ArcelorMittal to Delay $20 Billion India Factory Plan

Feb 16, 2009
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ArcelorMittal to Delay $20 Billion India Factory Plan

April 15 (Bloomberg) -- ArcelorMittal, the world’s largest steelmaker, said it will delay a $20 billion plan to build two factories in India because of the global recession and difficulties in securing mines and licenses.

The plants, planned with an initial capacity of 6 million metric tons each, will be deferred by at least two years to 2014 and their sizes may be cut, Vijay Kumar Bhatnagar, chief executive officer of the India unit, said today in New Delhi. While the government has allotted plots in the states of Orissa and Jharkhand, land acquisition has yet to be completed, he said.

Steelmakers are shelving new projects and reducing production as the global recession slashes sales of cars and homes, weakening international steel demand. Luxembourg-based ArcelorMittal said yesterday it will close a facility in Indiana that makes steel bars for the auto industry.

“Globally steel companies are trying to conserve cash to beat the recession,” said Rakesh Arora, an analyst at Macquarie Group Ltd. “ArcelorMittal is delaying its plan because in a few years global production is expected to realign with demand.”

ArcelorMittal fell as much as 3.4 percent to 19.37 euros and traded at 19.89 euros at 12:09 p.m. in Amsterdam. The shares have risen 18 percent this year.

Steel Prices

Hot-rolled steel prices plunged by more than half from a record $1,068 a ton in July as the slowing global economy cut sales of automobiles, appliances and homes. ArcelorMittal has reduced global output by 45 percent as demand collapsed.

The company in October 2005 said it would set up a factory with a final capacity of 12 million tons in Jharkhand and announced another plant of the same size in neighboring Orissa the next year. While the initial sizes may be cut, there will be no change to final planned capacity, Bhatnagar said today.

The Indian states of Jharkhand, Orissa and Chhattisgarh account for 70 percent of India’s coal reserves and 55 percent of its iron ore, according to McKinsey & Co.

Like ArcelorMittal, plans by Posco, Asia’s third-biggest steelmaker, to set up a factory in India have yet to take off. Land disputes and delays in allocating mining licenses have prevented the South Korean company from starting a 12 million ton steel plant in Orissa for the past two years.

ArcelorMittal and competitors including U.S. Steel Corp. may exceed debt-to-earnings ratios set by their creditors, JPMorgan Chase & Co. said in a March 12 research report. ArcelorMittal, with about $8.4 billion of debt maturing this year, has the largest debt due “in the short term,” analysts led by Michael Gambardella said in the report.

To contact the reporter on this story: Debarati Roy in Mumbai at [email protected]


Regular Member
Mar 4, 2009
With the profits the city bank has seen in q3,we could be seeing the beginning of the end of the recession.
Its good that India is not that caught up in this mess cuz only 30% of our economy is tied to the outside and rest in the internal trade....unlike china where millions of labourers and workers have been laid off....

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