JSW, JFE ally to develop West Bengal project

JSW Steel has inked a deal with Japan’s JFE Steel, the world’s sixth-largest steelmaker, to jointly develop a 10 million tonne steel project in West Bengal. The companies also agreed on a production tie-up and may take stakes in each other.

Sajjan Jindal, vice-chairman and managing director, JSW Steel, said, “We have a collaborated with JFE Steel for joint development of the West Bengal project and for auto-grade steel. The details are currently being worked-out. The companies will have mutual shareholding too.”

Jindal did not give details regarding the stock holding of JFE in JSW Bengal Steel, the JSW subsidiary that is building the project. He said, “Right now, both are discussing options and no conclusion has been drawn yet.” DNA Money broke the story on Wednesday.

Biswadip Gupta, joint MD and CEO, JSW Bengal Steel, said, “With JFE coming on board the project, we will achieve the financial closure much faster.”  JSW will take up the Bengal project after the 10-million-tonne capacity expansion at Vijayanagar is completed in 2011.

He said the project cost in the first phase has been brought down by Rs 4000 crore as the proposed power plant has been hived-off and JSW Energy will now take it up. “The power plant of 1600 mw capacity in the first phase will now be constructed by JSW

Energy, which brings down our costs by 25%,” Gupta said. JSW plans to develop automotive steel in India of higher tensile strength and will move towards more premium and value-added steel. For this, technology will be provided by JFE.

The deal also gives the Japanese firm a foothold in India’s growing market. It will make it easier and cheaper for JFE to supply locally-based car makers such as Suzuki Motor Corp. Toyota Motor Corp and Nissan Motor Co. “Our customers, especially the automakers ... are expanding their business across borders. So serving the local demand of the cars for, say Suzuki, by export is not a good idea,” JFE Steel president and chief executive Hajime Bada said. “We want to have a local base to serve the customers,” he said via a translator.

JSW had originally planned to produce slabs at the West Bengal unit and export it to its US steel pipe making subsidiary. However, the downturn and crumbling steel demand in the western world, especially US, has forced the company to change the plan. Gupta said, “Now we will also make long products that will be sold in the domestic market.”