Essar Steel Bags $50 Million Export Deal To China

The Essar group flagship, Essar Steel, the largest hot-rolled coil exporter, has secured a $50 million export deal with China.

According to the terms of the contract, Essar will be exporting 2 lakh tonne of metal in a year.

Essar Steel managing director J Mehra said, "The Chinese order is around 30 per cent of the total exports. We are expecting to sign a few more of such annual contracts with players in the Middle-East." The company has developed new export markets in the Middle-East and the far east.

"For these markets, we have shifted our focus from the commercial grades towards the high end and value-added product category such as HSLA, API, corrosion resistant steel and other such grades which are at present limited to a few mills. This enables us to have a competitive edge," Mehra said.

Meanwhile, the company has embarked on a fresh cost-cutting drive. Apart from the reduction of the fixed-cost per tonne by the virtue of capacity expansion, technical innovations and process re-engineering are being considered to pare costs.

Essar Steel is looking at reducing consumption of power at all shops and optimise the feed mix for sponge iron and enhance yield at the steel melting shop.

In an attempt to to reduce power consumption, the company is charging hot DRI (HDRI) instead of hot briquitted iron (HBI) in the electric arc furnace (EAF) for steel making. This will enable the company to save energy to the tune of 130 kwh per tonne of steel and an over all cost reduction by around $12 per tonne.

The company has also reduced sourcing of pellets from Hy-Grade Pellets, a joint venture company with Stemcor where Essar Steel holds 49 per cent equity, and is currently importing pellets for its hot rolled project from Belgium and Bahrain.

"Initially we were sourcing the entire pellet requirement from Hy-Grade but now we have reduced it to 30 per cent and will soon bring it down to zero," Mehra said. The imported pellet being of high quality contributes towards the cost reduction process.

Meanwhile, Essar Steel is looking at offloading the 50 per cent stake in Hy-Grade. According to the company, its cash flow position at present is satisfactory and the company will unlock its investment in Hy-Grade, which is a value created, at an opportune moment.

Essar Steel has booked its first export order for API X-70 grade steel to be exported to Spain. The quantum of export is around 30,000 tonne valued at $9.5 million.