Grasim Sponge Iron Plant Turns Around

For the first five months of 1996-97, the plant has reported a capacity utilisation of 110 per cent against 46 per cent for 1995-96. In 1994-95, utilisation was 54 per cent, while in the earlier fiscal it was 12 per cent.

Industry sources say if it does not face any more accidents or breakdowns, it can easily achieve 110 per cent utilisation for the full year. Grasim had set up the 7.5 lakh-tonne sponge iron plant in 1993 with new technology from a Mexican company.

In 1995-96, utilisation would have been higher at 65 per cent if the fire had not hampered operations.

 

Figures show that for the first three months, production was 2.16 lakh tonnes, a 115 per cent utilisation. For five months, production touched 3.46 lakh tonnes, a rate of 110 per cent.

Analysts estimate the division will make pre-tax profits for the first time this year.

They have finally managed to stabilise the plant. For the full year they could do anywhere between 7.5 to 8.25 lakh tonnes, says Vivek Jasuja, analyst at SSKI Securities.

The division contributes nine per cent to gross sales and its revival will be a great relief for the company. Out of all its major divisions, sponge iron was the one posing problems.

This year, sales realisations are also expected to improve from Rs 6,078.9 per tonne registered last year to Rs 6,189.7 per tonne. It is estimated to rise further to Rs 6,333.1 per tonne.

Sponge iron prices are currently weak and global prices have crashed from $160 per tonne some months back to $140 per tonne at present.

They are not expected to stay at these levels for long. Steel analysts say global scrap prices are likely to rise as steel capacity in the US is going up and scrap exports from that country will drop.

Meanwhile, Grasim will pump in Rs 320 crore in the next two years to fund group companies