Mumbai: The Rio Tinto Group’s HIsmelt technology steel plant in Australia is being dismantled and sent to China and not to Jindal Steel and Power Ltd (JSPL) in Orissa in a deviation from what was announced in 2011 by the two companies, and their original deal is now being revised, executives at the companies said on Tuesday.
“The Chinese company Molong appeared to have a more urgent need for the technology, as it committed to a binding agreement early in the process,” Nik Senapati, managing director of Rio Tinto India, said in reply to an emailed questionnaire. “The HIsmelt equipment in Australia is presently being deconstructed by a demolition company, some of which will be shipped to China later this year.”
On 5 August 2011, Jindal and Rio Tinto had announced that a memorandum of understanding (MoU) had been signed in New Delhi by Naveen Jindal, chairman and managing director of JSPL, and Sam Walsh, director Rio Tinto and chief executive, Iron Ore and Australia, in the presence of Australia’s high commissioner to India, Peter Varghese.
Their announcement also said the agreement would involve the relocation of the existing HIsmelt plant from Kwinana in Australia to India at JSPL’s existing facility at Angul in Orissa.
The relocated plant was to be fully owned by JSPL, and the Indian company and Rio Tinto were to work together to further develop and market the technology, their announcement had said at that time.
JSPL’s deputy managing director and chief executive (steel business) V. R. Sharma said bringing the plant to India involved making “too many changes” and therefore, it had to go to a Chinese company as “a pilot plant”.
“The plant has a small capacity at 0.5 million tonnes (mt). We wanted to upgrade it,” Sharma said.
After the pilot run in China, JSPL will build a plant at its Angul site with the HIsmelt technology with a capacity of 1 mt or 1.2 mt, Sharma said. This is envisaged for construction in 2015, with production starting in the following year.
The plant will be indigenously built with some components imported, he said.
A consortium has been formed by JSPL, the Chinese company and Rio Tinto and stakes in the pilot plant in China are now being worked out, Sharma said.
Senapati said JSPL’s MoU was being revised. As for the plant in China’s Shandong province, it’s being constructed and is scheduled to start in 2014.
Molong’s normal supplies of liquid pig iron have been stopped for environmental reasons and it’s not allowed to build conventional blast furnaces. For environmental reasons, HIsmelt is the only technology capable of producing liquid pig iron at the required capacity and environmental standard, Senapati said.
Both Senapati and Sharma did not give the value of the purchase of the plant.
HIsmelt—short for high intensity smelting—is a technology owned by Rio Tinto and is said to be ideal for India as it can directly use iron ore fines and non-coking coal, abundantly available in India. It is said to be environmentally friendly and more economical than traditional methods.
“China seems to have leapt ahead of Jindal,” said Neil J. Bristow, a mining and metals consultant from H and W Worldwide Consulting Ltd in New South Wales in Australia. He added it was not easy to stabilize a new technology, specially one that was not commercially proven, and one where there was a high cost of dismantling a plant and shipping it elsewhere.
JSPL’s Sharma said almost all of the steel technology currently in use in India—be it blast furnace or Corex—has come from overseas.
Production from JSPL’s plant in Chhattisgarh rose 21% to 2.76 mt of steel in 2011-12 from the previous year.
At Angul in Orissa, JSPL plans to build a 12.5 mt per annum steel plant, where it will use an electric arc furnace, a direct reduced iron facility with HIsmelt being the additional technology for the plant.
The Angul plant has already commenced production, with a 5 metre wide plate mill.
On Tuesday, shares of JSPL fell 0.79% to Rs.376.30 on BSE. The benchmark Sensex gained 0.69% to 19,635.72 points.