By Alaa Shahine
World's largest steel maker nudges out UAE and India firms after intense bidding.
ArcelorMittal, the world's largest steelmaker, said on Tuesday it would invest up to $1 billion in Egypt after winning a licence to build direct reduced iron (DRI) and billet steel factories.
ArcelorMittal, which will pay 340 million Egyptian pounds ($61.2 million) for the licence, beat India's Essar Global and Al-Ghurair of the UAE in the auction.
"The bid was intense. It was about 81 rounds," ArcelorMittal Executive Vice President Sudhir Maheshawri told newswire Reuters.
"The project will cost between $800 million to $1 billion," he said, adding it would take up to four years for production to start.
Under the agreement, the production capacity of the factories is be 1.6 million tonnes per year of DRI steel and 1.4 million tonnes of billet steel. The firm has the right to increase production by up to 30%.
Kuwait's Al-Kharafi group also won a licence for pelletising factories for 105 million Egyptian pounds, and Saudi Arabia's Al-Tuwairqi Group won a similar licence for 64 million pounds.
"The point of these licences is to lower steel prices in Egypt and boost the backward integration of the industry," Amr Assal, the head of the Industrial Development Authority, told a news conference after the auction.
Egyptian housing and real estate companies would benefit from the new capacity, which would ease prices for steel rebars, Egypt's Commercial International Brokerage Company said in a research note.
Egyptian steel producers, currently dependent on imported intermediate products, would also benefit from cheaper locally produced DRI and billets, the brokerage said.
Egypt, the Arab world's most populous country, went from importing two million tonnes of steel annually less than 10 years ago to becoming an exporter of 900,000 tonnes in 2006, the trade and industry ministry has said.
The Industrial Development Authority said Egypt's 2006 steel production stood at 5.4 million tonnes. The International Iron & Steel Institute (IISI) said Egypt's crude steel output was six million tonnes in 2006. (Reuters)