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Construction Set to Begin on Dh1bn Abu Dhabi Steel Plant

Construction work on a Dh1 billion galvanised steel plant in Abu Dhabi will begin this month, the Saudi-backed firm behind the project said.

“This is the first major investment outside of Saudi Arabia,” said Sheikh Mohammed Al Rahbani, the chairman of United Iron & Steel (UIS), a joint venture between Saudi Arabia’s Safid Group and the UAE’s Abdul Jalil Group.

Al Diyar is the main civil contractor, with Zamil Steel providing the steel structure for the factory and Danieli of Italy supplying the majority of the manufacturing equipment to the plant, according to UIS.

UIS has more projects in the pipeline, Mr Al Rahbani said.

The facility in the capital’s Industrial City (Icad) will have the capacity to produce 500,000 tonnes of galvanized steel upon completion. The plant will be built in two phases, totalling 250,000 tonnes each, with the first phase expected to be complete in late 2016.

Galvanised steel is used in the construction sector for cladding and ducting.

According to UIS, 50 per cent of the region’s galvanised steel is imported and about half the output from the Abu Dhabi plant will be made available to GCC-based customers, including Safid, with the rest going to European and African markets.

“In the next five years we expect regional demand for rolled and coated steel products to double. Further afield, global demand will grow annually between 2 to 4 per cent, so we also expect strong demand from customers in Europe and Africa,” said Souheil Hatoum, general manager at UIS.

Abu Dhabi was chosen as the location for the steel plant because of its infrastructure and “low cost of energy”, said Mr Al Rahbani.

The plant will need about 20 megawatts of continuous supply, he said.

“This is enough power to light a small town,” he said. On average, 20MW would be enough to power 20,000 homes. The World Steel Association in Brussels said that the cost of energy accounted for 15 to 20 per cent of the total cost of steel production.

The cost to operate the plant in Abu Dhabi, at the utility rate of 15 fils per kilowatt hour (kWh), compared to the US, is 70 per cent lower, according to calculations by The National.

Arun George, senior commercial surveyor for the Dubai property company Knight Frank, said that access to affordable electricity played a major part in attracting more projects to the capital.

“We are noticing a trend that manufacturing companies are more keen on Abu Dhabi [than other areas in the region], and we are now starting to monitor the sector,” he said.

According to the editorial director of the regional business publication Meed, Richard Thompson, this year will be strong for the region’s construction market as more industrial projects are announced.

With about US$172bn worth of project contracts planned to be awarded [in the GCC] this year, 2015 will eclipse the previous best year on record,” said Mr Thompson.

The projection is slightly up from last year, which was the best on record, at $170.5bn worth of project contracts awarded.

These record years were driven by government spending on infrastructure and industrial projects that was supported by the very high levels of oil prices and oil production and export,” said Mr Thompson.

The UAE is the region’s second-largest projects market with $739bn worth of projects planned or under way, and Meed forecasts project awards to reach $40bn this year.

“The UAE market is being driven by government spending on industrial and energy projects and infrastructure investment,” said Mr Thompson.

However, he warned that after this year the sector could experience the negative impact of lower oil prices and regional security issues.