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Steel slump brings down plant cost


The slump in steel prices has come to the rescue of the Baldota group’s upcoming plant. The cost of the one-million tonne steel plant proposed by the group has fallen by 20-25% as lower prices have brought down the equipment cost.

The group company Aaress Iron and Steel, which will be setting up the plant, now proposes to complete the project with an investment of around Rs3,500 crore as against the original cost close to Rs4,500 crore.

The company has received lower offers from Chinese and Korean equipment manufacturers as Baldota had approached them after prices started falling. The company was to fund the plant through internal accruals and a public offering way back in 2006. However, it later shelved the IPO plans due to the worse market conditions. About 25% of the investment in the steel plant will now come from internal accruals and the remaining would be raised from public sector banks.

In 2006, when the project was conceived, the estimated cost was nearly Rs2,200 crore. It went up to Rs4,500 crore early this year when steel prices were rising. The one mt capacity in the first phase of the project is expected to start operation by the end of 2010. It has proposed a total capacity of 5 MT, which would be completed in the next five years with a total investment of around Rs8,500 crore. It will also have a captive power plant with a capacity of 70 MW, which will be enhanced to 340 MW.

The plant will produce alloy and special steel in the first phase to target the automobile sector. The production will then be ramped up to manufacture flat steel products in the second phase.

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