Basrah State Company for Iron & Steel
Note: All currency figures are in 000's of Iraqi Dinars unless otherwise noted.
1. General Information
| Company Name |
State Company for Iron & Steel |
|
Sector |
Engineering |
| Brief Description |
DRI, structural sections, spiral pipes and reinforcement bars. Company
started sponge iron plant in 1964 and steel plant in 1978. |
|
Revenue in 2002 (Iraqi Dinars '000s) |
29,446,769 |
|
# of Employees |
4,290 |
|
Annual Employee Salaries & Bonus |
5,730,546 |
|
Headquarters Address |
Basrah, Khar Al Zubair (15km from port) |
2. Company Highlights
- Massive looting to all facilities, which is ongoing. $20-30M USD
in damages. May be up to one year before production could be
restarted.
- Pipes are in particular demand from Oil Ministry, who has asked
that this Company receive priority attention. The project has been
allocated to Um Qasr plant. Reject pipes can be used for water and
sewage.
- Pipes are critical to Oil Ministry's goal of multiplying oil
output over next couple years. Estimated needs of 250K tons/year
indefinitely. Would provide $25M USD in annual value added revenue
to Company. Oil Ministry willing to purchase raw materials.
- Local production costs for pipes, including shipping, are
$200/ton cheaper than imports (may be a result of subsidies,
though).
- After removing subsidies, Company believes production should
remain competitive. However, it may not be fully considering value
of subsidies it historically received.
Company received scrap metal free of charge, received almost $10M
USD in import subsidies, and used 86mw of electricity in 2002 for
virtually no cost. Also used 68 million m3 of natural gas at
virtually no cost. Unit cost without these subsidies needs to be
studied.
- Has new pipe plant worth $20M USD in storage in Germany. Will
increase the Capacity from 80K tonsto 250K tons/year. Will cost $8M
to transport and erect.
Local advantages: (1) transporting coils is expensive (2) Importing
of finished pipes would be logistically difficult, and (3) necessary
coatings are made of local materials.
Has $1M USD in a Jordanian account, currently frozen by Jordanian
government.
11 page report by local Ministry official on strategy for developing
this Company on file.
- Ministry of Oil has an MOU for steel coils to the value of $44M
to be converted into pipes at this location.
- Part of the machinery is Spanish made and it may be possible to
rehab through Spanish funding.
- Company has between $50M and $80M worth of raw materials (scrap
metal and iron sponge pellets, with interested buyers.
- Allocated $500K USD for 2H 2003 operating budget and provided
with zero mw off of grid.
|
3. Facilities
|
Name |
City |
|
Damage % |
Power Needs |
|
Pipe Plant |
Basra |
spiral $22mil 3 lines build 1975 |
80% ($6M USD to repair) |
|
|
Pipe Plant |
German storage |
|
0% |
|
|
Steel Structure Plant |
Basra |
Iron and steel $496M paid in 1979 |
$7M USD to repair |
85mw |
|
Value of All Plant & Equipment Before War, and Initial Purchase Dates
and Prices for Major Items |
Total investment was $550M USD not including real estate costs. |
4. Products
|
Product Name |
Unit Measurement |
Design Capacity |
Available Capacity |
2002 Production |
2002 Revenue |
|
Bars |
tons |
240,000 |
60,000 |
|
|
|
Sections |
tons |
160,000 |
|
|
|
|
Spiral Pipes |
tons |
100,000 |
60,000 |
4,400 |
|
|
New Spiral Pipes Plant in Storage |
tons |
250,000 |
0 |
|
|
|
Description of Importance of Products to Other Iraqi Industries |
Ministry of Trade main bars and section
Pipes for Ministry of Oil and Water Board |
5. Customers
|
|
Customer Name |
2002 Revenue |
Subsidized (Y/N) |
Products Sold to Customer and Unit Pricing |
|
|
SC for Construction Materials (Min of Trade) |
|
|
Sections and bars at 400K ID/ton |
|
|
Iraqi Military |
|
Y |
Artillery pieces at 325K ID/ton |
|
|
Oil Ministry |
|
|
Spiral pipes at 450K ID/ton |
6. Suppliers
|
Supplier Name |
2002 Purchases |
Subsidized (Y/N) |
Products Purchased and Unit Pricing |
|
Primier (Turkey) |
$3,214,250 USD |
Y, thru MOU |
Rolling mill rolls |
|
Unnamed Syrian Company |
$1,275,000 USD |
Y, thru Protocol |
500 tons of graphite electrodes |
|
Red Found (Russia) |
|
|
500 tons of graphite electrodes |
|
Sigri (Germany) |
|
|
|
|
Graphite from India |
|
|
|
|
Sorpa (Turkey) |
|
|
|
|
Didier (Germany) |
|
|
|
|
Viecher (Austria) |
|
|
|
|
Manesman (Germany) |
|
|
|
|
MCC (China) |
|
|
|
|
Mica from Turkey |
|
|
|
|
Mitsubishi - Japan |
|
|
|
|
Esab (Sweden) |
|
|
|
|
Silvana (Turkey) |
|
|
|
|
Current Payment Terms From Suppliers |
25% advanced payment, 15% at time of opening the L/C. Remaining 60% when
products are received. |
7. Imports & Exports
|
2002 Import Markets for Raw Materials |
Extensive. See list of suppliers. Total cost of imports of $220-$260 USD / ton. |
|
Potential Import Markets in Free Market |
|
|
2002 Export Markets for Finished Products |
None. |
|
Potential Export Markets in Free Market |
Gulf area, especially the medium sections. |
8. Competition
|
Description of Competitive Situation |
Main competitors were imports brought in by SC for Importing
Construction Materials (MOT). |
|
Market Share Description |
Company was covering no more than 5% of local demand. But at full
capacity prodution can cover 30%. |
9. Summary of War Damage & Looting of Property & Equipment
|
Description of Damage |
$7M USD of looting damage to control equipment and electrical work at
steel structure plant. Separately, $6M USD damage to pipes plant. Power
generators also damaged. |
|
Current Operating Status |
Not operational. Will take 5 months to one year to repair damage and
begin operations, maybe up to 1 year. Will take 9 months to erect and
start new pipe plant. |
|
Immediate Property & Equipment Needs To Restart Operations |
Must repair most damage described above. |
|
Total Cost to Return to Pre-War Condition |
$20M USD for both factories, and growing. |
10. Inventory Status
|
Raw Material Status |
Iron ore and Steel scrub are available for 1year production. 1M to 1.2M
tons of scrap steel at facilities (which it received free of charge). An
additional 500,000 tons are scattered around the country. 500K tons of
iron ore pellets worth $27M USD. $1M worth of bricks and electrodes. |
|
Months of Material Supplies & Production Rate |
Scrap metal and iron pellets would last 3 to 5 years under normal
production rates. |
|
Immediate Raw Material Needs |
Immediate need for import of graphite electrodes, ferro alloys,
refractories & spares. |
|
Finished Products Supply (Units and Value) |
Company could sell scrap metal and iron sponge pellets for over $50
million, maybe as much as $80M. Also has $1.5M USD in other finished
goods. |
11. Fuel & Electricity Needs
|
Description of Fuel Needs |
5 mcf of natural gas |
|
Description of Electricity Needs |
For two furnaces, need 85 mw |
12. Other Needs to Restart
|
Working Capital Needs |
Rebuilding cost is more relevant than working capital |
|
Security Needs |
Yes, looting is still a major issue as of 7/12/02 |
|
Other Needs |
|
13. Strengths, Weaknesses, Opportunities & Threats
|
Description of Strengths |
Availability of scrap metal, cheap labor and energy, availability of
complete infrastructure and harbor facilities for import & export, good
technical staff. |
|
Description of Weaknesses |
Old equipment and production technology make operating costs
uncompetitive. |
|
Description of Opportunities |
To upgrade the production capacity with modern equipment and add new
longitudinal welded pipeline to serve oil and gas industry (8 - 24")
200k to 250k meter /year. |
|
Description of Threats |
Looting and ongoing security threats. |
14. Long Term Strategy
|
Description of Strategy |
Need to erect new pipes factory and upgrade steel structure factory.
Total renovation on property and equipment would cost $150M USD. This
would allow output to increase to 600K tons/year (over $200M USD in
annual revenue). See reports on file for full description of strategy. |
|
Potential New Products |
ARW pipes (similar to spiral pipes). Longitudinaly welded pipes. |
|
Potential Partnership Opportunities |
No partnerships identified by mgmt, but willing to partner with
manufacturing and/or marketing companies. |
15. Revenue and Costs Overview
|
Description of How Pricing Was Set |
Cost of production + 30% profit. In free market, Company can sell
merchant steel at $275 USD per ton, bare pipes at $600, anand coated 3
layer P.E. at $700. |
|
Description of Production Costs |
Labour & raw materials (20%), Utility (3%), depreciation (0.5%), Rental
interest (1%), other expenses (0.25%) |
|
Potential for Profitability in Free Market |
Depends on ability to invest in modernizing production equipment. |
| |
Two natural gas-based direct-Government began discussions with foreign
companie sreduced iron units were listed with design output
capacitiesaimed at production-sharing agreements for directof 543,000
t/yr and 950,000 t/yr of sponge iron, normallyparticipation in the
planned expansion of the oil sector .having a content of 90% to 92%
iron. Steel facilities wer eThrough 1995, these companies were from
France, Italy,described as including four 70-ton electric arc furnaces. |
Source: Coalition Provisional Authority
Basrah State Company for Iron & Steel
Iraq
Reconstruction: Important Links and Information
Iraqi Steel
Industry Overview
Iraqi Consumption of
Steel Products
Total Imports
of Flat Steel Products to Iraq in 2002
|
