60 not out - Sixty Successful Years of Continuous Ferro Alloy Making at Joda

What could be the reasons for its longevity in a sector that is notoriously volatile? 

All thoughts and opinions in this article are my own and do not necessarily represent company policy. Nothing in this article is either endorsed by Tata Steel nor does this represent any official view of Tata Steel.

Background

On 20th April 2018, Tata Steel’s Ferro Alloy Plant at Joda turned sixty. It is India’s oldest continuously operating ferroalloy plant, and one of the oldest continuously operating ferroalloy plants in the world.

 Tata Steel (called “TISCO” at that time) set up one of India’s earliest ferroalloy plants at the Joda Valley in the Keonjhar District. The plant was set up as a wholly owned subsidiary(Joda Ferro-Alloys Pvt. Ltd.). It was the first assignment of M/s M N Dastur and completed eight months ahead of schedule.

 Inaugurated on 20th April 1958, the plant used power from the newly constructed hydroelectric power plant at the Hirakud dam on the river Mahanadi and was connected to the railway network via a freshly laid, 18 kilometre long, railway line.

Hirakud Dam the first major multipurpose river valley projects after India's independence was inaugurated by Pandit Nehru on 13-Jan-1957. The project generates 347.5 MW of power in two power house with ten turbines.

 Then called Ferro Manganese Plant, it is designed to produce high carbon ferromanganese for the steel plant at Jamshedpur (hitherto produced in Blast Furnaces) via two 9 MVA Elkem Furnaces. One furnace was later converted in 1990 to a 15 MVA furnace for Silico Manganese production. For operational efficiency, from the year 1998, based on recommendations of the Booze Allen team, production of Silico Manganese was stopped and only HC Ferro Manganese is now produced.

Sectorial Volatility

The Ferro Alloy sector globally, and especially in India, is notoriously short-lived, some of the reasons being :

 Market Side

a)  Ferro Alloy prices are extremely volatile – the wild swings in pricing that have short spikes and long periods where prices fall below cost and most “swing” players stop production. Also, since there are hardly any trade barriers, the exchange rate has an overwhelming influence.

b)  One factor of market volatility and the standardization of specifications is that ferroalloys have become commoditized with almost no Customer Loyalty; compounded by the fact that most ferroalloy players have themselves to blame - limited market innovation and their behaviour during price spikes! No company can survive without strong customer loyalty – through the good, and more importantly, the bad times.

Supply Side – Power, Ores, Reductants

c)   Ferroalloy manufacturing needs a large amount of electricity. While the power situation in India has improved drastically in the recent years, India faced a crisis of power in the eighties-nineties, killing off many reputed names in the Industry. About 30%-40% of the cost is of electric power – rising power costs, especially power from thermal sources – due to a shortage of coal – has made ferroalloy making in many areas (western & southern India) uneconomical.

d)  While Chinese Ferro Alloy plants survive on almost 100% imported ore; in India, it is very difficult for the ferroalloy industry to survive without backward integration. Some ferroalloy manufactures have resorted to wet leasing their plants (becoming External Processing Agents or Conversion Agents) to companies with access to ores to survive, however, these relationships, which are between two companies with different aspirations and mindsets, have not stood the test of time. Even Chinese companies have backward integrated and invested heavily in Zimbabwe and South Africa to ensure raw material security.

e)   Rising cost of coking coal and its impact on cost and availability of Low Ash Metallurgical Coke has led to ferroalloy producers look at alternate reductants. However, the limited availability of charcoal in India – unlike in South Africa or China – makes these options also uneconomical, pushing up manufacturing cost.

 Others

 f)    In the late 1990s till mid-2000s’ easy availability of loans and a rising market, fuelled by seemingly insatiable demand for steel raw materials(due to the exponential growth in steel manufacturing in China), many ill-conceived ferroalloy plants were set up. Most of them are now shut and form a significant proportion of NPAs of Indian Banks.

Secrets of the Longevity of FAP Joda

 Ferro Alloy Plant Joda has many “unfair” advantages that have helped it survive for six decades without any interruptions in production. Innovations both on the market side and in production, the quality of the management; and that fact that it is a wholly owned subsidiary of a very successful steel major(and later incorporated into the same company), Tata Steel have been very important factors :

 Market Side

a)  While ferroalloy prices have been volatile, a large proportion of the production is earmarked for the steel plants of its parent company, i.e. Tata Steel’s plant at Jamshedpur and now Kalinganagar; buffering it from the market volatility.

 b)  Building a customer connect through initiatives like Customer Value Management, improving packaging, branding etc., to become the most preferred ferroalloy player in India for the portion of ferroalloy sold to the market (see www.dhirubhai.net/pulse/market-development-brand-building-b2b-marketplace-prabhash-gokarn/)

 Operational

 c)   Operational Efficiency due to an experienced, loyal and committed workforce and a single in-house source for most of its raw materials (reducing variability). A constant focus on process improvement (awards won for small group activities year on year has fuelled a passion for improvement in the workforce) and focus on keeping cost in control (e.g. a flexible power sourcing strategy, use of alternate reductants, use of FeMn slag etc.) helps it remain very profitable even in downturns.

The fact that it makes a single product, high carbon ferromanganese, is also a very important factor that has helped it become a world benchmark in operational efficiency. {The two attempts at diversification, the first, making Silico Manganese lasted only a few years(~1991-1998) before being dropped for operational efficiency, and the second, an attempt make Ferro Chrome in the mid-2000 (due to a transformer breakdown at FAP Bamnipal); did not take off}.

d)  Operational Innovations – e.g. installation of the first and only Solid-Liquid Separation Unit to handle GCP Slurry (see https://www.dhirubhai.net/pulse/safety-challenges-construction-large-water-recovery-plant-gokarn-1/) with the option of recirculating high Mn/Fe dried sludge through agglomeration and recirculation of water has helped improving sustainability; and will help reduce cost.

Another noteworthy innovation is the briquetting of ferromanganese fines (a by-product of ferroalloy sizing) which helps convert lower value fines into higher value briquettes which fetches better realization ( www.slideshare.net/prabhashgokarn/agglomeration-of-ferro-alloy-fines-for-use-in-bulk-steel-making-process-vf )

Supply Side – Power, Ores, Reductant

e)   FAP Joda was set up taking advantage of the recently opened hydro-electric power plant at the Hirakud dam on the river Mahanadi; giving it access to an eco-friendly source of power, inured to the availability of thermal coal (that has plagued thermal power plants). In addition, as mentioned before, taking advantage of power wheeling, this has been supplemented by cheaper sources of power as & when available.

 f)    Access to a large captive Manganese Ore mine has given FAP Joda advantages of a reliable supply as well as uniform quality. The captive ore has been enriched with high grade imported ores as and when such ores become economically viable.

g)  Constant innovation has made it possible for FAP Joda to accept a wide variety of reductants. Access to nut coke from the steel plant which is available at transfer prices and ability to accept other reductants (Char, Jhama Coal etc.) has kept costs under some control in the face of periodic sharp increases in coal & coke prices.  

Strong Environment Focus : staying ahead of legislation

h)  Many plants, especially in China and some in India, have had to be shut for environmental reasons. Tata Steel believes in staying ahead of the regulations and that has helped FAP Joda become a benchmark amongst Ferro Alloy Producers in India. Apart from the above mentioned Solid-Liquid Separation Unit, FAP Joda is the amongst the first ferroalloy producers to install online stack monitoring facilities with direct uploading of stack data to the Central Pollution Control Board/Odisha Pollution Control Board. Apart from this, FAP Joda is one of the few industries that have achieved zero liquid discharge.

 Taking the community along

 i)    A strong sense of Corporate Social Responsibility is inevitable, given that Tata Steel is the global benchmark for CSR. Some of the recent initiatives include participation in the “100 schools project” and the adoption of local schools. The enduring support from the local communities has been a key factor in Sixty Successful Years of Continuous Ferro Alloy Making at Joda – 60 not out!!