RIO DE JANEIRO, June 22 (Xinhua) -- Brazil's steel producer Gerdau said on Friday it has signed an agreement with the Kalyani Group to operate a steel plant in Tadipatri, in the southern Indian state of Andhra Pradesh.

The SJK Steel Plant, located close to India's three cities of Bangalore, Chennai and Hyderabad, comprises two companies, each holding 45 percent of shares, and has a combined annual capacity of 275,000 tons, according to a Gerdau press statement.

Gerdau expects capacity to soar in the next few years to 1.6 million tons. Preliminary studies show that it will be necessary to invest between 250 million and 300 million U.S. dollars to achieve such goal.

Gerdau, a leader in steel production in the Americas, stressed that the investment "reinforces its strategy to become one of the consolidators of the steel sector in the world."

The company's CEO Andre Gerdau Johannpeter added that the partnership with the Kalyani Group "aggregates knowledge of the local market and culture."

Gerdau is currently investing 71 million dollars in the operation, the first by the Brazilian company in India.