Long-Awaited Danieli Project Finally Operational

After more than a decade of delays, Iraq has officially commissioned a major steel production facility in the southern port city of Basra. The 600,000 metric ton-per-year steel mill, awarded to Italian industrial giant Danieli Group over ten years ago, was inaugurated this week by Industry and Minerals Minister Khaled Al-Najm. The project represents a significant milestone in Iraq's industrial redevelopment efforts following years of conflict and instability. According to the state-run Iraq news agency, the facility cost nearly $305 million to complete. While officials did not explicitly address the extensive delays during the inauguration, previous statements attributed the setbacks to domestic security challenges and political turbulence that have plagued the country since the project was initially awarded.

Chinese Investment Expands Basra's Industrial Footprint

In a demonstration of Iraq's growing industrial ambitions, Minister Al-Najm also laid the foundation stone for the country's first steel industries park during the same visit to Basra. This complementary project will be constructed by China's Tsingshan Group, one of the world's largest stainless steel producers. The dual announcements signal Basra's emergence as a critical industrial hub for Iraq's reconstruction efforts and highlight the government's strategy of engaging multiple international partners in developing the nation's steel production capacity. The steel industries park is expected to create a manufacturing ecosystem that will support downstream industries and generate significant employment opportunities in a region traditionally dominated by oil production.

Meeting Surging Domestic Demand

The newly operational steel mill arrives at a crucial time for Iraq's reconstruction efforts. A study by the Industry Ministry has estimated the country's current steel demand at more than 8 million metric tons annually, with projections indicating steady growth in the coming years. Minister Al-Najm emphasized that the Danieli facility is "one of several steel plants to be built in Iraq" specifically to address the surging demand driven by post-conflict reconstruction projects. The domestic production capacity will help reduce Iraq's dependence on imported steel, potentially lowering construction costs for critical infrastructure projects while improving supply chain security for essential building materials.

Danieli's Expanding Footprint in Iraqi Industry

The Italian industrial engineering firm Danieli Group has established a significant presence in Iraq's developing industrial sector. Beyond the newly inaugurated Basra facility, the company was awarded a contract in 2024 to build a new rolling mill plant for rebar production near Baghdad. Located in the industrial area of Al-Hilla, this additional facility will have an output capacity of 500,000 metric tons per year, further expanding Iraq's domestic steel production capabilities. Danieli's continued investment in Iraq reflects growing international confidence in the country's industrial potential and economic stability. The company's expertise in steel production technology provides Iraq with access to modern manufacturing processes essential for producing high-quality construction materials.

Supporting Iraq's Ambitious Infrastructure Plans

The expansion of domestic steel production capacity comes as Iraq prepares for several ambitious infrastructure initiatives, most notably the $17 billion "Development Road" project. This massive undertaking includes the construction of a 1,200-kilometer rail line and a parallel motorway linking southern Iraq with the Turkish border in the north. With Turkey, Qatar, and the UAE as shareholders, the project is scheduled for completion in 2029 and will require substantial quantities of steel and other construction materials. The newly commissioned steel mill and planned production facilities are strategically positioned to supply materials for this and other large-scale infrastructure projects, potentially creating significant cost efficiencies compared to importing steel from international markets.

Regional Industrial Competition and Cooperation

Iraq's push to develop its steel industry occurs against a backdrop of regional industrial development and competition. Neighboring countries, including Iran, Saudi Arabia, and the UAE, have made significant investments in their own steel production capabilities in recent years. However, Iraq's approach appears to emphasize international cooperation, with Italian and Chinese firms playing key roles in different aspects of the sector's development. This strategy allows Iraq to benefit from diverse technical expertise and investment sources while potentially positioning the country as a future regional steel producer. The government's willingness to engage with both Western and Eastern industrial partners demonstrates a pragmatic approach to industrial development that prioritizes technical capability and investment capacity.

Economic Diversification Beyond Oil

The development of Iraq's steel industry represents an important step in the country's efforts to diversify its economy beyond oil production. While petroleum exports remain the dominant source of government revenue, the volatility of global oil markets has repeatedly demonstrated the risks of over-reliance on a single commodity. By developing industrial capacity in sectors like steel production, Iraq aims to create more stable sources of employment and economic activity. The Basra steel mill alone is expected to create hundreds of direct jobs and potentially thousands more in related industries. This industrial diversification strategy aligns with similar efforts across the Gulf region, where governments are investing in manufacturing and other non-oil sectors to create more resilient economic structures.

Future Industrial Development Trajectory

With the commissioning of the Danieli steel mill and the groundbreaking for the Tsingshan steel industries park, Iraq has established a foundation for continued industrial growth in the steel sector. Officials have indicated that several additional steel plants are planned, suggesting a coordinated strategy to develop sufficient production capacity to meet domestic demand while potentially positioning Iraq as a regional exporter in the future. The involvement of major international firms like Danieli and Tsingshan provides access to modern production technologies and global best practices. As these initial projects prove successful, they may attract additional international investment in Iraq's industrial sector, further accelerating the country's economic diversification and reconstruction efforts.

Key Takeaways:

• Iraq has commissioned a 600,000 metric ton-per-year steel mill in Basra built by Italy's Danieli Group at a cost of $305 million, ending a decade-long delay attributed to security and political challenges

• China's Tsingshan Group will construct Iraq's first steel industries park in Basra, as the country aims to meet domestic steel demand estimated at over 8 million metric tons annually and expected to rise with reconstruction efforts

• The steel facilities will support major infrastructure projects including the $17 billion "Development Road" that will connect southern Iraq to the Turkish border with a 1,200-kilometer rail and motorway system scheduled for completion in 2029