Gerdau and Kalyani form a joint venture in India

The partnership includes the SJK Steel Plant Limited, unit located in the city of Tadipatri in the state of Andhra Pradesh

The Gerdau Group and the Kalyani Group signed today, June 22, 2007, a contract to form the Kalyani Gerdau joint venture with current steelmaking assets of US$ 170 million. The partnership includes the SJK Steel Plant Limited, unit located in the city of Tadipatri in the state of Andhra Pradesh, which is close to three large urban centers (Bangalore, Chennai, and Hyderabad) as well as to one of India’s main railway line. The equipment involved in the joint venture – a blast furnace, a melt shop with two converters, a ladle furnace, a continuous caster, and a pig iron production facility – will be used to meet the growing internal demand in the country. Both of the partners own the same percentage (approximately 45%) and have the same rights in the joint venture and the other 10% is owned by other investors. The management of the business, therefore, will be shared between the Gerdau Group and the Kalyani Group. The Gerdau Group’s investment to acquire the stake in the joint venture will be of approximately US$ 71 million. The final amount will be determined at the time of closing the deal. "This is Gerdau Group's first step into Asia and reinforces our strategy of being one of the agents in the consolidation process of the world steel business. The partnership with the Kalyani Group is essential for the success of the business because it brings new knowledge about the local market and culture,“ affirms the company's CEO André Gerdau Johannpeter. Commenting on the joint venture, Mr. B N Kalyani, Chairman, Kalyani Steels Ltd., said that “We are very happy to be associated with the Gerdau Group and partner them in their first steel venture in Asia”. Together, Kalyani Steels and Gerdau will forge a powerful partnership to grow their individual companies which will capitalize on the strengths of the two organizations in steel business, he added. In the next few years, Kalyani Gerdau's annual installed capacity in Tadipatri will grow from its current level of 275,000 metric tons of liquid steel per year to 1.6 million tons, which will call for US$ 250 million to US$ 300 million in investments according to preliminary studies. One of the highlights of this investment program is the installation of rolling mills, which will allow the production of steel with higher added-value and supply both the automotive and civil construction industry, covering a broad range of special bar quality (SBQ) and construction products. Currently, India is the eighth largest steel producer in the world and by 2015 it should reach second place in the world ranking. It has abundant reserves of iron ore and a low cost to produce steel. For the next 10 years the market forecasts point to a GDP growth of approximately 8% a year. Currently, the per capita steel consumption in India is only 38 kilograms (compared to 93 kilograms in South America), and this level should reach 75 kilograms by 2015.
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