Posco India has signed an offtake agreement with Essar Steel valued at around Rs 5,000 crore.
Sources said that the agreement was for procuring one million tonne of hot rolled products and it was the fourth such memorandum of understanding signed between the two companies.
Commenting on the MoU, G H Bang, MD, POSCO Maharashtra said, ”We have found Essar Steel to be a very dependable partner to meet our requirements. They are able to meet our stringent quality standards and delivery timelines. I am happy that this partnership has stood the test of time and the bond between the companies has become stronger. The way our partnership has progressed is a showcase story of how an Indian company can support a global company to make ‘ Make in India’ a reality”.
Bang also mentioned that irrespective of the pending matter related to the ownership of Essar Steel, the company had continuously improved its operational and financial performance which is commendable.
Insolvency proceedings against Essar Steel started in August 2017 and the matter is still pending in court though ArcelorMittal's resolution plan has been approved by the National Company Law Tribunal (NCLT)
Posco's partnership with Essar Steel started with a trial order of 1,000 tonnes in 2014-15 which was followed up by a bulk order of 10,000 tonnes in 2015-16 and ended the year with a total supply of 62,000 tonnes. The completion of this order finally led to the first MoU in 2015-16 for an order of 650,000 tonnes. The quantity was enhanced the following year to 850,000 tonnes. This were further enhanced to one million tonne in 2017.
During this period, 16 new grades of steel have been developed for auto and other special applications.
Essar Steel has been ramping production over the last few years and is currently operating at around 85 per cent. Last year it produced 6.9 million tonnes of crude steel and is expected to cross over seven million tonnes in the current fiscal.
Essar's revenues grew to Rs 5,545 crore in April-May 2019, as against Rs 5,106 crore in the same period last year while Ebitda grew by 17 per cent to around Rs 770 crore from Rs 660 crore.
Posco Maharashtra, on the other hand, is a two million tonne unit at Mangaon Maharashtra and is part of the Posco Group, fifth largest steel producer in the world.