Emirates Steel's third expansion will be built in the new Khalifa Industrial Zone (Kizad), and will be the second tenant of the new hub near Abu Dhabi.

The project will move ahead as soon as the Abu Dhabi Government grants the steelmaker the gas allocation for the energy-intensive facility, which will increase the company's output by almost a third.

But Abu Dhabi is grappling with a shortage of natural gas, the prime feedstock for power plants in the Arabian Gulf, as runaway consumption of electricity is exhausting domestic gas supplies. The Government is developing unconventional gas fields, and is turning towards liquefied natural gas (LNG) imports to avoid a shortfall. The Shah sour gas project will come online next year, and LNG will be imported from a floating terminal in Fujairah from 2015.

The Emirates steel plant will bring a significant boost to the Khalifa Industrial Zone, known as Kizad. The huge zone and its accompanying harbour were inaugurated last year, and are key to Abu Dhabi's efforts to diversify its economy away from hydrocarbons.

Kizad's only other large tenant so far is Emirates Aluminium (Emal), which started operations even before the zone was completed. It is hoped that large-scale producers such as Emal and Emirates Steel will attract downstream industries that turn the basic metals into more complex products.

State-owned Emirates Steel issued a tender for the steel mill in September 2011. According to the Middle East Economic Digest (Meed), the Italian contractor Danieli submitted the lowest bid for the construction of the facility the following June, and is the preferred bidder for the plant's construction. Danieli has been the main contractor for the initial phase and each of the two further expansion phases.

Emirates Steel produces iron as DRI in gas based shaft furnaces for its electric arc furnaces and has already invested Dh9bn (US$2.45bn) on the two earlier expansions located at Mussaffah, Abu Dhabi completed last year at

Emirates Steel presently has a production capacity of 5.5Mt, making it one of the region's largest producers.

With industrialisation high on the list of government priorities, Emirates Steel's chief executive, Mr Al Rumaithi is confident the Phase 3 expansion will be allocated its gas supply.

Emirates Steel will grow sales between 3.5 and 4.5% this year on the back of an active regional construction sector, according to the chief executive.

The company's biggest markets lie in the UAE and Saudi Arabia. Qatar's anticipated Fifa World Cup construction boom is yet to come into full swing, commented Mr Al Rumaithi. "We expect the peak to be around 2015-16.

Emirates Steel signed an iron ore supply deal with Sweden's LKAB last month, and further agreements could be tied up soon.

Source: Daily ‘The National’, Abu Dhabi