Emirates Steel raises AED4.04bn for expansion

The second phase is due for completion mid 2012.

RELATED ARTICLES: Emirates Steel parent secures AED1.8bn credit line | Emirates Steel adds 45% capacity as UAE sales jump | Zamil to spin off steel and air con into LLCs

Emirates Steel, the UAE’s largest integrated steel producer, yesterday signed an AED4.04 billion, seven-year project financing agreement with a consortium of seven conventional banks and two Islamic finance banks for the second phase of its plant expansion.

The state-owned company is a subsidiary of the Abu Dhabi Basic Industries Corporation (ADBIC), which is wholly-owned by General Holding Corporation (GHC). Its production plant in Musafa completed the first phase of expansion last year, according to spokespeople.

The second phase is expected to be completed by mid 2012 and will be able to produce 3 million tonnes per annum at full capacity.

Story continues below

Advertisement

FEATURED COMMENT Please click here to comment on this article

The project finance debt was raised through an AED1.347 billion Islamic facility and an AED2.692 billion conventional facility, each of seven-year tenor. The conventional banks consortium consists of the National Bank of Abu Dhabi, Union National Bank, First Gulf Bank, Bank of Baroda, Arab Banking Corporation, Al Khaliji France and Al Khalij Commercial Bank (Al Khaliji). The two Islamic finance institutions are the Abu Dhabi Islamic Bank and Al Hilal Bank. Natixis has acted as financial advisor and Denton Wilde Sapte as legal counsel.

The agreement is the second money-raising deal for the plant this month. On 2nd August it was announced that the company and GHC raised AED6.24 billion from conventional and Islamic banks, as well as AED1.863 billion backed by AED1.836 billion backed by Italian insurance group SACE.

The second phase is expected to be completed by mid 2012 and will allow the plant to produce 3 million tonnes per annum at full capacity.

Profit margins for a number of steel companies in the country have been squeezed due to a decline in construction projects and cheap imports. Mr Govia of Emriates Steel Industries highlighted the cheaper products available from Turkey.

The average price of flat steel from Turkey has fallen for most of 2010 so far, from AED3,000 per tonne in February to as low as AED2,650 in June. Dubai steel, by contrast, rose 5.6% to AED2,850 between February and March before slashing prices by AED1,000 per tonne to AED2,600 between May and June.

Steel bars of 10-25mm from the UAE rose in price from AED2,007.5 in February to AED2,937 in April, before dropping to AED2,183 last month, though a similar fluctuation was seen for the Turkish equivalent.