Steel producer Southern Ispat & Energy Ltd (SIEL) is planning to enter into backward integration by setting up a 1.2 -million tonne pelletisation plant in Chattarpur, Madhya Pradesh. With an estimated investment of Rs 300 crore, the plant is set to start operations by April 2014.
SIEL will invest Rs 150 crore in the first phase. The remaining investment would be done in the second phase. The company has already acquired 100 acres in Chattarpur and is expected to start its beneficiation and pelletisation process by April 2014, said a senior company official.
Pelletising is the agglomeration of beneficiated and ground iron ore into spherical shaped green balls and subsequently heat hardening them.
SIEL, which currently produces billets for long and flat steel producers had entered into mining activity in the Buxwaha Iron Ore mine spread over 150 hectares in Chattarpur over a decade ago. The mines have a substantial resource base of superior quality iron ore with high Fe (iron) content and bulk density.
The current proposed investment will enable SIEL to secure its raw material requirements and will cater to the iron ore demands of its existing as well as proposed steel plants.
Moreover, with the soaring international steel market potential, this value addition will lead SIEL to capitalise their mining resources and will lead to an incremental rise to top line by Rs 250 crore and maximise profits by Rs 50 crore, thus enhancing value creation of the company, the official added.
Steel mills have been facing a huge shortage of raw material due to the non-availability of high grade iron ore because of restrictions put in by the Supreme Court on mining, with a complete ban followed by a partial roll back in Karnataka. Also, a number of companies are entering into pelletisation to convert low grade into high grade iron ore for use in steel furnaces.