Had big project implementation conditions been ideal here, doubts will not be arising about India building steel making capacity of 200 million tonnes by 2020 and 500 million tonnes in 40 years from now. While the prospect of missing out on capacity creation targets is looming increasingly large, demand for steel here will continue to grow at a speed higher than the GDP growth rate.
Posco may find solace in the identical experience of its peers like ArcelorMittal and Tata Steel, which are not finding it easy either to negotiate our terrain full of political minefields. Is there a taker in the government of Tata Sons director J J Irani’s advice that if sanctions are not to be given, then the applicants should be so told, without keeping them waiting indefinitely? Or are our mandarins aware of the Australian system, as Gujarat NRE chairman Arun Jagatramka informs: In case an applicant does not hear from Canberra within a given period, he should assume sanctions are in place.
It is not only the FDI of $12 billion that is held back as Posco awaits a green signal for the Orissa venture but also the introduction of Finex technology for the first time outside South Korea on a very large scale. Finex along with mini flat mill (MFM) is a ground breaking technology development, as it allows direct use of iron ore fines and non-coking coal, in a move away from the blast route of making hot metal. No sintering of iron ore and no coking of coal into coke in mills based on Finex technology and therefore, their capital and operating costs are lower than BF-BoP units. Moreover, MFM has the virtue of shortening the production chain from crude steel to hot rolled strip. To our comfort, Finex technology will allow use of iron ore with high alumina, as it replaces the increasingly expensive coking coal by thermal coal.
In fact, Verma says an India specific technological challenge for steelmakers is to negotiate high alumina in ore. He thinks more recent technologies like Finex, Corex and ITmk3 could “at least play a supplementary role in our steel production minimising our dependence on coking coal,” for the sourcing of which the industry is very largely import dependent. This perception must be the reason for SAIL to sign an MoU with Japan’s Kobe Steel to explore the possibility of building a mill here in a joint venture using ITmk3 process of iron making. Building a new mill here on their own is a challenge for which most leading groups abroad do not have the appetite. But who would still not want a foothold in the market here which is emerging as next only to China and the second best option for them is to have alliances with Indian steelmakers. The alliance with Kobe will hopefully make it possible for SAIL to add greater value in its production chain by making steel for use in automobiles, a nuclear power plant and super critical thermal power plant. The SAIL-Kobe association could also cover special alloy steel and stainless steel tube. But SAIL is not alone in joining hands with foreign groups to access technologies missing here. Tata Steel has announced a 51:49 JV with Nippon Steel for making high grades of auto cold rolled flat panels. JSW Steel will be sourcing technology from Japan’s JFE Corporation to make skin panels for cars, for which we are now import-dependent.
Verma laments that Indian steel makers are spending a lot less on R&D than in other major producing countries. Meaningful R&D is an expensive proposition. Development of Finex and its commercialisation cost nearly $600 million. Ideally, we need pooling of resources by steel makers under a single umbrella to make a success of R&D. Pending that, let the industry take up the India-oriented R&D agenda recommended by Verma.