ArcelorMittal to make auto steel in India in 3 years as car output booms

16 December 2017

India’s state steel company will start producing automotive steel in a $1 billion partnership with ArcelorMittal in three years, a top government official said, helping cut imports of high-grade steel as the country revs up car manufacturing.

Steel Authority of India Ltd has approved entering into a "non-binding" agreement of terms on the joint venture with the world's biggest maker of the alloy, the state steelmaker said in a statement on Wednesday, confirming a Reuters report from Dec. 7 on the impending approval.

SAIL said a definitive agreement with ArcelorMittal would be “finalised in due course subject to financial viability”, but Steel Secretary Aruna Sharma told Reuters on Friday the joint venture would start production in three years.

Sharma, the top civil servant in the steel ministry, which controls SAIL through the government’s 75 percent stake in the steelmaker, did not elaborate on the time or other details.

SAIL spokesman M.C. Agrawal said the company and ArcelorMittal have cleared the first stage in the process of signing a formal agreement on the automotive steel venture, but that it was too early to talk about any production deadline.

An ArcelorMittal spokeswoman did not immediately reply to a request for comment.

SAIL and ArcelorMittal signed a preliminary understanding in 2015 to jointly produce 1.2 million tonnes of automotive steel a year, but disagreements over commercial terms have delayed the venture that would give the Luxembourg-based company a foothold in the world’s fastest growing steel market.

ArcelorMittal has also been looking for other way into the Indian steel market, planning to bid for debt-ridden firms such as Bhushan Steel, Essar Steel and Bhushan Power and Steel, Reuters reported in September.

India is banking on the SAIL partnership with ArcelorMittal to cut imports of high-grade auto steel, which mostly comes from Japan and South Korea. India is a major automobile producer and exporter, and the country is stepping up manufacturing under Prime Minister Narendra Modi’s “Make in India” campaign.

Maruti Suzuki, Hyundai Motor and Tata Motors are among the top-selling carmakers in the country. India is forecast to be the world’s third-largest car market by 2020, up from fifth-largest now.

For money-losing SAIL, the deal would help it rise up the value chain and compete more effectively with private rivals such as JSW Steel and Tata Steel, both of which already make auto-grade steel.

Billionaire Sajjan Jindal’s steel-to-power JSW Group has built enough capacity to make 2.3 million tonnes a year of auto-grade steel with technology from Japan’s JFE Holdings , and plans to diversify into electric car manufacturing using its own steel.