Japanese steel maker JFE Steel is keen to pick up a stake in an integrated steel plant planned by JSW Steel in West Bengal’s Salboni. In July 2010, JFE had acquired 14.9% in JSW Steel, India’s largest steel maker by installed capacity, for Rs 4,800 crore. Demand for steel in India is estimated to grow at 13.6% in 2011, almost twice the global average demand.
?We are committed to the West Bengal project,? said Seshagiri Rao, joint managing director and group chief financial officer of JSW Steel. ?But we are waiting for certain approvals like land, pipeline and water. JFE Steel is very keen to take a stake in the West Bengal project.?
?JFE always wanted to take a stake in the West Bengal project,? says Bhavesh Chauhan, an analyst who tracks the metals sector on an independent basis. ?What we have to see is how much of a stake they take.? The move will help bring in better technology and much-needed funding to JSW’s project, he added. JSW Steel, which had borrowed heavily to fund its expansion plans and to acquire loss-making steel maker Ispat Industries in December 2010, had a debt of R 12,106 crore as on September 2011.
?Progress is slow, but the Japanese companies have done well to realise that they need an Indian partner,? said an analyst who did not wish to be quoted as his firm is a consultant to international steel companies. ?The advantage of having an Indian partner is in getting land clearances quicker. Also, since automotive grade steel is a finished product, it makes more business sense for Japanese firms to tie up with Indian companies producing crude steel.?
Sajjan Jindal-promoted JSW Steel has tied up with another Japanese company to cater to automotive demand. It formed a joint venture with Marubeni Itochu Steel or MISI, announced October 12, to set up a 180,000 tonnes a year plant in Gurgaon, Haryana, an automobile industry hub, by 2013.
When JFE picked up the stake in JSW, Hajime Bada, president and CEO of JFE Steel had said: ?JFE, with this agreement, is determined to intensify its relationship with JSW to serve the request of its automotive customers, which are rapidly expanding production, in local procurement of value-added steel products.? The agreement will also provide JFE an avenue to look into the future possibilities of development in India, he added.
?Japanese steel makers have an existing relationship with Japanese carmakers. Therefore, it is natural for them to enter India to tap the growing demand for flat steel products as the auto sector has been growing rapidly,? said an ex-ArcelorMittal India executive, commenting on why the companies are eyeing India.
Japanese firms which have announced JV projects are targeting the flat steel product segment while their Indian counterparts are keen on the new technology such pacts can bring in.