Uttam Galva-Posco plant might start by Feb-end

Feasibility study of $3-billion integrated steel plant in Maharashtra to be completed; traders say setting up new steel plant in ongoing market conditions not prudent

Shree Uttam Steel and Power of the unlisted arm of Miglani family-run Uttam Galva Group is carrying out a feasibility study for its $3-billion integrated steel plant in Maharashtra, jointly planned with South Korean company Posco, and is expected to be completed by February next year.

"Once the study is complete, the final plant configuration will come before us and since all the other approvals, including the environment clearances, are in place, we'll be in a position to take the project ahead from there," Ankit Miglani, director of Uttam Galva Steels, told Business Standard.

The plant would produce hot-rolled coils, which will cater entirely to the domestic market, he added.

Traders, however, were of the view that additional steel capacity would not be a right decision in the current market conditions.

"Setting up a steel plant in the ongoing market conditions is suicidal," said Ashok Mehta, trader and member of Bombay Iron Merchants Association. "China is selling steel at such low prices that it absolutely makes no sense to put up a plant even if it is going to come up, perhaps in the next two or three years. Not much is going to change in terms of demand for steel for next few years," he added.

Miglani said the steel plant would take four years to come up and by then, there would be demand for steel in the market.

Currently, the company is engaged in getting raw material secured for its three-million-tonne plant to be set up in two phases of 1.5 million tonnes each.

"We've already had informal talks with Goan miners for procurement of their low-grade ore and whatever balance requirement we will have, the company will be buying from the open market via the e-auction route," said Miglani.

For supply of coking coal, another key raw material used in the making of steel, Miglani said the company would import the fuel via the Mormugao port in Goa, which is 80 km away from the plant. The company is also in talks with the railways for rakes.

He, however, did not divulge more details on the number of rakes the company plans to take up. To be located at Satarda in Maharashtra, the plant would be a joint venture, where Posco would have 20 per cent stake and 80 per cent would be with Shree Uttam Steel and Power.

Although the usage of low-grade iron ore for making steel typically takes up the manufacturing cost, the usage of Posco technology at the plant should resolve this issue, say traders.