Jindal Stainless to invest Rs 1,200 cr in nickel pig iron JV in Indonesia

JSL says it is the first strategic partnership by an Indian company for securing a stake in a nickel reserve abroad

Jindal Stainless, India’s largest stainless steel company, and New Yaking Pte, which is part of Eternal Tsingshan Singapore, have signed an agreement to set up a nickel pig iron (NPI) smelter in Indonesia.

JSL will invest Rs 1,200-1,300 crore, giving it a 49 per cent stake in the joint venture (JV) company while the balance would be with New Yaking.

JSL said this is the first strategic partnership by an Indian company for securing a stake in a nickel reserve abroad. The smelter would be located in an industrial park in Halmahera Islands, Indonesia.

“Nickel being a critical raw material for our industry, we felt that it made absolute sense to make the investment in backward integration, now that we are a 3 million tonne (mt) player,” said Abhyuday Jindal, managing director of Jindal Stainless, adding that the company sought to secure an ore scarce in India.

The smelter would be a greenfield set-up and the project would take about two years. “We expect the (JV) company to be operational by the end of FY25.”

JSL’s cash outflow for the investment would be over two years: Rs 700-750 crore in FY24 and around Rs 500-550 crore in FY25. The project, which would have a production capacity of 200,000 tonnes, would secure JSL’s NPI requirements.

“About 16 per cent of our nickel requirement as of now is in the form of nickel pig iron. With this JV we are creating the possibility of securing the NPI which we are using for our nickel requirements,” said Tarun Khulbe, wholetime director of Jindal Stainless.

JSL meets the bulk of its nickel requirement through stainless steel scrap and NPI/ferro nickel. Even though purchase from the JV would be at market price, it would help availability. Geopolitical issues, logistics, prices and the pandemic have affected demand-supply dynamics of nickel, increasing cost and uncertainty for industries such as stainless steel.

“We are envisaging a project IRR (internal rate of return) of 25 per cent with a payback of about four years,” said Jindal.

JSL, which has been in expansion mode, expects to commission 2.9 mt capacity in steel production in April and will ramp up later. “We will see a volume growth of 25 per cent in FY24 and another 20-25 per cent in FY25. But if the market progresses and we see an uptick in demand, we can ramp up faster,” Jindal said.

JSL has two stainless steel manufacturing plants in India, in Haryana and Odisha.