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| Edited By: Swati Khandelwal |Source: Zee Business |Updated: Jun 17, 2019, 06:30 AM IST
Improvement in operational parameters and cost reduction helped Steel Authority of India Ltd (SAIL) post healthy profits despite a fall in prices. Chairman Anil Kumar Chaudhary, in an interview with Swati Khandelwal, said this cost reduction process will continue and the steel major will focus on the value-added products as they will provide more realisation and increase income.
Your observation related to record production is correct. Even the steel prices have fallen significantly, especially in the last five months of fiscal 2018-19. It was a difficult period for the steel industry as we have seen several ups and downs. We didn't move up but went down definitely. For instance, the prices that we were getting in the month of October 2018 went down by Rs 3,500 in March 2019; but we were able to post good profits in the third and fourth quarters. In the third quarter, our profit before tax (PBT) stood at around Rs 950 crore and about Rs 700 crore in the fourth quarter. These numbers were achieved by improving our operational parameters and reducing the cost. An important aspect of the steel industry is that costs can be brought down considerably by increasing production volumes. This happens because the fixed costs get divided among the larger number of units, which reduces the per tonne cost of production. This is what we did mainly in the last two months of the last fiscal as we produced nearly 2.950 million tonnes in this period. Besides, increased production also improves our techno-economic parameters. We have seen that there was an improvement in blast furnace productivity, CDI (coal dust injection) consumption, specific energy consumption or concast production. It helped us in reducing our cost by Rs 2,300 crore in the fourth quarter when compared to the third quarter. This is a reason that we remained in profit despite the fall in prices. Secondly, this cost reduction process will continue in the future also. In fact, the company has given a cost reduction target of Rs 3,000-3,500 crore to its employees in the current financial year and we are working on it.
In the steel industry, value addition provides more opportunity to earn. For instance, if you add Rs 1,000 in the industry, then it will provide returns up to Rs 2,000-2,500. This means that it has a multiplier factor of 1-1.5 times. The company is now putting more emphasis on increasing value-added products. Our value-added production grew by 12-13% last year. In addition, the company also developed several new products like NPV 759 and LSV wheels. The company has increased the production of rail products, which is a high value-added product for SAIL, to 9,85,000 tonnes. Similarly, this year, we will focus on increasing the production of boiler-quality steel at Rourkela steel plant and high-carbon wire rod at IISCO steel plant. I wish that every product being developed at the new mills is value-added product as it will provide more realisation and increase our income as well as profit.
The production took a hit at Bhilai steel plant. Actually, one of our blast furnaces faced some problem for two months, especially between June and August 2018, but things have returned back to normal and the plant has grabbed speed. I feel that we will be able to meet this year's production target of 6.2 million tonnes. As far as IISCO Steel plant (ISP) is concerned, it is the youngest member of the SAIL family and is majorly known for value-added products. We have decided not to produce any TMT in the wire rod mill (WRM). The mill will be engaged only in the production of high value-added steel. It has a production target of 2.4 million tonnes for the year and I think we will be able to meet it. In fact, the plant is doing well at present and its production will be increased in times to come. However, the plant faced certain problems in the month of April, but it has been resolved. So I think that Bhilai and IISCO, which were not able to perform last year, will be doing well in the recent future.
Steel prices have remained stagnant. The companies haven't received ample room to increase the prices since November 2018. Prices were hiked slightly in the month of February, which was rolled over in March. Later, we had to reduce the prices in April and May consecutively. On the other hand, the input cost is increasing; the cost of iron-ore has reached the mark of $105 per tonne while the imported coal, which stood at $77-78 a tonne in 2016, has gone up to $205 per tonne. Such an increase is putting pressure on our cost and that's why we will have to raise the prices to some extent to neutralise the pressure on our cost as we don't have any other ways to handle the pressure. However, we wish that cheap steel is available in the country, as far as possible, and we try to do it. But the increase in the input cost will pressurise us to increase the output cost. Otherwise, we will not be able to serve the nation.
The export scenario has been a good one, especially for SAIL. Last year, we exported 7.63 lakh tonnes material, which was a record of 13 years, and earned around Rs 3,000 crore from it. We exported 2.28 lakh tonnes in the last quarter of FY19 and earned Rs 1,485 crore.
We want to grow in every section in FY20. For production, we have set a target of 17.5 million tonnes; last year, it stood at 15.1 million tonnes. Similarly, we have a sales target of 17 million tonnes; last year, it stood at 14.8 million tonnes. When it comes to turnover, it is Rs 79,000 crore. The target is ambitious in nature because I feel that if the target is ambitious, one will make all efforts to achieve it. I feel we will achieve this target because there is a positivity in the steel sector and our people are enthusiastic to carry forward with the legacy that we had and remove the pressure of the last three years. So that we can reach new heights. Amid factors like the enthusiasm of our people, market positivity and the plans of the new government, which haven't unfolded yet, I think that we will be able to meet this ambitious target.
— Zee Media Newsroom
