Calcutta, Dec. 19: Sponge iron manufacturers of the eastern region have decided to close down operations in a phased manner because of high iron ore prices. This will jeopardise a large section of steel making units in this area.
Seventy-two units from Chhattisgarh will stop production from tomorrow. Producers from Bengal, Jharkhand and Orissa are expected to follow suit by January 15 if their demands are not met.
The producers’ body has sought intervention from respective state governments, steel minister Ram Vilas Paswan and the Prime Minister’s Office (PMO).
In Bengal, the West Bengal Sponge Iron Manufacturers Association has written to chief minister Buddhadeb Bhattacharjee to urge the Centre to address their grievances.
Sponge iron is the basic input to make secondary steel. India produces 7 million tonnes of coal-based sponge iron.
Sponge iron is used for making steel through the induction process. The National Steel Policy, unveiled a few weeks back, see the demand for sponge iron to touch 35 mt by 2020.
Manufacturers want the government to make cheap iron ore available to them.
“The government should fix the upper band of iron ore price to save this industry,” Bengal association secretary S. Bhattacharjee said.
He said the cost of production has crossed Rs 10,000 a tonne while the market price was stagnating at Rs 7,500 a tonne, making the business unviable.
The price improved today after Chhattisgarh decided to close down from tomorrow.
Bengal is likely to be the biggest loser as it has no iron ore mines and steel making units largely depend on sponge iron.
The other three states can think of the blast furnace route, which is in a much bigger scale with a higher investment.
Since iron ore-rich states are unwilling to give mine leases to those who do not put up plant there, Bengal is unlikely to have blast furnace units requiring large amounts of ore.
Bengal has a capacity to produce 1.8 mt of sponge iron. It has so far witnessed investments worth Rs 2,000 crore, while another Rs 1,600 crore is expected to flow in the near future.
The iron ore price has shot up from Rs 500 per tonne to Rs 2,400 per tonne.
Sponge iron producers say they will settle for a price of Rs 1,500 a tonne.
“The cost of sized iron ore production (including mining) is not more than Rs 750 a tonne,” he said.
While private players have refused to budge, the government-owned agencies have followed the market price.