'Iron ore price hike taking heavy toll on RINL'

Visakhapatnam: The steep increase in iron ore prices by mining major NMDC Limited will cast a huge burden on RashtriyaIspat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant, popularly known as Vizag Steel. "NMDC has increased iron ore prices by 100 per cent i.e. doubled in recent months...this has a huge burden on steel producers like RINL," according to a recent tweet by Katam SS Chandra Rao, joint secretary, Steel Executives' Federation of India (SEFI).

RINL, which has a production capacity of 7.3 million tonne per annum from its shore-based integrated steel plant here, is the only major steel producer without captive mines-a demand which remained unanswered for several decades due to a variety of reasons. RINL has an agreement with NMDC to source lion's share of its iron ore requirement from Bailadila mines in neighbouring Chhattisgarh's Bastar region. Rao told Bizz Buzz that Vizag Steel did not have captive mines for iron ore and coking coal. Both thematerials are not only major raw materials for iron and steelmaking but also have a high impact on cost of production.

RINL/Vizag Steel, one of the best steel plants, has been suffering due to lack of captive iron ore and coal mines. RINL's raw material cost is 63 per cent of total cost whereas that of SAIL's and TATA's is 48 per cent and 35 per cent respectively (both companies have their captive mines), he informed.

He stated that RINL was losing about Rs800 crore to Rs1000 crore per annum exclusively onaccount of lack of iron ore. Though RINL has been performing well, only on account of high input cost on material, it was faced with a liquidity crunch.

"Non-allotment of captive iron ore mines since long time, capital investment of more than Rs 30,000 crore as per the Government of India Steel Policy ( Expansion to 6.3 mt, and 7.3 mt by modernisation), dumping of cheap steel products from China and global crisis, the plant has gone into deep financial crisis since 2016," he stated.

The plant has plans to undergo further expansion. The company invested Rs 12,300 crore for 6.3 mt expansion. As part of modernisation of critical facilities mainly the installation of pulverised coal injection (PCI) on three blast furnaces the company spent about Rs4,000 crore.

Allotment of captive ore mines to RINL/VSP is long pending demand. "Since NMDC is also GoI enterprise, and both are under Steel Ministry, in view of various inherent drawbacks of Vizag Steel, we request a long term MoU between Vizag Steel & NMDC for supply of iron ore at cost plus reasonable margin,"Rao said.

Through RINL acquired controlling stake in Orissa Minerals Development Company Ltd.(iron ore, manganese ore) to have raw material security, all the six mining leases of OMDC had expired by the time of acquisition itself and after clearance from legal hurdles, clearance from State and Central Government had been obtained recently, he pointed out.