Taking a pronounced nationalist stance against the backdrop of political tensions between India and China, the $14-billion JSW Group has said that it will stop all imports from China by Mar’22. The group, working towards this end, is already in talks with vendors in Germany, Brazil, some European countries and the US.
A source, speaking to SteelMint, said that sourcing from non-China vendors will increase the cost of procurement but that a large group like JSW, with a presence in steel, energy, cement and infrastructure, will be able to absorb the extra cost.
However, importantly, the JSW Group is negotiating long-term, three-year contracts with these vendors where they are being asked to supply at China’s costs to the integrated steel major, it is learnt. There are several vendors in Turkey, Brazil and the US who are amenable to such terms, especially Turkey, the source said.
The group imports close to USD 1 billion worth of products directly and indirectly from China. These include refractory of which almost 100% comes from the dragon country for its steel business, and other machinery items that are required for the day-to-day maintenance of plants. Out of this corpus, USD 400 million worth of goods are directly sourced from China (orders are directly placed with Chinese vendors by JSW Group) while the balance is rerouted from China. For instance, several vendors supply items to JSW from Germany but have their manufacturing unit located in China.
“The indirect corpus contains orders made to companies in Germany. But, these companies have plants located in China and the items are re-routed from China to Germany and then despatched to India with German tags on them,” the source informed.
“The group is creating its own non-China vendor base. And JSW is very strict. It has included a clause in the agreements with the non-China vendors that if it places orders with them, they cannot re-route their products from China. If they do so, JSW will not be placing orders with them,” the source informed.
The source further said: “The costs are a little higher but JSW is in talks to forge long-term, three-year contracts with them in lieu of which they should supply to it at China’s rates.”
An industry source said that most mills cannot take a vociferous stand on stopping imports from China because that would lead to a 30-40% increase in their sourcing costs.
JSW Group supremo, Sajjan Jindal, recently said in a media interview, that the new supplies from alternative sources, that also include India, are going to start from as early as October this calendar.
Jindal also minced no words in saying that, “… I respect my country and my Army. If they (China) have killed 20 of my soldiers, I’m not going to buy products from them and strengthen their armies more.”
~By Madhumita Mookerji
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