01 August 2012

INDIA’S state-owned Rashtriya Ispat Nigam (RINL) is looking at Saudi Arabia for setting up a three million tonne-per-year (tpy) steel plant as a joint venture with the local Rajhi Steel at an investment of $3.63 billion, according to press reports.

“RINL is in talks with Rajhi Steel for a three million tonnes per annum plant in Saudi Arabia. The integrated plant would produce both long and flat products. RINL has forwarded a non-disclosure agreement for signing,” a source close to the development was quoted as saying.

The gas-based plant would require 200 billion rupees ($3.63 billion) to set up which would be shared in the ratio of shareholding between the two parties, and take five years to go on stream from the start of construction.

The Riyadh-based Rajhi Steel, which mostly produces rebar, currently has a capacity of over three million tonnes and sells most of its produce within the country, which is the fastest-moving steel consuming market in the Middle East.

Buoyed by construction boom and growing investment in the real estate sector, steel consumption in Saudi Arabia has gone up at a faster pace over a decade. It, however, hugely depends upon imports to meet the domestic demand.

Steel consumption in Saudi Arabia increased to around 12 million tonnes in 2011. On the other hand, as per World Steel Association figures, its production rose to 5.3 million tonnes in 2011, up from five million tonnes in 2010. The remaining is imported.

Industry watchers said Saudi Arabia’s reliance on imports would come down gradually as the country is poised for a big domestic capacity addition. The country’s domestic output was just 2.98 million tonnes in 2000.

The joint venture would allow the state-run RINL to make a move to a market which has lots of potential and is abundant with petro products that would prune dependence on coking coal, which would get scarcer and dearer given its limited source.

RINL is the second largest state-run steel maker in the country producing three million tonnes at its lone facility at Visakhapatnam. The capacity is being raised to 6.3 million tpy in the current fiscal year. It has also prepared a feasibility report for enhancing it further to 12 tpy with an investment of Rs 30,000 crore ($5.45 billion).

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