Raw material linkage crucial for Odisha plant: Oommen

Essar Steel is making huge investments to secure its raw material requirements.

Its 10 million tonne per annum (mtpa) steel facility at Hazira, in Gujarat, is well connected to iron ore sources in Odisha and Andhra Pradesh through sea ports.

The company will use low-grade iron ore dumped as waste in both the States. Cutting production costs has become essential for steel companies to remain competitive in the market. This, particularly, when steel supply is exceeding demand in the short term.

Mr Dilip Oommen , Managing Director and Chief Executive Officer, Essar Steel, is confident that his company “will be the last man standing in the market place” because of its cost advantage.

Excerpts from the interview:

What has the steel demand been, of late?

The demand in India is still growing. The long term demand is robust.

All the sectors of the economy are growing which will be reflected in steel demand as well.

However, in the short term supply may exceed demand as many companies are adding capacity.

How do you see steel demand this fiscal?

The rate of growth may have temporarily dropped in India.

We expect the growth to pick up in the coming quarters with the Government's plan to spend over a trillion dollars on infrastructure in 12th Five year plan.

With slowdown in demand are you confident of passing on incremental costs?

Over a period of time, increases in the input and freight costs will get passed on to the customer.

However, Essar Steel through the addition of its Odisha facilities is well placed to withstand the impact of volatility in input costs.

With our cost reduction measures, we will be among the lowest-cost producers and hence will be cost-competitive in the market place. Our focus is to ramp up and stabilise production at our plants.

Are you pitching for iron ore mines in Odisha?

Yes. We have signed a memorandum of understanding with the Odisha government for building an integrated steel complex.

Need for appropriate raw material linkage has been stated as a prerequisite and we are actively pursuing the matter with the State government.

Is the pipeline to source iron ore from Dabuna complete? What will be the cost savings on this front?

The said pipeline is expected to be completed by first quarter of this financial year.

We will be able to get pellets delivered at $110 a tonne (Rs 5,500 a tonne).

Currently, if we have to buy it from the market it costs anywhere between $160 and $170 a tonne.

A lot of iron ore from India is being exported to China on the pretext that it cannot be used by Indian companies. How do you see this development, considering in particular that the Odisha pellet plant uses lower grade iron ore?

We believe national resources belong to the country and should be utilised for the development of its people.

We have created the facility to utilise low grade ore (which was treated as waste) and convert into value added product or pellets which are used for steel production.

>suresh@thehindu.co.in

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