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| Japanese steel giants tie up with Indian firms |
| Abhineet Kumar / Mumbai Feb 06, 2010, 00:52 IST |
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Last week, Tata Steel, India’s largest producer, announced a joint venture (JV) with Japan’s Nippon Steel for production and sales of automotive cold-rolled flat products at Jamshedpur. The JV is expected to invest $400 million (Rs 1,850 crore) to set up an automobile venture in India.
For, analysts were told by Koushik Chatterjee, group chief financial officer of Tata Steel, the undisputed world leader in cold-rolled output was Nippon Steel. Unlike European companies, which prefer galvanised steel, cold-rolled steel is used in India.
Tata Steel-Nissan is just one among a slew of such JVs announced recently between Indian and Japanese steel producers.
About three months earlier, Sajjan Jindal-promoted JSW Steel signed an agreement with Japan’s second largest producer, JFE, to collaborate for making automobile steel.
“In autos, the outer panel and bonnet require high quality of annealed products,” said Seshagiri Rao, director, finance, at JSW Steel. “We have been producing cold-rolled coil (CRC) for a number of years but we are not able to do outer panel,” he said. Hence the company collaborated with JFE.
JSW has 1.8 million tonnes (mt) of CRC capacity and is not planning any additional investments. It would use the technological collaboration to produce from the installed capacity.
Currently, India produces 4.5-mt of CRC, of which 1.9-mt is used for auto manufacture and the rest for consumer durable products. This is expected to double, as the Society of Indian Automobile Manufacturers expects passenger car sales to rise to three million units annually in the next five years from 1.5 million units in the last financial year.
Automakers import the annealed products but as the volume of cars and the raw material demand increases, Japanese steel makers want to cash in on that surge. That also explains why Bhushan Steel signed a technical collaboration and marketing agreement last month with Sumitomo Metals, Japan’s third largest steel producer.
Bhushan is India’s largest (in the secondary sector) cold-rolled steel plant owner to manufacture auto grade-CRC and sheets for automobiles and white goods industries. Bhushan Steel and Sumitomo had first entered into a six-year strategic alliance in 1997, which they renewed in 2003 and then in 2009.
This time, the two companies are also exploring the erection of a six-mt steel plant at Asansol in West Bengal. The company signed two agreements with Sumitomo Metals for technical know-how and marketing for selling products from its Orissa plant.
The first phase of the Orissa plant, with a capacity of 2.2-mt, is scheduled to go on stream in January. In the second phase, the plant’s capacity will go up to 5-mt by October 2012. The company’s current capacity is 1-mt. The Japanese steel major will provide technical expertise to Bhushan’s Orissa plant and market a part of the produce under the Sumitomo brand for its customers in India.
“At least $1 billion (Rs 4,670 crore) of investment is expected in the next three years in auto grade-steel, including those used by component makers,” said Anjani K Agarwal, partner, metals and mining, at global management consultancy Ernst and Young.
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