 "Pig iron makers shift focus amid bear market")
Pig iron makers in India, who have been shackled by poor demand for the intermediate steel good amid tight iron ore supply, have been changing strategies to make money, something which was almost a metaphor a few quarters ago.
Sesa Goa, which produces pig iron under Sesa Industries, the biggest foundry grade pig iron manufacturer, is now focusing on cutting cost and producing as per need only.
"It is true that demand for pig iron is down. We hope to cut costs by using more iron ore fines than lumps," said a company source. Iron ore fines or powdery ore, are priced much lower than lumpy ores. Currently, fines with 62 per cent iron content are traded at Rs 2,000 a tonne at mines, while lumps with similar iron content are quoted at around Rs 6,500 a tonne.
"Earlier we used to market pig iron in Gujarat only. But now, we are focusing on the North Indian market as well. We have plans to increase our sales depot in major markets too," the source added.
The company used to import iron ore for pig iron production, but now, it has decided to run the business based on the availability of iron ore from Karnataka as well as the leftover quantities of ore remaining in its pig iron plant. The company, which is producing 1,400 tonnes of pig iron a day, does not have any plans to cut output because of export commitments, even if it means losses for the company.
The biggest pig iron producer, Nilachal Ispat Nigam Ltd (NINL), with an annual capacity of 1.1 million tonnes, has switched to steel making and will gradually curb pig iron making in the current fiscal. It commissioned the steel melting shop in March and is expected to start billet production from May onwards. It hopes to make profits this financial year on billet sales.
"Steel Authority of India Ltd is in talks with us to buy out the entire billet produced by us. Visa Steel has also approached us. We see a great scope for billet," said S P Patnaik, managing director of NINL.
Odisha-based producer Mideast Integrated Steel Ltd, a Mesco group company, having a one million tonne pig iron plant at Kalinganagar in Odisha, also said it had plans to cut costs by minimising the use of high grade lump ore.
"Though we have made profits in 2012-13 over the previous fiscal, profitability from pig iron sales was not that impressive. We have plans to cut costs by setting up one more sinter plant and by less use of CLO (sized iron ore)," said Rita Singh, managing director.
Pig iron is the solid form of hot iron metal, obtained by smelting iron ore with coke. Though most integrated steel plants use this intermediate for steel making, they also set aside some quantity to sell in the domestic as well as international markets, to be used in electric arc furnaces and in foundries.
Demand for pig iron is directly linked to buying interest for long steel products, used in construction, as it is the raw material for producing billets and ingots, the semi-finished steel long products. Foundry grade pig iron finds usage in the production of automobile parts.
Pig iron prices have slipped heavily since October on poor demand in both, domestic and international markets. It is currently trading at around Rs 22,000 a tonne, lower than the October price of Rs 26,000. In the export market, the rates have shed more than $60 to quote at $400 a tonne.
"Today, the pig iron business is facing a huge headwind in the form of subdued pricing. Second, it is further complimented by the high price of iron ore because of non-availability from Goa and very scanty quantity available from Karnataka," said a spokesperson of Sesa Goa.
In the last fiscal, NINL incurred an almost Rs 100 crore loss, against a Rs 20 crore profit in the previous year. Similarly Sesa Goa, also posted an operational loss in its pig iron business for the first time in the March quarter.
India produces around 5.5 million tonnes of pig iron every year.
HARD TIMES
* Low demand for pig iron and rising prices of iron ore have eaten into profits of pig iron makers.
* Pig iron is currently trading around Rs 22,000 a tonne against Rs 26,000 in October
* In the export market, pig iron has shed $60 to quote at $400 a tonne
* Nilachal Ispat Nigam Ltd, the biggest producer, has switched to steel making and will gradually curb pig iron making in the current financial year
* Sesa Industries (part of Sesa Goa) and Mideast Integrated Steel Ltd are trying to cut cost by replacing lumpy ores with cheaper iron ore fines
Sesa Goa, which produces pig iron under Sesa Industries, the biggest foundry grade pig iron manufacturer, is now focusing on cutting cost and producing as per need only.
"It is true that demand for pig iron is down. We hope to cut costs by using more iron ore fines than lumps," said a company source. Iron ore fines or powdery ore, are priced much lower than lumpy ores. Currently, fines with 62 per cent iron content are traded at Rs 2,000 a tonne at mines, while lumps with similar iron content are quoted at around Rs 6,500 a tonne.
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Apart from cost cutting, the company has plans to boost sales by exploring new markets.
"Earlier we used to market pig iron in Gujarat only. But now, we are focusing on the North Indian market as well. We have plans to increase our sales depot in major markets too," the source added.
The company used to import iron ore for pig iron production, but now, it has decided to run the business based on the availability of iron ore from Karnataka as well as the leftover quantities of ore remaining in its pig iron plant. The company, which is producing 1,400 tonnes of pig iron a day, does not have any plans to cut output because of export commitments, even if it means losses for the company.
The biggest pig iron producer, Nilachal Ispat Nigam Ltd (NINL), with an annual capacity of 1.1 million tonnes, has switched to steel making and will gradually curb pig iron making in the current fiscal. It commissioned the steel melting shop in March and is expected to start billet production from May onwards. It hopes to make profits this financial year on billet sales.
"Steel Authority of India Ltd is in talks with us to buy out the entire billet produced by us. Visa Steel has also approached us. We see a great scope for billet," said S P Patnaik, managing director of NINL.
Odisha-based producer Mideast Integrated Steel Ltd, a Mesco group company, having a one million tonne pig iron plant at Kalinganagar in Odisha, also said it had plans to cut costs by minimising the use of high grade lump ore.
"Though we have made profits in 2012-13 over the previous fiscal, profitability from pig iron sales was not that impressive. We have plans to cut costs by setting up one more sinter plant and by less use of CLO (sized iron ore)," said Rita Singh, managing director.
Pig iron is the solid form of hot iron metal, obtained by smelting iron ore with coke. Though most integrated steel plants use this intermediate for steel making, they also set aside some quantity to sell in the domestic as well as international markets, to be used in electric arc furnaces and in foundries.
Demand for pig iron is directly linked to buying interest for long steel products, used in construction, as it is the raw material for producing billets and ingots, the semi-finished steel long products. Foundry grade pig iron finds usage in the production of automobile parts.
Pig iron prices have slipped heavily since October on poor demand in both, domestic and international markets. It is currently trading at around Rs 22,000 a tonne, lower than the October price of Rs 26,000. In the export market, the rates have shed more than $60 to quote at $400 a tonne.
"Today, the pig iron business is facing a huge headwind in the form of subdued pricing. Second, it is further complimented by the high price of iron ore because of non-availability from Goa and very scanty quantity available from Karnataka," said a spokesperson of Sesa Goa.
In the last fiscal, NINL incurred an almost Rs 100 crore loss, against a Rs 20 crore profit in the previous year. Similarly Sesa Goa, also posted an operational loss in its pig iron business for the first time in the March quarter.
India produces around 5.5 million tonnes of pig iron every year.
HARD TIMES
* Low demand for pig iron and rising prices of iron ore have eaten into profits of pig iron makers.
* Pig iron is currently trading around Rs 22,000 a tonne against Rs 26,000 in October
* In the export market, pig iron has shed $60 to quote at $400 a tonne
* Nilachal Ispat Nigam Ltd, the biggest producer, has switched to steel making and will gradually curb pig iron making in the current financial year
* Sesa Industries (part of Sesa Goa) and Mideast Integrated Steel Ltd are trying to cut cost by replacing lumpy ores with cheaper iron ore fines