Saudi Basic Industries Corporation (SABIC) announced yesterday that their wholly-owned subsidiary, the Saudi Iron and Steel Company (HADEED) has signed an agreement with a consortium of local, Gulf and international financial institutions to secure a SR 4.725 billion (U.S. $ 1.26 billion) loan to finance a major expansion program. About SR 3.975 billion (U.S. $ 1.06 billion) of this will be used for the construction, already begun, of a new plant for flat steel at the HADEED complex in Al-Jubail Industrial City, with the balance for a new Direct Reduction Module (DRM) that will supply its raw material.
For the flat steel plant, more than SR 2.268 billion (U.S. $ 604,682,000) will come from the export credit agencies of Austria and of Germany. International banks, Creditanstalt of Germany, and the Frankfurt and the Bahrain branches of the Australia-New Zealand Bank, will lend about SR 647 million (U.S. $ 172,494,415). Local and Gulf banks in the consortium, the Riyad Bank, Al Bank Al Saudi Al Fransi, Saudi Cairo Bank, and the Gulf International Bank, will contribute SR 1.06 billion (U.S. 282.6 million). The Sumitomo Bank of Japan will wholly underwrite the DRM part of the project.
An international loan of this size is a mark of the strength of the Saudi economy and the soundness of investing in SABIC's world-scale projects. The increasing willingness of global lending institutions to fund SABIC's projects is based on the proven profitability of its industries. HADEED's flat steel project will considerably strengthen the company's presence in the local, regional and international steel production market, with 850,000 metric tons a year (mt/y) of products supplying raw material for diverse downstream industries such as the manufacture of pipes, tanks, containers, trailers, poles, ships, metal furniture and air conditioning ducts. Since it is estimated that the local demand for flat steel products will exceed 2 million mt/y by 2002, the project design allows for future expansion to raise the capacity to 2.5 million mt/y.
For construction of the plant, contracts were signed last June with Voest-Alpine of Austria and Schloeman Siemag of Germany, to include a melt shop, steel caster, hot and cold rolling mill, and galvanizing line. The plant will be operational early in 1999. The DRM will be built by Davy International of the United Kingdom.
HADEED, established in 1979, currently produces steel reinforced bars and wire rods, achieving a production record of 2.4 million metric tons in 1995. This makes it one of the most efficient rebar/rod producers using Electric Arc Furnace (EAF) technology.