In order to gain foothold in a growth market, overseas steel manufacturers may make strategic investments in smaller steel mills in India, agency reports suggest.
Such investment by foreign steel firms may be beneficial for both the investor and the local company. The local partner gets both funding and technology while the MNC gets a foothold in a growth market for several years to come.
Foreign steel makers are viewing the Indian steel industry as holding strong growth prospects and they expect steady growth for the next 30 years.
At the same time, they are also interested in entering the value addition space hoping to test the investment climate in India without committing significant investments.
These companies may even go for a minority stake to enter the supply chain and test the environment. India’s demand for steel is poised to rise to around 200 million tonne per annum in next 10 years from a little over 77 million tonne per annum in 2012, calling for massive investment for capacity expansion. In 2013, the domestic steel sector is expected to expand at least around six per cent.
Industry watchers feel that the pelletisation and beneficiation space is attracting investment and it would help address volatility in raw material prices.
Iron ore prices skyrocketed to $151 per tonne in the recent past from $87 a tonne in September last. It is now hovering at around $148 per tonne.
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