SAIL nears deal with Mittal
The Telegraph, Jayanta Roy Chowdhury, September 24, 2017
New Delhi, Sept. 24: Steel Authority of India Ltd is close to a deal with Arcelor-Mittal for a joint venture in automobile steel even as a few "commercial issues" are yet to be resolved.
SAIL chairman P. K. Singh told The Telegraph, "We are close to clinching a deal. Some commercial issues, however, remain to be resolved."
The two sides had signed a memorandum of understanding in May 2015 and have since been trying to hammer out an agreement. The SAIL chairman did not elaborate on the contentious issues.
"It will be a 50:50 joint venture with substrate (raw materials ) from our Rourkela plant," said Singh.SAIL has drawn up a list of six sectors for which it wants to make high-value steel - infrastructure, including ports; engineering, including ship-building; defence and nuclear power plants; high-grade construction steel; specialised steel for the capital goods industry such as making pressure vessels and electric grade steel; and automobile steel.
"Automotive steel is a fast growing sector and usually global auto makers who have come to India use the steel used by their parent companies abroad," said Singh.
India produced around 3.4 million cars and 8,00,00 commercial vehicles in 2016 and this number is expected to go up to 7 million by 2020.
The Tatas had inked a joint venture for automotive steel with Nippon Steel and Sumitomo in 2012. Besides the Tatas, the venture mostly has Japanese clients, including Maruti, Toyota and Honda. Local companies Bajaj and TVS as well as European giants Daimler and Ford are its other customers.
SAIL's joint venture with the Mittals, which is likely to initially cost about $1 billion, expects to get mostly European clients, besides Indian car makers and customers from the Gulf, Africa and the Asean countries.
The Mittals have a 17 per cent share of the global auto steel market and sells to many European car makers - some of whom, such as Renault, Mercedes, Fiat and Audi, have set up shop in India.
According to steel ministry sources, the venture has been delayed as both sides have been bargaining hard.
SAIL had objected to the high technical fees demanded by the Mittals, while it itself demanded a higher price for its semi-finished steel, top steel ministry sources said.
Thorny issues
While the Mittals wanted its technical fees to be front-loaded - meaning the bulk of the payments be made early - SAIL wanted them to be reduced and staggered over a longer time frame.
SAIL felt a new venture will have a gestation period during which it would be losing money and wanted a longer time to pay the fees.
In the early discussions, SAIL had wanted a majority holding, similar to the Tata venture with Nippon and Sumitomo.
Mittals, too, wanted to be the bigger player. In a similar joint venture in China with Hunan Valin, Arcelor has a one-third stake.
The intervention of the Niti Aayog and the Prime Minister's Office has nudged the two sides to concede their demands .
The government wants the venture to take off as it will be a showcase venture for its Make in India programme. The joint venture is supposed to build a cold rolling mill and other downstream facilities for the automotive sector.
The input will come from SAIL's new hot strip mill at the Rourkela Steel Plant which has a capacity of 3 million tonnes per annum. The annual steel capacity of the venture is likely to be1.5 million tonnes.
The government is also planning to set up five scrap-based plants at an investment of Rs 500 crore within a year to ensure that a chunk of the country's targeted 300 million tonne steel output is met through scrap.
India's target is to more than double the steel output by 2030, from 10 MT at present. "...from 126 MT (million tonnes) to 300 MT (of steel output) that we are eyeing, in that everything will not come from the fresh iron. So it will be coming from the scrap," Steel Secretary Aruna Sharma told PTI.
Comments
Post a Comment