US $5bn firm will boost steel supply

Gulf Finance House is establishing a US $5 billion (BHD1.8 billion) steel firm with five partners in an effort to shore up the gap between supply and the increasing demand for steel in the Middle East.

NEXT FOUR YEARS: HadeedMENA will initially produce 8 million tonnes of steel annually.
NEXT FOUR YEARS: HadeedMENA will initially produce 8 million tonnes of steel annually.

Gulf Finance House is establishing a US $5 billion (BHD1.8 billion) steel firm with five partners in an effort to shore up the gap between supply and the increasing demand for steel in the Middle East.

GFH chairman Esam Janahi told reporters at a news conference last week that HadeedMENA would produce an initial capacity of 8 million tonnes of steel annually over the next four years, with plans for total output to reach 12 million tonnes.

"We intend to differentiate ourselves by taking a top to bottom approach to the value chain," Janahi said.

"It will focus both on upstream and productions for steel billets as well as the downstream manufacturing for steel rebars and structures."

Jahani provided no details when he hopes to reach maximum production. He also did not provide specific locations where steel would be produced other than to say that India, North Africa and GCC countries are potential sites. "The objective is to capture 10% of the market share by 2012," Jahani said.

But that target is only a drop in the bucket in providing steel to the region. The investment plan comes at a time when demand for steel far outstrips supply. The Goldman Sachs Group announced in a study that global steel markets will remain tight due to growing demands, particularly from China and other Asian countries.

Sal Tharani, an analyst at Goldman Sachs' New York offices, said in a statement that, "Over the last few months, global demand has exceeded supply, creating a shortage of steel. This scenario could continue through 2017."

Tharani pointed to new demands from the Middle East, Brazil, Russia, India and China.

The demand is expected to boost steel prices and put pressure on the existing 1.5-billion-tonne global supply.

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