Chhattisgarh Sponge Iron Production Hit

Iron Ore Supplies Disrupted To Almost Half Of Plants

Production at around 50 sponge iron manufacturing plants in the Chhattisgarh region on India has been hit after miners in Orissa stopped supplying iron ore.

"Chhattisgarh has 105 sponge iron units having an annual output of 8 million tonnes, but production has been stopped completely at nearly 50 percent of the units because Orissa-based private contractors have stopped supply since March 4," Anil Nachrani, president of the Chhattisgarh Sponge Iron Manufacturers Association, told reporters. Chhattisgarh accounts for about 30-35 percent of India's annual sponge iron production.

Mr Nachrani said the plants used about 12 million tonnes of iron ore each year, of which 9 million tonnes were supplied by private miners from Orissa's Keonjhar district with the National Mineral Development Corporation provided the remaining 3 million tonnes from its Bailadila mines in Chhattisgarh.

Iron ore supply was disrupted last month after the Orissa government began a crackdown on the alleged illegal mining of iron ore in the state. Supplies to a number of larger companies such as Monnet, Ispat and Sharda Energy have also been hit.

Manufacturers say more units will either suspend or cut production if supply was not restored.

Blackstone Group Takes Stake In Indian Power Project

US investment company, Blackstone Group, is to acquire a 12% stake in Monnet Ispat & Energy’s Greenfield power plant to be set up in Orissa, India.

The 1050 megawatt plant is expected to cost in excess of Rs50 billion and will be funded through a mix of equity capital and debt.

Monnet Ispat is principally engaged in the manufacture of sponge, steel and ferro alloys. The Company has a combined capacity of 0.86 million tons per annum of sponge iron, 0.3 million tons per annum of steel, 0.06 million tons per annum of ferro alloys and power generation facility of 150 megawatts besides running an underground coal mine in India.

Indian Sponge Iron Prices Up 5 Per Cent In Two Days

Sponge iron producers in India have raised basic selling prices of their products by 5.25 per cent in the last two days on apprehensions that the ongoing raids to stop illegal iron ore mining across the country may create scarcity of the raw material in the short term.


With the current upward revision, high quality of sponge iron was quoted at Rs 14,200 a tonne while the mid and low grade steel-making raw material was sold at Rs 13,700-14,000 a tonne.

Producers, however, consider the current trend a “blessing in disguise” as after several months of poor demand there is a revival in steel and thereby, sponge iron industry is in sight. Sponge iron producers are looking for an opportunity to raise their products’ selling prices further to cash in on the anticipated rise in demand.

“The industry was operating with virtually ‘zero’ margin and working just to honour the commitments. Profit margins had bottomed out due to high iron ore prices and low demand from steel industry,” said Amitabh Mudgal, vice president (Marketing and Corporate Affairs) of Monnet Ispat, one of the largest players in the industry.

With revival in the construction sector, it is likely to see a huge investment in the coming months. Pending projects are likely to get second round of funding by December-end.

Also steel scrap, another raw material for steelmaking, was selling at $340 a tonne as against $290-315 a tonne a month ago. As a result, billet and re-bar producers raised prices in tandem to sell their produce at Rs 23,000 a tonne and Rs 26,700 a tonne, respectively.

Meanwhile, R K Sharma, Secretary General of the Federation of Indian Minerals Industries (FIMI), the apex mining trade body, said the closure of 56 mines (50 in Orissa and 6 in Andhra Pradesh) is unlikely to result in scarcity of iron ore in the country. Rival iron ore producers always take advantage of closures of mines and they raise production. Hence, there would no shortage of iron ore in the country, Sharma said.

According to sources, the government suspended mining activity in 128 mines and cancelled 482 trading licences in Orissa for acts of irregularities following vigilance raids.

The government is also cracking down companies and traders, engaged in illegal mining in Goa. Goa, Andhra Pradesh and Orissa, the major ore producing states in the country, together contribute 50 per cent of exports.

Source: Business Standard

NMDC Defers Sponge Iron Investment Plans

India’s largest iron ore producer NMDC Ltd is deferring a Rs1,200 crore investment in the struggling Sponge Iron India Ltd because of a steep drop in global sponge iron prices.

NMDC, which will merge Sponge Iron India into itself by the year-end, had planned to expand the company’s production capacity fourfold and diversify its operations to include manufacturing of steel products for the construction sector.

“We are a little careful about the whole thing” because the prices of sponge iron are quite low now, said Rana Som, chairman and managing director of both NMDC and Sponge Iron India.

“Things are a little difficult and we have to redo our financial calculations,” Som added.

The Union government in May 2008 cleared the merger of NMDC with Sponge Iron India to turn around the sponge iron firm with financial support and an assured supply of iron ore.

Sponge Iron India has been facing an acute shortage of iron ore in the past few years as Indian producers shipped more overseas to take advantage of rising prices. As a result, it has not been able to use at least 75% of its production capacity of 60,000 tonnes a year at its plant in Andhra Pradesh’s Khammam district.

NMDC had firmed plans to enhance its capacity to 260,000 tonnes a year but has deferred the plan as the price of sponge iron in global markets has declined by about half to Rs13,500 per tonne, said Som. “If we invest Rs1,200 crore... we have to have an attractive (selling) price which can bear the interest and depreciation cost. Otherwise, the whole venture will be unproductive,” Som said.

Source: Livemint