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| Expansion plan can boost Essar's HRC capacity by 1.2mt |
| Economic Times - July 5, 2004 |
Suresh Nair |
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Engineering and consultancy firm Mecon has recommended an expansion plan for Essar Steel (ESL) that will increase its hot rolled coil (HRC) capacity to 3.6m tonnes from 2.4m tonnes, about 18 months after all engineering plans of the company were frozen.
ESL executive director Vikram Amin said that the expansion, which will come at a cost Rs 700 crore, will lower the cost of production.
Mecon's study has suggested that capacity expansion can be achieved through improving the use of the third electric arc furnace and installing balancing equipment for the rolling mills. Mr Amin, however, clarified that the plan implementation would depend on lenders' approval. According to the corporate debt restructuring (CDR) package, the company will have to seek lenders' approval for any capital expenditure plan beyond Rs 50 crore.
Company officials said that the approvals, as of now, have not yet been obtained from the CDR empowered group.
Mr Amin further said that SMS Demag, which supplied the existing rolling mill, has been identified to supply the required balancing equipment to increase the rolling mill's capacity. SMS Demag will also install an additional slab caster which will have enough capacity to use the additional hot metal produced from the third arc furnace.
The capacity expansion has been planned to take advantage of the buoyancy in the steel market with growing demand in the domestic and export segments, said Mr Amin.
"The idea is to lower cost of production through optimised capacity,while retaining the strategic advantage of maintaining market share in the light of capacity being built by competitors," Mr Amin said. This kind of expansion costs less compared to a greenfield capacity of the same size. An Essar official said that a greenfield steel plant should cost at least Rs 3,000 crore per m tonne as against Rs 700 crore for the brownfield expansion.
ESL, in the current fiscal, produced 1.93m tonnes of steel and is targeting production of 2.4m tonnes for the current financial year. |
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