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Apr 15, 2013 03:02 PM IST | Source: CNBC-TV18

Pact with Posco to benefit both firms: JSL's Ratan Jindal

JSL, a part of the USD 15 billion OP Jindal Group was in talks with Posco for almost two years, said Ratan Jindal, Vice Chairman and Managing Director of Jindal Stainless in an interview with CNBC-TV18

Last week Jindal Stainless Ltd (JSL) signed a three year agreement with Korean steelmaker Posco for selling 200 series steel products to the latter or its subsidiaries. This series is used for domestic as well as industrial applications.

JSL, a part of the USD 15 billion OP Jindal Group was in talks with Posco for almost two years, said  Ratan Jindal, Vice Chairman and Managing Director of Jindal Stainless in an interview with CNBC-TV18

He further said that both companies would also review joint establishment and exploration for a nickel smelter process in Indonesia.

Read This: Jindal Stainless has resistance around Rs 58: SP Tulsian

The move will benefit both JSL and POSCO in long term and the pact can be extended further on mutual cooperation, he added

Shares of the company are up 5.84 percent to Rs 57.10

Below is the edited transcript of Jindal's interview to CNBC-TV18.

Q: Could you just walk us through the contours of this memorandum of understanding (MoU) that you have signed with POSCO and what it means for your company?

A: Jindal Stainless and POSCO have been in talk for quite sometime for the last one-and-half to two years of working on our strong points and synergizing both. POSCO is the world’s third largest stainless steel producer and Jindal Stainless Steel is the world’s ninth largest producer. So, the market situation is pretty tough worldwide as there is an oversupply. Hence, instead of competing with each other, we thought of synergising our marketing strategies.

We signed two MoUs. One is purely to supply 200-series. There are three grades of stainless steel- 200, 300 and 400. So, out of this, 300-series is the most popular which is holding almost 50-51-52 percent market share. That is followed by the 400 series which is about 30 percent and the last 15-16 percent is the 200 series.

Firstly, they have two subsidiaries- POSCO in Thailand and Vietnam. So basically, they need 200 series for these companies. One MoU that we have signed is basically to supply 200 series from our new plant in Odisha which has excellent quality. From nowhere in 2000, it has now picked up 15 percent of the 37-38 million tonne stainless steel worldwide.

The second MoU is basically to look for more synergies in marketing and in certain other areas. This includes exploring the possibility of setting up nickle smelters in Indonesia where the nickle ore is mostly available. It is going to China. China has become the largest nickle producer, nickel pig iron producer, so we are looking at those possibilities plus marketing our products worldwide where they have certain strength in some products and we have certain strengths. So, instead of competing with each other we are just going to explore the possibility of working together.

Q: The more important question is what are the revenue implications for your company because of this? By which quarter you think it will get reflected by?

A: POSCO has already started picking up the 200 series for their two companies in Thailand and Vietnam. They had tested our material, they liked it and they wanted to get into it for long-term. We have signed this MoU of supply to them for three years which is mutually extendable. So, they just want to ensure that the supplies are on regular basis. As the Indian market has slowed down in last two years, the growth we were looking at 17-18 percent has come down to 8-9 percent now. We are looking at markets other than India as avenues to find the market for our products. So, it is going to be very-very helpful as far as Jindal Stainless is concerned. It’s a win-win situation for both the companies.

As far as revenue is concerned, it’s too early to say. They are already picking up, say USD 5-10 million worth per month. It is very difficult to say where it will go. They have a fairly large capacity in these two plants, about 500,000 tonne a year and the 200-series is typically 10-15 percent of the market. We are hoping that it will be fairly decent quantities for them as well as for us.

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