The profitability of Indian government-owned steel producer Rashtriya Ispat Nigam Limited (RINL) is negatively impacted to the extent of $156 million per year owing to its lack of any captive source of raw material, particularly iron ore, company officials said on Wednesday, December 27.
The officials said that, compared to other government-run steel companies, RINL is hamstrung in terms of being competitive since it has to rely on commercial purchases of iron ore, which increases its operational costs.
Raw material costs constitute about 63 percent of its total cost of production compared to 48 percent for Steel Authority of India Limited, the government owned and operated steel company which has its own captive iron ore mines. Despite this inherent disparity in RINL's cost of production, it has to keep its finished steel product prices balanced with those of its counterparts, which impacts its margins, the officials added.
RINL operates a 6.4 million mt per year capacity steel mill located in the southern Indian port town of Vishakhapatnam.