SAIL, Posco in strategic tie-up

In the first alliance of its kind in the domestic steel industry, government-owned Steel Authority of India Ltd and South Korea's largest steel company and the world's fourth largest, Posco, have signed a memorandum of understanding for a comprehensive strategic alliance.

G Ojha, director (personnel), SAIL, and Soung-sik Cho, senior executive vice-president and board member, Posco, signed the MoU in the presence of SAIL Chairman SK Roongta. The agreement will initially be effective for three years.

The South Korean company is investing in a 12 million-tonne steel plant in Orissa at a cost of Rs 52,000 crore. The project has been facing controversies over the reservation of scarce iron ore resources and land acquisition problems.

The MoU has been signed between SAIL and the South Korean parent, and not Posco India. However, Cho is also chairman and managing director of Posco India.

Industry observers said the deal benefited both signatories. "Posco is seeking to expand its knowledge of the Indian steel market ahead of its entry there, while for SAIL the alliance means a strong foreign partner in a rapidly consolidating steel market," they said.

Industry sources added that Posco India would be assured of a strong marketing network in India through SAIL's extensive all-India network and a dedicated port at Haldia. SAIL also has seven iron ore mines.

STEEL BONDS

• Information sharing in corporate strategy planning
• Sharing know-how and expertise in the areas of development of mines and business practices such as ERP, PI and Six Sigma
• Coordination in procurement of coking coal, nickel and ferro alloys and engagement of transportation vessels
• Joint usage of each other's existing marketing and warehousing network
• Exchange of engineers, technicians and other professionals
• Subject to further discussions, both companies will also cooperate in joint R&D and other mutually-agreed projects