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AMITY GLOBAL BUSINESS SCHOOL
HYDERABAD
PRODUCTION AND OPERATIONS
OF
JINDAL STEEL WORKS
BY
K.THARUN KUMAR-12
R.DINESH -62
G.ABHINAY -75
T.SNEHA -83
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INTRODUCTION
Steel is crucialtothe developmentofanymoderneconomy and is considered to
bethe backboneofhuman civilisation. Thelevelofper capita consumptionof
steel is treated as an important indexofthelevelofsocioeconomic development
and living standards ofthepeople in any country. It is a productofa large and
technologically complex industryhaving strongforward and backward linkages in
terms ofmaterialflows and incomegeneration. Allmajor industrialeconomies
are characterised bytheexistenceofa strong steel industry and thegrowthof
manyoftheseeconomies has beenlargely shaped bythe strengthoftheir steel
industries intheir initial stages ofdevelopment.
Steel industry was inthevanguard intheliberalisationofthe industrial sector and
has made rapid strides sincethen. Thenew Greenfield plants representthelatest
in technology. Output has increased, the industry has moved up i n the value
chain and exports have raised consequentto a greater integration withtheglobal
economy. Thenew plants have also brought about a greater regional dispersion
easing the domestic supplypositionnotably in the western region. At the same
time, the domestic steel industry faces new challenges.Someofthese relate to
the trade barriers in developed markets and certain structuralproblems of the
domestic industrynotably duetothehigh costofcommissioningofnew projects.The domestic demand toohas not improved to significant levels. The litmus test
of the steel industry will be to surmount these difficulties and remain globally
competitive. Ithas beenobserved that steel industryhas growntremendously in
the lastone and a half decade with a strong financial condition. The increasing
need of steel by the developing countries for its infrastructural projects has
pushed the companies inthis industrynear their operative capacity.
INDUSTRY OVERVIEW
Steel is the worlds third largest commoditymarket with a dollar value inexcess of
$700 billion. In recentyears, the industryhas undergone radical restructuring and
has becomemoreglobal, moreefficient and morefinanciallyviable. Events have
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resulted inhigh prices, supply disruptions and increased volatility, all elements
whichtheexistenceoffutures contracts canhelpthe industrytomanage.
Exceptional growth continues to be seen in the global consumptionof finished
steelproducts. Growth in steel demand is highest inthe developing world. China
has increased its domestic consumptionfrom 53 milliontonnes in 1990 tonearly350 milliontonnes in 2005. Economic growth inthe developing world tends to be
more steel intensivethangrowth in developed nations. As a result, steelplays a
vital role in these new economies. World steel trade has expanded as global
consumption has increased. In 1990 international steel trade was 167 million
tonnes and is forecasttogrow to 353 million in 2015.Global steelproductionhas
continued to increase but, at a lesser rate toprevious years. In 2005, the total
world crude steelproduction was 1,107.2 millionmetric tons and was valued at
over $700 billion. This growth is estimated to continue until 2015 at a rate of
approximately 4% per year. Previously from 1990 to 2000, thegrowth rate wasonly 1.6% per year.
THE GLOBAL STEEL INDUSTRY
The current global steel industry is in its best position in comparing to last
decades. The price has been rising continuously. The demand expectations for
steelproducts are rapidlygrowingfor comingyears. The shares ofsteel industries
are also in a highpace. The steel industry is enjoying its 6th consecutiveyears of
growth in supply and demand. And there is manymoremerger and acquisitions
whichoverall buoyed the industry and showed somegood results. The subprime
crisis has lead tothe recession ineconomyofdifferent countries, whichmaylead
tohave a negativeeffecton whole steel industry in comingyears. However steel
production and consumption will be supported by continuous economic growth.
The most significant growth that can be seen in the steel industry has been
observed duringthetwo decades that is 1960s and 1970s, whenthe consumption
ofsteel around the whole world doubled. Betweentheseyears, the rate at which
the steel industrygrew has been recorded to be 5.5 %. In late 70s the industry
showed a deceleration in growth. After this period, the continuous fall slowed
down and again started its upward movementfromtheearly 1990s.
New innovations are alsotakingplace inSteel Industryfor costminimization and
atthe sametimeproductionmaximization.Someofthe cuttingedgetechnologies
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that are being implemented inthis industry arethin-slab casting, makingof steel
throughthe useofelectric furnace, vacuum degassing, etc.
INDIAN STEEL INDUSTRY
Steel Industry in India is on an upswing becauseofthe strongglobal and domestic
demand. India's rapid economic growth and soaring demand by sectors like
infrastructure, realestate and automobiles, athome and abroad, has put Indian
steel industryontheglobalmap.
Thefinished steelproduction in India has grownfrom a mere 1.1 milliontonnes in
1951 to 36.957 milliontonnes in 2003-04. Duringthefirsttwo decades ofplanned
economic development, i.e. 1950-60 and 1960-70, the average annual growth
rateof steel production exceeded 8%. However, this growth rate could not be
maintained inthe decades thatfollowed. During 1970-80, thegrowth rate in steel
production came downto 5.7% per annum and picked upmarginallyto 6.4% per
annum during 1980-90. The production during the last decade has doubled.
Though India started steelproduction in 1911, steelexports from India beganonly
in 1964. Exports in the first five years were mainly due to recession in the
domestic iron and steelmarket. Upon revivalofthe domestic demand there was a
decline inexports. India once again started exporting steelonly in 1975 touching a
figureof1 milliontonnes ofpig ironexport and 1.40 milliontonnes ofsteelexport
in 1976-77. Thereafter, exports againfell rapidlytomeet rising domestic demand.
It was only after liberalisationofthe steel sector thattheexports of iron and steel
haveonce again started increasing.
TransformationofIndian steel industry after liberalisation
India's Steel Industry is morethan a centuryold. Beforetheeconomic reforms of
them early 1990s the Indian steel industry was a predominantly regulated one
with the public sector dominating the industry. Tata Steel was the only major
private sector company involved the productionof steel in India. Sail and Tata
Steel have traditionally been the major steel producers of India. In 1992, the
liberalizationof the India economy led to theopening upof various industries
includingthe steel industry. This led tothe increase inthenumber ofproducers,
increased investments in the steel industry and increased production capacity.
Since 1990, morethan Rs 19,000 crores (US$ 4470.58 million)has been invested
inthe steel industryofIndia.
India's steel industry wentthrough a roughphase between 1997 and 2001 when
the overall global steel was facing a downturn and recovered after 2002. The
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major factors that led tothe revivalofthe steel industry in India after 2002 was
the rise inglobal demand for steel and the domestic economic growth in India.
India has now emerged as theeighthlargestproducer ofsteel inthe world with a
production capacity of 35MT. Almost all varieties of steel is now produced in
India. India has alsoemerged as a netexporter of steel which shows that Indiansteel is being increasingly accepted intheglobalmarket.
Thegrowthofthe steel industry in India is also dependent, to a largeextent, on
the levelof consumptionof steel in the domestic market.Steel consumption is
significant in housing and infrastructure. In recent years the surge in housing
industryofIndia has led to increase inthe domestic demand for steel.
Policy changes
The important policy measures, which have been taken for the growth and
developmentofthe Indian iron and steel sector, are as under:
In the new industrial policy announced in July, 1991, iron and steel industryamongothers, was removed from the listof industries reserved for the public
sector and alsoexempted fromtheprovisions of compulsory licensing under the
Industries (Development and Regulation) Act, 1951.
Witheffectfrom 24.5.92, iron and steel industry was included inthelistof high
priority i ndustries for automatic approval for foreign equity investment upto
51%.
This limithas since been increased to 100%.
Pricing and distributionof steel were deregulated from January, 1992. At the
sametime, it was ensured thatpriority continued to be accorded for meetingtherequirements ofsmall scale industries, exporters ofengineeringgoods and North
Eastern Region, besides strategic sectors such as Defence and Railways.
The import regimefor iron and steelhas undergonemajor liberalisationmoving
graduallyfrom a controlled import by wayof importlicensing, foreignexchange
release, canalisation and high import tariffs to total freeing of iron and steel
imports fromlicensing, canalisation and loweringof import dutylevels. Exportof
iron and steel items has also beenfreely allowed.
Import dutyon capitalgoods was reduced from 55% to 25%. Duties on raw
materials for steelproduction were reduced. Thesemeasures reduced the capitalcosts and production costs ofsteelplants.
Freightequalisation scheme was withdrawn in January 1992. However, withthe
coming upofnew steelplants in differentparts ofthe country, iron and steel
materials arefreely available inthe domestic market.
Levyon accountofSteel Development Fund was discontinued from April, 1994
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thereby providing greater flexibility to main producers to respond to market
forces
Industrial and Trade Policy Resolutions in 1991 with regard totheSteel industry
Exempted from industriallicense system
Abolitionofprice controls Liberalising conditions for FDIs
Liberalisationof imports and exports
Loweringtarifflevel
Changes after theeconomic liberalisation
Steelproduction and export increased muchfaster than before
This increase attributabletonew comers
Technology catching up rapidly
New typeofsteelfirms appeared Flatproducts imported and exported
Emergingtrends in steel industry
An increasing investment in infrastructure, construction and urbanisation as well
as growth in automobile, whitegoods and industrial sector is a further boost to
theoptimism withinthe domestic steel industry.
Power: Addition of 41,000 MW of power generating capacity between 2002and 2007 and about 61,000 MW between 2007 and 2012 should drive steeloff
take, leadingto an incremental consumptionof0.4 milliontones in FY2006 itself.
Roads: The government intends to embark on the construction of 48 newprojects with a view to four lane about10,000 kms of roads in addition to the
existing ongoing programme of National Highway Authority of India.With steel
intensity in the roads under construction being considerably higher than the
legacy infrastructure, theoutlook for increased steel consumptionon this count
appears to be brighter.
Housing: Low interest rates and easy availability of housing finance hasresulted in a housing boom; the Housing and Urban Development Corporation
intends to add two million houses every year (35 per cent in urban areas),
estimated to create an additional annual demand of0.6 to 0.8 mtpa ofsteel.
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Malls: From 25 malls in 2003, India expects to commissionmorethan 220 mallsby 2006 (estimated 40 million sqft) and 600 malls by 2010 (100 million sqft).
Automobile and ancillaries:In 2004-5, Indias au to industry consumed
about 2.8 mt of steel (about 8 per cent of Indias s teel consumption). This is
expected to grow at 11-12 per centover thenext threeyears following Indias
emergence as a globaloutsourcinghub for the auto industry.
White goods: Rising income and theeasy availabilityof low costfinancehasstarted a white goods (refrigerators, air conditioners and washing machines)
revolution in India, leadingto an increased consumptionofsteel.
Industrial Projects: Indias i ndustrial growth is encouraging a number ofcompanies to reinvest leading to an increased consumption of steel, the steel
industry is expected toemerge as a major steel consumer itself.
Thepositiveoutlook for increasing steel demand in India along withthe strategic
advantages offered have resulted in a keen interest from domestic and
international steelmajors for setting up steelprojects in India.
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JSW Steel Ltd
JSW Steel Ltd. is one among the largest IndianSteel Companies in India today.Indias third largest steelmaker, JSW Steel Ltd. consists ofthemostmodern, eco-
friendly steel plants with the latest technologies for both upstream &
downstreamprocesses. We are amongthe largest integrated steel companies in
India, having established production facilities at close proximity to the mineral
resources as well as to the market for its products. Our cost of production is
amongthelowest inthe country duetolocational advantages, strongleadership,
and committed work force. The integrated steel plant at Toranagallu in Bellary
Districtof Karnataka produces hot rolled coils ofvarious Carbon and Low Alloy
grades of steel for wide application ranging whitegoods, automotive, line-pipe,railway wagons etc. Wehave adopted thetechnologyof ironmaking usingpellets
through the novel Corex process as well as in the conventional Blast Furnace
route. We are among the few plants in the world to adopt and successfully
operate Vibro-compacted non-recovery coke-oven, utilizing theheatof the flue
gases for power generation.
Stainless Steel
In 1912, an Englishmetallurgist, Harry Brearly, accidentally discovered StainlessSteel. Intheprocess of discovering an alloytoprotect cannon bores in England,
what came into existence was stainless steel. Ever since, the magic of this
materialhas become an integralpartofour lives.
From underground pipes to space, dairyequipmenttopharma equipment, coins
to automobiles. Stainless Steel is everywhere. Like we like to say, "Tomorrow
definitely belongs to stainless steel".
The GroupJindal Organization, set up in 1970 by the steel visionary Mr. O.P. Jindal, has
grownfrom an indigenous single-unit steelplant in Hisar, Haryana tothepresent
multi-billion, multi-national and multi-product steel conglomerate. The
organization is stillexpanding, integrating, amalgamating and growing.
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Thegroupplaces its commitment to sustainable development, of its people and
the communities in which itoperates, attheheartof its strategy and aspires to be
a benchmark for players inthe industrythe world over.
The Jindal Organizationtoday is a globalplayer. It's relentless questfor excellencehas reaped rich benefits and it is today one of the worlds most admired and
respected groups withinthe steelfraternity.
Jindal StainlessJindal Stainless is in many ways very much like the material it produces. Like
stainless steel the company is versatile in its thought process, strong and
unrelenting in its operations, environment friendly in its manufacturingprocess,
bright, shining and beautiful in its community support activities. The listof the
properties ofstainless steel is endless, just as our values are allencompassing.
Jindal Stainless has always been committed to innovation and progression,
research and development. Our innovations are admired beyond thegeographical
boundaries of our country. No wonder we are the strategic partners of global
leaders by choice. Our achievements narrate a story of our determination to
succeed and our passionto win. We will continuetoleverageour opportunities in
creating excellence that the world cannoteven think about. Today we are the
largest integrated stainless steel producer in India, tomorrow we will rule the
world.
JindalStainless is a ISO: 9001 & ISO: 14001 company is the flagship companyof
the Jindal Organization. The company today, has come a long way from a single
factory establishment, started in 1970. As thenumero uno it has takenon the
task ofmaking stainless steel a partofeverybody's life by taking a 360 degrees
approachfromproductionof raw materials to supplyofarchitecture and lifestyle
related products.
Hisar Plant, IndiaAt Hisar, JindalStainless has India's only composite stainless steelplant for the
manufacture of Stainless Steel Slabs, Blooms, Hot rolled and Cold Rolled Coils,
60% ofwhich areexported worldwide.
PrecisionStrips
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The company produces stainless steel precision strips in various grades. These
strips areproduced innarrow 20-Hi mills intheprecision cold rolling unit.
BladeSteelThe company is theexclusiveproducer of stainless steel strips for making razor
and surgical blades in India.
Coin BlanksBesides supplying CR Strips tothe Governmentof India, theplant at Hisar houses
a coin blankinglinefor supplyof coin blanks tothe Indian Mint and Mints inthe
globalmarkets.
Vizag - IndiaJindalStainless has a Ferro Alloy Plant at Vizag with an installed capacityof40,000
metric tones per annum.
Orissa Project - IndiaJindalStainless is setting up a Greenfield integrated Stainless Steelproject inthe
stateofOrissa with capacityof1.6 milliontones per annum.
Products:
Hot Rolled products:HR Coil, HR plate and sheet, HRPO, HRSPO
Applications: Automobile, Boiler and Pressure Vessels, Ship Building, Railways,
Transmission Towers, Oil and Petro Chemicals, Marine Containers, Coal andMining General and Heavy Engineering
Cold Rolled Products:CR coil and Sheet
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Applications: Automobile, Whitegood, Cold rolled formed section, General
engineering & fabrication, Packing, Drums/ barrels, Furniture
Galvanized Product:Galvanized Corrugated Sheet, GP Sheet and Coil
Applications: Automobile, Boiler and Pressure Vessels, Ship Building, Railways,
Transmission Towers, Oil and Petrochemicals, Marine Containers, Coal and
Mining, General and Heavy Engineering.
Pre-Painted Galvanized Product:PPGI coil, PPGI sheet, PPGI profile
Application: Roof, Wall cladding and other buildingproducts, Householdappliances, Furniture, Automotives
Jindal Vishwas GC SheetsIt is the roofthathas totakethe bruntofnature's extremities during its entirelife
and
- Analysis ofConversion Costhence utmost caremust betaken in selectionofthe
right roofingmaterial. Wrong choiceofroofing and cladding can createlosses in
terms ofhumanlives and material in cases ofnatural disasters A good reliable
roofwithleastnumber ofcomplications gives peaceofmind tomeetthese
challengingneeds ofthe customers, JSW offers superior quality Galvanized
Corrugated sheets under the brand name"Jindal Vishwas".
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Competitive Strengths
Location: Upstream facility is located in the Iron Ore rich belt of Bellary-Hospet region of Karnataka. The strategic location of the manufacturing units
with respect to established ports and well connected rail and road networks
ensures reliable and cost efficient receipt of raw materials and dispatch of
finished steel.
Technology: In order to maintain quality and cost of products they haveadopted technologies such as Vibro compacting non-recovery Coke Ovens, the
novel Corex Process as well as the conventional Blast Furnace route of Iron
Making.
Integrated operations: They have a vertically integrated company withoperations spanning across iron ore mining to manufacture of value added
galvanized and colour coated products. For preserving competitive advantage,
they focus on developing advanced skill sets within the organization through
internal research and development efforts as well as tie up with leading
companies.
Marketing: Havingoneofthelargestgalvanising capacities inthe country, JSWis oneofthelargestexporters ofgalvanized products toover 50 countries infive
continents. Professional Management: As partofcorporategovernancepractices,
theyhave a qualified and experienced management in addition to a diversified
independent board.
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Business Strategy Capacity enhancement: They intend to leverage proximity to iron orereserves and the existing infrastructure to expand capacities at low specific
investment costper ton..
Increasevertical integration: Their impetus has beento increasethevertical
integrationthrough strategic tie up, long-termlinkages and acquisitions aimed atensuring availabilityofcritical raw materials atlow cost.
Improveproductprofile: They intend to improvethevalue added products inproductmixto withstand thevagaries ofpricevolatilities besides being ableto
offer suiteofproducts tomeetthegrowing requirements ofthe customers.
Aligned tothis strategy, theyhad merged the steel business ofJISCO, which was
intomanufactureofvalue added products HR Plates, Cold Rolled and
Galvanised.We aremodernizinghot stripmillto increasehot rolled product
capacities while also setting up a 1 mtpa CRM complextomeetthegrowing
demand for value added products.
Improvefinancialprofile: Beingpartofa capital-intensive industry withhighvolatility intheproductprices, theyneed tomaintain a healthyfinancialprofile.
Theyhave accordingly reduced debt significantlyover thelast coupleofyears
bringing downthegearinglevels and also intenttomaintainlow gearing ratio and
proposeto reduce debtlevels goingforward tomake resilientto any downward
pressureofsteelprices and continue smoothoperations.
Investing in technology to improve productivity and reduce wastage: theyhave invested inlatesttechnologies for efficientoperations and are continuingto
improvetoensurethat bestoperatingpractices arefollowed. The initiatives are
adopted across company including areas related to coal distribution, refractory
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relining file and plant availability enabling to improveefficiencies resulting in
reduced costs.
Swot Analysis
Strengths They are one of the major players in the steel sector and have a diversified
client base. Theyhave adequateexperience and expertise as an integrated steel
producer and have withstood the cyclic fluctuations thathave characterized the
steel industry inthepast.
They areoneofthe low costproducers ofHot Rolled coils, whichforms a key
inputfor their CRM project. They also usethe Corex-BOF routefor making steel,
which requires less amountofcoke.
They have sourcing arrangements with suppliers ofpower and oxygen which
reduces vulnerabilitytofluctuations intheprices ofthese raw materials.
Weaknesses The debt / equity ratioor gearing is relativelyhigh compared to someof the
other integrated steel producers in India. They are actively taking steps to
rationalizefurther high cost debtto reduce interest burden.
Theprofitabilityof the Company is dependentonprices of key inputs such as
ironore, coal and zinc. Thoughthe Companymitigates these risks byentering into
strategic tie ups sourcing contracts with raw material suppliers, any adverse
fluctuations inthe input costs would affectthemargins ofthe Company.
Opportunities Compared totheglobalper capita steel consumption average and the steel
consumption average for developed world, Indias per capita consumption of
steel is extremelylow. To address this low consumptionofsteelthe NationalSteel
Policy 2005 envisages steelproductiontogrow at 7.3% CAGR to 110 Mtpa from
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thepresentlevels offinished steelproduction at 38 Mtpa. It alsoenvisages steel
imports growing at 7.1% CAGR (Compound Annual Growth Rate)fromthepresent
levelof 2 Mtpa to 6 Mtpa and steel exports to grow at 13.3% CAGR from the
prevailing 4 Mtpa (Metric Tons Per Annum) to 26 Mtpa leading to a healthy
apparent steel consumption of 90 Mtpa by the F.Y. 2019- 20, a 6.9% CAGRgrowth. Several initiatives taken by the Government of India in the form of
infrastructural development programs such as the National Highway
Development Programme, the Indira Awas Yojna and the National Urban Renewal
Programme areexpected tohave a beneficial impactonthe demand for steel.
Demand for Hot Rolled, Cold Rolled and Hot Dipped Galvanized Steelproducts
formingthe steel-valuechainfor the Company is expected to substantially benefit
fromthepositive impactofthese initiatives.
The Cold rolled products are used inthe automobile sector. There is a major
opportunityfor themtomarkettheir products on a large scaletothe automobilesector resulting from robust growth in the demand for automobiles combined
with stringent regulations onpollution controlpertainingtoold vehicles.
India is perceived to beoneofthemanufacturing destinations for steelmaking
globally and this maypropeltomeetthe demand notonly domestically but also
internationally.
Threats
The steel industry is characterized by cyclical fluctuations inprices of finishedsteel products as well as those of the key inputs. Any downward cyclical
movement in the steel sector could reduce the demand for steel and reduce
profitability.
Operatingmargins could come under pressure ifthere is a fall inthe demand for
steel and increase in input costs. However, since JSW is oneof the lowest cost
producers inthemarket, theymay still be abletomaintain reasonableoperating
margins for their products.
The Indian steel industry is highly competitive. They face substantial
competition inthe steel industry, bothfrom Indian and international companies.Domestic as well as international steelmajors like Tata Steel, POSCO and Mittal
Steelhave announced plans to set upmanufacturingfacilities in India. This could
lead to excess capacity and consequently downward pressure on the prices of
finished steelproducts.
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Upstream Process Flow at jindalSteel:
Cooking Oil Cooking Oil
Pellet For Sale
Flue Gas
Coke Hot Metal Corex Gas
Hot Metal
Wasteheat recovery Slab for sale
HR Coilfor sale HR Coilfor Downstream
Coal
Iron Ore
Pellet Plant
Blast Furnace Power Plant Corex PlantOxygenfrom
Jpocl
Coke Plant
oven
BOF & CCP plant
JSW Ltd. Energy
Power Plant 2 HotStrip Mill
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DownStream Process Flow at JindalSteel :
HR Coils fromUpstream
HR Slitter Picklingline Coil Rolling Mill
Boil AnnealingGalvanizing
Line
GP Coils CRCA Coils
CR CoilsCR Slit/Sheet
GP/GC Sheet GP(fnsh) Coils Colour Coating
Line
Colour Coated
Products
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Process Explanation:
Hot Rolled Steel, theprimary inputmaterial for the JSW, Tarapur unit comes to
theplantfrom Bellary based unitof JSW. Thefirstprocess to whichthehot rolled
iron is subjected to is termed as Slitting . Inthis, thehot rolls are cutfrom bothsides or from a single side into sheets of desired width as per the customer
orders. This step removes the damaged edges of the rolls, thus improving the
qualityoftheend product
.Cold Rolling, Galvanizing, Color Coating
Hot Rolled Steel Slitting Pickling
After slitting, the next step is Pickling of rolls. During transit and previous
processing underwent, surfaceofthe rolls acquire some impurities and alsogetsoxidized, so they are treated with chemicals (HCl acid) to remove these
impurities. Later these sheets are rinsed, dried and oiled to avoid further surface
impurities. Nextprocess in line is Cold Rolling of sheets. After initial uncoiling
and welding, the sheet is subjected to a pair of rotating rolls to reducethickness
ofpickled sheets, and achieve desired mechanical and metallurgicalproperties for
the sheets. A sensitive balancehas to beobtained interms ofthe sheetthickness,
width and length and involves a highprecision work. The Galvanizing process
takes placenext and begins withthe uncoiling and weldingofthe coils toproduce
a continuous steel strip. This strip is then cleaned and degreased in a continuous
cleaning section. The strip next enters the heat treatment furnace. It has an
atmosphereofnitrogen and hydrogen topreventoxidationof the steel surface.
Here the steel is subjected to a controlled heating and cooling cycle to alter its
physicalproperties. The zinc coatingoperation is performed bypassingthe steel
strip directly from the exitof the annealing furnace into a molten zinc bathof
temperature of around 4600 C. Excess zinc on the surface is wiped off by air
"knives" after the strip leaves the bath. The zinc composition in the bath is
carefully controlled to ensure that the optimum coating characteristics are
achieved. Zinc provides a tough, metallurgical bonded coating that completely
protects the steel surface from corrosive action of the environment. The
galvanized steelthenpasses through a setof rollers inthe skinpass leveller unit.
Here any distortions that the strip has acquired in the annealing furnace are
smoothed out.Fromtheleveller, the strippasses through a chromate spray which
reacts with the fresh zinc to produce a passive film of zinc and iron oxides.
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Galvanized sheets are the major finished goods produced at this plant. Color
Coating
is thenext activity in theprocessing cycleof the sheets and provides a
varietyofcolor coated sheets. This is totallymarket driven initiative and is earning
rich dividends for the organization. A major application of these sheets is in
consumer goods industries. The coil is subjected to unwinding, pre-treatment andcoating process before being recoiled. This process here employs high grade
green technologies and makes little waste, usually burning solvents to provide
energyfor curingthepaint. Various types ofpaints can be used onthe surfacefor
different applications and properties i.e.polyester, epoxy, pvdf, plastisoletc. The
organic coating can be done on the cold rolled steel coils, galvanized coils,
galvalume and various grades of aluminium. Galvalume, a zinc-aluminum alloy
coated steel sheet, is an upgraded product from JSWs hot dip metal coating
galvanizing line is the latestoffering. JSW Steel Ltd is the first Indian Company,
under a technology licensing from BIEC International Inc., USA to produceGalvalume sheets - the fastest-growing sheet steel product renowned for its
excellent corrosion resistance and heat reflectivity. Galvalume sheet's superior
performancehas beenproven inthefield. Over three decades ofactual buildings
in North America, Europe, Australia and Asia testify to the products u nrivaled
corrosion resistance and long servicelife. Galvalume sheets has 2-6 times longer
service life compared to G-90 (275 gsm) galvanized sheet. A patented alloy of
barrier-resistant aluminum and corrosion-fighting zinc gives Galvalume sheet its
superior corrosion resistance. Galvalume coating features an alloy that is 55%
aluminum, 43.5% zinc and 1.5% silicon. The Galvalumeproductionhas started atVasind unit and is at advanced stages ofproduction at Tarapur.
Following are the list of raw materials used in
Galvanizing & Color-coating Line of JSW: ---
a) HR/ CR COILS :It contributes about 64% ofthetotal conversion cost.Sothe companymusttry
tofind out different alternatives through whichthey can reducethe costoftheir
raw materials.
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b) ZINC & ALLOYS :Zinc & alloys constitutes about 10 % ofthetotal costofconversion in Galvalume
& Galvanisingplant. Ithas beenestimated that corrosion costs about 4% of the
GDP of an industrial countrys economy. In Galvanizing industry the 45% of the
conversion cost involves the zinc consumption. The technique used in TarapurplantofJSW is hotdipped galvanizing. Themain zinc supplier for Tarapur branch is
Hindustan Zinc .
The coating products of zinc & its alloys are as follows:-
1. Galvanized: A zinc coating, usuallyhot-dipped, in whichthe zinc and steel
form a metallurgical bond. Thethickness ofa hot-dipped coating can bevary
fromthin zinc/ironlayer toheavy applications.
2. Galvanneal: A zinc-iron coatingproduced bypost-heating a hot-dipped
coating. It is used whenpaint is to be applied tothe coated sheet.
3. Galvalume: Here Zn-Al alloy is used in which contributionofAluminum is
about 55% with superior corrosion resistance.
So, the thickness of the zinc coating plays very important role in deciding the
costs. Morethethickness more will bethe costofgalvanizing.So, constantefforts
must be taken by company to develop new mechanism to reduce the zincconsumption. Increasingthetemperatureofmolten zinc can reducethethickness
of the zinc coating. Also research was done to analyse the costofother metals
that can be used for galvanizing. But it was found that costofexistingmetals &
alloys thatprovide good corrosion resistance is veryhigh when compared with
zinc except some alloys liketernemadefromtin & lead & NASSAC.
c) PAINT:Paint constitutes about 50% ofthetotal conversion cost in Colour Coatingplant.
Paint is applied over Galvanized product as per the customer requirements.In JSW, Primer, Top coat & Back coat are three important elements in Colour-
coatingline.
Here, the colour-coatingline applies about 5 ofprimer coatingon boththe side
ofGI/GL coils. Top coat is applied as per the customer requirements. Viscosityof
paint is oneofthefactor which affects the coverage area ofpaint. Moreviscous
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thepaintmore is thevolume solid percentage. Volume solid is thematerialthat is
actually applied over coils & restpart is evaporated.Previously, company useto
prefer Epoxy backcoat which consists of35% volume solid. Its main characteristic
was that itoffer good pufadhesion & its cost was also low. But for a good back
coat its volume solid % must be high enough, so company thought of usingPolyester or PU back coat. Butpolyesters pufadhesion was low and PUs
cost was high. So, a company named Akzo nobel developed an intermediate
product which contains combinationof above 3 back Coats havinggood volume
solid percentage, good pufadhesion & reduced cost. Company atpresent keeps
only 10-15 days inventoryof paints. It has tied-up contract for 50 shades with
suppliers so as tomeet its demand. Timeprocurementplays very important role
in deciding cost & continuity inprocess can bemaintained only ifthere is proper
supplyof raw materials from suppliers. They also sometimes make useoftinters
which aremixed withexcess stock & old stock in inventorytomakenew shades.Hence, stock which would have contributed to waste is actually converted into
usefulproduct and thus this recycled product can be used for colour-coatingon
coils. Inthis way, theseprocesses help in reducingthe cost.
Recommendations:Company can go for setting up their own Mi xing Stations b eside their Color-
coating section, sothatthey canmeettheir paint requirements easily without any
delay. In mixing station they can prepare their own colours so that they can
reducetheir procurementtime & cost as well as savetheir transportation cost.
But after feasibility study we found that setting upour own bigmixing station
won t be beneficial as we arenot intopaint business. The company willhaveto
incur additional costfor procurementof raw materials for makingofpaints. But
our main business is Steel so we cannot indulgeour manpower & other resources
inpaint business. Alsothe capital coat required prevents from setting upofa big
mixing station. And moreover we won t begettingmuchprofitoutof it as we will
benot be ableto compete inmarket with alreadyestablished big brands. But we
can set up a smallmixing station, so that we canmake useof theold stock or
excess stock bymixing them with tinters to formnew shades. This new shades
formed fromold stock can be applied on GI coils. Thus, it canhelp a lotto reduce
the inventory. Reduced inventory means reduced inventory carrying costs
carrying cost on account of interest, storage and handling charges, insurance,
record keeping, inspection and risk ofdeterioration inquality. In November 2008
Company converted mostofthepartoftheir old stock ofpaints toformnew
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shades bymixing withtinters.
Thethickness ofthe colour coathas to be reduced. Thethickness ofthetop coat
must beminimum but satisfyingthe customer specification. Even ifwe are ableto
reducethe coating by 1 then we could savelakhs ofrupees.
In Colour coating business, product rejections aremainly dueto change in colourshades. These colour changes occur duetovariation intemperatureofprimer &
top coat. The cookingprocess ofprimer & top coatmust be carefully controlled
bymaintainingproper temperature infurnaces. Thethickness & colour ofprimer
alsoplays very important role in defining the shadeof top coaton GI coils. The
quantity & priceofthepaintvary withtheir quality.
2. FUEL:Fuel contributes about 1% of the total conversion cost. Basic manufacturingindustry consumes fuel in largequantum. Fuels alsomake largepartof costof
productionhence any cost reduction strategies would have significant impact.
Followingfactors helps infuel consumption:-
1. Air fuel ratios
2. Fluegas recycling
3. Nozzles sizes
4. Proper maintenanceofburners.NET VALUE OF FUEL = CALORIFIC VALUE X COST
Present fuel: Fuel used inplant is LPG for producingheat infurnace & manyother
applications.
Available substitutes: Cheaper substitutes availablefor LPG accordingtome is
Natural Gas, another substitute can be Corexgas.
Naturalgas is much cheaper than LPG. Butthe calorific valueofthefuels play
important role in deciding the cost of the fuel. At ambient temperatures it
remains in gaseous form; however, it can be compressed (CNG) under high
pressure tomake it convenient for use inother applications or liquefied (LNG)under extremely cold temperatures (-260F) to facilitateefficient transportation
ofthegas. But consumptionofCNG will be 3 times morethanthe consumptionof
LPG for the sameheating required.
Liquefied naturalgas (LNG) takes uponly 1/600thof the space thatnaturalgas
would in its gaseous state and thus can be stored and transported more
efficiently.
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Essar steels and BhushanSteel co arepresently using LNG. Corexgas is used in
Bellary plant of Jindal but it is one of the by-products over there so easily
availabletothem & hence it is cheaper substitutefor them.So availability costof
fuel and its calorific value must be considered before selection of fuel. Fuel
consumption also depends uponthetypeofthe burners used.Weishaupt burners& Benetone burners can be used. Burners efficiency results in low fuel
consumption.
Other important factor of combustion is air -fuel ratio. All manufacturers of
burner provides exact rationofair fuel. This ratiomust bemaintained withinplant
also. Regular maintenanceofburners alsohelps infuel consumption.
In CCL plantofJSW, there are 2 lines running inparallelnamely CCL 1 & CCL 2. In
CCL 1, thefuel consumption rate is about 26-28 kg/MT & in CCL-2 thefuel
consumption rate is about 14-16 kg/MT. This difference is due to installationofRTO system in CCL-2 which has reduced the fuel consumption rate. So, same
systemmust be installed in CCL-1 so as to increase its efficiency.
3. POWER:Power contributes around 2% of the total production cost. All manufacturing
industry consumes power or other energy sources for its production activities.
Major source of power consumption are production equipment like furnaces,
ovens, primemovers, air compressors, HVAC, coolingtowers, lightningetc.
It is recommended to conduct an internal audit of energy consumption of allequipment inthefactory. It is found thateither equipment areoverrated or are
running idle for sometime. Equipment selection & introducing control features
can reduceenergy cost. JSW Tarapur branchhave already started with their 30
MW power plant tomeet its electricity requirements and alsogainprofit from
surplus production by selling itto MSEB. Heretheyhave set-upofthermalpower
plant. Previously, company use to buypower from MSEB for its production and
other purposes. In 1983, they started with justoneplant butnow they arehaving
about 7-8 lines runningparallel.Sotheir power requirements are increasing day-
by-day duetheir various expansionplans.Sotheyhave set-uptheir ownCaptivePower plant. In a Captive power plant, company uses 50% of the power
generated for its own use & the rest 50% is sold to MSEB. The companyhas topay
doublethe amountpaid by domestic holdings.So, the company will be benefiting
a lot with its own Captivepower plant. Also it will begainingprofitthrough selling
ofthepower generated to MSEB athigher rates. Companypreviously converted
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manyof its power-driven devices to fuel-driven becauseofhigh costofpower.
But now since it has its own power plant it can have more of power-driven
devices if its fuelprices aremorethanpower prices.Various other modifications
can be done inproductionlinefor reducingpower consumption.
4. STORES & SPARES:Stores and Spares contribute about 2 % intotal costofproduction.Stores include
the raw materials that will be required infuture. It is not always good to keeplot
ofstock withyou. For proper storemanagement, forecastoftheproductionmust
be accurate. Higher amountofmaterials in stores, thenhigher will beour carrying
cost. Spares include maintenance of machinery. Proper care of the machinery
must be taken inorder toprevent any sudden breakdown, whichmay abruptly
affecttheproductionline. Alertness amongtheemployees willhelpto reducethecostofStores and Spares. In Tarapur JSW branch, ABC method ofStores control is
followed. The classificationofthe items intothe categories A, B and C is madeon
the basis ofsuchfactors as their valueofconsumption, investmentvalue, or sales
or profitpotential. Thus, here withminimumofeffort, control is exercised over
the items ofcomparativelyhighimportance. Proper forecastofthe stores must be
done based onproduction. Thus, forecastmust be accurateoftheproduction.
Stores & spares departmenthere follows Zeromovement Inventoryprocess at
the end of eachmonth. Through this study they try to find out those items in
inventorythathavenot beenmoved i.e.there is no issueor dispatchofthat item.
They prepare the frequency reports through which they classify non-usable
inventory into non-moving inventory, obsolete inventory etc. Based on their
results theytrytofind out reasons for non-usabilityofan inventory item and how
to deal with it. The primary reason for nonusability is modification in
technologies. But there are many other reasons also. Study of critical items is
done and buffer stock is maintained for critical items. Here havetheir inventory
period of 30 days.Someof the raw materials such as Zinc & HR/CR coils follow
just-in-time approach. They have mainly 3-4 days inventory, while for paints a
proper lead-time is planned. Accordingtome, Cost reduction strategythat can be
followed inStores & spares is
Standardization of equipments, reduction of lead-time in inventory &
procurementtimemust be realistic.Standardizationofequipments would helpto
reducethe spares for machinery. Periodic verificationofthe stores must be done.
Mostlythis is doneonce a year. Periodic stocktaking usuallynecessitates the shut
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downof the factory, and it should therefore be completed as soon as possible.
Therefore, company plans indentation plan. Wastage should be reviewed in
detail. Excess inventory holding leads to excessive carrying cost on account of
interest, storage and handling charges, insurance, record keeping, inspection and
risk of deterioration inquality and thus adversely affects theprofitabilityof theorganization. Nonprocessiblematerial ifany is takeneither for Rework or Auction
considering currentorder status and Aging/physical condition respectively.
5. PROCESS LOSS:Process Loss constitutes about 3% in CCL plant. There are various reasons for
Processloss. Process loss may be due to breakdowns, line stoppages, repetitive
works onproductionline which consumetime & money, humanerror, inefficient
working of some machinery parts, some defects or delays in raw materials,etc . Process loss can beminimized by reducing the arisings percentage and
increasingtheyield. Also steps must betakento reducethe breakdowns. Mainly
process losses are dueto breakdowns dueto raw materials defects, raw material
delayor shortage, Operationalor mechanicalor electrical reasons. Corrective &
preventive actions must betaken. Line stoppages must be reduced bymaintaining
continuity withintheplant. Continuity can bemaintained byproper planningof
orders.Shortageofraw materials & orders often affecttheproduction. Repetitive
works must be identified withintheplant and correctivemeasures must betaken
to taken to reduce redundancyof work. Rewindingof the coils is doneon the
sameline in CCL plant.So setting up a separate rewinding line would give better
results. Changingofcampaigns also results inprocess loss as it requires cleaning
ofequipments involved in colour coatingpurpose & there is loss ofthinners. Thus,
there should beproper schedulingof similar campaigns ingroups or batches &
clubbingof same campaigns sothatthere is less loss duetofrequent cleaningof
thesepaintingequipments.
As, thickness and widthofcoils change, many changes haveto be brought in into
the systems parameters. Butthemachines are designed in such a waythat abrupt
changes inthickness and widths willnotgive satisfactory results. Hence, ithas to
be done in stages toensurenecessaryquality levels.So, ideally theplanningof
coils must be done carefully so as to reduce the wastage inthe formof dummy
coils. Dummy coils are used to assimilatethe systems to thenew thickness and
widthparameters.
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6. PACKAGING :Responsibility for coilquality does notend at themill. Quality at finalpointof
delivery is dependentontheprotection afforded bythe coilpackaging. Increasing
demands for suitablepackaging for coil stock led to a new approach toprotectcoils duringtransportation and attheir final destination.Storage at destination is
one aspect which determines the typeofpackaging. However, there are stillno
commonly used standards onhow suchpackaging should look.
Starting from the strapping machines, whether manual or fully automatic, a
varietyofpackaging systems are available.Someofthepackagingmaterials that
are used here are GP sheet, OD ring GP, ID ring HR, straps, wood for providing
support at baseetc. Mostofthepackingmaterials used are reuseofthepacking
materialobtained from HR coils packing. In JSW, they follow floating budget for
packaging cost. This floating budget depends on coil weight. As the coil weightdecreases by 25% its packing cost budget increases by 10- 15%.Savingpotential is
shown in data & analysis section. There aretwomainfinished goods produced at
this plant, namely GI (Galvanized Steel) and PPGI (color coated steel) rolls.
Following are the sales channels through which these products are sold in the
market, namely:
a) Trade
b) OEM
c) Export
Packaging specificationfor these 3 segments is different depending uponnature
of packaging required for different customers. OEM are the manufacturers of
whitegoods whosequality constraints areveryhigh.
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Analysis of Conversion Cost in Colour Coating LineCOST SHEET OF JSW STEEL LTD
Aboveformathas beenobtained from costing department, which is applicable as
on 31.05.2009. The same formathas been used for studyof all theSixmonths
under considerationofcurrent analysis
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Conclusion1. JSW does notownmines for someofits basic raw materials.
2. Inabilityto utilize 100% capacity.
3. Low perception among investors aboutthe companys management and ability
to sustaingrowth.
4. Althoughthe company is focusing a on R&D, the budget is only a fractionof
what international competitors can afford to invest intheir R&D activities.
5. The labor and conversion costs ( these include labour cost, energy cost and
other manufacturing costs) per tonne of steel are among the lowest in the
industry( both domestically and internationally)
6. JSW is Indias largestprivate steelmaker. This allows JSW totheeconomies of
scale inproduction and better bargainingpower with respectto suppliers and
customers.
7. JSW steel is located in a fastgrowing country like India where theper-capita
steel consumption is stilllow butthis means hugepotentialfor growth.
8. JSW steel has access to top talent from the country and that too at
comparativelylower prices thanthe competition.
9. JSW steel still does nothave captivemines and oncetheyhave it, their cost
structure would improvefurther and theexternal risk tothe company will be
mitigated to a largeextent.
10. The currenteconomic scenario where steel demand is declining around the
world is another major area of concern for theorganization. The companyhas
already postponed and/or delayed some of its projects which were in the
pipeline.
11. JSW Steelthough is driven bytechnology, does not spend muchon Research
and development and prefer to acquire and gettechnology solutions fromoutside
either throughpurchaseor sometimes through Jointventures and projects.
12. The average costofproduction/tonnehas reduced over theyears and the
productivityoflabor has increased substantiallyover theyears. This has primarily
been duetothe deploymentoflatesttechnology intheir processes and inorder
for this trend to continue, itneeds to sustain investment inthis domain.
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Recommendations1. Controlling coating parameters such as air, temperature & viscosity using
closed loop controls is important.
2. Improvements in continuous coatingoperations typically relate to increasing
the Line speed oftheprocess.
3. Paint jobs must be scheduled tominimize changing colour in roll & coil coating
equipment. Paint withlight colours first, then darker ones;thelighter coating
does notneed to be completely removed, but can blend intothe darker coating.
4. Roll & coil coatingequipments should be cleaned regularlytoprevent coating
materials from drying on the rollers & feed lines. Water should be used in
cleaning steps to reduce the amount of hazardous waste generated. Initial
cleaning should beperformed with used solvents, saving fresh solvents for final
cleaning stages.
5. In Packaging, efforts must bemadetolower the budgeted cost in allthe 3
segments by bringing automation inpackagingline, replacing GP sheets with CR
sheets for packing ifpossible & reducingthe straps di mensions without affecting
its strength.
6. Companymusttryto acquire somemines to satisfy its basic raw material
requirements.
7. Itmustput someefforts to convert its fuel- driven devices intopower- driven
devices.
8. Companymayplan infutureto built its ownmixing stations for paint.
9. Develop good relations with suppliers so as to reduce the raw material
shortages & improveprocurementtime.
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ARTICLE:JSW Steel willexpand its production capacity at its flagship Bellary unit by
60%, to 16 million tonne over the next three years.
Sajjan Jindal, vice chairman and managing director, JSW Steel said, W e have
decided to expand steel manufacturing capacity at our Bellary plant from 10
million tonne to 16 million tonne at an investment of $5-6 in the next three-
years.
DNAfirst reported about this plan on October 1, 2008, that the steelmaker is
creating blueprinttotake Bellaryproductionto upto 16 milliontonneper year.
Once completed, this will bethelargest singlelocation steellocation in India.
The company is currently expanding production to 10 million tonne, which is
expected to be completed by March 2011. JSW Steel had submitted this
expansionproposaltothe Karnataka governmentlastyear which was approved inSeptember 2009.
Seshagiri Rao, jointmanaging director and group CFO, had then told DNA, W e
havegotthe approvalfromthe Karnataka governmentto increasethe capacityto
16 milliontonneper annum (mtpa). However, we arefocusingonlyon a 10 mtpa
expansion rightnow, which will be completed by March 2011.
Hehad said thatthe steelmaker had applied for certain clearances and havegot
them. Rao had said, bu t haven t decided yet when we want to start that
expansion.
The steelmaker has already invested Rs 40,000 crore inexpanding its Bellary steel
plant to 10 million tonne and has drawn upplans to invest another Rs 70,000
crore in
two 10 million tonne plants each in Jharkhand and West Bengal.
The company is in talks with JFE Holdings, Japan for a possible stake sale in the
BengalSteelplant.
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Bibliography
1.jsw.in2.. www.steelbb.com
3.. www.google.com
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