BlueScope to spend A$277.5m in India, RI
BlueScope to spend A$277.5m in India, RI
Bloomberg, Melbourne
BlueScope Steel Ltd., Australia's largest steelmaker, plans to spend a total of A$277.5 million (US$203 million) building plants in India and Indonesia to tap growing demand for the alloy in Asia.
The company will build a A$265 million steel-coating and painting plant in India as part of a joint venture with Tata Steel Ltd., the nation's second-largest steelmaker, Melbourne- based BlueScope said today in a statement. It's also spending A$145 million to at least double capacity at an Indonesian plant.
BlueScope plans to triple its Asian steel-coating and painting capacity over five years as Asia's economic expansion fuels construction and stokes demand for autos and domestic appliances. The Indian government is targeting at least a tripling of steel production in 15 years.
"It's part of their strategy to grow their downstream" or steel products business, said Peter Chilton, who helps manages A$1.1 billion of funds at Constellation Capital Management in Sydney. "A lot will depend on execution."
Shares of BlueScope fell 15 cents, or 2 percent, to A$7.20 on the Australian Stock Exchange. The stock has fallen 12.7 percent this year, after it said profit may decline due to excess supplies of steel in Asia and after a fire at an Australian plant.
"Asia is our core growth region," said Kirby Adams, Chief Executive Officer of BlueScope Steel in a statement to the exchange. The company is also building and expanding plants in Thailand, Vietnam and China, with total Asian investments over A$1 billion, said Adams.
Its Asian coating, painting and roll-forming plants in Asia helped bring in A$1 billion of sales in fiscal 2005, Adams said during a conference call.
BlueScope produces hot-rolled steel coil, a benchmark product which is processed to make pipes and tubes and is used in cars and buildings. It also paints, coats and processes steel, turning it into roofs, fences and walls.
BlueScope is expanding its Cilegon plant, located west of the Indonesian capital Jakarta, with the new capacity expected to be ready by early 2008, the company said in one of two separate statements to the exchange.
"Indonesia, the world's fourth most populous country, is experiencing strong growth in the residential and commercial building sector," Adams said.
It also formed a venture with Tata Steel, which will be based in Pune, India, the company said. The new steel-coating and painting plant at Jamshedpur in the eastern state of Jharkhand will be ready for operation by the middle of 2008. The plant will have the capacity to coat 250,000 tons and paint 150,000 tons of steel a year, the statement said.
BlueScope last December said it will spend A$100 million on three plants in India making pre-engineered buildings and related steel products. The venture will assume ownership of the three plants that BlueScope is building in Pune, Chennai and New Delhi. The venture will also take over ownership of BlueScope Steel's roll forming business in Sri Lanka. BlueScope will be compensated by Tata Steel, the statement said.
The joint venture will decide later on the compensation amount for the Sri Lanka plant, said Sanjay Choudhry, a spokesman of Tata Steel, in an interview.
"This joint venture combines the strengths of the two organizations and would increase the use of value-added steel products," said B. Muthuraman, managing director of Tata Steel, in the statement.
Michael Courtnall, president of Asian building and manufacturing markets at BlueScope, had said the two companies were planning a A$250 million plant investment in an interview in September.
"It is a market that is growing as India grows," said Courtnall today on the call. "The amount of steel in construction is actually quite low."