Events and Updates

Title: Experts differ on JSW Steel’s monopoly if it acquires Essar

Posted on: 9th April 2018

MUMBAI: Analysts tracking the steel industry are divided in their views on the possibility of JSW Steel attaining monopoly in the western market if its consortium with Nu Metal acquires Essar SteelNSE 0.00 %, explaining that the primary infrastructure alloy is a global commodity for which price benchmarks usually are set overseas. 

Last week, ArcelorMittal hit out at JSW Steel alleging that Sajjan Jindal’s firm will control more than 90% of the steel supply in the western market. Analysts that ET spoke to compared the situation with ArcelorMittal’s market share of more than 83% in the cold rolled steel space in Italy after its recent acquisition of Ilva. 

JSW Steel already has a 5 MT steel facility at its plant in Dolvi, which it plans to raise to 10 MT by 2020. With 12 MT steel capacity in Vijaynagar in Karnataka, together with Essar Steel’s production capacity of 10 MT, JSW Steel could have a sizeable presence in the South and the West if it were to win the bid.

Although this puts the steel maker in a position of significant strength in the western market, it has to be noted that in the overall Indian market, its dominance will be just about 20% given its entire mix of products. India's present steel capacity is 128 MT.

“The competitive landscape for the steel industry in India will undergo a change due to the change in ownerships of the businesses, reduction in debt levels of the subject assets vis-à-vis non-NCLT cases etc.,” said Anjani Agarwal, global steel leader at EY. 

“Regional capacity concentration may be a matter of attention from CCI (Competition Commission of India). However, given the globalised nature of the industry, regional trade dominance, if any, may be very limited in time and impact,” Agarwal said. 

According to data examined by ET, ArcelorMittal controls almost 48% of the market in the EU in the hot rolled coiled product space as well as 54% in the cold rolled product space after the acquisition of Ilva. Another analyst said even though steel is a global commodity with prices determined by international benchmarks price, JSW Steel’s control of the western market may give it some price advantage. 

With a likely low logistics cost, the company may price its products more competitively