Al Ittefaq Steel eyes IPO on Tadawul, market share hits 25% : exec

A product of Al Ittefaq Steel

Al Ittefaq Steel Products Co. (ISPC) intends to float a portion of its shares on the Saudi Exchange (Tadawul), Jassim Al Abbas, General Manager of Business Development, Sales and Marketing, told Argaam.
 

ISPC is valued at more than SAR 8 billion, Al Abbas said, adding that Hilal Al-Tuwairqi owns nearly 60% of the company’s capital and the remaining 40% is held by other investors, including Jarir Marketing Co.

ISPC is set to sign an agreement with a financial advisor to manage its initial public offering (IPO), the executive said, adding that the subscription study and preparation for the regulatory requirements may last until 2023.

“If things go as expected, the offering may be completed in the first quarter of 2024,” the official noted.

The firm holds currently 25% of the Saudi market's production capacity, which amounts to nearly seven million tons per annum (tpa) of rebar.

Al Ittefaq Steel factories produce two million tpa of iron blocks and three million tpa of reinforcing iron, while Al-Faisal Factory produces 500,000 tpa of conventional iron products.

ISPC exports its products to the GCC region and Egypt. It is the only Saudi company that exported iron products to Myanmar and Hong Kong.

The company supplies about 50,000 tons of reinforcing iron per month (600,000 tpa) to NEOM project. Demand for rebar in NEOM will likely reach over 9.8 million tons until the end of 2027.

Elsewhere, Al Abbas said the iron industry depends on two key factors in its production inputs. The first is sponge iron, which is produced in the Kingdom through two factories only: SABIC Steel with a production capacity of about five million tpa, and Al Ittefaq Steel with a production capacity of 1.5 million tpa.

The second material is scrap iron, and the Saudi market’s production of this material ranges between 3.5 to four million tpa, the executive said, indicating that this material is produced from the industrial operations of companies, in addition to iron waste resulting from the demolition of real estate projects as well as waste of electrical and electronic devices.

The scrap iron constitutes the largest part of production inputs, as most steel companies in the Kingdom fully depend on it. This is except for SABIC Steel and Al Ittefaq Steel, as scrap iron represents 30% and 40% of their iron production inputs, respectively, compared to 70-60% for sponge iron.

The prices of raw materials (scrap iron) are high in the local market at present, as the price per ton ranges between SAR 1,650 to SAR 1,700, compared to an average global price per ton of about SAR 1,300.

This increase is mainly attributed to lack of supply and strong growth in the number of small- and medium-sized iron factories, with a production capacity of 150,000-200,000 tpa in the Saudi market.

The average rebar price is SAR 3,000 per ton. When comparing this figure to global prices, it would be found that prices in the Kingdom are competitive and lower than some countries such as Turkey.

Al Abbas highlighted the sharp price fluctuations over 2021 and 2022, during which reinforcing steel prices reached their highest level of nearly SAR 3,500, expecting prices to stabilize in Q4 2022.

Factories endeavor a partial rise in prices, which will lead to improved profitability, the executive said, indicating that the surge in scrap iron prices remains the main challenge as it constitutes the largest part of the cost of production.