Hit by slowdown, Orissa steelmakers seek bailout

November 5th, 2008 - 2:20 pm ICT by IANS  

Bhubaneswar, Nov 5 (IANS) Orissa’s sponge iron industry has been hit hard by the economic slowdown, notwithstanding a rush for new projects in the state, forcing existing players to cut production and downsize workforce, government and industry officials said.A steep fall in prices in the global market and high raw material costs have led the 100-plus sponge iron factories in the state, producing more than 1.2 million tonnes, to look at ways to cut costs while demanding a bail-out package from the state government.

The industry employs some 23,000 people directly and hires another 50,000 indirectly in the state.

“There is a steep fall in commodity prices,” said A.M.R. Dalwai, Orissa’s steel and mines secretary. “This has hit the sponge iron factories badly, leading to production cuts,” Dalwai told IANS.

Some players complained that high raw material costs had made their operations economically unviable, leaving them with no option but to cut production.

“More than 60 sponge iron factories in Orissa have stopped production during the past two months due to the market collapse,” said Manoj K. Agarwal, managing director of Adhunik Metaliks.

Agarwal, whose company has an integrated steel plant in Sundergarh district and manufactures and markets iron and steel products, feared that sponge iron units in other parts of the country may follow suit if the situation does not improve.

In Jharsuguda and Sambalpur districts, for example, where there are at least 20 sponge iron industries, many units have stopped operations and urged the state-run Orissa Mining Corp to reduce input costs.

Similar tremors are also being felt in the 12,000-acre Kalinga Nagar industrial complex, one of Asia’s largest industrial hubs some 100 km from here, where most of the nine steel plants have cut output, officials said.

Some of the companies located in the complex include Jindal Stainless, Tata Steel, Visa Steel, Mesco Steel, BRPL and Dinabandhu Steel, among others.

Visa Steel, part of the minerals and metals giant Visa group, said it may soon shut down its ferrochrome plant in the complex because the price of the ferro alloy used in stainless steel has come down sharply.

“Visa Steel’s financial performance during the second quarter of financial year 2008-09 has grown on the backing improved performance from the Lam Coke and Ferro Chrome businesses,” the company said.

“However, due to the global financial crisis, sharp correction in the commodity prices and slowdown in demand, the quarter-three and quarter-four performance may get adversely affected,” said the company.

The company had logged a whopping 482 percent growth in profit after tax in the second quarter.

The industry now hinges its hopes on the proposal by Orissa Mining Corp to re-tender to fix the prices of raw materials, based on a plea by the Kalinga Nagar Industrial Association.

“All industries at Kalinga Nagar are feeling the heat as prices of steel, sponge iron, pig iron, ferro chrome and other steel commodities are crashing on a daily basis and rates have already hit below the operable limits,” the association said.

The industry body has told the state government that while the cost of producing ferrochrome was about Rs.60,500 per tonne, the selling price was Rs. 51,000. The situation for pig iron was no different, the association added.

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