Mr Ranjit Mathure - Shipping Steel Challenges Going Forward


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  • Objective: Describe background of the group Time: 1 min Speaker: VATalking PointsLeadership positions in 4 verticals various sectors include:Energy:Listed on LSERecent acquisition of Stanlow Refinery in UKSteel:More detail on the next few pages/slidesInfrastructure:Projects – EPC for Essar & Third partyPortsConcessions – recent contract for road development in IndiaServices:Telecom – Recent stake sale in tVodafone Essar Indian telecom business – had over 100 mn subscribersShipping & Oilfield ServicesBPO businesses - Aegis
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  • Mr Ranjit Mathure - Shipping Steel Challenges Going Forward

    1. 1. Shipping Steel- Challenges Going Forward
    2. 2. A $39 billion enterprise Over 73,000 Over 75,000 employees employees Spread across 25 countries With presence in steel I energy I infrastructure I services
    3. 3. A leading diversified conglomerate Essar Group 76% 100% 100% Steel Energy ** 100% Infrastructure Services Oil & Gas Resources Projects Shipping*** 2,109 MMBOE reserves Iron Ore Engineering, Procurement & 26 ships. 9 new ships on order 39 MMTPA refining capacity • 2 Bn tonnes of reserves Construction 13 rigs incl. 1 semisubmersible 1,400 retail outlets • 80% stake in NewZim Minerals 2nd largest equipment bank in India Fleet of 5,000 chartered trucks • 27 MTPA pellet plants Ports** BPO Coal • 210 MT coal reserves 88 MTPA operational capacity 50,000+ Aegis employees 70 MTPA under construction 50 global Aegis locations Steel Making & Marketing 158 MTPA total capacity Real Estate 14 MTPA steel-making capacity Concessions 5 MTPA processing and US$ 300 million road concession Portfolio of approx. 16mn sq.ft. in residential, commercial and mixed use projects distribution capacity from NHAI 375+ retail outlets under the Aims to create a US$ 4 billion Essar Hypermart brand portfolio in the next 2-3 years Power 450 MT coal reserves 1,600 MW operational capacity Going upto 4,500 MW by 2012 and 6700 MW by 2014 3,067 employees US$ 19.45 bn revenue* 9,161 employees US$ 6.24 bn revenue* *Aggregate figure- includes inter group transactions of $2.6bn for March 2012; Telecom Services 3,505 employees US$ 2.37 bn revenue* 03 ** Listed on LSE, GSM services in Kenya with 3 mn subscribers 1,200 branded retail outlets under The MobileStore in India 61,108 employees US$ 1.89 bn revenue* ***Listed on BSE & NSE
    4. 4. Essar Steel India •10 MTPA steel making capacity at Hazira making it the largest single location plant in India •Secure raw material supply with pellet capacity of 8 MTPA expanding to 20 MTPA through 12 MTPA pellet facility at Paradeep, Orissa •State-of-the-art Pipe & Plate Mills •One of the world’s largest processing & distribution and retailer network (Hypermarts)
    5. 5. Essar Steel Hazira… India’s largest single location flat steel plant with 10MPTA capacity
    6. 6. The Essar Steel edge •1/3rd of India’s flat steel capacity •One of the greenest steel producers in the world •Three different iron making technologies – Blast furnace, Corex, HBI/DRI •Strong downstream capability including a world class plate and pipe mill • Best HSE performance as per the Economic Times – IMEA • India’s largest chain of Processing and Distribution centers for customised steel solutions •India’s first and one of the largest steel retail 350+ Hypermart across India chainstores
    7. 7. Producing the entire range of flat steel Cold Rolled 2 MTPA Hot Rolled 7.1 MTPA HDGI Color Coated 1 MTPA 0.4 MTPA Thickness0.4 -3.2mm Thickness0.8-20mm Thickness 0.18-3mm Width 2001525mm Width 8002000mm Width2001340mm Thickness 0.25-1.2 mm Width 3001310mm Plates 1.5 MTPA Thickness 5-150mm Width 11004950mm Pipes 0.6 MTPA Diameter 406-1524/ 2510mm Thickness6-65/25.4 mm
    8. 8. Key facilities at Essar Steel Compact Strip Production Mill Equipment supplied by SMS Siemag, Germany and Tenova (LOI), Italy. Thickness of up to 0.8mm - the thinnest in India Plate Mill Technology from Seimens VAI, Stein-Heurtley, France and Wheelabrator, Waldrich, LOI Germany. API (License No.: 2H – 0023; 2W – 0016; 2Y – 0012), ASTN, JIS, EN, IS grades in widths up to 5m, the widest in India Pipe Mill State of the art Technology from Linsinger, Urhan& Schull, GE. Germany Phamitech, YSD China
    9. 9. Overview: Logistics In India • Many years of growth in India (GDP growing at 7 to 8%) has resulted in significant increase in volume of freight traffic moved. • The Logistics Sector in India is pegged to be between 90 to 120 Billion USD. • The industry is estimated to be growing at 15%. • Due to immense growth in the Infrastructure in India, India is considered to emerge as major logistics hub in future as per Emerging Market Survey, 2011 conducted by transport intelligence. 9
    10. 10. Steel Trade • Till 2006-07 India used to be a Net Exporter of Finished Steel. • Since 2007-08, India has become a Net Importer of Steel. • Slowly and Steadily again, India is approaching a Trade Balance. • By 2017-18, the Demand and capacity of finished steel in India is expected to be close to 110 Million MT. • The Supply Drivers are however constrained by following aspects: – Demand – Financials – Input Raw Materials Security – Logistics 11
    11. 11. Indian Steel - Logistics • Most of the Steel Plants are in Small and Congested Iron Belt • Slow Growth of Road Rail Networks • Road/ Rail Cost Equilibrium – Road Movement is 1.5 Times costlier • Wider Plates and Long Rails – Still there is no logistic solution for movement of these products. • Port and Shipping Growth Lagging Behind – Coastal Movement is miniscule Result: One Ton of Steel – Four Tons of Movement 12
    12. 12. Issues in Road Transportation of Steel In India Road has become the predominant mode of Steel Movement with nearly 65% of cargo moved by Road in India as compared to 37% in USA and 22% in China. The major challenges faced are: • Inadequate Road Network Coverage/ High Transit Time: – National Highways constitute only 2% of the Road Network of India however they carry 40% of the total traffic. (Results in huge Transit time of Steel from Ex Factory to Destination) • Poor Road Quality/ Accessibility Issues: – Motorable roads in India is still less than 10% of total roads in India which makes Steel Movement to North and Eastern part of the country very difficult. • High Cost of Transportation Fuel: – The high cost of Transportation fuels such as Diesel etc. and non accessibility of roads in India makes Road transportation the costliest mode of transportation 13
    13. 13. Issues in Rail Transportation of Steel • • • Less Flexibility in carrying different type of products: – Special wagons are not easily available for carrying specialized products. For example special types of steel required for automobile production have to be carried by trucks as the existing wagons do not offer the kind of protection that these high value products require. – Wider Plates (Width >3200 mm) and Long Rails are also difficult to move in standard Wagons. Important Rail Networks are Oversaturated: – Additional lines on Existing important routes have increased by 6.6% since Independence, whereas the freight and passenger traffic has increased by 54% thereby making important rail networks over saturated. – Traffic for Railways for Steel Industry by 2020 would increase by 300%, thereby Important Rail networks would have to grow substantially. Rail Freight Tariffs in India are high: – Rail Freights in India is 4 Times that in USA thus again making Steel Transportation by Rail in India very costly increasing the intrinsic cost of Steel Delivered to Customers. 14
    14. 14. Port and Shipping Growth is Lagging Behind • High Turnaround Times at Ports resulting in high Transit time: – Ports in India have high turnaround times for Cargo Ships. – JNPT has 2 times the turnaround time of Colombo and Singapore Ports because of congestion on berths • Inadequate Depth of Ports: – The depth at many ports in India is not enough and dredging tenders take a long time in getting awarded. – As a result with the existing depths many ports are not able to attract very large vessels • Coastal Shipping has still not taken off: – Costal shipping in India is hampered by inadequate port and land side infrastructure which hampers large scale use of it for freight movement especially Steel 15
    15. 15. Challenges pertaining to Sea Shipments • Freight Rates – Reasonable freights required to gain a competitive edge. – Longer term charter of freight arrangements needed to have longer term visibility and greater element of certainty. • Sailing Times – Buyers expect shorter sailing times and quicker deliveries to hedge against the excessive volatility prevalent in the steel trade. • Prevention of Quality Claims – The shipment must ensure maintenance of product quality till delivery of goods to prevent susceptibility to quality claims. • Documentation – Prompt and efficient documentation necessary to prevent vessel delays and resultant costs due to demurrage. 16
    16. 16. Impact of Challenges Faced • With regards to cost of spends on logistics, India’s Logistics sector account of 13% of GDP of India which is much higher than that in US (9%), Europe (10%), Japan (11%). • 30% of total logistics cost in India is attributable to various types of losses such as loss in transit time, poor warehousing facilities etc. • The logistics cost as a percentage of total product cost in India is 4-5 times that in Developed countries. Thus intrinsically increasing the Delivered value of Steel. 17
    17. 17. Initiatives taken by Essar Steel • Essar Logistics : a sister organization who does freighting (road/rail), documentation, handling etc • Essar Shipping : a sister organization who takes care of ocean freighting • Essar Bulk Terminal : also a sister organization involved in developing port facilities at plant site and destination ports. Also takes care of developing rail infrastructure to ports at plant site 18
    18. 18. Thank You 19