Essar Steel Draws Debottlenecking Plan Of Rs 110 Cr

The Essar group flagship Essar Steel has drawn up a Rs 110-crore investment plan for the next two years to undertake debottlenecking and technology improvements at its 2.2 million tonne hot strip mill in Hazira, Gujarat.

The company proposes to finance the investment through internal accruals.

Speaking to newspersons at Hazira last weekend, Essar Steel director, operations, John C Parker, said, "Steel prices are on the uptrend, ruling at around $ 330 per tonne, and this should allow for better cash flow during the current fiscal. This year, we plan to ramp up capacity to 2.4 million tonne and the plan next year, 2001-02, is to take it up further to 3 million tonne per annum."

 

Global prices of hot-rolled (HR) coils have moved up from a low of $ 180 per tonne in the first quarter of 1999-2000 to the present level of $ 330 per tonne.

The original rated capacity of the Hazira plant was 1.8 million tonne per annum, which is proposed to be enhanced this year to 2.4 million tonne.

The company has also indicated that the improved steel prices and better realisations would enable the company to service payments to bondholders of its $250 million floating rate notes (FRN) through internal accruals.

According to S N Puri, director-finance, "Since the cash flow situation is expected to be better this year due to the uptrend in steel prices, the company's bottomline would be able to sustain the impact of the outgo on account of FRN redemptions."

During the current fiscal, Essar plans to enhance exports of HR coils to 1.2 million tonne, while the remainder would be pumped into the domestic market. Export prices of HR are currently ruling at $ 330 per tonne while at home the company has been getting between Rs 15,000 per tonne and Rs 18,000 per tonne.

China will be an emerging overseas market this fiscal and the company has already bagged an order for 16,000 tonne which will be executed over a span of four months, said Parker. Other major overseas markets this year will be the United States, Europe and south-east Asia.

Over the next 3-4 years, the company will also undertake a series of benchmarking exercises and is currently in talks with Thyssen of Germany for a possible benchmarking partnership.