London/New Delhi: NRI billionaire Lakshmi Mittal-led ArcelorMittal on Friday partnered PSU giant SAIL to set up an automotive steel plant with an estimated Rs 5,000 crore investment, taking a fresh shot at entering India after nearly a decade-long wait for its earlier projects to take off.
The details of the investment and plant size were not disclosed. However, a source said the plant size discussed is "1.5 million tonne (MT) and the investment could be in the range of USD 850 million".
"The proposed JV will construct a state-of-the-art cold rolling mill and other downstream finishing facilities in India that will offer technologically advanced steel products to India's rapidly growing automotive sector," ArcelorMittal and SAIL said in a joint statement.
"We can't put a definitive timetable on this project. However, as a broad guide...It could take up to two years to carry out all necessary due diligence and cement our relationship into a formal joint venture company," a Steel Authority of India spokesperson told PTI.
The project needs formalising the JV structure, assessing the various options regarding potential plant locations, costing the project and so on.
The MoU towards setting up the JV was signed by Lakshmi Mittal, Chairman and CEO of ArcelorMittal, and SAIL's Chairman CS Verma.
The move is being viewed as a big step for ArecelorMittal which has been trying to make inroads into India after failed attempts to set up plants at Odisha and Jharkhand. Its work on USD 6.5 billion Karantaka plant is yet to take off.
The JV proposal comes at a time when South Korean steel giant POSCO is also in talks with SAIL to set up an integrated steel plant.
Steel Secretary Rakesh Singh said: "Increasing the availability of indigenously produced automotive steel would reduce India's reliance on imports and provide the Indian steel industry and the automotive industry with a sustainable competitive advantage."
He added that India is expected to grow as a hub for automobile export manufacturing facilities to cater to the international market.
"This proposed collaboration between ArcelorMittal and SAIL is a positive and welcome step towards fulfilling the objectives of the 'Make in India' campaign launched by Prime Minister, Narendra Modi."
Mittal said the company was in discussions with SAIL for some time and the pact indicated its intention to further advance the collaboration.
"Bringing together our leading automotive technological capabilities with SAIL's production scale in India, in a similar manner to ArcelorMittal's partnership with Hunan Valin on our VAMA joint venture in China, is an exciting and powerful combination," he said.
He added: "The automotive sector is a highly strategic and important market for ArcelorMittal; establishing an automotive focussed production presence in India, one of the world's fastest growing automotive markets, is a natural progression in executing our global automotive strategy."
Verma said SAIL is on the verge of completing a comprehensive modernisation and expansion programme to increase its hot metal capacity from 14 million tonne per annum (MTPA) to 23.5 MTPA, with a quantum jump in production of value added steels.
"Furthermore, we have drawn up a Vision 2025 plan to further increase capacity to 50 MTPA. Product enrichment is an integral part of this plan and the MoU with ArcelorMittal will pave way for a new chapter in indigenous production of high- quality automotive steel in India," he said.
"It will also aid a broader effort by SAIL to help fulfil the high-quality steel requirements of the rapidly growing infrastructure and manufacturing sectors in India," he added.
ArcelorMittal CFO and CEO ArcelorMittal Europe, Aditya Mittal and Steel Secretary Rakesh Singh were also present at the signing of the Memorandum of Understanding.
India is forecast to become the world's fourth largest automobile manufacturing nation by 2020, growing from about 3.5 million units now to over 7 million units.
In response to the level of demand, and supported by the government's 'Make In India' programme, which has been designed to transform the country into a global manufacturing hub, automotive manufacturers have been increasing presence, the statement said.
ArcelorMittal has completed a draft feasibility report for its Karnataka plant for which it had in June 2010 entered into a pact with the state government.
However, there is not much progress on its 12 MT Jharkhand project for which it had signed a pact with state government in 2005. The company had scrapped its 12 billion Odisha project in 2013.
ArcelorMittal is the world's leading steel supplier to the global automotive sector, with a market share of approximately 17 percent. In 2014, the company shipped over 13 million tonnes of steel to automotive customers globally, resulting in revenues in excess of USD 12 billion.
SAIL is India's largest steel maker conferred with 'Maharatna' status. It has a turnover of USD 9 billion and owns and operates 5 integrated steel plants at Bhilai, Durgapur, Bokaro, Rourkela and Burnpur, 3 special steel plants and ferro-alloy & refractory manufacturing units. SAIL is also the second largest producer of iron ore in India and meets 100 per cent requirement from captive mines.
