Tokyo: Japan’s Sumitomo Metal Industries Ltd is in talks with India’s Bhushan Steel on building an integrated steel plant together in the West Bengal, the Nikkei business daily reported on Tuesday.
Japan’s big steelmakers have been expanding overseas to tap growing demand, although the global economic turmoil has forced world no.2 player Nippon Steel Corp and third-ranked JFE Holdings Inc to delay or review some of these plans.
The Nikkei said Sumitomo Metal Industries, Japan’s third-biggest steelmaker, will likely invest up to $3 billion in the project, with the aim of starting operations around 2015.
Sumitomo Metal played down the possibility of striking such a deal anytime soon.
“We are considering various overseas projects including that in India, but it is not true that we are discussing such details and that we have not made any decision,” the company said in a statement.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co, said Japanese steelmakers’ moves into India and China would be positive in the longer term.
“The two markets will become the core of growth. If there is a chance and a partner, they should actively invest in the early stages of growth,” he said.
The Nikkei report said Sumitomo was in talks with mid-tier steel maker Bhushan on setting up a joint venture to build an integrated mill capable of producing 3 million tonnes of crude steel a year.
The venture is expected to be majority-owned by the Indian steelmaker, with Sumitomo Metal holding a 30 to 40% stake, it said.
Sumitomo Metal and Bhushan have had business ties since 1997.
The Japanese company is providing technical assistance to Bhushan in its plan to build a blast furnace in the state of Orissa. The plant is expected to start operations in 2010.
Bhushan also makes steel sheet from semi-finished products supplied by Sumitomo Metal and sells the products to the Indian units of Japanese automakers and others.
In other international deals, Sumitomo Metal Industries is involved in constructing an integrated steel mill in Brazil together with French seamless pipe partner Vallourec.
But some Japanese plans in India have fallen through before. The country’s fifth-biggest steel maker, Nisshin Steel Co, conducted a feasibility study for a plant there with Spain’s Acerinox several years ago but they gave up on the plan, saying the market was still not mature enough to consume a large volume of aluminium products.
The Nikkei said that although the global economic crisis has curbed steel demand in emerging economies, Sumitomo Metal expects Indian demand to increase thanks to infrastructure projects and growth in the automobile industry.
But it said the company has yet start a feasibility study or negotiations with the Indian authorities on the new project.