Power shortages hit RAK Steel's output

POWER WOES: RAK Steel said on Monday that its output is down 15 percent due to power shortages. (Getty Images)

Power shortages in the UAE has forced RAK Steel to reduce its output by 15 percent, the group's chief executive said on Monday.

The UAE's northern emirate of Ras Al Khaimah's industrial sector is suffering from chronic power shortages as development outpaces supply, resulting in frequent outages.

"We currently produce 30,000 tonnes of steel per month which is around 15 percent less than what we can produce if we had sufficient power supply," said Ajay Aggarwal, CEO of RAK Steel, a joint venture with sovereign wealth fund Ras Al Khaimah Investment Authority (RAKIA).

To generate more power for the emirate, RAK Minerals & Metals Investments, another RAK government investment fund, announced in February plans to spend $1 billion to develop a rail link and receiving terminal to import coal from Indonesia.

"I believe things will improve and our production will be higher once all the power situation is addressed," said Aggarwal in a phone interview.

RAK Steel plans to increase its annual capacity of its rolling mill to 750,000 tonnes from 500,000 tonnes by the end of the year to meet healthy domestic demand, Aggarwal added.

"The capacity to produce 750,000 tonnes will be ready the last quarter of this year or early 2010, but we will actually start producing at full capacity in about a year's time."

However plans to start producing steel billets remains uncertain, said Aggarwal.

"The market conditions are not very stable right now... that's why we are still not certain about the time frame," he said.

"But I would say it will take 3-4 years time to be complete."

Steel demand in the Gulf region has fallen as the economic slowdown hit y consuming sectors such as automotion and construction.

RAKIA has a 51 percent stake in RAK steel, the remaining share is owed by private investors. (Reuters)

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