ArcelorMittal, the world’s largest steel producer, plans to make India and China the sourcing hub for its greenfield projects equipment to bring down overall costs.
Speaking on the sidelines of an event organised by the Confederation of Indian Industry (CII), ArcelorMittal Design & Engineering Centre CEO Pierre Jonette said: “Our main objective is to bring down the total project cost by 20-22 per cent across all the green projects. We have internally decided to increase sourcing from local low cost destinations for most of our greenfield projects.”
Jonette pointed out the cost of equipment in India and China were about 30-40 per cent cheaper than in Europe and other markets. Also, there was a greater scope for localisation in India and China compared to other markets, he added.
Cost of equipment roughly constituted half of the total project cost. India stands to be the biggest beneficiary as the two of the biggest greenfield projects of ArcelorMittal are being planned in India.
The company has plans to build two steel plants each with a capacity of 12 million tonnes each in the state of Orissa and Jharkhand. The two projects are delayed because of government approvals, the targetted schedule for both the projects is end of 2013 or beginning 2014.
Despite the delay Jonette said, there would be no downsizing. The company is still working on the capex, product-mix, lay out etc.
The company also had new projects in Saudi Arabia, Kazakhstan and Brazil, he said. While from India the company was looking to buy equipment such as boilers, steel structures, infrastructure, from China, it was looking at sourcing blast furnace, coke oven and sinters, said Jonette. The in-house dedicated design and engineering centre of ArcelorMittal (AMDEC), which was inaugurated last year will help in greater optimisation of resources and downsizing cost.
“The slowdown has opened up more opportunities for AMDEC. We are receiving a lot of requests for technical support from other ArcelorMittal plants around the world. For now, we will be working exclusively for ArcelorMittal projects. Later on, if we obtain a good name and we might be open to consulting others as well,” Jonette said. AMDEC is primarily responsible for making plan layout, designs, equipment sourcing, etc for all the ArcelorMittal projects. AMDEC at present has a headcount of 60 people in the Kolkata office. The target is to scale it up to 200-250 in another 3-5 years.