Recently, ArcelorMittal (MT) signed a memorandum of understanding (MoU) to form a joint venture with Turkish partner Dayen to build a steel mini-mill with electric furnace in Sulaimaniyah, Northern Iraq.

In its initial phase, the mill will produce up to 250,000 tons per year of bars from locally sourced scrap and require investment of $100 million to $130 million, jointly contributed by ArcelorMittal and Dayen.

Construction is expected to start in the second quarter of fiscal 2010 and production will commence early in the fourth quarter of fiscal 2011. Later, production could eventually increase to 500,000 tons per year.

The company will benefit from the increase in demand for steel products in the local construction industry.

ArcelorMittal expects a surge in steel demand in the coming months largely due to the technical recovery as inventory de-stocking nears completion. Although the steel sector scenario remains unpredictable, we also expect a gradual sales recovery in the next couple of quarters. However, we do not expect demand to return to the levels of 2008 in the medium term.

A reversal of global economic activity triggered by the intensification of the credit crisis last September led steelmakers to stop operations at several plants, lay off staff and refinance debt. The U.S. steelmakers are still operating with almost half their capacity.

Global steel prices have fallen in some regions from their peak in mid-2008, as the recession triggers a reduction in demand from sectors such as construction and automotives. We believe this will continue in the very near term.

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