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MMK Eyeing India for Expansion
(The Moscow Times Via Thomson Dialog NewsEdge)Magnitogorsk Iron & Steel Works, or MMK, said Thursday that it was considering acquiring a steelmaker in India to tap into the lucrative Asian metals market. The company is exploring all opportunities in the country and may reconsider its previous plan to build a greenfield factory, instead opting for an acquisition, an MMK spokeswoman said.
"At present, we are evaluating all the possibilities," said Yelena Azovtseva, a spokeswoman for MMK, adding that no final decision had been made.
"It's no secret that India has performed very well in recent years. We see that if we don't seize that opportunity, our competitors will," she said, calling the move part of the company's new strategy to pursue significant expansion outside Russia.
MMK announced its intention to build a smelter with a 10 million-ton annual capacity in 2005 -- the same year another major Russian metals player, Russian Aluminum, announced plans to create an alumina-producing joint venture with India's Vedanta.
MMK held talks with authorities in the Orissa region of India last November about building a $10 billion steel plant, and the proposals were discussed further last December during Indian Prime Minister Manmohan Singh's vist to Moscow.
On Thursday, India's Financial Express, citing a senior Indian government official, reported that the issue of land allocation -- the main sticking point for RusAl's and MMK's expansion in India -- would be resolved in the near future, as "New Delhi has assured facilitation of these investments."
India is widely regarded as a low-cost, fast-growth market with the potential to become the world's second-largest steel consumer after China, said Alexei Morozov, a metals analyst with UBS. In addition, it mainly buys rolled steel, a product that MMK specializes in, he said.
Some analysts remained skeptical, however, as much about the seriousness of MMK's and RusAl's intentions as the likelihood that the assistance offered by India would never materialize. India has stalled foreign investments in its industries in the past.
"Until recently, MMK's management has not been inclined to diversify its asset base, operating just one large Russian steel plant," said Nikolai Lukashevich, a metals analyst with Fitch Raitings.
In India, the company would face restrictions on foreign ownership should it want to buy, and shortages of energy capacity should it choose to build, he said.
"MMK are more likely to make a small, careful purchase and test how that works," Lukashevich said.
Meanwhile, RusAl said Thursday that it retained its interest in Indian alumina projects and was "monitoring and assessing opportunities" in the country.
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