ArcelorMittal, the world?s largest steel manufacturer on Thursday said it has revised its strategy in India. Instead of concentrating solely on two mega-projects, the steel major would now focus on smaller hubs, with the first domestic production expected in 2013.
The move is significant, since the steelmaker had earlier entered into a pact with the Jharkhand government for setting up a 12 million tonne per annum (mtpa) steel plant in 2005 but has been facing delays in land acquisition amid regulatory hurdles. The company has plans to set up three steel projects in the country ? two in Jharkhand and one Orissa with an annual production capacity of 12 million tonne each.
ArcelorMittal has now proposed a Rs 30,000-crore project in Karnataka for setting up a 6mtpa plant. It has also entered into a joint venture with domestic steelmaker Uttam Galva. Aditya Mittal, CFO of ArcelorMittal in a presentation at the company?s Investors Day 2010 in London and New York said, ?We now plan smaller steps of 1.5 to 3 million tonnes per annum (mtpa) module.? He further said that the land acquisition for the Karnataka greenfield project is expected to be completed by end of this year and it is also expecting to get some mining lease in the state.
ArcelorMittal aims to implement a further $2 billion of cost cuts by 2012 and will spend $4 billion to make it more self-sufficient in iron ore over the next five years. ArcelorMittal has already achieved $3 billion of what it describes as ?management gains? since the financial crisis struck, largely by axing jobs.
The company, which is aiming a strong platform for expansion in high growth emerging markets including India, expects India?s steel demand to triple to 150 mt by 2010. However, it notes that steel supply is expanding fast in India but may fall short of demand.
Before the economic downturn, ArcelorMittal had planned two mega greenfield projects in Jharkhand and Orissa, but the plans have been slowed down due to high tribal influence, said Aditya Mittal.
The company, in its new strategy, plans project in the state of Karnataka due to easier access to land and proximity to strong consumption centres. This would reduce implementation risk.
Meanwhile, the company plans to spend $4 billion to increase iron-ore production to 100 million metric tons by 2015. In an investor presentation posted on its website ArcelorMittal expects ore prices to fall as supply increases. A drop in price volatility would also smooth? margins, it said.
Lakshmi Mittal, chairman and CEO of ArcelorMittal said, ?ArcelorMittal is a stronger company after the crisis. We now have more efficiency, a stronger balance sheet, lower costs and a very clear steel and mining growth strategy keeping in line with our financial objectives.?