Operating its lone 10 MT steel plant here at double the rate of 35% a year back, Ruias-promoted Essar Steel hopes to achieve a turnaround helped by lower gas price, higher demand and better prices of the alloy. The Reserve Bank of India’s nod to lenders’ move to refinance Rs 15,000 crore of the steel-maker’s rupee debt under the 5/25 scheme came in handy for the firm.
The company has also Rs 8,000 crore working capital debt. Like all its peers, Essar Steel had been in trouble until recently as the domestic steel market was hit by imports from China at predatory prices. Input costs for the company was so high that production became unremunerative, according to its managing director and CEO Dilip Oommen.
All these had forced the company to look for buyers to sell assets to pare down debt, but that plan is now put on the back burner.
The company depends on imported gas to run almost 66% of its production. Now, it has negotiated the price at just $6 per mmBtu from $15-16/mmBtu earlier. Iron ore prices have also come down. The market is also responding to government’s effort to curb imports. Prices of the alloy have also inched up.
“The biggest challenge that was coming in front of us was that we could not ramp our production because gas was so expensive. Iron ore was costlier. We, therefore, had to limit ourselves. We were generating only 35% of the capacity and this kind of generation was not enough to meet our obligation (to repay banks),” Oommen said.
The company is also trying to reduce its dependence on the imported gas by using the gas from coke oven plant.
Source: financialexpress