New Delhi: Japanese steel firms Nippon Steel and Sumitomo Metals are likely to retain Tata Steel as partner for India play, post their proposed merger.
Nippon Steel has a tie-up with Tatas and Sumitomo Metals has a partnership with Bhushan Steel.
Industry sources said that the new entity, formed out of Nippon-Sumitomo’s existing businesses, will keep only one firm as its India ally and the balance is tilted towards Nippon’s long-standing partner Tata Steel than Sumitomo Metals’ Bhushan Steel, which has a marketing and technology tie-up with the Japense firm.
“There could be conflict of interests, if they continue with both the firms and that is not Japanese way of doing business,” a source said, adding, “Obviously, Tata Steel has an edge as it is a bigger brand in global arena.”
Besides this, the Tatas also have a long-standing tie-up with Nippon Steel and both the companies are in the process of setting up an auto-grade steel making facility in Jamshedpur.
However, keeping its fingers crossed, Sumitomo Metals, in an e-mailed statement to the agency, said, “Nothing is decided on what the new company would do about projects in India”.
“Sumitomo Metals and Nippon Steel are now discussing how they can merge their businesses. However, that discussion does not include how the merged new company would proceed in India,” it added.
The two Japanese firms, which announced their intention to merge between themselves in February, are competing with global rivals like Posco and JFE to get a foothold in the Indian market.
In January, Nippon and Tatas had signed a joint venture agreement for setting up a facility for making auto-grade steel at Jamshedpur, where the former would hold 49% stake.
Last month, Tata Steel had also brought in Nippon Steel’s associate firm, Krosaki Harima as a strategic partner in its group firm Tata Refractories by selling 51% stake.
On the other hand, Sumitomo has a marketing and technology agreement with Bhushan Steel -- the third largest domestic producer of secondary steel like cold-rolled coil, galvanised coil, high tensile steel strapping among others. The agreement is valid for six years.
It has also been in talks with Bhushan Steel for the last two years to set up a six million tonnes per annum (MTPA) steel mill in West Bengal at an investment of Rs 30,000 crore.
However, on the question of withdrawing from the project, Sumitomo Metals maintained that it is still “in the discussion stage on the project in West Bengal” with Bhushan Steel.
Bhushan Steel, with a total production capacity of 2 mtpa, has three plants in Uttar Pradesh, Maharashtra and Orissa and plans to produce 5.5 MTPA by September, 2012.