Libya's Lisco keeps the steel mill rolling despite war

MISRATA, Libya (Reuters) - Libyan steelmaker Lisco is struggling to keep its mill rolling in a war zone, no easy feat when the power cuts off every night, shippers are reluctant to dock and foreign contractors are long gone.

Lisco Chairman Mohamed Abdelmalik al-Faqih may have an office overlooking the Mediterranean, but the steel plant in Libya's third-largest city Misrata looks more like a military base. A tank guards the melt shops, mills and furnaces, and the nearby port is protected by anti-aircraft guns.

"The position of the company is not good, even worse than 2013 or 2014, (but) we are working," Faqih told Reuters in an interview.

Power and gas shortages are perhaps the biggest day-to-day challenge for the energy-hungry steel business as more than a dozen oilfields across Libya have been forced to shut due to protests, fighting and militant attacks.

The Tripoli-based electricity ministry had forced Lisco, one of North Africa's largest steelmakers, to cut output to one third of capacity for six months to save power. That's on top of having to shut furnaces down each evening.

The Libyan Iron and Steel Company (Lisco) is caught up in the armed struggle that has enveloped the country as two rival governments vie for control fours years after the ousting of Muammar Gaddafi.

"The main problems are shortages of natural gas and electricity," Faqih said.

Yet the company hopes to keep output near steady this year compared to 2014, planning to produce between 500,000 tonnes and 600,000 tonnes of liquid steel, its main base product, in 2015. This is roughly in line with last year's output, already hit hard by gas shortages.

Output at iron plants will reach up to 700,000 tonnes or half of the annual target, Faqih said. Last year, it was around 800,000 tonnes, then only half the intended amount.

This included around 300,000 tonnes of hot briquetted iron, a steel making ingredient, short of the goal of 500,000 tonnes.

Lisco's bar mill would produce 350,000 tonnes, missing an original plan of 485,000 tonnes, he said. The hot-strip mill would reach 250,000 tonnes, short of a plan of 332,000 tonnes.

SHIPPERS RELUCTANT

The firm has also struggled to persuade foreign shipping companies to dock at Misrata after the commercial port in the free zone was hit in January by war planes.

"Sometimes it is difficult to fix a ship but eventually we succeed," Faqih said.

Lisco managed to offset weaker demand from its main market Egypt by selling more to China while keeping a presence in Turkey and North African markets such as Tunisia and Morocco.

"Demand from Egypt is not that big but we still are exporting HBI (hot-briquetted iron) and hot-rolled coils."

Yet exporting is not easy. Air strikes have scared off Turkish Airlines, the last major foreign carrier serving Libya while local carriers are booked out for weeks -- making it difficult to stay in touch with foreign business partners.

Yet it has plans to boost production with a new 800,000-tonne mill, although a lack of foreign workers means development will have to be done remotely by engineers based in Italy.

Foreign contractors from Italy's Daniele, helping with the $2.5 billion-expansion, have left Misrata for security reasons.

"It's (the mill) ready for commissioning," Chairman Mohamed Abdelmalik al-Faqih said. "Now we are in negotiations with them (Danieli) to assist us with the commissioning... with remote assistance. They will train some of our people at their plants in Italy."

(Reporting by Ulf Laessing; Editing by David Evans)