Emirates 24x7 reported that the high cost of iron ore in the international market could adversely affect expansion plans of steel manufacturing units in the country, delivering a double whammy after the deflation in steel prices caused earlier by the global economic downturn.
Expansion plans at two leading steel mills in the UAE are on hold due to the sharp decline in demand for steel on the back of the global economic slowdown.
RAK Steel, a JV of Ras Al Khaimah Investment Authority and the Middle East Traders Group, and the second largest steel mill in the UAE, had plans to increase production capacity of deformed steel reinforcement bars by 50% to 750,000 tonnes by the end of 2009. The plant currently has a capacity of 500,000 tonnes of deformed steel reinforcement bars.
Mr Ajay Aggarwal CEO of RAK Steel said that "The expansion plan is on hold as of now. We have the machinery in place but it is not been installed as yet."
Earlier, the company had announced plans for a 50% expansion in steel production in view of mounting steel demand in the UAE's construction industry. It had announced a USD 165 million investment in production for the domestic market, which is now largely served through imports from Turkey and other steel producing countries.
Al Ghurair Iron & Steel has also scaled back its original expansion plans for hot rolled steel due to the economic slowdown. Mr Suraj Malhothra, the company's marketing manager, said that the HR project was part of the original project feasibility studies.
He added that "We have a CR and galvanized steel plant. Instead of going in for an HR plant we are doubling our galvanized steel production from the current capacity of 20,000 tonnes per month. Awarding the contract for the plant will now be delayed until the fourth quarter of 2010."
Expansion is to be scaled down from the original plan, which according to some reports was worth USD 100 million. The company's iron and steel complex, located on a one million square feet plot in Abu Dhabi's Mussafah industrial area, was to produce 350,000 tonnes of HR, pickled and oiled steel products, of which 50,000 tonnes were of saleable cold rolled full hard steel and 200,000 tonnes were of galvanized material.