Steel Major Buys 49% Stake in Indonesian Nickel Co, Stock Soars 201% from Low

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Steel Major Buys 49% Stake in Indonesian Nickel Co, Stock Soars 201% from Low
Credit: © Reuters.

By Malvika Gurung -- Shares of stainless steel manufacturer Jindal Stainless (NS: JIST ) surged 3.84% to Rs 290.7 apiece on Wednesday, as the company acquired a 49% stake in the Indonesian nickel pig iron company New Yaking Pte for a deal value of around $157 million.

Founded in 1970, Jindal Stainless (JSL) is the largest stainless steel manufacturing company in India.

The company has entered into a collaboration agreement with New Yaking Pte. Ltd for investing in the development, construction and operation of a Nickel Pig Iron (NPI) smelter facility located in an industrial park in Halmahera Islands, Indonesia.

As per the ‘Collaboration Agreement’, Jindal Stainless will acquire a 49% equity interest in the facility for consideration of almost $157 million.

Through the agreement, JSL will ensure the availability of nickel for the long term, given India’s deficient position in nickel ore.

For a better understanding, the price trend of nickel is a major factor in the global business of stainless steel. However, geopolitical issues, logistical hurdles, and pandemic-induced constraints, among others often affect the demand-supply dynamics of nickel, thereby increasing the cost and uncertainty for its user industries such as stainless steel.

In such a scenario, the strategic collaboration of JSL with New Yaking Pte shall usher a sharper competitive advantage to the former in domestic as well as international markets.

“The Facility is planned to be commissioned within 2 years, with an annual nameplate production capacity of up to 200,000 metric tonnes of NPI with an average 14% Ni Content,” said JSL in a press release on Tuesday.

Further, this is the first-ever strategic partnership entered into by an Indian company for securing a stake in nickel reserves globally.

Jindal Steel’s shares have jumped over 53% in a year, and are soaring 200.7% from their 52-week low.

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