“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

Cargo Movement For Steel Industry Scale of Logistics movement in Steel Industry Iron Ore Coking Coal Fluxes (Ferro Alloys) Iron 3 units INPUT 1 unit OUTPUT Cargo Movement For Steel Industry Coking coal consumption: 1:1, Iron Ore: 1:1.63, Flux: 0.4, 2

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 Speed 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

Major Raw Material – consumption & requirement SAIL - Volume of Logistics Major Raw Material – consumption & requirement Unit: Million Tonnes   Actual 2016-17 After Ongoing Expansion 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 18

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 Eliminate waste in terms of time,money & capacity Capacity utilisation of resources – railway wagons, Captive mines, Own warehouses & railway sidings, loading bays Reduction in turnaround time of wagons Operate from efficient Supply Chain entities (e.g – ports, mines & railway sidings) to cut down waste.

Risk Pooling 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.

Risk Pooling contd. 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 Owning railway wagons for deploying on strategic routes. Creation of feeder routes between SAIL plants/units and Dedicated freight Corridor (DFC). Creation of regional processing cum despatch Warehouses along the DFC at strategic location in each region 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