With the recent partnership with Posco, Miglani is betting big on India's steel demand even as domestic companies grapple with overcapacity
Ankit Miglani of Uttam Galva Steels is fast emerging as the go-to man for foreign steel companies looking to get a toehold in India.
First, it was ArcelorMittal. In 2005, it had signed a MoU with Jharkhand for a 12 million tonne steel plant. The next year, it signed another one in Odisha for a similar sized unit. Till 2009, nothing moved and ArcelorMittal finally bought 33 per cent in Uttam Galva and entered India.
Next was Posco. The South Korean steel maker signed a MoU around the same time as ArcelorMittal (in Jharkhand) to set up a steel plant in Odisha. That intent now stands suspended. Last month, Posco Chairman & CEO Kwon Oh Joon said at an investors' meet in Seoul that the company was "tentatively suspending the Odisha project due to lack of progress". However, Posco did set up a downstream unit in Maharashtra.
Finally, a few days ago, it signed an agreement with the Miglani-owned Shree Uttam Steel & Power for a three million tonne steel plant.
To be sure, it is not uncommon for overseas steel makers to tie up with local producers: Japanese steel companies have been at the forefront of these partnerships.
In 2010, Japan's JFE had bought a minority stake in JSW Steel. Tata Steel and Nippon Steel have joined hands for automotive cold-rolled steel. SAIL and Kobe Steel have a pact for an iron nugget plant. More recently, ArcelorMittal signed a MoU with SAIL for an automotive steel facility.
Of course, there are exceptions. Thus, China Steel Corporation has gone solo with an electrical steel plant in Gujarat. But partnerships seem to be the favoured route. "It's not that foreign companies can't operate on their own. But a steel project requires mines and large tracts of land which complicates the situation," a steel producer explains.
his seems to be the reason behind the proposed Posco-Shree Uttam Steel & Power venture. "We have 2,000 acres for the project. Environmental clearances are also in place," says Miglani.
Moreover, the three million tonne plant will be based on Finex technology, developed by Siemens VAI and Posco. Unlike the blast furnace route, Finex uses iron ore fines and non-coking coal. Iron ore fines, considered useless till recently, are a by-product of iron deposits found at the time of excavation. So securing mines for the project is not on the agenda.
Even then, it took Miglani a while to convince Posco that the project could be implemented. One of the reasons that went in his favour was the location of the project: Satarda in Maharashtra happens to be in the iron ore belt. The steel plant will come up in two modules of 1.5 million tonnes; each phase could cost $1.5 billion. As things stand, Posco will own 20 per cent of the venture and the Miglani family 80 per cent, but that could be revisited later.
Headwinds persist
Peers are keenly watching the venture's prospects, especially since this would be the first Finex plant outside Posco's home turf.
There is also the added concern of overcapacity in the domestic industry. The 100 million tonne per annum industry has been working at 70-75 per cent capacity for the past four to five years. What's more, an additional six million tonne capacity has been commissioned this year, and another six million tonnes could be added the following year, all part of the government's larger plan of achieving capacity of 300 million tonnes by 2025.
Cheap imports have aggravated the situation. According to an ICRA report, cheaper imports would continue to exert pressure on domestic steel prices, especially since the near term outlook on steel demand growth in the country is muted.
"Given that the construction sector, which accounts for about 60 per cent of the total steel demand in India, is yet to witness much on-the-ground recovery, the automobile sector is expected to be the growth engine for domestic steel demand in the near term," says the ICRA report.
At a micro level, industry veterans feel that this venture could be a test for Miglani as well who has so far been only in downstream products and not in primary steel-making.
Miglani is not particularly perturbed by the industry scenario. The proposed venture already seems to have a ready market. Posco's downstream project in Maharashtra requires two million tonne of hot-rolled steel, while Uttam Galva Steels needs another one million tonne.
Miglani points out that it takes three to four years to build a steel plant. The next step for the project would be a detailed project report. Only by next monsoon is work on the site likely to get going.
But what is the rationale for venturing into steel-making when most producers are already bleeding? "Every year, we will need additional capacity of six million tonnes," says Miglani. His words could easily pass off as one of the biggest endorsements for the government's 'Make in India' initiative.
Source: Business Standard
- metaljunction »
- Metal News
Metal News & Events
METALJUNCTION PUBLICATIONS
Coal Insights (English) Monthly
Coal Insights is a ready reckoner for anyone associated with coal. This publication is aimed at tracking everything related to coal in India.
India Coal Market Watch(English) Monthly
ICMW is a one-stop source for all news, data and research pertaining to coal demand, consumption, stocks, spot- and long-term prices with respect to the Indian Market.
India Steel Market Watch (English) Monthly
ISMW is a brand new high-end steel market report, covering all aspects of the steel industry in India.
Steel Insights(English) Monthly
Steel Insights delves into various facets of the domestic and global steel industry such as market fundamentals, raw material price trends, price forecasts etc.