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By Alex MacDonald

LONDON--ArcelorMittal (MT) said Friday it has signed a preliminary agreement with state-owned Steel Authority of India Ltd to create a automotive-steel joint venture in India that would take advantage of burgeoning demand for cars and trucks.

ArcelorMittal, the world's largest steelmaker by shipments, signed a memorandum of understanding with SAIL to build a cold rolling mill and other finishing facilities that would use the steel titan's advanced technology to sell steel products to India's rapidly growing automotive sector.

India is forecast to become the world's fourth-largest automobile-manufacturing nation by 2020, with output growing from approximately 3.5 million units to more than 7 million units by the end of the decade. But a bloated bureaucracy and significant hurdles over purchasing land and regulation have deterred some foreign companies from investment.

In 2013, ArcelorMittal pulled out of constructing an integrated steel plant in the eastern state of Odisha have experienced significant delays after signing an accord with the state government in 2006.

ArcelorMittal is proceeding with plans to build two other steel plants in the states of Jharkhand and Karnataka.

ArcelorMittal is the world's largest automotive steel producer, accounting for 17% of global supply and generating more than $12 billion last year from the sale of more than 13 million tons of steel to automotive customers globally.

SAIL is expanding its hot steel production capacity to 25 million tons a year from 14 million tons annually with a view to then doubling production capacity to 50 million tons a year by 2025.

Write to Alex MacDonald at alex.macdonald@wsj.com

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