JFE of Japan plans to spend USD110 mln to build a 7 mln tpy iron ore pellet plant

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Nov 2008

Steel Corp, the world's third-largest steelmaker, said it planned to spend USD110 million to build a 7 million tonne-a-year iron ore pellet plant in Oman jointly with Bahrain's pellet maker Foulath. Shares in JFE rallied after the news, first reported by the Nikkei business daily, closing the day up 7.2 percent at 2,315 yen , outperforming the steelmaker index's 5.7 percent rise.
Low-grade iron ore is usually pelletised for use as a feed for blast furnaces. The new plant will be JFE's first iron ore pellet plant abroad, the company said.
JFE Steel, the core unit of JFE Holdings Inc, said it will take a 40 percent stake in the new company, which will be capitalised at USD280 million. Foulath, half owned by Gulf Investment Corporation, will take the remaining stake.
Of the total investment costs of USD700 million, 60 percent will be financed by bank borrowings, JFE said.
JFE said the project is part of its attempts to increase stable and long-term supplies of low-cost raw materials.
Japanese steelmakers, including JFE and Nippon Steel Corp currently source nearly 70 percent of their top-grade iron ore needs from major Australian producers BHP Billiton and Rio Tinto.
The Oman plant will start operations in 2011. JFE will use about 3.5 million tonnes a year of the plant's output to cover nearly 10 percent of the total amount the firm needs.
The rest of the pellets will be sold to steelmakers in Asia and the Middle East.
Japanese steelmakers recently bought 40 percent of Namisa iron ore mine in Brazil for USD3.12 billion to diversify iron ore supply source. Nippon Steel said it plans to produce pellets using the Namisa iron ore.

Source: Reuters