ArcelorMittal said it has formed a joint venture with Japan’s Nippon Steel and Sumitomo Corp (NSSMC) as part of its bid to acquire Essar SteelBSE 0.41 %. Its Indian subsidiary ArcelorMittal India Pvt Ltd submitted a resolution plan for the Gujarat-based debt-stricken steel company on February 12.
Under the agreement, both companies are poised to jointly acquire the Ruia family’s steelmaking asset in Hazira, Gujarat, if ArcelorMittal’s bid is selected.
ArcelorMittal and Numetal Mauritius have emerged as the two bidders for Essar Steel. Numetal is a special purpose vehicle (SPV) backed by VTB Bank, engineering agency Tyazhpromexport, both from Russia, and the Ruia family.
“Partnering with NSSMC for Essar Steel has always been our intention and adds further strength to our offer,” Arcelor-Mittal chairman Lakshmi Mittal said in a statement on Friday. “We believe that together we can contribute our technology and knowledge to support a rapid turnaround in Essar’s performance, enabling it to increase production, enhance its product capabilities and make a meaningful contribution to the future growth of India’s manufacturing sector and the development of its economy.”
ET was the first to report on January 29 that the two global steel giants will be partners in a joint bid for Essar Steel.
NSSMC said in a release that India was one of the “most promising steel markets in the world,” noting the company had been steadily expanding production in the country and targeting sectors where it could benefit from its technological advantage.
NSSMC also said it has been seeking opportunities to engage in integrated steel production in India to steadily capture the growing demand for steel products, which is expected to increase along with the development of domestic infrastructure.
“We have been looking to expand our business in India, and having Essar as our production base means we could increase our competitiveness in a very attractive market,” S&P Global Platts, an energy and commodity information service, cited an NSSMC spokeswoman as saying.
ArcelorMittal’s decision to bid for Essar Steel through a joint venture with Nippon Steel is targeted at grabbing a sizeable chunk of the growing market for high-value steels in India.
Nippon Already has a Tie-up with Tata Steel
It will be able to draw on Nippon Steel’s knowledge of the Indian steel market where it already has an existing tie-up with Tata Steel for automotive steels.
Jamshedpur Continuous Annealing and Processing Company, a 51:49 joint venture between Tata Steel and NSSMC, has a Rs 2,750-crore facility and is one of the leading providers of automotive steel in India. Sumitomo Corp had entered into a pact with Bhushan Steel in 2009 for sourcing OEM (original equipment manufacturer) steel sheets from the latter’s Dhenkanal plant in Odisha.
The acquisition of Essar, if it does happen, will not impact its relationship with Tata Steel, the NSSMC spokeswoman told Platts. “With Essar, it would mostly be in the area of construction steel, so the two wouldn’t compete in any way,” she was cited as saying.
Arcelor and Nippon have been partners for the last 30 years in two joint ventures in the US — I/N Tek and I/N Kote in Indiana that produce high-value products for the automotive and domestic appliance markets. More recently, in 2014, ArcelorMittal partnered with NSSMC to acquire AM/NS Calvert, a downstream finishing facility in Alabama in the US.
The facility has a 5.3-million-tonne capacity and is the largest newly constructed steel facility in the US. The revival programme focussed on improving production of higher value-added steel products, including Usibor, ArcelorMittal’s flagship advanced high strength steel for the automotive sector.
“These investments have helped to facilitate a rapid improvement in AM/NS Calvert’s performance: capacity utilisation rates have improved by over 20%; shipments to the automotive sector more than doubled between 2015 and 2017,” the Arcelor statement added.
Source: Economic Times