India: NMDC's Nagarnar plant to not renew MECON O and M contract
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In a key development, NMDC Steel (NSL) recently said it will not renew its existing operations & maintenance (O&M) contract with MECON, which expires on 17 December, 2024. The contract/services of the WMC members and executives for MECON will not be required beyond this date, NSL said in a release. However, it is willing to employ existing contractual manpower hired by MECON, as per existing terms and conditions.
Takeover proposal?
This development has deepened a buzz around the possibility of a steel PSU eying NSL's takeover.
Earlier in June this year, as per a media report, a delegation of two MPs from Andhra Pradesh - Daggubati Purandeswari and C.M Ramesh, SAIL Independent Director S Kasi Viswanath Raju, and Central Minister Bhupatiraju Srinivasa Varma had met the new Minister of Steel and Heavy Industries, H.D. Kumaraswamy. The delegation had presented a strategic proposal for the takeover of Visakhapatnam Steel Plant (RINL) and Nagarnar Steel Plant, Chhattisgarh, by the Steel Authority of India Ltd (SAIL). This proposal aims to establish a new powerhouse in the Indian steel industry, positioning it as a "Jewel of India", the report added.
Since then rumours refuse to die down.
Steel being a capital-intensive business, with $1 billion required to make 1 mnt, mills would show a propensity for brownfield expansion in the run-up to achieving India's 300 million tonne target by 2030, especially since these often come as an integrated package along with one or more captive mines or raw material linkages.
NSL origin
NMDC's 3-mtpa Nagarnar Steel Plant had been set up as a forward integration and business diversification plan. The pure-play miner had conceived the project as a step to move up the value chain and hedge against the vagaries of steel prices. However, the government was keen to sell 50.79% stake in NSL and had invited EoI in 2022, possibly since it wanted to further unlock its value. In line with the Cabinet Committee on Economic Affairs (CCEA) approval, Nagarnar Integrated Steel Plant was demerged from NMDC into a separate company, Nagarnar Steel Limited (NSL). Subsequent to the demerger shares of NSL were to be listed on BSE, NSE and CSE.
NSL's advantages
Certain aspects of NSL make it a very good candidate for takeover. It has access to NMDC's iron ore mines at Bailadila, Kirandul and Bacheli complexes in Chhattisgarh and Kumaraswamy in Karnataka. Plus, The major technological facilities of NSL include one of the largest blast furnaces (BF) in India with a 4506 m3 capacity (useful volume), a hot strip mill coupled with thin slab caster (TSC), basic oxygen furnace (BOF), and two 7-metre tall coke ovens.
That apart, it has some unique features. It is the first time that a hot strip mill with thin slab caster was installed in a PSU steel plant for the production of HR coils which are used in manufacturing value-added steel, an area that Indian mills could well be eying in the not-too-distant future.
With green being the buzzword today, NSL employs energy efficient cutting-edge technology, whereby the energy consumption is estimated at 5.9G Cal/T. The integrated steel plant operates with a zero liquid discharge, ensuring that effluent water is treated and reused.
However, takeovers are easier said than done. Huge cost aspects, manpower rationalisation and technology integration issues are involved amongst a host of other challenges, sources told BigMint. "If PSUs are involved then such proposals become even more complex," the source added.
