Visa Steel posts Rs 302 cr loss on steep ore prices

1 June 2015

Visa Steel closed 2014-15 with a net loss of Rs 302 crore as steep iron ore and chrome ore prices in the domestic market weighed on its operations.

"In the international market, prices of both iron and chrome ore have fallen and correspondingly, global steel and ferrochrome prices have also declined. Ore prices in the domestic market continue to be artificially high due to closure of mines, affecting operations of companies like Visa Steel", a top company official told Business Standard.

Visa Steel has set up a 0.5 million tonne per annum (tpa) steel plant, 180,000 tpa ferro chrome plant with 75 MW Captive Power Plant (CPP) and 0.4 million tpa coke oven plant at Kalinganagar in Odisha.

The steel maker has been running its operations without captive ore leases. Visa Steel had entered into a memorandum of understanding (MoU) with the state government in December 2003 with the state government committing grant of captive iron ore and chrome ore mines to the company.

But with the recent enactment of the Mines and Minerals (Development & Regulation) MMDR Amendment Act of 2015, the terms have changed.

"The equations have changed with the amended MMDR Act. Now, we are left with no other option but to participate in auctions. We hope that with this new Act, the supply situation of iron ore and chrome ore would improve. What we want is that auctions should be held early", he said. Visa Steel depends on state run miner Odisha Mining Corporation (OMC) for iron ore. Though iron ore supplies from OMC's Daitari mines has improved, high floor price fixed by OMC in iron ore e-auctions remains a concern.

"OMC needs to go for downward revision of its e-auction floor prices since its current price is very high and the auctions have not attracted buyers", the official said.

The other concern was depressing steel prices due to cheaper imports from China.

"Our contention is that the import duty on steel long products be raised from five per cent to 15 per cent", he said.

Visa Steel's ferro chrome business has been hit due to drop in production of chrome ore from OMC and non availability of chrome ore from Tata Steel, Misrilal Mines and B C Mohanty mines. These mines were facing shutdown after the Supreme Court order in May 2014 that disallowed operations of mines operating under second and subsequent renewal.

The company's coke business also suffered huge loss due to cheap imports from China and the company had no option but to reduce coke production. China had last year removed export tax of 40 per cent on coke exports to nil. This has triggered spurt in imports by India at prices which are below cost of domestic coke producers.