JFE Steel Invests in JSW Steel, Develops Indian Market

JFE Steel announced on Tuesday the firm reached agreement with JSW Steel in JFE Steel’s capital injection and technical support to JSW Steel. JFE Steel subscribes preferential allotment by JSW Steel for 48 billion rupees. With the JFE Steel’s largest investment in offshore company, JFE Steel has 14.99% interest in JSW Steel. It is the first investment in Indian steel maker by Japanese integrated steel maker. JFE Steel also provides automotive flat steel making technology to JSW Steel and with JSW Steel’s base, JFE Steel serves local users including transplants of Japanese automakers. Through the tie-up, JFE Steel enters into growing Indian market in full scale.

JFE Steel sets the capital participation at less than 15%, which is the limit for forced take over bid, while JFE Steel and JSW Steel has kept talking for various cooperation items since the strategic collaboration agreement in November 2009. JFE Steel expects the share purchase would cost 10-20 billion yen additionally depending on JSW Steel’s share price. JFE Steel provides automotive flat steel technology and technical support for JSW Steel’s steel works. JFE Steel sends a non executive director in JSW Steel.

JFE Steel provides technology to make automotive hot rolled flat steel and cold rolled flat steel while JFE Steel supplies hot band until JSW Steel can make the targeted grade products. JFE Steel and JSW Steel provide joint application engineering to the users while the steel makers launch joint products development works. JFE Steel also supports JSW Steel’s effort to improve operation at Vijayanagar works in energy saving, environmental actions, improvement of quality and yield while JFE Steel checks the potentiality of facility expansion at the works.

JFE Steel’s vice president Shigeru Ogura said at press conference on Tuesday JFE Steel tries to expand sales of JFE Steel’s own products through JSW Steel’s sales network in India and JFE Steel establishes local base for production and sales in India when JFE Steel is confident Indian market and JSW Steel should grow steadily. JSW Steel plans to start construction of new steel works in West Bengal in 1-2 years. JFE Steel eyes potential participation in the new project as joint venture.

JSW Steel, which was established in 1994, has 4 works including the main Vijayanagar works in Karnataka. The firm plans to expands the raw steel output capacity to 11 million tonnes in 2011 from current 7.8 million tonnes. The firm also plans to expand the capacity to 32 million tonnes by 2020 through new 10 million tonnes steel works each in West Bengal and Jharkhand. The firm makes hot, cold rolled and coated flat steel, wire rod and steel bar. The firm posted 22 billion rupees of earnings before tax with 201.2 billion rupees of sales for the year ended March 2010.