According to a source familiar with the matter, the ongoing diplomatic tension between India and Canada is starting to impact trade relations, as India's JSW Steel is reportedly slowing down its efforts to acquire a stake in the steelmaking coal division of Canada's Teck Resources.
The strained relationship between India and Canada escalated when both countries expelled each other's diplomats following a dispute over the assassination of a Sikh separatist leader in the Canadian province of British Columbia in June. In response, India recently suspended visa services for Canadian citizens, citing security concerns for its consulate staff in Canada.
The source revealed that discussions between JSW Steel, India's largest steelmaker by capacity, and Teck regarding the stake purchase have experienced a slowdown, although the paperwork process is still ongoing. The source explained, "We will wait until the issue subsides," while also mentioning that they preferred to remain anonymous as they lacked authorisation to speak to the media. The source further clarified, "We do not anticipate the situation spiraling out of control. We are in the midst of valuing the deal, engaging with banks, and this process is still underway."
JSW Steel declined to provide a comment, and Teck Resources responded to Reuters inquiries by stating, "We do not comment on market rumors or speculation."
Canada's Ministry of Industry, responsible for approving foreign investment transactions, mentioned that any acquisition of a Canadian company by a foreign entity would be subject to a national security review under the Investment Canada Act.
Another source close to the situation disclosed that JSW is in discussions with investment banks, including Standard Chartered and Deutsche Bank, to secure the necessary funding for the transaction. The source suggested that the final ownership stake could fall within the range of 34% to 37%.
JSW Steel has a significant presence in Teck's coal business, making it one of its prominent customers. It's worth noting that Teck Resources previously rejected a $22.5 billion unsolicited bid for the entire company from global mining and trading company Glencore. In July, Teck announced that it had received offers from various interested parties for its coal division. Additionally, Japan's Nippon Steel expressed continued interest in Teck's coal business, having previously agreed in February to acquire a 10% stake following a potential split.
For India, Canada ranks as the fourth largest exporter of coking coal used in the steel industry, according to data from the Indian government. The top three suppliers of coking coal to India are Australia, Russia, and the United States.
