January 25, 2012: Essar Steel India Ltd, which recently expanded its steel making capacity to 10 million tons per annum (mtpa), said it set up the entire plant at a cost of only around $750/ton against an industry average of $1,000/ton.

"We have constructed the plant at a total cost of Rs 37,500 crore ($750 million), including beneficiation and pellet plant, which is much lower than the industry average cost of $1000/ton of steel making capacity," Essar Steel's Chief Financial Officer Amit Agarwal said.

"Today people talk about construction cost of steel plant at about $1000 for a ton of steel making capacity, but we have been able to achieve this right from beneficiation to pelletisation to iron making to steel making to caster to downstream facility like plate mills and pre-coated steel by spending around $700 to $750/ton," Agarwal said.

"If you take $1000/ton steel making plant and put other facilities on top of it, the total cost would come to around $1400/ton. Compare to this what we have spent is around $700 to $750 a ton. We have been able to keep the investment cost at almost 50% lower than the prevailing market benchmark," he added.

The company achieved this as a couple of factors went in its favour, Agarwal said, adding that Essar Project Ltd was responsible for setting up the plant and it helped to cut cost. Also important was the fact that the entire project was completed within the scheduled time frame, he said.

"The main thing that jacks up the cost of a project is time overrun and we have been able to scale it down considerably," he added.

The other thing that also happened is that Essar had bought the equipment from all the major players such as Siemens, Demag etc, but then did some bottlenecking and some right changes in order to increase or enhance the capacity without incurring additional cost, Agarwal said.

It had also been able to buy a certain number of equipment at very attractive prices. For example, it bought an entire set of Corex plant from Daewoo steel at scrap prices and saved a considerable amount of investment.

"These put us in a very competitive situation and ensured that the vertically integrated project was completed at a considerably low cost," Agarwal said.

Source: ISMW