Competition for Mittal’s $8.7 Billion 12 Million Ton Indian Steel Plant from POSCO

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Researched by Industrial Info Resources (Sugar Land, Texas). Arcelor-Mittal (NYSE:MT) (Rotterdam, Netherlands), the world’s largest steelmaker has signed a MoU (Memorandum of Understanding) with the government of the eastern Indian state of Orissa to build an $8.7 billion steel plant. The detailed project report is expected to be completed by mid-2007.

In full operation the plant will have the capacity to produce 12 million tons of steel per annum and create 5,500 direct and 15,000 indirect jobs. It will be built on an 8,000 hectare site in the Keonjhar district 300 kilometers northwest of Bhubaneshwar. The region is rich in minerals. Orissa holds 25% of India’s iron ore reserves and has attracted the interest of a number of international steelmakers. Arcelor Mittal will build a dedicated 750 MW power station on the site. Water will be drawn from two local rivers and the plant will consume 600 million tons of feedstock over the first 30 years of operation.

The announcement of project comes at a time when there has been competition between Mittal and South Korea’s POSCO (NYSE:PKX ) (Pohang, South Korea), the world’s third largest steelmaker, to launch the first mega steel project in the state. POSCO signed an agreement in June 2005 to build a 12 million tons per annum steel mill in Orissa, but has had the allotment of a site delayed by protests from local farmers.

There has also been competition for the state of Orissa from the state of Jharkhand for the steel projects, and in October 2005, Mittal signed for a 12 million tpa project in that state. The fact that the state’s Steel Authority of India (SAIL) staked its claim on the iron ore mine favored by Mittal to feed the plant has caused legal wrangles and delays. But Mittal have said that they are keen to develop projects in both states and that the Jharkhand project is still on.

POSCO’s first self operated steel processing plant has begun operations in a joint venture with LG International (35%). POSCO (65%) has invested $14.5 million in the POS-India Processing Center in Pune, 125 kilometers southeast of Bombay. The plant produces electrical and automotive plates to meet the rising demand for high end products in India. With an annual production capacity of 130,000 tons the plant is not expected to make a significant contribution to the company’s bottom line but will act as springboard towards gaining market share in India where current demand for electrical ;plates is 335,000 tpa and is expected to reach 600,000 tpa by 2010. POSCO is considering the constructio0n of an additional automotive plate center in Pune in 2007.

Globally, POSCO plans to invest $400 million into 40 steel processing plants with a total annual capacity of 4 million tons.

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