India's SAIL Proposes Greenfield Steel Mill in Rajasthan

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Researched by Industrial Info Resources (Sugar Land, Texas)--Steel Authority of India Limited (SAIL) (BSE:500113), India's largest steel producer, is planning to construct a greenfield steel mill in the central Indian state of Rajasthan. The facility will be linked to iron ore deposits in the state's district of Bhilwara. To incentivize SAIL's investment, the state government of Rajasthan will offer linkages with limestone deposits in Jaisalmer and dolomite mines in Jodhpur.

The estimated 500 million-ton iron ore reserves in Bhilwara were discovered in 1967, but few steel producers were interested in developing the area because geological surveys indicated the ore to be of low quality with a ferrous content of no more than 35%. However, SAIL officials said that with new technology available and through beneficiation, it could be feasible to construct a steel mill linked to the Bhilawara deposits. SAIL is currently undertaking a pre-feasibility study of the deposits and a land survey for the proposed plant.

The implementation of the Rajasthan plant will be outside the purview of SAIL's current $15 billion expansion and modernization program, which will increase the company's total steelmaking capacity to 23.5 million tons per year from its current 14 million tons per year. The expansion and modernization program will be completed by 2013. Officials said that since the ongoing modernization and expansion program was nearing completion, future investments in the project in Rajasthan will have to be earmarked separately. The company proposed to construct a 2 million-ton-per-year steel mill, but a final decision on the capacity will be taken only during preparation of a detailed project report, when total quantity of extractable iron ore from the reserve will be ascertained.

SAIL runs five integrated iron and steel complexes in Bhilai, Chattisgarh; Durgapur, West Bengal; Bokaro, Jharkhand; Burnpur, West Bengal; and Rourkela, Orissa. SAIL has iron and steel alloy production plants in Bhadravati, Karnataka; Chandrapur, Maharasthra; Durgapur, West Bengal; and Salem, Tamil Nadu.

Company officials said that SAIL had received several proposals for joint venture greenfield projects from companies including Kobe Steel (TYO:5406) (Tokyo, Japan), POSCO (NYSE:PKX) (Pohand, South Korea) and ArcelorMittal (NYSE:MT) (Luxembourg). Whether the Rajasthan project will be undertaken by SAIL on its own or with a joint venture partner will be decided after accessing the technology requirement of using low-grade iron ore and the final plant capacity, the officials said.

SAIL has already signed a joint venture with POSCO to put up a FINEX process plant at its steel mill in Bokaro in Jharkhand state. The plant will enable the mill to utilize low-grade iron ore fines. SAIL will also sign a joint venture agreement with Kobe Steel for a greenfield project using Kobe's proprietary ITMK3 technology for the use of iron ore fines and thermal grade coal for the production of steel. No decision has been taken on the proposed joint venture with ArcelorMittal.

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