Sign MoU; will conduct feasibility studies to decide on investment.
Essar Steel and Kobe Steel of Japan have entered into a memorandum of understanding (MoU) to produce autograde steel in India.
Under the MoU, the two steelmakers will jointly explore the possibility of setting up a continuous annealing line and a continuous galvanising line. These two lines are primarily used to produce high grade steel used in the auto sector.
“The auto industry is expected to be a major driver for steel demand in the years to come. The MoU will further strengthen Essar Steel’s product portfolio to enable it to produce steel for high-end applications in the auto segment,” said Malay Mukherjee, CEO, Essar Steel Business Group.
The two companies will now conduct feasibility studies to arrive at the plant size and investment that will be required to set up the product lines. The company said the location of the plant hasn’t been decided yet, but given the massive expansion currently underway at Hazira in Gujarat, it is likely that the facility could come up there.
Mukherjee, on December 2, had told Business Standard that the company had appointed a consultant of international repute to study the auto sector in India and identify companies, which would play major roles. He had said, “We would like to tie up with their preferred suppliers of steel.”
Essar Steel already has an umbrella technology sharing agreement with Kobe Steel. At present it has a 20-25 per cent share in the Indian autosteel market and doesn’t want to lose it to the growing competition from other steelmakers who have signed similar agreements with Japanese steelmakers.
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JSW, Tata Steel and Bhushan Steel have similar tie ups with Japanese steelmakers such as JFE, Nippon and Sumitomo Metals, respectively.
With the MoU, Essar Steel will get the desired technology from Kobe Steel and will supply steel to the latter’s customers in India.