Growth Arc

In recent years Emirates Steel has committed AED10 billion to a two-phase expansion plan. How has this investment transformed the company?

On 26 September 2012, we inaugurated the completion of our AED6 billion ($1.6 billion) Phase 2 expansion program. This Phase increased our total production capacity to 3.5 million metric tons per annum (MTPA). We launched our two-phased expansion program in June 2006, completing Phase 1 in June 2009 at a cost of AED4 billion ($1.1 billion). This has more than doubled our production capacity and made our company the largest integrated steel plant in the UAE, capable of manufacturing raw steel from iron oxide pellets. Our expansion has both directly and indirectly created over 2,000 jobs in the country; in parallel, many high-profile technical job opportunities have opened up for our UAE nationals. Today, we are the leading producer of reinforcing bars (rebar), and we are recognized as one of the foremost wire rod producers in the GCC. Besides our finished rebar and wire rod, we also have the capacity to produce and sell direct reduced iron and steel billets as semi-finished products. More significantly, we are now the sole producer of structural steel in the MENA region.

What long-term role can Emirates Steel play in the Etihad Rail network?

An MoU was signed with Etihad Rail to use rail as the chief method for raw material and steel transportation in the UAE. This represents a key step toward easing the transportation issues associated with the major flows of Emirates Steel’s finished products and raw materials. The partnership will help the company meet the distribution needs of the growing demand for quality steel products from the region’s fast-developing economies. By 2016, these raw materials and finished goods flows could reach an estimated annual volume of 12 million tons. By integrating rail in the transport process, considerable savings will be made.

What is your current production capacity? And what is your current output in MTPA terms?

In 2012, we began producing at a capacity of approximately 3.5 million MTPA, following two expansions and the investment of AED10 billion ($2.72 billion). Annually, we produce around 2.1 million tons of 150 mm x 150 mm billets, around 1.9 million tons of 8 mm-40 mm rebar and around 560,000 tons of 5.5 mm-16 mm wire rod. As of the beginning of 2012, we began producing around 1 million tons of structural sections from approximately 200 to 1,016 millimeters in depth.

Turkish hegemony over steel rebar production is no longer what it once was. How have Gulf companies such as Emirates Steel been able to increase their share in this market?

Emirates Steel has increased its domestic market share to almost 60% and widened its export markets to include Europe, the Americas, the Indian subcontinent, and Asia on top of its traditional markets in the Middle East and North Africa. To maintain its market share at such high levels and lessen the country’s reliance on Turkish imports, Emirates Steel asserted its commitment to deliver consistently high-quality products. It also continued manufacturing steel products using state-of-the-art technology and operating with industry best practices in manufacturing. On top of that, it implemented an integrated management system conforming to local and international standards.

Last year when Emirates Steel appointed you as CEO, it also appointed its first ever UAE national to the role. How important is Emiratization? And do you think your company has set an important precedent?

Emiratization is very important to Emirates Steel. In fact, our responsibilities do not end on the manufacturing side, but transcend that to include the process of training and qualifying our UAE nationals. Considered to be our most important priority, training nationals reflects the Abu Dhabi government’s vision to develop our national human capital. Through partnerships with local universities, colleges, and vocational high schools, we contribute to the development of qualified nationals to lead the future of Emirates Steel and the rapidly expanding industries of the country. So far we have succeeded in our Emiratization drive and our rate of nationalization, currently at 19%, stands witness to that. Up from a meager 9% in 2006, we plan to grow the number of UAE nationals within our workforce to reach 30% by 2017. The objective is to equip and empower future generations of nationals with the necessary expertise, competencies, abilities, and drive to develop and support the growth of the UAE industrial sector. Existing employees are provided with a Career Development Plan (CDP), which is a road map for their future target positions. UAE national employees also benefit from study leave programs, which allow both the individual and the company to plan ahead for their personal development.

How is Emirates Steel encouraging other Emiratis to enter the workplace?

Just like the oil and gas industry, compensation and skill development are two of the most important areas in which we are trying to encourage UAE nationals to join us. We also have many training programs available and joint cooperation with universities. This includes training and intake programs. The steel industry has not been here as long as the oil and gas industry; it is a new industry. There is a lot of potential for UAE nationals to grow, and there are big opportunities for individuals to get good jobs at technical and senior levels. This is also what we are trying to encourage others to do. We believe we have a number of advantages to inspire UAE nationals to come and join us. So far, we have been successful under this initiative and we have more than 400 employees who are Emiratis—the number is an indicator in itself.

What countries are you currently exporting to?

Our domestic market share increased in 2012 to approximately 60%. This has been achieved through targeted efforts to support key customers and by pursuing sales policies that assist in bringing stability to the local market. Apart from focusing on domestic markets, where we sell nearly 70% of our products, we have exerted sustained efforts in increasing rebar and wire rod exports to regional markets, with a year-on-year increase of 67%, our most significant export markets being the GCC states, followed by Southeast Asia, India, Pakistan, and Iraq, where we sell the remaining 30%. We have the capability to produce and sell a wide range of heavy and jumbo structural sections from 0.2 meters to 1 meter in depth. We anticipate that GCC demand for sections is currently around 1 million MTPA. This market is further expected to grow at 3%-5% per year for the coming decade. A significant proportion of our structural sections will be sold in the GCC market, while the remainder will be exported outside the region to Arab countries, Europe, America, Australasia, the Indian subcontinent, and Asia.

What major projects are you currently involved in? What market trends are you noticing in these projects?

Emirates Steel looks forward to produce and supply its products to companies involved in nuclear activities. In June 2012, the company was awarded a Quality System Certificate (QSC) as a Material Organization (MO) from the American Society of Mechanical Engineers (ASME) for the manufacture of concrete rebar. The company was the fourth rebar manufacturer worldwide to be awarded this certificate and the first in the GCC. This is a significant accomplishment for our company, and we expect the nuclear market to be a growing market for the use of rebar. With this issuance of a QSC to our company, we are now well positioned to service that growing market. Emirates Steel’s NQS was developed to supply products to nuclear projects and will be activated only for nuclear orders. We have noticed that there is a shift toward infrastructure projects in the UAE. The country therefore continues to enjoy sustained development and accordingly we believe there will be further room for growth in long products, even rebar, which mainly serve construction and infrastructure. On the other hand and in a welcome move by the industry, the government of Abu Dhabi announced this January that it plans to spend AED330 billion on development projects over the next five years. These and other ambitious economic development plans will give a major impetus to the steel sector in the UAE, with projects planned in the construction, railway, and oil and gas sectors set to drive the steel industry’s growth.

How does Emirates Steel support Abu Dhabi’s Economic Vision 2030?

The meteoric rise of the company has always been in line with the Abu Dhabi Economic Vision 2030, which maps out the government’s long-term plans for the diversification and development of the Emirate’s economy. Each step has been made to ensure that we grow in parallel to the sustainable economy of Abu Dhabi, making provisions for global competitors within the Emirate’s borders. As such, our ambitions run far and wide to become the leader in our area of expertise and in turn reduce reliance on the world for imports. The main goal behind Emirates Steel being established was to serve the downstream sector. Emirates Steel supports the diversification of the local economy, and wants to help support downstream industries, especially the smaller industries coming from the steel sector. Of course, we want to help create jobs for the UAE nationals, which is one of the main core areas the Abu Dhabi government has chosen to focus on.

What is your forecast for 2013?

The UAE is a very stable market and the government is injecting money into a lot of big projects. The government’s initiatives are going to enhance the economy. Emirates Steel is closely linked to the construction industry, which is performing very well at the moment. This year will be a reflection of 2012. Last year was a mature year in terms of numbers, and 2013 is expected to have a similar reflection. We are fully booked in terms of production and at present we are producing above capacity 24 hours a day, seven days a week.

© The Business Year – April 2013