Malay Mukherjee, chief executive officer of Essar Steel, has seen the evolution of the steel industry and played an important part in shaping steel baron Lakshmi Niwas Mittal’s monolithic steel empire. Now at the helm of affairs of Essar Steel, a responsibility he assumed two years ago, Mukherjee takes pride in calling himself more of an industry guy than an Essar guy.
And it is this industry experience with which he is planning to take Essar to the next level of specialised steel making. In a chat with DNA, he talks about Essar’s current expansion programme at Hazira, issues related to de-linking of iron ore prices and iron ore exports from the point of view of employment. Excerpts:
What is Essar Steel’s growth plans for the next five years?
Essar Steel’s growth story is not only limited to tonnage. It is a different game for us. As you see the company’s distribution network was a pioneering concept in the Indian steel industry. Just like the concept of electric arc furnace for the production of flat steel products.
So our company is not only about assets but about intellectual property as well as the vision behind the growth.
Another aspect of Essar Steel is that it has always looked at steel manufacturing from a complete integration perspective. Today everybody is talking about beneficiation of iron ore while Essar got its beneficiation and pelletisation plant some 10 years back.
These are the aspects of Essar Steel which have been examples for others to follow and this is what Essar Steel wants to keep doing in the next five years also.
A lot of things are happening at Hazira as part of your capacity expansion programme. Can you elaborate on that?
Currently, Hazira has a total steel making capacity of 4.5 million tonnes per annum (mtpa) which is being increased to 10 mtpa.
First, in terms of backward integration, we are setting up a beneficiation plant at Orissa which will have a capacity of 12 mtpa of beneficiation with a slurry pipeline to Paradip. We are also setting up a 12 mtpa pellet plant, half of which is ready.
Second, a port concession has been taken from Paradip Port Trust which is being developed for evacuation of these pellets from Paradip to Hazira.
Now, at Hazira, for a 10 mtpa capacity, we require around 30 mtpa of total raw materials and also infrastructure for evacuation of the final product. So, the first step was to expand the port so that it is able to handle 35 mtpa of raw materials. This is already complete.
On the iron making side, we have added one more module for 1.8 mtpa for DRI (direct reduced iron or sponge iron). Plus, on the hot metal side, we have already added a blast furnace which is also 1.8 mtpa. Two Corex plants of 1.6 mtpa are also being set up. Only the commissioning of the Corex plants is left as we are expecting coal to come from Australia which is delayed due to floods in Australia.
On the steel making side, we have a 5 mtpa melt shop which consists of two twin arc furnaces. Out of this, first is already commissioned and operating. And the second is awaiting the start of Corex plant. Out of the 5 mtpa steel produced from the arc furnaces here, 1.6 mtpa will go to a plate mill which is already commissioned and currently producing close to 70,000-80,000 tonnes of finished product. Another 600,000 tonnes per annum of pipe mill is also commissioned.
The remaining 3.4 mtpa will be made into a continuous strip product, which will be made using three casters. Out of these, caster 1 is ready and operating, caster 2 is just about to be operationalised and caster 3 will be ready by December.
Since. all these assets need to ramp up, by end of current financial year we will be operating at 8 mtpa and by early next fiscal, we’ll reach 10 mtpa.
What are Essar Steel’s plans for the downstream sector?
Today, we have a total of six service centres operating which is an expansion from last year’s four and one more will soon be launched. Plus, we have about 600 retail distribution points known as Essar Hypermarts. We have opened such service centres to meet the requirements of smaller players and also to provide customised products to automotive sector players who want specialised panels.
What would be the company’s level of backward integration when you will have a capacity of 10 mtpa?
Our energy needs are divided and we are hedged in terms of our energy requirement. Our energy needs are natural gas, Corex coal, PCI coal and coking coal. Now just 20% of my energy need is through the coking coal route on the expanded capacity of 10 mtpa. We require Corex coal of about 17%, PCI coal is even less and natural gas requirement is about 7 million metric standard cubic metres per day (mmscmd). So, in a way it is advantageous for us because of our natural hedge. For iron ore, we do have concessions which are under exploration in Bailadila.
What is your vision till 2020?
See, a steel industry is driven largely by how the consumers of steel grow. So the vision is how to meet the standards of quality that will be demanded by high value customers. For us, as I said before, it is not about volumes alone. Our vision is to be able to supply to specialised segments where high quality and high strength steel is required. We want to be the leaders in that.
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