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Oman's steely future
The
construction of Oman's first steel billeting plant at
Rusayl could be the beginning of a flourishing steel
industry. Industry analysts argue that if the Sultanate
can take advantage of its energy resources, solid
infrastructure and proximity to export markets, the
country could become a major steel producer in the
region. OER reports
Oman's first steel billeting
plant is shaping up at the Rusayl Industrial Estate,
just outside Muscat. When it comes on stream later this
year, many expect this unit to be at the vanguard of a
promising steel industry taking root in the Sultanate.
Although small in size compared to the steel-making
behemoths of Asia and North America, the billeting plant
of Modern Steel Mills LLC is being nevertheless touted
as one of the 'heaviest' units to be established at this
industrial hub. Housed within a cavernous industrial
shed, it will also consume a hefty 15 megawatts (MW) of
electricity per day, making it the most energy intensive
plant on the estate.
The project, involving a
total investment of RO4 million, is being backed by a
group of prominent Omani business houses and
individuals. They include Sheikh Hamad Bin Hamoud Al
Ghafri (Hamdan Trading Group), Ominvest, Hamad Hamed Al
Ghafri (Future Group), Assarain Enterprises, Ashwin
Dharamsey, Sheikh Salim Saeed Hamed Al Fannah Al Araimi
and Mohammed Rashid Al Fannah Al Araimi (Galfar), Al
Mamoorah Company, and Gulf Transport Co. LLC. The
Industrial Bank of Oman (IOB) is pitching in with a
commercial loan of RO2.05 million.
Annual
production, at 76,000 tonnes of billeted steel, may be
modest by world standards, but the plant's significance
to a potential steel industry in the Sultanate cannot be
underestimated, says project consultant Hari Kumar
Sreedharan."This project underscores the potential for a
vibrant steel industry in this country, especially as
Oman embarks on a path of economic growth powered by
industrialisation and economic diversification," says
Sreedharan, who is the general manager of Future
Management Economic Consultancy (FMEC). FMEC is a part
of the Future Group, which is a shareholder in the steel
billeting project.
He further adds: "Economic
development will drive construction activity on a major
scale, which in turn will require enormous quantities of
steel in the form of sheets for industrial sheds,
seamless pipes and flanges for the oil and gas sector,
and rolled products for building construction. Clearly,
there is a huge domestic market for steel products, not
to mention soaring demand in the region, as well as the
emerging markets of South Asia."Ashok Pavate, managing
director of Semac Private Ltd, which are the engineering
consultants for the project, agrees that a local steel
industry is an eminently attractive proposition.
"A steel plant can be a sure shot given the
country's ideal location, favourable political and
economic conditions, cheap energy and relatively easy
access to finance. Also, the Sultanate's excellent
relations with potential importing countries are an
important determining factor." According to Pavate,
plans for a major steel plant in the Sultanate were
first discussed in the early 1980s. At this time, Indian
engineering consultants MN Dastoor & Co., a company
credited with helping establish some of India's biggest
steel plants, had strongly backed the idea of a steel
mill in Oman. Nothing came of the proposal, however,
largely because of the fact that at the time discoveries
of natural gas vital for such energy-intensive
industries was not considered abundant enough.
Annual steel consumption in the Sultanate is
projected to rise to 810,000 metric tonnes by 2005,
further climbing to 1,100,000 tonnes by 2010. In
contrast, demand in 1996 was pegged at around 600,000
tonnes, with steel bars and rods making up roughly 60%
of all steel imports. Steel pipes accounted for about
30% of these imports. In fact, it is this insatiable
appetite for steel that prompted the Japanese
steel-making giant Kobe Steel Ltd, or KOBELCO, to forge
plans for a world-class steel mill to be established at
Sohar. Envisaged under proposals drawn up more than two
years ago is a world-class direct reduction iron (DRI)
complex of 1.2 million tonnes capacity rivalling some of
the world's largest steel plants.
A feasibility
study conducted by the Japan International Cooperation
Agency (JICA), a Japanese government-funded body, has
priced the venture at $US784 million, with much of this
investment proposed to be raised through term loans from
Omani, Gulf and Japanese financial institutions. The
JICA study has also recommended private equity capital
from the Omani and Japanese promoters of the project.
Efforts to get it off the ground are currently
mired in complex negotiations with the government over
supply of natural gas and electricity, which the
promoters have sought at competitive rates. The
energy-intensive plant will require about 0.8 trillion
cubic feet (TCF) of natural gas over the 25-year life of
the project, in addition to about 200 MW of power. Both
sides are quietly optimistic that the project will
eventually materialise, given the enormous benefits that
will accrue to the Sultanate's economy. According to the
JICA study, the venture will result in foreign currency
savings to the tune of $US3.2 billion over 20 years, as
imports of steel rods become a thing of the past.
Moreover, the project's contribution to Oman's gross
national product (GNP) will be significant as well -
adding an estimated $US2.6 billion to the GNP over 20
years.
KOBELCO not only plans to participate in
the project equity, but assist in the management,
training, and marketing as well. The bulk of steel
manufactured by the plant is proposed to be exported
elsewhere around the Gulf, and even beyond to markets in
Asia and Africa. But unlike the DRI complex, which will
depend on iron oxide pellets as raw material, Modern
Steel Mills' steel billeting plant at Rusayl will turn
to the huge scrap iron market for its raw material
needs.
According to Sreedharan, FMEC's Gulf and
Middle East regions are awash in scrap iron and scrap
military ordnance, thus serving as an inexhaustible
source of raw material. The Sultanate is also a major
producer of scrap iron, with exports in the order of
60,000 metric tonnes per annum, mainly to Pakistan and
India. At Modern Steel's plant, shredded scrap initially
sourced from Russia will be preheated to around 400
degrees Centigrade and then melted in an Electric Arc
Furnace to produce high grade mild steel (MS). A casting
unit will thereafter churn out billets to the customer's
specifications.
Sreedharan says the billets,
which are refined to BS-4449 Grade-460 standards, can be
used to make a variety of steel productsincluding
rolling products such as MS rods, channels, sections and
flats for the construction industry, or seamless pipes
for the lucrative hydrocarbons sector. Forging units can
also convert the billets into high-value flanges for
pipelines, or produce a variety of machinery or
automobile parts.
Company officials say they
expect the plant's entire annual production of 76,000
metric tonnes of billeted steel to be consumed locally.
Potential candidates are Sohar-based Sharq Sohar Steel
Rolling Mill, which has an installed capacity of 180,000
metric tonnes, and Hadid Majan LLC, a new rolling mill
currently under construction at Rusayl. Total demand for
billeted steel in the UAE alone is estimated at 1.15
million metric tonnes per annum, 80% of which is
imported.
Depending upon market demand, Modern
Steel can also switch to the manufacture of carbon and
alloy steel for the forging industry. Stainless steel
production is also an option, says Sreedharan. Plant
construction and commissioning are being undertaken by
Larsen & Toubro (Oman), a subsidiary of the Indian
engineering giant L&T, which has built a number of
giant steel plants across India. The plant is due to
commence production in December
2000. |