Why ArcelorMittal Came Back to India’s Steel Sector With SAIL

It was barely two years ago that major steel multinationals, ArcelorMittal and the South Korean giant POSCO had announced they were pulling their multibillion dollar project investments out of India. Some of these had been pending for a decade or so for such varied reasons as lack of land and government permissions.

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Now, ArcelorMittal is back, like that famous line from Arnold Swarznegger in “The Terminator.” Different time, different government, fresh hope.

ArcelorMittal Signs MoU with SAIL

A few days ago, billionaire Lakshmi Mittal-led ArcelorMittal announced the signing of a memorandum of understanding with the Indian public sector giant Steel Authority of India Ltd. (SAIL) for an automotive steel plant. Obviously, ArcelorMittal is betting on an expected spurt in steel demand in India. Who can blame the conglomerate? Now that China has spun out of investors’ trajectory, steel companies, domestic as well as multinationals, can only look with hope at the until-now dormant Indian steel sector. It’s a case of damned if you do, damned if you don’t.

Still, pessimists would say the MoU is only the first step on the path of establishing a joint venture (JV) between the two companies. The JV will construct a state-of-the-art cold-rolled steel mill in India that will produce technologically advanced steel products for the Indian automotive sector. The facility is set to be the world’s fourth largest by 2020. On paper itself, the time taken from the MoU to setting up the plant is only two years. Indian ground reality is, if past examples of delayed steel projects such as the POSCO steel plant are anything to go by, much different.

Other Indian Steel Projects

Yet ArcelorMittal is not the only steel multinational to look at the Indian market in anticipation. India’s infrastructure sector, the main driver for steel, accounts for around 60% of total domestic steel consumption. Here’s a quick look at what the other major steel cos, especially the multinationals, which have announced India projects or set up in the recent past:

  • One of India’s largest private steel makers, JSW Steel, said it would be setting up a plant in the Indian province of Karnataka, the largest at 20 million tons by 2022.
  • Tata Steel plans to commission 3 million metric tons of capacity in its Odisha plant, while adding another 3 million mt at the plant in near future. The company’s greenfield Kalinganagar steel plant in Odisha is nearing commission, probably taking off late this year.
  • SAIL, the country’s largest steel maker, has charted a course until 2025 to ramp up steel production from 24 million metric tons to 50 mmt.
  • POSCO has overall plans to bring in investments of some $1 billion to build three plants. As part of this, in 2012, it set up a steel plate manufacturing facility with an annual capacity of 450,000 mt of automotive steel plates. This was expanded to include an electric steel sheet facility in 2013 and a cold-rolling mill in 2014. But its pet project, announced in 2005, the $12 billion steel mill project in the Odisha province, has remained on paper only, and was almost on the verge of being scrapped but for the intervention of Indian Prime Minister Narendra Modi.

Most of these major steel multinationals have set aside formidable capital expenditures for the long run in India, yet, for the short-term, have reported dips in performance. Tata Steel, for example, while announcing its quarterly results (ending March 2015) recently, had posted a net loss, blaming Indian and European weak steel markets, and recognition of impairment in the value of its international assets for it.

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  • POSCO should have built their $12 billion steel factory in Gujarat.

    India exports iron ore and imports coking coal.

    So why not take ore from Goa and ship it to Gujarat and turn it into steel in Gujarat?


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