The Hindu Business Line : MSTC entering iron ore, cement trade

New foray
Getting into iron ore or cement trading would be easy for MSTC, as it has a ready platform.
The company could also provide the freight advantage, as it can procure the materials in bulk.
Scrap was likely to remain expensive over the medium term and supply of scrap substitutes was likely to rise more aggressively.

Amit Mitra

Mumbai Dec 10 Metal Scrap Trading Corporation (MSTC) is moving from scrap to iron ore and cement.

MSTC, which sources and procures various inputs for the iron and steel industry, is planning to expand its business portfolio by foraying into iron ore and cement trading.

While it will get into sourcing and procurement of cement shortly, the foray into iron ore, a key raw material for the steel industry, will materialise a little later.

Iron ore supplies

“With iron ore supplies remaining an area of concern for the steel industry (in terms of both availability and pricing), we see a lot of potential in this space. We intend to do some two to three million tonne of sourcing and procurement of iron ore annually,” Mr Malay Sengupta, MSTC Chairman and Managing Director, said on the sidelines of the recently concluded seventh Asian Steel Conference here.

Three companies, CVRD, Rio Tinto and BHP Billiton, at present dominate the world sea-borne trade of iron ore, accounting for about 70 per cent of the world trade.

Margin-squeeze

The burgeoning prices of the ore have been squeezing margins of domestic steel producers for some time now.

Mr Sengupta said MSTC would be open to procuring iron ore both from domestic as well as overseas producers.

“In general it can be said that iron ore price has trebled in the last six years and increased by 300 per cent in the last three years,” he said.

Biz portfolios

MSTC has two major portfolios of business. It sources and procures various items such as HR coils, billets, LAM coke, coking coal, naphtha and HMS for the domestic steel industry.

It also provides a “virtual marketplace” for domestic sellers and buyers to do business in metal scrap (both ferrous and non-ferrous), the methodology including open tender, public auction and e-auction.

For MSTC, getting into iron ore or cement trading would be easy, as it has a ready platform.

“MSTC can procure materials from foreign sources accumulating small demands and we can have more negotiating power,” he pointed out. This apart, the company could provide the freight advantage, as it can procure the materials in bulk.

Trading in metal scrap has been providing a steady flow of income for MSTC, with the growing need for this raw material by the steel industry. Out of the total production of 45 million tonnes of crude steel in 2006-07, about 22 million tonnes stemmed from the secondary sector.

This required about 25 to 26 million tonnes of metallic inputs, out of which the requirement for scrap is about 5.5 million tonnes.

While three million tonnes come from indigenous sources, about 2.2 million tonnes is imported and the balance comes through individual small container imports.

Scrap imports up

Mr Sengputa pointed out that import of scrap has increased from one million tonne in 2003-04 to 2.2 million in 2006-07.

The imports are mainly from the UK, the US and The Netherlands.

Mr A.K. Dastidar, MSTC’s General Manager (marketing), said, in his presentation at the steel conference, that if the country’s steel production touches the envisaged mark of 100 million tonnes by 2020, the demand for scrap was bound to go up to 18 to 20 million tonnes by that year, out of which the import component could be 6-7 mt.

Mr Sengupta added that scrap was likely to remain expensive over the medium term and supply of scrap substitutes was likely to rise more aggressively.

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