ArcelorMittal, the world’s second largest steelmaker, has inked agreements with a clutch of Japanese banks to raise a $5 billion loan to fund the proposed expansions undertaken by the company’s subsidiary in India.

AM/NS India, the 60:40 joint venture between ArcelorMittal and Nippon Steel, has chalked out an ambitious plan to expand the steel making capacity at Hazira, Gujarat, from 9 million tonnes to 15 MT. The loan from the Japanese banks will be used to part finance the project and a bunch of other associated investments.

The agreement was signed between AMNS Luxembourg Holding S.A, the parent company of AM/NS India, and Japan Bank for International Co-operation (JBIC), along with MUFG Bank, Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Mizuho Bank and Mizuho Bank Europe N.V.

In addition to the primary steelmaking capacity expansion, the project includes the development of downstream rolling and finishing facilities that will enhance AM/NS India’s ability to produce value-added steels for sectors including defence, automotive and infrastructure.

The expansion project, which started in October last year upon receipt of environment permit, will create more than 60,000 jobs, ArcelorMittal said in a statement.

AM/NS had earlier disclosed that the JV is investing $7.4 billion to expand capacity, which includes debottlenecking capacity to 9MT, $1 billion for value-added steels and $5.6 billion for the upstream expansion. While the value-added downstream units will be ready in phases by 2024, the expanded capacity at Hazira will be completed by 2026.

Commenting on the development, Nippon Steel said the steel market in India is expected to grow steadily with economic and population growth, while the domestic production of steel, including upstream processes, is progressing under the government of India’s “Make in India” policy.

AM/NS India is currently the fifth largest producer of crude steel in India, and through these initiatives to expand its capacity, Nippon Steel aims to capture the growing demand in the Indian market and secure its market presence.

In addition, this construction and expansion of the facilities will also serve to enable future transfer of carbon-neutral technology, which is under development by Nippon Steel and AM, it added.

Industry observers say AM/NS India stands to gain from the financial arrangement as the cost of loan in Japan is lower than in India. The agreement also signals the first big expansion taken up by two global steel majors which entered India by acquiring Essar Steel from bankruptcy court for Rs 42,000 crore in 2019.

Since then, the JV has been growing, especially by acquisitions, most notably Uttam Galva Steels and a $2.4 billion acquisition of port, power plants — linked to AM/NS operation — from Essar Group.