Leading steel producer Mideast Integrated Steel Ltd (Mesco Steel), the flagship company of the $4-billion Mesco Group, has reaffirmed its commitment to expand steel output at its facility at Kalinganagar (Odisha).
The company said it had placed major orders for expansion and was awaiting environment clearance for the planned ramp-up in production. Mesco Steel is shifting focus from pig iron to value-added steel products as pig iron business had turned unviable.
“As announced earlier, we are on our way to expansion. Major orders have been placed for expansion, and designing of the plant is underway, targeted to full capacity production by the end of 2017. We are also awaiting environmental clearance for the same. Currently, Mesco produces pig iron which is not viable even though we have been running this plant for past 12 years. Therefore there is a need for producing value added products for which expansion is required. It does not make sense to lose earned money in producing a product which incurs losses”, the company stated.
Earlier, Mesco Steel had announced to expand its nameplate capacity in steel making from one million tonne per annum (mtpa) to 3.5 mtpa. The expansion is estimated to cost around Rs 12,000 crore. The expansion plan includes revamp of Maithan Ispat, an ailing steel company which it acquired in March 2015.
Mesco said it has successfully scripted the turnaround of Maithan Ispat in the past 15 months by paying principal and interest regularly. Mesco Steel, on the contrary, enjoys debt free status.
However, being a standalone producer of pig iron was hurting Mesco Steel’s viability. Pig iron no longer featured in the Government of India’s pruned list of 66 products enjoying protection by way of Minimum Import Price (MIP). In the changed scenario, importing pig iron from China was a cheaper option than producing it domestically. This has prompted Mesco Steel to turn to value added products for long-term sustainability.
The company intends to transfer one hot metal blast furnace to Maithan Ispat as soon as the electric arc furnace is commissioned which is expected by the end of next year. The second blast furnace would produce ductile iron pipes catering to the market demand for bars, rods and billets.
More From This Section
On iron ore mine, the company said it was not assigned the captive mine yet. “We wish to clarify that mines bought for Mesco are not captive. “The present mine is standalone mine and is allowed to trade. Besides, it is also supplying raw materials to the Maithan plant. The captive mine is not yet assigned and as and when we get it we shall utilise it for the present plant.”
Mesco Steel said unlike other steel producers, it had no intention to run the plants by bleeding losses. Hence, it had gone for temporary shutdown of its plants since November 2015 as it was not feasible to run the facilities on high production costs and tepid sales realisations. Even during this period of shutdown, Mesco claimed it has paid full wages to the employees.
But as circumstances deteriorated, Mesco Steel has been compelled to go for lay-off of 324 employees. The company has applied to Odisha’s labour department, to allow the lay-off for 45 days according to the Industrial Disputes Act.
“Before proceeding for lay-off, we had few rounds of discussions with the (workers) Union explaining the position. During the discussion, the Union members indicated that the employees will not able to be manage their livelihood with 50 per cent of basic plus DA payable during lay off, as per the Act. The management then offered reasonably more amount over and above as payable under the Act for maintaining their livelihood”, the company statement said.