Acerinox, Nisshin Steel plan India JV

Acerinox SA, the world's second-biggest stainless steelmaker, is studying building a plant in India with Japan's Nisshin Steel Co to tap rising demand from makers of automobiles and houses.

The company was considering stainless steel demand and energy issues as part of the study into establishing a joint venture in India, Acerinox Chairman and Chief Executive Victoriano Munoz Cava said in an interview yesterday in Kyoto.

Acerinox is looking into India, the world's fastest-growing major economy after China, because overall steel demand is forecast by the government to double by 2012. Nisshin Steel, which offered technology to Acerinox when the European company was founded in 1970, holds an 11 per cent stake in the Madrid-based company, according to Bloomberg data.

"We have not decided the location because not only consumption, but securing power supply matters,'' Munoz Cava said.

Global output of stainless steel rose 17 per cent last year to 28.4 million tonnes, with China's production gaining 68 per cent to 5.3 million tonnes, according to data from the International Stainless Steel Forum.

Acerinox was the world's second-biggest producer of sheet stainless steel by 2006 output, according to Nippon Steel & Sumikin Stainless Steel Corp estimates.

The company's profit surged to ¤210.2 million ($284 million) in the first quarter this year from 23.16 million euros a year ago, as higher output offset lower margins caused by increasing competition from China, Munoz Cava said.

"Competition will be intensified in the coming years,'' he said on the sidelines of a stainless steel forum meeting.

China, which became the world's biggest stainless steelmaker last year, will boost output by another 37 per cent to 7.35 million tonnes this year, metal research company Heinz H Pariser said in March.

Industry consolidation was likely in Asian countries including Japan, South Korea and China, Munoz Cava said. Acerinox may seek to buy steel plants in China, if they are cheap, rather than building a more costly new mill, he said.

Nickel traded on the London Metal Exchange has risen seven-fold in the past five years, reaching a record $51,800 a metric ton May 9 as demand for stainless steel used in cookware and building rose, especially from China. Nickel closed at $50,400 a ton on May 18.

Chromium Content

High prices have sparked production of stainless steel with higher chromium and manganese content, and nickel-free grades. "There is a lot of speculation surrounding the nickel,'' said Munoz Cava, ``But there is no shortage of nickel.''

Even so, Acerinox, through its operations in South Africa and the US, will double the level of its chromium-based stainless steel production to 40 percent, sourcing more raw material from a Samancor-operated mine near its South African plant, Munoz Cava said. "Our priority is still in South Africa and the US,'' he said.