India's NMDC, Russia's Severstal Sign Pact for Joint Steel Venture

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TC Malhotra contributes to MetalMiner from New Delhi.

India’s state-owned miner NMDC Ltd. and Russian steel and mining giant Severstal have signed the implementation protocol in Moscow for setting up a joint venture steel plant in the southern Indian state of Karnataka, according to a recent article in the Hindu Business Line.

The implementation protocol between NMDC and Severstal takes another step following the memorandum of understanding (MoU) they had signed in December 2010 for establishing a steel plant with an initial capacity of 3 million metric tons in Karnataka.

The proposed steel plant may be commissioned by 2017. The 50/50 joint venture project will span about 2,800 acres of land at Bellary in the southern state. The plant is estimated to cost $4 billion and would be funded with a 70/30-debt equity ratio by the Indo-Russian partners.

According to a statement issued by NMDC, a high-level delegation from India including the Indian steel minister and other NMDC executives held discussions with Severstal in their Moscow office. Severstal and NMDC discussed progress in establishing their joint project in Karnataka.

NMDC is involved in the exploration of wide range of minerals including iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, and beach sands. NMDC is India’s single-largest iron ore producer and exporter, producing about 30 million tons of iron ore from three fully mechanized mines. India is planning to increase its steel capacity to almost 200 million tons by 2020, which would only put a dent into China’s production lead.

The protocol defines the initial target plant capacity to be 3 million tons of finished steel. It also confirms NMDC and Severstal’s intentions to fully meet the joint venture’s captive requirements of both iron ore and coking coal so that it becomes fully integrated for these primary raw materials.

According to the statement, until the captive assets are fully developed, NMDC and Severstal take the responsibilities to supply iron ore and coking coal to the JV at market basis from their existing assets or alternative sources.

Alexey Mordashov, Severstal’s chief executive, is quoted as saying, “Our joint venture project in India with NMDC provides a very good fit with Severstal’s vertically-integrated, growth-focused business model. P.K.Mishra, the Indian government’s secretary of steel, is also quoted as saying this will be a vital move for the Indian steel industry.

Rana Som, chairman and managing director of NMDC, also reinforced that NMDC wants to make the project not only financially strong, but also socially meaningful and economically relevant to meet India’s needs.

Incorporated in 1958 as a fully owned public enterprise, NMDC is under the administrative control of the Government of India’s Ministry of Steel.

–TC Malhotra

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