ArcelorMittal, the world’s largest steelmaker, and state-run Steel Authority of India (SAIL) have signed an MoU for setting up an auto-grade steel unit in the country.
“The MoU is the first step of a process to establish a JV between the two companies. The proposed JV will construct a state-of-the-art cold rolling mill and other downstream finishing facilities in India that will offer technologically advanced steel products to India’s rapidly growing automotive sector,” a joint statement issued by the firms said.
Although the companies haven’t announced the size of the plant or the location, sources said it could be a 1.2-million-tonne unit, entailing an investment of around Rs 5,000 crore.
“The automotive sector is a highly strategic and important market for ArcelorMittal; establishing an automotive focussed production presence in India, one of the world’s fastest growing automotive markets, is a natural progression in executing our global automotive strategy,” said ArcelorMittal chairman and CEO Laxmi N Mittal.
The MoU with ArcelorMittal will pave the way for a new chapter in the indigenous production of high-quality automotive steel in India. It will also aid a broader effort by SAIL to help fulfil the high-quality steel requirements of the rapidly growing infrastructure and manufacturing sectors in India, said SAIL Chairman CS Verma.
There is a huge gap to bridge between India’s demand for auto-grade steel and its existing domestic production capacity, leading to a surge in imports of inputs. A large part of India’s total 9.32 mt steel imports accounts for automotive steel. The two steelmakers’ coming together is aimed at plugging the gaps.
SAIL had been scouting for a partner with sound knowledge and expertise to foray into the high-grade automotive steel making, sensing the compelling need for raising the ratio of value-added products in its kitty as they fetch higher margins. The company, which is aiming to raise its annual production capacity to 50 mtpa by 2025, had in 2013 floated a global tender inviting expression of interests (EoIs) from global biggies to forge a joint venture
partnership for automotive steelmaking.
ArcelorMittal, world’s leading steel supplier to the global automotive sector, with a market share of approximately 17%, had evinced interest, which resulted in the signing of the memorandum of understanding between the two parties in London.
NRI billionaire Laxmi N Mittal-led company shipped over 13 mt steel to automotive customers globally in 2014, resulting in revenues in excess of $12 billion.
The firms said a working group, comprising representatives from both parties, would in coming months evaluate the structure of the proposed jv and carry out feasibility studies as part of a comprehensive due diligence.
India’s automobile sector is forecast to double to 7 million units by 2020. Automotive manufacturers have been enhancing their presence in the country.
