India' Jindal in $700 Million Indonesian Stainless-Nickel Joint Venture

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Jindal Stainless Limited (New Delhi, India) recently signed a joint venture (JV) agreement with PT Antam Tbk (Jakarta, Indonesia) to set up a stainless steel mill and a nickel smelter at North Konawe in South East Sulawesi, Indonesia. The total investment in the JV, PT Antam Jindal Stainless Indonesia, is expected to be about $700 million, which will be funded by a mix of equity and debt. Jindal will have a 45% stake in the JV and PT Antam Tbk 55%.

The initial plant capacity is expected to be 250,000 tons per year of high quality stainless steel and about 20,000 ton per year of nickel contained in ferronickel. Based on reports, the final product may be stainless steel long products or stainless steel slabs. Construction work is scheduled to start in early 2009 and the complex will be commissioned by mid-2011.

The status of the worldwide nickel market depends heavily on the stainless steel industry. Globally, the stainless steel industry accounts for 64% of nickel consumption. The price of stainless steel is also dependant on the market price of nickel. The demand for nickel is expected to continue growing with the rising demand for stainless steel and the increasing use of nickel in a growing range of industrial products. Price peaking in world nickel markets in recent years has encouraged the use of new alloys which avoid or greatly reduce the use of nickel in types of high quality stainless steels.

Developing countries such as India and China will continue to play a big role in the global nickel market, as will developed nations such as the U.S., Germany, and other EU countries, which have large aerospace and automotive industries. China, which has been devouring nickel, may see a slowdown in the demand for nickel due to the overcapacity of its domestic steel industry. The global demand-supply gap for nickel, which has been very wide, is expected to stabilize with the addition of new nickel projects in 2008. Over the next decade, global nickel production is expected to grow by 4 % annually.

The JV between Jindal and Antam will be an amalgamation of Jindal's expertise in stainless steel processing and global marketing with the latter's expertise in mining and nickel processing, along with its local experience and knowledge. It is claimed that the project marks the first time a stainless steel unit is being built next to a nickel mine and plant. The concept is expected to result in substantial cost savings.

The Jindal - Antam project is part of a recent spurt in such JV initiatives across various industries and sectors between companies seeking to leverage each other's niche skills that complement their own portfolios of expertise in two-way technology and skills transfers. A JV allows companies to pool resources and to achieve the necessary leverage to compete globally with the additional advantage of risk sharing, especially in capital-intensive industries. For a company, such as Jindal, seeking to enter a foreign market, a JV with an established local partner provides instant access to a ready market without the hassle of creating new distribution channels and customer bases. Further, if the companies work in a concentrated market, greater market power gives the JV the opportunity to even impact prices. The JV route transcends financial, legal and geographical barriers involved in mergers and acquisitions. A strategically chosen JV partner such as Antam enables easier access to funding and increases credibility with third parties.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.