SteelMint Exclusive:
In an interview conducted by SteelMint, Mr. Anil
Nachrani, President of Chhattisgarh Sponge Iron Manufacture's Association (CSIMA)
says “Secured supply of Raw material is the key factor for sustained growth
of Steel sector in India.” He also expressed his views on the recent roll
back in Coal prices by CIL and expected cut in Iron ore prices by NMDC.
Below is the transcript of Mr. Anil Nachrani's interview with Team
SteelMint:
Q: The article published in Dainik Bhaskar
on 02nd Feb states that 20 sponge iron units have been shut down due
to shortage of raw material. How will CMDC (Chhattisgarh Mineral Development
Corporation) help in easing the supply of Iron ore in the state?
A: Sponge iron units in Chhattisgarh are highly dependent on NMDC to meet
its iron ore requirement. Supply from the neighboring mineral rich state Odisha
is also not very supportive. Allotment of mines to CMDC (Chhattisgarh Mineral Development
Corporation) was done 3 years ago but it has not been operational yet. Once it
starts operating, supply to sponge units in CG will improve as their first
priority will be to supply iron ore to plants within the state. Moreover, the Government could earn revenue of
Rs 3,000 crore in terms of royalty, excise, VAT, etc.
Q: It has been heard that NMDC is likely to cut its prices by Rs
300/MT and they have also come up with a new pricing mechanism. How far is it
true?
A: We were expecting a 30% cut in Iron ore prices but the correction in
prices is said to be merely 5% which won't have much impact on steel prices.
They have come up with a dual pricing policy and are setting prices according
to International or domestic prices, whichever is higher. So, it is the
secondary players who have to suffer from these kinds of pricing policies.
Q: Private mines in Odisha like Essel and Rungta which have been
closed from quite some time are likely to open within one month. So will this
help in improving the supply of Iron ore to Chhattisgarh steel units or will
they still have to depend on Iron ore from NMDC?
A: Almost all mineral rich states in India like Odisha, Karnataka want to
restrict the supply of raw material to the plants within the state. So even if
these mines re-open, it may not have
major impact as the plants will still have to be dependent on the state
run- NMDC. That is why we want CMDC to start its operation soon so that more
and more raw material could be secured for the plants within the state.
Q: How much quantity of Coal & Iron ore is required to make 1 MT of
Sponge Iron? And from which
major mines do steel units in Chhattisgarh source their Coal requirement?
A: It is very important to understand the amount of raw material that is
required to make steel. We normally require 2 MT of Iron ore & Coal each to
make 1 MT of Sponge iron. So, the ratio of converting raw material to Sponge
iron is 4:1. Secured availability of raw material is very important. Plants in
Chhattisgarh normally source their Coal from SECL with 8 different collieries
namely Gevra, Dipika, etc.
Q: As per our learning, Gevra, Dipika collieries of SECL show a price
hike of 18-24% even after CIL has rolled back its recent price hike announced
in the beginning of January. So what
could be its impact on the sponge iron prices?
A: The hike which was previously announced by CIL reported around 80%
hike in Coal prices which has now come down to 18%. This will surely increase
the production cost. CIL will also review its policy in March. The hike has
been put on hold for now and prices are mostly likely to move up further after
March.
Q: In a recent presentation, the WSD (World Steel Dynamics) has
sighted a negative outlook on the fortunes of Steel Industry in 2012. Steel
demand from India is expected to be around 5%-6% as against an earlier
expectation of 8%-9%. So broadly how do you expect the outlook of Steel
Industry to be in a manufacturer's point of view?
A: Steel production in India is distributed almost equally between private
and public players contributing around 30-32 million tonnes each. So, when
almost 50% of them have secured supply of raw material, the rest 50% have to be
assured of continuous and secured supply of raw material. Hike in raw material
prices prompt steel manufacturers to keep their prices high but we cannot
dictate terms; lower demand forces us to reduce the prices. Proper availability
of raw material has to be ensured and it is the key factor for sustained growth
of steel sector in India. Moreover, there should be a distinction between legal
& illegal mining and Govt. should take steps to check illegal mining rather
than imposing a blanket or a complete ban on mining activities.
Reported by:
Monica Patnaik (monica.patnaik@steelmint.com),
Amit Purohit (amit@steelmint.com)
Leave a Reply