ArcelorMittal Moving Ahead with $27 Billion of Indian Steel Mills

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Researched by Industrial Info Resources (Sugar Land, Texas)--The world's largest steel producer, ArcelorMittal (NYSE:MT) (Luxembourg), is in talks with the state government of Chhattisgarh to set up a 6 million-ton-per-year integrated steel mill. The company intends to invest about $3 billion in the project. Discussions are still in the initial stages, but when the project is complete, the company's proposed steel production capacity from its units in India will reach 30 million tons per year within the next decade, constituting about 20% of the company's global steel production.

The plans to set up a plant in Chhattisgarh are believed to have been initiated during ArcelorMittal's CEO and President Lakshmi Mittal's recent visit to India. No further details about the project have been revealed so far. According to Vijay Kumar Bhatnagar, CEO of ArcelorMittal India Limited (AMIL), Chhattisgarh is one of the several mineral-rich Indian states being considered for future projects. He said that although the company's proposed projects in Orissa and Jharkhand were facing delays, the company was not discouraged and were looking at other options too.

The company has also bid for rights to mine 100 million tons of iron ore reserves in Chhattisgarh. Results of the bid are expected sometime later this month. According to the state policy of Chhattisgarh, any company which obtains mining rights in the state must set up a steel plant of a capacity proportional to the size of the iron-ore reserve it mines.

Earlier this year, ArcelorMittal announced plans to invest $24 billion in two integrated steel plants, one each in the states of Orissa and Jharkhand. Each greenfield project is to have a production capacity of 12 million tons per year. The projects are expected to be commissioned in 2011-2012. However, both projects are yet to take off as local residents have been staging frequent protests against land acquisition. Both projects may have to be delayed by a year or two. While ArcelorMittal has stated that it is making good progress with its project in Jharkhand and has already started carrying out tasks related to corporate social responsibility, landowners have refused to give away of land to the company. Private owners own 75% of the 11,000 acres of land requisitioned by the company.

According to Mr. Mittal, although delays in mining and other approvals were causing his company cost overruns of up to 50% because of increasing costs all around, he was optimistic that construction of both plants would start in the first half of 2009 and the first phases would be on stream by 2012.

Applications for land acquisition have been filed with both state governments and the public hearings are to begin later this month. The land allotment issue is expected to become clear only at the end of October. Meanwhile, the company has started conducting workshops at both sites for local workers to upgrade their skills. Also, eligible individuals would be employed in the ancillary units.

AMIL has also expressed interest in buying stakes in two coal mines in the states of Jharkhand and Orissa. In a joint venture with the GVK group (Secunderabad, Andhra Pradesh), AMIL intends to purchase a 55% stake in the Seregarha Mines in Jharkhand. In another six-way joint venture, AMIL has expressed interest in obtaining a 13% stake in Rampia Coal Mines and Energy in Orissa. The coal obtained would be used in the 750-MW captive power plants to be set up along with the steel projects in the two states.

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