Manganese Alloy Cos In A Spot

Maharashtra Elektrosmelt, the largest producer of manganese alloys, a SAIL subsidiary and a captive source of manganese alloys to SAIL has put out poor results in the six months of April-September 1997.

Sales have fallen to Rs 80.49 crores from Rs 90.84 crores during April-Sept `96 and net profit has slid to Rs 5.90 lakh from Rs 11.38 lakh. Interest costs have increased sharply to Rs 2.14 crore from Rs 1.31 crore and stocks have increased to; Rs 9.32 crore from Rs 1.56 crore.

Conditions are likely to; get worse during the remaining six months of the year as prices of manganese alloys are not rising, in fact they are falling mainly due to competition offered by the new units from West Bengal where the power rate is around Rs 2 per kwh while it is near Rs 4 in Maharashtra, Karnataka and Andhra. In the Raipur belt most of the units are working at less than 50 per cent capacity and the existence or survival of most is threatened. Sandur Manganese which is a large producer of manganese ore has closed its manganese alloy capacity and is producing in one furnace ferro silicon for export as it is getting some NTPC power. It is convening an EGM to report to BIFR as a sick unit and to evolve a rehabilitation package.

 

Sandur's production of manganese alloys has been falling over the last two years before being stopped completely. Thus in 1995-96 Sandur produced 23,218 tonnes of ferro manganese and silico manganese but in 1996-97 ferro manganese and silico production fell to 12,448 tonnes .

Thanks to NTPC power at lower rate, it increased the production of ferro silicon from 2,368 tonnes to 7,397 tonnes for export. Sales fell from Rs 115 crore of 1995-96 to Rs 87 crore in 1996-97 and the company suffered a loss of Rs 10.88 crores. In the previous year the loss was Rs 18.11 crore.

The situation to some extent was saved by increased exports of manganese ore and total exports of the company including ferro alloys rose from Rs 15.99 crore in 1995-96 to Rs 41.35 crores in 1996-97. Sales of ore increased from 170,369 tonnes to; 258,901 tonnes. The company exports about 100,000 tonnes of ore every year.

According to the directors report the major factors affecting the financial results of the company in 1996/97 were, ferro silicon becoming unviable due to high cost of power and supply of ferro manganese to SAIL being discontinued due to negative contribution consequent to power tariff increase to nearly Rs 4 per unit from July 1, 1996.

The claims of electricity board against the company are Rs 22.94 crores against which provision has been made for only Rs 9.25 crores and the matter is before the Supreme Court which will be a danger for the company.

If Sandur, with captive sources of manganese ore could not sustain itself, Maharashtra Elektro-smelt with outside purchases of ore and with rising fuel costs, will also face losses In 1995-96, the loss was Rs 1.60 crore. But being a subsidiary of SAIL it could be saved by being absorbed by SAIL, thus saving some costs for the unit. nGilbert Lobo

What is the future for Sandur without a source of captive power plant. The company has entered into a loan agreement with Indian Renewable Energy Development Agency for a term loan of Rs 35 crores for setting up a hydel project at Hassan It wants to set up a two tonnes per hour pilot plant for beneficiating low grade manganese ore to ferro grade with Mn/Fe ratio of above five. Laboratory scale studies have been completed at Regional Research Laboratory, Bhubaneswar at a cost of Rs 12.37 lakh. Erection of pilot plant was under progress with Dastur as consultant.

Based on the success of pilot plant, a 135,000 tonnes of commercials inter plant at a cost of about Rs 100 crore will be set up so Sandur will need Rs 150 crores for its power plant and the sinter plant.

The question is how to raise the money in the present adverse circumstances. If the government makes available power at NTPC rate there could be some relief but today the prices of ferro alloys have fallen to rock bottom levels in the world market and therefore most of the units in India in ferro alloys will be an unviable proposition.

Ferro chrome prices: After prolonged negotiations ferro chrome contract prices were rolled over the October, December period from what they were in July Sept period around 46/47 cents per lb chrome content, The producers were not making any money on the current prices and were keen to maintain the prices. There was a shortage of material; in the spot market and contract price could be maintained.

The stainless steel production is not picking up and the prices are also not rising. The currency crises in Far East now seizing even South Korea and Japan going into a sort of depression there may be bad days ahead for both ferro chrome and stainless steel producers

Meanwhile, Chrome Corporation of South Africa which is producing about 420,000 tonnes of fero chrome is adding two more furnaces of 80,0000 tonnes capacity each which will go into production during the first quarter of 1998. It will increase its production in 1998 to about 575,000 tonnes. Chrome Corporation sells about 250,000 tonnes of ferro chrome to Europe and the balance to Japan and other countries.