The deal was signed in Sharjah by Hamriya Steel Factory board chairman Dr Shaikh Sultan Bin Khalifa Al Nahyan and Hamriya Free Zone chairman Shaikh Khalid Bin Abdullah Bin Sultan Al Qasimi.

Hamriya Steel Factory will have an annual capacity of one million tonnes in the first phase.

The project is being set up in partnership with a Russian group that will provide knowhow for the plant.

Scheduled to be ready in 16 months, the new factory will cover 112,000 square metres in Steel City, the free zone's director-general Rashid Al Leem said.

"This is the second mega steel project in Hamriya. It will help in meeting the huge demand for steel in the UAE construction sector," he told Gulf News.

Indian steel giant Essar is also setting up a plant in Steel City. Essar's plant will cover 1.6 million square metres.

The second phase of Hamriya Free Zone expansion covers 11 million square metres.

It is designed to facilitate heavy industries in key sectors such as cement, steel and maritime. Steel City alone covers five million square metres.

Al Leem said Sharjah will continue to direct its marketing efforts to bring big industry players to the emirate.

"We have created infrastructure that supports heavy industries," he said.