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Salem, April 26

IF sourcing stainless steel slab, the prime raw material for the Salem Steel Plant (SSP), at competitive rates is the basis for long-term profitability of the company, any decision to invest on the proposed steel melting shop for the plant to support itself in raw material sourcing should merit long-term viability of such an investment.

This is the economic logic that SAIL is likely to pursue in evaluating the feasibility study on the steel melting shop project, according to SSP officials.

"Dastur and Company, the engineering consultant, has already done a feasibility study for the project which we have forwarded to SAIL," said Mr M. Roy, Executive Director, SSP.

"The study has covered the entire gamut of the proposed investment. It does not limit itself with the project but explores other possible investment avenues too, taking into account the long-term viability of such a course," he added.

"Issues like whether the investment should happen at the steel melting shop stage or at the cold-rolling stage as well would also be evaluated by the SAIL board. No final decision has been taken in this matter yet," said Mr Roy, adding that in any eventuality, the investment proposal would be through this year.

According to SSP officials, the plant's profitability hinges heavily on how best the plant is able to cut the cost of sourcing slab, which by its very nature is not a tradable commodity.

Factors such as paucity of slab suppliers and the unavoidable longer lead time in sourcing further compound the difficulties for plants like SSP.

The current international slab prices are high and SSP, besides importing slabs, occasionally gets a limited quantity from the Alloy Steel Plant, Durgapur.

It also gets supplies from Indian slab producers such as Jindal and Shah Alloys, which are its competitors. These competing companies would not offer slabs any cheaper to SSP, officials said.

If SSP produces slabs at its own melting shop, it may be able to save Rs 8,000-10,000 per tonne.

This makes the entire difference in pricing its final saleable stainless steel products.

If the SAIL board is convinced of the viability of the melting shop, it would have to invest Rs 500-600 crore.

SSP mulls non-stainless steel coin production

EXCESS supply of coins in circulation may have brought cheer to coin-users. But the same may not be the case with the Salem Steel Plant, makers of stainless steel coins in one rupee and 50 paise in blank; this is because of the abundant supply of coins in circulation already, SSP's 6,000-tonne per annum coin blanking unit has not received any order from India mint during 2004-05. Attempts made to tap business from neighbouring/SAARC have also not paid any dividends in terms of orders.

(This article was published in the Business Line print edition dated April 27, 2005)
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