We plan to become a global trader of minerals in future: Ravi Uppal
Jindal Steel and Power CEO talks about the impact of the rail freight hike and the firm's growth and diversification plans
New Delhi: Jindal Steel and Power Ltd (JSPL) has just signed a mining lease in Cameroon to explore an iron ore mine estimated to hold 250 million tonnes (mt) of reserves, Ravi Uppal, managing director and chief executive officer of JSPL told Mint in an interview. Uppal also discussed a wide range of issues, including his expectations from the new government, plans to become a global trader of minerals, the impact of the rail freight hike, as well as the company’s growth and diversification plans. Edited excerpts:
There have been rumours about JSPL looking at western Africa to source iron ore for the recently-commissioned steel plant in Oman. Can you confirm?
Yes, we have just secured the mining lease for an iron ore mine holding about 250mt of reserves in Cameroon. The mining lease has been acquired from Legend Mining Ltd. First, we have to start exploration to establish what is where, then mining execution plan and (that) happens with a bit of lag. A lot of these things get buoyancy depending on the economic activity. In Oman, we are currently buying pellets from leading manufacturers outside the country plus we are also supplying iron ore from India.
The Oman plant caters to the requirements of the Arabian peninsula and neighbouring countries like Jordan, Egypt, as well as other North African countries. Right now, we are producing billets and rounds and next year, we will start bars.
Presently, we have mines in other overseas destinations like Australia, Mozambique and South Africa too. In future, we plan to become a global trader of minerals.
Can you elaborate?
We have coal mines in Australia and Mozambique and have started to mine coal out of them. Right now, coal prices are low, so, that is an issue of concern. So we are also waiting for the business climate to improve globally, before we start actively trading these minerals. We want the prices to firm up, so that we can recover our costs and keep them profitable. So, the future plan is that some of our overseas mines will feed Oman, some of them will be traded in overseas markets and the remaining will be for our own steelmaking in India. Currently, we are trading only anthracite from South Africa.
In Mozambique, we are setting up a flotation plant, whereby the yield of the plant improves, and looking at logistics, whereby costs can be brought down and can become more remunerative. In Australia, we would like to reach 5mt in the next two-three years and in Mozambique, we plan to take it first to 3mt and then 10mt, depending on market conditions. Australia is currently producing about 2.5mt per annum (mtpa) and Mozambique close to 3mt. Coking coal from our overseas mines is already coming to India.
What is your most urgent demand from the new government?
During the tenure of the previous government, projects worth billions of dollars were stalled because of impediments like the environmental and forest clearances, non-availability of land and lack of finances. Single-window clearances must be given to projects, land acquisition must be done very fast, environment and forest clearances should be speeded up, and bank finances be given in time.
In Angul (in Odisha), we have certain mining applications where we are waiting for the mining lease. We have gone through a laborious process as far as Utkal B mine is concerned. We had spent eight years and finally everything was ready and we had gone through the entire rigmarole and we think that we deserve to have our coal mine. For the time being, we are having to rely on auctioned coal. It is 50% more expensive to buy coal through auctions.
The new government must also take a hard look at the existing land Bill and see if any amendments can be made whereby the liability of the industry can be reduced and they can focus on what they have to do rather than getting embroiled in a whole lot of issues related to land. In Raigarh (in Chhattisgarh), for instance, we want to expand from the current 3.5mtpa capacity to 10mtpa in two phases with investments of around $7 billion hinging on this. Land is a subject of anxiety and it doesn’t come easily. So, we have requested the government for more land for expansion.
Labour reforms are also long overdue. We are still governed by antiquated laws and employers are trying to see how they can do without labour because they think that once they are on board, the current regime of labour laws are very prejudiced against the owners.
What is the impact of the rail freight hike on the steel industry?
We are concerned with the government’s decision to hike the rates of rail freight by 6.5% for goods and 12-14% for passengers.
I think the government should realize that the losses that they incur in railways are a result of the inefficiency we have in the system. This rate hike will translate straight into inflation. For example, if you take the steel business, we have both inward and outward movement of material. So, both of them will go up by 6.5%. Steel prices, as a result, will go up by ₹ 500-600 per tonne, which is about 1.25-1.5% higher. It is not something which is coming to the steel industry actually, but rather is going into the ministry of railways. Our realization will remain the same but the cost to the customers will go up by 1.25-1.5% and is untimely at this moment.
The government is talking about hiking the steel production capacity in the country from 100mt to 300mt. Is JSPL gearing up for this?
We are going to use the Angul plant for high-grade products which can be used for ships, windmills, boilers, defence applications like tanks etc. So Angul will be 6.5mt, Raigarh 3.5mt, and when we set up Patratu (Jharkhand), it will be 3mt and if we add Oman’s 2mt, our overall capacity will become 15mt by 2018.
After this, we will enter Raigarh phase 2, which will happen by 2020. Angul phase 2 will happen by December 2015. Patratu will basically cater to Jharkhand, Chhattisgarh and Madhya Pradesh, whereas Angul will have a different product range for the south, west, central and export markets. The Raigarh plant, on the other hand, will do the normal grade plates. Angul is one of the most versatile mills in India and produces special grades of steel which we intend to export.
Can you give further details of your export plans?
Our basic intention is to export 20% of domestic production from 2016, when our total production will stand at around 10mt. So, we will be in the international markets with 4mt of steel, including 2mt from Oman. Then, of course, there will be pellets and such things which will also be there. Different products have different markets; for instance, in the case of high-grade plates, this will go to Europe, the US, Canada and Mexico, which will make big pipes and vessels for chemicals and petrochemicals. In Africa, it would be more structures and TMT rebars (thermo-mechanically treated reinforcement bars).
How is your foray into the retail segment doing?
The retail segment has been the big success story for us because we have established our Panther brand that grew significantly in 2013-14 from around 8,000 tonnes to 125,000 tonnes and we hope to sell 300,000-400,000 tonnes in 2014-15.
We are increasing our focus on retail products and post-Diwali we will add more products. To the current TMT cut and bend range of products, we will add smaller beams, thinner plates and angles of smaller profiles.
Are you looking at further diversification?
Over the next six months, we plan to launch a new vertical for our parallel range of construction products. Our non-core products include cement, bricks, tiles, HR (hot rolled) columns, as well as structural bases for construction of housing.
We also make synthetic aggregrates and special material for making roads. This comes from our three plants, in Jharkhand, Odisha and Chhattisgarh. Therefore, we have a full basket of construction products, along with cement. We have started pilot-marketing these products and will subsequently add dealers.
The debt levels in your books are quite high, standing at around ₹ 36,0000 crore. How do you propose to deal with this?
We plan to reduce debt levels by cutting down on new investments.
Also, the increased earnings on account of the newly commissioned plants like the Angul and Oman plants, as well as the divestments in certain non-performing and non-core assets, will help reduce debt levels. We expect to reduce our FY15 net debt to Ebitda (earnings before interest, taxes, depreciation, and amortization) levels to less than 4.
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First Published:9 Jul 2014, 12:09 AM IST
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