* Japanese firm may buy stake in 3 mln T/yr new venture
* Plant to come up in West Bengal, will cost $4.3 bln
* Sumitomo, Bhushan sign production, sales pact (Recasts, adds details, background, quotes, share moves)
New DelhiL: Japan’s third-largest steel maker, Sumitomo Metal Industries, is considering buying a stake in a steel plant in India to help tap a rapidly growing market.
“We trust the growth of this country,” Hiroshi Tomono, president of Sumitomo Metal, told reporters on Wednesday after signing a production and sales pact with small Indian steel producer Bhushan Steel.
“Steel demand is growing so rapidly. It is a very important market for Sumitomo to explore,” he said.
Under the pact, Sumitomo will buy steel from the Indian firm and sell under its brand name to Japanese car makers operating in India, such as Toyota Motor Corp, Suzuki Motor Co and Honda Motor, Tomono said.
Bhushan plans to build a new steel plant in West Bengal state in eastern India that will cost Rs200 billion ($4.3 billion) and Sumitomo may buy a 26-40% stake in the venture, Bhushan’s managing director, Neeraj Singhal, said.
“The possibility of Sumitomo entering into a joint venture with Bhushan Steel for this project is being explored,” he said, adding the plant will have an initial capacity for 3 million tonnes a year when it starts production by 2014/15.
Bhushan currently has a capacity to produce 1 million tonnes of steel a year and is set to start operations at a new plant in the eastern state of Orissa in January that can produce 2.2 million tonnes a year.
The World Steel Association has forecast India’s steel consumption will grow at 12.1% in 2010, prompting foreign players to set shop in the world’s second-fastest growing major economy.
Last month, JFE Steel, the world’s sixth-largest steelmaker and a unit of JFE Holdings, and JSW Steel agreed a production tie-up and may take stakes in each other, giving the Japanese firm a foothold in India’s growing market.
ArcelorMittal, the world’s top producer, has made an open offer to buy more than 29% in Indian re-roller Uttam Galva.
Shares in Bhushan Steel, which the market values at $1.4 billion, have more than quadrupled this year while the main BSE index has risen about three-quarters.
The stock ended up 0.7% at 1,Rs340.10 on Wednesday while the main Mumbai market rose 0.2%.