New Delhi: ArcelorMittal, the world’s largest steel company, all set to take over the assets of Essar Steel. With this, the steel major has indicated that it is exploring setting up a new steel plant close to the Essar’s current pellet unit at Paradip.
In a statement, ArcelorMittal claimed it will turn around the stressed asset of Essar Steel. The capacity of the steel plant in Gujarat may also be ramped up to fullscale of 10 million tonnes (mt) and further to 15 mt.
ArcelorMittal’s acquisition of Essar Steel is being touted as the country’s first fire sale to have witnessed fierce fight for control between rival entities.
The Supreme Court Friday allowed ArcelorMittal to make payment for Essar Steel India, paving the way for acquisition of the bankrupt steelmaker by the Luxembourg-headquartered entity.
Steel sector analysts agreed that ArcelorMittal’s might could heat up competition in the Indian market and result in the introduction of a new category of value-added product segment that till now is either being imported or is available in lesser quantity in the country. The action may also shift to auto-grade steel where other steelmakers such as Tata Steel and JSW are fighting fiercely for market share.
“Acquisition of Essar Steel presents a good opportunity for ArcelorMittal to have a foothold in the Indian market. But to realise full potential from Essar Steel, the company would need to first invest and build synergies around its global operations, so that cost could be brought down and products are made competitive.
“Also, demand conditions would play an important role in the growth of steel operations post the entry of ArcelorMittal in the Indian market,” said steel market investment and market strategist A.S. Firoz.
ArcelorMittal’s bid amount of Rs 42,000 crore emerged successful as it was much higher than the other bidder, Vedanta, and would help the lenders realise about 85 per cent of their total debt exposure of close to Rs 49,000 crore.
Moreover, sources said that ArcelorMittal is bidding with Nippon Steel for Essar. This would help the two to use their global approval for auto-grade steel to source steel from Essar Steel India after the restructuring. It will provide a greater number of ready-made customers to Essar Steel.
(PNN & Agencies)
