- On 19 October,
ArcelorMittal , the world’s largeststeel maker, announced that it had been selected as the preferred bidder for Essar Steel by the bankrupt company’s committee of creditors. - While the Luxembourg-based steelmaker submitted a joint bid of ₹420 billion with Japan’s Nippon Steel & Sumitomo Metal, negotiations for a final price will commence shortly.
- The acquisition of Essar Steel - which includes a production facility in Gujarat capable of producing 10 million tonnes of steel a year - will give ArcelorMittal a significant competitive advantage in India’s steel industry.
India’s domestic steel giants must be on high alert. On 19 October, ArcelorMittal, the world’s largest steelmaker, announced that it had been selected as the preferred bidder for Essar Steel by the bankrupt company’s committee of creditors.
While the Luxembourg-based steelmaker submitted a joint bid of ₹420 billion with Japan’s Nippon Steel & Sumitomo Metal, negotiations for a final price will commence shortly. A decision is expected within the next few weeks.
The decision caps an eight-month long saga which saw the company vy for the prized assets of Essar with Russia’s Numetal, which had to bow out of the bidding owing to its inability to pay back the outstanding dues of its affiliates, and Vedanta.
The acceptance of the bid marks a win for India’s new
Earlier this month, on 4 October, ArcelorMittal was ordered to clear the loans of its local subsidiaries first in order to be considered eligible for bidding. The two subsidiaries- Uttam Galva and KSS Petron - had outstanding loans of ₹75 billion.
In response, last week, the steelmaker agreed to pay only a portion of the estimated outstanding dues of its subsidiaries- specifically ₹45.5 billion. However, the following day, which was incidentally a day before the deadline for the clearing of the loans, ArcelorMittal gave in and decided to pay the full amount.
A shakeup for the industry
The acquisition of Essar Steel will give ArcelorMittal a significant competitive advantage in India’s steel industry. The debt-laden steel maker has a facility in Gujarat that is capable of manufacturing 10 million tonnes a year, making it the largest such plant in India. The complex also includes a natural gas-fuelled power plant and a dry bulk port.
It also marks ArcelorMittal’s second stab at the Indian market following the failure of Uttam Galva, which it was forced to exit in order to bid for Essar Steel. The Luxembourg-based steelmaker’s big entry is expected to spur India’s domestic steelmakers, the likes of which include Tata Steel and JSW Steel, to cut costs, speed up operations and price their product offering more competitively.
The company, which is owned by