Visa Steel joins race to buy Stemcor assets

Unlike other players, company needs a pellet plant for its blast furnace

Visa Steel has evinced interest to acquire assets of steel trading major Stemcor in Odisha that includes an iron ore pellet plant and stakes in an iron ore and manganese mine.

The race for the Stemcor asset is already crowded with Tata Steel, Jindal Steel and Power Ltd (JSPL), Essar Steel and Mesco Steel announcing their intention to acquire the asset earlier.

“We are very much interested to acquire Stemcor property. We have sent proposals in this regard,” said Vishal Agarwal, managing director of the company.

He declined to comment about the asset valuations of Stemcor, estimated at $700-$800 million. However, Goldman Sachs has projected that it could go as high as $1.3 billion with more companies joining the race.  

Stemcor property in Odisha includes Brahmani River Pellet Ltd (BRPL), a wholly-owned subsidiary and a majority stake in Aryan Mining & Trading Corporation (AMTC), which has operating iron ore and manganese mine. It also has 10 per cent stake in Mideast Integrated Steel Ltd (MISL) and trading rights of MISL, though the latter has questioned legal validity of the arrangements with Stemcor, which has backed out from financing its projects.

The UK-based trading company has not commented about asset sales so far, but trade sources confirmed that the company is in talks to sell its iron ore pellet plant at Kalinganagar. AMTC has denied reports about sale of mining assets saying that ‘Stemcor is a shareholder of Aryan Mining and being a shareholder does not confer any right to sell or auction the assets of company’.

Most of the companies including Tata Steel are interested to buy the asset primarily because it involves the 100 million tonne iron ore deposit of AMTC. Both JSPL and Essar Steel have iron ore pellet plants at different places in Odisha and Tata Steel is building its own sinter unit for its Kalinganagar plant. Pellets and sinters are formed out of powdery iron ore and can be used in blast furnaces in place of sized ore to produce crude steel.

However, for Visa Steel, which neither has iron ore asset nor a pellet plant, the acquisition of Stemcor asset would be crucial, opined a trade source.

Visa Steel operates a 500,000 tonne per annum (tpa) steel making unit at Kalinganagar where it has 225,000 tpa pig iron plant and 300,000 tpa sponge iron plant along with a 500,000 tpa steel melting shop and a rolling mill of 500,0000 tpa.

As per its current capacity, it has iron ore requirements of up to 800,000 tonne a year for its Odisha operation. It has plans to double the existing steel-making capacity to 1 million tonne a year.

In April this year, Visa Steel had entered into an agreement with Neelachal Ispat Nigam Limited (NINL) for converting iron ore fines into sinter, which will be processed at Visa Steel blast furnace for making steel. As per the agreement, NINL will provide 20,000 tonne of sinter every month in exchange of iron ore fines provided by Visa Steel procured from private and government-controlled mines. NINL will charge Rs 2450 per tonne for conversion of fines into sinter.

“For other players, buying Stemcor assets would be an additional resource, but for Visa Steel it is important,” said a trade source.