State-owned Emirates Steel Industries has signed a Dh1.74 billion ($474 million) contract with Danieli Corporation for construction of phase II B of the company's overall Dh9 billion ($2.45 billion) expansion plan.

Italy-based Danieli will be the contractor for construction of a heavy section rolling mill with a production capacity of 1 million tonnes per year, which will add to Emirates Steel's total capacity by the end of 2011.

Phase II B's rolling mill will produce heavy section beams, columns and sheet piles.

Emirates Steel currently has output capacity of 2 million tonnes, and is expected to reach 3 million tonnes by 2011.

The company has said it is looking to further boost its capacity to 6.5 million tonnes annually by 2013-2014 through capacity expansions and acquisitions.

Emirates Steel has acquired 100 per cent of a steel manufacturing company in the Middle East, Hussein Al Nowais, chairman of Emirates Steel, said at a news conference in Abu Dhabi.

'We have signed a MOU (memorandum of understanding) with a regional steel company and this is part of our acquisition plan to increase the overall production capacity of Emirates Steel,' he said, declining to name the company or the value of the deal.

Nowais added that the company has raised $850 million from local banks and the Italian government while the rest of the financing for the overall expansion project will come from Emirates Steel's equity.

'Our ultimate objective is to issue an IPO but this won't happen before one to two years time,' he said. – Reuters