Steel sector in the spotlight with takeovers and mergers

New Delhi, Dec 29 | Updated: Dec 30 2006, 05:30am hrs
Takeover battles brought the steel sector on to centrestage during the year. No sooner had the pitched battle for controlling stakes in European steel manufacturer Arcelor by the India-born L N Mittals Mittal Steel settled in, Indias second largest steel producer Tata Steel made a bid for Anglo-Dutch company Corus to pitch for the position of the fifth largest steel maker from its current position at 55th position.

However, Tata Steels fate would be eventually decided in the new year with Brazilian CSN acting as a spoilsport with rapid counterbids. With Mittal-Arcelor emerging as the largest steel producer and Tata Steel also vying for a top slot, consolidation seemed to be driving the steel companies during the year, with almost all of them announcing expansion plans like never before. Iron-ore rich states of Jharkhand, Orissa and Chhattisgarh vied with each other and rolled out red carpets for steel majors in the hope of turning their regions into investment centres.

The year saw total MoUs for projects touching about Rs 3,60,000 crore planned in the three states by the steel companies for greenfield and brownfield operations. Orissa, with 43 MoUs, plans to grow its steel production capacity to 58.04 tonne, Chhattisgarh, with 42 aims at a production capacity of 19.32 tonne, while 31 MoUs for Jharkhand would produce 68.67 tonne steel.

However, issues related to land acquisition, rehabilitation and resettlement, mining leases, export of iron ore, continue to hang over the fate of these projects. The government has set a target of producing 110 MT of steel by 2020 as against 42.1 MT at present. By 2011-12, about 65 MT production was envisaged but buoyed by the MoUs, the government now feels that 80 MT production would be achieved by 2011-12. However, whether these fructify would depend upon the outlook of this cyclical sector. Prices remained stable during the year with very few hikes announced by the companies. Demand for steel continues to be fueled by China but with the country turning into a net exporter, the earlier volatility has melted.

Stealing The Show

Tata Steel made a bid for Anglo-Dutch company Corus to pitch for the position of the5th largest steel maker
Consolidation seemed to be driving the steel companies this year, with all of them announcing expansion plans
Iron rich states vied with each other and rolled out red carpets for steel majors hoping to attract investment

Indian as well as global majors have outlined projects in the country. Mittal-Arcelor announced investment of about Rs 40,000 crore in Orissa.

It plans to build an integrated steel plant with a total annual capacity of 12 million tonne in two phases. Poscos biggest global project ever would see an integrated mill in Orissa, which in the first phase would churn out 4 million tonne of slabs and hot-rolled coils annually by 2010. The second phase expansion, by 2020, will help it have a production capacity of 12 million tonne. Meanwhile, Tata Steels 4.7 billion pound bid to take over Anglo-Dutch steel maker Corus is stuck with Brazilian steel maker CSN making a counter offer of 4.9 billion pound.

The UKs Takeover Panel has finally intervened and both Tata Steel and CSN have been given a deadline of January 30 to further revise their bids. After which, the winner would be decided through an auction.