Preparedness of Steel Mills To Improve Efficiency in Logistics

Indian Steel Markets Conference
Organised by Mjunction services limited

On 7-8 June, 2018 at Kolkata
“Preparedness Of Steel Mills to Improve

Efficiency in Logistics”
L N Mallik
ED (Transport & Shipping) SAIL
Scale of Logistics movement in Steel Industry
Coking Coal Fluxes (Ferro Alloys)
Iron Ore
3 units INPUT
Cargo Movement
For Steel Industry
1 unit
OUTPUT
Iron
 Coking coal consumption: 1:1, Iron Ore: 1:1.63, Flux: 0.4,

Crude Steel Production in India (Million tons)- last 10 yrs
National Steel Policy 2017
 With a vision to create a technologically advanced and globally competitive steel
industry that promotes economic growth, the GoI has formulated the National
Steel Policy 2017.
 The NSP aspires to achieve 300 MT of steel making capacity by 2030, translating
into additional investment of Rs.10 lakh crore.
 The policy seeks to increase consumption of steel in major segments like

infrastructure, automobiles, and housing, as well as seeks to increase per capita
steel consumption from existing level of around 61 kg to 160 kg by 2030.
 The policy has extensively dealt with almost all areas like steel demand, capacity,
raw materials, technological efficiency, product quality, value addition, focus on
high end research, infrastructure and logistics.
 National Steel Policy (NSP) 2005 aimed at 100 MMT by 2019-20 which has
already been achieved by India.
National Steel Policy 2017
Infrastructure & logistics:
Adequate and timely infrastructure growth in the eastern states where

bulk capacity addition is likely to come up.
Development of evacuation infrastructure to minimize turnaround time
as well as to build necessary linkages to reduce length of haulage.
Alternative modes of transportation of raw materials such as slurry
pipelines and conveyors.
Promotion of transportation of raw materials and finished goods through
inland waterways and coastal shipping.
Port-laid development of steel clusters under the aegis of Sagarmala
Programme.
Strengthening Port infrastructure.
Logistics Scenario
Logistics Scenario in India
 India’s spend on logistics activities is higher
than the developed nations due to low
efficiency
 Key factors
 Low level of mechanisation
 Low average Vehicle speed
 High turnaround time
 High cost/time for inland movement
 Significant current & planned investment in

infrastructure
 The competitive advantage between

companies is going to be determined by the
logistics cost
Logistics Infrastructure for Steel Industry in India
 Major dependence on Indian Railway as most of the plants are located in

hinter land.
 Bulk commodities like iron ore , Coal, fluxes, move almost by rail.
 Presently, around 50-60% of the domestically produced steel moves by rail.
 Coastal movement in India is not well developed.
 Bottlenecks in reaching and also evacuation of cargo from the ports and
plants.
 Inland waterways in a nascent stage.
 Infrastructure development being accorded priority by Government and
industry.
CONCENTRATION OF STEEL MILLS
Major steel plants located in three states rich in coal and iron ore, putting pressure on
port & other logistics infrastructure for both Import & Export.
Indian Railways – development to help Steel Industry
 Share higher than 60% for most of the bulk movement for
core sectors
 Suffering from Congested Track/ high density of traffic,
Low avg speed of Trains – Low turn around
 Modernization and upgradation of equipment-both fixed
infrastructure & rolling-stock
 Doubling and Port Connectivity
 Dedicated Freight Corridors will be a game changer in rail
transportation.
 FOIS : Real time information system on rake movement
 Large investment under PPP route – Logistic Parks/ Hub
 Steel Movement by Rail : Presently ~ 50% , to be
improved
Cargo Owner Perspective
 For steel sector, challenges are two fold involving inward and outward
movement through coastal mode:
 To ensure supply of raw material at right time and price
 To ensure order servicing by supplying steel at the destination at right time
and cost.
 The decision to shift cargo from rail/road to coastal/IWT will depend on the
ability of the service provider to reach material of a reasonable size at a
optimum cost and at right time.
 The decision of cargo user is mainly based on the mode optimization in terms
of cost, delivery, time of servicing etc. as shown in the matrix.
Mode Optimisation
RAIL ROAD Coastal/ IWT
Cost Medium High Cheap
Batch size Large Small Large/ Medium
Door to door Limited High Limited
Speed Medium Fast Slow
Integration and partnership across members of logistics value chain is essential

New Ports for advantage of Steel Industry
 National Maritime Agenda 2010-20
formulated by Ministry of Shipping,
envisages massive investment in port sector.
 New Ports : Dhamra, Gangavaram,
Krishnapatnam, Gopalpur, Kakinada will
play a big role to support exim logistics for
Steel Industry in east coast
 Port capacity likely to increase to 3.2 billion
tonnes by 2019-20 for handling about 2.5
billion tonnes of cargo
 Capacity expansion mainly by way of
construction of new berths and jetties
 Increase Coastal shipping and facilitate
hassle-free multimodal transport & promote
use of the inland waterways for cargo
movement
Development of Coastal Shipping
 India has long coast line of 7,500 kilometers but
penetration of coastal movement is low.
 Ministry of Shipping formulated scheme under
Sagarmala to provide financial support to ports for
creation of infrastructure.
 Under the Scheme, projects for construction/ up-
gradation of exclusive coastal berths for coastal cargo
and berths/jetties, mechanization of coastal berths;
capital dredging etc. will be considered for assistance.
 Mineral resources available along the coast, suits the
development of industries to raise the potential of growth
of coastal trade in the long-term.
 Major ports such as Calcutta, Haldia, Tuticorin, Madras,
Cochin, Kandla, etc. have the right infrastructure for
handling coastal trade along with other minor ports.
 Steel Companies desire to explore this option
seriously
Inland waterways
 India has an extensive network of inland waterways. Transportation by
waterways is highly underutilised as compared to developed nations.
 Development of NW5 - The significance of NW5 lies in its location close to
Talcher-Paradip region which is abundant in resources for evacuation of
different commodities including thermal coal, coking coal and iron-ore.
 Development of NW4 - This waterway which connects the upcoming capital of
Amaravati to the coastal parts of the state is extremely important for the
development of new industrial hinterlands proposed under the various nodes of
Visakhapatnam Chennai Industrial Corridor.
 Development of NW2 - This waterway has potential to cater to the traffic in the
north eastern region.
 Development of NW1 - With a length of 1620 km, NW1 is the longest
waterway in India from Ganga-Bhagirathi-Hoogly river system from Allahabad
to Haldia.
 Steel Companies desire to explore this option also along with coastal
shipping
SAIL – A Maharatna Company
SAIL – A Maharatna Company
 Largest steel manufacturing company

in India
 Capacity 23.0 MMT Hot Metal to
increase to 50 MMT by 2030
 Extensive marketing net work and
dealer outlet in all 600 districts in
India
 Producer of the widest spectrum of
steel products in the country
 Turn over 2017-18: 59,381 Crore
SAIL - Volume of Logistics
Major Raw Material – consumption & requirement
Unit: Million Tonnes

After Ongoing
Actual
Expansion
2016-17
2020-21
Hot Metal (HM) 15.60 23.46
Raw Materials Requirement
Iron ore 25.00 39

Limestone 3.90 5
Dolomite 2.80 4
Coking Coal 15.00 21

Total RM 46.70 69
* Import of dry bulk is expected to be around 20 million tonnes per annum beyond 2020
SAIL Vision 2030 : Traffic Envisaged
Transportation requirement of SAIL 5 ISPs
(Unit: Million Tonnes)
Detail 2017-18 2030-31
H.M.Production 16 52.5
Coking Coal 16.3 47
Boiler Coal 4.1 24
Iron Ore 26.5 87
Flux 7.35 23
Total Inward 54.3 233
Outward Despatch 12.7 42
Total Rail Traffic 67 275

All expansion at existing SAIL 5 ISPs location
Strategy
1. Eliminate waste in terms of time,money & capacity
a) Capacity utilisation of resources – railway wagons,

Captive mines, Own warehouses & railway sidings, loading
bays
b) Reduction in turnaround time of wagons
c) Operate from efficient Supply Chain entities (e.g – ports,

mines & railway sidings) to cut down waste.
2. Risk Pooling
a) Include alternatives entities to mitigate risk which may
be cost effective and make supply Chain agile to handle
uncertainty.
 Multi-sourcing to eliminate uncertainties in supplies from

single source.
 Alternate mode of transports like road, inland water

ways ,coastal shipping, slurry pipe line.
 Multi-Port operation to remove logistics constraints in

respect of port operation, railway operation.
2. Risk Pooling contd.
b) Adopt multi strategy to evacuate finished products :
 Develop despatch Yard in plants

 Increase road despatch facilities at plants
 Induct own dedicated rakes for plant to plant based

Ware houses
 Adopt Marketing strategy based on Hub & spoke

distribution model
3. Competitive advantage
a) Owning railway wagons for deploying on strategic routes.
b) Creation of feeder routes between SAIL plants/units

and Dedicated freight Corridor (DFC).
c) Creation of regional processing cum despatch
Warehouses along the DFC at strategic location in each
region
d) Owning of additional deep draft mechanised port/berth
in Eastern Coast along with share in all the existing ports
(Tajpur port at Sagar,West Bengal is being developed
Jointly by State Govt. & Ministry of Shipping)
Expectation of Steel Industry & Way Forward
 India will have strong steel demand in coming years and Steel making capacity
to grow manifold
 Ports:
 Augmentation of ports Capacity to be done as envisaged in time
 Port connectivity - Each Major port & Non Major Ports should have last
mile connectivity.
 Rail & Road:
 Availability of Railway rakes for seamless evacuation
 Last mile connectivity
 Coastal Movement:
 Integration of Coastal and Inland waterways to create single window
solution and improve hinterland connectivity
 Possibility of diversion of domestic cargo from land modes
 Multimodal transportation to be strengthened
“Leaders win through logistics.
Vision, sure. Strategy, yes.
But when you go to war, you need to have both toilet
paper and bullets at the right place at the right time.
In other words, you must win through superior
logistics.”
-Tom Peters
Thank You

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Indian Steel Markets Conference

Organised by Mjunction services limited

“Preparedness Of Steel Mills to Improve

 Coking coal consumption: 1:1, Iron Ore: 1:1.63, Flux: 0.4,

 The policy seeks to increase consumption of steel in major segments like

Infrastructure & logistics:

Adequate and timely infrastructure growth in the eastern states where

 Significant current & planned investment in

 The competitive advantage between

 Major dependence on Indian Railway as most of the plants are located in

RAIL ROAD Coastal/ IWT

Cost Medium High Cheap

Batch size Large Small Large/ Medium

Door to door Limited High Limited

Speed Medium Fast Slow

Integration and partnership across members of logistics value chain is essential

 Largest steel manufacturing company

Hot Metal (HM) 15.60 23.46

Raw Materials Requirement

Iron ore 25.00 39

Coking Coal 15.00 21

Outward Despatch 12.7 42

Total Rail Traffic 67 275

1. Eliminate waste in terms of time,money & capacity

a) Capacity utilisation of resources – railway wagons,

b) Reduction in turnaround time of wagons

c) Operate from efficient Supply Chain entities (e.g – ports,

 Multi-sourcing to eliminate uncertainties in supplies from

 Alternate mode of transports like road, inland water

 Multi-Port operation to remove logistics constraints in

 Develop despatch Yard in plants

 Induct own dedicated rakes for plant to plant based

 Adopt Marketing strategy based on Hub & spoke

a) Owning railway wagons for deploying on strategic routes.

b) Creation of feeder routes between SAIL plants/units

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