A persistent demand slump that has seen steelmaking capacity idled worldwide for nearly a year is pushing top global producers to expand their footprint in India, which along with China is a rare bastion of growth.
Strong local demand driven by infrastructure building and rebounding car sales has led big foreign steelmakers to seek out investments among a fragmented local industry after efforts to develop standalone projects met with delays.
“India is on the radar of most companies given the lucrativeness of the market,” said Rakesh Arora, analyst at Macquarie Research. “India has both demand growth and cheap iron ore going for it.”
Mid-level firms including Usha Martin, Electrosteel Casting, Bhushan Steel and Monnet Ispat are seen as attractive targets for joint ventures or acquisitions by foreign firms keen to enter a market beset by regulatory hurdles and land acquisition issues.
Smaller, less-competitive domestic players, however, could see their market positions under threat as global players increase their presence in the country.
Earlier this month, global leader ArcelorMittal said it would acquire a one-third stake in Indian re-roller Uttam Galva, and more such deals are expected given the difficulty of going it alone in India.
“It is very difficult for someone coming from outside to set up a greenfield project,” Nittin Johari, chief financial officer of Bhushan Steel told Reuters.