ArcelorMittal, SAIL tie up to make auto steel in India

New Delhi: The world’s leading steel maker, ArcelorMittal, on Friday signed an agreement with Steel Authority of India Ltd (SAIL) to set up an automotive steel manufacturing facility in India, under a joint venture (JV). This would be the first greenfield investment by the LN Mittal group in India’s steel sector, after years of trying to get a foothold in the country.

“In the coming months, a working group, with representatives from both companies, will work on evaluating a structure for the proposed JV and carry out feasibility studies as part of a comprehensive due-diligence process,” said a joint press release.

The deal was signed in London, by ArcelorMittal Chairman and Chief Executive Officer Lakshmi Mittal and SAIL Chairman C S Verma, in the presence of Steel Secretary Rakesh Singh and ArcelorMittal Europe Chief Financial Officer and chief executive, Aditya Mittal.

The proposed venture would construct a cold-rolling mill and other downstream-finishing facilities in India. These would offer technologically-advanced products for India’s rapidly-growing automotive sector. Brian Aranha, head (global automotive and commercial coordination), ArcelorMittal, told Business Standard the company would get steel from SAIL’s existing plant. “The signing of the MoU (memorandum of understanding) is the first in the process, which will be linked to key decisions such as the location of and investment in the new plant,” he said.

Currently, SAIL produces steel for internal applications in the automobile sector. With the joint venture with ArcelorMittal, it expects to make high-end applications such as auto body sheets.

The investment in the new venture will be decided after a feasibility study. Automotive steel would give the ArcelorMittal group the “fastest entry pass” in India, where they could replace imports, said Aranha.

Earlier, ArcelorMittal had signed MoUs with state governments, including those of Jharkhand and Odisha but its plans couldn’t take off. It had also set up an oil refinery in Bhatinda, Punjab, along with Hindustan Petroleum Corporation. In 2009-10, the group became a co-promoter in the Miglani-family-run Uttam Galva. The ArcelorMittal group is the world’s leading steel supplier to the automotive sector, with a market share of 17 per cent.

“The automotive sector is a highly strategic and important market for ArcelorMittal. Establishing an automotive-focused production presence in India, one of the world’s fastest growing automotive markets, is a natural progression in executing our global automotive strategy,” Mittal said.

India is estimated to become the world’s fourth-largest automobile manufacturing country by 2020, growing from the current 3.5 million units to about seven million units. Aranha said considering 650-750 kg of steel was required to produce a unit, the total market size was huge.

Besides, with India considering introducing crash standards for vehicles, the demand for new technology would increase, he added. While reducing India’s reliance on imports, Singh hoped increasing the availability of indigenously-produced automotive steel would provide a sustainable competitive advantage to the Indian steel and automotive sectors.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.