The US-based, diversified, multinational provider of leading industrial services and engineered products Harsco Corporation (HSC) has announced that it had inked a 15-year contract with one of India’s largest steel producers, Essar Steel India Limited, for slag management and metal recovery services.
Harsco has managed to sign three deals in India within six months in the steel sector, including the one with Essar, thereby making it a big player in the Indian market – however, current global prices of steel may be clouding the demand picture.
Valued at US $160 million, the services will be provided at Essar’s Hazira facility, the world’s fourth-largest single-location steel plant that has a steelmaking capacity of over 10 million tons a year. Work is expected to start in late 2014.
Like any other global steel behemoth, Essar Steel, part of the Essar Group, a $27 million diversified corporation, has been trying its utmost to tackle the global downturn and weak demand, and struggling to keep its finances under control.
The Essar Group is one of the world’s largest integrated flat carbon steel producers with its portfolio ranging from extra wide plates, hot rolling, galvanizing and color coating.
Earlier, the Pennsylvania-located Harsco had signed separate deals with JSW Steel and Jindal Stainless Steel Limited. The three deals together were expected to generate revenues in excess of US $500 million over the next 10 to 15 years, according to a blog on Nasdaq. The latest deal, say analysts, will further boost Harsco’s bottom line.
India Steel Price Outlook
India is currently the most rapidly developing market for steel production. According to industry forecasts, India was poised to become the world’s second-largest producer of steel by the last half of the current decade.
For now though, despite weak local demand, India has turned into a net importer of steel due to the sharp fall in prices in the global market. Global steel prices have dropped by about 15 percent in the past three months, with China export prices falling too.
But in India, prices had fallen by only 2 percent in the same period. Many analysts felt the higher imports could be because Indian domestic steel prices were at import parity compared to a discount of about 3 percent in April 2013.
Indian prices had also been supported by the depreciation in the Indian rupee, which continues to grow weaker against the US dollar with every passing day. Analysts are now saying they expect Indian domestic prices of steel to remain at a discount of 1-2 percent for 2013-14 as demand is expected to remain under pressure.
Essar Steel, on the other hand, has been going through some rough patches lately, as reported by MetalMiner. With a production capacity of more than 14 million tons per year, the company operates seven steel processing and distribution centers in India and Indonesia.
Recently, the company raised about US $1 billion through External Commercial Borrowing to repay its rupee-denominated debt.