No, no, not the highly addictive substance enjoyed by billions – nor the powdery white narcotic (gotcha! eh?) – we’re talking, of course, about the crucial raw material in the manufacture of steel.
Barely a month after the Pennsylvania, US-based industrial services company Harsco Corporation signed a US $100 million deal with Indian steel major Jindal Stainless Steel Limited comes the news that another US company, SunCoke Energy, Inc. (NYSE: SXC) decided to get into a joint venture with India’s VISA Steel Limited (BSE: 532721 and NSE: VISASTEEL) to set up a coke-making venture in India.
The joint venture will be called VISA SunCoke Limited, according to a press release by SunCoke.
The latter is one of the largest independent producers of metallurgical coke in the Americas, with 50 years of experience supplying coke to the integrated steel industry. VISA Steel, on the other hand, is a leading player in India in the specialty steel, sponge iron, coke and ferro-chrome industry. It has manufacturing facilities located at the Kalinganagar Industrial Complex in the eastern state of Odisha and is headquartered in Kolkata.
VISA Coke is a special purpose vehicle that has been formed by splitting off VISA Steel & Power’s 400,000-ton-per-year Odisha coke plant. The JV is said to be part of VISA Steel & Power’s debt restructuring plans and a major portion of the funds from the deal is expected to be used by the company to retire part of its debt.
SunCoke Energy holds a 49 percent interest in the joint venture, with VISA Steel holding the rest. The former has invested approximately US $67 million.
Explaining the rationale behind the JV, Frederick “Fritz” Henderson, chairman and CEO of SunCoke Energy, Inc., explained that as infrastructure, housing and transportation needs accelerated in India, local steelmaking companies would require high quality coke, and VISA SunCoke was prepared to be their supplier of choice.
VISA SunCoke Chairman Vishal Agarwal told The Times of India that the company’s aim was to ramp up its capacity to 1.5 million tons in the next five years. SunCoke and VISA Steel will co-manage the business with equal representation on the partnership’s board.
Following the JV development, Vishambhar Saran, chairman of VISA Steel, said, “….it’s a great opportunity for VISA SunCoke to leverage its operating and technological expertise to serve customers across India with the highest quality coke. The coke industry in India is a key market that offers attractive growth opportunities and we believe that VISA SunCoke is well-positioned to grow its coke business and become an industry leader.”
Some of India’s steelmakers have been importing cheap coke, which has worried the domestic coke industry. Agarwal himself told the Times that coal sourcing was not a problem since his company would be importing the raw material from companies such as Australia’s BHP Billiton.
At the same time, he said, this would not negatively impact VISA SunCoke’s pricing. Most of the domestic steelmakers except Tata Steel and SAIL were importing coke, he said, but what would ultimately matter was the optimization of the manufacturing process by blending with a softer variety of coal, for which Visa SunCoke had access to one of the best technologies from China.