India pig iron producer facing shut down

Neelachal Ispat Nigam Ltd. (NINL), a public sector steel entity and largest merchant supplier of steel-grade pig iron in India, is battling a “raw material crisis,” according to a report by India-based SteelMint.

Sources told SteelMint that NINL is struggling to “buy iron ore on its own to feed the plant” after Metals and Minerals Trading Corp. of India (MMTC) stopped supplying the raw material. Under an arrangement, MMTC buys iron ore from the open market to feed the NINL plant at Kalinganagar, Odisha, and sells the finished products manufactured at the plant. For all buying and sales transactions, MMTC is entitled to a 3 percent commission.

SteelMint says reasons why MMTC broke the agreement are unknown; however, MMTC and the Odisha government had announced plans to sell stake in what it calls a "loss-making" plant. MMTC is the largest stakeholder in NINL with an equity of 49.9 percent. The Odisha government owns 26 percent stake, according to another report by Business Standard, with offices in New Delhi and Mumbai, India.

“Over the past few years, NINL's financial performance has been underwhelming,” a government official told the newspaper. “We have minority equity participation in the company and don't have much say in its management. We don't feel it’s prudent to stay invested in NINL, although a decision is not firmed up yet. MMTC being the largest stakeholder should take the call. The revival of NINL needs sizeable investments and given its stressed finances, the steel PSU is constrained to work on its own.”

NINL is one of the state-level public enterprises (SLPEs) across the country that are accumulating losses, according to the report. The report also says NINL has a history of failed merger plans and bids to acquire the company, noting unsuccessful mergers with Rashtriya Ispat Nigam Ltd. (RINL) and Steel Authority of India Ltd. (SAIL).

SteelMint says the closure of the facility would impact the scrap iron market seeing as NINL is the largest producer of steel-grade pig iron, with an annual production of 800,000 metric tons. NINL would need to invest 1,700 million Indian rupees to “turn the tide,” the report says.