Kalyani Gerdau Steels Ltd, the joint venture for an alloy steel plant between India’s Kalyani Group and Brazilian steel major Gerdau, is set for a Rs 250 crore expansion in Anantapur district in Andhra Pradesh. The expansion will involve setting up a rolling mill, sintering plant and a 6 Mw gas recycling power plant.
Kalyani Gerdau’s annual installed capacity at this plant is estimated to grow from its present level of 275,000 tonnes of liquid steel per year to 1.6 million tonnes, which will require a $250 million to $300 million in investment.
The company is setting up the rolling mills, thereby facilitating the production of steel with a higher added-value and supplies both in the automotive and civil construction industry, covering a range of special bar quality and construction products.
The Gerdau Group and the Kalyani Group, in June 2007 set up the joint venture with steel-making assets of $170 million. The partnership included the SJK Steel Plant Limited, a unit located in the city of Tadipatri in Andhra Pradesh, which is close to three large urban centres — Bangalore, Chennai and Hyderabad — as well as to one of India’s main railway lines.
The equipment involved in the joint venture — a blast furnace, a melt shop with two converters, a ladle furnace, a continuous caster and a pig iron production facility — is being used to meet the internal demand in the country. Both partners own the same percentage (approximately 45 per cent) and have the same rights in the joint venture and the other 10 per cent is owned by other investors.
The Gerdau Group’s investment to acquire the stake in the joint venture was around $71 million. The Gerdau Group is the 15th largest international steel producer with production capacity of close to 18 million tonnes and gross revenue of close to $18 billion.
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Presently, India is the eighth largest steel producer in the world and by 2015 it should reach second place in the world ranking.
It has abundant reserves of iron ore and a low cost to produce steel. For the next 10 years the market forecasts point to a GDP growth of approximately 8 per cent a year. Presently, the per capita steel consumption in India is only 38 kg (compared to 93 kg in South America), and this level should reach 75 kg by 2015.