Vitoria, Brazil: The world’s biggest steel maker ArcelorMittal’s flagship and largest plant in Latin America, situated near this historic port town of 1.6 million people, offers a window into the company’s future in India—especially as it grapples with how to power those ambitions.
The plant in Tubarao, as the area around the bend of the horseshoe-shaped Camburi Bay is known, has achieved energy efficiency by co-generating power from gas emitted during steel production. Now, the company is promoting the “Brazilian model” for its two planned steel mills in the states of Orissa and Jharkhand, which, if implemented, will bring the largest foreign direct investment into India.
Adapting tech: ArcelorMittal Brazil chief executive officer José Armando de F. Campos.
Last year, its president and chief executive officer Lakshmi N. Mittal announced that the company will invest $20 billion (Rs79,000 crore) in two steel plants in India. Sudhir Maheshwari, executive vice-president for finance, told Reuters on Thursday that the company had identified sites for the plants and was discussing sourcing for iron ore with the state governments, adding that a licence for coal mining was expected within a few months.
In Brazil, the Tubarao plant produces 7.5 million tonnes of flat steel and generates 440MW of power, selling a surplus of about 100MW. That has allowed ArcelorMittal to become self-efficient in energy—significant in a country largely dependent on hydel electricity; last week, prices soared to Reais 570 ($326) per MW hydel, compared with Reais 17 per MW hydel last year. (One Brazilian Reais is equivalent to $.56)
While about $1,000 was invested to set up 1MW capacity at the plant, revenue from power touched $70 million last year. Guilherme Correa Abreu, an environment management specialist at the company, said while the plant’s power generation has been an expensive proposition, the arrangement has brought stability in operation and helped avoid price fluctuations in power. The plant also boasts of the longest running blast furnace, set up 25 years ago.
While ArcelorMittal controls 10% of world’s steel production, mostly through a chain of mergers and acquisitions, it has yet to set up a steel plant from scratch.
And that is why so many eye its plans in India with such interest, alongside the fact that Mittal, one of the richest men in the world, was born and raised in India.
The company’s 15-member international team for India projects has been drafting guidelines for its entry for the last several months. “We will be sharing one of the best practices, which is a result of long years of learning. Our model on energy consumption can be analysed and adapted, including in Jharkhand and Orissa,” said José Armando de F. Campos, chief executive officer of ArcelorMittal Brazil, which has some 17 big and small plants.
ArcelorMittal’s biggest challenge in India, though, will be to win over locals who have voiced resistance to the company’s acquiring land to build steel plants. The states have largely supported the company’s bid, seeing the possibility of jobs and infrastructure development.
According to state government officials, the company has identified land in Khuti district near Ranchi town. It has already submitted an application to acquire 12,000 acres of land. And after initial reservations, the Orissa government also has approved the company’s request of 7,000 acres.
With hopes of the company, which has the world’s fourth largest iron ore mining interests, securing a portion of the disputed Chiria mines in Jharkhand thinning, the company has applied for three mining and prospective licenses in the Ghatkuri and Karampada regions of the state.
As fellow members of the so-called Bric nations—Brazil, Russia, India and China, which collectively represent nearly half of the world’s steel production—officials say ArcelorMittal’s experience here holds many lessons for India. Brazil and India recorded 7.3% and 9.3% production growth, respectively, last year.
India is the fifth largest steel producer and Brazil ranks ninth.
But according to a 2007 Boston Consulting Group report, it takes five man hours to produce a tonne of cold-rolled steel in Brazil—compared with 38 hours in India for the same due to a lack of technology and quality control. Brazil has the lowest cost in steel production and vast resources of iron ore.
“Both India and Brazil are growing economies,” said Stefan Schwarz, a company spokesman. “We would like to emulate the experiences of steel-making process....”
Maitreyee Handique is a guest of ArcelorMittal in Brazil.