Algeria targets self-sufficiency in steel

There are a large number of capacity-building projects under way in Algerian steel, which has become a thriving subsegment within the country’s industrial landscape. Forecasts indicate output will increase by 7m tonnes to 12m tonnes per annum (tpa) by the end of 2020. A milestone was reached in 2017 with the start of operations at the Algerian-Qatari Bellara steel complex in the wilaya (province) of Jijel. Valued at $2bn, the facility spans 200 ha and has the capacity to produce 2m tpa of steel products, including rebar and machine wire. Production is expected to scale up to 4m tpa once the facility, 80% complete as of September 2018, is fully operational.

Facilitating Growth

The Bellara project and wider capacity expansion is expected to make Algeria largely self-sufficient in steel and, consequently, drastically downsize imports of it. “Developing capacities in the steel industry is very strategic,” Belmiro Torres Couto, managing director of metals producer Martimetal, told OBG.

The government’s protectionist policy, which included import quotas in 2016 – notably for rebar and wire rod – of 2m tonnes and 300,000 tonnes, respectively, helped stimulate investment in domestic steel facilities and also led to a fivefold increase in steel billet imports in 2017 to 1.8m tonnes, according to the International Steel Statistics Bureau. However, due to continuing expansion, billet imports are also expected to fall sharply by 2020. “Import restrictions have been a great opportunity to increase production,” Couto told OBG. “Algeria has the potential to become a steel industry leader.” Another factor giving Algeria a competitive advantage is low energy prices, as energy accounts for a large share of steel production costs.

Capacity Building

Two major players in Algeria’s steel industry are the state-owned producer Imetal and Turkish firm Tosyalı. Both have major expansion projects under way or in the pipeline. In May 2018 Tosyalı inaugurated a new production unit at its steel plant in Béthioua, near Oran. First established in 2013, the plant is undergoing four expansion phases that will increase its capacity to 2.5m tpa. Meanwhile, Imetal is in the midst of a renovation programme at the El Hadjar steel complex in Annaba. Launched in 2015, the project aims to bring liquid steel production at the facility back up to 1.2m tpa. According to press reports, output was expected to reach 720,000 tpa by the end of 2018.

Adding Value

The steel industry’s expansion is expected to benefit wider industrial development by supplying key segments, such as automotive manufacturing or construction, with raw materials which would otherwise be imported. In order for this to happen, Couto argues that the low energy prices the steel industry benefits from should be reflected in the domestic selling price to benefit steel processing industries down the chain. “Algeria can be a global steel processing power. All sectors should benefit from the steel industry’s competitiveness,” he told OBG. “The state should have a policy that gives processors the advantage.”

In addition to meeting domestic demand, which remains modest, Algerian steel could also have interesting export prospects, due to rising steel prices rise on the back of increased demand from China and India. For Bellara, however, the first export market will be Qatar, its main investment partner.

Challenges

A key challenge facing the local steel industry is upgrading the quality of its output. Algeria mainly produces basic steel at present, which is unsuitable for some applications, such as metallic carpentry for major construction projects, like airports or football stadiums. “Carpenters are still waiting for the improvement of steel and more sophisticated products,” Couto told OBG. “Right now, diversifying production towards more complex products for construction materials is very important.”

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The Report: Algeria 2018

Industry & Mining chapter from The Report: Algeria 2018

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