Essar Steel in talks to set up plant in Orissa

Essar Steel is in talks with the Orissa government for setting up a steel plant in the state.

Sources close to the development said the plant's capacity could be 4.25 million tonnes. Essar executives were not available for comment.

Essar Steel has a plant at Hazira in Gujarat comprising a 2 million tonne hot briquette iron plant, a 2.4 million tonne hot rolled coil plant and a downstream complex.

Since Essar Steel has a manufacturing base in western India, it makes strategic sense to set up a plant in the east. Moreover, Essar Steel will have access to Orissa's iron ore, for which many companies are queuing up. The group's shipping business can take care of the logistics issues.

The investment in the project could be over Rs 7,000 crore"" the cost of adding 1 tonne of steel capacity is around Rs 16,000.

Industry sources said Essar Steel was exploring several growth opportunities. The company is considering raising the capacity at Hazira to 3 million tonnes. This can be accomplished with little extra investment, lowering the marginal cost and raising profits.

Essar Steel had also struck a long-term agreement with Stemcor for sourcing raw material for its upcoming cold rolling mill. Essar Steel will provide the infrastructure and Stemcor will source hot rolled coils from the company.