The Hindu Business Line : Salem Steel turnaround to begin next month

Some time in January, Alloy Steel Plant, Durgapur, part of Steel Authority of India Ltd, will start supplying stainless steel slabs to Salem Steel Plant (SSP). That will mean the beginning of a new chapter in SSP's life, perhaps the beginning of its turnaround.

Last year, SSP (which is also a unit of SAIL) made a Rs 65-crore loss, after only two years of profit making. The problem faced by SSP is essentially that its raw material suppliers (such as Jindal Stainless and Shah Alloys) are also its competitors for the end products. SSP had to completely depend upon them for stainless steel slabs and had no control over the prices.

In order to address this problem, SAIL had decided to get into stainless steel manufacturing. Capacities were planned to be put up both at ASP, Durgapur and at SSP. Investments in the former were made earlier and ASP will, from January, be in a position to supply the slabs to SSP.

Asked if ASP would not sell slabs at market prices, sources in SSP said that because ASP was a part of SAIL, SSP need not pay market prices for the raw material.

According to Mr P.M. Balasubramanian, Executive Director, SAIL, who is in-charge of SSP, prices of raw material is the only problem of SSP. The fact that the 47 per cent of the unit's sales (of about Rs 1,200 crore) comes from exports is a sort of a certificate of quality, Mr Balasubramanian told Business Line. A project of about Rs 1,500 crore, for expansion of SSP, was approved by the SAIL board in June. SSP is now in the process of hiring consultants for the project, which is expected to be done by the end of this month.

The expansion project should be completed by 2009, after which SSP will have a stainless steel making capacity of 1.8 lakh tonnes. In addition, ASP will supply another 1.9 lakh tonnes to SSP. SSP therefore will have a capacity to roll 3.7 lakh tonnes of stainless steel. The project also includes enhancing the cold rolling capacity of SSP from 70,000 tonnes now to 1.45 lakh tonnes.

Mr Balasubramanian said that SSP also planned to develop an ancillary estate within its premises, where users of its end products, such as fabricators and utensils manufacturers, would set up their own facilities. "Today, we are not able to develop ancillaries because we are not able to commit supply of stainless steel sheets to them," he said.