Roongta: Bond theory

New Delhi, Aug. 16: Steel Authority of India Limited (SAIL) has signed an agreement with Korea’s Posco for collaboration in diverse fields, from knowledge sharing to logistics and raw materials.

This comes weeks after Posco’s global rival, ArcelorMittal, turned down overtures for a tieup to explore synergies with SAIL. The arrangement between SAIL and Posco covers exchanges of engineers and sharing of technology, particularly in mining.

Other areas of co-operation are in warehouses, shipping and the purchase of raw materials such as coking coal.

“The deal will help us explore synergies. It’s a good business strategy,” SAIL chairman and managing director S.K. Roongta told The Telegraph over phone.

Analysts are assessing the ramifications of the deal vis-à-vis ArcelorMittal.

SAIL is involved in a tussle with the Jharkhand government over the control of Chiria mines, which is being eyed by ArcelorMittal.

On the other hand, Posco is a global rival of ArcelorMittal.

Posco, the world’s fourth-largest steel maker, and SAIL will also collaborate in corporate strategy planning. Analysts feel this can range from simple information sharing to thwarting a rival.

“I am open to a similar deal with the Mittals. It will help us both,” Roongta said. SAIL feels it is in a position to offer its expertise in human resource development and mining to Posco, which in turn can help in steel technology, warehouses, shipping and in the supply of coking coal.

“We have co-operated with the Tatas in the past. We have a 50:50 joint venture with them too,” Roongta said, referring to the Internet steel portal, MetalJunction.

Earlier, steel minister Ram Vilas Paswan had told Korean Ambassador Paek Young Sun his intentions of inviting companies such as Hyundai, Dusan, Samsung and Posco to participate in the expansion programmes of SAIL and Rashtriya Ispat Nigam Ltd.

SAIL and Posco will set up a joint co-ordination group in two weeks to implement the agreement, which will initially be for a period of three years.

“The strategic alliance between the two steel giants is a significant step toward synergising their strengths while retaining their identities in the rapidly consolidating global steel industry,” SAIL said in a statement.