JSW Steel and JFE Steel to Develop 10 Million-Ton Plant in West Bengal

JSW Steel Limited (Mumbai, India) entered into an agreement with JFE Steel Corporation (Tokyo, Japan), the sixth-largest steelmaker in the world, to develop a 10 million-ton steel plant in the Indian state of West Bengal. According to research from Industrial Info Resources (Sugar Land, TX), the mutually beneficial move covers agreements related to the production of automotive steel, such as the supply of basic input required for galvanized steel products, as well as hot and cold rolled steel variants, and the transfer of associated production technologies.

The companies will be active in the services sector involving automotive development and application engineering activities. Mutual shareholding is also being considered. Accordingly, the parent company, JFE Holdings Incorporated (Tokyo), is likely to acquire a 10 percent stake in JSW, which in turn, may acquire a stake in JFE. The exact investment in crossover shares has yet to be decided.

JSW has announced that it will commence work on the West Bengal plant only after the completion of the ongoing expansion operations at the Vijayanagar steel plant in Andhra Pradesh, which is scheduled for completion in March 2011. The production capacity of the facility is being ramped up to 10 million tons per year from the present capacity of 7 million tons per year.

In 2007, JSW signed an agreement with the state government, the West Bengal Industrial Development Corporation (Kolkata, West Bengal) and the West Bengal Minerals Development and Trading Company (Kolkata), to set up a 10 million-ton-per-year integrated steel mill and an associated power plant in Salboni in the west Midnapore district of the state. The project has already been delayed for economic reasons.

Recently JSW Energy (Mumbai) and JSW Bengal Steel Limited (Kolkata) agreed to jointly set up the 1,600 MW associated power plant by establishing a special purpose vehicle, thus saving JSW about $800 million on the project's first-phase costs. Financial closure for the power and steel plants are likely to be achieved by October 2010 and April 2011, respectively. Scheduled overall project completion has been moved from 2013 to 2014. The project is expected to be on schedule now that both JSW Energy and JFE have entered the fray.

Backed by JFE's technological expertise, JSW also has plans to enter the high-tensile automotive steel segment. The company is exploring the possibility of manufacturing premium grade products catering to the domestic market. With the global steel markets yet to recover, the West Bengal plant will produce long products for local consumption, rather than steel slabs originally intended for export to the U.S.

On the other hand, JFE will be establishing a presence in India by means of this project and possibly cater to several Japanese automobile manufacturers such as Suzuki Motor Corporation (Hamamatsu, Japan). With Nissan Motor Company Limited (Tokyo, Japan) and Toyota Motor Corporation (Toyota City, Japan) also planning to open production facilities in India next year, this project is expected to give JFE a head start against competitors.

In addition to automotive steelmaking technologies, the companies will also jointly work on energy and process efficiency, yield and quality enhancements, eco-friendly technologies, benchmarking critical parameters, and the auditing of existing JSW facilities.

Meanwhile, two other Indo-Japanese collaborations in the steel sector are under way. Nippon Steel Corporation (Tokyo, Japan) is negotiating a collaboration with Tata Steel Limited (Mumbai, India), while Sumitomo Metal Industries Limited (Osaka, Japan) is looking to partner with Bhushan Steel Limited (New Delhi, India) in a blast furnace venture.