JSW Steel Anticipates Drop in Cost of $7 Billion Integrated Steel Mill

JSW Bengal Steel Limited (Kolkata, West Bengal), a subsidiary of leading Indian steel manufacturer JSW Steel Limited (Mumbai), expects the total cost of setting up an integrated steel mill in Salboni in the West Medinipur District of West Bengal to drop because of falling steel prices. JSW Bengal Steel, an 89:11 joint venture between JSW Steel and the state government of West Bengal, was formed in 2007 to build an integrated steel mill with a capacity of 10 million tons per year.

According to Industrial Info Resources (Sugar Land, TX), the total capital outlay for the project, which is being implemented in two phases, was originally estimated to be about $7 billion. The first phase is currently under construction and involves setting up a 3 million-ton-per-year steel mill and a 300-megawatt (MW) power plant. At the time of launch, the first phase was estimated to entail an investment of nearly $2 billion. However, a decline in the cost for this phase is anticipated because of the economic slowdown and a steep slump in steel prices.

Cost of equipment and other supplies, including steel, a major component used in construction, has significantly reduced. Steel was trading at $1,200 per ton a year ago compared with the current price of $450 per ton. Engineering, procurement, and construction prices worldwide have dropped by more than 20 percent in the past year fueled primarily by a fall in the cost of raw materials. JSW Bengal Steel has acknowledged a fall in the cost of equipment supplies but is yet to revise the project cost. The company is presently adhering to the original project cost.

The project is on schedule, and the first phase is scheduled for commissioning in 2012 with a steel making capacity of 3 million tons per year. The plant would achieve a capacity of 6 million tons per year by 2015 and 10 million tons per year of steel by 2020. Before steel production starts in 2012, the company plans to commission a $900 million pellet and beneficiating unit in the facility.

The project in Bengal is part of JSW Steel's plans to augment its steel production capacity to 30 million tons per year by 2020. The project has obtained all the necessary clearances from the Ministry of Environment and Forests. West Bengal Mineral Development and Trading Corporation Limited (Kolkata, West Bengal) has cleared the coal linkage for the power plant and the state government has allocated water supplies for the plant. JSW Bengal Steel acquired 4,500 acres of land for the project in a landmark agreement with the farmers by offering jobs in the plant and shares in the firm.

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