Bhushan Steel, the country’s third-largest producer of secondary steel (existing yearly capacity, two million tonnes; 2010 gross turnover, Rs 6,000 crore), has various expansion plans. Neeraj Singhal, managing director, charts the company’s and the industry’s course in the near term, in a conversation with Ishita Ayan Dutt. Edited excerpts:
Steel companies have had to bring down prices early this month. When do you see prices picking up? Logically, demand has to pick up. The current raw material prices, of coking coal and iron ore, make a strong case for price increase, but demand is not picking up. More, there are imports from Russia and China. If that happens, it may be difficult to increase prices now.
But, hopefully, demand in flat products will pick up from May, though it may not be possible in long products. In May, there may be a small increase of Rs 500-1,000 a tonne, led by cost push. From May-June, automobile sales will start picking up. April is sluggish for auto.
Have raw material price increases kicked in, with NMDC announcing provisional increase and coking coal prices also being raised? We don’t take much from NMDC. We buy iron ore locally in Orissa. Fortunately, we had some stocks of coking coal. So, for the April-June quarter, we will just be picking up 20 per cent of our requirements because we already had stocks. By July, prices of coking coal will definitely come down. One reason behind this huge increase was floods in Australia. Prices will normalise by June; it cannot sustain at this level.
It has to come down to $250-260 a tonne.
Will Bhushan Steel margins be affected, since you can’t raise prices immediately? Not really.
What is the status of your expansion projects? In Orissa last year, we did 1.2 million tonnes and this year, we should be doing around two million tonnes. By September 2012, we are hoping to commission 5.5 mt, but our internal target for blast furnace commissioning is May-June.
What is the total investment in capacity expansion to 5.5 mt? The investment will be Rs 12,000-14,000 crore, and it has been tied up.
What is the progress in your new projects? We are in an advanced stage of acquiring land in Karnataka. The government has been very pro-active and we are hoping it will allot some iron ore mines. Only after that would the pace of the project pick up.
What about West Bengal? We are at the land acquisition stage. But for the past one year nothing moved, because the government was not so enthusiastic about industrialisation. Let the new government come; I think, things will start picking up.
What is holding up your proposed joint venture with Sumitomo Metal Industries? We are just awaiting developments in West Bengal. As far as the Japanese are concerned, they are committed to the project. We are sluggish because we don’t know what is in hand. Till the time we have land, one really can’t proceed.
Is the valuation done? We have discussed but can’t finalise till the time we have the land in possession. Once that is done, we will pick up from there.
What is the total investment planned over the next five years? In Thursday’s environment, one can’t plan unless we have the land in hand, whether it is Karnataka or West Bengal. In Orissa, we are sure because we have everything in place. A lot depends on how and when it happens.
Do you have mines in Orissa? We have got a small mine, but are looking for more. The Orissa government has promised us a bigger mine. We are in the process of opening up the coal mine that we have bagged. In Bengal, we have been promised a coal mine. That also needs to be done once the new government is in place.