Lakshmi Mittal believes that in 5 years, the share of developing countries in world production will be 70%.
Steel czar Lakshmi Mittal believes that in five years the share of developing countries in world steel production will be around 70 per cent. While much of that will be on account of China, which last year had a share of 46.7 per cent of global steel production of 1.41 billion tonnes, India should stay on course to become the world’s second-largest producer by 2015-16 from the present fifth slot in the heap of producers.
In another couple of years, the developed world is likely to return to pre-crisis level steel production. But beyond that Mittal does not see any significant growth in output volume in that space. Be that as it may, the industry in developed countries, according to Mittal, would continue to shepherd the world in product development in the form of making steel lighter but stronger, more environment friendly and finding new applications for it. Mittal’s dogged pursuit of the Arcelor trophy in a hostile takeover environment was as much to grow in size as to gain access to the industry’s high-end technology.
Steel Authority of India Limited (SAIL) Chairman C S Verma is acutely aware that insufficient allocation for R&D all these years has seen to the missing of a number of very high value-added products from the Indian steel industry’s portfolio. But as the country’s manufacturing and power sectors here grow rapidly in capacity and become increasingly more sophisticated, their requirements of items like cold-rolled grain oriented silicon steel and cold-rolled non-oriented steel will rise. In the absence of local capacity for such products as also forging grade steel for automobiles and super critical and nuclear power plants, their growing demand is perforce met by imports.
Verma says the country has remained “a net importer of steel or steel deficient” since 2007-08 because the local industry is still to climb to the high end of value chain. In the 11 months to February 2011, India imported 6.03 million tonnes of steel compared with exports of 3.04 million tonnes. The SAIL chairman believes it will be “wise on our part to be on guard against China dumping steel here. After all our neighbour has built steel capacity of over 700 million tonnes and it is leaving a lot of that unused.”
According to Verma, this is an unavoidable situation when “our steelmakers are spending around 0.15 per cent of their turnover in R&D while allocation on this head is between 2 and 2.5 per cent in Japan and South Korea. This has to change.” R&D and product development based on research results are a long haul proposition. Verma has set out to correct the lacuna in his company in two ways: Join hands with world leaders like South Korean Posco and Japanese Kobe to access groundbreaking steel making technologies like Finex and ITKM3 and at the same time give a new direction to SAIL R&D. Building greenfield mills with technologies allowing use of iron ore fines and dispensing with the use of coking coal for which the country is hugely import dependent is a sensible move. But, there will be a high price tag for technology recipients.
For SAIL to walk into the industry’s hall of fame, it has to start making those grades of steel for which the country is import dependent. With this target, Verma has commissioned the services of an eminent scientist to prepare by September a master plan for SAIL R&D. Once the plan is available and the board has taken a view, SAIL will start providing more and more funds for R&D. Hopefully, the nearly Rs 45,00 crore company will at some point provide two per cent of turnover for R&D.
A meaningful R&D is an expensive proposition. Will it not then make sense for the industry to pool resources from individual steelmakers to do R&D under a common roof? This may sound good on paper, but it may not work because of inevitable pulls and pressures to emerge from different directions. “Our new age R&D will be singularly ours. We will be patenting the research results. But, we are ready to work with other steel groups for exploration and acquisition of mineral assets abroad. It’s a good idea to negotiate together in a consortium and share risk among partners.”
SAIL’s capacity expansion to 24 million tonnes of crude steel by 2012-13 along with modernisation assumes significance as all steel then will be made through basic oxygen furnace route and continuously cast. On completion of expansion, in the total production the share of value-added products will rise to 55 per cent from the present 37 per cent. An environment concern for steelmakers with ownership of iron ore mines is the growing mounds of fines at pitheads. While this is so, SAIL does not have the option to sell iron ore in the market. The only escape route from the quagmire then is to make pellets from ore fines. Verma is leading SAIL to build 10 to 12 million tonnes of pellet making capacity in the next four to five years, including a four-million-tonne unit close to Gua mines in Jharkhand.
