Face-to-Face

Steel Making to Adapt Vast Scope of Development in Coming Decade

- R. K. GOYAL Managing Director, Kalyani Steels Ltd.

alyani Steels Ltd, is a part of the over $2.1 billion Kalyani Group. Established in 1973, Kalyani Steels is a leading manufacturer of forging and engineering quality carbon & alloy steels using the Blast Furnace route. Over the years, Kalyani Steels has been continuously upgrading its technology and infrastructure. The facilities at KSL are at par with any sophisticated steel manufacturers in the world. Although the forging industry in India

is the primary market for the company's products, markets of various components for commercial vehicles, two wheelers, diesel engines, bearings, tractors, turbines and rail also form a substantial part of the company's clientele. Kalyani Steels Ltd has earned the status of preferred steel supplier for engineering, automotive, seamless tube and primary aluminum industry. Mr. R. K. Goyal, an Engineering Graduate from BITS, Pilani and M.B.A., is currently working as Managing Director of Kalyani Steels Ltd., Pune and is Director on the Boards of Kalyani Carpenter Special Steels Ltd. And Kalyani Investment Co. Ltd., Pune. Mr. Goyal is responsible for overall management of Kalyani Steels Ltd., Kalyani Carpenter Special Steels Ltd. and Kalyani Investment Co. Ltd. & new 3M MTs Steel plant and Power plant project and mining business. Before joining Kalyani Steels Ltd., Mr. Goyal worked as Director Strategy and Corporate Affairs with JSL Stainless Ltd. Mr. Goyal was responsible for overall Growth Strategy Formulation, Mining Business, Strategic Alliances, Mergers & Acquisitions, Indirect Taxation and was monitoring performance of all companies in the Group. During 30 years of his professional career, he is associated with Steel industry, particularly stainless steel, for more than 25 years. In the future, there will be increased emphasis on the Cost Reduction projects , says Mr. R. K. Goyal, Managing Director - Kalyani Steels Ltd.in an exclusive interview with Steelworld. Excerpts:
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What according to you is the present situation of Indian Steel industry and what is the future outlook ?
- The current Steel production in India is around 73 Million Tons per annum. However, the total installed capacity is around 85 MT. This indicates a good capacity utilization ratio of around 85%.

Financial Year 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Imports Finished Steel (Million Tons) 4.93 7.02 5.83 7.38 6.66 6.83

As we can see from the table above, the imports have seen steady growth barring couple of years. Looking at the recent problems in the Iron Ore mining coupled with the growth rate of consumption, it can be estimated that this demand-supply gap will expand further and India may be one of the major importers of steel in the long term i.e. 5 to 7 years. The Iron ore Mining Crisis has added to the woes of the Steelmakers across India. In the Iron Ore mining sector, Orissa, Karnataka and Goa together constitutes more than 70% of the total Iron Ore production in the country. However, all these states are facing problems over illegal mining. Honourable Supreme Court in its order dated 29 July, 2011 and 5th August, 2011 banned all the mining activities in the state of Karnataka. It later allowed NMDC to mine up to 1 Million Ton Iron Ore per month and sell it to Steel companies through e-auction. The Honourable SC also allowed selling 1.5 Million Tons of Iron Ore per month through E-Auction from then existing stocks of 25 Million Tons in Karnataka. By now all the stocks have exhausted and only Ore mined by NMDC is available which is not more than 0.7 MMT per month. In addition to this, 4 category A? mines have opened but their material is not available for E-Auction yet. After closure of mines, they were categorized under category A? , B? and C? by CEC based on the extent of illegalities and a detailed roadmap was

developed for starting these mines. A cap of 30 million tons was put on the total production of Iron Ore from the state which is less than the current industry requirement of 35 million tons in Karnataka. It may take around two years of time for implementing all the R & R Plans and opening of all 'A' and 'B' category mines. Based on the trends of approvals, the total mined quantity excluding NMDC will be around 10-11 Million Tons at the end of the two years. This means that by the end of 2013, the total available quantity may be around 15 million Tons and may reach upto 20-21 million Tons by end of 2014 provided NMDC mines upto 10 MTPA. This will be much lower than the demand of around 35 Million Tons in Karnataka alone. Thus, the industry will continue to starve for Iron ore. In Goa, the State Govt. suspended all mining activities temporarily from 11 Sep, 2012 after an expert panel formed by the government found "serious illegalities and irregularities" in mining operations. Later, Honourable Supreme Court in an order dated 5 Oct, 2012 banned all the mining activities in the state. The CEC also said that mining operation be allowed only after Environment Impact Assessment is done and reclamation and rehabilitation (R&R) plans are in place. Currently, all the mining activities are banned in the state. Similarly, in Orissa, the Shah Commission is conducting its probe on illegal mining and is expected to come up with its findings soon. The Honourable Supreme Court took commendable steps in its decisions for clampdown on the illegal mining but it may have been done in a way so that the companies who were doing a fair business may have not been affected. The decision

of selling Iron ore through E-Auction and limiting the mined quantity in Karnataka led to speculative prices which in turn led to closure or lower capacity utilization of steel plants in the region. It also led to skyrocketing in prices of Iron ore in other states. Apart from this, Steel Industry is also affected by various regulatory issues such as lengthy processes in allotment of Iron Ore mines and Coal blocks. Several global major companies are rethinking about their strategy to expand in the Indian Market and implementing various brownfield and Greenfield projects. Currently, expansion plans of various companies like POSCO have hit the roadblocks. POSCO inked a deal with Orissa government to set up a 12 MTPA steel plant 8 years ago but it still has to start project related work in those areas. The Government has missed its Steel production target of 124 Million Tons by 40% in 2012. In 2009, the then steel minister had repeatedly announced that India would double steel production by 2012. That is, from 62 million tons in 2009 to 124 million tonnes in 2012. However, the steel production in 2012 was around 76.7 million tons (Ref: World Steel Association). Thus in comparison to an expected increase of 62 Million Tons in last 3 years, Steel production has only gone up by 14 Million Tons. With the current cap on Iron Ore mining in Karnataka, and the similar probable scenarios in other states, we may not see large investments in Greenfield projects in the country. Thus, in next 5-10 years, India may become a major Steel importer. For setting up new Greenfield Projects you require Land, Water and Iron Ore and unless these issues are resolved new investment may be limited. In India, the

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new technologies in terms of Steel making.

What are your plans for raw material security for the future ?
- Iron ore and Coking Coal are the two major raw materials for Steelmaking. Due to the Iron ore mining crisis in Karnataka, the Iron ore purchasing costs have gone up very sharply. The Company has recently commissioned two Sinter Plants of 0.4 MTPA each. These Sinter Plants will enable the company to use Iron ore Fines and Coke Fines in the Steel Plant and thus will reduce the cost of Iron making as well as decrease the raw material dependence on Iron ore Lumps. The Company is also planning to setup a beneficiation and Pelletization Plant which will enable it to use low-grade fines in the Blast Furnace by converting them into pellets. The Company is also exploring Iron Ore and Coal mines in India and abroad. This will enhance the raw material security in the future. Also, the Pulverized Coal Injection (PCI) plant will be commissioned by end of this financial year. We are targeting a reduction in Coke Consumption by around 90 Kgs per Ton of Hot Metal by injecting 100 Kgs of Pulverized Coal. The PCI project will enable the company to use coal to replace Coke in the Blast Furnace.

investing companies found lot of troubles in even acquiring the land. The current process takes years for allotment / acquisition of land, Water and Iron Ore and then getting the necessary licenses. Brownfield expansion may happen but if the Iron ore will be sold at international prices coupled with Coke procurement from abroad, high energy and manpower costs then as a country we may not be competitive. It may be cheaper to import Steel rather than to import the Raw Materials.

According to you, where will the Indian Steel industry stands in the global perspective by about 2030 ? How do you think the steel industry should cope with the steep rise and fluctuations in the raw material prices, which the industry faced in recent times ?
- India may become world's second largest country in terms of Steel Consumption by 2030 only behind China. However, with the e-auction and limited supply of Iron Ore, India will lose its inherent competitive advantage of low price Iron Ore and may be prone to cheaper Steel imports from China. In the future, there will be increased emphasis on the Cost Reduction projects. The Cost reduction projects and initiatives which may see in future may include l Projects like Sinter, Beneficiation and Pelletization which will enable the Steelmakers to use the low-grade Iron Ores as well as decrease their costs for Steelmaking. l Hot Blast Stoves for reducing the Coke Consumption in the Blast Furnace l Increase in injection of Pulverized Coal to replace the imported Coking Coal l Usage of Coke Oven gas and Blast

Furnace Gas to replace FO consumption in the plant and produce DRI. Also, there is scope of vast improvement if one improves their internal efficiencies. The coming decades may also see a greater focus on the Energy consumption reduction in the Steel Sector. The current Global benchmark for Energy Consumption per ton of Crude Steel production is 4.5-5.5 Gcal/t whereas the Indian companies consumes somewhere between 6-7 Gcal/t. As Energy also have a significant costs in the Steelmaking, decrease in Energy consumption will result in decreased costs for Steel Companies. The Indian Companies are installing projects like Hot Blast Stoves which will reduce the Coke consumption and thus reduction in energy consumption but more innovative steps are required. The other area of focus may be maximizing revenues from wastes. Currently, many Steel companies don't realize maximum benefits from these byproducts. There is scope for substantial metal recovery from these wastes which can again be used in the Steel plant. Also, the companies might look at areas like developing new grades to reduce life cycle cost, identifying a niche market, identifying new applications for their products or marketing their products in alternate avenues in domestic or foreign market. The future may see a ban on smallsize blast furnaces as done in China recently to improve the efficiency of Steel sector and decrease Energy Consumption (Large Size Blast Furnaces consumes less Coke per ton of Steel Production). In terms of adaptation to innovations and new technologies, there is vast scope of development and the coming decade may see a higher level of adaptation to

How do you think should the steel industry face the environment, forest and land issues ?
- Unfortunately, The Steel industry can't do much rather than adopting a wait and watch policy. The Government may help by developing a roadmap for granting licenses within a stipulated time and on a fast track basis so that the new companies might not have to wait long for implementation of their projects or enhancement of the existing capacities. The government may develop a model for allocation of resources and minerals for Steel production. For example, for a Steel production plant of 3-5 MTPA capacity, it may make a package of Suitable size of land, water and Iron Ore Mine. This package may be put for eauction globally. The companies acquiring the package through e-auction may be given a stipulated timeline for execution of projects. Administrative measures should be taken in case of nonexecution of projects.

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February 2013