BHUBANESWAR: When ArcelorMittal (AM) re-entered Odisha with its Rs 42,000 crore acquisition of Essar’s Steel Plant following a two-year-long acquisition battle, it was looking at a second coming, the steelmaker’s first foray being in 2006.
In February last, it bagged Thakurani Mines with a 107.55 per cent (pc) premium securing raw material security. However, eight months down the line, the global steelmaker is besieged with issues - beyond its control - that range from logistics to bad roads hitting its raw material feed.
The Essar acquisition was made under a joint venture with Japanese steelmaker Nippon Steel (NS). Its operations in the State include a 253 km slurry pipeline to carry iron ore from its 8 MTPA beneficiation plant at Dabuna to its 6 MTPA pellet plant in Paradip whose capacity is being doubled.
The AM-NS had created an inventory allowing the company to operate its Paradip plant at 114 pc in July but it dropped to 73 pc in August and 78 pc in September due to shortage of iron ore while contribution of Thakurani - its captive mine - was a mere five pc in August and 20 pc in September despite having adequate inventory at the mines. At Thakurani, mine development and production agreement (MDPA) works out to 14,000 tonnes ore a day which is significantly less than AM-NS’ captive requirement of 17,000 for the pellet plant. “There is no reason for the company not to meet its MDPA agreement but there is no way it can happen because dispatch is a huge issue,” said sources.This has forced AM-NS, like other steel players, to be dependent on merchant mines in Odisha and hit by the transition which is taking place during the Covid pandemic.
A slow transition in the mining sector has meant that the new player has to compete with the old miner but existing roads and traffic are just not up to it. Trucks with adequate capacity are not available crippling dispatch. The 50 km stretch from the mines to Dabuna, plant sources said, takes a painstaking 14 hours. Also two players operate with mining infrastructure like weighbridges, stockyards and roads which could barely be adequate for one.
To ensure that the transition does not cripple the sector, previous lessees were allowed six months from April 1, 2020 when their leases lapsed to dispatch material. The State Government, under the MCR rules, has allowed them another month’s extension.
Similarly, to prevent lessees from squatting on mines and allow steel industry disruption-free supply of ore, Mining Concession rules require them to meet 80 per cent of the average of the mine’s last two years’ production. A senior officer from the Steel and Mines Department said this also protects the State against any dramatic shortfall in royalty earnings. This was why all the companies were reminded last month of this condition though it was initially misinterpreted as a minimum monthly target.
A spokesperson of ArcelorMittal said, issues have been raised with the department and district administration. “We have been assured that they would be sorted out,” he said. Out of the mining leases executed, sources said, five lessees are carrying out daily dispatch while three will start shortly.
PROBLEM AREAS
The AM-NS had created an inventory allowing the company to operate its Paradip plant at 114 pc in July but it dropped to 73 pc in August and 78 pc in September due to shortage of iron ore
Trucks with adequate capacity are not available crippling dispatch. The 50 km stretch from the mines to Dabuna takes a painstaking 14 hours