Indian Steel Demand on the Upswing as Bidding for Essar Heats Up

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The Indian steel industry is witnessing some interesting times — and not in the sense of the Chinese curse.

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After a hiatus, domestic demand is up. On the other hand, the sector is seeing consolidation as international and domestic steel players spar over assets of bankrupt Indian steel companies.

Much of the action of late has been around Essar Steel, the country’s fourth-largest steelmaker, which is on the block after filing for bankruptcy last year.

A buyer is expected to be announced within the next few weeks, gaining control over 10 million tons in annual production capacity, equal to one-tenth of India’s crude steel output in 2017.

Yet, hurdles remain.

A joint bid for Essar by ArcelorMittal and Nippon Steel & Sumitomo Metal is among the top contenders. The Luxembourg-based ArcelorMittal’s first bid was held ineligible due to its joint venture with a debt-ridden Indian company. But Arcelor has moved away and reentered the race with the Japanese player, Nippon.

There has already been two rounds of bidding, and now there are reports of a third due to legal reasons. Earlier, a court had ordered the Essar Steel’s Committee of Creditors (CoC) creditors to reconsider bids from ArcelorMittal and a Russian-led consortium, sidelining a rival offer from London-listed Vedanta. The second round was scrapped by the National Company Law Tribunal (NCLT) last Friday after it hauled up the lenders and the Resolution Professional for not doing a thorough job in handling the bidding process.

Reports in the Indian media now say the CoC could be looking at inviting fresh bids for the stressed asset, paving the way for JSW Steel, Vedanta, Tata Steel, ArcelorMittal and Numetal to make another attempt to acquire it.

The lenders have sought legal opinion on calling for fresh bids. A final decision will be made later this week, as not all bankers favor going through the process again, the Economic Times reported.

While all eyes have been on this action, many have missed this development. India’s steel production rose to 86.7 million tons in the nine months to December 2017 from 73.96 million tons in the year-ago period, according to steel ministry data.

As per an earlier forecast, India’s domestic steel demand was expected to increase by 5.5% in 2018 and 6% in 2019, making it the fastest-growing market for steel among the top 10 largest steel markets by volume.

All this activity is been monitored closely by the Government of India (GoI), which has announced its own initiatives to propel the sector. A senior official told news agency Press Trust of India (PTI) that the GoI would roll out a red carpet to the big guns internationally who want to set up greenfield steel projects.

Steel Secretary Aruna Sharma said the sector provides huge growth potential against the backdrop of the country becoming the world’s second-largest alloy producer with increasing consumption.

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Foreign players like Posco, ArcelorMittal and Thyssenkrupp already have presence in the country.

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