Indian mining majors look to diversify into steel making

Tuesday, 19 Jul 2011

BL reported that large miners such as NMDC, MOIL and Sesa Goa are set to transform into metal and alloy producers as part of their forward integration strategy.

Analysts feel there is a rush to set up steel plants as mineral rich States such as Karnataka and Chattisgarh are looking at value addition as a pre condition for grant of new mining leases and renewal of existing ones.

Mr Bhavesh Chauhan analyst at Angel Broking Ltd said that “Mining firms realise that if they have to get additional mining leases, they need to set up steel plants.”

Miners, however, look at diversification as the next logical step for them, while analysts feel that the move would hurt the miners' profitability.

NMDC's plans
NMDC, the country's largest miner, is in the process of setting up a 3 million tonnes per annum unit with an investment of INR 15,000 crore at Nagarnar in Chhattisgarh. NMDC has also formed a joint venture with Russian steel maker OJSA Severstal to set up a 5 million tonnes per annum specialised steel unit in Karnataka.

An analyst said that “Profitability, the world over is much stronger in the mining business as compared to the processing business. In case of these firms, the impact will be felt over the next couple of years, when their proposed steel units will be commissioned.”

Sesa Goa's buy
Sesa Goa, which operates major mines in Karnataka, recently acquired the assets of Bellary Steel and Alloys Ltd in Bellary for INR 220 crore. BSAL was building a 0.5 million tonnes per annum unit and has 700 acres of land in Bellary.

However, the BSAL acquisition has been challenged by JSW Steel in Supreme Court, which has directed the parties concerned to maintain status-quo till the next hearing.

The Vedanta Group company is expanding its pig iron capacity in Goa, besides planning to set up two small steel mills ranging from 1 to 1.5 million tonnes per annum in Orissa and Jharkhand, where it has prospecting licence to carry out mining operations.

MOIL's units
MOIL, the country's largest manganese miner, is in the process setting up two ferroalloy units through joint ventures with SAIL and RINL. It is likely to be operational in June 2012. Ferro alloy is a key raw material for producing steel.

The proposed ferroalloy plant with SAIL in Chhattisgarh will have a capacity of 106,000 tonne, while the one with RINL in Andhra Pradesh will produce 57,500 tonnes.

(sourced from BL)