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| SAILing through rough times |
| Kunal Bose / Mumbai Jun 09, 2009, 00:04 IST |
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What a year was 2008-09 for the steel industry! Sushil Roongta, chairman of Steel Authority of India Limited (SAIL), tells us the metal’s roller coaster ride saw prices making it to the crest in the first half of the year only to nosedive subsequently caused by global economic meltdown.
Riding the boom for most of the first half of 2008-09, SAIL, like other steel majors across the globe, earned record net profit of Rs 3,845 crore for the period. But come the third quarter, SAIL profit sank to Rs 843.34 crore from Rs 1,935 crore in the corresponding period of 2007-08.
Thanks to some quick midcourse correction in response to precipitous demand and price falls, SAIL profit in the final quarter rose to Rs 1,487 crore. It was, however, way below Rs 2,377 crore in the same period of the earlier year. In the circumstances that it found itself in the second half, a Rs 1,362-crore fall in the annual net earning to Rs 6,175 crore should not detract attention from what Roongta describes as converting “challenges into opportunities.”
Being self-reliant in iron ore – output of 24 million tonnes met full requirements of all SAIL blast furnaces – the company did not have to bear the brunt of last year’s meteoric rise in prices of the mineral. Nevertheless, it had to contend with coking coal prices rising to $300 a tonne and ferro alloys also becoming so much more expensive.
Incidentally, the halving of steel prices from the peak in August enabled Nippon Steel to now strike a coking coal deal at $128 a tonne, a 57 per cent year-on-year discount, for 2009-10. SAIL responded to the challenge of exorbitant cost of foreign coking coal by raising the share of local coal in the blend and also by using auxiliary materials like coal tar and nut coke. Coal dust injection in blast furnaces was also stepped up.
As should be the case, the SAIL flagship unit Bhilai Steel not only brought down the share of imported coal to 75 per cent from the earlier 80 per cent but it was also able to cut the coke rate to 491.2 kg a tonne of hot metal (PTHM) from the earlier best of 497 kg in 2005-06. The coke rate for SAIL as a whole was 521 kg PTHM.
Not the one to allow SAIL to cave in under the twin impact of input price rises and demand recession, Roongta launched a drive to cut corners wherever possible, step up production of special and value added steel, the share of which was 3.7 million tonnes in the total output of 12.5 million tonnes of saleable steel and restrict sales of semis in favour of in-house value addition.
Difficult times often bring out the best in an organisation and prepare it to reap maximum benefits when the market becomes favourable once again. Like other steel makers, SAIL, has been pursuing cost saving with some vigour since the industry was hit by the recession which lasted till 2002. But 2008-09 was special since cost savings amounted to a whopping Rs 725 crore defying the theory of diminishing return on this front if practised over a long period.
When it became clear in the latter half that the demand for steel was falling, Roongta made the intelligent move to prepone the repair of two BFs in the SAIL stable. Even then as production of 14.4 million tonnes of hot metal showed, SAIL worked at well above its nameplate capacity.
Times were difficult. But that did not detract SAIL from developing new products in response to customer demands, including the railways, defence establishments and the construction sector. Bhilai Steel alone introduced 12 new products, including earthquake and extra high corrosion resistant TMT rebar, ultra high strength steel plates and specially alloyed rail. A new SAIL is emerging where the focus is on selling steel as products. Taking it further, SAIL has put in place a “decoiling system” allowing the stockyards to make customised products available to dealers and project customers. The urge to hold on to its share of the growing domestic steel market in the face of many other steel majors executing capacity building programmes is reflected in SAIL coming to own as many as 65 warehouses and a 2,500 strong dealership network.
SAIL is leading from the front to boost domestic use of steel going beyond urban centres into semi-urban and rural areas. This is evident in its sales within the country accounting for 11 million tonnes of total sales of 11.57 million tonnes. As India’s industrial economy is showing distinct signs of recovery since April, the SAIL marketing strategy should yield good dividends.
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