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JFE Steel and Foulath Sign MOU on Pelletizing Project in Oman

12/01/2008 - ABSTRACT: JFE Steel and Foulathof Bahrain sign a Memorandum of Understanding to jointly establish a pelletizingproject that could produce as much as seven million tonnes of iron ore pellets per year in Sultanate of Oman.

JFE Steel and Foulath1, Bahrain, recently signed a Memorandum of Understanding to jointly establish a pelletizing2 project in Sultanate of Oman.

Located in the Salalah Free Zone, Sultanate of Oman, the joint venture is to have an annual production capacity of seven million tonnes of iron ore pellets. 3.5 million tonnes of that total is to go to JFE Steel on a long-term basis (> 20 years).
 
Under terms of the MOU, Foulath is expected to hold a 60% shareholding in the new joint venture, with JFE Steel holding the remaining 40%.
 
The venture represents an expected total investment of approximately US$700 million, although the parties note that this amount is subject to change. Commercial operation is expected to start in 2011.

Under terms of the MOU, JFE, together with Foulath, would establish a joint-venture company that would produce and sell iron ore pellets in the Salalah Free Zone, Oman. JFE would hold 40% of the JV’s shares.
 
Of the joint venture’s total annual production, which is expected to reach as high as 7 million tonnes, JFE Steel would take 3.5 million tons per year on a long-term basis. The other 3.5 million tonnes would be sold to direct-reduced iron and other blast furnace plants, particularly those located in the Middle East and Asia.
 
With high-grade iron ores expected to become depleted of in the future, the new joint venture will be focused on securing a long-term and stable supply source for raw materials. Foulath brings to the partnership more than 24 years’ experience and expertise in the operation of pellet plants and a contract for more than 25 years of iron ore for pelletizing.
 
For the Japanese manufacturing industry, the project will be the first-ever full-scale investment project into Oman. The Salalah Free Zone, where the pellet plant will be constructed, provides the project with various benefits such as a developed port infrastructure, easy access to necessary fuels, and application of the long-term tax incentive for the corporate tax and taxation on dividends.
 
In addition, the pellet plant is located close to Gulf countries as well as South Asian countries including India, where high economic growth is expected in the long term. JFE believes that the project contributes to its business expansion in this region in the future.
 
1) Foulath means “steel” in Arabic.
 
2 Iron ore pellet is produced through a process combining agglomeration and thermal treatment. Continued depletion of lumpy ore (which can be directly charged into a blast furnace) and the declining grades of fine ore used for production of sintered ore are expected to lead to increasing consumption of pellets in the future.
   
Headquartered in Bahrain, Foulath has over 24 years of experience in operation of pellet plants through its fully-owned subsidiary GIIC (Gulf Industrial Investment Corporation) Bahrain. The company is currently constructing a second pelletizing plant in Bahrain, and also is planning to set up two pelletizing plants (each with a capacity of 7 million tonnes per year) in Egypt. Foulath’s shareholders structure is as follows: GIC (50%), Qatar Steel (25%), Al-Kharafi Group (10%), National Industries Group (10%) and Kuwait Foundry (5%).
 
GIC (Gulf Investment Corporation) is an investment company established by six GCC (Gulf Cooperation Council) member countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) for the purpose of economic growth and advancement in the region. Each member country provided 1/6 of the company’s capital for its establishment. Its total assets amount to $9.1 billion as of the end of December 2007.