Home / Industry / Manufacturing /  New Essar owners seek to ramp up steel capacity by up to 50%

ArcelorMittal and Nippon Steel, the new owners of erstwhile Essar Steel, have decided to ramp up capacity at the plant from the current 9.6 million tonnes per annum (mtpa) to 12 or 15mtpa on the first day of taking over the company.

The company said it wants to play an active role in the domestic market and intends to “fully benefit from the anticipated growth in the Indian steel industry".

On Monday, the new owners of the plant took over with the appointment of Aditya Mittal as chairman of the board. In a statement, ArcelorMittal announced the acquisition of Essar Steel India Ltd (ESIL) and simultaneously established a joint venture with Nippon Steel Corp. The joint venture is named ArcelorMittal Nippon Steel India Ltd (AM/NS India), and will own and operate ESIL. ArcelorMittal owns 60% of AM/NS India, while Nippon Steel holds the balance. Dilip Oommen, who was chief executive officer (CEO) of the plant under the Essar management, will continue in the role.

“The acquisition of Essar Steel is an important strategic step for ArcelorMittal. India has long been identified as an attractive market for our company and we have been looking at suitable opportunities to build a meaningful production presence in the country for over a decade. Both India and Essar’s appeal are enduring. Essar has sizeable, profitable, well-located operations and the long-term growth potential for the Indian economy and, therefore, Indian steel demand is well known," Lakshmi Mittal, chairman and CEO of ArcelorMittal, said in a statement.

Eiji Hashimoto, representative director and president of Nippon Steel, said: “Nippon Steel and ArcelorMittal will bring out AM/NS India’s potential by providing it with their respective business experience and world-leading advanced technologies, so as to promptly implement the resolution plan and realize its further business expansion. I am confident AM/NS India will play a significant role in the development of India’s steel industry."

AM/NS India is an integrated flat steel producer and the largest steel company in western India. Its current level of crude steel production is about 7.5 mtpa against a 9.6 mtpa capacity. It also has iron ore pellet facilities in Odisha, with annual capacity of 14 mtpa.

The change in control comes after ArcelorMittal and Nippon completed the payment of 42,000 crore to the financial and operational creditors of distressed Essar Steel, led by State Bank of India. This is a landmark case in the country which, through its 863 days of resolution, shaped the contours of the Insolvency and Bankruptcy Code (IBC).

AM/NS India said its plans for the plant include increasing finished steel shipments to 8.5 mt over the medium-term “by initially completing ongoing capital expenditure projects and infusing expertise and best practice to deliver efficiency gains, and then through the commissioning of additional assets, while simultaneously improving product quality and grades". The aspiration is “to increase finished steel shipments to between 12 and 15 mtpa through the addition of new iron and steelmaking assets", the statement said.

In an earlier interview, Atanu Mukherjee, president of global metals and energy consultant M.N. Dastur, estimated that expanding capacity to 12 or 15 mtpa at the Essar Steel plant would require investment of up to 20,000 crore. The current resolution plan includes 8,000 crore of equity infusion into the plant’s operations.

Satish Kumar Gupta, resolution professional of Essar Steel who steered the asset through its long resolution process, told Mint: “My involvement with Essar Steel ends now that the new board has taken over."

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