Securing the raw materials needed to make steel is becoming a major issue for producers. Steel companies want direct control over iron-ore mines; mining firms want the freedom to export.
The government-run Steel Authority of India Ltd (SAIL), India’s largest steel manufacturer, produced 14.4 million tonnes (mt) of hot metal and 12.6mt of crude steel last year. It has a production target of 25mt of hot metal by 2010 and will require 40mt of iron ore by the same year.
Sushil Kumar Roongta, the 57–year-old chairman of the company, remains bullish on the sector. But in an interview with Mint, he says access to iron ore is the key to continued growth. Excerpts:
What are the main challenges for achieving the production target in three years?
Modernization and expansion. Second, to exploit the potential of existing resources. We are also planning to get more productivity from existing plants before building new capacity.
Has the company chalked out any global expansion plans?
Our priority is to invest and increase capacity at home. But raw material is going to be a major concern. We need large-scale mechanized mining to meet our long-term needs.
SAIL owns Chiria, the country’s largest mine located in Jharkhand. Has it begun mechanized mining there?
Since the mine was under IISCO (the loss-making subsidiary of SAIL was amalgamated into the parent company last year) and was referred to the Board of Industrial Financial Reconstruction, investments were put on hold.
Has it mechanized any of its other mines, in Chhattisgarh or Orissa, for instance?
Not all of them. In Jharkhand, Kiriburu, Meghatuburu and Gua, mines are mechanized while others are not. In Orissa, we are also in the process of developing a new mine at Rowghat which has a reserve of 500mt as the existing reserve (in Rajhara) will deplete in five years.
Do you have any data to back the fact that iron-ore reserve is actually depleting in the country?
India has a total reserve of 23 billion tonnes, of which proven amount of heamatite, the ore that is used in blast furnace, is only 13 billion tonnes. At this rate of consumption, we should not look to past when consumption was very low.
Why does a steel plant need a captive iron-ore reserve?
Putting a steel plant is a huge investment. You need to be sure you are getting your raw materials and other linkages before setting up a plant.
Only three companies—SAIL, Tata Steel and Jindal Steel and Power Ltd— have captive mines, because of which they enjoy price advantages. Why can’t steel companies buy iron ore at a market rate?
Prices are a separate issue.
So, a captive mine is essential for steel manufacturing?
I feel no company will plan a steel plant without security of iron-ore capacity.