With economy becoming highly sophisticated, use to increase in making railway wagons, automobiles.
Because of fund constraints, SSP was conceived on reverse integration basis that is the finishing cold rolling mill to come first to be followed by backward joining of a hot rolling mill and finally of a steel melting shop. It has now built capacity to make 180,000 tonnes of stainless steel slabs by installing an electric arc furnace, 364,000 tonnes of HR coils and 146,000 tonnes of CR stainless steel. The last phase of SSP expansion has cost SAIL close to Rs 2,000 crore, the payback period of which will be eight years. The rapidity with which the market for stainless steel is growing here will, however, leave much scope for further expanding the Salem plant. Incidentally, even when the new EAF achieves full capacity use, SSP will continue to depend on Durgapur Alloys Plant for 190,000 tonnes of slab and thereby incur transportation cost of Rs 2,500 a tonne.
Even after providing for further expansion, SSP will be left with much surplus land and Verma wants that to be put to productive use. At one stage, a move was made to create a SEZ with units making stainless steel products. But the project was abandoned as the two prospective developers had doubts about its viability. In the post Verma visit, brainstorming about the surplus Salem land use has begun. The exercise could lead to the setting up of a special steel plant or a power complex or a direct reduced iron (DRI) unit. But the exercise of the last option is linked to the Kochi-Bangalore gas pipeline materialising and securing gas allotment. In the EAF for making stainless steel slabs, up to 30 per cent DRI can be fed, the principal feedstock being scrap. Salem gets its scrap mainly from SAIL plants on inter-unit transfer price basis. It generates revert scrap. Plus some imports are there.
Here it will be in order to go back in history. Was it not that Salem was chosen as the site for making steel for its proximity to Kanjamalai hills where an estimated 75-million-tonne iron ore deposit is found? The ore is of magnetite variety with iron content of 35 per cent. No great ore is this. But as China has shown any ore can be made worthy of iron making. In fact, as early as 1830s, Kanjamalai ore was used as feedstock for making pig iron. It is not SAIL alone eyeing the Kanjamalai deposit. The Jindal hat is also there in the ring. But mining there has invited protests from locals and the subject is now tied up in legal knots.
As the six year harried experience of Posco in securing clearances for diversion of forest land to make room for a 12 million tonne steel mill will bear out, it is always time consuming to overcome legal hurdles on land matters and buy peace with the locals. The surplus land with SSP is so much more precious because of the developed infrastructure in the area. A DRI unit may stay in the imagination of SSP managers, but a question mark remains as to when mining will be allowed at Kanjamalai hills and which parties will win mining rights. So, will Verma be heralding investment in further capacity expansion of SSP and also any other projects before the Kanjamali issue gets sorted out? Like say, the HR capacity can be stepped up by installing another reheating furnace.
It is in the last five years that SSP has started emerging from a chequered past. Hopefully, the last hump has been crossed with the commissioning of EAF reducing SSP’s future dependence on outside sources for slabs by nearly half. What, however, should not be lost sight of is that some relatively new entrants, particularly JSL have raced past SSP by many miles. JSL has a 700,000 tonne unit in Hissar being expanded to 900,000 tonnes and at the same time it is building a 1.6 million tonne mill in Orissa. If groups like JSL and some others are building large greenfield capacity, it is on assumption that stainless steel demand in the country will continue to grow at a double digit rate.
According to SSP Executive Director Pankaj Goutam, the Indian economy becoming increasingly sophisticated will lead to more and more use of stainless steel in the making of railway wagons and coaches, in building and construction, automobiles and engineering and process industries. At this point, however, close to 75 per cent of our stainless steel goes into the making of kitchenware. As the use pattern will inevitably change, the Indian per capita consumption now at 1.5 kg can only move closer to the world average of 4 kg.