JSW Steel, Posco look at 50:50 joint venture for steel plant in India

JSW Group and Posco have signed an agreement to set up a steel plant with an initial capacity of 5 mtpa in India

JSW Steel, the flagship company of the Sajjan Jindal Group, and South Korea’s Posco will have an equal share in the proposed steel venture in India with an initial capacity of 5 million tonnes per annum (mtpa).

 

On Tuesday, the JSW Group and Posco announced a collaboration in steel, battery materials, and renewable energy in India. The renewable energy is for captive use of the steel plant.

 

Jayant Acharya, joint managing director and chief executive officer of JSW Steel, told Business Standard that the cooperation would bring two major steel producers together.

 

“A 50:50 joint venture between JSW Steel and Posco will set up a 5 million tonne per annum (mtpa) steel plant in India, bringing together Posco’s technical excellence and our project execution and management capabilities,” Acharya said.

 

He said the axis of steel production has shifted to the East with Japan, S Korea, India and China accounting for more than 70 per cent of world steel production.

 

On the investment, Acharya said, it was too early to discuss the amount.

 

“Internationally, the thumb rule for a greenfield steel plant is $1 billion for a million tonne. However, JSW Steel is known for its competitive specific cost of capex investment per million tonne of capacity and that expertise will bring in value to reduce costs,” Acharya said, adding that it would also depend on the product mix and technology.

 

Going forward

 

The next steps in the process for the steel venture would be to identify the location and the technology.

 

“As of now, the location is open within India. The project could be set up in Odisha or any other mutually decided state. It will be determined by factors such as proximity to iron ore, land availability, and investment support by the state,” Acharya explained.

 

JSW Steel has plans underway to set up a 13.2 mtpa steel plant in Odisha on the piece of land that was allocated to Posco before it suspended its mega project in 2015. However, the steel plant with Posco would be separate from JSW Steel’s Odisha greenfield already in the works.

 

Posco's tryst with Odisha

 

If the JSW-Posco steel project comes up in Odisha, it would be a second coming for the South Korean steel major.

 

It signed a memorandum of understanding (MoU) with the Odisha government for a $12 billion plant in 2005. But the project got mired in protests against the land acquisition.

 

The final blow, however, was a change in mining laws by the Centre in 2015, which made it mandatory for companies to go through the auction route for captive mines as opposed to allotment on a nomination basis. The same year Posco suspended its project in Odisha for lack of progress.

 

Since then, it has been trying to gain a major foothold in the growing Indian steel market through partnerships with private and public sector companies. The last move was with the Adani group in 2022.

 

Despite challenges in setting up an integrated steel plant, the Korean steel major has 2 mtpa downstream unit in Maharashtra.

 

JSW Steel expansion

 

For JSW Steel, the partnership with Posco for the proposed steel venture is another milestone in a busy year, marked by deals and expansion.

 

In August, it picked up a 20 per cent economic interest in an operating coking coal asset in Australia.

 

The idea, Acharya explained, was to get better control of premium low volatile hard coking coal, whose price is very volatile and fluctuating.”

 

“Between the mines in India and the operating coking coal asset in Australia, we should have about 4 mt from captive sources,” he added.

 

In value-added steel, the company recently announced a deal to acquire thyssenkrupp’s electrical steel business in India, jointly with its strategic partner, Japan’s JFE. The cost of the acquisition is Rs 4,051 crore. Electrical steel is a high-margin product.

 

JVML (JSW Vijayanagar Metallics Ltd), a wholly owned subsidiary of JSW Steel, commissioned the blast furnace for 5 mtpa expansion at Vijaynagar in the early part of October.

 

Once fully ramped up, it would take JSW Steel’s capacity to 34.2 mtpa in India. With the US operations, the capacity would stand at 35.7 mtpa.

 

Scope of JSW-Posco MoU

 

To develop a steel plant with an initial capacity of 5 mtpa

 

Explore collaborations in the areas of battery materials related to electric vehicles and renewable energy for meeting captive requirements of the proposed steel plant