Finex in hand, POSCO seeks to broaden ties with SAIL

Korean steel maker POSCO, which has been trying to set up integrated steel plants in Orissa and Karnataka, is also weighing several other options to increase its presence in the country. Among other things, it is keen to forge a broader partnership with the Steel Authority of India Ltd (SAIL).

POSCO has already signed two memorandums of understanding with SAIL —- one in 2007 to collaborate in operational exercises and the other in 2010 to form a joint venture (JV) to set up a steel plant in the country using Posco’s patented Finex technology.

“We are currently working together in the field of corporate strategy, training, business practices and the proposed joint venture with SAIL will also be finalised soon. Once the JV takes off, we will look forward to a much broader partnership with the company,” said Vikas Sharan, vice-president, POSCO India.
He did not divulge the possible parameters of the “broader partnership.”

CS Verma, chairman and managing director of SAIL, too refused to divulge the details, though he confirmed that “negotiations are on.”

Analysts, however, feel the company would like to have a long-term agreement to offer its technology for all upcoming steel plants of SAIL in the country.

“The proprietary right for ‘Finex’ technology is held by POSCO worldwide and none of the Indian companies has access to an alternative technology. It is a next generation steel making technology using unused iron ore fines and could be very useful for companies like SAIL, which have their own iron ore mines,” an analyst with a leading domestic brokerage house said, requesting anonymity.

According to Sharan, Finex technology allows low-quality iron ore fines to be used instead of iron ore lumps, thereby putting to use a resource that would otherwise be wasted at the mouth of the mine. Also, the fines are injected directly into the blast furnace, obviating the use of coking coal, a major ingredient in the conventional steel making process.

“SAIL is a PSU and the biggest steel player in the country. With a JV with SAIL, we can showcase not only our technology but also establish our commitment towards environment-friendly steel making in India,” said Sharan.

The analyst said the JV talks are currently hinged on whether SAIL or POSCO will have a majority holding in it and how much investment needs to be pumped in by the two players. However, SAIL being a PSU, it is unlikely the JV will pick up anytime soon as there are several administrative roadblocks when dealing with government companies in India.

According to experts, another company that uses a similar patented technology is Japan’s Kobe Steel, whose technology is named ITMK3, meaning third-generation steel making. Mining giant NMDC and SAIL have been mulling a tie-up with Kobe Steel as well, but no substantial progress has been made on that front either.