PROJECT REPORT ON

INDIA’S STEEL VISION-MACRO LOGISTICS BASE

Submitted to

Prof. G.P.S. Sharma

Submitted by

B.K.Dheeraj 1226109209

Ch.Vishal Chandra Babu 1226109210

CH. Keerthi Madhuri 1226109211

Debashish Patnaik 1226109212

G.V.V.S.Narayana 1226109213

Gautam Kumar 1226109214

Gayathri VRP 1226109215

SECTION – “B”

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ACKNOWLEDGEMENT

We take immense pleasure in thanking Prof.G.P.S.Sharma, our

respected faculty for giving the opportunity to carry out this project work and

for his able guidance and useful suggestions, which helped us in completing

the project work.

We would also like to thank Prof.K.R.Subramanian and

Prof.P.R.S.Sarma , our respected faculty for their valuable assistance in

our project work.

CONTENTS

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1. Abstract

2. Introduction

3. Structure of Indian steel industry

4. SWOT Analysis

5. Logistics in Indian steel industry

6. Future outlook for the Indian steel industry

7. Conclusion

8. References

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ABSTRACT

The Indian steel industry has made a rapid progress on strong fundamentals over the recent few

years. The industry is getting all essential ingredients required for dynamic growth. The

government is backing the industry through favorable industrial reforms, while the private sector

is supporting it with investments worth billions of dollars. Even in the tough times of economic

slowdown, the industry succeeded to sustain its positive growth momentum on the strong

fundamentals of domestic demand from construction, automobile and infrastructure sectors. With

an impressive track record, the country has become a reputed name in the world steel industry.

In this report a brief overview on the Indian steel industry is given. Its current position and future

outlook is also discussed. Also the Indian steel industry with respect to logistics is also discussed

to certain extent. SWOT analysis for the Indian steel industry is done to find out the strengths,

weaknesses, opportunities and treats faced by the industry.

Logistics and supply chain is one of the key drawbacks for the Indian steel industry. In this

report the current scenario of handling and transportation of steel is discussed briefly. Finally

some measures which are to be taken by the industry to be competent in the global market are

analyzed and discussed.

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INTRODUCTION

Iron and steel represents one of the most energy intensive sectors in any economy and therefore

this industry has such a prominent role. Steel industry in India has dominated the other energy

intensive industries such as aluminum, cement, fertilizers, glass and paper etc. With the

improvement in production technologies and transport means, demand for steel production is

increasing. Due to many reasons such as the infrastructure development in developing countries,

improvements in automobile industry, increasing industrial capacity etc, demand for steel is

increasing drastically. Industries which are closely related to steel industry and helping the

growth of Indian steel industry are power generation, infrastructure, urban and rural

infrastructure and real estates.

There have been almost revolutionary changes in the global steel scene with fierce competitive

pressures on performance, productivity, price reduction and customer satisfaction. National

boundaries have melted to encompass an ever increasing world market. Trade in steel products

has been on the upswing with the production facilities of both the developed and the developing

countries complementing each other in the making of steel of different grades and specialty for

the world market.

Also with increasing concerns such as eco friendly production, reduction in carbon emissions,

safe and hygienic transportation etc made global steel manufacturers to concentrate on

production and supply processes.

The steel industry is also highly material intensive. Generally, 1 tons of steel output requires

handling and transportation of around 4 tons of bulk materials. Therefore, logistics play a critical

role in determining the operational efficiency and cost structure of a steel producer.

According to industry estimates, these costs account for over 15% of the total costs of Indian

producers of steel. In addition, the specific investment (rupees per ton of capacity) requirement

for a steel project is high and therefore the capital outlay for a typical steel project is quite large.

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Consequently, success or failure in executing projects may impact the financial health of steel

companies quite significantly.

Structure of Indian steel industry:

India has emerged as the 3rd largest exporter of iron ore behind Brazil and Australia. India stands

in top 10 countries in producing steel in the world. But its global trade only accounts for only 2%

of the global steel trade. The domestic steel industry reported rapid growth during the period

between 2003-04 and 2007-08, and steel producers responded positively to this by announcing

large Greenfield or Brownfield expansion projects. Almost all domestic steel companies, along

with some international majors, have announced large expansion projects. While some of the

projects are likely to be deferred or shelved, the capital expenditure for the industry would still

be large, given the high capital intensity of steel projects.

The last decade of the twentieth century will go down as one of the most turbulent phases for

Indian steel industry. The period witnessed sweeping changes in the steel arena, transformation

of self contained national markets into linked global markets and consequent fierce competition;

oversupply of most kinds of steel resulting in no real appreciation of steel prices and

simultaneous rise in input cost; and most importantly, rise in customer expectations. The

profitability of Indian steel companies has improved in 2009-10 on a quarter-on-quarter basis.

Besides a somewhat improving steel price scenario, a significant softening of iron ore and coking

coal prices has also contributed to this improvement. India with its abundant availability of high

grade iron ore, the requisite technical base and cheap skilled labor is thus well placed for the

development of steel industry and to provide a strong manufacturing base for the metallurgical

industries. Companies in more mature industrial countries like India are increasingly forced to

look to assets (and growth) by setting up production operations (steel factories) in key

developing economies that places then close to natural resource supplies (both in terms of inputs

and energy).

Recent years have witnessed unprecedented turmoil in the global steel market. The crisis in the

international steel market might be attributed to the misbalance between capacity, demand and

production and consequent drop in prices.

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Availability of iron ore was and is not an issue, as the domestic production of iron ore is

sufficient to meet demand. Secondary steel producers require closely sized lumps (CLO) which

generate fines. In addition, at the time of mining 60% of the ore comes as fines and balance 40%

as lumps (including big boulders). Thus, in the total production of iron ore 70-72% are fines

either at the time of mining or while crushing into CLO or handling (loading/unloading)

operations at mines, railway stations or at ports.

India is 5th largest producer of steel with total production of 53.08 MT in 2007. The crude steel

production in India registered a moderate year-on-year growth of 2.7% in 2009 and reached 56.6

Million Metric Tons. On the other side, some Asian countries such as Japan and South Korea

saw significant decline in their production levels. In 2008, per capita finished steel consumption

stood at an estimated volume of around 44 Kg, which represents tremendous growth potential for

coming years. This further signifies the resilience and strength of the Indian steel industry

against external risk factors. Indian steel industry mainly consists of three distinct groups. The

first group comprises the integrated steel producers which produces greater than 1MT and

includes Steel Authority of India Ltd (SAIL), Tata Steel (capacity 3 Mt) and Rashtriya Ispat

Nigam Ltd (RINL) (3 Mt). SAIL has four integrated steel plants at Bhilai (4 Mt), Bokaro (4 Mt),

Durgapur (2 Mt) and Rourkela (1.8 Mt). The group of secondary majors consists of the Ispat

Group, Jindal Group, Lloyds and Essar. Their capacities range between 1 Mt and 2 Mt using a

mix of technologies, with much lesser degree of backward integration. These two strategic

groups together hold around 70% of the mild steel capacity in the Indian steel industry. The third

groups of tertiary producers are mini-steel plants, using electric arc or induction furnaces and are

very small in size.

There have been almost revolutionary changes in the global steel scene with fierce competitive

pressures on performance, productivity, price reduction and customer satisfaction. National

boundaries have melted to encompass an ever increasing world market. Trade in steel products

has been on the upswing with the production facilities of both the developed and the developing

countries complementing each other in the making of steel of different grades and specialty for

the world market. The Indian steel industry comprises of the producers of finished steel, semi-

finished steel, stainless steel and pig iron. Indian steel industry, having participation from both

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public sector and private sector enterprises, is one of the fastest growing markets for steel and is

also increasingly looking towards exports as driving the growth of the industry.

The Endeavour is not only in tandem with India's National Steel Policy of achieving a production

level of 110 Mt of crude steel by the year 2020. The timely completion of the projects for new

forthcoming steel plants is of great challenge in the present Indian scenario.

Factors which influenced growth of Indian steel industry:

Factors which were favorable for the growth of Indian steel industry are:

Global steel consumption: The global steel consumption due to many reasons is

increasing consistently year by year. The main cause is the development of infrastructure

in the developing countries, also with the other growth of other complementary industries

such as automobiles; construction, urban infrastructure etc helped the steel industry to

grow at a rapid pace.

Implementing latest technologies for improving the quality and productivity also helped

the industry. This led the manufacturers to focus on improving the customer delivery

times and also decrease the costs of production and transportation.

Making strategic alliances: The manufacturers started making strategic alliances with the

other OEM (original equipment manufacturers) in long term which helped them in

mitigating demand risks and uncertainties, high product take off and better capacity

utilization.

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Government initiatives: The government policies and initiatives helped the domestic steel

manufacturers to a great extent. This is also key for the growth of the Indian steel

industry. Also, increased infrastructure spending by the Government of India and

development of roads could generate significant savings in freight and transportation

cost, making Indian steel companies and other industries globally competitive.

Impact of liberalization: The economic reforms initiated by the government in 1991 have

added new dimensions to the industrial growth in general, and steel industry in particular.

Automatic approval granted for foreign equity investment in steel has been increased up

to 74% [Government of India 1999]. Restrictions on external trade, both in import and

export, have been removed. Import tariff reduced from 105% in 1992/93, to 30% in

1996-97.

Other policy measures like convertibility of rupee on trade account, permission to

mobilize resources from overseas financial markets, and rationalization of existing tax

structure.

Cost competitiveness of Indian steel industry:

The cost of major raw materials like iron ore, coking coal, and other raw materials is less in India

among the countries mentioned. The labor cost is low, but it is neutralized by its low level of

productivity.

The financial cost and the cost of power, oil and some other materials are high. Energy accounts

for about 35 - 40% of the cost of steel production in 13 India, whereas it is about 28% in the

developed countries. All these make the pre-tax cost of steelmaking in India higher than that of

South Korea, Australia, Mexico, and CIS countries.

India has a definite advantage of having low wage rates compared to all the other countries. The

wage rates and other related costs accounts to 15% of the total costs for production of steel, it is

almost half compared with other countries which is 30% of the total costs.

Current projects under progress:

Bhushan Steel plans to invest US$ 5.72 billion for building 12 million ton-capacity in the

states of West Bengal, Jharkhand and Orissa.

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Non-ferrous metals giant, Vedanta Resources, plans to invest around US$ 4.79 billion in

a 5 million ton steel plant in Keonjhar district of Orissa and envisages its commissioning

by 2012–13.

Tata Steel is also planning to build a 5 million ton plant in Chhattisgarh with an

investment of around US$ 3.59 billion. The steel major is setting up Greenfield projects

in Jharkhand, Orissa and Chhattisgarh. While in Jharkhand it is likely to invest about US$

8.38 billion for a 12 million ton integrated steel plant, in Orissa it plans to pour in almost

US$ 4.39 billion for a six million ton capacity plant.

Mesco Steel plans to invest US$ 2.20 billion for expansion of two of its steel plants in

Orissa.

Reliance Infrastructure, (part of the Reliance Anil Dhirubhai Ambani Group) plans to

build a 12-million ton steel plant in Jharkhand, which is likely to be completed by 2012.

Indian Railways plans to invest around US$ 437.25 million per annum to raise its

consumption of stainless steel for adding new alloy-made wagons and coaches to its

portfolio.

Welspun Gujarat Stahl Rohren, (one of the largest steel pipe makers in India), plans to

increase the capacity of its pipe plant by 75 per cent to 1.75 million tons with an

investment of US$ 222.52 million.

The JSW group plans an outlay of US$ 40 billion for steel and power projects. These

projects will be completed by 2020.

Visa Steel has lined up a US$ 1.51 billion – US$ 2.02 billion integrated steel project in

Chhattisgarh.

Sarralle India, a subsidiary of Sarralle Equipos of Spain and one of the largest designers

of steel plant equipment, has decided to set up a manufacturing base in Uluberia in West

Bengal.

Interarch Building Products Private, (the largest player in pre-engineered steel buildings

space) plans to set up its Greenfield manufacturing facility in Gujarat by 2009–10.

Also, the Confederation of Indian Industry (CII) plans to start six new small and medium

enterprises clusters for steel companies in Visakhapatnam. It will also set up a steel task

force to propel growth in the steel clusters.

SWOT ANALYSIS

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Strengths:

Abundant supply of iron ore

Low cost and reasonable efficient labor force

Strong man power capability and improving productivity

History in steel making and acquired skill

Strongly globalised Industry and emerging global competitiveness

Increases in productivity through the adoption of more efficient and cleaner technologies

in the manufacturing sector will be effective in merging economic, environmental, and

social development objectives.

Strong steel production base and achieved productivity levels

High degree of entrepreneurship

Availability of investments and capital back up

Support from government which helped in growth of the steel industry

The biggest boost to efficiency in the steel industry has come from the increased use of

continuous casting – an indicator of the modernity of the production process.

Availability of good rail way network for domestic shipping

Weaknesses:

Limited availability of coking coal

High transportation and handling costs.

Mining costs are also high.

Implementing latest technology has become a concern for the Indian steel industry.

Steel industry in India did not attain self sufficiency in constructing and efficiently

maintain steel plants. It still relies on the countries like Russia, Ukraine, and Kazakhstan

etc. for installing new steel plant in India.

Although India has modernized its steelmaking considerably over the past decades,

nearly 6% of its crude steel is nevertheless still produced using the outdated open-hearth

process

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Quality is also one of the drawbacks India is focusing. Quality of either flat steel or long

steel is becoming an issue for reaching international quality standards.

Logistics for steel industry is one of the constraints for the competing in the global

markets. Industry has to concentrate on the supply of the raw materials and reaching the

customer’s delivery times. The loading and unloading rates at ports, container handling,

in plant logistics were also weak in terms of Indian steel industry.

With 1 ton of finished steel requiring handling and transportation of around 4 tonnes of

bulk material, the anticipated expansion of steel capacity, even accounting for delays,

would exert tremendous pressure on India’s logistics infrastructure post-commissioning

of projects. The problem would get aggravated if the future capacities show regional

concentration, which is likely.

Opportunities:

Increase in steel consumption hugely will result in tremendous growth in steel industry in

coming years

India has all the resources and capabilities to become a global supplier of quality steel

Low steel prices smooth the way for imports from Russia, Ukraine and Kazakhstan. The

geographical proximity of Japan, South Korea and China makes them important suppliers

as well.

With the decreased potential for steel in developed countries, India have opportunities for

becoming the world leader in production and supply of steel and iron ore

Concurrently industries like automobiles and urban infrastructure are also growing

simultaneously.

Threats:

Infrastructure is becoming a major threat for the steel industry. Insufficient infrastructure

in terms of transportation and logistics is becoming concern for Indian steel industry.

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Government is also planning to increase its share of infrastructure in GDP from 2.5%

currently

Huge competition in the global markets. In the Indian markets also, with the entry of the

foreign players the domestic steel producers are facing high market competition.

Increasing concern for the global climate change is becoming a threat to the industry.

With the concern over the climate change countries are focusing on the reduction in

carbon emissions particularly with respect to the energy intense industries like steel,

cement etc. The steel industry accounts for between 5 and 6% of total man-made CO 2

emissions. This is less than accounted for by transport or power use by the general public,

it does mean that the steel industry is in the frontline in making a contribution to fight

global warming.

Future energy use and carbon emissions depend on the level of production and the

technologies employed. Furthermore, different economic and policy settings affect

structures and efficiencies within the sector.

Issues with dumping of low priced steel products from the Chinese and companies of

other countries is also becoming a barrier for the growth of Indian steel industry.

Infrastructure with respect to steel plants and logistics of steel industry is also one of the

key challenges for the Indian steel industry.

LOGISTICS IN INDIAN STEEL INDUSTRY

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There is a growing concern for the macro and micro level logistics of Indian steel industry. The

customer delivery times, inventory management, cargo handling at ports, procurement of iron

ore and other raw materials are some of the areas in which steel manufacturers are focusing at

micro level. Some of the concerns of logistics for the steel industry at macro level are:

High transportation costs: This is one of the major concerns which is affecting the growth

of the industry. Due to the problems in infrastructure and also with low levels of

productivity in terms of handling and transporting cargo, the costs of transportation were

soaring day by day.

Lack of connectivity to the ports with sufficient rail and road networks is also one of the

causes for high transportation costs.

Along with the transportation costs, the costs of order placement and transactions costs

are also increasing. Industry should look for the efficient flow of information from end to

end in the supply chain. Implementation of technologies like EDI (electronic data

interchange) and ERP (enterprise resource planning) will help to improve reliability of

the information flow and also reduce the costs to a greater extent. The implementation of

these technologies and also the other strategies like BPR (business process reengineering)

are at the initial stages in the industry. Apart from some major producers of steel like

Tata, JSW, ISPAT etc were able to successfully implement them in their steel plants

which helped them in reducing the inventory lead times and also improved the

information flow. These technologies must be implemented in a large scale at a macro

level so as to increase the growth of Indian steel industry. Creating the virtual

information networks from end to end will not only save in terms of costs but also the

time for order placing and procurement can be done. Lead times and delivery schedules

can be improved much better than ever before.

The advantage of a proper IT-based information system is that accurate information can

be obtained at a much faster rate, reducing downtime and speeding up decision making

process. Since, time is more than money; it would have direct impact on cost. The

objective would be to implement IT in all operations and to integrate these with day-to-

day decision-making process. IT applications will help in streamlining both process chain

and supply chain and would thereby result in cost reduction and increase in productivity.

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Proximity and access to raw materials. Infrastructure development requires the transport

of raw materials for steel production for achieving the goal of 75 million ton of additional

capacity by 2019-20 will require the movement of an additional 300 million ton of raw

material

Freight movements are further delayed by onerous transport regulations, which include

restrictions in the hours of the day that heavy vehicles can operate, interstate border

crossing closures and lengthy trans- border crossing procedures, frequent tolls and

inspections, and road closures at night due to the risk of attacks by insurgents or bandits.

The efficiency of Indian ports is affected by shallow draught, low productivity, high

costs, long vessel 60 turnaround times, poor governance, and lengthy customs delays.

Shipping costs are consequently high — a shipment from India to the United States can

cost 20 per cent more than from Thailand and 35 per cent more than from China

Unlike international ports like Singapore and Rotterdam, the shortage of storage space in

the major ports in India had further compounded the problem of speedy evacuation of

cargo from port premises.

Performance of logistics in Indian steel industry:

Some of the key performance indicators of logistics in Indian steel industry are:

Performance attribute

Factors India International standards

Reliability Forecast accuracy Delivery performance to customer request dates

50- 70%

40 – 65%

85%

97.5%

responsiveness Order fulfillment lead times Response time to enquires

20 – 30 days

1day –1 month

14 days

Less than 3 hours

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Flexibility Re-plan cycle times

1 – 3 months 15 days

Assets Inventory turns 3 – 5 times 7 times

From the above table it can be observed that the performance of India in terms of logistics is

poor and has to improve drastically to be in the global competition. Though Indian companies

are excelling in terms of production they are lagging far behind in terms of supply and

distribution of the finished product which affects the industry considerably.

Some of the other factors which influence the performance of logistics in steel industry are:

Out bound logistics costs: due to the problems with inefficient maintenance of cargo, the

out bound costs of the logistics are increasing considerably. Out bound logistics costs

includes costs of idle freight, detention, in plant logistics, transaction costs, handling and

storage costs, lashing and bracing costs etc.

In plant logistics: In plant logistics includes the activities such as Real time location

visibility levels, In plant wagon turn around, In plant truck turn around, Dispatch spread,

Transit inventory, In plant route network, No of handlings etc. these are the activities

which are to be carefully taken care and also the efficient operations of these activities

will also reduce the costs considerably.

Selection of and planning for transport minimizes transportation costs in accordance with

company documentation.

Planning for the availability of personnel and plant conforms to plant production

schedule.

Scheduling of on-line product to customers enables the plant production schedule to be

achieved. Load sequencing of on-line and ex-stock product enables the plant production

schedule to be achieved

Destination sequencing prevents multiple handling of the product en route.

Documentation enables transportation of product to required destinations.

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Handling and transportation of steel and iron ore:

Increase there is an increase in use of multi modal transportation for the shipment of cargo.

Since, steel and iron ore comes under the dry bulk cargo, handling and maintenance would be a

challenge. Though containerization solved the problems of handling cargo to a greater extent,

there must be focus on the improvement of handling capacities and dispatch of cargo. More than

98% of the steel and iron ore are exported and imported using the seaways. Also for the domestic

shipments rail and road networks are the major means of transportation.

Cargo handling at Ports:

Global sea trade in iron ore is dominated by the countries such as Brazil, China, Australia etc.

though India is also a key player in the global steel trade, huge competition in terms of sea trade

is given by these countries.

Major iron ore exporting countries:

Country Exports of iron ore in the year 2007 (in

MT)

Brazil 269.40

Australia 266.80

India 90.70

Major iron ore importing countries:

Country Imports of iron ore in 2007 (in MT)

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China 383.10

Japan 138.90

South Korea 46.20

Germany 46.20

From the exports and imports of some of the top countries in the global steel trade, it can be

observed that India is one of the largest exporters of iron ore in the world. Though India is in

such a dominating position in the exports of iron ore and steel production in India, its share to

GDP is comparatively low with less than 2%.

China seems to be dominating the global steel industry with 47% of the iron ore imports and

stood as world leader in the production of steel with 36% of the global production. China have

very limited mineral resources compared to India, but it’s the market leader in the steel

production. India, being one of the largest manufacturer of iron ore and major producer of steel

has huge opportunities for increasing its exports and become a dominant player in global

industry. Also the domestic consumption of steel for India is very little with per capita of only

about 48 KG where as the per capita of steel consumption for other major countries is 340 KG in

EU, 1200 KG in Singapore, 420 KG in north America, 635 KG in Taiwan etc.

There are 12 Major Ports, 185 nos. of Minor and Intermediate Ports Cargo basket moving away

from being bulk cargo Centric. Minor ports market share increased from 9.9% in 1997 to 28.8%

in 2007. Major sea ports accounted for traffic of steel and iron ore cargo are JNPT, Mumbai,

VPT, Visakhapatnam, ports of Chennai, Mangalore etc.

In almost all the ports iron ore loading is a mixture of mechanical loading systems which consists

of conveyors, stack reclaimers and ship loaders and manual loading process using shore cranes

and ships gears and grabs. The existing mechanical loading systems are becoming old and

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obsolete and there is an immediate requirement for upgrading the infrastructure in the ports

particularly with respect to loading and unloading of cargo.

Also poor infrastructure at ports leads to high through put times, high turnaround times for ships,

slower loading rates, delays due to break downs etc. This in turn results in higher incidents of

demurrage costs and over all high costs for loading and unloading cargo.

Rail connectivity:

Rail networks are the most preferred means of transportation of steel and iron ore for domestic

shipping. It is also the most commonly used mode of transportation. As per the statistics of 2007,

iron ore is the second largest commodity moved by rail accounting for 16% of the total traffic,

coal being the first with 43% of the share. About 116 MT of iron ore is moved out of ports using

rail of which 38.84 MT were for exports. Iron is moved from mines to steel plants, sponge iron

and pig iron plants.

Keeping in view the significance of port connectivity for efficient evacuation of cargo from the

ports and its impact on international trade, the Committee on Infrastructure recommended (2006)

minimum double-line rail connectivity for major ports, which was to be achieved within the

stipulated time frame of three years.

JNPT, Kandla, Mumbai, and Paradip ports had double lines in parts of their rail networks

whereas the ports at Chennai, Cochin, Goa, Haldia, Kolkata, Tuticorin and Visakhapatnam

continued to have single-line connectivity, resulting in slower movement and inefficient cargo

dispersal. Although NMDP envisaged taking up 16 railway schemes for laying of new lines, no

specific scheme for conversion of single lines to double lines had been mooted. Despite the

emphasis on exclusive freight corridors by the Government, passenger and freight systems

shared the same railway networks outside the port areas. Rail networks at ports other than

Mormugao were not connected to the hook points and the cargo had to be inter-carted74 to the

sidings using dumpers, trucks and trailers. Such multiple handling of cargo could only add to

increase in the handling time and the cost of handling. Port users at Chennai felt that the long

distances between railway sidings and the berths needed to be addressed by laying railway tracks

just along the berths which would result in quicker, easier and cheaper loading / unloading

operations.

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The sidings at JNPT, Haldia, and New Mangalore could handle full rakes of 59 wagons, while

only some sidings at Chennai (two sidings), Paradip (21 out of 41) and Visakhapatnam (eight out

of 15) could handle full rakes. Out of 18 sidings at Mumbai, only two had the length to

accommodate 40 wagons whereas the other sidings could accommodate 20 or less wagons. At

other ports, the sidings could not accommodate even half rakes. At Mumbai, even the two

sidings having capacity of 40 wagons each could not be optimally utilized as the low capacity

locomotives used for hauling could not handle rakes having more than 20 wagons. Users at

Kolkata port stated that full rakes could not be handled at the berths at Netaji Dock and

Kidderpore Dock due to which longer time was required for handling the rakes, resulting in

increased detention charges for wagons.

International railway systems carry more than 100 wagons per rake with the Australian system

carrying over 300 wagons per rake. Compared to this, a rake in India handles 58 BOX wagons as

the length of the loops in the yards and stations in India is only 686 m, limiting the length of the

trains. Even rakes of 58 wagons cannot be handled at sidings of some ports. The space

envelope82 in India does not permit the movement of double stack container wagons. Since

stations, platforms, roofs and bridges had been constructed according to the previously designed

space envelopes, the envelopes of existing railway lines cannot be increased, thereby limiting the

carrying capacity of the rakes. Load carrying capacity expressed as the ratio of a loaded wagon

to an empty one ranges from 4-7 internationally as against 2.5 in India.

NMDP envisaged undertaking 11 projects under Phase-I and three projects under Phase-II for

improvement of port railways. The scheduled date of completion of the projects under Phase-I

was March 2009, whereas the projects under Phase-II were to be completed by 2012.

Some of the other challenges with rail connectivity are:

Iron ore miners are forced to move out by road due to the lack of proper rail connectivity

Sharing of rail way lines for both passenger and goods is creating a problem resulting in

priority of passengers and thereby delays and congestions of good traffic.

Low average speed of freight traffic leads to longer lead time and reduced through put.

Lower haulage capacity leading to higher lead time.

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Frequent changes in freight charges. Freight charges for iron ore are being targeted for

frequent hikes leading to increase in costs for rail than by road.

Roads connectivity:

About 28 per cent of cargo dealt with by the major ports during 2007-08 was transported through

roads. Except for Haldia, Mormugao, Paradip and Visakhapatnam where rail was the preferred

mode for dispersal of cargo, the movement at other ports was by roads. most of the major ports

except Princess Dock in Mumbai had two to three common entry and exit gates for movement of

cargo. JNPT had only one access point to the port. In all the ports, the exit points opened to roads

common to general traffic as well and there were no exclusive port roads except for short ones in

Kandla and Visakhapatnam. This restricted the free and speedy movement of cargo from the port

premises, which was further delayed due to restrictions imposed on cargo movement during

working hours.

At Chennai, the movement of cargo during the daytime was restricted due to the absence of

exclusive approach roads. At Mormugao port, entry for heavy vehicles in the city was restricted

during daytime. At Kolkata port, Customs clearances were given from 10 am to 4 pm whereas

from 6 am to 6 pm, trucks were not allowed on the roads. The waiting period for trucks to enter

the port was thus very long. Due to non-availability of data, the waiting time could not be

measured in respect of Kolkata port but the feedback of users disclosed that it was more than a

day. Thus the lack of exclusive approach roads as well as access restrictions on common roads

resulted not only in delays in the movement of cargo but also led to congestion. Ports such as

Haldia, Kandla, Mormugao and Visakhapatnam, were connected to one national highway

whereas the other ports had connectivity with more than one highway.

The National Maritime Development Programme envisaged 22 road connectivity projects under

Phase-I and five projects under Phase-II. The projects under Phase-I were to be completed by

March 2009 whereas the stipulated date of completion of the projects under Phase –II was 2012.

Some of the other challenges for road connectivity are:

Width of the highways is not sufficient for both passenger and goods to go comfortably.

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Maintenance of high ways is also poor. Much of the highway maintenance is

underfunded.

Lack of organized fleet owners is resulting in reduced quality and professionalism.

Improper road connectivity resulting in longer lead times

Reliability and cargo integrity with other modes of transportation are becoming an issue

Iron ore transportation through inland water ways:

The riverine system of Goa consisting of Zuari, Mondovi Rivers and Cumbarjua canal is the only

water way used for iron ore transportation. Mormugao and Panjim ports in Goa state receive iron

ore barges from mines and loading jetties on this riverine system. Almost all the iron ore of the

Goan origin is transported to ships by barges. This quantity is approximately 33.5 MT in the year

2007. Non Goan iron ore is first transported to nearest rail head or by road to nearest jetty and

then moved by barges to the two ports. Any movement of iron ore through water ways in the rest

of the country is almost nonexistent. Since water ways is the cheapest and most reliable means

for transportation of cargo, government has to take steps to improve the status of national water

ways.

Other than this only water way system existing in the country for transporting iron ore, many of

the major companies uses coastal mode of transportation for iron ore shipments. Companies like

ISPAT and ESSAR steel don’t have captive mines and thus ships them through coastal shipping.

But, the feasibility of coastal shipping is only limited to large sized mills with large requirement

of iron ore.

Pipeline transportation of iron ore:

KIOCL and Hy-Grade pallets of ESSAR group is using pipeline mode of transportation. These

pipe lines are privately owned and of captive use. This is the cheapest mode of transportation

compared to all modes of transportation irrespective of size of mines and amount of cargo

transported. But the small sized mines and dispersed steel mills are becoming barriers for use of

this mode of transportation. However, movement of cargo to ports will be a feasible option.

However, the only drawback of this pipeline is the requirements of huge initial investments.

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KIOCL in 1982 has constructed a 67 KM length of pipe line from Malleshwara (Kudremukh) to

Panambur near Mangalore. Capacity of this pipe line is 7.5 MT. But, this pipe line is not

operational since 2006. KIOCL has stopped using as mines in Kudremukh have been banned on

mining due to environmental considerations.

In early March 2006, Essar Steel commissioned the world's second longest iron ore slurry

pipeline. The length of this pipe line is 267 KM long. The pipeline will connect Essar's iron ore

beneficiation plant at Bailadila in Chhattisgarh to its pelletization plant at Visakhapatnam in

Andhra Pradesh. The pipeline will traverse Chhattisgarh en route. The Bailadila pipeline, built by

Essar Steel, is designed to carry 8 million TPA of slurry and is expected to reduce Essar Steel's

transportation cost from Rs.550 per ton to about Rs.80 per ton. The pipeline will help the

company save at least Rs.200 crore every year, with its capacity set to increase to 4.6 million tpa

from the present 3 million tpa. The pipeline infrastructure includes two pumping stations and a

valve choking station, apart from terminalling facilities at Visakhapatnam and Bailadila. The

pumping operation from Bailadila to Visakhapatnam is monitored and controlled by a

computerized supervisory system. The slurry pumps were supplied by Geho, Netherlands and a

consortium of JSC Stroytransgaz and Essar Constructions executed the project.

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FUTURE OUTLOOK FOR THE INDIAN STEEL INDUSTRY

The sponge iron has of late come up as a major input material for steel making through electric

furnace route – both Electric Arc Furnace and Induction Furnace. Due to long gestation period,

huge investments, dependence for coke on foreign suppliers, the steel industry is slowly

diverting itself from blast furnace route to electric furnace route and the requirement of Sponge

Iron is increasing 67 very fast. Another major reason is the global shortage of scrap. The steel

making furnaces in the eastern region use average 70% Sponge Iron in the feed material for

steelmaking.

The future for the Sponge Iron is therefore quite bright. The steel is today considered as the

backbone of India economy. The growth of economy has a direct relation with the demand of

steel. With the present steel intensity index, considering the GDP projection by the Government

of India, growth of steel demand will be around 11% annually.

As per the National Steel Policy issued by the Ministry of Steel – India will produce 110 million

tons of steel by 2020. The requirement of Sponge Iron as metallic will be 30 million tons. The

Ministry of Steel has decided to come out with a White Paper on the logistics requirement of the

steel industry at a production capacity of 250-300 million tons. The exercise has been prompted

by the logistics constraints in the movement of raw materials and end-products faced by the

country today when steel production is at 65 million tons.

It is expected that India would become the second biggest producer of steel within the year 2016

and the production per year would be 137 million tons.

Today India produce 13.9 million tons of sponge iron, out of which 4.2 million ton is gas based

and remaining 9.7 million ton is coal based. India has a proven reserve of 410 million ton of high

grade iron ore, another 440 million ton of high grade iron ore which will be established. India

has total 9992million ton of iron ore reserves (as per IBM report of1995).

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India has sufficient non-coking coal through of high ash low fixed carbon grade. Coal is used as

a reducing for sponge iron making in the furnace. The availability of scrap of required quantum

is unlikely and therefore scraps needs to be replaced more and more by DRI.

Expanding India’s steel sector depends on lower port costs for handling key inputs such as

coking coal which is predominantly imported, as well as servicing potential steel exports as

envisaged under the National Steel Policy

Some of the measures that the industry has to take in the long term at macro level are:

High freight rates are the major reason for drastic fall in iron ore loading by railways in

recent months. Plans must be made to reduce the freight rates to improve the growth rate

of the industry.

Rail transportation can become competitive by increasing line capacity, carrying capacity

of trains, port connectivity etc.

Road transportation is the most common mode for transport of all goods accounting for

65% of all commodities carried. Measures must be taken so as to improve the

infrastructure of the high ways and fund for the maintenance of the highways.

Port infrastructure in India is outdated and inadequate resulting in bottlenecks and high

costs. Investments must be invited from domestic and foreign sources to upgrade the

infrastructure at ports, also latest technologies must be implemented to reduce costs and

loading and unloading times.

Attract FDI’s for investing in coastal transportation and pipeline which are the cheapest

and most reliable modes of transporting iron ore. This will make steel manufacturers

competent enough in the global steel trade.

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CONCLUSION

A multimodal system, which uses the most efficient modes of transport from origin to

destination, is a prerequisite for the smooth functioning of any port. With the growth of cargo in

the ports by over seven per cent and increase in container traffic by 17 per cent, the Government

had laid emphasis on capacity expansion and improvement in infrastructure of the ports for

handling these growing volumes of cargo. Unless matched with connectivity infrastructure, the

increased cargo would result in congestion and undermine the competitiveness of Indian industry

and also affect the economy at large.

Though India is technologically forward and advanced in the production of steel and exporting

iron ore, problems with infrastructure and logistics are making it to lag behind in the

international trade of steel and iron ore. Also India should concentrate on increasing the

consumption of steel at the domestic level. The per capita consumption of steel is the indicator of

growth for the developing countries.

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REFERENCES

http://ies.lbl.gov/iespubs/41844.pdf

http://www.forging-industry.com/bearing_manufacturer.asp?aid=77

http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000202605.pdf

http://www.careratings.com/archive/3/1991.pdf

http://www.icra.in/Files/PDF/SpecialComments/2010-February-Steel.pdf

http://newsletters.cii.in/newsletters/steelsummit2009/pdf/SESSION_1/RVS_Ramakrishna.pdf

http://www.openpr.com/pdf/68829/Indian-steel-s-long-term-fundamentals-are-intact-Ernst-

Young.pdf

http://www.ieindia.org/publish/mm/1003/oct03mm2.pdf

http://ppac.org.in/ppac_0809/PIPELINES%20IN%20INDIA.pdf

http://www.steelworld.com/proessar.pdf

http://121.241.184.234:8000/pdf/PE/pradip_poa_2006.pdf

http://www.me.iitb.ac.in/~narayan/transport/multi-modal-supply-chain.pdf

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