Essar ramps up Hazira steel unit capacity to 10 mtpa
Essar Steel began its journey at Hazira in 1989 with a 0.9-mtpa sponge iron-making plant and in the passage of 22 years, gradual expansion of capacity has made the facility one of the top four flat steel producers in the world at a single location.
In an era where low-cost is the buzzword, Essar Steel has more than doubled the capacity of its Hazira steel plant from 4.6 million tonnes per annum to 10 mtpa at an investment of USD 7.5 billion, less than half the industry standard for setting up a facility of this size.
"It took USD 7.5 billion to create a 10-mtpa fully-integrated steel-making facility at Hazira. The investment includes raw material beneficiation, steel-making and distribution. The industry standard is more than twice for putting up a 10-mtpa capacity alone," Essar Group Chief Executive Prashant Ruia told reporters on Wednesday.
The plant will have the capability to manufacture steel at a low cost through a series of cost-cutting measures.
Essar Steel began its journey at Hazira in 1989 with a 0.9-mtpa sponge iron-making plant and in the passage of 22 years, gradual expansion of capacity has made the facility one of the top four flat steel producers in the world at a single location.
"We would like to dedicate this plant to the nation. When I first ventured into Hazira, it was my desire to put India on the global steel map and today that dream has come true. Our world-class steel complex is a testament to the hard work put in by the Essar family and our small contribution to the steel industry and India's growth story," Essar Group Chairman Shashi Ruia said in a statement.
The company is already among the lowest cost steel producers in the world through raw material and energy securitisation, Prashant Ruia said, adding that operational efficiencies, throughput enhancement and asset optimisation would move it further down the cost curve.
The Hazira facility combines a DRI, blast furnace and corex technology for making iron, which is later used in the steel-making process through electric arc furnaces. The advantage of having such a combination is that there is no wastage of gas generated through the corex iron-making technology.
As a result, the company generates almost 45 per cent of its captive requirement in the gas-based DRI. Essar Steel has a long-term contract with ONGC for the rest of the gas requirement.
"The cost of labour for per tonne steel-making is just USD 8.2 per tonne. This is only second to USD 5.71 for Baosteel. Even Posco's labour cost for per tonne steel production is higher than us at USD 9.22," Ruia said.
Ruia said the plant is expected to run at 80-85 per cent capacity in the next fiscal and 70-75 per cent of the output would be value-added products, the demand for which is on the rise on account of the fast-growing automobile and FMCG sectors.
"We will continue to export 20-30 per cent of the produce and the rest will be sold in the domestic market. Considering 7-8 per cent GDP growth, India needs a lot more steel. Plus, per capita consumption in India is just 53 kg compared to 150 kg in Brazil and 445 kg in China," he said.
Asked if the company would go for further capacity expansion since its pellet-making capacity would far outstrip the 14 million tonnes requirement for feeding the 10-mtpa capacity, Ruia did not give a direct answer, saying, "In the next two years, our intention will be to consolidate the existing operations."
In his presentation, he said, "Every achievement is not an end, but the beginning of a new journey."
Pellets are produced through beneficiation of iron ore. About 1.4 million tonnes of pellets are required for manufacturing one million tonnes of steel. Essar Steel will have 20 million tonne pellet-making capacity once its Odisha beneficiation plant goes on stream in two equal phases, starting March this year.
The full capacity of six million tonnes will be operational in a year's time. Essar's Vizag facility currently produces eight million tonnes of pellets a year.
Ruia said the company expects to clock a Rs 40,000 crore turnover in the next two years and hence, Essar Steel is in not in a hurry to raise funds for retiring its debt, which currently stands at Rs 20,000 crore.
To a question on listing of the company on the bourses, he said, "We have not made any choice nor any decision."
