Author: Aaron Chaze



By Aaron Chaze



Steeling the show: India enhances its steelmaking capacity

As part of its drive to raise over $3 billion from power privatizations, the Indian government is poised to offer global institutional investors a 5% stake in the National Thermal Power Corporation (NTPC). The government currently owns 90% of the listed company, which is India’s largest power producer, and could raise around $2 billion based on the current market capitalization of $41 billion. The government is also selling stakes in Rural Electrification Corporation, which could raise $1.2 billion, and hydropower
generator Satluj Jal Vidyut Nigam, which could yield $600 million. The sale proceeds from these three companies have been earmarked for spending on road and port projects.

The large bet on India made by South Korea’s Posco, the world’s fourth-largest steelmaker, may finally see some results. The company announced a second $7 billion project in the southern state of Karnataka in the first week of January 2010. In addition, the Indian environment and forests ministry has agreed to allow Posco to acquire the 4,000 acres of land it needs in the eastern state of Orissa to build a $12 billion integrated steel plant. However, a mining permit is still needed for the company to source the ores for its proposed smelter. ArcelorMittal, the world’s largest steel company, won approval for a $6.6 billion steel plant with an attached 750 megawatt power plant in Karnataka, in addition to its other ongoing steel projects in India. A total of 160 million tons of new steelmaking capacity have been announced by domestic and global companies recently and are at various stages of planning or implementation across eastern India, which holds more than half of India’s iron ore and coal deposits.

The increased investment in steel production will be urgently needed if current rates of economic and industrial growth are maintained. The Indian government announced that India’s industrial production for November 2009 grew at the fastest pace in 25 months. Industrial production increased by 11.7% year on year for that month, up from the October 2009 year-on-year expansion of 10.3%. Manufacturing, which is a component of industrial production, grew by 12.7% year on year in November.