In a bid to grab a larger pie of the steel market where demand is soaring, Hy Grade Pellets Ltd (HGPL)- the 51:49 joint venture between Stemcor of the UK and Essar Steel Ltd - has chalked out an investment plan with around Rs 1,000 crore in the next two years.

The investment will include doubling of the JV's pellet capacity at Vizag. But first, the company will set up a slurry pipeline project, which is expected to be completed by October this year. The move comes in the wake of most steel companies adopting a cost-competitive strategy to boost productivity. The company will also set up a beneficiation plant (for further removing impurities from iron ore), which will produce the direct reduction (DR) grade of iron ore pellets, to increase its customer base.

In order to match the capacity of the slurry pipeline, HGPL has drawn up plans to double its pellet production capacity from 3.3 mmtpa to 7 mmtpa.

HGPL commercial director Matthew Stock, while confirming the development, told FE that the total cost of both the slurry pipeline and beneficiation projects is Rs 550 crore and will be financed partly through internal accruals and partly through debt.

Mr Stock added that an additional Rs 450-500 crore will be invested to double the pellet production capacity. The project will be completed next year.

According to an official in a financial institution (FI), most steel companies are taking advantage of the fact that the fortunes of the steel industry are on a rise and, as a result, many companies are looking to enhance capacities.

"As long as proper caution is exercised, there should be no problem for the concerned company," the FI official said.

HGPL operates a 3.3 mmtpa pellet plant at Vizag, Andhra Pradesh and the technology for the plant has been sourced from Lurgi and others.

At present, the raw material and iron ore fines are transported through railway wagons via the Kirandul-Kottavalsa railway line.

According to a company official, HGPL is expected to save transportation cost of roughly about Rs 300 per tonne with the completion of the project.

The official added that this eight million tonne (267 km) pipeline will transport iron ore in slurry form from Bailadila mines in Chhattisgarh to the company's pellet plant at Visakhapatnam.

He said a contract for the construction of an iron ore slurry pipeline from Bailadila to Visakhapatnam had been signed between the company and OAO Stroytransgaz's consortium with Essar Constructions Ltd.

OAO Stroytransgaz has deputed specialists and has supplied special machinery and equipment for the implementation of the pipeline project.

The slurry pipeline will save the company on railway freight which has been increasing every year and two slurry tanks are being constructed with a height of 20 metres and a diametre of 18 metres.

HGPL has a dedicated market for 50 per cent of its pellet output with the promoter company (Essar Steel), thus ensuring an assured off-take. For the balance output, the company will focus on exports in the Asian region.