KIOCL Ltd (formerly Kudremukh Iron Ore Company Ltd), a wholly state-owned enterprise operating under the Union steel ministry with a miniratna status, said it is planning to restart its pig-iron production at its blast furnace unit (BFU) in Mangalore. ?We are sending the proposal to the board to restart operations at BFU,? KIOCL chairman & managing director K Ranganath told FE.
The KIOCL has suspended operations at its BFU in September last following the fall in prices of pig-iron in the domestic market. Pig-iron prices that stood at 35,000 per tonne in September 2008 tumbled to below Rs 18,000 in December 2008. Now the price has increased to Rs 21,000, but still, it may create loss for the company as the price of coke, a main raw material for pig-iron, stood at Rs 22,000 per tonne.
The company produced 1.57 lakh tonnes of pig-iron in 2007-08, but production declined to 1.18 lakh tonnes in 2008-09. This fiscal year, until the closure of BFU in September, the company produced around 62,000 tonnes of pig-iron. However, the company will start operating BFU, which has an annual installed capacity of 2.16 lakh tonnes, as it has to supply pig-iron to its long-time customers, Ranganath said.
Meanwhile, the company has started operating its pellet plant since last December. During last year, production at the pellet plant was also suspended at different times due to the fall in pellet prices.
?We bought iron ore, a main raw material for pellet, at higher prices before September 2008 during the boom period. But when the prices fell after December 2008, we were forced to supply pellet at lower costs even as the input cost was more than the manufacturing cost,? he said. The pellet price tumbled to $54 per tonne in December 2008 from the peak level of $245 in August 2008.
Following this, the production in the pellet plant declined to 1.316 million tonnes in 2008-09 from 1.92 million tonnes a year ago. Now the company has started running the plant without halt from December 2009 as pellet prices in the international market have risen. Currently, the price hovers around $118 per tonne and it is expected to stabilise at $135 in the next four-five months, he said. ?The company is comfortable with manufacturing pellets when the price is ruling above $115 per tonne,? he added.
The company produced 2.4 lakh tonnes in January 2010. With the market reviving, steel consumption is expected to rise in the coming months. If the current trend continues, he said, the company would achieve its full production capacity of 3.5 million tonnes in 2010-11.
Earlier, KIOCL had in-house raw material supply from its iron ore mine in the Kudremukh belt in Karnataka. But it has closed the captive ironore-mining site in December 2005 following a Supreme Court order. Since then, the company is procuring iron ore from the outside market. The company maintains a long-term contract with NMDC for iron ore supply.
