Essar, Kobe in talks for steel-making unit

Already in a technology-sharing pact, Kobe Steel of Japan and Essar Steel have now decided to take their relationship to the next level. They have initiated talks to jointly set up a steel plant in India.

Essar Steel managing director and chief executive officer Dilip Oommen confirmed the development. “Talks were initiated some time back, but you know it’s too early to comment. We also have to keep in view what is the current economic situation, etc. So, it’s too early to comment on the joint venture,” he said.

The two companies had signed an agreement in December 2010 for collaboration in the areas of technology for manufacturing advanced high-strength steel sheets used mainly in the automotive sector. Essar has started producing steel for the automotive sector with Kobe’s technological help.

The association between the two companies dates back to much before this agreement. They have had an umbrella agreement, which states the two will share technology and resources to manufacture high grade iron and steel products to capture the growing demand for high-grade steel products in India.

However, the plant that the two are exploring to jointly set up will be a continuous annealing line and a continuous galvanising line to produce steel for the auto industry.

Essar Steel is not the only Indian company Kobe has tied up with. The Japanese company is also looking at setting up a steel plant with state-run Steel Authority of India Ltd at the latter’s Durgapur facility in West Bengal. The plant will use Kobe’s exclusive ITmk3 technology to produce 500,000 tonnes of steel nuggets. It is expected to start operations in 2015.

Apart from Kobe, there are other Japanese steel makers who have entered India through joint ventures. JSW Steel has tied up with JFE Steel to manufacture auto-grade steel. It is setting up a cold-rolling mill at its Vijayanagar plant with JFE’s technical help. JFE also bought a 15 per cent stake in JSW Steel.

Tata Steel has tied up with Nippon Steel to produce auto-grade steel. The joint venture company will invest Rs 1,800 crore to set up a 600,000-tonne cold-rolled steel line. It plans to start production in 2013.

Bhushan Steel entered into a technological tie-up with Sumitomo Metals in 2010 for its steel plant in Odisha. They were in talks for setting up a steel plant in West Bengal, but couldn’t agree on the valuations. Bhushan has put the plant on the back burner.