Expansion targets, cost economics on RINL’s radar

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By Madhumita Mookerji

P K Rath, who took over as the Chairman-cum-Managing Director of Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Vizag Steel Plant (VSP), has a clear-cut blueprint for taking the company forward. Number one on the agenda is to bring the plant up to a level of 7.3 million tonnes (MnT) of production. Second is increasing the tonnage of value-added steel. Third is raising blast furnace productivity and PCI usage and, lastly, stabilisation of the structural and special bar mills. A long products player, RINL has been nursing flat products ambitions, for which Hyundai and POSCO have shown some interest in a collaborative deal. Steel360 spoke at length with the dynamic CMD of RINL. Excerpts from the interview:

P K Rath, Chairman-cum-Managing Director of Rashtriya Ispat Nigam Limited (RINL)
P K Rath, Chairman-cum-Managing Director of Rashtriya Ispat Nigam Limited (RINL)

 You took over almost a year back. But you are not an outsider, in fact, very much a part of RINL! What major developments did you initiate since you took over the reins?

I took over as the Chairman-cum-Managing Director (CMD) in September 22, 2018. My sole objective is to keep up the production of the expansion as well as the revamped units. Sustaining the production volume after the ramp-up, that is what I am concentrating on. My whole thinking is that the capacity utilisation should support the increase… because the plant is now at 6.3 million tonnes (MnT) levels.

In the 7.3 MnT expansion, almost all the units are completed except one, and this is the twin ladle furnace, which is slated for commissioning in September, 2019. Except for this one, almost all the other units have come up. The twin ladle furnace is required for tapping the total potential of the expansion units of steel mill shop No. 2.

 

What is the capacity of the steel mill shop no. 2?

The total production rated capacity of the steel mill shop no. 2 is 3.8 MnT while the existing rate of production capacity is 3.5 MnT. Suppose we consider the two parts, one is the expansion and the other is the existing unit… To take care of that expanded capacity of 3.8 MnT, one more unit has to come up and that is the twin ladle furnace, which is slated for September commissioning. And, that is the reason why we are not able to tap the total potential of the expansion units.

 

On paper, in that case, what is RINL’s total production capacity at present?

I will put it this way. Up to September, 2019, we should call it a 6.3 MnT plant and beyond September 2019 it should be totally a 7.3 MnT plant.

 

What is the liquid steel production target for FY20?

This financial year (that is, for 2019-20 or FY20), we have taken a target of 6.4 MnT of production of liquid steel. In 2018-19, the target had been 6 MnT of liquid steel production, out of which we produced 5.5 MnT of the same. The saleable steel production target is 5.8 MnT for FY20.

P K Rath, Chairman-cum-Managing Director of Rashtriya Ispat Nigam Limited (RINL)
P K Rath, Chairman-cum-Managing Director of Rashtriya Ispat Nigam Limited (RINL)

What were the reasons for this 0.5 MnT shortfall?

The reason was the stabilisation of the expansion units. Although we have got a total 6.3 MnT units commissioned, we are not able to tap the total potential because of the stabilisation of the shop is not complete. Generally, in a steel plant, even if you install all the equipment, it takes 1-2 years for the stabilisation process to be completed. We, thus, still have a little way to go and that is why there is the shortfall in reaching the liquid steel production target. But, this fiscal, we are certainly slated for 6.4 MnT of liquid steel production and we are going at a rate of 6.4 MnT for 2019-20 of liquid steel.

 

What is your revenue target, in that case, for FY20?

 The revenue target we have set for ourselves is INR 27,000 crore – which is a stiff target for us. In the last fiscal (2018-19), our revenue target had been INR 20,844 crore. But, although the ministry has given us a target of INR 27,000 crore, we are aiming at INR 25,000 crore which, we feel, is a very good target as well. In FY19, we actually crossed our target of INR 20,844 crore by achieving Rs 21,000 crore, because the market was good in the first half of last fiscal and we also increased our production from 5 MnT to 5.5 MnT in 2018-19, a 12% increase in production.

What are the major targets you are looking to achieve within your tenure?

Among my major targets, first, is to come to that 7.3 MnT of liquid steel production, which would enable 100% production capacity.

Secondly, I want to increase substantially the value-added steel tonnage. In this category, there was a growth of around 9% from 7 lakh tonnes in FY18 to 9 lakh tonnes in FY19, and around 29% increase in value-added yield (in FY19). And we want to sustain that growth in 2019-20 as well. Remember, we produced 9 lakh tonnes, which is almost 1 MnT, of value-added steel, in 2018-19 and want to increase this to 1.3 MnT in 2019-20.

Thirdly, I am trying to concentrate on the cost economics. Or, what we would call the techno-economic parameters. Our cost economic parameters are mostly decided by iron-making units or blast furnace operation and that is the reason we concentrate on the techno-economic parameters of the blast furnace categorically. In 2019-20, particularly, I am concentrating on the blast furnace parameters and these are 1) blast furnace productivity and 2) the pulverised coal injection or PCI rate.

Our blast furnace productivity was around 1.64% by the end of financial year 2018-19 but I want to increase this to 2% by FY20. Secondly, I want to bring up the PCI quantity, which was hovering around 65 kg per tonne of hot metal overall, to 100 kg per tonne of hot metal, in a bid to increase my PCI parameter.

Apart from that, we are aiming at a higher convertor life. The convertor lining was at around 3,500 lives. We want to increase this to around 5,000 lives.

Fourthly, stabilisation of the mills, which produce the ultimate products. We have two mills – one is the special bar mill and the other is the structural mill which were moving at 60% of their rated capacity in FY19. The production capacity of the special bar mill is around 0.8 MnT per annum and the structural mill’s is around 0.9 MnT per annum. We want to increase the capacity utilsation of both to 100% in this financial year.

 

How do you propose to go about increasing BF productivity and PCI usage?

 Blast furnace productivity always depends upon the constant regime of BF operations. In 2019, we were fluctuating the regime of operations in the BF, which is stabilising in 2019-20. We are almost done because we are going at a rate of 85 kg per one tonne of hot metal. And the blast furnace productivity is also hovering around 1.8% at present, which we want to improve to 2%, as I have already mentioned earlier.

However, we have certain short-comings in managing PCI,. We had certain problems in the blast furnace numbers 1 and 2. As you know, we have got three blast furnaces. Where BF 3 is concerned, we are doing great, at a rate of 120 kg of PCI per tonne of hot metal. But in BF 1 and BF 2 we were not able to do PCI because of certain technical issues which we are overcoming in the months of July and August. PCI usage always reduces the consumption of coke, which is the most expensive item in steel-making. BF coke is the fuel we use for reduction of iron to make hot metal. Coke is the reducing agent as well as the fuel. The coke cost is much more than that of PCI. So, if I use this coal, it will substitute coke. So, suppose my coke cost is INR 30,000 per tonne, the coal (PCI) cost is around INR 17,000 per tonne. If we use coal to substitute coke, then automatically the cost of production will come down in our blast furnaces substantially.

Thus, by using PCI, the blast furnace cost economics will be tilting in favour of RINL. So I want to increase usage of PCI substantially – at least by two times. It was around 64 kg per tonne of hot metal and now we are aiming at around 100 kg, so that would be a substantial increase. We are, at present, going at a rate of 80 kg of PCI per tonne of hot metal.

 

What are the factors that did not allow full capacity utilisation of the mills?

These were completely new mills and there were problems of stabilisation. This year, we have almost overcome this problem, because, if you consider the structural mill, in 2018-19 we produced 0.38 MnT against a target of 0.9 MnT. It was commissioned in August 2017.

We are concentrating on the structural mill now and are going at a rate of 80% capacity at present. We want to increase it to 100% this fiscal.

Our wire rod mill is another unit that produces finished products, but which has already achieved 100% rated capacity in the last fiscal itself and we will sustain that.

 

Tell us a bit about the long-term vision for the company

We have a vision statement where we have plans for further expansion to around 11.7 MnT with a slab caster with flat products because, at present, we are only into long products. But, at this point, that 7.3 MnT expansion has not touched its total potential. Also, the financials of the company do not permit me to go in for expansion. So we are thinking in terms of some sort of a collaboration or a joint venture with an overseas company who has shown interest. It will be an equity and financial collaboration.

 

Have you made any headway in terms of your flat products plans?

We have not yet made any headway. The positive point is that some companies have shown interest in RINL. These are Hyundai and POSCO but these are at a very nascent stage.

If anything crystalises then certainly we will go for flat products.

Generally, when we plan construction of a steel plant, it takes two to three years for a plant to come up. At this moment, it will be very difficult to say what the investment is likely to be. Tor us at this moment the expansion to 7.3 MnT is our priority now and so we have not given that much importance to this plan. Hyundai and PSCO showed some interest and that is why we were thinking in terms of a collaboration. But, at this moment, tapping into the total potential of the plant is the objective of this company

 

Is this 11.7 MnT part of the 300 MnT target set by the government for overall crude steel production by 2030-31? When will it be achieved?

Yes it should be part of that 300 MnT overall target.

As for 11.7 MnT it is difficult to say by when… see, the government decides, the companies show interest in a collaboration and after that it may take two to three years in setting up a plant, attaining stabilisation before realising the full production potential.

 

RINL has always had iron ore supply issues because it has never had a captive mine…

Yes that is the biggest bottleneck for the plant because we do not have an iron ore mine of our own. We have requested various state governments like Odisha and Chhattisgarh to allocate us a mine and that certainly will improve our bottomline. Our total iron ore requirement for production of 7.3 MnT of liquid steel will be 10 MnT per annum. We have a long-term understanding with NMDC for supply but because of logistics we have also started sourcing the raw material from Orissa Mining Corporation (OMC) and we have also tapped down south, from NMDC’s mines in Karnataka. We are participating in OMC’s auctions and buying the raw material from there.

We have also shown interest in and have applied for participating through the auction route for iron ore blocks.

 

What is RINL’s coking coal requirement per annum?

Our coking coal requirement is around 5 MnT per annum and we are importing around 90% of that from Australia, the US, Indonesia and the rest from domestic sources.

 

What is the status of the pellet plant that you are setting up with KIOCL?

Yes we have a joint venture with KOCL for a pellet plant of 2 MnT capacity. We are now going to sign an agreement with KIOCL on this. The KIOCL board has given the approval, so has our board. Now, we are in the process of finalising the draft agreement. The moment that is ready, we will sign the agreement, It is going to happen in the near future.

 

What benefit will accrue from this pellet plant for RINL?

One, it will help in the logistics of operations and two, give rise to higher productivity of blast furnaces.

Setting up the plant will take a little time because KIOCL will have to make the investments… it will take two to three years to set up the plant. We are only providing the land for the project inside our plant and the rest of the investment is to be done by KIOCL.

 

What is the update on the forged wheel factory?

The forged wheel plant for one lakh units per annum in Rae Bareli is slated for commissioning in September, 2019. We have a memorandum of understanding with Indian Railways for the entire volume of one lakh units as an import substitution.