INDIA BUSINESS WORLD - February 16th - February 29th
- 2008
BAO STEEL OF CHINA FORGES JV WITH VISA STEEL LIMITED
BAO Steel of China has picked up 35% in a JV with Visa Steel Limited. The new company, Visa Bao Limited, was incorporated earlier this month. It will help Bao Steel, China’s largest steelmaker; gain a foothold in the ferro chrome business.
The move marks the first foray by a leading Chinese steel company in the Indian market. It also coincides with a steep hike in ferro chrome prices in the world market. Ex-plant prices have shot up by almost 30-40% from Rs 50,000 to Rs 65,000-70,000 per tonne in recent months.
“Visa Bao Limited was incorporated on February 1. Our partnership with Bao Steel is significant since it will help us produce and export value-added ferro chrome,” Visa Steel MD Vishal Agarwal said.
The Visa group will have a 65% holding in Visa Bao through Visa Steel (51%) and Visa Comtrade, a group arm. The latter will hold the remaining 14% of the shareholding in Visa Bao.
Visa Bao plans to set up a ferro chrome plant with a capacity of 1 lakh tonnes per annum. Globally, China is one of the largest consumers of ferro chrome, some 25-30% of which finds use in the making of stainless steel. Visa Steel is setting up a 50,000 tonne ferro chrome unit and a 0.5 million tonne special and stainless steel facility in Orissa.
The dynamics of the ferro chrome market have changed in the last few years, prompting large producers to look for opportunities in India. In production of ferro chrome, power costs account for a hefty 50-60% of the total cost. However, the power situation in China has forced the country to discourage power-intensive industries.
As a result, from an exporter of ferro chrome, China has turned into a net importer in the last few years. Given this scenario, Visa Bao is, thus, eyeing a meaningful slice of the export market for value-added ferro chrome.
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