In a development signaling the impact of a diplomatic dispute on trade relations, JSW Steel Ltd of India is reportedly slowing down its efforts to acquire a stake in the steelmaking coal unit of Canada's Teck Resources, as reported by Reuters citing an anonymous source familiar with the situation.
Tensions between India and Canada escalated significantly following the expulsion of each other's diplomats in the aftermath of a dispute concerning the murder of a Sikh separatist leader in British Columbia, Canada, in June.
On Thursday, India suspended visa services for Canadian citizens, citing security concerns for its consulate staff in Canada, according to a statement from the foreign ministry spokesperson.
The source mentioned that discussions between JSW Steel, India's largest steelmaker in terms of capacity, and Teck regarding the stake sale have slowed down, though work on the required paperwork is still ongoing. The source added that they plan to wait until the diplomatic issue subsides before moving forward. However, they emphasized that they do not anticipate the situation to escalate beyond control, and preparations, including valuation paperwork and discussions with banks, are still underway. JSW Steel declined to provide a comment, while Teck Resources responded to Reuters queries by stating, "We do not comment on market rumors or speculation."
Canada's industry ministry, responsible for approving foreign investment deals, noted that the acquisition of a Canadian company by a foreign entity would undergo a national security review under the Investment Canada Act.
Another source close to the matter revealed that JSW is in discussions with investment banks, including Standard Chartered and Deutsche Bank, to secure funding for the transaction. The source suggested that the final ownership stake in Teck's coal unit could fall within the range of 34 percent to 37 percent.
JSW Steel is a significant customer of Teck's coal business, which has previously rejected an unsolicited $22.5 billion bid for the entire company from global mining and trading giant Glencore. In July, Teck announced that it had received offers from various interested parties for its coal business. Japan's Nippon Steel also expressed continued interest in Teck's coal unit, having agreed in February to purchase a 10 percent stake following a split.
For India, Canada ranks as the fourth-largest exporter of coking coal, a vital component in the steel industry, according to data from the Indian government. The top three suppliers in this category are Australia, Russia, and the United States.
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