India. Essar Steel plant expansion plan on track

India. Essar Steel plant expansion plan on track. by Rakesh Sharma Essar Steel Ltd., part of the diversified conglomerate Essar Global Ltd., is going ahead with the expansion of its Hazira plant in western India, but is putting on hold all of its greenfield expansion plans due to slowing global demand, the company's chief executive officer said Wednesday. The company is expanding capacity at Hazira to 10 million metric tons a year from the current 4.6 million tons. The expanded capacity is likely to come on stream by June 2010, after investment of $2.7 billion to $2.8 billion. "There is a great recession in steel. But India is growing on planned investment in infrastructure," Essar Steel CEO J. Mehra told a news conference in Bahadurgarh, in the northern state of Haryana. India's steel consumption is expected to grow 1.7% in 2009 to 53.5 million metric tons, while global steel use is expected to contract 14.9% to 1.02 billion metric tons, according to the World Steel Association's short-range outlook. Steelmakers around the world are slashing production, cutting jobs and shelving expansion projects in order to conserve cash amid the global economic slowdown. Essar Steel has put on hold plans to build manufacturing capacity in Vietnam, Trinidad and Tobago, and the U.S. state of Minnesota. Mr. Mehra said the expanded capacity at Hazira will be coal-based, while the existing capacity uses nine million metric standard cubic meters a day of natural gas. Essar Steel procures about 3.3 MMSCMD of gas through long-term contracts, and sources the remainder from the spot market. The company has asked the Indian government to provide gas for its plant from Reliance Industries Ltd.'s Krishna Godavari basin, Mr. Mehra said. Reliance began natural gas production from the D6 block, located in the basin off the country's east coast. Output is likely to reach about 40 MMSCMD by July. Under a utilization policy formed by the federal government, gas from the KG basin will be allocated first to fertilizer plants, while gas-starved power plants will be the second priority. Meanwhile, Mr. Mehra said Essar expects to produce 4.5 million metric tons of saleable steel in the current fiscal year, up from output in the financial year that ended March 31 of 3 million tons. Production was lower in the last financial year due to fuel shortages and forced shutdowns related to low demand, he said. Essar is planning to open retail outlets to expand its reach to rural markets, Mr. Mehra added.