Coega stainless steel plant in pipeline

Posted On Wednesday, 25 May 2005 02:00 Published by eProp Commercial Property News
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A NEW plan is being drawn up to site a stainless steel plant at Coega in Eastern Cape, with discussions under way to find an anchor investor for the $5bn project.


Property-Housing-ResidentialThe plant would be a major boost to Coega, and could become an anchor project for the port’s planned industrial development zone, given continuing uncertainty over the prospects for building a $2,2bn aluminium smelter there.

The steel project would involve twice the investment of the aluminium project, and would bring significant new employment to Eastern Cape.

If the stainless steel plant goes ahead, one way of helping to fund it could be through a stock exchange listing, according to sources close to the project.

London-based resources company Kermas, which recently purchased Samanchor chrome in a $469m deal, is one of the prospective participants in the Coega stainless steel project, as will be the Industrial Development Corporation and Bateman.

There will also be an empowerment shareholder in the consortium which, the sources said, could start operating next year. Discussions are under way with three global players in the stainless steel industry to recruit another international investor, who would provide both expertise and finance.

"It would be a modular project," said an industry source, who asked not to be identified.

"There would be a ferronickel smelter and a ferrochrome smelter, and the output from these two plants could be sent, still in liquid form, directly into the stainless steel plant.

"Initially, we could build the two smaller plants, with the stainless steel mill coming on stream at a later stage, with stainless steel production envisaged at 1-million tons a year."

The plant would produce stainless steel in raw form, mainly for shipment to markets in the Far East.

However, there are existing plans for downstream stainless steel production, and these factories could source stainless steel from the planned new mega plant, which would be one of the largest industrial investments in South African history.

"Officials from the Coega Development Corporation visited stainless steel facilities in Spain recently, to get an idea of the sort of project we are envisaging," said the industry source.

"We favour Coega as the site for the project, but we have also looked at Maputo and Dubai."

He said one big advantage of the project was that it was modular in design, with the ferronickel and ferrochrome plants being feasible at relatively low capital expenditure.

However, land would need to be obtained for the whole planned development before the initial stages of the project could be launched.

Electricity would be a key input, and Eskom would be asked to provide an attractive tariff.

"We will be using revolutionary technology — by using ferronickel and ferrochrome while it is still liquid, you save on transport and on energy costs," said the source.

He said that if the project consortium could be assembled soon, and the finance arranged, construction of the first phase of the project could begin next year "but it’s a 10- to 12-year project."

He said that part of the financing could be linked to the arms offset programme, and the project should also meet the requirements for various government investment incentives.

"The project will be hugely job creative, and Coega is a priority for government," he said.

Meanwhile, Alcan of Canada is still considering building an aluminium smelter at Coega, and there has also been interest in a similar project from Russian aluminium group SUAL, headed by South African executive Brian Gilbertson.

Last modified on Thursday, 26 June 2014 10:04

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