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DNA MONEY EXCLUSIVE: ArcelorMittal revives Rs 30,000 cr India project as steel prices shine

ArcelorMittal had inked a deal in 2010 to set up a 6-million-tonne-per-year steel plant at Bellary in Karnataka

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Lakshmi Mittal
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World's largest steel maker ArcelorMittal is reviving its plan to set up a steel project in India, almost eight years after the Lakshmi N Mittal-headed global giant signed a pact with the government for a Rs 30,000 crore project at Bellary in Karnataka.

The decision to revive the project, which almost got dumped and replaced by a solar power project, follows global revival in the steel industry.

Luxembourg-headquartered ArcelorMittal informed the government last week of its decision of "manufacturing of iron and steel at integrated plant in a phased manner", official documents showed.

The revival decision follows two recent trips of Mittal to India in December-January, sources said.

While he attended the Bengal Global Summit 2018 on its inauguration day on January 16, Mittal didn't divulge his plans publicly. That visit was preceded by another trip in early December last year, when the plan to revive the project was finalised.

ArcelorMittal had inked a deal in 2010 to set up a 6-million-tonne-per-year steel plant.

For its Rs 30,000 crore investment plans, about 4,865 acre was sought by the steel giant in Bellary district, of which 2,000 acre was allotted by 2013.

But a global recession in steel industry along with the failure of ArcelorMittal to secure iron ore mine in Karnataka mothballed the project and the decision to dump the project became evident when in January 2016 ArcelorMittal CEO Sanjay Sharma told Karnataka chief minister about a plan to create 600-megawatt solar power plant instead.

Since then, the fortunes of the global steel industry and that of ArcelorMittal have transformed for the better.

In its just-released earnings details for 2017, ArcelorMittal reported Ebitda (earnings before interest, taxes, depreciation and amortisation) growth of 34.4% on year to $8.4 billion, with net income rising 156.7% to $4.6 billion.

Though steel shipments rose a modest 1.6% year on year to 85.2 million tonne, it is primarily an improvement in prices that drove profitability, analysts said post its annual earnings call on January 31.

With sustainability in profits in sight, the group has even decided to revive its dividend distribution plans.

"Given the improving performance and market outlook, the Board proposes to reinstate the base dividend," officials told analysts.

The recent revival has also helped state-owned SAIL report a positive profit before tax in the third quarter, for the first time in ten consecutive quarters with an Ebitda per tonne for the third quarter at Rs 4,162 against just Rs 107 a tonne a year back.

The revival in the fortunes of the steel industry has largely been due to China's decision of cutting down on steel produced by blast furnace route to reduce pollution.

"China's steel prices will rise and margins improve, and steel exports will fall aiding global steel prices. We expect domestic steel prices to increase and buoy earnings of Indian steel companies over the next two to three quarters," Kotak Securities said in a research report.

TIDE TURNS

  • ArcelorMittal had inked a deal in 2010 to set up a 6-million-tonne-per-year steel plant at Bellary in Karnataka
     
  • About 4,865 acre was sought by the steel giant in Bellary, of which 2,000 acre was allotted by 2013
     
  • But a global recession in steel industry and the failure of ArcelorMittal to secure iron ore mine in Karnataka mothballed the project
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