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Arcelor Mittal-Nippon Steel lays out large expansion plan, seeks support

Sanguine about India’s high growth potential in the steel sector, AM/NS India has approached the government, seeking specific policy support to an ambitious plan to expand its steel-making capacity in India with “significant investments”, according to a senior company executive. The company is primarily evaluating the option of a large green-field facility in eastern India, but may also opt for further expansion through the inorganic route.

AM/NS India, a 60:40 joint venture between world’s largest steelmaker ArcelorMittal and Japan’s Nippon Steel Corporation, had acquired Essar Steel’s 9.6 million tonne Hazira plant for `42,785 crore in December. This was the country’s largest stressed-asset deal and marked Arcelor-Mittal’s entry into India’s potentially fast-growing steel industry.

Senior representatives of AM/NS India have recently made a presentation to Union steel minister Dharmendra Pradhan on the firm’s likely investment proposals in the country. They also explained to the minister the support that the company would be requiring, from the Centre and the concerned state governments for the plans to materialise. “It was a fruitful meeting in which we explained our ambitions to expand our steelmaking footprint in India in the future. We also discussed with the minister the appropriate backdrop which would provide us with the confidence to make significant investment to fulfil the ambitious plans,” Dilip Oommen, CEO, AM/NS India, told FE.

Despite the Covid-19 pandemic, AM/NS India did well compared to peers in India in first three full quarters of 2020 since the Hazira unit acquisition – it clocked $423 million as earnings before interest taxes depreciation and amortisation (Ebitda) in the January-September period. The Hazira unit produced 4.7 million tonne of crude steel during the nine month period, of which the highest output was in the September quarter, at 1.8 mt.

AM/NS India has already announced a plan to enhance the finished steelmaking capacity at Hazira to 12-15 mtpa from 6.5 mtpa now. However, the larger plan, which is being discreetly shared with the government, is to expand its India footprint via a green-field facility in the eastern part of the country. The idea is also to bank on the government’s ‘Purvodaya’ initiative that encourages the setting up of new steel plants. In sync with its strategy, in February, AM/NS India bagged an iron ore mine with estimated reserves of 180 million tonne in Odisha through competitive bidding.

Sources said Arcelor Mittal will undertake all steel capacity expansion in India through the joint venture entity, at least for the time being. On its own, Arcelor Mittal had executed with the Karnataka government a lease-cum-sale agreement for 2,643 acre on December 26, 2018, for its proposed 6 mtpa steel plant with a captive 750 MW power plant, but its latest annual report said, “The project is currently under review”.

India’s current installed capacity is around 140 mtpa. The country aspires to have 300 mt installed capacity by 2030-31. India’s per capital steel consumption is still around a third of the global average.

During the first seven months of the current fiscal year (April-September), India’s cumulative production of crude steel stood at 52.37 mt and finished steel at 47 mt, registering declines of 18.2% and 21.6%, respectively, on year.
Source: Financial Express

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