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First integrated steel plant for UAE

posted on 03/02/2009: 3412 views

Emirates Steel Industries (ESI) will start operation of a new steel billet plant in Musaffah this month, paving the way for the company to launch the country's first integrated steelmaking operation in the spring and control a third of the local ¬market.

The plant will serve as a middle link in the integrated chain by turning reduced iron pellets into 1.4 million tonnes of rectangular billets, the raw material for adjacent rolling mills, which cast rebar and wire rod.

When a third plant starts up in April to make the pellets, the company will be able to transform iron oxide directly into usable products in a US$820 million (Dh3bn) operation, an investment that will boost its profit margin and shield it from the volatile prices for steel inputs, said Ahmed al Dhaheri, the company's assistant vice president for projects.

"We were basically dependent on the international market for securing all our raw materials, so the management decided we should become an integrated plant,” he said. "By being integrated, it gives the company an advantage to compete with other players in the market.”

Like other steel producers across the region, the economic crisis hit ESI hard at the end of last year.

The firm was forced to suspend production at least once, as prices fell up to 70 per cent and developers and builders drew down massive stockpiles rather than purchase more steel.

But Mr. al Dhaheri said he was confident that prices had already hit bottom, and the firm was proceeding with plans to get two new mills up to full production, raising the company's output capacity to 2 million tonnes per year.

"The volume has increased, and the prices in the last two weeks have turned the corner,” he said. The ESI facility currently uses imports of billet to produce more than 700,000 tonnes of rebar a year, which forms the skeletons of such landmarks as the Emirates Palace hotel and apartment towers in Dubai Marina.

The company controls about 20 per cent of the steel market in the UAE, but as the two new mills ramp up production, ESI will potentially hold 35 per cent of the market, according to Mr. al Dhaheri.

The company is also constructing an adjacent US$1.5bn plant that will be a copy of the first integrated complex, but produce 1 million tonnes of structural beams when it opens next year.

A third integrated operation, planned for Taweelah, will produce flat steel products, which will serve as raw material for the development of a downstream industry, fashioning anything from boilers to car parts to piping. A fourth plant will transform up to 10 million tonnes of iron ore into usable pellets, allowing the company to source materials directly from mines.

Final investment decisions have not yet been announced for the third and fourth projects.

The UAE steel industry as a whole was racing to supply steel for the country's building boom, and ESI had set an informal goal of approving projects within five years of the first decision in 2006, said Saeed Alromaithi, the assistant vice president of operations at the company.

"You want to build the country at least from local steel,” he said.

The steel will also be greener than most, if ESI moves forward on plans to work with Masdar, the Government's alternative energy investment firm, to capture carbon dioxide emissions from all its steelmaking plants and inject them into oilfields for permanent storage.

Masdar is developing a carbon capture network that will take 6.5 million tonnes of carbon dioxide emissions from three power plants and ESI's facility, and transport them through a pipeline for injection into oil wells operated by the Abu Dhabi National Oil Company.

The scheme is intended to boost oil production, reduce the emirate's carbon footprint and free up precious natural gas that is now left in wells to maintain pressure.

ESI's iron pellet plant includes necessary technology to absorb the estimated 1 million tonnes of carbon dioxide emissions from its main reactor, so capturing the emissions from there would not be too difficult, Mr. al Dhaheri said.

"If you look at other plants, they use the CO2 for the beverage industry,” he said. "ESI will take the lead as an environmentally friendly steel producer and reduce its carbon footprint while still finding ways to benefit from such collected gases.” – The National


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