» Business » Steel firms delay expansion plans on global credit crisis

Steel firms delay expansion plans on global credit crisis

By Ishita Ayan Dutt in Kolkata
Last updated on: October 13, 2008 12:47 IST
Get Rediff News in your Inbox:

At least three steel companies-JSW Steel, Jindal Stainless and Bhushan Steel-have decided to wait for the financial storm to pass before they take up their expansion plans.

Ratan Jindal-promoted Jindal Stainless has put its third and fourth phases of expansion in Orissa on hold while Sajjan Jindal's JSW Steel has decided to start its Bengal project with raw material and not steel. Bhushan Steel has also pushed back its Bengal project by 6-9 months.

At stake is the steel ministry's target of exceeding 100 million tonnes production by 2011-12.

Seshagiri Rao, director-finance, JSW Steel said, "In the first-phase, we will concentrate on raw materials such as pelletisation, beneficiation and coal-mining, and take up the steel project later."

The first-phase would now entail an investment of Rs 4,000 crore (Rs 40 billion) compared to Rs 15,000 crore (Rs 150 billion) for a 6-MT plant as planned earlier.

Rao said, "After we announced that the first-phase would have 6-MTof the total capacity of 10 MT, the markets tumbled. We then decided to go for the raw material in the first-phase."

By 2011-12, JSW had lined up a brownfield expansion of 11 MT at Vijaynagar, which was on track, and 1-MT at Salem and the first-phase of the Bengal project.

While financial closure for the brownfield at Vijayanagar had been achieved, JSW would take a call on whether to include steelmaking for the first-phase of the Bengal project and the 1-MT expansion at Salem in 2009, depending on the condition of the credit market.

However, for the Rs 4,000 investment in Bengal, funds had been tied up.

Jindal Stainless has decided to put its third and fourth phases of expansion in Orissa on hold. Arvind Parekh, director for strategy and business development, Jindal Stainless, said that the company had initiated negotiations with suppliers
for the third and fourth phases of expansion but had now deferred it.

The expansion would have doubled the power and stainless steel capacity at Orissa from its current level of 250 MW and 800,000 tonnes.

The investment would have been Rs 2,000-3,000 crore (Rs 20 to Rs 30 billion), largely to be raised through debts.

Bhushan Steel, which is setting up a 2-MT steel plant and a 1,000-MW captive power plant in the Salanpur industrial area near Asansol, around 260 km from Kolkata, is pushing the timeline for the project.

Neeraj Singal, managing director, Bhushan Steel, said, "We will push back our project by about 6-9 months. We were supposed to start the project in April 2009 but will postpone by 6-9 months, though land acquisition is underway." The total investment in the project is Rs 8,000 crore (Rs 80 billion).

Except for greenfield projects, steel capacity additions were running behind schedule owing to problems in land acquisition and delay in mine allocation. 

As things stand now, even the brownfield expansion appears to be in jeopardy.

Get Rediff News in your Inbox:
Ishita Ayan Dutt in Kolkata
Source: source

Moneywiz Live!