If media reports emanating from Japan are any indication, Nippon Steel and Tata Steel are all set to take their partnership to a new level. A JV between the two would make Nippon Steel the first among Japanese steel majors to set up shop here in India.
The reports also quoted a Nippon Steel spokesperson as saying, “We consider automotive-use steel to be a likely business area... but we are seeking various possibilities.” Tata Steel’s shares rose 0.7% to Rs 441 on BSE on Monday. Steel industry circles have been rife with speculation about a possible teaming up of the two Asian steel majors ever since Nippon Steel president Akio Mimura and Tata Steel’s Muthuraman met recently in New Delhi.
“We have a tie-up for use of Nippon Steel’s galvanised steel product, ‘Galvaneal’. We also have a technology licence from Arcelor for Hot Dip Galvanised (HDG) products for the automotive industry,” Mr Mukherjee said. Under this agreement, Tata Steel has the licence for use of Arcelor’s proprietary product, ‘Extragal’, including the trademark and associated know-how. Extragal, which is a pure zinc HDG product, was specifically developed by Arcelor for the automotive industry.
The two companies are eyeing a potentially-large auto market in India, which is growing at an average rate of over 10% every year. Japanese carmakers like Suzuki Motors and Toyota already source a significant volume of auto body sheets from Tata Steel. Toyota is planning to quadruple its production to 2 lakh units by 2010. If it comes through, the latest venture would be the culmination of long and deep ties between Tata Steel and Nippon Steel. The latter is providing technology to Tata Steel’s 6-MT project in Kalinganagar, Orissa.
Nippon Steel also acted as technical consultant for Tata Steel’s cold rolling mill (CRM) when it was set up in 1999-2000. The CRM produces automotive grade steel, one of the most sophisticated categories of steel. As part of the agreement, Nippon Steel also helped Tata Steel achieve and meet the right quality of steel for a highly demanding market segment like automobiles. Tata Steel currently produces about one million tonnes of auto steel, which makes up for more than 50% of the size of Indian market. It counts leading car makers like Hyundai, Honda and Tata Motors among its list of customers.
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