Drop in iron ore prices boosts auxiliary industries in Odisha

ROURKELA: Amid a drop in prices of iron ore and rise in demand for construction steels, the private sector secondary iron and steel industries in Sundargarh district are buoyant, especially the Induction Furnace (IF) industries, which have returned to profit zone  after a long gap.

Local industrialist and former president of Odisha Sponge Iron Manufacturers’ Association (OSIMA) Gouri Shankar Agarwal attributed the drop in iron ore prices to increased availability which reduced the cost of production of sponge iron by about Rs 1,700 per tonne.

He said now sponge iron is priced at about Rs 20,000 per tonne, but their profitability remains same. He said the power-intensive IF industries consume sponge iron to manufacture ingot and billets, but were
suffering largely due to high power cost.

However, the scenario changed in the past two months as with low sponge iron price and other  factors, the IF industries are ‘miraculously’ making profit after a hiatus of nearly five years. He said the next downstream industries in Rolling Mills consume billets and ingots to manufacture construction steels, including TMT bars, angles and channels continue to be in good shape.

Another local industrialist, Yogesh Dalmia, said in January, size ore price had disproportionately increased to Rs 5,300 per tonne which has now reduced by around `800, while price of iron ore fine also reduced by `500 and is selling at Rs 2,200 per tonne. Dalmia opined that the most affected IF industries facing survival threat are doubly benefited with reduced sponge iron cost and rise of about `2,000 per tonne in prices of billets and ingots which are selling for about Rs 34,500 and Rs 33,500 per tonne respectively.

Dalmia said the impact of rise in prices of billets and ingots is  absorbed by Rolling Mills amid good demand for end products like construction steels.  He said after a gap of five years, all three types of inter-connected industries in the value chain are happy, adding that there is further need for rationalisation of iron ore prices.

Industry sources said barring the usual slowdown during monsoon, the growth trend would continue amid demand for construction steels due to good Government spending. Gradually, over the past one year, about 40 functional sponge iron industries in the district are doing well, while in recent months, about 25 remaining IF industries are out of negative growth and about 10 Rolling Mills are in good position.
 Meanwhile, Koida Deputy Director of Mines Salil Behera said fear of drop in Government revenue due to fall in iron ore prices seems untrue, adding that increased volume and consumption would make up for the loss.