1. Shipping Steel- Challenges Going
Forward

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. 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*
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** 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. 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. Essar Steel
Hazira… India’s
largest
single location
flat steel plant
with 10MPTA
capacity

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. 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. 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. 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.
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11. 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
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12. 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
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13. 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
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14. 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.
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15. 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
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16. 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.
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17. 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.
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18. 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
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19. Thank You
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