Essar Steel commissioned a six million tonnes per annum (mtpa) pellet-making facility at Paradip in Odisha on Monday.
This is the first phase of the 12 mtpa pellet plant to be commissioned by 2013.
The company is also setting up 12 mtpa iron ore beneficiation plant at Dabuna and a 253 km slurry pipeline connecting Dabuna and Paradip.
The beneficiation plant will enhance the iron content in the ore to 63 per cent from 54 per cent.
Essar Steel plans to invest Rs 4,200 crore to set up the integrated facility in Odisha.
The pellet plant in Paradip, along with the eight mtpa facility at Visakhapatnam, in Andhra Pradesh, will fully secure the iron ore requirements of the company's Hazira plant.
Mr Dilip Oommen, Managing Director and CEO, said the company will beneficiate the low-grade iron ore available at Dabuna and transport it through a slurry pipe to the pellet plant at Paradip.
The pellets will then be transported from the company's dedicated berth at Paradip port to Hazira.
“The entire process will bring down our production cost to $750 a tonne against the industry average of $1,000 to $1,350 a tonne,” he said.
Mr Shashi Ruia, Chairman, Essar Group, said Odisha is fast emerging as a favoured investment destination and Essar is committed to be part of this growth story.
LARGEST PRODUCER
“This pellet plant in Odisha is crucial in our quest to achieve complete vertical integration,” he said.
Essar has emerged as the largest pellet producer in India with a capacity of 14 mtpa.
This will increase to 20 mtpa after completion of the second phase in Odisha. JSW Steel has 9.2 mtpa capacity followed by JSPL, at 4.5 mtpa.
Essar Steel requires about 15 mtpa pellets to produce 10 mtpa of steel at Hazira. It intends to either export or offload the surplus pellets when the entire capacity is commissioned.
The company has signed a 10-year supply contract for iron ore in Odisha and has a long-term contract with NMDC for its requirement at Visakhapatnam.
It has applied for allotment of iron ore mines in Odisha.
STEEL PRODUCTION
The company has set a production target of 7.4 mtpa for this fiscal against 4.35 mtpa achieved in FY'12.
“We intend to ramp up production at all our facilities and aim to produce more value-added products, such as outer panels for the auto sector and the white goods industry, besides targeting import substitution. The realisation from value-added products is higher by $70-80 a tonne,” said Mr Ruia.
The company's turnover will touch Rs 40,000 crore once it produces 10 mtpa of steel, said Mr Oommen. It has a debt of Rs 20,000 crore.