Mr. Siddig Elhassan, Deputy Commercial Manager of Unisteel Kuwait, updates us on the mill's growth and sales strategies as well as the market situation and expectations in Kuwait. Founded back in 1996, Unisteel Kuwait is the major rebar producer in the country.
What are the current projects that Unisteel Kuwait is working on in terms of steel production and expansion?
We are the first rolling mill in Kuwait started back in 2001. We have just acquired the second rolling mill in Kuwait and we are working on increasing its capacity from 250,000 mt to 500,000 mt. This revamp will be executed in stages, i.e., as we produce, and at a certain stage the mill will have to stop in order to finalize the revamp. We expect to complete this project within the first quarter of next year and the halt is estimated to last about one month to six weeks period. In addition to this rolling mill, our existing rolling mill capacity is at 700.000 mt per annum.
We also had a meltshop investment completed recently. We have just had the power switch on in the new mill last week. We will produce billets there. The annual capacity for billet production will be 1.2 million mt.
At the meltshop and billet casting, the power we should have is 120 megawatt. But the government has given us 90 megawatt for now. At this stage we will not be able to produce the whole 1.2 million mt. So for the initial 9-10 month period our production quantity will be at around 800.000 mt and after that we will have the full power and start producing at full capacity.
Kuwait is one of the best markets in terms of demand today. How much do you think annual demand is for long products and/or rebar currently?
The need for rebars this year in Kuwait according to our estimation is around 800,000 mt and 1.1 million mt to 1.2 million mt from next year onwards. With the two rolling mills and the meltshop, by Q3 of 2011 we will be able to cover the full market requirement in the country, without any import need from abroad.
Are you expecting this level of demand to raise in the upcoming period due to new projects?
Actually the demand in Kuwait started to strengthen just this year, especially in the last four months. There are a lot of governmental projects on paper and also a few private projects too. But the majority of the projects are coming from the government. You know in Kuwait after the invasion, it has been a while since anything has been done in the country. We are talking about new airports, roads, construction, bridges, etc. there is a lot happening in terms of construction. The government has come up with a big budget, and put a five year plan and with this encouragement the demand started to increase.
We knew this was going to happen one day and that was one of the reasons that we acquired the rolling mill and constructed the meltshop. We are aiming to cover the need in Kuwait. Today, we can say that the projects are taking place but for the moment slowly, not yet at the pace we desire.
Will the demand become more persistent?
You need the financials first for construction although it is government. The construction companies have to have the backing of the bank. Since the recession the banks are acting very cautious. We are going through that process at the moment. Only a very few companies can find the support from the banks right now.
In a way if you look at it from our perspective, this situation is giving us time to build and finish our meltshop and other facilities. But in terms of demand there is still a need for imports at the moment in Kuwait. But we strongly believe in the long run, this demand will be fulfilled by Unisteel.
In view of the current outlook of the global markets is export still applicable for you?
Not at the moment. In the past we used to export but for the moment we are covering the local market. Prior to the recession we'd exported to Saudi Arabia, as the demand was much higher there and we were in the position to do so. Since the second half of 2008, we did not have any exports.
For the rest of the year?
In view of all these projects we mentioned, we will be using everything locally. But if we export in the future, we will most probably export billets because we believe that we will have a surplus of 300.000 mt of billet production.
Do you have any exports generally? Is it mostly to the Middle East region or do you have access to other destinations? Iraq?
When everything is stabilized we could look into exporting to Iraq. When your local market is covered and the margin is suitable for selling to the neighbouring countries then we would consider exporting anywhere not just to Iraq and as I mentioned earlier currently Saudi Arabia is good place for export.
Which markets do you supply your billets from, until your billet production comes into force?
We buy from the Turkish market and Brazil and in the past China. We know a lot of mills in Turkey and we work with them directly.
What is the share of domestic supply and import supply in Kuwait?
Now we have a lot of material coming from Turkey and the neighbouring countries, but the majority is coming form Turkey. We are aware that Turkey needs to export 75 percent of its long production and this makes them competitive in terms of price since we are buying billets from there. Although in the last couple of months the domestic demand in Turkey was not too bad it went up by around 40 percent, however, they still have to find markets to export to, we understand that.
We will still need to import billets in the next seven months until we reach the full production level at the meltshop. So far, we imported billets mostly from Turkey because of our particular requirement of a steel grade GR ASTM 60 A615. This grade is somewhat scars in the CIS. But after we acquired the second mill in which we have a temcore system, now we have already started to look into booking from the CIS as well. We will now have more room to decide as per the price competitiveness from now onwards.
Do you have any further investment plans in Kuwait?
We have plans to invest in our own production of the DRI and HBI but it still has some seven to eight years of time. This has got to do with the natural gas we have in Kuwait, of which the government is working on right now. We have been thinking to invest in some of the neighbouring countries where natural gas is available.