A successful bid by ArcelorMittal for Essar Steel would give exposure to the Indian steel market, which is likely to be the fastest-growing in the world over the next two decades.
Essar Steel is the fourth-largest steel producer in India with a capacity of 10 million tonne. It is also among India’s highest-cost producers, with hot-rolled coil (HRC) averaging $ 485/tonne in 2017 — over $ 100/tonne more than the lowest-cost producer, according to CRU cost estimates.
However, Essar Steel is a relatively high-cost producer in the Indian market, and is likely to require substantial investment to improve operating efficiency and make higher production volumes cost effective, said a report published by Fitch Rating agency and CRU.
The credit impact of a winning bid would also depend upon the transaction amount and the structuring of the deal, which are currently unknown. Read More