India Steel2012

Indian steel supplement

From the arrival of the Qilin in Nanjing, whowere thought to herald the absolute harmony ofthe Yongle Emperor, to Halley’s Comet fore-telling the victory of William the Conqueror,portents of prosperity have transcended historyand culture.

Today, the conventional assessment of acountry's performance begins with reference toits Gross Domestic Product (GDP). GDP, how-ever, is a rather turgid measurement.Examining a country's steel industry provides amore dynamic and expansive means of fore-casting its economic future. Steel consumptionper capita is directly related to the condition inwhich a population lives: it can be broken downregionally to depict discrepancies in economicdevelopment, it reflects patterns of urbanisa-tion, infrastructure spend, the state of industryand manufacturing capacity. “Steel productionand consumption is accepted as a barometer ofany country’s progress,” says Dr AmitChatterjee, consultant and former advisor tothe managing director of Tata Steel,Jamshedpur.

In the case of India, an examination of thesteel industry is particularly instructive. Thecountry is now the world’s third largest steelconsumer yet, while production has increasedsteadily since economic liberalization, con-

sumption per capita in India remains remark-ably low. Average Indian steel consumption in2011 stood at around 55kg per person per year,compared to the global average of 206kg andmore than 500kg in mature economies coun-tries such as the USA and Japan. What is espe-cially relevant is that rural Indians, who consti-tute more than 70% of the country's popula-tion, consumed on average just 9.78kg in 2011according to Sushim Banerjee, director generalof Institute for Steel Development and Growth(INSDAG). For India to truly become a globalleader in steel production, it must access itsdomestic market; meaning this figure has toincrease drastically.

In a sense, China’s Qilin has already arrived.China reported produced of 695.5Mt of crudesteel in 2011 (this figure being only that official-

ly recorded) compared to India’s 72.2Mt in thatcalendar year (Table 1). Once skyrocketing,China steel demand is expected to decelerateand the steel rolling industry is expected toexperience stable but comparatively lowergrowth from 2012 to 2016.

Despite the obvious growth potential ofIndian steel production and consumption, thetrajectory of the country's steel industry over thenext few years is more difficult to predict. Onthe one hand, India has signalled its intentthrough investing heavily in giant steel mills,continuous modernisation and the upgrading ofold plants. Expectations are tempered, however,by concerns over access to raw materials, a com-plex land allocation process, and questions overthe ability of India’s infrastructure to keep up.

A roadmap to successEconomic reforms in 1991 ushered in a new eraof growth and new capacity was piled ontoIndia’s steel scenario. Yet despite a successionof high profile investment announcements, thepace of development, especially relative to thatof China, did not befit that of a waking giant.Although India’s impressive economic growthrate made the country appear an ideal destina-tion for FDI, discouraged investors repeatedsimilar complaints: infrastructure was absent;

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*Global Business Reports

India rising: Can India’s steel industry deliver on years of promise?

A REPORT BY GLOBAL BUSINESS REPORTS FOR STEEL TIMES INTERNATIONAL

Steel – The gateway to India’s industrialisation

Built in the days of the British Raj, the‘Gateway to India’ is an impressive

monument on the shore of the then city ofBombay – present day Mumbai – andremains a symbol to welcome foreign

investment into India

Picture courtesy of Flickr:

Himanshu Sarpotdar

India has seen crude steel productionincrease by 47Mt or 174% since the startof the 21st century an average annualincrease in output of 14.5%. It nowranks as the fourth largest producer inthe world. Much of this growth hascome from the private sector which nowaccounts for three-quarters of total pro-duction. This Special Report compiled inIndia by Global Business Reports revealesthrough interviews with key industrialplayers how this remarkable growth hasbeen achieved. Additional articles reviewIndia’s passion for small and large scaleDRI plants, its vast ore reserves but trou-bled development of these and how a105 year old steel site has moved intomodern times. By Joseph Hincks andPavlina Pavlova *

Dr Amit Chatterjeeformer TechnicalDirector Tata Steeland recently retiredadvisor to the MD

Steel Times International – July/August 2012 – XX

GBR copy_Layout 1 7/5/12 12:07 PM Page 1

00 – July/August 2012 – Steel Times International


ArcelorMittal and Posco’s monumentalinvestments reflected the optimistic climate inwhich they were conceived. However, as ofFebruary 2012 neither project had begun sub-stantial construction and, at the time of writing,Lakshmi Mittal has suspended activities on allproposed projects in India and Posco is stillawaiting the land allocated to its mill to beapproved pending various counter claims andenvironmental concerns.

In Posco’s case, of the 4004 acres requiredfor the project 3586 acres belong to the stateand approvals pertaining to forested land in

particular have been shunted back and forthbetween the federal and state governments.

“There is no point in selling India as an invest-ment destination at Davros when the invest-ments which have already come are facing mul-tiple problems and not able to move forward,”vice president corporate affairs Posco India,Vikash Sharan, told journalists in January 2012.

Although in many ways India’s democraticapproach to land allocation is to be lauded, thegovernment must be seen to be taking stepstowards streamlining the process if it expects togarner future greenfield project investment.

“Land acquisition is a problem and is themain reason for investors shifting their focus tobrownfield projects. The governments of thefive or six states that are major steel producersneed to make brave decisions, otherwise Indiawill not have an industry. We are hopeful of apractical approach being taken,” India’s govern-ment supported Joint Plant Committee told us.

In February 2012, signs were emerging thatPosco could soon see a resolution to some ofthese land issues, and there are hopes that thenew steel policy will expedite a more efficientapproach to land acquisition. PurshopamAgarwal, vice president, projects advisory andstructured finance, of SB Capital Markets atthe State Bank of India is optimistic aboutfuture foreign investment in the country. “Ithink we will see more foreign steel players inIndia in the near future,” said Agarwal.“Everybody is eyeing India in terms of furthergrowth in business. With some more clarity interms of policy issues, I am hoping more andmore players will be interested in coming here.”

Coking coalLand access issues may have accounted for thedelays in India’s greenfield projects, but theywere not the sole constraint on the Indian steelindustry’s growth in 2011; a look at the produc-tion figures of India's largest steelmakers in2011 reveals that constraints were felt even bylong established plants (Table 3).

India has abundant thermal coal resources, yetdeposits of coking coal are scarce. Most of thecountry’s coke requirement, a vital input for theconventional blast furnace method of steelmak-ing, is met by imports of hard coals for coking.

Modern steel producers have always beensomewhat vulnerable to raw material price fluc-tuations but in 2011, high coking coal prices,driven by factors such as the Queensland floodsand augmented by the depreciation of theIndian rupee, exerted particular pressure onsteel industry profit margins.

“The recent depreciation of the rupee hasresulted in a spike in coking coal prices in Indianrupee terms at about INRs.23 000/t ($408.5)compared to about INRs19 000/t (US$337.4) inthe corresponding period last year,” the StockMarket Review reported in December 2011.“Higher raw material prices are expected tokeep the cost of production high even in theweak demand scenario and may make it difficultfor companies to pass on the higher cost to con-sumers. This is likely to put pressure on the mar-gins and cash flows largely in the case of non-integrated companies.”

Indian steel producers have moved to insu-late themselves from the effects of coking coalprice volatility in two distinct ways: throughbackward integration, acquiring coking coalassets domestically and overseas, and throughinvesting in technology. As part of its moderni-sation programme, for example, India’s largeststeel producer state-owned Steel Authority of

ports and roads were needed; and things in thecountry just happened too slowly.

In 2005, the Indian Government, in its newrole as a facilitator, came up with a directivethat promised a solution: The National SteelPolicy 2005. The policy envisaged steel produc-tion reaching 110Mt by Financial Year (FY)2019-20 with an annual growth rate of 7.3%.

The 2005 Steel Plan was largely successfuland by 2007 new investment had propelledIndia towards becoming the fifth largest pro-ducer of steel in the world and the largest pro-ducer of direct reduced iron (DRI, also referredto as sponge iron) in the world.

At the time of writing, the National SteelPolicy 2005 was being reviewed in light of therapid developments on both the supply anddemand side of the domestic steel industry. Thenew steel policy, released in June 2012, will setproduction targets far exceeding those of the2005 plan.

Based on an estimated infrastructure spendof nearly US$1tr, the projected growth ofIndia’s manufacturing industries, an increase inthe country’s urban population to 600 millionby 2030, and the emergence of the rural marketfor steel consumption, the Ministry of Steel’sWorking Group on Steel for the 12th Five YearPlan April 2012-17 has projected that crudesteel capacity in India is likely to reach 140Mtby FY2016-17. Furthermore, memorandums ofunderstanding (MoUs) signed by private pro-ducers with the various state governments indi-cate that capacity might exceed 200Mt by 2020.

“The next five year plan includes infrastruc-ture investment, financed by taxes on the steelindustry, and commitment to research anddevelopment,” the Joint Plant Committee toldus. “In general, we expect demand to grow ataround 8.5%, although this year the manufac-turing sector slowed down slightly and growthwill only be around 6%.”

Table 2 shows apparent steel consumption(ie Production + Imports – Exports) of carbonsteels since 2000. Consumption has grown overthe period by 36.5Mt or 130% an average annu-al growth in demand of 10.8%.

Raw materials forsteelmakingIndia’s growth prognosis should, in theory,prove a huge spur for foreign direct investment(FDI) in the steel industry. Yet a simplisticinclusion of just infrastructure plans anddomestic market potential is not enough; anexamination of industry sentiment elicits amore multifarious response. Indeed, each oneof the vital ingredients for steelmaking – iron-ore, coking coal, and, we must not forget land,– is in its own way, compromised in India.

LandBack in 2005, Lakshmi Mittal, the head of theworld’s largest steel company ArcelorMittalrescinded on an alleged promise he had madenever to do business in his own country andflew into the state of Jharkhand to announce a$9bn investment to build a greenfield steelplant with a 12Mt/y production capacity. InJune of the same year, the South Korean com-pany, Posco, the world’s fifth largest steelmaker, signed a MoU with the Orissa (nowrenamed Odisha) government for an eventualinvestment of $12bn for setting up a steel plantin the state. At the time, this represented thelargest FDI in Indian history.


Financial year Quantity (April-March) (Mt)

Table 1 Crude steel production in India(Million metric tonnes in Financial Year)

2000-01 26.89

2001-02 27.94

2002-03 30.44

2003-04 34.25

2004-05 38.49

2005-06 46.46

2006-07 50.82

2007-08 53.86

2008-09 58.44

2009-10 65.84

2010-11 69.58

2011-12 73.79(p)

Source: Joint Plant Committee (JPC)

(p) Provisional

Product Production % change for sale over prev FY

Table 3 Saleable product in FY 2011-12 (kt)

Cold Pig Iron* 5881 1.66

of which ISP’s 502 (-)13.30

Secondary 5379 3.32

Less IPT/Own consumption 98 (-)2.97

Production for sale 5783 1.74

Sponge Iron (DRI) 24 834 (-)2.00

of which ISP’s -- --

Secondary 24 834 (-)2.00

Less IPT/Own consumption 4462 1616.15

Production for sale 20 372 (-)18.78

Carbon Finished Steel 77 946 9.33

of which ISP’s 17 577 (-)3.27

Secondary 60 369 13.64

Less IPT/Own consumption 9016 27.96

Production for sale 68 930 7.28

Notes: *Surplus of steel making requirements supplied to foundries.

Source : Joint Plant Committee (P) = Provisional

Financial year Quantity

Table 2 Apparent steel consumption of carbon steels by Financial Year (Mt)

1999-00 28.03

2000-01 28.00

2001-02 29.19

2002-03 30.63

2003-04 33.62

2004-05 37.73

2005-06 43.91

2006-07 49.67

2007-08 55.23

2008-09 55.09

2009-10 60.00

2010-11* 64.56

*Provisional

Source Steel Scenario Yearbook



XX – July/August 2012 – Steel Times International


over 1Mt of steel per annum, whereas DRI-based production has allowed small producersto thrive in India. The Sponge IronManufactures Association, for example, whichrepresents the Indian DRI industry, currentlyhas 94 members.

For India’s larger producers, the DRI routehas provided something of a hedge againstcoking coal price volatility. Jindal Steel andPower (JSPL), for example, one of the fourJindal group entities, operate using both theconventional blast furnace and DRI route tosteelmaking at its plant in Chattisgarh state.“Having compared costs, we believe that DRIis a cheaper route to manufacture steel thanimporting large quantities of coking coal,although like most Indian companies we willmix our methods,” said VR Sharma, CEO anddeputy managing director, steel business, atJSPL. In fact, the company is India’s largestproducer of coal based DRI by far making13.19Mt last financial year representing 77.3%of India’s coal based DRI production.

India is unusual in relying so heavily on coalto produce DRI. In calendar year 2011, a totalof 73.3Mt of DRI was produced worldwide ofwhich 17.3Mt was made from coal or 23.6%.Of this coal based DRI, India produced around17Mt or 98%. More will be said regarding thetechnology of this process later.

Even with DRI use becoming more promi-nent in the Indian steel scenario, producers willcontinue to depend to a large extent on import-ed coking coal. However, with Mozambiquebecoming an increasingly viable source,Australia taking steps to protect its mines fromflood damage, and Indian players such asNMDC, NRE Gujarat, and GVK Power havingalready entered the Australian mining space,there are encouraging signs that the Indian steelindustry will be less vulnerable to price volatilitygoing forward. “With the arrival of Americanand Russian mining companies, the dominanceof Australian firms is reduced, and in the past sixmonths prices have gone down from more than$300 to $200/t. I think Indian prices shouldreach $160 to $180 and if they do, coking coalwill no longer be a great concern,” JSPL’s VRSharma told us. However, a caveat to thisshould be that rising resource nationalism inIndonesia, a key coking coal supplier to India, iscausing increasing concern, as is the deprecia-tion of the Rupee against the US dollar.

Iron oreIn part driven by strong Chinese demand foriron ore and the commodities resultant prof-itability, illegal mining has flourished in India.Even authorised miners have faced a litany ofcharges in India’s ore-rich states, includingunregulated encroachment on forest areas,underpayment of government royalties, andconflict with tribal groups regarding land rights.

In 2010 the Indian government launchedinvestigations in the states of Karnataka,Orissa, and Goa in an attempt to stymie illegalmining. The investigations are ongoing in Goa,and have led the government to impose miningbans in Karnataka and export restrictions inOrissa. Such restrictions have translated intosupply constraints for many of India’s steelmak-ers. Karnataka, which accounts for around 30%of India’s steel output and about 25% of thecountry’s iron-ore exports, has been especiallyhard hit.

Around 80% of sponge iron units inKarnataka remained closed at the end of 2011,and sponge iron units in other states were affect-ed by either a straightforward lack of availabili-ty, or scarcity induced high pricing of iron ore.The lack of iron ore was compounded by a shortsupply of thermal coal. “As things stand today,the future of the Indian sponge iron units, par-ticularly the stand alone units, appears to bevery bleak,” said Dr Kashiva, executive directorof the Sponge Iron Manufacturers Association.In addition, new Standards for construction re-bar – the major market for induction furnacesmelting sponge iron – are to be implemented inSeptember which will be difficult to meet bythese small scale producers.

India Ltd (SAIL) has taken steps towards reduc-ing coking coal use in its existing plants. “We aretargeting higher filtration (washing the coal tolower the ash content), reducing the need forcoke and thus coking coal,” said AnirbanDasgupta, SAIL's deputy general manager in theChairman’s secretariat. “Secondly, we are tryingto develop technologies to use more of semi-softand non-coking coal in the plant so our depend-ence on prime coking coal comes down.”

Some of the most promising technologies willbe discussed later, but most solutions mootedfor India have the use of direct reduced iron(DRI) for steelmaking at their core.

India has championed the DRI route to steel-making to a greater extent than any other steel-producing nation. There are now estimated tobe 1275 induction furnaces spread across Indiawhich are used to melt a blend of coal basedDRI and scrap. Although each operation is smallscale, a total of 17Mt of coal based DRI wasproduced in FY 2010-11 contributing 24.4% ofall production. Add to this 6.19Mt of gas basedDRI production and the full contribution ofDRI grows further to 33.4%. DRI-based pro-duction has increased dramatically; from essen-tially zero in 1980 to 23.2Mt in FY2010-11(Table 4). India is now the world’s largest pro-ducer of DRI. A conventional blast furnace iseconomically viable only for plants producing

Nearly a quarter ofIndia’s steel was pro-duced in small scaleinduction furnaces in2011 Pic courtesyInductotherm India Ltd

V R Sharma CEO &deputy MD, steelbusiness, JSPL

FY 05-06 FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11

Table 4 DRI production in India (Mt)

Coal Based 7.278 11.012 14.142 16.050 16.821 17.065

Gas Based 4.542 5.264 5.845 5.280 6.172 6.190

Total 11.821 16.277 19.987 21.330 22.993 23.255

A rotating SLRN kiln for coal basedDRI production

Pic courtesy Outotec




manager in the Chairman’s Secretariat, AnirbanDasgupta.

SAIL’s previous large-scale expansionoccurred in 1995-96, when the company mod-ernised its plants at Durgapur and Rourkela.Buoyed by India's demand scenario, SAIL iscurrently undergoing a round of expansion thatwill take its production capacity of finishedsteel into the region of 23.5Mt/y, and its crudesteel capacity to around 20Mt/y.

Meeting projected demand and increasingmarket share is not the only driver in the cur-rent round of expansions. “The second precon-dition was the need to modernise our facilities,”said Anirban Dasgupta. Over the past five yearsSAIL has increased production by roughly 11%,mainly through enhancing process efficiencies.However, some of SAIL’s current facilities wereinstalled in the late 1950s and many – such asIISCO – are reliant on now obsolete produc-tion processes. In addition to adding about10Mt/y of capacity, SAIL plans to phase out3Mt/y of its under-performing assets: 2.5Mt/yat its Bhilai steel plant and around half a millionat its Burnapur plant.

As part of its modernisation programme,SAIL will be employing various technologies toreduce coking coal consumption at its plantsand therefore insulate itself against volatilepricing. SAIL is collaborating with Japanese

giant Kobe Steel for the installation of newtechnologies, and notably with Korea’s Poscoaround the installation of Finex technologywhich can use fine ore and non-coking coal asthe raw material feed (this technology will bediscussed later).

Table 5 shows crude steel production bySAIL and privately owned plants

Tata steel Established in 1907 in Jamshedpur NE India,Tata Steel was India’s first industrial steel plant(Indian Iron had set up a blast furnace at Kulti– near Asansol, West Bengal – a little earlier butwithout steelmaking facilities). Today, its pro-duction places it in seventh place among globalsteel companies with an annual crude steelcapacity of over 28Mt/y. In calendar year 2010it produced 23.2Mt of crude steel across itsIndian and international operations. Followingits acquisition of the UK-Dutch Corus Group,it is now one of the world’s most geographical-ly-diversified steel producers, with operations in26 countries and a commercial presence in over50 countries.

The Tata Steel Group, had a turnover of US$22.8bn in FY’10, and has over 80 000 employ-ees across five continents and is a Fortune 500company.

Tata Steel’s larger production facilities include

In a move that some many consider reminis-cent of pre-liberalized Indian economics, thegovernment has become increasingly involvedin India's mining scenario. In February 2012,the Supreme Court-appointed CentralEmpowered Committee (CEC) recommendedthat an artificial ceiling of 30Mt/y be applied inKarnataka’s ore production based partly onfears – unwarranted according to commenta-tors such as the Indian Bureau of Mines – thatthe state might run out of iron ore resources in15 to 20 years time. At the time of writing, themining industry, under the aegis of theFederation of Indian Mineral Industries, waspreparing to appeal to the Supreme Court topermit ‘A' category mines in Karnataka, those inwhich no illegality or marginal legality wasfound, to resume work immediately. At present,only the state owned NMDC is permitted tocontinue mining operations in Karnataka.

In parallel with the mining restrictions, theIndian government raised export duty from20% to 30% in early 2012. The export dutiesare intended to advantage Indian steel produc-ers by ensuring that they are able to competefor the country's now artificially limitedresources.

Although the iron ore production limit of30Mt from Karnataka meets the currentdomestic requirement for steelmaking and pigiron production, the ban on exports is costingKarnataka and Indian Railways, who move theore, around $2.2bn per year, and the loss ofexport taxes alone accounts for nearly $1bn.India is the third largest exporter of iron ore inthe world, with exports primarily feeding theChinese market. India produced 260Mt of ironore in 2009, but this fell to 190Mt in 2010, andexports from major ports were down 35% yearon year in November 2011.

The bans may have served their immediatepurpose of enabling Indian steel producers tocompete with overseas buyers for iron ore sup-plies, but they have also impacted investment innew mines. New projects face difficultly inaccessing funds if raw material supplies have notbeen secured. “Raw material availability is oneof the most important aspects we consider whencarrying out due diligence for a project,” saidPurshopam Agarwal, vice president, projectadvisory and structured finance, SBI CapitalMarkets at the State Bank of India. “In the past,the availability of raw materials, especially ironore, was taken for granted. Of late, due to theenvironmental and other related issues, the situ-ation has changed significantly. All governmentclearances on the supply side should be in placeto ensure the viability of a project.”

Further details on iron ore reserves and thepolitical ramifications of their control are dis-cussed in a separate article in this issue.

Steel giantsSAIL Public sector Steel Authority of India Ltd(SAIL) is India’s largest integrated steel pro-ducer, currently holding a market share ofaround 17% to 18% of the country’s steel pro-duction. Throughout its history, SAIL has notonly contributed significantly to India’s produc-tion portfolio, but also to a large proportion ofits steelmaking expertise. “Many of the peoplewho have headed other major industrial compa-nies came from SAIL. Many engineers andtechnicians groomed in SAIL have learnedsteelmaking and then gone on to work in othersteel companies,” said SAIL’s deputy general

Sail is close to com-missioning a new500kt/y wire rod milland a 3.88Mt/y sin-ter plant at its IISCOSteel Plant (ISP) atBurnpur in the east-ern state of WestBengalPic Courtesy Sail

Public sector Private sectorFY BSP DSP RSP Bok ISP ASP/ Total VSP Tata Others Total Grand

VISL Sail RINL Steel Private total

Table 5 Crude steelproduction by majorintegrated plants(Mt)

06-07 4.789 1.869 1.990 4.067 0.472 0.309 13.505 3.497 5.174 28.640 33.814 50.816

07-08 5.055 1.914 2.093 4.127 0.458 0.315 13.962 3.129 5.014 31.753 36.767 53.858

08-09 5.184 1.888 2.082 3.578 0.417 0.264 13.413 2.963 5.646 36.419 42.065 58.441

09-10 5.109 1.966 2.128 3.599 0.400 0.308 13.510 3.205 6.564 42.562 49.126 65.841

10-11 5.329 1.961 2.160 3.593 0.411 0.308 13.762 3.235 6.855 45.723 52.578 69.575

Notes: BSP Bhilia Steel Plant; DSP Durgapur Steel Plant; RSP Rourkela Steel Plant;

Bok Bokaro; ISP Indian Iron & Steel Co; ASP/VISL Alloy Steel Plant & Visvesvaraya Iron & Steel Ltd; VSP Visakhapatnam Steel Plant (Rashtriya Ispat Nigam Ltd – spunoff from public sector to privatise


Tata Steel, established in Jamshedpur in 1907 is the first steel company to breakground to build a greenfield plant somewhere in India Pic courtesy Tata Steel

Steel Times International – July/August 2012 – XX




costs are cheaper.” JSW Steel’s management did indeed learn

from its first foray. In 2002, when the govern-ment and the national reserve bank came upwith a corporate debt-restructuring scheme,JSW embarked upon a round of expansion,pioneering a green technology that did notrequire coking coal: the world's India’s firstCorex plant. “We set up a blast furnace in 2003,and since then have never looked back,” saidJain. The works now operates two modestlysized blast furnaces each capable of producing900kt/y and two C-2000 Corex units each witha capacity of 800kt/y.

Jain’s analysis of market conditions has ledJSW Steel to maintain its primary focus on theIndian market. “While demand rises, supplyfaces constraints: setting up new steel plants inIndia is not easy – there are serious land, socialand infrastructure issues – which means thatthe country will continue to be a net steelimporter,” said Jain.

As part of its capacity increase programme,JSW is commissioning an extra 2Mt/y of capac-ity at its Vijayanagar plant in 2012-13, and thecompany aims to produce 34Mt/y by 2020, withgreenfield integrated steel plants coming up inWest Bengal and Jharkhand.

JSW steel has been one of the earliest moversin promoting steel use in India’s rural areas.“When the industry opened up after economicliberalisation, steel only reached urban areas,and there was a further problem of poor knowl-edge of steel use in the countryside,” said Jain.“The first thing JSW did was to improve steelavailability: we placed stockyards in remoteareas, with all of our products made available.Simultaneously, JSW has been promoting theuse of steel, and our goal is to double our num-ber of stockyards within 24 months.”

Essar SteelEssar Steel was one of the first companies inthe private sector to move into steel productionafter the government liberalized India’s econo-my in the 1990s. Although 80% of Essar Steel’sbusiness is local, Essar is present in over 30countries, an attribute that Essar claims enablesit to understand global business and how prod-uct portfolios change.

In India, Essar Steel is expanding its capacityfrom 4Mt/y to 10Mt/y, and is now in the stageof commissioning new plants and ramping upto production.

Like JSW, it is not forgetting the rural market.Through its pioneering distribution model,Essar Steel has taken the lead in addressing thediscrepancy between rural and urban steel con-sumption. “We were the first to determine thatthe steel intensity of India was low compared tothe rest of the world. This was not becausethere was no demand for steel, but because itwas difficult for people to get hold of it,” Essar

Steel’s former CEO and current board memberMalay Mukherjee told us. “Our retail outletsare close to customers, with materials availablein small packs, giving access to anyone within afive to 10km radius to quality products.”

At the time of writing, Essar Steel had sevenservice centres located in India’s industrialzones, and more than 375 retail centres. Largerretail outlets belong to the company, whilesmaller ones are franchised. “It is an idealmodel that we believe works in creating steelintensity and availability to customers,” saidMukerjee.

Bhushan SteelWhile the mixed fortunes of large scale foreigninvestment into greenfield projects, such as thatof ArcelorMittal and Posco, may have garneredmuch media attention, investment in the formof technical tie-ups between Indian steel-pro-ducers and foreign, particularly Japanese, com-panies, have enjoyed much greater success.

Bhushan, located in the state of Orissa, isunusual as a large scale producer in that it pro-duces DRI using coal which is then melted in anelectric arc furnace (EAF) which, unlike theinduction furnace, permits refining to takeplace. Bhushan has eight DRI kilns each of500t/day capacity.

The formation of the partnership betweenrelative industry newcomer Bhushan Steel andJapanese giant Sumitomo in 1996 preceded thesubsequent collaborations of Nippon Steel andTata Steel, JSW Steel and JFE Steel, and SAILand Kobe Steel. “Bhushan Steel was the first torealise the potential of this kind of arrange-ment,” said Bhushan Steel's CFO NithinJohari. “Our partnership with Sumitomoallowed us to enter into auto-grade steel in thefirst place.”

The automotive market is considered to beone of the key growth destinations for Indiansteel production, with the largest players nowpresent in the country. Through its collabora-tion with Sumitomo, Bhushan Steel has pene-trated more than most into the automotive sec-tor's niche markets. “Steel is usually regarded asa commodity but we are not a commodity play-er,” said Johari.

Expanding on the company’s current rangeof flat products for the automotive industry,Bhushan Steel has signalled its intention to setup an advanced pickling line coupled with tan-dem cold mill and continuous annealing line(PLTCM & CAL) facility at Orissa, with acapacity of 2Mt/y. This line will cater to therequirements of the automobile industry: byincreasing the strength of steel, thinner sectionscan be used thus reducing the weight enablingreduced fuel consumption. “We have alreadyfinalised the technology side, and are nowworking on the engineering, and we will startphysical construction sometime in January

those in India, the UK, the Netherlands,Thailand, Singapore, China and Australia.Operating companies within the Group includeTata Steel Ltd (India), Tata Steel Europe Ltd(formerly Corus), NatSteel, and Tata SteelThailand (formerly Millennium Steel).

Within India, Tata Steel started constructionof a greenfield integrated site at Kalinganagar,Orissa state in January 2011. This is the firstgreenfield project to be started in India formany years. Phase 1 of production due to startin 2013-14 will have a capacity of 3.5Mt/y andthe second phase, to be commissioned in 2015,will increase this to 5.5Mt/y. The plant will pro-duce flat products.

At Tata’s Jamshedpur works Jharkhand state,north east India, output reached 3.54Mt ofcrude steel and 3.46Mt of saleable steel in FY2010-11, up 8.1% year-on-year. The company isinvesting in new plant at Jamshedpur includinga second roller hearth furnace for its thin slabcaster and rolling line.

Tata Steel has signed an agreement withNippon Steel Corp to form a joint venture tobuild a continuous annealing and processingline (CAPL). The CAPL will have a productioncapacity of 600kt/y and should start operatingin 2013. The two companies plan to discuss fur-ther collaboration in fields such as galvanizinglines for auto sheet or upstream operations.

JSW Steel The Jindal Organization, set up in 1970 by thesteel visionary O P Jindal and today incorporat-ing Jindal Stainless Ltd, Jindal SAW Ltd, JindalSteel and Power Ltd (JSPL) and Jindal SouthWest (JSW) Steel Ltd, is regarded as one ofIndia's most important steel powerhouses. Thegroup has grown from an indigenous single-unitsteel plant in Hisar, Haryana into a multi-billiondollar, multi-locational and multi-product steelconglomerate.

Today, JSW Steel, headed by Sajjin Jindal, isIndia’s largest private sector steel company interms of installed capacity and one of the low-est cost steel producers in the world. However,the journey has not been easy for the group.Building on the Jindals’ expertise in the steelsector, JSW’s former incarnation JindalVijayanagar Steel Ltd set up its first plant in theBellary-Hospetarea in the south-west state ofKarnataka in 1995. Following the Asian finan-cial crash of 1998, however, and the bursting ofthe dot-com bubble around 2000, the hot-rolled steel price dropped to $145 and the newplayer was in trouble.

“JSW made the mistake of investing duringthe peak of the economic cycle the first timeround,” said JSW Steel’s head of corporatestrategy Prashant Jain. “The management has(now) learnt to foresee market changes andadjusted our corporate strategy towards makinginvestments during recession years when capital

Prashant Jain JSW Steel’s head of corporate strategy

Jindal South West is India’s largest private sector steel company in terms of installed capacity and oneof the lowest cost producers in the world Pic Courtesy JSW





ern part of the country based on natural gas.Therefore, for the first time in the world, JSPLhas entered into a technological change for pro-ducing DRI by coal gas (syngas),” said Sharma.

Should JSPL’s syngas project prove a successwhen it comes on stream in August 2012, it willrepresent another step change in reducing theindustry’s dependence on coking coal. JSPLalso plans to install India’s first HIsmelt plantby 2014. The product of a joint venture withRio Tinto. HIsmelt could provide a more effi-cient means of consuming iron ore fines usinglocal coals to produce hot metal. “I am sure thiswill prove to be the technology for tomorrow,”said Sharma.

The Corex process also offers an alternativemeans of supplying gas to a DRI shaft furnaceand such a coupling has been operating atSaldanha in South Africa for many years.

FINEXPosco’s beleaguered Orissa project is not onlynotable for the size of investment it entails. TheOrissa facility is set to be the world’s first steelplant to employ solely Finex technology.

Finex, developed by Posco in partnershipwith Siemens VAI, provides another means tobypass the need for coking coal and allows thedirect use of iron ore fines and non-coking coalas feedstock. The process uses fine iron orecharged in a series of fluidised-bed reactors.The ore cascades down through each in turnmeeting the hot reducing gases from a coal gasi-fier and melter below. The ore is reduced toDRI which is then hot-compacted and trans-ferred to a charging bin positioned above themelter gasifier, from where it is charged by grav-ity into the melter gasifier where reduction iscompleted and it is melted. The tapped prod-uct, liquid hot metal, is equivalent in quality tothe hot metal produced in a blast furnace orCorex plant.

Posco’s technology promises a dramaticreduction of SOx and NOx emissions, anddust, as compared to the blast furnace route.This reflects the emphasis India is placing onenvironmentally friendlier production methodsgoing forward. “In the past the focus was all onproduction rather than (preventing) pollution,but now new plants have to receive permissionfrom environmental organisations,” saidNavinender Gupta, chief general manager atKorus Engineering Solutions. “Environmentalconsiderations are an integral part of invest-ment, without which you cannot get your plantto run.”

While Finex has the potential to change theface of the Indian steel industry, it is still com-mercially being optimised. A 1.5Mt/y commer-cial plant started operations at Posco’s PohangWorks in South Korea in April 2007 and theconstruction of a second 2Mt/y plant is underway at the same location. The industry’s fore-most engineers will be watching its applicationkeenly. “From an environmental point of view itdoes make sense,” said Dr Jens Kempken, SMSSiemag’s executive vice president for strategicproject development and an expert on method-ological engineering. “Finex is a unique solutionto the problem of what to do with this low qual-ity, high ash coal... [but] the capital expenditureis enormous, especially for the coal specifica-tion. We shall see whether this pays off or not.”

Pelletising ore finesOf the few really large miners in India, manyare steel producers with captive mines.However, more than 90% of India’s mines are

2013,” said Johari. Bhushan Steel expects to be in the position

to complete its project in Orissa in two and ahalf years from start of physical construction.

Engineering thefutureSyngasOf more than 350 DRI-based plants in India,all but seven make use of coal-fired rotary kilns.Rotary kilns are comparatively cheap and haveallowed numerous SME's to enter into steel-making, however such kilns rarely exceed200kt/y production capacity. Eventual steelquality is often compromised due to the use ofashy, sulphurous coal and low-grade iron orelumps.

The DRI produced using coal has a lower car-bon content of 0.2-0.3% than that produced bygas-based processes which makes it suitable forthe production of rebar for the constructionindustry. However, the induction furnaces usedto melt the DRI cannot refine the product in par-ticular leaving it high in the detrimental elementssulphur and phosphorus by modern standards.

Gas-based DRI plants enable a much greaterproduction capacity from a single site and onthe surface appear to be an ideal solution.However, while India has abundant thermalcoal, the country suffers from a shortage of nat-ural gas required for the gas-fired process. Thishas forced steel makers to import LNG at high

cost, negating the original benefit of avoidingthe coking coal intensive blast furnace route,and has meant that just seven natural gas-firedshaft furnace plants, including six MidrexDirect Reduction Modules, have been installedin the country up to now. These are at EssarSteel, Gujarat, the former Ispat Industries (nowJSW Ispat Steel following the taking of a41.29% stake by JSW in December 2010),Maharashtra state, west India and WelspunMaxsteel also in Maharashtra.

In December 2009, Jindal Steel & Power Ltd(JSPL) announced its intention to construct a1.8Mt/y Midrex DR plant with a Lurgi coalgasification plant to supply the reductant gas inAngul, Orissa. The Midrex module will paircommercially available gasification technologyfrom Lurgi of Germany, with a 7.15m diameterMidrex shaft furnace to produce DRI as a feedto an electric arc furnace.

“In the long run, the Angul plant will haveanother gas based DRI. It will be based on theHYL/Tenova technology at a capacity of 2.50Mt/y and one more Blast Furnace which willelevate the plant to 12Mt/y. We are expectingthis quantity in Angul by 2017,” said VRSharma, JSPL’s CEO and deputy managingdirector, steel business.

JSPL’s project will be the first time a Lurgigasifier is paired with a Midrex shaft furnaceand will effectively enable the production ofsynthetic gas – or ‘syngas’ – from India’sdomestic thermal coal to be used in the steel-making process. “India is short of natural gasand it is impossible to produce DRI in the east-


Bushan Steel isoperating eight coalbased DRI kilnsmelting the productin an EAFPic courtesyBushan Steel


Ore fine Non-coking coalHeat

exchanger

Fluidizedbed reactor

Meltergasifier Oxygen

Hot DRIcompaction

Coal briquettes

Power plant

Oxygen plant

CO2removal

PCI

R4

R3R2

R1

Process flow ofFinex



owned by small merchant miners with miningcapacities of around 1.5Mt/y. Kolkata basedengineering company Hari Machines, in part-nership with Siemens, has come up with a newpelletisation technology specifically targeted atsmall merchant miners with a pelletising needof 1Mt/y to 2.5Mt/y capacity. “Since we hadalready acquired technology in the field of ben-eficiation, grinding and pelletising, Siemensapproached our group for a tie-up on smallerpelletising plants. This is the best venture weare involved in, particularly in light of the gov-ernment’s restrictions on ore exports,” HariMachines’ managing director SabyasachiMishra told us.

Initially focused on contract manufacturing,Hari Machines backwardly integrated into engi-neering when it became obvious the domesticsteel industry would require more technicalsolutions to advance. “Hari Machines wasbased in Orissa from 1971, so the natural incli-nation was to get into mineral processing basedindustries,” said Sabyasachi Mishra. “The ideawas not to manufacture based solely on cus-tomers' designs but to provide complete solu-tions. In order to do this we needed engineersand industry leading technologies, so HariMachines approached the global experts andformed joint ventures with them.”

Hari Machines is an example of an Indiancompany that, through a combination of techni-cal tie-ups and internal research and develop-ment initiatives, has moved up the value chainand helped equip the industry to face thedemands imposed upon it. Hari Machines willset up the largest beneficiation plant in Indiafor JSPL and has also supplied to Essar for theirproposed beneficiation plant in Orissa.

Foreign engineering Foreign engineering specialists have played anintegral role in the Indian steel industry’s devel-opment. Germany’s SMS Siemag, for example,has been in India for the last 30 years, and hasaround 80% market share in steelmaking tech-nologies and maintains a large workforce in thecountry.

As the market leader in plant engineering,SMS Siemag has come up with a variety ofmethods for optimising India’s resources mix“The raw materials situation here in India issuch that there is low quality iron ore that leadsto a poor quality of hot metal,” said DrKempken. “Therefore for the steelmakingplants that SMS has established in India we useConarc technology.”

Developed 20 years ago, Conarc is particular-ly suitable for the Indian steel scenario: of fourplants in the world using the technology, threeare in India and SMS recently provided a2.5Mt/y Conarc furnace for Essar’s Hazira steelcomplex.

The Conarc technology effectively combinesthe merits of an EAF with an oxygen converter(BOF). Indeed, the name is derived from‘CONverter ARCing’. It is a very flexibleprocess in terms of both charge mix and energyuse. Varying proportions of scrap, pig iron orDRI can be charged depending on the steelgrade to be produced as well as according to theavailability and prices of materials. An electricarc is used to melt the charge and an oxygenlance to decarburise the melt. And there is fur-ther flexibility when it comes to the type ofenergy used which can be electricity, coal or gas.

Another technology particularly appropriateto newly industrialised nations is SMS Siemag’sCompact Strip Production (CSP) technology

www.steeltimesint.com Steel Times International – July/August 2012 – XX

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which combines thin slab casting with an in-linerolling mill to produce hot rolled coil (HRC).This has also been employed in India as plantslook to optimise capacity. “The key advantage isless capital expenditure: you do not need a bigfurnace, so there is less energy consumption forheating the slab and for rolling, and productionyields are higher,” Kempken explained.

As India ramps up its production and contin-ues to modernise its processes, foreign engi-neering companies such as SMS Siemag,Siemens VAI, Danieli, and Outotec will contin-ue to play a key role. In addition, in recentyears, local engineering players have increasing-ly contributed to step-change innovation. “Upuntil now, steel grades have been imported andprocessed in India, however it is only a matterof time before India will do that on their own,”Kempken told us.

Brand IndiaPartha Majumder, the founder of EasternMetec, is one entrepreneur that has benefitedfrom the rising profile of Indian engineers over-seas. From an initial investment of around$5000 in 2006, Kolkata based Eastern Metechas reached an annual turnover of between$20M and $25M in just five years and has anextensive portfolio of overseas projects.

Eastern Metec focuses on the engineering offurnaces, and supplying coating, and castingequipment to the steel industry, as well as pro-viding consultancy services. The company hasprospered in both the domestic and interna-tional markets in part thanks to a series of suc-


base for after sales service support for ourgauges.,” O P Garg, executive director at JaschIndustries told us.

In addition to the company ’s recent presencein the US, Jasch Industries has an almost 100%market share in India, Pakistan, Bangladeshand the Philippines for coating gauges for gal-vanizing lines, and an almost 90% market sharein China, alongside a significant presence inEurope. The company is looking to ramp up itspresence in the European market with anotheracquisition in the near future.

Jasch Industries’ facilities include a researchand development centre at its Sonepat factorywith a staff of 78, incorporating 25 research anddevelopment specialists. “Jasch Industriesproducts are not a onetime sale and so we needregular modernisation,” explained SinghChadha, “Everything, including the design ofPCB’s and even software, is done in-house.”

In the past Indian specialist equipment wasconsidered cost competitive but not necessarilyof internationally competitive quality. This per-ception made it difficult even for Indian com-panies with quality products to gain brand trac-tion. However, in part due to sustained invest-ment in research and development and the suc-cess of products such as Jasch’s gauges, ‘BrandIndia’ is gaining a much stronger reputation inglobal markets.

Steel futures While volatile metal prices have had repercus-sions across the strata of the Indian steel indus-try, the country’s steel traders are particularlyvulnerable. The introduction of steel futurestrading by financial institution NCDEX hasoffered traders a valuable hedge in the today'suncertain climate.

NCDEX, which is promoted by four leadingIndian financial institutions: the Life InsuranceCorporation of India; ICICI bank; the NationalBank for Education and Rural Development;and Credit Rating and Information Services,has pioneered a price discovery and registrationplatform for steel.

Unlike base metals, there is little precedentfor forward trading in ferrous metals: standard-isation is difficult because steel is an alloy, andhaving a standard is a pre-requisite for any formof futures trading. Furthermore, steel has var-ied applications across many sectors, and it ischallenging to bring so many disparate partici-pants together. Steel producers worldwide havebeen, and continue to be, adverse to the idea ofsteel futures. “They are unwilling to surrendertheir prices to somebody else,” Ramesh Iyer,vice president of business at NCDEX told us.

However, the Indian steel market is differ-ent. “Secondary steel companies comprisearound 60% of the market. They are sand-wiched between very volatile raw materialprices and equally volatile finished productprices”. Such small companies are vulnerable tochanges in input costs but are generally toosmall to do anything about them. It is this seg-ment that NCDEX took it upon itself toaddress. “While the primary industry followedthe international example, the secondary pro-ducers embraced our contracts. These are smallbusinessmen that know their limitations butwanted to be part of the steel industry so tookto hedging in it,” says Iyer.

NCDEX’s futures contracts are compulsorilydelivered, unlike some of the other exchanges,and see around 50 000t of goods exchanged permonth. Steel futures give producers, intermedi-aries and end consumers a real-time indication

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cessful collaborations with technology partners. A commitment to research and development

has been central to Majumder’s businessmodel. “We cannot follow Chinese companieswho made European contacts, copied theirtechnology and implement it in their own coun-try,” said Majumder. “In India we prefer towork together with international companies.”

Eastern Metec has mainly collaborated withoverseas companies on a project-by-projectbasis, but is now seeking longer-term partner-ships as it expand its product offering into slabcasting and rolling mill lines.

Indian specialist equipment suppliers are alsogaining brand traction overseas. In January2012, Indian company Jasch Industries, whichspecialises in gauging systems for flat products,augmented its growing global presence byacquiring one of its former competitors,Chicago-based Indev Gauging Systems.“Entering the market in the USA is challenging,so we acquired Indev to market our products inthe States; thereby providing us with a local



of price trends. One of the issues that makesteel futures trading so challenging is the widegrades and possible applications. However,NCDEX has been able to overcome this byfocussing on low carbon steel, which accountsfor 70%-80% of steel consumption in India'slargely construction-orientated market.

Black steel during chaosPopular rhetoric has it thus: Old World Europeis locked in a debt crisis, and the former NewWorld is absorbed in its own slow recovery.Economic power and influence have shiftedeast, and rests in the hands of the new NewWorld: Asia, and in particular two formidableBRIC’s: India and China.

However, this east/west dichotomy has itslimitations. While European traders may haveonce rounded the Horn of Africa to acquire thebounties of India and China, their contempo-rary Chinese and Indian counterparts areunlikely to be guilty of such an oversight: Africais not a continent to be circumnavigated.

African mines are an increasingly viable alter-native to Australia for India’s raw material con-strained steelmakers. While Australia will con-tinue to play a vital roll in supplying raw mate-rials, and particularly coking coal, to India,never-the-less Indian steel producers have beenaggressive in acquiring iron ore and coking coalassets in Africa. These include JSPL, JSW andTata Steel in Mozambique, while Essar Steelhas invested in Zimbabwe, and SAIL in SouthAfrica.

‘But the advance of Indian steelmakers' intoAfrica goes beyond basic acquisitions.Steelmaking sub-Sahara is practically limited toSouth Africa. There is a vast landscape inbetween, with a population of a billion peoplewith very limited access to steel products. “Wemake a mistake by looking at Africa as just aresource base,” Malay Mukherjee, former CEOof Essar Steel told us.

“Zimbabwe fits far more into our vision forAfrica than it would be if we were just lookingat a mine. In addition to getting a steel mill upand running, we will look at meeting demandby adopting our Indian model of service andretail centres,” said Mukherhjee.

If India’s producers and service companiesare successful in navigating their own domesticchallenges: complex land rights issues, infra-structure constraints, and extremely low steelconsumption in rural markets, they will not onlypropel their economy forward and raise thematerial standard of living for millions, but alsoprove themselves uniquely equipped to servicethe highly prospective African market. It is pre-cisely this struggle against challenging political,economic, and environmental conditions thathas galvanized Indian steel players to take onthe world. �

www.steeltimesint.com Steel Times International – July/August 2012 – XX

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