Nov, 7th, 2009

Oct, 12th, 2009

Leveraging on Sohar’s competitiveness to Oman competitiveness to Oman create a steel cluster in Sohar

demand analysis Mt of finished steel Unmet demand is likely to be supplied by steel imports. North Africa. Iran. Pakistan and India. unless additional capacity is developed 33 80 83 208 175 128 92 2008 Capacity Expansions 2015f Capacity Gap (imports) 2015f Demand New Demand 2008 Demand Supply (installed capacity) * Including GCC. MB 2020 Mena report. Source: IISI. ISSB. Vale Demand . Turkey.There is a significant market opportunity for MENA steel producers: a supply-demand gap of 30 Mt of finished steel MENA supply vs.

200 South Korea Oman steel consumption Thousand tones Base case Optimistic scenario 1.000 2006 2008 2015 (Potential) GDP per capita (US$) I Low steel consumption • Agriculture • Labor-intensive manufactures II Steel intensive • Construction / infrastructure • Vehicles / consumer goods III Steel reposition • Services • High tech Depends on industrial developments. Vale . GDP Thousand tones Oman 2008 Oman 2015 2008 1.000 50.000 60.000 20.000 40. for example: steel can be consumed internally and indirectly exported in the form of consumer goods Sources: EIU. IISI.000 UAE Steel Kg per capita 800 (finished steel) 600 Japan 400 Saudi Arabia China Oman EU-27 USA 2000 1000 500 200 0 0 Egypt Brazil India 10.000 30.Oman is in a steel intensive phase of economic development and is about to double its steel consumption Steel consumption per capita vs.

etc. vehicle bodies.) Overseas logistics Flats: Slab Plates HRC / CRC* • Cut / shaping • Welding • Steel sheets • Tin plate • Checkered steel sheet • Cut / Shaping • Welding • End product (home appliances. etc. etc) •Wires •Coils / dampers •Electrodes DR pellets Direct reduction iron (DRI) Longs: Bloom / billet Rebar • Cut / Shaping • Welding Sections • Cut / Shaping • Welding Wire Rod NON EXHAUSTIVE •Seamless tubes .) • End product (Construction structures. etc. shipping hull.Oman has the potential to play an important role in the steelmaking value chain Raw Material Primary iron Jindal Shadeed Steel making Sharq steel Rolling mill Sharq steel Service centers Heavy applications Service centers Manufacturing Al Jazeera Steel • Cut / shaping • Welding • End product (sewer covers. steel cans.) • End products (construction structures lattices. rails.

Competitiveness in today’s environment requires flexibility and innovation • Flexibility in approach: – Partnerships – Integration across the value chain – Synergies • Flexibility in production through traditional measures such as lean management • Innovation through the application of new technology to maximise efficiency and production Sources: The Boston Consulting Group .

2007 basis) > 3000 858 702 558 327 135 Raw Material (Pellets) Primary iron (DRI) Steel making (Semi-finished steel) Rolling mill (finished steel) Service centers Service centers (Heavy applications) (Manufacturing) Source: Steel industry McKinsey and Vale's experts on Steel division .Going downstream in the value chain adds value to the steel products Value addition through the value chain Prices for the equivalent to 1 Mt of steel product (US$ / t .

job generation is concentrated in the downstream Job generation in steelmaking value chain Job generation (number of direct jobs / million tons produced) per phase Cumulative job generation cumulative (number of job generated / million tons along the value chain) 1713 1. team analysis .213 1213 782 500 395 169 72 2 371 400 217 67 1 Raw Material (Pellets) Primary iron (DRI) 3 4 5 Steelmaking Rolling Service centers (Heavy applications) * Service centers (manufacturing) 6 Source: McKinsey and Vale's experts from Steel division.In the steelmaking value chain.713 1.

Metal Bulletin.5 Mt Note: Average values for each phase in the direct reduction / electric furnace production route Source: Vale.1 – 0. Clarksons. downstream should be a natural development Sohar position in the value chain Local footprint Create.5 . and there is a market opportunity. utilize “Harvest times” Attract. promote “Sowing times” Global footprint Typical scale (Mt) Iron ore / mining Logistics up to steelmaking DRI / Metallics Semi & Finished steel (long / flat) Service centers (Heavy aplications) Service centers (Manufacturing) > 100 Mt > 40 Mt 3 – 5 Mt 3 – 5 Mt 0.1 Mt 0. team analysis .Once scale is achieved.

tax benefits and incentives in Sohar SEZ Upstream Access to raw material Competitive logistics for bulk material Sohar is a Pellets hub.Sohar has all success factors to develop a steel cluster and offers a good investment climate. part of Vale's world class global supply chain Sohar provides economies of scale to bulk material logistics allowing the usage of large size vessels Low energy / power costs All gas & utilities infrastructure available Scale Land availability Exports are a platform for scale generation and combined with Oman domestic market provides scale for upstream development Sohar has available industrial land at a competitive price .

Sohar has all success factors to develop a steel cluster and offers a good investment climate. tax benefits and incentives in Sohar SEZ Downstream Access to consuming markets Proximity and strategic geographic position allows potential downstream producers to reach MENA´s market Access to competitive upstream production Depends on upstream production scale Competitive logistics for distribution Sohar has a port with full distribution capabilities. interconnection with roads and a railway project potentially linking it to Abu Dhabi All gas & utilities infrastructure available Oman has the lowest labor cost between GCC countries Sohar has available industrial land at a competitive price Low energy / power / labor costs Land availability .

Oman has invested US$ 12 billion and is moving towards the establishment of a competitive steel cluster in Sohar Actions already taken Competive bulk logistics US$ 12 billion invested on the development of Sohar Industrial Port Expertise provided to Sohar Industrial Port (Rotterdam port) Access to raw material Attracting a world class iron ore supplier (VALE) Establishment of a “virtual mine” in Sohar Distribution infrastructure in place in the Port of Sohar • Containers terminal • Road interconnection Already sustainable investments in general education and Access to consuming markets Labour engineering schools Source: Mckinsey .

Brazil and China. through exports.Conclusions • Steel is a platform for diversification and economic development – Several countries like Japan. the necessary scale to support a competitive steel cluster in Sohar – Many regions have gas availability. South Korea. but do not have competitive logistics – No other region. besides Oman has the combination of raw material and logistics . Taiwan. among others. established a competitive steel production platform to support their industrial development • Gaining competitiveness requires flexibility and innovation through: – Synergies and integration across the value chain – Application of new technologies to increase production • There is a market window of opportunity in MENA that can leverage.

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