Logistics Management in Steel Sector in India Prof. S. K. GARG
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1 Logistics Management in Steel Sector in India Prof. S. K. GARG Professor and Dean (Academics) Delhi Technological University, INDIA and Independent Director, Rashtriya Ispat Nigam Limited
2 Steel Sector - Global Scenario In 2012, the world crude steel production reached 1547 million tonnes (mt). China remained the world s largest crude steel producer in 2012 (716 mt) followed by Japan (107 mt), the USA (89 mt) and India (78 mt). Per capita finished steel consumption in 2012 is estimated at 217kg for world & 477 kg for China.
3 Steel Sector- Indian Scenario Steel Production in India in 2012 was 78 mtpa and the per capita steel consumption was about 57 kg only compared to a world average of over 217 kg. The average per capita consumption of finish steel in rural India is a mere 11 to 12 kg., which is extremely low. Out of 78 mtpa steel production, 43 million tonnes was produced by Main (SAIL, RINL and TATA) and Major Producers (JSW, JSPL and ESSAR) and the balance by secondary producers. As per Draft National Steel Policy 2012, 300 mtpa steel capacity by 2025 (GDP@8%) is envisaged.
4 Raw Materials Required for one Ton of Steel Steel industry is highly raw material intensive industry. It requires 3 tonnes of raw materials 3 tonnes of water 6 tonnes of air to produce 1 tonne of crude steel.
5 Raw Materials Requirement For the target of 300 mtpa steel production by 2025, the requirement of iron ore would be around 450 mtpa, coking coal would be 300 mtpa, non-coking coal of 100 mtpa, other fluxes would be around 50 mtpa.
6 Locations
7 Logistics in Steel Sector Logistics Management of steel, therefore, is not confined to finished products. The logistics would involve raw material, utilities, by-product with a wide array of internal material movements too. Movement of raw materials requires special attention as extraction of mineral resources is largely confined to remote and relatively inaccessible areas in eastern and southern regions of India. Mining areas therefore in general are characterised by poor transport and logistics network.
8 Logistics Challenges for Indian Steel industry Logistics of raw materials and finished products play a critical role in determining the operational efficiency & cost structure of steel producers. According to industry estimates, logistics costs account for over 15% of the total costs of Indian producers of steel. A typical logistics framework consists of physical supply, internal operations and physical distribution of goods and services Supplier Steel Plant Branch office Customer
9 Rail In , Railways carried million tonnes of coal for steel plant million tonnes of iron ore for steel plant million tonnes of iron ore for other domestic users million tonnes of other raw materials million tonnes of finished steel and pig iron from steel plants and other points This accounted for 20% of the total railway traffic in India and 2.5 times the total steel produced in India.
10 Rail As per National Steel Policy 2012 (draft), keeping the increasing share of large producers in view, 70 to 75% of raw materials ie about mtpa would be transported by Rail. As per Vision 2020 document of Indian Railways, around 50 to 60% of domestically produced steel will move by Rail.
11 Rail The National Steel Policy 2012 (draft) identified the following specific areas of concern for the Indian steel industry where immediate action is needed: Strengthening and augmenting railway links between ports and steel plants as Indian steel is expected to become increasingly dependent on imported coking coal/coke Capacity planning, mobilization of funds and timely execution of railway projects in the iron ore mining areas Most importantly, augmentation of rail infrastructure in the eastern and southern states where large steel capacities are being planned in close proximity to major sources of iron ore in the country.
12 Rail Construction of two corridors, one each on the west and east routes, spanning a total length of about 3,300 km. The Eastern Corridor, starting from Ludhiana in Punjab, will pass through the states of Haryana, Uttar Pradesh and Bihar and terminate at Dankuni in West Bengal. The Western Corridor will run from Dadri to Mumbai, passing through Delhi, Haryana, Rajasthan, Gujarat and Maharashtra.
13 Rail The proposed creation of four additional DFCs North-South (Delhi to Chennai), East-West (Howrah to Mumbai), Southern (Chennai to Goa), and East-Coast (Kharagpur to Vijaywada) Would meet increased freight demand and also elevate the quality of service to global standards.
14 Rail Indian Railways also proposes to establish and improve connectivity with ports to form an inclusive intermodal strategy for firstand last-mile connectivity. Increasing axle load of wagons to 25 tonnes, running of long haul trains Improving Rolling Stock Introduction of single stack & double stack containers.
15 Augmentation of Rail infrastructure Public Private Partnership (PPP) initiatives include 1) SPVs for connectivity Projects 2) Wagon Investment Schemes 3) Container Operation 4) Manufacturing Units for rolling-stock/components 5) License for private container train operator 6) Special Freight Train Operators (SFTO) policy 7) Automobile Freight Train Operator scheme (AFTO) 8) Private Freight Terminal Policy (PFT) and 9) New R3i Policy on Railways Infrastructure for industry Initiative attracting private sector participation in rail connectivity projects.
16 Rail The freight rates are high due to Subsidization of passenger trains Involvement of more number of people for maintaining transaction Minimum chargeable distance Unwanted surcharges (busy season - steel industry has no lean period) and other costs like idle freight, siding and shunting charges etc.
17 Road Reasons for increasing importance of road transportation The dispersed geographical spread of the proliferating small/medium scale units The inadequacies in the railway transportation system in handling the bulk transportation needs of the expanding Indian steel industry The need for efficient last mile distribution of finished steel to end users located in distant areas. Road transportation has become an important element in a multi modal transportation matrix, especially, as part of the port related transportation network for import of raw materials and export of finished steel.
18 Road Areas of concern High transportation, delays and loss of materials in transit due to Low road density - National Highways constitute only about 2% of the road network but carry nearly 40% of the total traffic resulting in severe congestion. Freight travel only a third of the distance compared to developed countries. Poor quality of roads - The road quality in India, on the National Highways as well and other roads, is improving but is still poor in many locations. Inadequate network - State & district level roads connecting mines and plants to the National Highways lack good networking. Slow progress on expressway network Only by the end of 13 th plan period, development of around 15,000 kilometres of expressways is planned.
19 Road Corrective Measures Development of minimum four lane and preferably six lane highways of good quality for allowing higher multi-axle loads for smooth, faster & cheap freight movements Road development to service the steel industry to secure its raw materials and move its finished goods at a low cost. Other actions may include: a) Promotion of fleet exchange: Creation of an efficient marketplace similar to Stock Exchange or Commodity Exchange to bring together transport customers & transport vendors for the largely unorganized transport sector to revolutionize trucking landscape b) Electronic Toll Collection c) Encouraging use of large trucks.
20 Ports Indian ports facilitate 90% by volume and 70% by value of India s external trade via maritime traffic. Long coastline spans across 7,500 kilometers 13 major ports and about 176 non-major ports Of its major and non-major ports combined, 139 are along the west coast, while the remaining 50 ports are along the east coast. Indian ports handle iron ore for both exports and domestic consumers and handle imports of coking coal. The port traffic would increase to 200 to 225 million tonnes assuming imports of 85% of coking coal, 20% of non coking coal and 30% of scrap and imports and exports of steel at 10% of consumption and production by
21 Ports Major problems Low productivity of operations attributed mainly to slow evacuation of cargo leading to increased transaction costs & loss of competitiveness of Indian steel industry. High turnaround times: Data from Indian Ports Association show that ports in India suffer from high turnaround times for ships. JNPT, which is the premier port in India, has more than 2 times the turnaround time of Colombo and Singapore ports because of congestion on berths & slow evacuation of cargo which are unloaded at the berths. Inadequate depth at ports: The depth at many ports in India is not enough and dredging tenders take a long time in getting awarded. As a result with the existing depths many ports are not able to attract very large vessels. Costal shipping has not taken off: Costal shipping in India is hampered by inadequate port and land side infrastructure.
22 Ports Corrective Measures Policy relook towards developing commercial ports and multipurpose jetties for bringing in more flexibility and industry friendliness. There should be more deep sea ports with mechanized facilities supported with connected road/rail infrastructure for proper flow of incoming/outgoing traffic of the port. PPP models should be encouraged for developing the port infrastructure in the country. State government should form consortium with states having port facilities and should encourage the industries of using sea network for domestic movements over rail and road.
23 Logistics Driven Locations of Near Mines Steel Plants India Durgapur, Tata Steel Near Coastal Areas India Vishakhapatnam, Ratnagiri ( Dolvi Plant), Mangalore ( KIOCL)
24 Railway Optimization of Transport Bokaro Rourkela Combine Trains bring iron ore from Rourkela => Bokaro and return with Coal from Bokaro =>Rourkela This optimizes the use of transportation (because wagons are never empty), and helped in growth of iron-steel both places.
25 Cost reduction initiatives Cape Vessels are planned instead of Panamax vessels for coking coal to reduce the freight charges. Cost saving during for eight vessels is around Crs. Panamax vessels are planned instead of Handymax vessels for soft Coking Coals to reduce the freight charges. Cost saving during is around 7.51 Crs. Pipeline transportation of iron ore slurry such as one being taken up by NMDC & RINL in a Joint Venture.
26 Conclusions High growth in the Indian economy in the last one and half decade have resulted in a significant rise in the volume of freight traffic moved. Road, Rail, Port and other infrastructure projects have been planned, but there is a time lag leading to high transportation costs, lack of connectivity to ports, inadequate roads, Inadequate air and sea port capacities Poor connectivity of Ports with roads (First and Last mile connectivity) Lack of development of modes of transports like railways and alternates like inland water transport.
27 Conclusions There is a need for a good system, which can estimate the future requirements, develop policy framework for the most optimal and integrated system of different modes of transport and other infrastructure and also develop good operational strategies to reduce the logistics cost and make the timely deliveries
28 BIBLIOGRAPHY World Steel Association in figures 2013 National Steel Policy (draft) 2012 Report of the Working Group on Steel Industry for the twelfth five year plan ( ), MOS Logistics Sector- Present situation and way forward, Jan 2012 by Deloitte & Indian Chamber of Commerce Indian Railways Annual Report & Accounts Steel Scenario, June Railway A logistics provider in Transport Sector - O.P.Mishra AUG 12 Human Resource and skill requirements in the transportation, logistics, warehousing and packaging sector (2022)- A report by National Skill Development Corporation. Logistics game changers transforming India s logistics Industry, A study by KPMG & CII PRS Legislative Research Monthly Policy Review February 2013.
29 Thank You
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