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3. Objectives and scope of the study
3.1 Objectives of the study
The objectives of the study are to establish the technical, financial and economic viability of setting up an integrated steel complex in Abu Dhabi.
In the conditions of Abu Dhabi, an integrated complex will necessarily involve part or the totality of the alternative "solid route to steel" ie direct reduced iron from high grade iron bearing materials, (high grade iron ore, pellets, scrap iron or any combination of the three), steel making by the most appropriate process (electric arc furnace or energy optimizing furnace), continuous casting, hot rolling, & production of construction steel i.e. wire, concrete rod, long products of small or medium sections.
However, if an integrated process is not deemed possible because of technical, economic or any other reason, a semi-integrated process, starting from the end-product, may be considered and then, semi-products produced in another steel plant, more integrated up-stream, would be necessary eg billets.
These important aspects will be addressed in the first part of the study, which is devoted to establishing a market & strategy of development.
3.2 Scope of the study
The study will address, but not be limited to the following aspects:
A. MARKET SURVEY
1. Detailed and realistic market study of construction steel in the UAE and neighboring countries. Computation of present and future demands of construction steel in the country and exploring the possibility of exports. The market forecast will be made for a 15 years period i.e. 0-5, 6-10, 11-15.
2. Study of similar projects which are existing, planned in the Emirates and or in the course of construction in the area of influence (neighboring countries) and their repercussions.
3. International competition, marketing systems in UAE and other neighboring countries together with a study of price fluctuations in the recent past, present position and future prospects.
4. Detailed study of suitable sources of raw materials required for the project, their present and future prices.
B. ENGINEERING STUDY
We will undertake this study to identify and evaluate the technical feasibility of all plant and equipment, as well as all industrial infrastructures and installations, that are necessary for the project.
The overall feasibility study will be based upon an agreed industrial structure and the resulting basic technology options, the market study and the resulting product mix, and on the supply and location of main inputs required.
Our study will address the following aspects:
1. Determination of appropriate site including land and soil conditions port conditions and material handling, township, access roads, power supply, water supply, gas supply, back up industries, manpower and environmental protection.
2. Determination of product mix to be made.
3. Determination of the most appropriate capacity of the complex together with its various plants, equipments, industrial infrastructures and installations.
4. Selection of manufacturing process and assessment of design alternatives. Consideration will also be given to the technical changes likely to occur over the next few years which could affect any choice of plant or equipment.
5. Preparation of principle process flow sheets indicating main input materials and products.
6. Identification of all effluents (solids, gaseous and liquid) and of their treatment to protect the environment. Similarly, identification of necessary plant safety measures to avoid risks & hazards to health and environment.
7. Determination of main input materials and utilities including all raw materials, consumables, fuels, process gases, water, etc...
8. Drawing up an overall basic plant layout indicating location of major plant units.
9. Preparation of plant & equipment lists identifying major items within each process unit and their duty specification.
10. Determination of the necessary infrastructure, materials off-loading and loading terminals, material handling and storage facilities, staff and labour housing, necessary community recreation facilities, power water and sewerage systems etc..
11. Budget estimate prices for supply and erection of main plant & equipment items, civil works and buildings, administrative buildings, housing, necessary infrastructures etc ...
12. Determination of a budget estimate for working capital requirements.
13. Preparation of a design, procurement and construction programme to determine the overall plant commissioning date.
14. Preparation of production plans for each year of operation starting from commissioning and up to date of attaining full production capacities.
15. Preparation of labour and personnel schedules for various sections of the plant and the project as a whole with their training programme.
C. FINANCIAL AND ECONOMICAL EVALUATION
The objective of the evaluation is to assess the financial and economic aspects of the project.
The evaluation will be undertaken on the basis of realistic capital structure for the implementation of the project.
1. Estimate the revenue resulting from the sales of the agreed product mix. An average long term sales price for the output of the plant will be established on the basis of known historic statistics, for a standard product representative of the product mix. Levels of variation of the average sale price andof the standard product will be defined and agreed upon.
2. Detailed estimation of total production costs.
3. Estimate earnings forecast for 10 years from commissioning year and determine returns on capital invested.
4. Determination of cash flows starting from construction year and extended up to (10) years from commissioning date.
5. Determination of internal & external rates of return.
6. Determination of pay-back periods, straight and with discounted values of cash flow.
7. Determination of break even points, straight and with discounted values of cash flow.
8. Determination of net present worth value as a function of selected present worth factors.
9. Determination of the economic rate of return of the project, based on reference costed inputs (ie without taxes & tariffs) & value added derived therefrom.
10. Sensitivity analyses of the above evaluation criteria to variations of critical parameters.
11. Suggest ways and means for financing the project.
4. Method of work and plan of execution of the study
4.1 General approach
Our approach as depicted in exhibit 1 will be to address the following four aspects:
- market and strategy of development
- industrial structure and technical details
- capital and operating cost estimations
- financial and economical evaluation.
All previous studies to date on the project of an integrated steel plant in Abu Dhabi or in the region, will be required from GIC at the beginning of the study. These data will be collected and reviewed during a visit to Abu Dhabi of the team of key experts.
These 4 aspects and the basic data required are briefly described hereafter.
4.2 Method of work
4.2.1: Basic data collection:
As a number of studies have already been performed on the project of an integrated steel plant in Abu Dhabi and in the region, it will be most useful for us that these studies be made available during a data collection visit that will take place at the beginning of the study. This visit will involve the key experts of our team which is depicted in exhibit 2.
In collecting the data we will address the following aspects:
- background of the marketing and strategy considered e.g. types and quality of products and their mix, choice of production level, volumes and market shares for the different products on the national, regional and international markets, sale prices;
- nature/quality, source/location of main technical inputs required e.g. iron-ore, energy (gas, fuel oil...), fluxes, skilled personnel;
- options considered for main technology e.g. DRI, EAF, rolling mills, etc...
4.2.2: Market and strategy of development
With regard to sales and market data, we will examine for the 5 past years:
- matrix of steel consumption in Abu Dhabi, the UAE and region, by products, sectors/branches, locations;
- imports/exports by products, sources/destinations, tonnages and values; also taxes and tariffs for imports/exports;
- all macro-economic data available on GDP, population, and on the structure and trend for uses of steel products in the UAE and in the region i.e.
. production indices of the different sectors/branches
. specific consumptions of the different sectors/branches
. pattern of distribution of steel products to the market
Concerning families of products and uses by sectors/branches of the economy, the following basic classification will be used & adapted to circumstances:
- semis
steel for castings
all solids for seamless tubes
other ingots and semis
- hot rolled heavy sections
railway rails
I&U>160mm
bars>100mm
piling sections
- hot rolled medium sections
bars 32-100mm
I&U<160mm
light rails
hot rolled uncoated sheet/coil under 500mm in width
- hot rolled small sections
bars<32mm
wire<13mm
wire rods (all concrete reinforcing material)
- thick plates
160-190mm wide, thickness 5-60mm
- hot rolled uncoated strip/sheet 3mm thick & above
- hot rolled uncoated strip/sheet under 3mm thick
- cold rolled uncoated strip/sheet under 3mm thick
- coated plate (galvanized, tinplate)
- electric strip/coil/sheets
4.2.3: Industrial structure and technical aspects
General description:
On the basis of the conclusions of the market and strategy report, the product mix and the capacity of the complex will be mutually agreed upon with GIC. Then the engineering study will be performed as described hereunder and according to the tentative time schedule as shown in exhibit 3.
Stage 1 - Basic process study:
- Determination of basic data for each main process unit of the complex
- Confirmation of processes involved.
Stage 2
- Selection of main equipments, principle process flow sheets, general layout. This stage is the continuation of the basic process study and will involve process experts and plant and equipment specialists (handling, piping, electricity, automation and control, ...)
Stage 3 - Site selection
As soon as the above stage 2 is sufficiently advanced, a back up mission will be organized in Abu Dhabi in order to select the best site and to study the local possibilities for the erection of the complex.
The general layout will be finalized according to the conclusions of the site selection mission.
Stage 4 - Technical details
For each main process unit, we will detail the list and description of the major items of equipments and infrastructure as well as utilities, effluents and by-products material balances.
Stage 5 - Definition of concrete and metallic structures
On the basis of the site selected and of the general study of the complex, our civil & metal structures engineers will select the best technical & economical solutions to be adopted for the design & engineering of civil works and metal structures.
Stage 6 - Personnel schedule and training
As soon as stages 2 to 4 are sufficiently advanced, an expert will elaborate the general personnel and labour schedule on the basis of our experience of similar complexes in the world.
Then a back-up mission will be organized in Abu Dhabi so as to confront these requirements to the actual local possibilities. This task will be done in close cooperation with GIC. With the conclusions of this mission, a general organization chart will be prepared by the personnel & training expert on his return to France.
Stage 7 - Capital & operating cost estimates
Capital & operating cost estimates will be determined from the inputs of the various engineers and experts involved in the study in the previous stages; they will be based on SOFRESID's international experience of similar complexes and on local prices provided by GIC for civil works, erection, & other items that can be provided from local or regional sources.
Stage 8 - Computerized project schedule
A computerized project schedule will be established indicating the main phases for the erection of the complex:
- finalization of basic design, cost estimates & budget, implementation schedule, as resulting from the feasibility study;
- detailed engineering by manufacturers & contractors;
- procurement including tendering, bid evaluations, contracting, inspection in manufacturers factories, control of contractors' detailed design work;
- erection on site, including site supervision & controls
- commissioning up to start-up & transfer of the complex plant & equipment to the owner.
Stage 9 - Production plan
The preparation of the production plan from commissioning till the full capacity stage will be prepared on the basis of SOFRESID's experience.
Limits of the study:
This feasibility study does not include the following items:
- desalination water plant
- electrical power station and connecting lines with the complex
- access roads or railways tracks out of the limits of the complex
- utilities connecting pipes out of the limits of the complex
Information to be provided by GIC
- land and soil testing and investigation & field investigations in the selected site area
- communication of all previous studies on the project
- information on local work market as far as labour is concerned
- local costs for erection, civil works and infrastructure
- local supply conditions and costs of all locally provided inputs including but not limited to, power, water and other utilities.
- taxes & tariffs levied on imported inputs as well as capital items.
4.2.4: Capital and operating cost estimations
Capital costs
Capital cost estimations will be established on the basis of our experience of similar plants and equipment. Consultations of manufacturers will be made so as to check main specific items.
Operating costs
Operating cost estimates will be established on the basis of specific consumptions of main inputs eg iron bearing materials, fluxes, energy fuels, electricity, water etc... & their unit economical costs ie delivered at the border of the region.
Personnel cost will be established on the basis of hours/tonne of output and with reference to our experience of competitive units operating with similar technology.
The main emphasis will be to establish add-on operating costs of the different individual production units. Add-on costs of individual units will be aggregated so as to obtain total operating cost estimates of the end products.
Other costs and overheads will be estimated on a global basis & percentage. Thus a total cost of production will be estimated. However, it must be realized that the most important factor which governs cost is the choice of process technology and the model of cost simulation is mainly concerned with individual process units i.e. DRI unit, steel melting, continuous casting, rolling mills.