JFE Steel to Construct Pellet Plant in Oman

JFE Steel, Japanese major steel maker, announced on Friday the firm and Foulath (headquartered in Bahrain) have signed the Memorandum of Understanding for jointly establishing a pelletizing plant in Sultanate of Oman. JFE and Foulath will establish a joint venture company to produce pellets at 7 million tonnes per year with the investment of about US$ 700 million and will start operation in 2011. They will judge the running of the project until March 2009. JFE will secure pellet when the firm expects to increase using pellet due to decreasing high quality iron ore resource.

JFE will hold 40% of the JV’s shares and Foulath will hold 60%. JFE will take 3.5 million tonnes per year for 20 years. Other pellets will be sold to direct reduced iron makers or integrated steel makers in Middle Asia or Asia.

Foulath has a subsidiary which produces pellet, and has technology for pellet production and long term contract for iron ore for pellet. The Salalah Free Zone, where the pellet plant will be constructed, has developed port infrastructure, easy access to necessary fuels and application of the long-term tax incentive for the corporate tax and taxation on dividends.

Major iron ore suppliers secure high quality iron ore resource and plan the mine development. On the other hand, budding iron ore developers are mainly aiming the development for low quality iron ore. Consequently, the corresponding figure of powder iron ore for pellet is expected to increase.