ArcelorMittal entry set to heat up India’s steel industry
The entry of ArcelorMittal, the world’s largest steelmaker, into the Indian market will force existing private sector players to increase efficiency and control costs, analysts say. A third steel producer, after Tata Steel Ltd and JSW Steel Ltd, with both financial heft and expertise, is expected to be good for the domestic market.
The lenders to bankrupt Essar Steel declared that the highest bid was from the joint venture (JV) of Luxembourg-based ArcelorMittal, promoted by Lakshmi Mittal, and Japan’s Nippon Steel and Sumitomo Metal Corp. The joint venture had cleared off the ₹7,469 crore of outstanding dues of Uttam Galva and KSS Petron—the bankrupt companies connected to Mittal—and had tabled a resolution plan that offered ₹42,000 crore to buy out Essar Steel’s assets, which had accumulated debt of over ₹49,000 crore.
Essar steel has a 10 million tonne (mt) per annum mill in Hazira, Gujarat. The company is a fully-integrated flat steel manufacturer with ore beneficiation, pellet making, iron making, steel making, and downstream facilities, including cold rolling mill, galvanizing, pre-coated facility, steel processing facility, extra wide plate mill and a pipe mill. In its FY17 annual report, the firm had said that it was the only private steel mill in the country which was allowed to supply steel for warships, submarines, battle tanks and armoured vehicles.
The joiint venture led by ArcelorMittal is inching towards closing the Essar Steel deal. Mittal is known to have built his career on buying out stressed steel mills across the world—in Mexico, Romania, South Africa, and the US—and turning them into profitable ventures, usually by ramping up volumes just in time for the upward steel cycle and controlling costs.
Even as ArcelorMittal battles to gain control of Essar Steel in India, it is simultaneously acquiring Italy’s Ilva, Europe’s largest steelmaker by capacity.