Mobility paves Samsung’s silver path
The Korean giant’s early bet on mobile phones helped it hit the $10-bn mark in India, but in its 25th year it ...
ArcelorMittal promoter Lakshmi Mittal. File photo - Bloomberg
A key logistical challenge awaits steel magnate Lakshmi Niwas Mittal as he prepares to take over Essar Steel soon. This comes after the Supreme Court approved the resolution plan placed by ArcelorMittal - the world’s biggest steel-maker- at the end of an arduous legal battle for the bankrupt steel plant previously owned by the Ruia Brothers.
ArcelorMittal, in partnership with Japan's Nippon Steel, will pay Rs 42,000 crores to the financial and operational creditors of Essar Steel under India’s new bankruptcy law – the Insolvency and Bankruptcy Code (IBC) – to acquire the steel mill located at Hazira in Gujarat’s Surat district.
But, the pay cheque does not cover a 50-million tonne (mt) capacity, all-weather, deep draft dry bulk port located next to the steel plant that was used by the erstwhile owners mostly as a captive facility to bring raw materials and export finished goods.
Located in the Gulf of Khambat on the outskirts of Surat, Essar’s port can accommodate partially loaded Capesize vessels and fully loaded minicape vessels of 105,000 tons.
Till now, the steel plant and the captive port were run by different entities but being under the Essar Group, the steel mill enjoyed favourable terms including pricing advantages from the port operator. Essar Bulk Terminal Ltd located at Hazira is run by Essar Ports Ltd, the port operating unit of the Essar Group.
Essar Steel India limited also holds a minority stake in the port operating company.
The 10 mt steel plant requires 20 mt a year of raw materials such as coal and iron ore which have to be shipped through the port.
With the steel plant going out of the Group’s fold, it will no longer be a captive, anchor customer for the port thereby classifying the new owner of the plant as a third-party customer with whom the port operator will have to re-work the pricing terms for the services rendered by signing a new long-term contract for at least ten years, a port industry executive said.
The proximity to the steel plant and the mechanised handling facilities erected including a conveyor system to take the raw materials such as iron ore and coal directly into the mill and export finished steel and other dry bulk products makes it an ideal choice for ArcelorMittal to continue using the port, giving a better price negotiating power to Essar Ports, he said.
The port has a 550 metre-long long jetty, ship unloaders and storage facilities for finished products, a rail network, dredgers, tugs, and mooring boats.
The steel mill will be handicapped without the captive port and ArcelorMittal’s choices are very limited.
The only alternative is a port run by the Adani Group located some 17 kilo metres away. But, in the absence of conveyor systems, carting the raw materials and finished goods to and from steel plant by trucks would add to the costs and erode the competitiveness of the steel maker.
“Essar will tell ArcelorMittal to pay market rate for using the port,” the industry executive said.
“I hope they understand the significance of the port to the steel plant and give us some good treatment and also some good pricing,” an Essar Ports executive said.
If the pricing terms are not favourable to ArcelorMittal, the only choice would be to acquire the port from Essar Group, the industry executive added.
ArcelorMittal could not be reached immediately for comment.
The Gujarat Maritime Board (GMB) which had awarded the rights to Essar Ports to build the captive facility on a long-term concession had allowed the port operator to handle third-party cargo also but this quantum was restricted to half of the total cargo handled by the port.
In September, the Gujarat government over-hauled the state’s port policy allowing captive facilities such as the one run by Essar to handle third party cargo without any restrictions. This will help captive ports to become full-fledged commercial ports besides granting them freedom to invest in expansion and modernisation.
In FY19, Essar’s Hazira port handled 24 mt of cargo. In the first six months of FY20, it handled 14.17 mt of cargo of which 11.88 mt was in-house cargo of the steel plant and 2.29 mt was third-party cargo (16.16% of the total cargo).
Essar Steel also owes Rs 703.21 crores to Essar Bulk Terminal Ltd and the port operator hopes to get about 20 per cent of this as part of the IBC resolution process.
The Korean giant’s early bet on mobile phones helped it hit the $10-bn mark in India, but in its 25th year it ...
Antrix should adopt a different tactic than merely fighting over jurisdiction: Experts
Invest in relationships, enterprise, behaviour, effort and learning
From different types of osmoses to new membranes, researchers have come up with ways of drawing water
Only half the Sensex stocks have bettered the index’s return in the last 10,000-point journey
High valuation and stiff competition from larger players are a dampener
Investors with a short-term perspective can buy The New India Assurance Company (NIACL) stock at current ...
₹1490 • HDFC Bank S1S2R1R2COMMENT 1475146015051520 Fresh short positions are recommended with a stiff ...
What makes the new crop of young Indian cricketers such game-changing winners? Over and above their talent, ...
In these isolated times when people yearn for a slice of the familiar, amateur and professional chefs are ...
‘You ready to go to work?’ Joe Biden had asked Kamala Harris before naming her as his running mate. ‘Oh my ...
Writer Narendra’s latest book, rich with vignettes from Bastar and his native village in Uttar Pradesh, ...
Digital is becoming dominant media, but are companies and their ad agencies transforming fast enough to make a ...
Slow Network, promoted by journalist-lyricist Neelesh Misra, pushes rural products and experiences
How marketers can use the traditional exchange of festive wishes meaningfully
For Fortune, a brand celebrating its 20th anniversary, it was a rude shock to become the butt of social media ...
Three years after its inception, compliance with GST procedures remains a headache for exporters, job workers ...
Corporate social responsibility (CSR) initiatives of companies are altering the prospects for wooden toys of ...
Aequs Aerospace to create space for large-scale manufacture of toys at Koppal
And it has every reason to smile. Covid-19 has triggered a consumer shift towards branded products as ...
Please Email the Editor