Japanese major, JSW Steel plan mutual shareholding

Sajjan Jindal-promoted JSW Steel is collaborating with JFE Steel Corporation, the world's sixth biggest and Japan's second largest steelmaker, for a manufacturing and mutual shareholding agreement.

The partners will initially collaborate in India to make automotive steel, including production technologies and supply of raw materials for hot rolled, cold rolled and galvanised products. The two will also offer joint service activities, including application engineering and product development for automotive customers.

Later, the two companies will explore shareholding in each others' companies. "Two task force committees of JFE and JSW Steel are working together to finalise the areas of cooperation," said Sajjan Jindal, vice-chairman and managing director of JSW Steel.

Asked about reports that JFE Holdings will acquire 10 per cent in JSW Steel for ¥30 billion to ¥40 billion (Rs 1,560 crore to Rs 2,600 crore), Jindal said the partners were discussing options and have not finalised "any numbers".

"Details will take some time," he added.

JSW Steel and JFE Corporation will also partner to take forward the proposed 10-million tonne West Bengal-based integrated steel project at Salboni, where JSW plans to start construction by 2011. The company has acquired land for the project, said Jindal.

"The collaboration will help get JFE an avenue to look into the future possibilities of development in India," said Hajime Bada, president and chief executive of JFE Steel.

The Rs 1,79,500-crore JFE Steel Corporation, formed in 2003 following the merger of Kawasaki Steel Corporation and NKK Corporation, has been associated with JSW Steel for more than six years, mainly in upgrading the latter's production facilities.

The Rs 14,000-crore turnover JSW Steel is the flagship company of JSW Group.

Automobile production in India is growing between 5 and 10 per cent annually and this will augur well for the partners, said Jindal.

Japan's Toyota Motor Corporation is setting up a second plant in Bangalore and Nissan Motor Company is setting up a manufacturing unit near Chennai. The collaboration will help JSW and JFE tap the potential of the high-value auto steel market where domestic production is currently nil or minimal, said sources.

JFE, which has three huge production facilities in Japan, has had a supply collaboration with Hyundai HYCO in South Korea since 2000 for automotive steel. It has a joint venture named DJ Galvanising Corporation, with leading Canadian steel maker Dofasco in Canada for zinc-coated sheets for automotive use among the US and Canadian car makers.

JFE also has a collaboration with German steel maker ThyssenKrupp for carbon flat steel, focusing on automotive steel products and related R&D, and a joint venture in China with Guangzhou Iron and Steel Works to make galvanised steel sheets for automobile industry.