Bahrain Steel, a wholly owned unit of Foulath Holding, expects to ramp up production by more than 80 per cent in 2015 and reach its full annual capacity of 11 million tonnes in 2016.

The pelletising plant's output was up 40 per cent in 2014 compared to the previous year, but the overall plant utilisation remained low as raw material supplies from its two main Brazil sources continued to be hampered because of force majeure events, said a report in the Gulf Industry magazine, our sister publication.

The company (formerly known as GIIC) feels value addition could be one of the prospects worth exploring in the future.

Production at the Bahrain plant closed at approximately 4.8 million tonnes for 2014 against 3.4 million tonnes in the previous year. Continued raw material shortage resulting from debilitating situations at two of its main raw material suppliers in the South American state hampered production. Supplies of high grade iron ore required by steel mills in the region are scarce internationally.

For Bahrain Steel, the main constraint is raw materials, and while demand exceeds supply, the company’s focus is on securing iron ore of a high standard to meet the requirements of its discerning customers.

Quality pellets have two basic parameters, one being that they have a high iron content and secondly that the physical properties in terms of cold compression strength, size consistency and fines match stringent standards. Bahrain Steel highlights it has the best product emerging from its lines to support its customers.    

The continuing raw material shortage in 2014 meant that the Bahrain firm could not meet the demands of a couple of its prominent customers. But the New Year comes with a silver lining.

Bahrain Steel’s current raw material suppliers are boosting production in Q1 and Minas-Rio, the mine whose opening was long delayed, commenced production and made its first shipment in October 2014. Bahrain Steel expects to load shipments from Minas-Rio starting this month.

The new year will, all in all, be a pretty good year with a strong likelihood that output could touch 9 million tonnes. The incremental production will mainly be supplied to Bahrain Steel’s traditional customers in the region, where the pellet demand remains strong and the superior quality of its products is widely recognised.

The expected good year in 2015 will overflow into 2016 with the prospect that in the latter year Bahrain Steel will produce at full capacity, 11 million tonnes.

Bahrain Steel has two pelletising plants, one of five million tonnes annually and operating since 1984 and the other of six million tonnes (potentially seven million tonnes) and running since 2010.

Ahead of reaching full capacity in 2016, Bahrain Steel has classified its customers in four broad groups. Group 1 comprises core customers who are the affiliate firms Sulb and Qatar Steel. Group 2 is made up of key accounts, namely the other leading DRI producers in the GCC. Some two thirds of output will be delivered to parties within these two groups.
Group 3 comprises peripheral markets such as India, Egypt and Malaysia while Group 4 embraces traders and will account for some 15 to 20 per cent of output.

The traders market will be viewed as a reserve category or cushion to enable Bahrain Steel to move additional shipments to customers in the first two groups when necessary. The trade segment will also be an opportunistic one where Bahrain Steel can capitalise on market upsides.

LOOKING AHEAD

In 2016, when Bahrain Steel hits its nameplate capacity, there will be the temptation to think of a capacity expansion. But that will not be as easy as it sounds. For one, there is the issue of dedicated gas supplies, which have to be substantial, as an expansion of such a kind involves upgrading by another five or six million tonnes annually. On the other hand, issues related to demand growth pattern and consistency as well as reliability in high-grade raw materials come to the fore.

There appears to be a move to skip any thought of a capacity expansion at this stage and instead consider another approach: growth in terms of value addition. It is felt that Bahrain Steel’s continued focus on energy efficiency would help it utilise the available gas for establishing a downstream merchant DRI plant to operate within the Bahrain Steel umbrella. It is visualised that an annual production capacity of 400,000 tonnes DRI would not be far-fetched.

Meanwhile, two proposed projects in Egypt for which the Foulath consortium has licences to build iron ore pelletising plants continue to be on hold because of current uncertainties centering on gas supplies and prices. Business circles believe the plants would do well in Egypt which has a long history of steel making and several players in the field. - TradeArabia News Service