India has approached steelmakers such as Posco and Hyundai Steel Co. to partner its state-owned mills, as Prime Minister Narendra Modi seeks to stoke local production of high-grade steel and reduce import dependence, according to people familiar with the information.
The south Asian nation is offering iron ore supplies to attract steelmakers in South Korea and Japan to form joint ventures with Steel Authority of India Ltd. and Rashtriya Ispat Nigam Ltd., the people said, asking not to be identified. The initial response from the South Korean steelmakers have been favorable and partnerships are being explored in brownfield projects.
“The ministry is in talks with these two companies to explore the opportunity of investing for manufacturing value-added steel products in India,” Monideepa Mukherjee, spokeswoman for the steel ministry, said.
Exploratory letters of intent have already been sent to the companies and the government is keen to discuss all aspects, the people said. Emails sent to SAIL and RINL were not immediately answered while Hyundai Steel and Posco didn’t immediately comment.
New Delhi’s keenness to stitch together ventures with foreign mills to make automotive steel stems from the fact that it’s a big importer of high grade steel, despite adequate local availability of high grade iron ore. An increased output of these products will also aid several Japanese and South Korean automobile companies that manufacture in India.
With India soon set to overtake the U.S. as the world’s second-largest consumer of steel and demand estimated to grow by 7 percent in the near-to-medium term, companies including Posco and ArcelorMittal are keen to tap the rapidly expanding market. ArcelorMittal and SAIL have tied up for an automotive steel plant in India since 2017, but the proposed venture has been plagued by delays.
India’s previous attempts to lure foreign investment in the steel sector were derailed due to multiple issues including delay in land acquisition and raw material linkages. In 2013, ArcelorMittal scrapped a 12-million tons a year plant in Odisha and Posco pulled out of a $12 billion project in the same state in 2015.
Boosting domestic steel capacity, especially of high-end products, is key for India as Modi’s administration focuses on its Make in India initiative to boost manufacturing to 25% of India’s economy by 2020 and create millions of jobs.