According to one of the senior Posco executive, a memorandum of understanding has been signed between Posco Steel India and Essar Steel to buy one million tonne hot rolled products worth close to Rs 5,000 crores.
The one million tonnes of steel will be supplied to the Posco Maharashtra that accommodates a 2 million tonne facility in the state and manufactures coated steel which is one of the value-added steel products. This is the fourth MOU that has been signed between Essar Steel and Posco over the past five years. Essar steel has earlier supplied 2.5 million tonne facility for the manufacture of value-added products.
According to G H Bang, Managing Director at Posco Maharashtra, since Essar Steel’s plant is in Hazira, which is close to Posco’s facility in Maharashtra, the transportation takes place through the sea route from Hazira to Dighi Port. Also, the quality of Essar Steel has improved over time.
The development holds significance as Essar Steel is still undergoing insolvency resolution process for having failed to pay banks debt worth Rs 49,000 crore as a plan offered by ArcelorMittal is awaiting a final nod by courts. The company’s capacity utilisation has increased from 40% since it was admitted for insolvency close to two years ago to 85% currently. It produced 6.9 million tonne steel last fiscal year out of nameplate capacity of 8.4 million tonnes and is expected to clock more than 7 million tonne production this fiscal year.