Saudi Arabia's only manufacturer of high-carbon steel products is going ahead with an expansion at its 40,000-tonnes-per-year Jubail plant.

National Metal Manufacturing and Casting Company marketing manager David Massey says the expansion is designed to increase the wire drawing capacity by approximately 8,000 tonnes, which will be used to increase capacity in existing products and broaden the size range in others.

Massey adds that a new 300 tonnes per year unit for producing self-drilling screws, which was operating on a trial basis earlier this year, is now up and running and operating with normal production. "Minor problems were experienced with the initial market offerings, all of which were quickly corrected," he says, adding that the product has been well received, orders have kept pace with production output and demand in the domestic market is expected to utilise all the production capacity available.

The principal users of the product are contractors and steel erection companies who use the screws to fasten cladding directly to the structural steel, without the need to pre-drill and tap.

The company plans to set up its own specialist mill to produce raw materials to ensure availability at crucial times and cut costs in its plant operations at Jubail.

The mill to produce raw materials is still in the contemplation stage and could take up to three years to materialise, says Massey. The new mill could either be a joint venture or an enterprise launched from within the company's own resources.

Massey says that while there are no major problems in terms of raw materials, sudden unexpected demand does pose problems from time to time.

"To solve these problems the company is now contemplating a manufacturing facility in the form of a specialist steel mill to produce its own raw materials," he says. He visualises a capacity of 500,000 tonnes per year for the new unit.

National Metal Manufacturing and Casting Company is a self-contained wire drawing plant specialising in high-carbon wires. Founded in 1990, the company is a private joint stock establishment with a capital of SR100 million ($26.67 million) and with National Industrialisation Company in Riyadh as the promoter and major shareholder.

The plant is a fully integrated manufacturing unit with flexible production capability and fully equipped state-of-the art laboratory facilities. The processes include wire rod pricking, wire drawing, annealing, galvanising, stranding, cold heading, heat treatment and electroplating. The plant was set in collaboration with Voest Alpine of Austria and the machines are European in origin.

The Jubail factory manufactures products in two main groups, the first of which contains the following items: Prestressing concrete strands (low relaxation) used for prestressing concrete slabs and beams and also for on-site post-tensioning applications; spring wires used for bedding and seating applications; high-carbon galvanised wires and strands used for reinforcing high-voltage overhead conductors and low-carbon galvanised wire used primarily for cable armouring and fencing applications.

The second group of products contains the following: High-tempered and mild-steel bolts, welding wires for continuous welding application, hardened steel nails for concrete fixing, and pallet nails and drywall ring shank nails.

"Almost all products have found wide acceptability in both the local and export markets," says Massey. "The prestressed concrete strand is a particularly strong product and sold in all export markets. The split between export and domestic sales is 60-40 in favour of exports. Further expansion in export markets is not envisaged because of unattractive price levels currently prevailing in these markets."

The official observes that while sales volumes have been growing rapidly, profitability has declined in common with global price levels for steel and steel products.

"The company faces intense competition both in the domestic market and especially in the export markets from world-class competitors," acknowledges Massey. "The absence of antidumping legislation in the Gulf and Middle East markets is an ongoing problem for local manufacturers shipping products outside their own national borders."

Commenting further on market conditions, he says problems of market price levels are not going to go away in the short term. Developed countries have antidumping legislation in place. The US, for example recently enforced legislation against steel producers dumping their goods in that market. Similar legislation, he notes, would ensure fair competition in the GCC and Middle East markets. Some governments assisted exporting companies by offering export credit guarantee insurance, which allowed local companies to offer extended payment terms to customers without the need for letters of credit. A similar programme in the GCC states would be of significant help to local exporters, commented Massey.

Most of the competition that the company faces is in low-carbon steel products, while the company holds sway in high-carbon steel. The competition mainly comes from Europe, Thailand and Indonesia.

Massey said there had been a slowdown in the release of projects in the public sector in the first half of this year and those released were behind schedule.

The first quarter was foreseen to be abysmal due to the holidays; however the expected pickup in the second quarter did not happen.

In a comment at the end of the first half, he said volumes for the year 2001 would be much the same as last year but with significant price erosion, which would significantly affect bottom-line results. At the time, he termed the outlook for the second half of the year as positive.