AMNS Luxembourg to raise $5 bn Japan loan

While JBIC will lend $3 billion, the rest will be provided by MUFG Bank Ltd, Sumitomo Mitsui Banking Corp, Sumitomo Mitsui Trust Bank Ltd, Mizuho Bank Ltd, and Mizuho Bank Europe NV.

AM/NS India is owned by AMNS Luxembourg, in which ArcelorMittal holds a 60% stake with the rest held by Nippon.

“The proceeds obtained through the JBIC co-financing loan will be used to finance the expansion of AM/NS India’s annual steelmaking capacity at its Hazira plant from 9 million tonnes per annum (MTPA) to 15 MTPA,” ArcelorMittal said in a statement.

The steelmaker’s ability to successfully raise large debt is underscored by expectations of a continued boost to India’s domestic steel demand, buoyed by the government’s mega infrastructure push. As per CareEdge Research, domestic steel consumption is expected to grow at 8-10% in FY24, spurred by increased infrastructure spending, robust real estate and construction activities, and strong automobile sales. ArcelorMittal said apart from adding to the primary steelmaking capacity, the project includes the development of downstream rolling and finishing facilities to enhance AM/NS India’s ability to produce value-added steels for sectors such as defence, automotive and infrastructure. The capacity expansion will create more than 60,000 jobs, it added.

After over two years of ligation under India’s insolvency law, ArcelorMittal acquired Essar Steel India Ltd (ESIL) in December 2019, forming a joint venture with Nippon Steel to own and operate ESIL. The company received environmental clearance last October, and announced a ₹60,000 crore investment plan to raise production capacity at Hazira to 15 MTPA.

JBIC, a Japanese government-owned financial institution, is restricted from taking over 60% of a loan consortium and thereby its share is at $3 billion, said an official on condition of anonymity.

The official said the deal is part of JBIC’s long-standing relationship and commitment to India.

“We are glad to see that ArcelorMittal Nippon Steel India will use this funding to expand their business and we are committed to support their investment,” the official said. In March 2020, AMNS Luxembourg Holding had signed a $3.09 billion loan agreement with JBIC to partially finance ArcelorMittal and Nippon Steel’s acquisition of Essar Steel.

JBIC said in a separate statement that the steel market in India is expected to make steady growth along with its economic and population growth. At the same time, localization of production of steel products is progressing based on the government’s Make in India campaign for the protection of domestic industry, it said.

“The loan will support Nippon Steel’s overseas business expansion, thereby contributing toward maintaining and improving the international competitiveness of Japanese industry,” the JBIC statement said.