Steel Authority of India Ltd (SAIL) is exiting semi-finished steel completely and shifting its product mix to have more value-added steel products. The steelmaker is looking at increasing realisations by at least 8% through the portfolio rejig. SAIL’s plan focuses on a wider product mix with emphasis on value-added products and improved product quality.
Confirming the plan, a SAIL spokesperson said, “Yes, we are exiting the semi-steel segment and our portfolio, post expansion, will be value-added steel.”He said the company has increased value-added steel production over the past three years. “We have added many new value-added products and will do so going forward.”
According to a report by JM Financial dated December 7, “Some new products in the pipeline are: SAW pipes for fast-growing oil & gas sector, CRGO steel, wide-flange beams for construction and colour-coated sheets.”
Abhay Laijawala and Anuj Singla of Deutsche Bank, in a December 7 report, said, “SAIL currently produces 18% of its saleable steel in the form of semi-finished steel. Over FY09-FY12, it plans to eliminate its sales of semis entirely. The company plans to add more rolling and finishing mills across its integrated steel plants. Progressive increase in finished steels will likely help raise the weighted average realisation on saleable steel.”
The company is currently expanding capacity to 26 million tonnes (mt) from 15 mt by 2012 end. The steelmaker is looking to grow via quality competitiveness and will spend Rs 54,000 crore for expansion and modernisation.
Two of the largest capacity expansions are being done at its most profitable Bhilai and Bokaro plants. The Bhilai plant is ramping up capacity by 2 mt and is SAIL’s largest plant and sole domestic producer of rails and heavy steel plates. The Bokaro plant is an exclusive manufacturer of flat steel and will add 3 mt capacity over the next three years.
Analysts are betting big on Sail’s IISCO plant at Burnpur in West Bengal where SAIL produces a large number of steel structurals and special sections including pig iron. The plant is expanding hot metal capacity will be raised to 2.5 million tonne by 2011-12.
Abhijit Mitra of ICICI Securities, in a report date December 9, said, “The plant will be equipped to produce high-end structural steels and low-carbon, high-margin steel (ball bearings).” The company plans to produce 1 million tonne of special quality steel.
Laijawala and Singla of Deutsche Bank said, “SAIL’s Burnpur expansion promises to become not only SAIL’s most efficient, modern and cost competitive facility, but also emerge as India’s top three most efficient steel facilities.”
Deutsche Bank believes that SAIL will be able to reduce operating costs in range of 15-20% after the modernisation plan. Also, SAIL plans to produce all of its steel through the modern continuous casting route post expansion.
Deutsche Bank said, “At the FY09 end, SAIL still produced 34% of its steel through the outdated ingot casting route.”
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