South Korean steel maker Posco may be struggling to get its $12-billion integrated steel plant take off in Orissa, yet, it is forging ahead with its ferrochrome joint venture plans with the IMFA Group, which is expected to operational by end of the current quarter.
Posco is picking up a 24 per cent stake for $5 million in a subsidiary of the Indian Metals & Ferro Alloys Ltd (IMFA), which will produce some 35,000 tonnes of ferrochrome alloy a year.
“We have got the shareholders' approval and hope to complete the transaction by September after complying with the FDI formalities,” said Mr Subhrakant Panda, Managing Director, IMFA.
The deal
The Bhubaneswar-based IMFA, which commissioned its newest and sixth furnace last September, is hiving it off into a subsidiary in which Posco – a long-term customer of over a decade – is buying stake. “For operational reasons, the furnace is being brought back under IMFA. Through an intermediate agreement Posco is taking the entire output even before the transaction formalities are complete,” Mr Panda said.
Posco, one of the largest stainless steel producers, will buy the entire ferrochrome output from the furnace for 25 years, with prices to be decided every quarter. In addition, it has signed a five-year deal with IMFA for supply of 50,000 tonnes of ferrochrome, a key ingredient in making stainless steel.
Over the past five years Posco has faced environmental clearance and land acquisition problems for its 12 mtpa integrated steel plant in Orissa. The steel maker's plans to set up a 6 mtpa plant in Karnataka through a joint venyure with two local firms have recently faced land acquisition issues. Posco is also in joint venture talks with the state-run SAIL for a 1.5 mpta unit at Bokaro.