TOKYO -- Nippon Steel & Sumitomo Metal has struck a fresh partnership deal with ArcelorMittal, with an eye toward jointly acquiring India's Essar Steel and bolstering its business in the world's third-largest and still-growing market.
ArcelorMittal submitted its offer Feb. 12 in competitive bidding for Essar Steel. Nippon Steel did not take part in the bidding itself. But the deal announced Friday will enable the Japanese company to purchase the fourth-ranked Indian steel producer through a joint venture to be set up with ArcelorMittal, provided that the world's No. 1 steelmaker wins in the bidding.
Partnering with Nippon Steel for Essar Steel "was always our intention and adds further strength to our offer," ArcelorMittal CEO Lakshmi Mittal said in a news release.
The European giant is expected to have a majority stake in the joint venture, but the companies have not announced a specific breakdown.
A group led by Russia's VTB Capital and including the Essar group's founding family and existing Essar Steel shareholders has reportedly also submitted a bid for the steelmaker. The winner will likely be selected in the coming months.
Amid the saturation of the Japanese market, Nippon Steel is pursuing the deal to make further inroads in such emerging markets as India. It operates a venture with Tata Steel to make automotive cold-rolled sheet there. Essar Steel's blast furnaces would let Nippon Steel process the metal from start to finish in India.
Essar Steel produces 7.5 million tons of crude steel a year -- nearly 10% of India's total annual output. But its aggressive investment strategy has backfired. Saddled with debt, the company is now undergoing bankruptcy proceedings.
Nippon Steel is strengthening ties with ArcelorMittal, which is actively acquiring new businesses. They jointly purchased a Thyssenkrupp plant in the U.S. for $1.55 billion in 2014.
Although U.S. President Donald Trump's plans for new tariffs cast a shadow on the sector, steel prices have recently been recovering on the easing of China's supply glut.