Spain's Acerinox may partner local co for Indian steel plant

MUMBAI: After Posco and Mittal Steel, it is now Spain’s Acerinox, world’s second-largest producer of stainless steel planning to come to India.

The $5-billion stainless steel major, along with Japan’s Nisshin Steel, is currently talking to large Indian steel companies to build a 1.5-million tonne integrated stainless steel plant on the western coast, to tap the growing demand for the commodity in India and the subcontinent. It is estimated that the investment for such a plant would be over $500 million.

Among the companies that Acerinox is learnt to be talking to, is the Ratan Jindal-led Jindal Stainless, India’s largest in that category. The Spanish company would want an Indian partner to establish its base in India already billed as one of the low-cost manufacturing bases for metals like steel, due to adequate deposits of raw materials — iron ore and ferro chrome.

E-mails sent to Acerinox and Jindal Stainless elicited no response. Although Acerinox is learnt to be scouting for possible locations, the Spanish major, at the recent global investors conference in Gujarat, expressed an interest in establishing a steel manufacturing facility to cater to the Indian market.

Gujarat government officials privately admit that Acerinox had also met senior state government functionaries and visited several proposed sites in Gujarat. Sources in the know said that negotiations between Acerinox and Jindal Stainless would be limited to a new plant and wouldn’t be for Jindal’s ongoing plant in Orissa.

For sometime now, Acerinox has made clear its intentions to set up a base in emerging markets. The Madrid-based company has also admitted to looking at acquisition possibilities in South and South-East Asia. And through Nisshin, in which the Spanish company holds 12% stake, it has a natural partner with experience in the region.

The two — ever since Acerinox was formed in 1970 — have jointly taken initiatives in technical and manufacturing tie-ups across the world. If successful, the latest venture will be the $3.5-billion Japanese steel major’s second venture with Jindal Stainless.

In 2004, the two companies had announced a two-year technical alliance, where the Rs 3,500-crore Indian company got assistance in the know-how of stainless steel manufacturing. Consumption of stainless steel is growing fast due to increased applications in new industries such as building and construction and in automobiles and consumer durables. Modern shopping malls and large-scale residential areas these days use stainless steel, leading the market to grow by about 8-9% every year.

Shares of Jindal Stainless rose 2.2% to Rs 124.9 on the BSE on Wednesday, outperforming the metal index which was up 1.4%. The stock has risen by over 6% within a week. The company’s revenues had almost doubled in the third quarter of the current fiscal to Rs 1,544 crore.

Both Acerinox and Nisshin have multi-million tonne hot-rolling and cold-rolling mills and boast of expertise in the technical side of the business. Through the two MNCs, Jindal Stainless will be expanded its presence globally and also have access to the latest in technology.