Stemcor may cut iron pellet output at Odisha plant

Says weak local demand, export tax affecting ops

British steel trader and iron ore producer Stemcor may cut iron ore pellet output at its plant in Odisha due to weak local demand and a recently introduced tax on exports of iron from India, an executive said.

Govt imposed a 5% duty on exports of iron ore pellets late last month, taking another step in conserving the raw material for domestic steelmakers that has slashed its shipments to top market China.

Pellet producers are trying to pressure the government to roll back the decision that they say is damaging for the industry since local demand is also weak.

Stemcor majority-owned Brahmani River Pellets Ltd, which operates a four-million-tonne-per-year pelletising plant, is considering cutting its production, N D Rao, managing director, told Reuters.

The plant, which was commissioned last year and has been slowly ramping up since, is currently producing at 50% of its capacity.

"If the government does not remove the export duty and there is no domestic demand, not only our pellet plant but all merchant plants will be forced to stop production," said Rao, who is also a member of Pellet Manufacturers' Association of India.

"There is much less pellet uptake in the domestic demand so people were exporting it to recover the costs. Gradually we have to reduce production if this continues."

The export tax is also weighing on the sale of Stemcor's Indian assets, necessary for the indebted company to repay some of its creditors.

Privately owned Stemcor, controlled by members of the Oppenheimer family, is raising money after failing to repay an $850 million debt in May last year.

Under a deal with lenders, it has extended a standstill agreement until the end of February to allow it to restructure a $1.25 billion debt.