The Ruias-owned Essar Steel has forged a technological tieup with SMS Demag to increase the capacity of its Hazira plant by over 1.2 million tonnes.

Primarily a maker of hot-rolled coils, the companyproduces 2.4 million tonnes at present, a level that will increase to 3.6 million tonnes. A recent study conducted by Mecon has concluded that the capacity can be ramped up without problems. The expansion will take about 18 months, and more than Rs 700 crore, to be completed in phases.

SMS Demag confirmed it would help the Ruias in the drive, and said its main mandate is to modernise the 2150-mm wide hot-strip mill that the German firm had originally supplied to Essar Steel in 1992-93.

SMS is optimistic about the expansion, saying the mill will churn out higher-quality products, including API grade steel for oil, ship building and other technology-driven sectors, once its upgrade is through.

According to the UK-based World Business Briefing, the hot strip mill expansion is part of a larger revamp of Essar's Hazira facility. The company is also believed to be raising production capacity at its direct reduced iron plant to 3.6 million tonnes to feed its hot-strip mill. Another slab casting unit could also be added to the plant soon.

A senior Essar Steel official said the objective is to achieve backward and forward integration so that there is more value-addition and higher cost saving.

The company had notched up revenues of Rs 4,000 crore last year, of which almost 35 per cent came from exports. It is targeting a faster rise in international sales by stepping up the volume of exports.

Essar Steel procures raw materials from the Vizag-based Hygrade Pellets, a joint venture it has formed with international pellet major, Stemcor of UK. Stemcor owns 51 per cent of it and the Ruias 49 per cent.