Electrosteel Steels Operating at 65% Capacity

After posting impressive production growth of 17% in financial year (FY) 2019 and 9% in FY20, Vedanta's Electrosteel Steels Limited (ESL) was poised to double the capacity of its Bokaro plant and the company was exploring opportunities of setting up a new plant in Karnataka - close to Vedanta's iron ore mines in the state - at an investment of INR 7000 crore when the coronavirus pandemic struck and the market went into a tailspin.

One BF Down

In an online chat with SteelMint recently, Pankaj Malhan, the CEO of the company, highlighted the state of the industry violently shaken by the Covid-19 outbreak. "The steel industry falls under the Essential Services Maintenance Act and blast furnaces and coke ovens can't be suddenly stopped due to technical reasons. Out of ESL's two BFs we have put one down to ensure that social distancing norms are followed at the workplace," he said.

Expansion Plans on Hold

"As a company we fine-tune ourselves according to the situation at hand and are ready to accept challenges," stated Malhan, adding: "We all know that FY20 was a bad year for the steel industry in terms of demand and prices. We weathered the 18-22% price correction that happened and braved the slowdown. We have a two-pronged growth target: first, de-bottlenecking assets and adding 20-25% to existing nameplate capacity; and, secondly, to significantly increase capital expenditure (CAPEX). In fact we were almost on the verge of roping in a partner but the pandemic disturbed our plans because the Chinese could not undertake travels during this period. So instead of concentrating on our previous plan of doubling the capacity of the Bokaro plant we are focusing instead on business continuity plans now. We haven't relegated capacity expansion plans to the backseat but are going slow at the moment because our partners are not in a position to collaborate due to the prevailing pandemic."

ESL's steel melting shop is running since day one of the lockdown. "ESL is already operating at 60-65% of capacity. Our product portfolio has undergone some change but at the BF level we are working to about 65% of capacity," informed Malhan.

Confident about Growth

Before takeover ESL's total production was a shade below 1 MnT. After Vedanta's takeover of ESL through the bankruptcy resolution process the company's performance has optimised, held Malhan who was at the helm of affairs at ESL during the takeover too. "Our major success has been that after the takeover we have been able to save about 10,000 direct and indirect jobs. We also brought in a culture of performance improvement and the different teams are capable of intelligent risk-taking. We were successful in turning ESL around in record time and with thumping numbers," he said.

Construction and real estate projects are stalled and forecasts are that demand for steel products in the country will shrink by 17-20%. "But we are optimistic about our volumes. We are hopeful of 10-12% production growth in FY 21 on a year-on-year basis," beamed Malhan.

~Inputs by Nirmalya Deb