The Hindu Business Line : Kudremukh Iron Ore unfazed by meltdown; plans new facility

Kolkata, Nov. 15 Undeterred by the current crisis, Kudremukh Iron Ore Company Ltd (KIOCL) sticks to its plans to set up a ductile iron spun pipe manufacturing facility and modernising the pellet plant at Mangalore to ensure a better future.

The Rs 400-crore investment may be fully financed from the company’s Rs 1,200-crore cash reserves.

“We stick to our plan to set up the spun pipe facility as a forward integration to our pig iron making facility. The project proposal is now ready. The estimated cost is revised from approximately Rs 225 crore to Rs 300 crore. We will seek board approval for the project in the next meeting scheduled in end November or early December,” company Chairman and Managing Director, Mr K. Ranganath, told Business Line. The project would take 18 months to be implemented.

According to him, the spun pipe sector continues to enjoy strong demand position due to increasing investments in civic infrastructure such as water pipelines and is not hit as severely as the rest of iron and steel industry during the present crisis.

Plans are also near finalised on modernising the pellet plant at an estimated investment of Rs 100 crore. This will help KIOCL in using wider variety of iron ore.

“Larox is identified as technology provider. We have already received the technical and commercial offers from the technology provider. Technical discussions are currently under way and price discussion will take place next week. We expect to seek board approval for the project in a month or two,” Mr Ranganath said.

Likely loss in Q3

Meanwhile sudden meltdown in the pellet prices (from $225 a tonne to $54 a tonne as in last week) and the resulting trade loss may force the company to incur a loss in the October-December quarter.

“To stop stockpiling of pellets and minimise the trade loss, we have advanced the maintenance shutdown period from December to November. While the plant would resume operations in mid December, we are currently holding on the two lakh tonne stock expecting some upward correction prices,” he said adding that pellet prices had corrected to $70 this week and was expected to go up to $85-90 a tonne – closer to the $100 a tonne break-even level – by end 2008.

“The situation may improve in the fourth quarter when we will be able to process low cost ore. Considering the Rs 85 crore of profits booked in the first half we are confident to close 2008-09 in the profit mode,” Mr Ranganath said.