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News Release


JFE Steel Corporation

Signing MOU on Pelletizing Project in Oman

JFE Steel and Foulath1 (headquartered in Bahrain) have recently signed the Memorandum of Understanding (“MOU”) for jointly establishing a pelletizing2 project in Sultanate of Oman. JFE, together with Foulath, will establish a joint venture company that produces and sells pellets in the Salalah Free Zone, Oman. JFE will hold 40% of the JV’s shares.

Of its total production of as much as 7 million tons (exp.) per annum, JFE Steel will take 3.5 million tons per year on a long terms basis while the other 3.5 million tons will be sold to DR (direct-reduced) iron and other BF (blast furnace) plants, particularly those located in the Middle East and Asia.

With the anticipation of the depletion of high-grade iron ore in the future, JFE will, jointly with Foulath which has more than 24 years’ experience and expertise in operation of pellet plants and a long-term contract (more than 25 years) of iron ore for pelletizing, secure long-term and stable supply source for raw materials.

For the Japanese manufacturing industry, the project will be the first-ever full-scale investment project into Oman. The Salalah Free Zone, where the pellet plant will be constructed, provides the project with various benefits such as developed port infrastructure, easy access to necessary fuels and application of the long-term tax incentive for the corporate tax and taxation on dividends. All of these benefits enable the project to enhance profitability.

In addition, the pellet plant is located close to Gulf countries as well as South Asian countries including India, where high economic growth is expected in the long term. JFE believes that the project contributes to its business expansion in this region in the future.

[Key Terms of MOU]

  • 1.JFE and Foulath to commence joint feasibility study for the project.
  • 2.Project outline:
    • Location: Salalah Free Zone, Sultanate of Oman.
    • Production Capacity: Seven million ton per year of iron ore pellets (of all, 3.5 million ton will be taken off by JFE Steel on long terms basis (> 20 years).)
    • Shareholding Structure: Foulath: 60%, JFE Steel: 40% (expected)
    • Total Investment (exp.): approx. US$700 million (rough estimation and subject to change.)
    • Start of Commercial Operation: 2011 (expected)
1 Foulath means “steel” in Arabic. The company has over 24 years of experience in operation of pellet plants through its fully-owned subsidiary GIIC (Gulf Industrial Investment Corporation) Bahrain, and is currently constructing a second pelletizing plant in Bahrain. Foulath is planning to set-up two pelletizing plants, each with a capacity of 7 million tons per year, in Egypt. Foulath’s shareholders structure is as follows: GIC3 (50%), Qatar Steel (25%), Al-Kharafi Group (10%), National Industries Group (10%) and Kuwait Foundry (5%).
   
2 Iron ore pellet is produced through the process which combines agglomeration and thermal treatment.
Consumption of pellets is estimated to increase due to the depletion of lumpy ore that can be directly charged into a blast furnace and the declining grades of fine ore used for production of sintered ore.
   
3 Gulf Investment Corporation is an investment company established by six GCC (Gulf Cooperation Council) member countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) for the purpose of economic growth and advancement in the region. Each member country provided 1/6 of the company’s capital for its establishment. (Its total assets amount to $9.1 billion as of the end of December 2007.)

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