Announcement of World Bank Loan to Assist Mexico in Three Billion Six Hundred Million Dollars Steel Expansion Project on July 2, 1976

World Bank 1818 H Street1 N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE NO. 77/3 JULY 2, 1976 WORLD BANK LOAN TO ASSlST HE.XlCO IN $3.6 BLLLION STEEL EXPANSION PROJECT The World Bank has approved ij $95 mill ion loan to Mexico to assist in the financing of the largest steel expansion project in the country's history. The joint borrowers will be Siderurgica Lazaro Cardenas-Las Truchas, S.A. (SICARTSA), a Government-owned steel corporation, and Nacional Fi nanciera, S.A. (NAFIWSA), the national development b.Mk. The total cost of the project is estimated at $3.6 billion. The World Ban~ loan will be mdtched by a loan of $95 million from the Inter-American Development Bar.k (lDB). The expansion is the second stage of the SICARTSA project, and is designed to increase annual raw steel production capacity from 1.2 mil lion tons to 3.3 million tons yearly. The Stage I I project includes facil~ties • to convert all the increased raw steel production into about 1 .7 million tons of flat products . The major project components are additional mining and raw material hand- ling facilities, iron-making facilities and steel-making capacity of about 2.1 million tons per year and related anciJlary and finishing facilities. The project provides for 130 additional coke ovens designed to operate with indige- nous coals with a capacity of about 1,3 million tons a year, agglomeration plants with a total capacity of about 3.4 million tons per year, two new blast furnaces with a total capacity of about 6,600 tons per day, a continuous cast- ing plant with three twin-strand slab casting machines, and a new flat prod•: :ts rolli.ng mill complex, including a semi-continuous 60-inch hot strip mill with a total capacity of about 2 million tons of slab a year, and a cold reduction mill with related finishing facilities. As a result of the exp~nsion, SICARTSA will be able to sell flat steel products at pdces comparab 1e to those of imports. The project wi 11 save more than $350 million per year in foreign exchange when the new facilities are in full production. The expansion of ·StCARTSA is a major step in carrying out the Government I s po 1 icy of decentra 1 i zing economic activity from the Mexico City metropolitan area, which is suffering increasingly from congestion and environmental problems. The project is located in a relatively underdeveloped region of the country with iron deposits close at hand and close to an excel- lent port. There are good transport facilities to both domestic and foreign markets. . The Government !ntends to further develop the area where the project 1s located by promoting the establishment of engineering industries and hopes to turn the region into a focus of future industrial expansio~ . • The $95 million loan is for a term of 15 years, including five years of grace, with interest at 8.85% per annum. NOTE: Money figures are expressed in U.S. dollar equivalents. FORM NO. 1121 (5-76) T E C HN I CAL DA T A PROJECT: COUNTRY: Steel Expansion Mexico • TOTAL COST: $3,621 million BANK FINANCING: $95 mil lion, for a term of 15 years, including five years of grace, with interest at 8.85% per annum. OTHER FINANCING: Inter-American Development Bank (IDB), $95 million. Suppliers' credits, $1,521 mill ion. Government of Mexico or Nacional Financiera, $447 mi 11 ion. IMPLEMENTING ORGANIZATION: General Manager Planning and Development Department Siderurgica Lazaro Cardenas - Las Truchas, S.A.(SICARTSA) Yucatan 15, Mexico 7, D.F., Mexico Telex: 017-73147 SICATME, Mexico City PROJECJ DESCRIPTION: The project includes facilities for an iron ore mine • and integrated iron and steel works to increase raw steel prodL'.Ction by about 2. 1 million metric tons annually and to produce about l .7 mill ion metric tons per year of flat finished steel products. The major project components are additional ore beneficiation facilities and agglomeration capa~ity of about 3.4 mill ion tons per year; 130 additional coke ovens designed to operate with indigenous coals with a capacity of about 1 .3 million tons a year; two new blast fur- naces with a total capacity of about 6,600 tons per day; a new basic oxygen steel- making plant with two 220-ton vessels; a continuous casting plant with three twin strand slab casting machines, with a total capacity of about 2 million tons 1 slab a year; a new flat products rolling mil 1 complex, including a semi-continuous 60-inch hot strip· mill and a cold reduction mill with related finishing facilities. PROCUREMENT: Plant facilities wi 11 be procured in large single respon- sibi 1 ity palkages under international competitive bidding according to Bank guidelines. As project financing wi 11 be on a parallel basis, there are separate equipment package 1 ists for World Bank, IDB and bilateral sources of financing. For the purposes of bid comparison, a 15% margin of preference or prevailing level of import duties, whichever is lower, wi 11 be granted to Mexican components of foreign bids. Bids, or components in foreign bids? are considered Mexican if supplied by a company incor- porated in Mexico and if the cost of local materials, labor and services are not less than 50% of the total value of the components offered. CONSULTANTS: The British Steel Corporation wi 11 provide general technical assistance for design, construction and initial operation of Stage I I, extending an existing agreement for Stage I. Societe Francaise d'Etudes Mini~res of France is providing technical assistance for pelletizing, iron ore exploration and mine planning. ECONOMIC RATE OF RETURN: ESTIMATED COMPLETION DATE: 12. 7% 1983 • - 0 -