SAIL, Posco ink strategic deal

NEW DELHI: India’s largest steel maker SAIL and world’s fourth largest steel producer Posco on Thursday entered into a strategic partnership to cooperate in a wide range of strategic business and commercial interest areas. The move is seen as Korean steel major’s strategy to counter the growing influence of ArcelorMittal.

Posco has already entered into similar arrangements with steel makers in Japan and the US, and is looking at expanding company-to-company cooperation across the world to expand its presence and strengthen the marketing network.

“We have signed an MoU with SAIL to synergise the strengths of both the companies together in the area of strategic planning, raw material purchase, exchange of technical know-how and business innovation and joint usage of each others existing marketing and warehousing network,” senior executive vice-president and member of Posco board Soung Sik Cho told ET.

He denied that the alliance was an effort to develop cartels in various steel markets that are witnessing rapid consolidation with the emergence of a few large players. Talking to ET, SAIL chairman SK Roongta said that cooperation between two steel giants would provide a win-win situation to both.

“There are several areas where operational synergy could be developed. Posco could learn about the Indian market from our vast experience and a wide marketing network and share our expertise in mining. We could access SAIL’s vast global marketing network and share some of state-of-the-art steel making technologies,” he said.

As per the MoU, SAIL and Posco would cooperate in information sharing and corporate strategy planning, sharing know-how in development of mines, joint usage of each other’s existing marketing and warehousing network and coordination in procuring raw materials such as coking coal and ferro alloys.

The cooperation may be expanded in future in conducting joint research and development projects and even joint development of steel projects both in domestic and overseas markets. The two companies may also cooperate in joint development of mines, an area that could help Posco’s Indian project in Orissa.

It is expected that Posco may rope in a mining company once its gets its captive mine. SAIL could provide its expertise here. The companies would establish a joint coordination group within two weeks to monitor, guide and review the implementation of the MoU, which will be effective for a period of three years initially.