Mittal wants assurance on iron ore supply

No commitment on Jharkhand plant.

As the Jharkhand government weighs its options for signing an agreement with Mittal Steel, the world's largest steelmaker has made it clear that it wanted firm "guarantees" on supply of iron ore before it commits to setting up a steel plant in the state.

"It would be totally unrealistic to embark on acquiring or building a steel manufacturing facility without first ensuring that we have the required raw material input (iron ore) necessary to operate the plant," Mittal Steel President and Chief Financial Officer Aditya Mittal told PTI.

"Before committing to anything in Jharkhand, this is a matter we need guarantees on," Mittal said.

Without specifying whether the company would export iron ore""an issue that has the domestic steel firms up in arms"" Aditya Mittal said in an e-mail reply that "a large proportion of the iron ore we acquire would be used as raw material for the steel plant we would be building."

Jharkhand Chief Minister Arjun Munda has also voiced opposition over exports of iron ore from the state.

"We are against export of iron ore," he had said on Monday after talks with Tata Steel which is pumping in Rs 40,000 crore for setting up a steel plant, power plant and a township in the state.

Tata Steel, Essar Steel and other domestic companies have, in the past, opposed export of iron ore from the country. The issue had also surfaced during South Korean major Posco's talks with with the Orissa government.

Mittal Steel was to sign a memorandum of understanding (MoU) by last month for setting up a 10 million tonne greenfield steel plant in Jharkhand with investments that could range around Rs 25,000 crore.

However, Mittal said the company had not set any time-frame for signing the agreement with the state government.

"Positive discussions continue, but we are unable to confirm when the deal will be finalised," said Aditya, the son of Mittal Steel Chairman and CEO L N Mittal.

He said the proposed steel plant would be built in phases with a final annual capacity of 10 million tonnes. The capacity would be added gradually, as market conditions dictate, with the end goal to be producing around 10 million tonnes, he said.

Identifying India as a high-growth area in the steel sector, the junior Mittal said the proposed investment in Jharkhand would play a vital role in the future of Mittal steel. The sector is estimated to see significant growth over the next five years with per capita consumption slated to rise rapidly.

"Per capita steel consumption in India is only around 30 kg compared with an average of 200 kg in China and 900 kg in Korea. Production is forecast to rise from 24.3 million mt in 1999 to 55.9 million mt in 2014, an annual growth rate of 5.7 per cent. The opportunities are clear," he said.

Mittal said India was on the company's radar, but it did not make any move till it saw an opportunity that could fit its global strategy.

"The government has not yet decided to privatise the Indian steel sector so these opportunities have not been available to us. It is only recently that the economic indicators have led us to believe that a greenfield project could be a sensible option," he added.