The share of the private steel companies in the total Arab steel production which came close to 21 million tons in 2006 has constituted a positive development strengthening the ability of these companies to have a peculiar role in the development of this industry. The share of the private sector accounted for about 67% of the total production of finished products. This share is apt to increase during the next years influenced by two basic factors ; the first is that most of the future steel projects will be set up by a private capital which has found in being introduced into this industry a good investment opportunity securing a financial return the presence of which has been strengthened by the increase of the prices of the steel products up to unprecedented levels; but the second factor is listed within the expansion and merger operations carried out by the world steel companies, which is a strong motivation to enter into such alliances in which the local companies have found a solution to cope with some problems related to financing and to introducing new technologies.
It would perhaps be worth noting that the companies which have taken this direction more rapidly are the companies which had originally been state-owned companies, such as Al-Hadjar Iron and Steel Complex in Algeria which is considered one of the largest iron and steel complexes at the Arab level, as Mittal Steel had acquired 70% of the capital of this complex as well as SONASID in Morocco which entered into a partnership with Arcelor by 50%. The results achieved for these companies which had entered into such alliances have encouraged the other companies to think of entering into similar operations, but what would delay entering into such operations are the good situations through which the steel industry is passing, which have been positively reflected on the level of the general activity and profitability for most, if not to say all, Arab steel companies.
It would also be more worth noting that the private sector companies are trying to strengthen their positions not through merging with the world companies but through both the horizontal and vertical expansion and diversification of products. Also the expansion conception is no longer confined to the geographical place where the company is located but it has taken a new appearance based on expansion across the geographical borders within which the company is located to other places. This spreading has recently been announced by some Arab companies like Ezz-Dikheila in Egypt which is planning to set up a steel mill in Algeria with a capacity of 1.5 million tons per year of long products as well as Al-Tuwairqi Group which is planning to set up a number of iron and steel projects in a number of Arab countries in addition to their projects which have extended outside of the regional borders of the Arab world.
All of this confirms a significant fact, the steel industry has begun to constitute one of the most important investment opportunities for the Arab capital, not the governmental one only, but also mainly the private capitals which used to see in entering into the steel industry a sort of risk, especially that the steel industry is considered among the capital-intensive and strongly competitive industries and that its return needs more years than the manufacturing industries the payback period of which is rapid.
However, despite this rapid development in the direction of the Arab private sector entering into the field of the iron and steel industry, two key points must be recorded; they are:
Firstly : The private sector is still apprehensive of entering into investment in the fields connected with providing the necessary raw materials for this industry, in particular the metal ores which constitute one of the rings of the permanent success of this industry.
It would be necessary to have a look at the new project in which some of the state-owned Arab iron and steel companies are shareholding such as the Saudi Basic Industries Company (SABIC) and Qatar Steel in co-operation with SNIM company in Mauritania and the Australian Sphere company. This project the cost of which amounts to about 1.5 billion dollars concentrates on the Mauritanian iron ores for the purpose of producing the iron pellets used in the Direct Reduction with a capacity of 7 million tons per year for a term extending for thirty years.
The second thing which must be given a special attention by the private companies is the Research and Development (R&D) because the strategy of competition and quality require companies to be attentive to innovation which cannot be achieved without research and development
We have begun our talk on the share of the private sector companies in the volume of the Arab steel production, but what is more important, which must be concentrated on through the new projects, is increasing their share not only in the total production but also in the quality of the products and producing high quality products as well as supporting setting up new steel products consuming industries.
The bet of the future is for those who produce more but produce better.