Essar Steel, Posco sign pact for supply of flat steel products

5 May 2017

Essar SteelBSE 0.41 % today said that it has entered into a strategic pact with Posco for supply of 1.1 million tonne flat steel products during the ongoing fiscal.

"Essar Steel has signed a strategic long-term MoU with Posco for supply 1.1 million tonne of flat steel products during the current financial year," the company said in a statement.

This is second year in a row that Essar Steel has signed such a contract. The contracted volume this year is higher by 30 per cent compared to last year.

The pact is in line with Essar Steel's strategy to lock-in a certain portion of its production through long-term arrangements.

In addition to Posco, Essar Steel has MoUs with customers from auto, infrastructure sector and has overseas customers as well. Further, almost two million tonnes of flat products is used by Essar Steel in its downstream units thereby limiting its products' availability in spot market.

Steel industry sources say, the quality of Essar Steel products is consistent and compares well with international products and hence many buyers prefer to have a long-term arrangements.

Their products also command premium in the market.

Commenting on the MoU, Essar Steel CEO & MD Dilip Oommen said, "Essar Steel's MoU with international player Posco revalidates our commitment to the 'perfect partnership'. The long-term arrangement helps us in better working capital management and manage finished goods inventory."

"Long-term arrangements reflects the confidence of our customers in the quality, reliability and service of our products," Oommen said.

Essar Steel has been ramping up production over the last two years. Last year, its production was up by 47 per cent at 5.6 million tonnes and its current year target is seven million tonnes.