JSW Steel, Marubeni Itochu Try to Reduce India's Auto-Grade Steel Imports

Auto-grade steel is one of the drivers of the Indian steel industry. Of late, some of India’s well-known brands in the steel sector are planning, or have already set into motion, plans to manufacture or process this type of steel, given the fact that India continues to rely, to a good measure, on imports.

Recently, one of Indian’s largest steelmakers by capacity, JSW Steel Ltd, announced it was setting up a second steel processing center with its JV partner, Tokyo-based Marubeni Itochu Steel Inc (MISI). The plant will come up in Pune in the state of Maharashtra.

The two partners already have another 50/50 joint venture, a similar steel processing center in Haryana state. The second venture is coming up in one of India’s major automobile hubs. Anyone who is in auto-grade steel has to have processing centers, and hence the decision of setting up the JV in Pune. Both JVs may be functional by early next year.

India’s automobile sector has not been faring well of late, impacting steel uptake, but the steel industry here sees this as only a temporary setback, faulting global economic conditions.

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JSW Steel, too, seems unperturbed by the slowdown in the auto sector, and wants to expand its presence in the automobile manufacturing space. The new JV, to be set up at an approximate cost of $US 33 million, will have an output of 360,000 tons per year. The JSW Steel project will be divided into two equal phases of 180,000 tons per year each.

The joint venture company will be able to process flat steel products like hot-rolled, cold-rolled and coated products, much of which can be used by the automotive, white goods, construction and other value-added segments.

According to a report in Live Mint, JSW was also looking at setting up a third processing center in India’s southern state, Chennai. Such processing centers are service units set closer to factories of clients in order to help steel companies customize products such as auto body parts.

JSW Steel is the flagship company of $11 billion Indian conglomerate JSW Group. The latter has a presence in Steel, Energy, Infrastructure, Cement, and IT segments.

Indian steelmakers are seeking to compete with their foreign counterparts, and trying to cut down Indian manufacturers’ reliance on imports of auto-grade steel. India imported 7.9 million tons of steel in the fiscal year ended March 2013, of which auto-grade steel was about 3 million tons.

JSW Steel is not alone in its thinking.

Tata Steel (like Tata Motors, a subsidiary of the Indian manufacturing conglomerate), has also decided to expand its portfolio by producing high-grade steel in India to replace imports. Recently, it announced plans of commissioning a continuous annealing line to produce these steels at an investment of about US$491 million.

JSW Steel’s Joint Managing Director and CFO Seshagiri Rao told Live Mint that the rapid growth of the Indian steel industry offered tremendous opportunity for supply of high-end processed steel.

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