Arab Banking Corporation (ABC) has been mandated to underwrite a US$555mn financing facility for Bahrain’s Gulf Industrial Investment Company (GIIC). The money will help finance GIIC to more than double the output of its iron ore pelletising plant at Hidd Industrial Estate and carry out major infrastructure work.

Initially the plant will be upgraded to increase production of iron ore pellets from the current 4.6mn tons capacity to 5mn tons in a project which will cost US$15mn and should be completed by the end of this year.

The company then plans to build a second pelletising plant along side the existing facility with an additional capacity of 6mn tons a year.

Two international contractors, Kobe Steel and Siemens have been shortlisted for the work, which will include stockyard and jetty extensions and should be completed towards the end of 2009.

In line with the expansion, the company has signed a 20-year contract with MMX of Brazil for the supply of 6.5mn tons of iron a year, with an option to increase this by a further 6.5mn tons in 2009.

Ali Basdag, chief executive officer of GIIC, says steel consumption in the Middle East has been growing at a faster pace than production, driven by a boom in infrastructure and real estate.

Growth in demand for pellets was estimated to rise by 17.5mn tons a year between 2006 and the end of 2008 and then increase by a further 10.4mn a year between 2008 and 2012.

The announcement was made at a commemorative ceremony yesterday to mark ABC’s successful syndicated debt financing of US$153mn for United Stainless Steel Company (USCO).

ABC was the sole underwriter and book runner of the facility which will be used to partially finance the construction and operation of a 90,000 tons per year cold rolled stainless steel mill in the Hidd Industrial Area. USCO will be the first cold rolled stainless steel producer in the region. Production is scheduled to start in the second quarter of this year.

ABC raised the US$153mn with a syndicate of regional banks but expects to have to include global banks in its efforts to raise US$555mn for the GIIC expansion.