The falling commodity price in the global market has badly hit the operation of two manufacturing units of the state owned Industrial Development Corporation of Orissa Limited (IDCOL).
The current market situation has also pushed the expansion plans of these two units into uncertainty. While one out of the 3 pig iron furnaces of Kalinga Iron Works Limited at Barabil has been closed down, one more furnace is likely to be shut down soon.
Similarly, IDCOL Ferro Chrome Alloys (IFCAL) plant at Jajpur Road, is closely observing the movement of ferro chrome price in the international market and in case the prices fall below the variable cost, the company may cut its ferrochrome production to minimize loss.
Meanwhile, IDCOL has taken up drastic cost cutting measures and stopped raw material purchases. It has also effected cost cutting in the electricity consumption and will resort to maintenance shutdown of furnaces if the market does not improve, sources said.
"The situation is very bad and we have taken a series of cost cutting measures including cut in production and stoppage of raw material purchase", Ashok Meena, managing director, IDCOL told Business Standard.
He said, the company will resort to maintenance shutdown of the furnaces so that they are ready for production when the market improves.
For the moment, only one furnace will be kept operational at KIWL for ensuring supply of spun pipes to the public health department of the state government.
Sources said, the price of pig iron manufactured by KIWL has come down by about Rs 10,000 per tonne.
The present price ranges between Rs 20,000 to Rs 22,000 per tonne, where as the cost of production is about Rs 30,000 per tonne. So the corporation is incurring a loss of about Rs 10,000 per tonne of pig iron produced.
KIWL plant has an installed capacity of 2 lakh tonne per annum.
Though two furnaces are in operation in IFCAL at present, the management may take a decision to shut down both the furnaces if the prices of ferrochrome falls further.
The price of ferrochrome has come down from about Rs 65,000 per tonne to about Rs 44,000 per tonne in the last couple of months while the cost of production is Rs 40,000 per tonne.
The global melt down may seriously affect the proposed expansion plan of both these units. Project consulting firm Mecon was asked to draft an expansion plan for these manufacturing units, sources added.
