Irons in the Indian fire

Thirty months after making an official entry into India, the world’s fourth-largest steel producer Posco’s 12 million tonnes per annum (TPA) mega-steel plant in Orissa is still mired in controversies. ArcelorMittal, the world’s largest producer of the same metal, zeroed in on Orissa 10 months ago.

Like Posco, ArcelorMittal too has had to negotiate roadblocks. But for Lakshmi Niwas Mittal, President & CEO, ArcelorMittal, the world’s fastest-growing economies of India and China are proving to be the harbinger of good tidings ahead.

In early November, Arcelor-Mittal announced that it had acquired a 28 per cent stake in the Hong Kong-listed steel maker China Oriental Group for $647 million. A toehold in China Oriental gives Mittal an entry into a highly-regulated Chinese steel market. In India, the steel tycoon has been awarded a block of coal mines for firing up his 1,500 MW power plants for captive consumption. He’ll need all the power he can generate.

After all, ArcelorMittal is planning to put a combined capacity of 24 million tonnes in the mineral-rich eastern states of Jharkhand and Orissa. ArcelorMittal, with production in excess of 118 million tonnes, which is almost 10 per cent of the world’s steel output), has planned an investment in the region of Rs 80,000 crore in India.

The two projects are proposed to be developed in two phases of 6 million tonnes each, but Mittal, who is reportedly not very happy with the progress due to government delays, wants faster action on the iron ore allotment front. “The iron ore requirement is 600 million tonnes for each plant for 30 years. We are in consultation with the respective state governments for the same,” says ArcelorMittal spokesperson.

A 12-million tonne steel plant would require about 600 million tonnes of iron ore annually. As things stand today, there are already delays in Jharkhand with regard to allocation of iron ore mines. In a presentation to investors recently, the ArcelorMittal top brass has said that “the site is to be announced immediately after the notification of a Rehabilitation & Resettlement policy by the Jharkhand State Government”.

The Orissa plant, where the company has already announced the project site, is expected to go on stream before Jharkhand—but only once the issue of iron ore allocation is sorted out.

Meantime, the coal block allocation last fortnight is expected to speed up the work at the Orissa plant. M.P. Singh , VP (Mining and M&A ) at ArcelorMittal in a statement said: “This is a good beginning towards the realisation of our Jharkhand and Orissa projects, which will both bring considerable economic benefits to India.”

The two coal blocks allocated at Seregarha in Jharkhand and Rampia in Orissa are on a sharing basis. In Jharkhand, ArcelorMittal has been allocated 83.33 million tonnes of steam coal out of the total 150 million tonnes. Similarly, in Orissa, the share is 84.16 million tonnes out of a total of 645.24 million tonnes.

Both the blocks can generate coal to produce 700 MW of power each. “Our vision would be to develop these blocks as worldclass mining operations with due emphasis on environmental protection and operational excellence,” says the spokesperson. The target date for the first phase of the two plants to go on steam is 2010-11. But analysts back home are already speculating whether ArcelorMittalbranded steel will be in the Indian market before that—if the takeover tycoon does decide to home in on domestic capacities.