Sept. 10 (Bloomberg) -- ArcelorMittal, the world’s biggest steelmaker, and South Korea’s Posco may start building $32 billion of factories in India next year as domestic demand defies the global recession, India’s Steel Minister Virbhadra Singh said.

“Posco is very keen and would like to start tomorrow,” Singh said in an interview. “I’m hopeful Posco will begin work next year. ArcelorMittal should also be able to start next year, at least on one of its two plants.”

Posco, ArcelorMittal and Indian rivals such as Tata Steel Ltd. are rushing to build factories in the country as demand increases for cars, roads and bridges. Prime Minister Manmohan Singh’s administration, which returned to power in May, aims to resolve land disputes and delays in allocating mining licenses to mills to help achieve as much as 9 percent economic growth.

“Posco and ArcelorMittal will build their plants once they are guaranteed iron ore assets and problem-free land in the country,” said Rakesh Arora, an analyst at Macquarie Group Ltd. in Mumbai. “The government is trying to simplify mining laws and once this is done, the companies will definitely build the plants here because demand is assured.”

Mittal Meeting

ArcelorMittal Chief Executive Officer Lakshmi Mittal met the steel minister recently to discuss the problems of acquiring land and mining licenses.

“L.N. Mittal met me a few days ago and put forward the problems,” the steel minister said. “I’m using my good offices to see the state governments expedite the process. ArcelorMittal is looking at how the global market shapes up and wants to synchronize its production with the global situation.”

Posco, South Korea’s biggest mill, rose 2.5 percent to 478,500 won at the close of trading today in Seoul. ArcelorMittal gained as much as 1.3 percent to 26.45 euros and traded at 26.33 euros, up 0.8 percent, as of 10:41 a.m. in Amsterdam.

Pohang-based Posco’s $12 billion, 12 million metric ton plant in eastern Orissa state, potentially the single-biggest overseas investment in India, has been delayed since plans were drawn up in 2005. ArcelorMittal aims to build a mill in Orissa state and another in Jharkhand with a total capacity of 24 million tons and at a cost of $20 billion.

“I’m talking to state governments to ensure the companies get mining leases and can start work,” the steel minister said yesterday in his Udyog Bhavan office in New Delhi, without specifying the measures he plans to implement. “India needs extra capacity because soon we’ll not be able to meet demand.”

Growing Demand

India’s steel demand is set to grow irrespective of global developments, S.K. Roongta, chairman of Steel Authority of India Ltd., said today in New Delhi, after the company’s annual general meeting. Production at Steel Authority, India’s second-largest steelmaker, will rise 10 percent this fiscal year from the previous 12 months, he said.

The company may set up a 10 million ton plant in Jharkhand if it is given assurances of iron-ore supplies, Roongta said.

ArcelorMittal is looking to build its plants “as soon as possible,” Vijay Kumar Bhatnagar, head of the India unit, said in a phone interview yesterday. “Of the two projects, we are slightly ahead in the Jharkhand project as we have secured a mining license in the state,” he said.

The company secured a permit to mine iron ore in 500 acres of land in Jharkhand in June 2008, three years after an accord with the state government to build the plant. The states of Jharkhand, Orissa and Chhattisgarh account for 70 percent of India’s coal reserves and 55 percent of iron ore, according to McKinsey & Co.

Uttam Galva

Luxembourg-based ArcelorMittal agreed to buy a 5.6 percent stake in India’s Uttam Galva Steels Ltd. on Sept. 3, its first acquisition in the South Asian nation. The purchase may help India-born Mittal gain from demand forecast by the government to grow as much as 10 percent in the year ending March 31.

India this year overtook China in car exports and is challenging Thailand and South Korea as an alternative production center in Asia.

Posco expects to start building the plant, once it secures the rights to use the land, spokeswoman Choi Youn Joung said in an telephone interview in Seoul today. The company has yet to win a license from the Orissa government to mine iron ore.

“The issue has to be resolved by the local people and the state government,” Steel Minister Singh said. “I am ensuring the process is expedited,” without giving details.

India plans to cut permit delays and attract overseas capital through “simpler” mining laws, Mines Minister B.K. Handique said last month. The legislation will be presented to parliament in the winter session this year, he said.

To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net

Last Updated: September 10, 2009 05:40 EDT