Bahrain-based Gulf Finance House (GFH) and several other Gulf institutions have formed a strategic partnership to set up a steel conglomerate embracing both upstream and downstream ventures.
The holding company HadeedMENA is looking at creating capacity of 8 million tonnes per year (tpy) in the next four years and eventually 12 million tonnes, serving 15 per cent of the Middle East and North Africa’s needs, GFH chairman Essam Janahi announced at a launch event.
The investment will have an end-value of $5 billion, he said.
HadeedMENA would be officially established by the end of September while acquisitions and tie-ups would be decided from October onwards.
 “HadeedMENA will operate in several locations across Asia and Africa serving both upstream and downstream requirements in the marketplace,” said Janahi. “Upstream production will be located in countries rich in iron ore and coal, while downstream activity will focus on countries with exceptionally high demand across the GCC and the MENA region.”
Likely locations for the upstream ventures would be the Indian Subcontinent, Africa and Yemen.
Discussing objectives, Janahi said: “We intend to differentiate ourselves by taking a ‘top to bottom’ approach to the value chain. It will focus both on upstream production for steel billets as well as downstream manufacturing for steel rebars and structures.”
GFH, which conceived the conglomerate, has teamed up with strategic partners Emirates International Investment Company, Khaleej Development Company, Q-Invest and First Energy Bank and technical partners and market advisors MN Dastur and Gulf Organisation for Industrial Consulting.
The consumption of steel and steel products in the Mena region was estimated at 35.4 million tonnes in 2006 although the region produces only around 24 million tonnes.
The Middle East is said to account for $2 trillion of investments in the construction and real estate sectors stemming from enormous liquidity created by high oil prices.
Janahi said market studies showed the demand supply gap was projected at 10.2 million tonnes by 2020 in the Mena region and that the new company aimed to capture 10 per cent of the marketing share by 2012.
The plan was to have initially $1.25 billion coming as private placement from founding members plus some others, Janahi said.
The official said the founders were interested in an IPO but that was not a critical issue at the moment. An IPO would entail obtaining approvals from the concerned authorities. What was important at the present time was to “capture the opportunity.”