Can you tell us a about the parent company in India, Jindal Steel & Power Ltd, and the milestones in the history of Jindal Shadeed Iron & Steel in Oman?
JSPL is a part of the O. P. Jindal Group with a turnover of $2.9 billion. JSPL is headed by Mr. Naveen Jindal, CMD, JSPL and member of the Indian parliament. He is a young & dynamic leader and under his dynamic leadership, JSPL made its presence felt throughout the world. Some notable ventures are located in Australia, South Africa, Mozambique, Congo, Georgia etc. It has versatile interests spanning across steel, power, oil and gas, mining and infrastructure. Current total investment of JSPL in its different ventures exceeds $30 billion. In India, our main business is in steel & power sectors. Our main steel and power plant is situated in Chhattisgarh. We have two other steel plants in India (Patratu and Angul), and altogether we are looking at a capacity of about 13 to 14 million tonnes of steel per year by 2015. All projects are ongoing.
About two years back, the Shadeed company was available in the market. The original owners had some financial difficulties so they wanted to find a partner or a company to take this plant over. Our company was interested in working outside of India and this seemed like a good opportunity so we purchased the company. When we acquired the firm, it was not operative and it was only partially built. We built the remaining part of the plant and commissioned it in a very short period of time. We started the operations a year and a half ago, producing hot briquetted iron (HBI).
Our capacity at the moment is 1.5 million tonnes per annum (MTPA). We are currently supplying about 15-20% of our production to the steel plants in Oman, while everything else is being exported to Kuwait, UAE, Egypt, Italy, Spain, India, China, and other countries.
In order to make value-added items, we have started our downstream expansion plans. In the first phase, we have already started the construction of a steel melting shop with a 2 MTPA capacity which should be commissioning by the middle of next year. The second phase expansion includes a rolling mill, where we will convert semi-finished material into finished products for use in construction industry in the country. We would also provide several possibilities for other downstream businesses.
In the upstream segment, one of our biggest challenges is getting the raw materials at the right prices. The market we are in is very competitive at the moment, so we need to make sure that business is viable. Therefore, we are also looking at the possibility of producing our own pellets.
The global economic environment affected the production and marketing of steel. What is your outlook for the industry globally for the short and mid-term?
Every industry goes through cycles and this is not the first time the steel industry has gone down. Back in the late 1990s, steel was famously said to be a ‘sunset industry’. But time has already proven that wrong.
If you look at the history, demand for steel increases continuously despite the short periods of downturn. Of course the producers with strategic advantages who can produce steel at competitive prices will be able to survive better than others. This is bound to happen. Some plants that are not operating efficiently may have to shut down temporarily, because of the market demand. For example, currently there are companies in the UAE which are not operating because of the market. It all depends on how well you run your operations and how strategically you are placed.
We believe that we are in a good position as of now. We think that we can add a lot of value because we make steel in a very efficient manner, and we should be able to remain viable.
What other challenges are you facing at this point in time?
When you set up an organisation, the first challenge is to get the right manpower so you can operate the plant well. The staff that worked in the company before we took over knew about this product reasonably well and we were also lucky to get the right kind of people on board very quickly. A number of Omani employees have been with us for quite some time, so we have a good Omanization (Omanization is a policy enacted by the government of Oman in 1988 aimed at replacing expatriate workers with trained Omani personnel).
Moving forward, in the short term, we want to make sure that we remain one of the best HBI-producing companies. Our plant is supplied by a company called Midrex Technologies, USA, one of the best technology suppliers and when they visited us they said that we were one of the best plants supplied by them so far in terms of maintenance, operations and house-keeping that they have seen here. Obviously this makes us happy but we believe that we have to go much further than this and therefore the skill level has to go up as well.
Now that we are putting up new plants, the challenges are becoming bigger in terms of human resources. We are putting up a steel melting shop with large electric arc furnaces and things such as a ladle furnace. All of these things require special knowledge. Therefore, we are already having discussions with the universities and colleges as to how to get the people with the right education.
The next challenge we are facing is the energy availability in Oman. Our production capacity is 1.5 MTPA, and we could increase it to 1.6 MTPA, but we are currently only able to produce about 1.4 MTPA because we do not have any more gas available. We are also in discussions with Midrex and other parties, and with some changes, we believe that we can increase our capacity to 1.8 MTPA, but this will happen only if we are able to obtain additional gas. As I mentioned, we are already constructing the steel melting shop and we will also be going ahead with the rolling mills project. We do hope that the gas will be available in the near future. We are in discussions with the Ministry of oil & gas and we know that a lot of exploration work is going on, so hopefully, by the end of next year we will be in a much better position.
The third major challenge for us is obtaining raw materials. Oman does not have iron ore, so we need to look at other options. As of now, we are buying iron ore pellets from three or four different sources, including a company in Oman. Even though we have a good relationship with all of them, our business will only be viable if we can produce our own pellets.
As Oman is industrialising, an industrial culture is gradually being developed in the country. When I speak about industrial culture, I refer to the fact that working in the industry is very hard work. However, in today’s competitive world, a company can only remain competitive if it has high level of productivity. The technology is available to everyone, so productivity levels, raw material availability, and the ability to market the products correctly is what differentiates one company from another. Labour productivity is a major challenge for us, but I am sure that as we move forward, the industrial culture will strengthen as well.
The plant is located in Oman’s industrial hub – Sohar. What are the main competitive advantages you obtain from operating in this location?
We have our own jetty, which is very convenient when it comes to offloading the raw materials from the ship. It also facilitates the export of the materials by directly loading in to the ships, so transport is definitely one of the major competitive advantages.
We have very good facilities in terms of electricity, water, infrastructure, etc. We have our own township for the employees. So we have all the basic needs to set up industry and everything is available.
Once larger amounts of gas become available, we believe that nothing will stop us from achieving a much higher capacity. For the moment we are talking about two MTPA, but if the country has enough gas in the future, then we could easily double our capacity.
There are numerous ongoing infrastructure development projects in Oman (new airports, ports, roads, and a railway), so how do you see the market shaping up in the future? How much of your production do you think will be consumed in Oman, and how much will you be exporting?
We did a study to look at present and future market demand, and we believe that most of our capacity will be used in the Gulf. More than 50-60% should actually be used in Oman itself. If these projects grow as fast as has been planned, then most of our capacity should be used in Oman. That is one of the reasons why we decided to put up this factory here. There are not many integrated steel plants in the GCC area and we are developing a fairly large integrated steel plant (2 MTPA), so we believe it will have a long-term impact on the industrial culture of the entire country. We also plan to expand our facilities to produce two additional MTPA steel-making facilities which include DRI, SMS and Rolling Mills.
If you look at steel consumption per capita in the world (which is one of the main indicators of the development of a country), you will see that Oman and the rest of the GCC are still far behin the global average. Therefore, we believe that our plant will help improve the industrial culture in Oman by creating opportunities for various downstream businesses, such as construction, building automobiles, steel building, etc. A number of new avenues will open as a result of our growth.
In India, we have seen a tremendous difference in the areas surrounding the steel plants, as they have become very affluent, simply because they generate many indirect and direct businesses. For example, if we employ 1,000 workers in our plant, it should create another 4000 to 5000 indirect jobs in the surrounding area. So we believe that our plant will have a considerable multiple effect as far as the industry is concerned in both Oman and the Gulf.
How many employees do you have currently?
For the moment, we are only producing the HBI, so we have about 350 people working for us. But once we set up our steel melting shop, the rolling mill and the pelletizing plant, the workforce will increase substantially and it will go up to around 1,500 employees.
Our experience in India has been that if you have 1,000 people working, then you have almost four to five times the number of indirect jobs. We believe that is what is going to happen in Oman as well. All the equipment needs to be repaired, so somebody has to set up a repair shop. I am sure that once this takes shape, Sohar will develop very fast. The pace of development in Sohar has been quite good until now. It can, however, improve considerably.
So far, Jindal has invested over $600 million in the development of the plant. As a major foreign investor in Oman, how would you comment on your experience in doing business in the Sultanate?
Oman is a very friendly country. The people are very courteous and all of our meetings with the government representatives have been very good. Purely from a business environment point of view, it is one of the best countries in the Gulf in my opinion. Oman also has an advantage in some raw materials, such as limestone, dolomite, etc. However, iron ore, which is important for us, is unfortunately not available here.
Jindal Shadeed has been actively engaged with Corporate Social Responsibility (CSR) from the very beginning. Please tell us about some of the projects that have already been completed?
This CSR culture of our company comes from back in India where we spend a considerable amount of money on improving the quality of life of neighbouring communities. For example, there are more than 40 villages surrounding our mother plant where we have been making significant improvements. We have built roads and improved the infrastructure in the area. Our employees go and train the local communities so that they become more skilled in order to be able to find jobs or self-employed.
In Oman, we are very new, only a year and a half old, but we are already spending close to 300,000 OMR per year on CSR, which is considerable. This money is primarily going towards education programs and facilities. We are also building a children’s park. However our focus areas are education and the well-being of the people. Furthermore, we will now try to develop people’s skills set, so our next focus is on training.
Please tell us about your background and your personal ambition here in Oman?
I have been in the steel business for nearly 38 years. After doing an engineering degree, I joined Tata Steel where I worked for 34 years, primarily building new plants and helping them achieve their required production levels. I joined Jindal Steel & Power in India about four years ago, and I came to Oman in May 2012, which was my first foreign assignment.
I see tremendous opportunities and potential here. The business in Oman is not just the steel plant which we are building, but it is also related to all the mining activity, which should happen alongside this. For example, we are following closely the developments that are taking place in Duqm, and we would like to set up some facilities there as well, which would go hand-in-hand with what the government is planning there. There are plenty of opportunities in the Gulf area as a whole too. This is definitely a place where we would like to make a mark and participate in the development of the country as well.