Can you throw light on your 12 mtpa iron ore beneficiation plant in Dabuna? What is the progress of work? What is the expected investment in the plant?
Essar Steel is setting up a 12 mtpa pellet plant at Paradeep supported by a 12 mtpa beneficiation facility at Dabuna with both plants connected with a 53 km slurry pipe line. The first phase of 6 mtpa Paradeep pellet plant has already been commissioned. The Dabuna plant has the capability to use low grade fines, which are lying aplenty in the region and upgrade the content of iron in ore to around 62-64%, thereby making the ore suitable for use in ironmaking furnaces.
The Dabuna plant is expected to be operational in the second quarter of this financial year. The total investment for the 12 mtpa pellet facility at Paradeep, Dabuna beneficiation plant and the 253 km slurry pipeline is approximately Rs4,200 crore.
How does your Dabuna plant contribute to eco-friendliness?
First, the Dabuna beneficiation plant will use low grade iron fines that are lying idle in the region. The low grade fines are generally mined along with higher grade lumps. The lumps have a more traditional market and can be sold easily, while the fines, especially low grade, have very few takers. Thus these fines pile up through the course of time and create an environmental nuisance for the miners and the region. We have specially chosen the beneficiation process to utilize these fines, thus helping the region overcome the environmental hazards that the fines create.
Second, we have chosen to transport the beneficated fines for pellet making through the slurry pipeline. This has tremendous advantages. Not only is it a low cost route of transportation, it also has minimal impact on the environment. Alternate route of transporting these fines through road or rail, puts much more pressure on the existing infrastructure and environment of the region.
Finally, the primary feed in ironmaking furnaces are agglomerates – either pellets or sinter, along with some lump ore. The carbon emission from a pellet facility is lesser compared to the alternative a sinter plant. This, the pellet plant at Paradeep helps in obtaining carbon footprint during the steelmaking process.
What is the capacity ultilization of your existing steel plants?
Our Hazira plant has been expanded to 10 mtpa and is currently in the ramp-up phase. We expect to reach a production of 7 million tonnes in the current year and full production a year thereafter. Our current market share in the flat steel segment would be around 15%.
What is the company's technological development over the year?
R&D at Essar has been structured to focus on process improvements especially in the iron and steel making divisions and on new product development to cater to the varied needs of the customer. On the product development side, we developed a number of different grades last year, especially for high strength and special quality plates. These grades have now found acceptance from important customer like the Indian Navy, who were earlier reliant on costly imports. On the process side, we have made exciting breakthroughs in coal fines briquetting and utilization of low grade iron ore.
What are your plans of expanding your overseas reach?
We are already exporting around 20-25% of the steel produced to varied markets of the Middle East, Europe, Africa, and NAFTA member countries. Besides, we have service centers operational in Dubai, UK and Indonesia to process steel according to the local requirements. We see this fraction of sales in export as sustainable. Nonetheless, we are also increasingly focusing on meeting the domestic steel demand.
How do you view the current competition in the steel market?
The competition in the Indian steel market is pretty intense, with both public and private steel makers expanding their production capacities to meet the rising demand. The high level of imports also adds to the pressure in the market place. On the raw material side, some steel makers have a traditional cost advantage as they own iron ore and coal mines. The present mining industry is highly consolidated and can dictate prices. Moreover, the steel industry is fractured with number of players vying for a greater share of the domestic market. The onus is on the steel makers to differentiate their products in the market and tailor their business strategies for improved margins. At Essar, we try to leverage our proximity to the market, our unique port based location with access to export markets and our wide steel product basket with a focus on niche and value added grades.
What is the impact of rising coal price on steel prices? Finally, how does this affect the steel demand?
Coal, especially coking coal, is a major driver in steel production. Rising prices of coal will increase the cost of steel produced and will thus drive up the steel prices. This may create new demand equilibrium, if the higher prices cannot be absorbed by the consumers of steel. The best way to deal with the problem is to provide coal linkage, and similarly iron ore mining rights, to steel producers who will then be shielded from the variability in the raw material market. This will stabilize steel prices and boost long term steel demand in the country.
Overseas companies foresee setting up steel plants with and overall investment of Rs 2 lakh crore. How does this prove a threat to the Indian steel companies?
Indian steel market is still growing. As per the projections, the total annual steel demand is expected to almost double from 70 million tonnes today to 150 million tonnes in 2020. This offers scope for further addition to the capacity. Hence, there is no concern or threat if new capacities get created. At Essar Steel, we strongly believe that if we are cost competitive, we can face any market conditions. There may be an oversupply situation in the near term but in the long run, the steel companies should grow sustainably.
The availability of right quality coal is indeed a concern. Majority of the coking coal in India is high in ash content and is unsuitable for use in steel plants. We are thus reliant on imports.
What measures must government take to curb such issues?
Currently, the steel producers are grappling with rising raw material costs and a poor economy. We are hopeful that the government will take cognizance of the predicament of the steel makers and take appropriate policy decisions. The new Mines and Minerals (Development & Regulation) Bill has been introduced in the parliament and we hope that with appropriate modifications, and with earnest implementation of the law when passed, many of these issues will fade. The government should also promote beneficiation of low grade coal to reduce dependence on imported coal and installation of state of the art washeries.