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ArcelorMittal Nippon Steel India to shift focus to domestic markets from exports

Highlights

India looks to increase output to 300 mil mt/year

Acquisition closed in December

European prices increasing, remain uncompetitive

London — ArcelorMittal Nippon Steel India, one of the country's leading producers, will shift its strategic focus to domestic markets from exports, the former Essar Steel said Thursday.

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Following the acquisition of Essar, ArcelorMittal and Nippon Steel said they view the Indian market as the most promising option and this would allow the joint venture to make a positive contribution to the nation's plan to increase its steel production capacity to 300 million mt/year by 2030. In 2018, the country's production totaled 106.5 million mt, according to Worldsteel data.

The acquisition was completed in December. Nippon Steel formally teamed up with ArcelorMittal in bidding for Essar in March 2018.

Indian and European traders this week said they had been informed the JV would cease exports to Europe.

AVOIDING COMPETITION

When contacted by S&P Global Platts, a representative of the JV said: "We would work in coordination with [ArcelorMittal] Europe to not directly compete with each other ... The business will continue, but maybe [with lower] volumes".

"This is an internal commercial strategy ... we are re-iterating what we have said in the past, we want to focus on the Indian market and why should we not? Considering it will become the second largest market for steel consumption," a source close to ArcelorMittal Europe said Thursday.

According to Swiss-based traders, Essar previously shipped around 30-40,000 mt of coils – hot-rolled coil, cold-rolled coil and hot-dip galvanized steel – each calendar month.

"I confirm we have been told that the new Essar will stop exporting into Europe, so I think their share of the quotas will now be utilized by other India-based producers, such as JSW, who are already very active in the European market," a trader said.

A number of sources said Indian mills were seen to have pulled back from Europe in recent weeks due to more profitable opportunities arising in Asia.

European domestic prices remain around Eur20/mt below current import offers, making imports unattractive for European buyers.

The Platts TSI hot-rolled coil index was assessed Thursday at Eur448.50/mt ex-works Italy, an increase of Eur1.50 day on day and up Eur19/mt since the start of January.

According to a mill source, European steel remains "cheap and is lagging behind relative to other regions and as long as that is the case, imports will not be competitive."

INDIAN DEMAND TO GROW

According to Worldsteel, Indian finished steel demand is forecast to grow 7% to 108.7 million mt in 2020.

The forecast would make India the world's second-largest steel user behind China, overtaking the US.

The JV is a fully integrated flat carbon steel manufacturer with installed capacity of 10 million mt/year. Its manufacturing facility comprises ore beneficiation, pellet making, iron making, steel making and downstream facilities including a cold rolling mill, galvanizing, a pre-coated facility, a steel processing facility, an extra wide plate mill and a pipe mill.

In its last earnings note, ArcelorMittal said it aimed to increase the JV's shipments to 8.5 million mt/year in the medium term, with a long-term target of 12 million mt-15 million mt a year "through additional brownfield capacity expansion".

The Indian automotive industry has suffered from a liquidity crisis, alongside weak global demand, registering almost no growth this year. It is expected to pick up in 2020 before the introduction of stringent pollution standards in April 2020, according to Worldsteel.