NEW DELHI (Reuters) - Steel Authority of India Ltd (SAIL.NS) is in talks with Japan’s Nippon Steel & Sumitomo Metal Corp (5401.T) and Kobe Steel Ltd (5406.T) for potential technical agreements to help the firm expand its global footprint, SAIL’s chairman told Reuters.
SAIL - which has been in the red for six quarters - may also consider buying troubled domestic steel firm assets if offered a “cheaper price”, Prakash Kumar Singh said in his first official response to a government proposal that state steel, power and shipping firms take over assets of indebted private companies.
India’s biggest state-owned steel producer has already held an initial round of talks with Japan’s top steelmakers, Singh said, adding that the steel produced through the tie-ups could be sold to India’s defence sector.
“The defence sector is using a lot of steel. So for all those grades, there is continuous improvement in R&D. And for penetrating these markets also - Japan and Europe - we need to understand their technologies, their uses. Therefore these tie-ups will be handy,” Singh said.
SAIL already supplies steel to the Indian navy and army, primarily for battle tanks.
Separately, the Indian company is in talks with two European steelmakers for similar partnerships, Singh said, without giving any specifics as the discussions were in initial stages.
SAIL is also ironing out details with the world’s biggest steel producer, ArcelorMittal ISPA.AS, for a proposed 60 billion rupees ($884.36 million) joint venture, Singh said.
“It will be difficult to give a time frame. But we are quite confident that we can sort it out.”
SAIL plans to raise output of saleable steel in the year starting April 2017 by about 10 percent to 16.5 million tonnes, Singh said. It is aiming for a 10 percent jump in 2017/18 exports, versus an estimated 700,000 tonnes shipped this year.
“We need to reduce production from our inefficient units and produce more from the efficient (units) in order to survive,” Singh said in the interview.
SAIL has already received approval ‘in principle’ from the government to sell stakes in three of its loss-making units.
This comes at a time when India’s steel sector remains in the woods, accounting for 28 percent of the banking sector’s stressed loans.
While government steps such as duties and quality controls on cheap imports from top producer China have helped Indian steelmakers raise prices, SAIL has been asked to buy some troubled private steel assets or manage their operations as part of broader clean-up of lenders’ bad debt pile.
Recently, India’s steel minister said SAIL or fellow steelmaker RINL were not in a position to buy assets but they could help with “expertise” or people.
($1 = 67.84 rupees)
Reporting by Neha Dasgupta; Editing by Himani Sarkar