Logistics Management in

Steel Sector in India

Prof. S. K. GARG
Professor and Dean (Academics)
Delhi Technological University, INDIA
and
Independent Director,
Rashtriya Ispat Nigam Limited

Steel Sector - Global Scenario

In 2012, the world crude steel production
reached 1547 million tonnes (mt).
China remained the worlds largest crude
steel producer in 2012 (716 mt) followed by
Japan (107 mt), the USA (89 mt) and India
(78 mt).
Per capita finished steel consumption in
2012 is estimated at 217kg for world & 477
kg for China.

Steel Sector- Indian Scenario

Steel Production in India in 2012 was 78 mtpa and the per
capita steel consumption was about 57 kg only compared
to a world average of over 217 kg.
The average per capita consumption of finish steel in rural
India is a mere 11 to 12 kg., which is extremely low.
Out of 78 mtpa steel production, 43 million tonnes was
produced by Main (SAIL, RINL and TATA) and Major
Producers (JSW, JSPL and ESSAR) and the balance by
secondary producers.
As per Draft National Steel Policy 2012, 300 mtpa steel
capacity by 2025 (GDP@8%) is envisaged.

Raw Materials Required for

one Ton of Steel
Steel industry is highly raw material intensive
industry. It requires
3 tonnes of raw materials
3 tonnes of water
6 tonnes of air
to produce 1 tonne of crude steel.

Raw Materials Requirement

For the target of 300 mtpa steel production by
2025, the requirement of iron ore would be
around 450 mtpa, coking coal would be 300
mtpa, non-coking coal of 100 mtpa, other fluxes
would be around 50 mtpa.

Locations

Logistics in Steel Sector

Logistics Management of steel, therefore, is not confined
to finished products. The logistics would involve raw
material, utilities, by-product with a wide array of internal
material movements too.
Movement of raw materials requires special attention as
extraction of mineral resources is largely confined to
remote and relatively inaccessible areas in eastern and
southern regions of India. Mining areas therefore in
general are characterised by poor transport and logistics
network.

Logistics Challenges for Indian Steel industry

Logistics of raw materials and finished products
play a critical role in determining the operational
efficiency & cost structure of steel producers.
According to industry estimates, logistics costs
account for over 15% of the total costs of Indian
producers of steel.
A typical logistics framework consists of physical
supply, internal operations and physical
distribution of goods and services
Supplier

Steel Plant

Branch office

Customer

Rail
In 2011-12, Railways carried
46.69 million tonnes of coal for steel plant
54.74 million tonnes of iron ore for steel plant
40.29 million tonnes of iron ore for other
domestic users
14.51 million tonnes of other raw materials
35.15 million tonnes of finished steel and pig
iron from steel plants and other points
This accounted for 20% of the total railway
traffic in India and 2.5 times the total steel
produced in India.

Rail
As per National Steel Policy 2012 (draft),
keeping the increasing share of large
producers in view, 70 to 75% of raw
materials ie about 650-700 mtpa would be
transported by Rail.
As per Vision 2020 document of Indian
Railways, around 50 to 60% of domestically
produced steel will move by Rail.

Rail
The National Steel Policy 2012 (draft) identified the
following specific areas of concern for the Indian steel
industry where immediate action is needed:
Strengthening and augmenting railway links between
ports and steel plants as Indian steel is expected to
become increasingly dependent on imported coking
coal/coke
Capacity planning, mobilization of funds and timely
execution of railway projects in the iron ore mining areas
Most importantly, augmentation of rail infrastructure in
the eastern and southern states where large steel
capacities are being planned in close proximity to major
sources of iron ore in the country.

Rail
Construction of two corridors, one each on the
west and east routes, spanning a total length of
about 3,300 km.
The Eastern Corridor, starting from Ludhiana
in Punjab, will pass through the states of
Haryana, Uttar Pradesh and Bihar and
terminate at Dankuni in West Bengal.
The Western Corridor will run from Dadri to
Mumbai, passing through Delhi, Haryana,
Rajasthan, Gujarat and Maharashtra.

Rail
The proposed creation of four additional DFCs
North-South (Delhi to Chennai), East-West
(Howrah to Mumbai), Southern (Chennai to
Goa), and East-Coast (Kharagpur to
Vijaywada)
Would meet increased freight demand and
also elevate the quality of service to global
standards.

Rail
Indian Railways also proposes to establish
and improve connectivity with ports to form
an inclusive intermodal strategy for firstand last-mile connectivity.
Increasing axle load of wagons to 25
tonnes, running of long haul trains
Improving Rolling Stock
Introduction of single stack & double stack
containers.

Augmentation of Rail infrastructure

Public Private Partnership (PPP) initiatives include
1) SPVs for connectivity Projects
2) Wagon Investment Schemes
3) Container Operation
4) Manufacturing Units for rolling-stock/components
5) License for private container train operator
6) Special Freight Train Operators (SFTO) policy
7) Automobile Freight Train Operator scheme (AFTO)
8) Private Freight Terminal Policy (PFT) and
9) New R3i Policy on Railways Infrastructure for
industry Initiative attracting private sector
participation in rail connectivity projects.

Rail
The freight rates are high due to
Subsidization of passenger trains
Involvement of more number of people for
maintaining transaction
Minimum chargeable distance
Unwanted

surcharges

(busy

season

steel

industry has no lean period) and other costs like

idle freight, siding and shunting charges etc.

Road
Reasons for increasing importance of road transportation
The dispersed geographical spread of the
proliferating small/medium scale units
The inadequacies in the railway transportation system
in handling the bulk transportation needs of the
expanding Indian steel industry
The need for efficient last mile distribution of finished
steel to endusers located in distant areas.
Road transportation has become an important element in
a multimodal transportation matrix, especially, as part of
the port related transportation network for import of raw
materials and export of finished steel.

Road Areas of concern

High transportation, delays and loss of materials in transit
due to
Low road density - National Highways constitute only about 2% of
the road network but carry nearly 40% of the total traffic resulting in
severe congestion. Freight travel only a third of the distance
compared to developed countries.
Poor quality of roads - The road quality in India, on the National
Highways as well and other roads, is improving but is still poor in
many locations.
Inadequate network - State & district level roads connecting mines
and plants to the National Highways lack good networking.
Slow progress on expressway network Only by the end of 13th
plan period, development of around 15,000 kilometres of
expressways is planned.

Road Corrective Measures

Development of minimum four lane and preferably six lane

highways of good quality for allowing higher multi-axle loads
for smooth, faster & cheap freight movements
Road development to service the steel industry to secure
its raw materials and move its finished goods at a low cost.
Other actions may include:
a) Promotion of fleet exchange: Creation of an efficient
marketplace similar to Stock Exchange or Commodity
Exchange to bring together transport customers &
transport vendors for the largely unorganized transport
sector to revolutionize trucking landscape
b) Electronic Toll Collection
c) Encouraging use of large trucks.

Ports
Indian ports facilitate 90% by volume and 70% by value of
Indias external trade via maritime traffic.
Long coastline spans across 7,500 kilometers
13 major ports and about 176 non-major ports
Of its major and non-major ports combined, 139 are along
the west coast, while the remaining 50 ports are along the
east coast.
Indian ports handle iron ore for both exports and domestic
consumers and handle imports of coking coal.
The port traffic would increase to 200 to 225 million tonnes
assuming imports of 85% of coking coal, 20% of noncoking
coal and 30% of scrap and imports and exports of steel at
10% of consumption and production by 202526.

Ports Major problems

Low productivity of operations attributed mainly to slow evacuation of
cargo leading to increased transaction costs & loss of competitiveness of
Indian steel industry.
High turnaround times: Data from Indian Ports Association show that
ports in India suffer from high turnaround times for ships. JNPT, which is
the premier port in India, has more than 2 times the turnaround time of
Colombo and Singapore ports because of congestion on berths & slow
evacuation of cargo which are unloaded at the berths.
Inadequate depth at ports: The depth at many ports in India is not
enough and dredging tenders take a long time in getting awarded. As a
result with the existing depths many ports are not able to attract very large
vessels.
Costal shipping has not taken off: Costal shipping in India is hampered
by inadequate port and land side infrastructure.

Ports Corrective Measures

Policy relook towards developing commercial ports and
multipurpose jetties for bringing in more flexibility and
industry friendliness.
There should be more deep sea ports with mechanized
facilities supported with connected road/rail infrastructure
for proper flow of incoming/outgoing traffic of the port.
PPP models should be encouraged for developing the port
infrastructure in the country.
State government should form consortium with states
having port facilities and should encourage the industries of
using sea network for domestic movements over rail and
road.

Logistics Driven Locations of

Steel Plants
Near Mines
India Durgapur, Tata Steel

Near Coastal Areas

India Vishakhapatnam, Ratnagiri ( Dolvi
Plant), Mangalore ( KIOCL)

Railway Optimization of
Transport
Bokaro Rourkela Combine
Trains bring iron ore from Rourkela => Bokaro
and return with Coal from Bokaro =>Rourkela
This optimizes the use of transportation
(because wagons are never empty), and helped
in growth of iron-steel industry @ both places.

Cost reduction initiatives

Cape Vessels are planned instead of Panamax
vessels for coking coal to reduce the freight
charges. Cost saving during 2012-13 for eight
vessels is around 21.11 Crs.
Panamax vessels are planned instead of Handymax
vessels for soft Coking Coals to reduce the freight
charges. Cost saving during 2012-13 is around 7.51
Crs.
Pipeline transportation of iron ore slurry such as one
being taken up by NMDC & RINL in a Joint Venture.

Conclusions
High growth in the Indian economy in the last one and half
decade have resulted in a significant rise in the volume of
freight traffic moved. Road, Rail, Port and other
infrastructure projects have been planned, but there is a
time lag leading to
high transportation costs,
lack of connectivity to ports, inadequate roads,
Inadequate air and sea port capacities
Poor connectivity of Ports with roads (First and Last mile
connectivity)
Lack of development of modes of transports like railways
and alternates like inland water transport.

Conclusions
There is a need for a good system, which
can estimate the future requirements,
develop policy framework for the most
optimal and integrated system of different
modes of transport and other infrastructure
and also develop good operational
strategies to reduce the logistics cost and
make the timely deliveries

BIBLIOGRAPHY

World Steel Association in figures 2013

National Steel Policy (draft) 2012
Report of the Working Group on Steel Industry for the twelfth five year plan
(2012-2017), MOS 2011.
Logistics Sector- Present situation and way forward, Jan2012 by Deloitte &
Indian Chamber of Commerce
Indian Railways Annual Report & Accounts 2011-12.
Steel Scenario, June 2013.
Railway A logistics provider in Transport Sector - O.P.Mishra AUG12
Human Resource and skill requirements in the transportation, logistics,
warehousing and packaging sector (2022)- A report by National Skill
Development Corporation.
Logistics game changers transforming Indias logistics Industry, A study
by KPMG & CII 2013.
PRS Legislative Research Monthly Policy Review February 2013.

Thank You