MITSUI STEEL PLANT. case study

Mitsui & Co., the $ 6 billion Japanese conglomerate, is keen to set up a five million tonne steel plant in Orissa. We are now exploring the possibilities and gathering information on the prospects of putting up a steel plant here, before coming out with a concrete proposal” said Takao Miyachi, chairman, Mitsui & Co India Pvt Ltd. He said, the most significant aspect of the proposed venture is that for the first time in the country, it will use the latest technology developed by an associate company of Mitsui, which uses non-coking coal for production of steel. This technology will not only help the venture to overcome the crisis faced by many steel industry due to short supply of coking coal, but also is cost effective.

Mitsui already owns a chunk of mining lease in Orissa through its Indian subsidisry Sesa Goa limited (in which Japanese company has 51 % stake) at Thakurani sector in Keonjhar district. Orissa has one of the richest iron ore reserves in the country, which account for a major share of the cost of production of steel.  

Though Miyachi did not specify the cost of the project saying it is still in an exploratory stage, he hinted that the cost could be less than the present industry standard of Rs. 2000 crore per tonne of steel because of the use of new techonologies. Striking a cautious note, Miyachi  remarked that Mitsui does not want to join the current rush by various domestic and international steel majors to set up steel projects  in Orissa. It will wait and watch and ascertain the atmosphere here before making the move. Besides, steel industry being cyclic in nature, we have to see there is enough demand for the product when the new project comes up, he added.

However, globally one of the key business areas of Mitsui is iron and steel product and raw material; trading. The expansion of capacities and volume of business has a priority of place in the company’s goal of attaining 100 billion yen income mark within next two years.

Among other international players, BHP Billiton is also planning an investment of Rs. 7000 crore in the state for mining and production of steel among other things. South Korean steel gaint Posco is also in talks with the Orissa government to set up 3 million tonne plant in Orissa. Non – ferrous metals major Vendata resources holding company of Sterlite industries has lined up an investment of Rs. 12,500 crore to set up 5 million tonne steel plant in the state, along with development of iron ore mines. Meanwhile, Tata Steel, the country’s largest private sector steel company has also announced a plan to set up 6 million tonne steel plant in Orissa. The company envisaged an investment of around Rs. 15000 crore for this project.

Questions to Ponder

Why are so many international steel manufactures planning to set up steel plants in Orissa?

Analyze the production function for steel and critically comment on the production strategy as envisaged by Mitsui and co.