SURESH P. IYENGAR, ANIL URS
THE HINDU BUSINESS LINE
Larger ones re-jig debt, rework product mix to beat slowdown
MUMBAI/BANGALORE, SEPT. 15:
The economic slowdown has hit the small steel companies more than the established ones. Small and medium units, especially in iron ore-rich Karnataka, are the worst hit.
The Karnataka Iron and Steel Manufacturers’ Association claims that almost half of the 60 sponge iron plants in the State have shut shop for want of iron ore. A few, such as Sathavahana Ispat, Kirloskar Ferrous, Kalyani Steels, Unimetal Ispat, Sandur Manganese and Iron Ore and Sandur Laminates, have suspended their operations partially.
K.R. Shetty, Vice-President (Exports), Vibhutigudda Mines (Bellary), said about 50 per cent of the small-scale units, especially in the Bellary, Hospet and Sandur region, are on the verge of closure due to iron ore shortage.
The Association has requested NMDC to earmark some quantity of iron ore that is e-auctioned for the small units as they create employment at the local level.
The mining operations in Karnataka resumed recently after an year-long ban imposed by the Supreme Court.
Appreciating the transparent iron ore e-auction, Narendrakumar Baldota, Chairman and Managing Director, MSPL, said the steel and pellet plants with captive mines should be exempted from iron ore e-auction and be allowed to use their own ore to feed to their plants.
NO MORE ATTRACTIVE
Speaking at the recent Mining Engineers’ Association of India summit, he said mining is no more an attractive business with the cost of production and royalty rates increasing tremendously in the last few years and 15 per cent of the price dedicated for social activities.
While small companies are struggling to keep their head above water, the larger ones are busy re-jigging debt to reworking product mix. JSW Steel, one of the largest steel plants in Karnataka, recently commissioned a two-million-tonne per annum beneficiation plant to enhance the quality of low-grade iron ore being supplied at the e-auction conducted in Karnataka. The company has been operating its Vijayanagar unit at 80 per cent utilisation due to iron ore shortage.
Tata Steel saved Rs 1,100 crore last fiscal by implementing cost saving measures and spotting improvement opportunity across the value chain.
Nicolas J. Sowar, Global Metal Sector Leader of Deloitte, feels companies should manage their balance sheet by reducing working capital besides improving efficiency to beat the slowdown blues.
“You need to look at supply chain from the start to finish, logistics, on maintaining the fixed assets, on how those are operating. Every employee has to understand the key matrix to achieving cost advantages,” he said.
MARKETING STRATEGY
With steel imports turning costlier after the sharp depreciation of the rupee against dollar, JSW Steel targets to cater this burgeoning demand.
Jayant Acharya, Director, Commercial and Marketing, JSW Steel, said though the conventional steel demand has slowed down, there is ample opportunity in the import replacement segment. “We are targeting to produce high-grade steel that commands better margin,” he added.
Tata Steel, which has been adding a million tonne capacity since last year, tweaked its marketing initiative to expand its market share in the automobile sector, which has been hit by poor demand. The company’s production capacity at Jamshedpur is expected to touch nine million tonnes this year going up to 10 million tonnes next year.
“Despite slowdown in the automobile sector, our share in the automotive segment has actually gone up. In fact, it is being used in more and more new models that are being launched,” said H.M. Nerurkar, Managing Director, Tata Steel, in a recent interaction with this newspaper.
TIGHTENING COST
Having done what it takes to maintain the market share, steel companies are tightening their cost of funds. Ruia-owned Essar Steel, which is known for rolling out specialised steel from its Hazira plant in Gujarat, has raised $3 billion (Rs 18,000 crore) in the last two months to repay its high-cost rupee debt.
The company expects to save Rs 1,300 crore per annum by prepaying some of the rupee loan and extending the loan maturity period to 6.5 years from 3.5 years.
The expansion of the facilities at Hazira was undertaken when the rupee was trading at Rs 40 a dollar and now the exchange rate has exceeded Rs 60 a dollar, said Ashutosh Agarwala, CFO and Director (Finance), Essar Steel, which is a low cost steel producer in India.
However, many small companies find it difficult to raise funds abroad. They embark on cost-cutting mode by curbing travel expenses and postpone annual salary hike for employees, besides reducing capacity utilisation.
Basant Poddar, Vice-President, Federation of Indian Mineral Industries and Managing Director of MEL, Chitradurga, said about 30-50 per cent of the steel mills in Karnataka have resorted to periodic shut down due to uncertainty of raw material supplies.
“While 50 per cent of the small and medium steel plants are on the verge of closure, many of them have reduced their workforce by half,” he added.
STEEL PRICE HIKE
The slowdown in demand has not deterred companies from raising prices. Essar Steel increased prices by Rs 1,000-1,200 a tonne from August 1, while JSW Steel plans to follow suit.
Steel companies are dependent on imported coking coal to meet their fuel needs. The weak rupee has pushed by the import bills. Besides, the cost of domestic iron ore prices have gone up due to acute shortage in supply after ban on iron ore mining in Goa. BMM Ispat, for example, is expected to put up a coal gassifier to reduce coal consumption in the next 15-20 days.
(With inputs from Shishir Sinha in New Delhi)
THE HINDU BUSINESS LINE
Larger ones re-jig debt, rework product mix to beat slowdown
MUMBAI/BANGALORE, SEPT. 15:
The economic slowdown has hit the small steel companies more than the established ones. Small and medium units, especially in iron ore-rich Karnataka, are the worst hit.
The Karnataka Iron and Steel Manufacturers’ Association claims that almost half of the 60 sponge iron plants in the State have shut shop for want of iron ore. A few, such as Sathavahana Ispat, Kirloskar Ferrous, Kalyani Steels, Unimetal Ispat, Sandur Manganese and Iron Ore and Sandur Laminates, have suspended their operations partially.
K.R. Shetty, Vice-President (Exports), Vibhutigudda Mines (Bellary), said about 50 per cent of the small-scale units, especially in the Bellary, Hospet and Sandur region, are on the verge of closure due to iron ore shortage.
The Association has requested NMDC to earmark some quantity of iron ore that is e-auctioned for the small units as they create employment at the local level.
The mining operations in Karnataka resumed recently after an year-long ban imposed by the Supreme Court.
Appreciating the transparent iron ore e-auction, Narendrakumar Baldota, Chairman and Managing Director, MSPL, said the steel and pellet plants with captive mines should be exempted from iron ore e-auction and be allowed to use their own ore to feed to their plants.
NO MORE ATTRACTIVE
Speaking at the recent Mining Engineers’ Association of India summit, he said mining is no more an attractive business with the cost of production and royalty rates increasing tremendously in the last few years and 15 per cent of the price dedicated for social activities.
While small companies are struggling to keep their head above water, the larger ones are busy re-jigging debt to reworking product mix. JSW Steel, one of the largest steel plants in Karnataka, recently commissioned a two-million-tonne per annum beneficiation plant to enhance the quality of low-grade iron ore being supplied at the e-auction conducted in Karnataka. The company has been operating its Vijayanagar unit at 80 per cent utilisation due to iron ore shortage.
Tata Steel saved Rs 1,100 crore last fiscal by implementing cost saving measures and spotting improvement opportunity across the value chain.
Nicolas J. Sowar, Global Metal Sector Leader of Deloitte, feels companies should manage their balance sheet by reducing working capital besides improving efficiency to beat the slowdown blues.
“You need to look at supply chain from the start to finish, logistics, on maintaining the fixed assets, on how those are operating. Every employee has to understand the key matrix to achieving cost advantages,” he said.
MARKETING STRATEGY
With steel imports turning costlier after the sharp depreciation of the rupee against dollar, JSW Steel targets to cater this burgeoning demand.
Jayant Acharya, Director, Commercial and Marketing, JSW Steel, said though the conventional steel demand has slowed down, there is ample opportunity in the import replacement segment. “We are targeting to produce high-grade steel that commands better margin,” he added.
Tata Steel, which has been adding a million tonne capacity since last year, tweaked its marketing initiative to expand its market share in the automobile sector, which has been hit by poor demand. The company’s production capacity at Jamshedpur is expected to touch nine million tonnes this year going up to 10 million tonnes next year.
“Despite slowdown in the automobile sector, our share in the automotive segment has actually gone up. In fact, it is being used in more and more new models that are being launched,” said H.M. Nerurkar, Managing Director, Tata Steel, in a recent interaction with this newspaper.
TIGHTENING COST
Having done what it takes to maintain the market share, steel companies are tightening their cost of funds. Ruia-owned Essar Steel, which is known for rolling out specialised steel from its Hazira plant in Gujarat, has raised $3 billion (Rs 18,000 crore) in the last two months to repay its high-cost rupee debt.
The company expects to save Rs 1,300 crore per annum by prepaying some of the rupee loan and extending the loan maturity period to 6.5 years from 3.5 years.
The expansion of the facilities at Hazira was undertaken when the rupee was trading at Rs 40 a dollar and now the exchange rate has exceeded Rs 60 a dollar, said Ashutosh Agarwala, CFO and Director (Finance), Essar Steel, which is a low cost steel producer in India.
However, many small companies find it difficult to raise funds abroad. They embark on cost-cutting mode by curbing travel expenses and postpone annual salary hike for employees, besides reducing capacity utilisation.
Basant Poddar, Vice-President, Federation of Indian Mineral Industries and Managing Director of MEL, Chitradurga, said about 30-50 per cent of the steel mills in Karnataka have resorted to periodic shut down due to uncertainty of raw material supplies.
“While 50 per cent of the small and medium steel plants are on the verge of closure, many of them have reduced their workforce by half,” he added.
STEEL PRICE HIKE
The slowdown in demand has not deterred companies from raising prices. Essar Steel increased prices by Rs 1,000-1,200 a tonne from August 1, while JSW Steel plans to follow suit.
Steel companies are dependent on imported coking coal to meet their fuel needs. The weak rupee has pushed by the import bills. Besides, the cost of domestic iron ore prices have gone up due to acute shortage in supply after ban on iron ore mining in Goa. BMM Ispat, for example, is expected to put up a coal gassifier to reduce coal consumption in the next 15-20 days.
(With inputs from Shishir Sinha in New Delhi)
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