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India’s mining and infrastructure companies are going through a roller coaster ride. While on the one hand steel demand is not in line with forecasts being made, on the other, regulatory hiccups are forcing several projects to get delayed. In an interview with Business Line, Sandeep Jajodia, Chairman and Managing Director of Monnet Group, talks about steel demand scenario in India and expansion strategies of his Group.
Excerpts:
When is your new steel plant going to get commissioned? Will you focus more on steel as power sector is in turmoil?
The plant will be commissioned by June 2013. Both (steel and power sectors) have their merits and demerits. Steel manufacturers have the problem of demand. All funds that were allocated to infrastructure development have not been put to work. There is fear that for some periods in 2013 there could be pressure like a steel glut in the country.
Will that lead to a further fall in steel prices?
That will be very sad because we have bottomed out. There are hardly any margins for any steel maker. Last week, the international market has reported an increase in prices by $40-50. We hope such price rise reflects in the Indian market, too.
Why is steel demand not taking off when India is pushing for infrastructure development?
The biggest spender is the Government. If the Government is chaotic, then there is not enough will to create infrastructure. All steel capacities have been planned based on GDP forecast by the Planning Commission. Now, if GDP growth is just 60 per cent of its target, there will be a problem.
When are you going to commercially mine coal from Sumatra in Indonesia?
Production will start next year. At present, we are exploring the block completely. We will take 3-5 months to finish. Soon thereafter, we will start a pit. In the next 6-9 months, we will start mining.
There are some logistics bottlenecks. Keeping that in mind, we would start with a million tonne and gradually ramp up to 5 million tonnes over five years.
Will you bring that coal here?
It’s going for merchant sale. At that point of time, whoever is offering us the price — India, Vietnam or South China — we will sell it to them. The rupee has depreciated so much. Now, it’s not economically viable to run power plants on imported coal. Therefore, it is better to sell it there.
When are you going to seal Columbian mine acquisition? Are you looking for more assets?
Hopefully tomorrow, if not, within a month. We are negotiating the price. We are looking out for manganese, coking coal, iron ore and chromate. For instance, Turkey has manganese and chromate. There are lot of assets under consideration but we have not started advanced talks. We are looking in West Africa such as Gabon, Tanzania, and Kenya.
Are you interested in Mozambique — many Indian companies are focussing there?
Mozambique story is over. There are evacuation problems. Railway tracks need to set up. Opportunities are no more easily available.
Has mineral asset prices come down overseas?
Yes, as the commodity prices are coming down, the mineral assets value has also come down.
Is Monnet going to announce new expansion plans?
We will establish the current projects. Then our attention will be to start working on Orissa Sponge. It makes no sense to announce big projects. We would go step-by-step.
Are you looking to buy equity in on-going hydel projects of JSPL or NHPC?
It could be a possibility, as starting a hydel project is not very easy. The gestation period is very long. But that needs deliberations. We have not yet started advanced talks with any company.
We have some obligations under renewable mechanism to generate power from sources other than fossil fuels. If we do not set up renewable resources, we will have to buy RECs, which is not sensible. We are seriously looking at alternative power generation routes from renewable.
How much renewable capacity are you targeting?
It can’t be a large capacity except if it is hydel. To start with may be around 50 MW. We will take an in-principle investment decision in a month or two.
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