Public sector steel major SAIL is in talks with the Afghanistan government to explore the possibility to set up a 3-million tonne integrated steel plant in that country. Company chairman CS Verma confirmed this development to FE, but added that talks were still in a preliminary stage.
?We are exploring the possibility, but talks have not reached a definitive stage. We may consider setting up a steel plant in Afghanistan provided the government there provides us requisite inputs like land, iron ore and coking coal,? Verma told FE. ?There is no memorandum of understanding (MoU) (for the deal) right now and talks are still in a preliminary stage,? he added.
The proposed 3-million metric tonne factory will draw raw material from the Hajigak mines. More than 22 companies are bidding for the mines, estimated to hold 2 billion tonne of ore. The deadline for offers is August 3.
SAIL is seeking to enter resource-rich nations for its expansion plans and would need to compete with global rivals ArcelorMittal and Posco in this pursuit. Afghanistan, ravaged by decades of civil war and insurgency, is betting on investment from overseas to rebuild houses, roads and bridges.
Hajigak will need about $3 billion of investments over 30 years. The Afghanistan government will allow the entire output from the mines to be exported and the winner of the bid will be urged to set up a steel mill with assured coking coal supplies from mines in the vicinity.
SAIL, along with local rivals Tata Steel and JSW Steel, is among companies shortlisted to bid for Hajigak, located on the Hindukush mountain ridge about 100 km west of Kabul. Talks are on with some of the 15 Indian companies in the fray to make a group bid for the mines.
The government of Hamid Karzai will assure investors complete security for their workers, an Afghanistan official is quotes as saying. The area around the mines will be patrolled by as many as 2,000 policemen to prevent terror attacks, he said.
The Indian government and SAIL will each sell a 5% stake in a follow-on public offer this year, raising about R5,920 crore.
Indian steelmakers are scouting the globe for coking coal and iron ore to secure supply of raw materials for their plants. The price of coking coal rose 74% last quarter after record rains slashed production in Australia?s Queensland state, the world?s largest exporter. Cash iron ore prices at Tianjin port in China rose 36% on average in the period.
Afghanistan is looking for stability through investments in its mineral reserves, potentially worth $1 trillion, according to a study by the US Defense Department in June last year. India and Afghanistan signed treaties for partnerships in mining, energy, information technology, communications and transport during prime minister Manmohan Sing’s visit to Kabul earlier this month.
?Afghanistan is rebuilding itself and steel will be a key component in the development,? Verma was quoted as saying by Bloomberg.