The Hindu Business Line : `Steel bull run likely to continue till 2010'

THE ongoing boom in the global steel industry is due to the massive growth in the Asian economies like China and India and in all probability it is likely to continue for the next years.

Bhilai Steel Plant belonging to Steel Authority of India Ltd (SAIL) is one of India's best steel producing units.

It is also the largest revenue earner for SAIL. The plant has pioneered a number of initiatives in the domestic steel sector.

Mr R.P. Singh, Managing Director of Bhilai Steel Plant, is an expert on the steel industry. In an interview to Business Line he spoke on the different aspects of the steel sector.

The steel industry is enjoying a bull run. How long do you expect this run to continue?

Steel demand is traditionally cyclic. This time, however, with the Asian economies led by China and India racing ahead, any let up in the steel demand is unlikely in the near future.

While global steel giants in the last five years doubled their production, steel production in India in the last fiscal grew by about seven per cent.

Finished steel production in the country crossed the targeted 35 mt (million tonnes) in 2003-04.

Domestic steel demand is projected at 38 mt by 2006-07, 52 mt by 2011-12 and 100 mt by 2020. Steel producers are planning additional capacities.

Against this backdrop, I feel the bull run in steel industry is likely to continue throughout the current decade.

What are the major factors behind this current boom? Please explain the Chinese factor that is being talked of so much.

A faster rate of Asian development led by China and India has fuelled the boom in the steel market. While the next Olympics in China boosted the demand for steel in that country, it has also planned to develop the infrastructure of its underdeveloped areas in the rural sector in a big way.

According to an estimate, China would need an additional 20 mt of steel every year.

Close on the heels of China, there is a massive upswing in the construction and manufacturing business in India resulting in increased production.

In the light of the recent imported coking coal crisis, what should be Indian steel industry's strategy to overcome it?

As supplies from domestic coal producers have substantially gone down, our overall dependence on Australian coal has remained. For SAIL, coking coal demand will increase to 13.7 mt in 2004-05 (including 9.5 mt of imported coal) from 12.7 mt in 2003-04.

Continued availability of metallurgical coal for steel manufacturers must be ensured.

Steel companies should invest in offshore coalmines or buy mining leases or enter into long-term contracts with foreign companies other than the existing suppliers. Prospects of Coal India, Tata Steel and SAIL jointly owning mines in Australia, Indonesia and South Africa with all three companies holding stakes can also be explored.

Possibility of forging a barter arrangement with Chinese companies to export iron ore and get metallurgical coal/coke in return can be considered too.

In SAIL, steps must be taken in tandem with Research & Development Centre for Iron & Steel (RDCIS) to broaden specifications of coking coal quality.

RDCIS must also look to charging blendable coal available domestically (in Meghalaya and other regions) in coke ovens as well as `foreign' coal with different characteristics.

What steps are being taken by Bhilai Steel Plant to overcome the coking coal crisis?

To tide over the crisis we are planning coal tar and coal dust injection in blast furnace.

Coal dust is already injected in blast furnace (BF) No. 6. Coal dust injection has been planned for BFs 7, 1 and 5. To increase productivity of BFs, oxygen enrichment has been planned in all the BFs.

Technical upgradation of all BFs would be taken up in a phased manner. We are using sponge iron in the BF.

The feasibility of using natural gas in BF to reduce coke consumption is also under consideration as a long-term measure.

What are the strengths of the Indian steel industry and how should it be leveraged in future?

The iron and steel industry is gradually shifting to the Asian continent with China, Japan, South Korea and India accounting for a major portion of the growth.

With vast reserves of iron ore, human resources and the growing domestic demand, India will be in an advantageous position to exploit the buoyant market demand.

However, the issue of upgradation of iron ore mines and procurement of coal and coke must be addressed before fresh capacity expansion plans are launched.

SAIL has worked out a roadmap to achieve 20 mt hot metal target by restructuring finances, cutting costs, increasing profitability and expanding capacities in brown-field projects in the next few years.

Thereafter, fresh capacity expansions and greenfield projects can be launched. Global steel-makers are using latest technologies.

If steel plants like Bhilai are to retain its leadership, it will have to upgrade its technology.

What changes are necessary in the Government policies to boost the growth of Indian steel industry?

Union Steel Ministry has asked steel companies to furnish data on their raw material as well as public infrastructure requirements to carry out operations smoothly till 2011-12.

The move is aimed at identifying supply side bottlenecks. Remedial measures in terms of supply of vital inputs and infrastructure facilities such as ports and rail transport capacities are welcome in view of the expansion plans and the coal crisis.

SAIL is facing tremendous shortage of rakes.

Also, port facilities have to be enhanced. Coal India must modernise its coking coal deposits and washeries to meet the quality and increased coal demand. Union coal and mining ministries have been asked to raise production.

Union Steel Ministry has proposed steel producers form joint ventures with Coal India on new projects. Union Steel Secretary's proposal to acquire coal blocks in the US, Canada and Australia should is actively considered.

What are the future plans of Bhilai Steel Plant?

In 2003-04, our plant has registered 12 per cent growth in hot metal and crude steel production and 13 per cent growth in saleable steel.

We have the entire range of TMT bars and rods in our product basket.

The blooming mill is rolling of narrow width slabs. Taking advantage of being manufacturer of both flat and long products, Bhilai plans to be a leader in both these segments.

New projects include a new slab caster, modernisation of A&B strand in Wire Rod Mill and others.

Now, it produces more than half of crude steel through the THF-ingot-bloom/billet route in SMS I, which is energy intensive.

It plans to phase out SMS I and install SMS III with basic oxygen furnaces and concast route.

We wish to increase hot metal production to 7 mt and saleable steel to 6 mt.

Moreover, pipe plant, bar & rod mill and compact strip plant are also planned.