Lloyds’s new ₹25,000 cr steel bet stares at triple challenges

Primary steel unit will have to deal with demand uncertainty, higher costs and Maoist threat

- Dipali Banka & Nehal Chaliawala

The company's mines in Maharashtra's Gadchiroli district have high-grade iron ore.

(BLOOMBERG)

India is set to get its second primary steel company in 15 years as Lloyds Metals and Energy Ltd prepares to launch primary steel manufacturing operations in Maharashtra. However, challenges for the metals and mining company are many.

Lloyds Metals has to invest ₹20,000-25,000 crore into a product for which demand has hit a low globally and prices are crashing. A primary steel company produces steel from iron ore rather than from scrap metal, making its operations more price-sensitive.

Lloyds will also have to overcome high logistics costs as its eastern operations are located far from the coast and from steel consumers, said experts. That's not all-it will also have to deal with social risks as its plants are located in areas prone to Maoist insurgency.