Land issues a barrier for global steel giants in India: Report

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Published: July 29, 2015 6:37:44 AM

India has barriers like land issues, which prevented global giants like ArcelorMittal and POSCO to take off their projects, a Ernst & Young report said on Tuesday.

Unlike major steel players in countries like China and US shifting closer to customers, India has barriers like land issues, which prevented global giants like ArcelorMittal and POSCO to take off their projects, a Ernst & Young report said on Tuesday.

Both the steel giants are unable to take off their USD 12 billion projects each in Odisha and Jharkhand, stuck for about a decade now over issues that include access to land.

“One of the ways to move to a service-oriented focus is to really focus on building strong customer relationships. A number of steelmakers are already seeking ways to move closer to their customers…Both POSCO and ArcelorMittal have thus far been unsuccessful in setting up new steel mills in India to tap into growing Indian steel demand due to land access issues,” a global EY report on Steel said on Tuesday.

Both, ArcelorMittal, the world’s largest steelmaker and POSCO, the South Korean giant have not been able to take off their ambitious USD 12 billion projects each in Jharkhand and Odisha despite over a decade of initial pacts with state governments, largely due to land issues.

It, however said, “they have both successfully invested in downstream businesses to acquire, service and satisfy customers in that market.”

The report said a number of steelmakers are already seeking ways to move closer to their customers in order to increase their competitiveness.

Citing example it said, “US Steel recently restructured its business operations to focus on customer groups, and Hebei Iron & Steel agreed to acquire a majority stake in trading company, Duferco, enabling it to better understand demand and operate more effectively in international markets.”

It added that ArcelorMittal also commenced production through its joint venture in China to follow its customers into the fast growing Chinese automotive sector.

“This year, China opened up foreign control of domestic steelmakers; so potentially, we will see more foreign steelmakers take up the opportunity to tap into China’s growing consumer demand by setting up shop near their customers,” it said.

About POSCO, it said that the South Korena major has developed an accelerated premium product strategy by integrating technology, sales and solution marketing, for example, its launch of technical service centers to provide solutions directly to clients.

“POSCO is also expanding sales of automotive steel by targeting strategic regions, through overseas production sites and sales networks (US and China),” it said.

Earlier this month, POSCO has said it has shifted its focus from the USD 12-billion proposed steel plant in Odisha citing “no progress” in the project.

POSCO Chairman and CEO Kwon Oh Joon had said the company is “tentatively suspending the Odisha (India) project due to lack of any progress.”

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