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Saudi Arabian royal in steel mill talks

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Matt Chambers | September 02, 2009
Article from: The Australian

ASPIRING steelmaker Boulder Steel is forging a $US2 billion ($2.4bn) plan with a member of the Saudi Arabian royal family to build a plant at the port town of Gladstone in Queensland that would more than double Australia's steel exports.

For a company with a market value of about $80 million that has been trying to get a steel mill off the ground for more than 15 years, the scheme is a grand one.

Boulder, which started life as a West Australian gold exploration company 23 years ago, wants to finalise a $US800m, 2.1 million-tonne-a-year plant at Gladstone by the third quarter of next year and start exporting steel billets and blooms to a Saudi Arabian finishing plant in 2013.

If all goes well, a second $US800m stage to boost the Gladstone mill to 5 million tonnes a year is on the cards.

The partner in the Australian and Middle East plants is Arabia for Business Studies, which is owned by an undisclosed member of the Saudi royal family.

Boulder general manager Carl Moser said financing would probably come from the Middle East, but declined to say in what form or what equity stake his company would keep in the project.

Boulder, which spent most of this decade trying to develop a seamless tube mill in Ipswich, signed a memorandum of understanding with ABS in May after a search for partners to help it build the Gladstone mill.

Mr Moser said Australia was ideal for making semi-finished steel because of its relatively cheap power and abundant iron ore and coking coal.

"The labour cost component for producing steel billets and blooms is relatively low, so the higher labour costs in Australia don't impact that much," Mr Moser said.

He said that lower labour costs in Saudi Arabia would be an advantage for the finishing process.

"Finished products will be almost exclusively for use in Saudi Arabia, and in surrounding countries," Mr Moser said.

"They've committed themselves to very big infrastructure projects, including railway lines in the eastern part of the country."

Boulder is in discussions with Australian miners to secure the 3million tonnes of iron ore and 1.5 million tonnes of coking coal needed each year by the plant.

Analysts were sceptical of the project, pointing to the failure of all other recent steel plant proposals in Australia.

They said shipping iron ore from Western Australia's Pilbara region to Gladstone would not be much cheaper than shipping it to China or Japan.

The viability of any steel mill could also be constrained by the Rudd government's planned emissions trading scheme, which BlueScope chief executive Paul O'Malley has said may cripple the industry. Queensland Premier Anna Bligh last week hailed the project as having the highest environmental standards in a project of its kind.

Power would come from a proposed co-generation plant to be built by the Queensland government, with excess heat and gas from the steel mill returned to the power plant.
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