Bhushan Steel sees a revival in demand in the near term, according to Managing Director Neeraj Singal. Battling to acquire Orissa Sponge Iron and Steel, Singal tells Ishita Ayan Dutt that he is keen on setting up a 1.2 mt steel plant if he gets a controlling stake in the company. Excerpts:
Is the steel sector recovering?
It is bound to. If India has to grow at 6-7 per cent a year, it’s a basic requirement. Look at the white goods and automobile sectors, they are doing very well. White goods registered highest sales in the March quarter. And cold-rolled (steel) is directly linked to these sectors. In the construction sector, there is activity in low-cost housing. I would say the recovery has already started.
How is Bhushan’s fourth quarter likely to pan out, compared with the third quarter? And what kind of performance is expected in the first quarter?
The fourth quarter performance will be good compared with the third quarter. Our sales were up 25-30 per cent. The first quarter (of 2009-10) will be even better.
When do you see the revival of demand translating into a price increase?
Hot-rolled coil is now at $450 and coking coal has come down to $100. Iron ore also has come down. Prices went up last year because coking coal and ore prices had increased. However, $450 is not the right level. Prices will increase to $550-$600.
If prices increase to $550-600 a tonne, can cold-rolled and galvanised prices remain at the current level?
Cold-rolled and galvanised steel prices are directly linked to hot-rolled prices, which is the key raw material. If hot-rolled prices increase, cold-rolled will definitely go up. Hot-rolled coils could touch $550-600 a tonne by the third or fourth quarter. It should happen from November-December.
Has the credit market improved and are your expansion plans on track?
Credit is available but interest rates need to come down. Our expansion plans are on track. The 2.5 mt hot-rolled coil project in Orissa will go onstream by December, according to schedule. The 1.2 mt ramp-up of cold-rolled capacity at our facilities at Sahibabad and Khopoli is already in place. The second phase of expansion at Orissa to 5 mt will be in 2011.
What about West Bengal?
In Bengal, we are in the land acquisition phase. We are working out how to acquire the land. No one can give a timeline for land acquisition. Once that is completed, we will go ahead.
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You are involved in the battle for Orissa Sponge Iron & Steel. What prompted you to acquire a significant stake in Orissa Sponge?
Orissa Sponge has mines and we already have a plant in Orissa. We would like to put up a one million tonne facility if we can acquire the company. We can even augment capacity at our existing plant. We have plans to take the capacity of our Orissa plant to 5 mt. Instead, we can do 6 mt.
But it seems it might be difficult to acquire a controlling stake in Orissa Sponge. In that case, what would happen to your plan to have an exposure in mines?
The Orissa Sponge acquisition is not linked to our existing plant. Whoever has control of Orissa Sponge has to put up a 1.2 mt plant. This was the condition under which the Orissa government allocated mines to Orissa Sponge. That would require an investment of Rs 3,000-4,000 crore. You can figure, among the three companies eyeing Orissa Sponge, who would be able to set up a Rs 4,000 crore project.
In case the plan to acquire Orissa Sponge falls through, would you be applying for mines in Orissa?
We already have been allocated a mine in Orissa. Once the formalities are through, we will start prospecting. We would be applying for mines in Orissa, Jharkhand as well as overseas.