The Indian galvanized steel producer Uttam Galva Steels Limited (Uttam) has confirmed to SteelOrbis that the company has entered into an alliance with fellow Indian steel producer Ispat.
According to the terms of the alliance, Uttam will source 500,000 metric tons of its annual requirements of hot rolled coils or sheets from Ispat.
Besides inventories, the deal will help Uttam in its quest to end uncertain sourcing from the spot market.
In comments made to SteelOrbis, Uttam's commercial director Ankit R. Miglani disclosed details concerning the new alliance agreement; "The alliance is based on an import parity mechanism and price in US dollars. The pricing is based on a certain benchmark rate and will then be converted into Indian rupees every month. This mechanism will protect Uttam at all times and also enable us to benefit in case of a fall in international prices."
In addition, since Uttam and Ispat are located only 40 km apart from each other, the logistical risk vis-à-vis imports will also be reduced substantially.
On the other hand, the alliance will also benefit Ispat since the company will have a ready buyer for 500,000 metric tons of hot rolled coils annually.