November 2, 2007
VIETNAM-INDIA : Investment
Tata Steel Explores New Venture In Vietnam
MUMBAI - India’s Tata Steel has signed an agreement with state-owned Vietnam Steel to explore building a mill to produce cold-rolled steel in the Southeast Asian country.
If they go ahead, Tata Steel will have a stake of 65% in the mill and Vietnam Steel 35%, the companies said in a release. The value of the deal was not specified.
Vietnam, with annual GDP growth of over 8% and per capita steel consumption of over 85 kg a year, is “on the threshold of a significant increase in steel consumption, including value added steel,” they said.
Consumption in India is rising at around 9% annually, but is still relatively low at an estimated 39 kg per capita. The global average per capita consumption is about 150 kg a year.
Tata Steel, through its Singapore-based Subsidiary Natsteel, already has a joint venture with Vietnam Steel. Both companies are also carrying out a feasibility study for a project that will involve Tata Steel building a 4.5 million ton steel plant in central Vietnam. Media reports here estimated the investment in the project at over $3 billion, but neither company has released any numbers yet.
Tata Steel’s net profit increased 8% for the quarter ending in September on higher demand and foreign exchange gains as the rupee appreciated against the dollar. Tata Steel became the world’s sixth-largest steel company through its acquisition of Corus for $12.9 billion earlier this year. This fiscal year, Corus is expected to account for 60% of its profit.
Over the next few quarters, the company expects to see strong domestic demand fueled by growth in infrastructure development and automobile sales, as well as a decline in exports from China. Domestic prices for the metal are likely to rise given the lack of adequate supplies in the country.
Tata Steel is keen to tap into new markets to meet the growing demand for steel.
Vietnam Steel has an annual capacity of 2 million tons, while Tata Steel’s capacity is around 25.6 million tons, including production from Corus.
The company’s shares rose 0.7% on Wednesday to 905.05 rupees ($23.05) on the Bombay Stock Exchange.