Jsw Steel PROJECT

8/9/2019 Jsw Steel PROJECT

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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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Documents

Jsw Steel PROJECT