Gujarat NRE set to diversify
(The Telegraph, July 3, 2005)

Gujarat NRE coke Ltd (GNCL) is diversifying into steel making and power generation.

The largest domestic non-captive metallurgical coke producer is setting up a 3 lakh tonne per annum steel rebars facility at Gandhidham in Gujarat at a cost of about Rs.50 crore.

The company will make rebars from sponge iron, scrap and Ferro alloys. A top Gujarat NRE executive said the project would be completed by December 2005.

The 20 mw power plant, at an investment of Rs.80 crore, will be ready by December 2006.

"It will utilise the waste heat recovery model to generate power. As a result, the cost will be Rs.1 per unit compared with close to Rs.5 we are paying now," a top GNCL executive said. Initially, the company will mostly use sponge iron from the market to make rebars.

Six months after the steel mill start working. the company intends to go for backward integration and set up a sponge iron manufacturing facility as well.

According to initial estimates, the capacity will be equal to that of steel making (3 lakh tonnes) GNCL will invest another Rs. 50 crore in the sponge iron facility.

The company plans to use iron ore from its newly acquired Australian mining unit to feed the sponge iron plant.

"By the time the sponge iron unit in ready, mining is likely to begin in Australia," the company executive added.

GNCL has acquired a 30 per cent stake in Zinico Resource NL, which has secured prospective iron ore and base metals projects in Tasmania in close proximity to existing world class mining projects.

The company claimed that it would still be cheaper to import coal from Australia than wheel it to Gujarat from mine heads in the country

The ocean freight from Australia to Gujarat ports is about $30 per tonne. On the contrary, inland freight from Orissa or Karnataka to Gujarat is $37 a tonne, the executive said.

However, the company is still keeping the option open for local procurement of ore.

The company will have raw material security of iron ore from the very beginning compared with other big integrated steel companies like Ispat and Essar.

The company intends to fund the expansion plan through FCCB and internal accruals.

Steel plants across the world are making a beeline for mines to hedge against irregular supply as well as soaring prices.

The Gujarat NRE Coke stock, which opened at Rs.124.70 on Friday closed at Rs.122.10, down Rs.2.60 or 0.85 percent, on the Bombay Stock Exchange.