Essar eyes Hyundai steel unit

Essar has undertaken due diligence of the plant.

Essar Steel is in talks with the Hyundai Automotive group to buy a three million tonne steel plant in South Korea.

The plant is run by Hanbo Steel, an arm of the South Korea-based steel manufacturer, and uses corex technology to produce hot metal. According to a source close to the development, the two companies are in an advanced stage of price negotiations.

Confirming the development, an Essar group spokesperson said: "We have undertaken a due diligence of the plant. The company does have some spare capacity. However, no final decision has so far been taken as we are looking at other options also."

The source said Essar Steel was eyeing the plant run by Hanbo Steel as it needed additional hot metal capacity to feed the new 1 million tonne steel plate facility it was planning in Hazira, Gujarat.

If the deal goes through, Essar Steel will may dismantle the plant in South Korea and ship it to Hazira. Hanbo Steel had turned sick a few years ago and was put on the block by its creditors.

Several leading global steel majors, including Posco of South Korea, were in the race to acquire it. INI Steel, a group company of the Hyundai Automotive group, emerged as the highest bidder.

The acquisition of Hanbo Steel's plant is the latest among a slew of investments lined up by Essar Steel. Even as the company is expanding its capacity at Hazira from 2.4 million tonnes to 3.6 million tonnes, Hy-Grade Pellets Ltd, a company owned 51 per cent by Stemcor of UK and 49 per cent by Essar Steel, is setting up a three million tonne integrated steel plant in Jharkhand at a cost of Rs 4,200 crore.

The company has signed a memorandum of understanding with the Jharkhand government to this effect. The proposed project also includes a captive coal-based power plant of 300 Megawatts.

Essar Steel has also announced that it will buy out Stemcor in Hy-Grade pellets as well as in Steel Corporation of Gujarat. The Essar Steel board has approved the raising of up to $500 million for the acquisitions.