The recovery of the steel industry has been at the top of the government’s agenda since the implementation of the first five-year development programmes in the early 2000s. Massive investments in housing and transport infrastructure resulted in a sharp increase in the nation’s needs for steel products, which quickly outstripped local capacity.
State Of Play
In 2014 Algeria’s domestic steel output was essentially produced by two major steel plants, including one in El Hadjar, jointly co-owned by the public steel firm Sider (51%) and Luxembourg-based ArcelorMittal (49%), with a capacity of 2m tonnes per year. However, due to persistent labour disputes and underinvestment, production has steadily declined from 1.3m tonnes in 2007 to 300,000 tonnes in 2014. The second plant is managed by Tosyali Industrie du Fer et de l’Acier Algérie, a subsidiary of Turkey’s Tosyali Holding. Located near Oran, it began operations in 2013 and has a capacity to produce 1.25m tonnes of liquid steel per year. As such, with an estimated output of 1.5m tonnes in 2014, domestic raw steel production has thus far not been able to keep up with the fast-growing domestic demand.
Up & Coming
However, authorities’ efforts to boost local production started to pay off in 2015, with a series of new investments coming on-line. In June 2015 Tosyali inaugurated a second steel production plant in Bethioua, near Oran, expected to produce 700,000 tonnes of wire rods annually, equivalent to 45% of annual imports. In addition, the company is constructing a third steel production unit, which is due for completion by 2017. It has an expected annual capacity of 2.5m tonnes. The total investment of €1.6bn is excepted to boost Tosyali’s production in Algeria to 4m tonnes of steel products by 2017.
Second, in June 2015 Italy’s industrial group Danieli and Algeria Qatar Solb (a joint venture 51% owned by Algeria’s public company Sider and 49% by Qatar Steel) signed a partnership to construct a new high-tech steel complex in Bellara for an investment of €1.8bn. The facilities, which include two steel mills and three rolling mills, should produce 2m tonnes of steel in a first phase, before doubling output to 4m tonnes by 2019. Perhaps influenced by a global spike in coke prices, both new facilities have opted for direct-reduced iron, an alternative technology that requires the input of iron and natural gas instead of coke.
It also offers the opportunity for Algeria to secure and consolidate its local supply chain through the development of its domestic iron ore production in Tindouf. To this end, Feraal – a new entity jointly co-owned by Sider, Manal and Sonatrach – will be in charge of producing sponge iron via the exploitation of the large iron deposits in Gara Djebilet and Mecheri Abdelaziz.
In mid-2015 ArcelorMittal transferred all of its minority shareholding in ArcelorMittal Algeria, ArcelorMittal Tébessa and ArcelorMittal Pipes & Tubes Algeria to the Algerian state as part of its regional strategy to streamline its portfolio of assets. As for the El Hadjar complex, it is expected to resume production in 2015, under the impetus of a new €920m development plan aimed at upgrading existing infrastructure. The project aims to reach a production of 2m tonnes by 2017, according to the Ministry of Industry and Mines.
Once completed, all these developments should result in an additional 6m tonnes of steel production capacity by 2017, which will allow for Algeria to cover 100% of its needs in steel products and become self-sufficient in steel production by 2019. These developments have had an instant knock-on effect on the trade balance, with steel and iron imports dropping by 30.64% from €1.4bn in 2014 to €990m over the first 10 months of 2015.
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