Sinosteel Corp, a Chinese mineral trading company, plans to spend $4 billion to build a steel plant in India, joining global steelmakers in tapping the world's fifth-biggest iron ore deposits.
Sinosteel will initially invest $500 million in the planned 5-million-ton plant in Jharkhand, the company's India Managing Director Wang Hongsen said. The total investment, the biggest in India by a Chinese company, will be made over eight years, he said.
Delays in allocating land and mining permits have held up projects amounting to $21 billion in India by Arcelor Mittal and South Korea's Posco. Sinosteel is betting its 16-year-old relationship with India may help it secure approvals faster than rivals.
"We are confident that there will be enough iron ore to support our plant," Wang said. "We have had very good relations with many sellers in India for many years."
Sinosteel has been buying Indian ore since at least 1991.
Arcelor MittalCEOLakshmi Mittal last month said progress was slow in the company's proposed Indian mills. In December, Mittal had agreed to build a $9-billion plant in the eastern Indian state of Orissa, after initially announcing a $9-billion, 12-million-ton-a-year plant in Jharkhand state in October 2005.
Posco, the world's fourth-biggest steelmaker, is yet to get all the land required for its $12-billion plant in Orissa because of opposition from some political parties and farmers' groups. Construction work on the project, talks for which began in August 2004, was to begin last month.
But steelmakers aren't deterred by such delays as demand in Asia is growing faster than in Europe and North America. Steel usage in India is forecast to rise 7.7 percent a year from 2010 to 2015, almost twice the 4.2 percent global rate in the same period, according to the International Iron & Steel Institute.
"Foreign companies investing in India are willing to put up with some delays as long-term benefits of such investments will far outweigh such irritants," said Dipak Acharya, who manages about $19 million at BOB Asset Management in Mumbai.
Sinosteel may next month sign an accord for the project with the Jharkhand state government, Wang said. It expects to get rights to mine 300 million tons of ore for 30 years.
"It's clear that there is a market here to be tapped," Wang said. Sinosteel will sell as much as 70 percent of its production in India, he said.
The eastern states of Jharkhand, Orissa and Chhattisgarh account for 70 percent of India's coal reserves and 55 percent of its iron ore, according to McKinsey & Co.
(China Daily 05/08/2007 page14)