May indefinitely defer the second plant at Orissa.
ArcelorMittal, the world’s largest steelmaker, may cut the size of a planned steel plant in India by half and indefinitely defer a second facility as the global recession curbs sales of cars and homes, a company official has said.
An investment committee would meet this week in Luxembourg to discuss building a 3 million-metric-tonne factory in eastern India for Rs 7,500 crore ($1.5 billion), said the official, declining to be identified as the plan is confidential. The company, which had planned two plants with a starting capacity of 6 million tonnes each, would defer the investments by at least two years to 2014 and might cut their sizes, Vijay Kumar Bhatnagar, CEO, India unit, said on April 15.
Steelmakers are shelving new projects and cutting output as the global recession weakens international steel demand. Luxembourg-based ArcelorMittal said last week it would close a facility in Indiana that makes steel bars for the auto industry.
“Companies will continue to do the groundwork but will revive their projects only when the fortune of the industry changes,” said Rakesh Arora, an analyst at Macquarie Group Ltd, Mumbai. “Allocation of iron ore is the key to securing investment in the steel sector in India.”
ArcelorMittal fell as much as 7 per cent, the most since March 30, to ¤20.56 and traded at ¤20.58 at 12:19 pm in Amsterdam. The shares have risen 21 per cent this year.
ArcelorMittal secured a permit to mine iron ore in the eastern Jharkhand state last year, almost three years after the company announced the $10 billion venture. The states of Jharkhand, Orissa and Chhattisgarh account for 70 per cent of India’s coal reserves and 55 per cent of its iron ore, according to McKinsey & Co.
ArcelorMittal in October 2005 said it would set up a factory with a final capacity of 12 million tonnes in Jharkhand and announced another plant of the same size in neighboring Orissa the following year. There would be no change to the final planned capacity, Bhatnagar said on April 15.
“ArcelorMittal remains committed to its greenfield projects in India,” Lynn Robbroeckx, a spokeswoman for ArcelorMittal in London, said today by phone. “However, it is only prudent to ensure that the timing of this project is adapted to the current exceptional economic environment.”
Robbroeckx was unable to confirm whether ArcelorMittal officials were meeting this week in Luxembourg to discuss the company’s plan for India.
Like ArcelorMittal, plans by Posco, Asia’s third-biggest steelmaker, to set up a factory in India have yet to take off. Land disputes and delays in allocating mining licences have prevented the South Korean company from starting a 12 million-tonne steel plant in Orissa for the past two years.
