Shanghai Baosteel Engineering & Equipment, part of the $12 billion Baosteel group, met the Tata Steel brass in Jamshedpur on Monday night to discuss a possible strategic alliance, which could lead to a joint venture.

Shanghai Baosteel General Manager Zhang Miao said the discussions ranged from iron ore supply to the Baosteel group by Tata Steel, to equipment and spare parts supply to Tata steel by Shanghai Baosteel.

A Tata Steel spokesperson said, "We are talking to them on some areas where we could work together." He said since Tata Steel was modernising, Baosteel could be a source of equipment supply. Tata Steel is raising production capacity by 1 million tonnes at an estimated cost of Rs 1,800 crore (Rs 18 billion), and is exploring the option of adding another 2 million tonnes.

The iron ore supply arrangement also fits Tata Steel's plans of serving markets in India, China, Korea and Japan with a production of 5 million tonnes in the first phase, at a project cost of Rs 75 crore (Rs 750 million). Tata Steel plans to use existing leases to expand volumes, taking advantage of low-cost mining operations.

Tata Steel managing director B Muthuraman, during his last visit to China, spent a day at Baosteel Steel Plant. When asked whether the alliance could lead to a joint venture, Miao said it was possible.

The delegation from Baosteel will also be visiting the Bhilai steel plant for similar discussions.

The delegation will study the developing trend in India, which according to Miao is similar to the conditions in China around 20 years ago. The company will also explore options of supplying technology and productivity skills to Indian producers in lieu of iron ore needed by China.

Miao said, "We will look at enlarging core operations between Shanghai Baosteel and Indian steel producers."

Shanghai Baosteel's operations focus on general planning, plant and equipment design, metallurgical devices and spare parts manufacturing, equipment complex, project general contracting and project management. It recorded $200 million sales in 2002.

Miao said another delegation from the Baosteel group was expected to visit India in April 2004.