Infrastructure Scenario of Iron & Steel Transportation in India

Gouranga Sen Geovale Services

Conference on Raw Materials Security for Iron & Steel, by FIMI, Goa, 6-7 Nov. 2015

1

Geovale Services

Due Diligence

Exploration Management

Resource Modeling

Prefeasibility Studies

Infrastructure Assessment

Mineral Analytics

Hydro-geology & Geotechnical

GIS & Remote Sensing

We Provide Solutions for the Global Mineral Exploration and Mining Industry

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Agenda

Infrastructure Issues in India

Possible Solutions

Case Studies - Thriveni

Indian Steel Industry: Standing Tall Amid Crisis

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-12.8 -10.4

-5.4 -3.5 -3

-1.3

0.3

4.8 7.3 10.2

0.5

-1

3.1

-2

1.3 0.7 2.3

4.1

7.6

1.1

-15

-10

-5

0

5

10

15

Bra

zil

Ru

ssia

Jap

an

Ch

ina

USA

S K

ore

a

Ger

man

y

Mex

ico

Ind

ia

Turk

ey

2015 (f)

2016 (f)

Steel Demand Forecasts

Source: WSA

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Domestic Demand to Support India’s Steel Production Growth

176

273

298 339

0

50

100

150

200

250

300

350

400

2013-14 2025-26 2032-33

GDP @ 6.5% Growth

GDP @ 7.0% Growth

GDP @ 8.0% Growth185

287 314

357

0

50

100

150

200

250

300

350

400

2013-14 2025-26 2032-33

Forecast of Finished Steel Demand (Mt) Forecast of Crude Steel Production (Mt)

Crude steel production is projected to hit 180-190 Mt in next 10 years from 87 Mt now

Source: Long Term Perspectives for Indian Steel Industry

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Huge Amount of Raw Material Requirement for Transportation

Raw Material Requirement At 7% GDP 2016-17 2025-26 Iron Ore 203 392 Coking Coal 89 173 Non-coking coal 27.8 66.2 PCI 4.5 9 Met Coke (including captive) 67.4 89.2 At 8% GDP 2016-17 2025-26 Iron Ore 215.4 452 Coking Coal 94.2 200 Non-coking coal 30.4 78 PCI 4.8 10.4 Met Coke (including captive) 72.5 153.9

Even if we can manage to augment mining or sourcing of this huge quantity of raw

material, having infrastructure to transport it will a big challenge

Source: Long Term Perspectives for Indian Steel Industry

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Steel Supply Chain

Iron Ore, Thermal Coal, Other Material

Coking Coal

Warehouse

Customers

Smaller Warehouse

Customers Ship-Rail

Rail-Road Major Rail – 95% Minor Road – 5%

Major Road – 98% Minor Rail – 2%

Road

Inbound Logistics Outbound Logistics

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Major Mode of Transportation for Iron Ore & Coal

Slurry Pipe Line

Railways

Roadways

Shipping

Inland Waterways

Iron Ore Coal

• Grossly overstretched

• Congestion and shortage of capacity in all transport sectors

• Low speed of transportation at higher cost

• Peculiar usage structure

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India’s Transport Infrastructure

57%

37%

22%

0%

10%

20%

30%

40%

50%

60%

India USA China

36%

48% 47%

0%

10%

20%

30%

40%

50%

60%

India USA China

Goods Transportation by Rail Goods Transportation by Road

Source: 12th Five Yea Plan

• Indian Railways is the fourth largest railway network in the world in terms of route kilometers (64,460 km in 2013)

• Most commonly used mode for iron ore

• After coal, iron ore is the second largest commodity for rail transportation (13% of total)

• 124 Mt of iron ore was moved in 2013-14

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Rail Transportation

0

200

400

600

800

1000

1200

2010-11 2011-12 2012-13 2013-14

Commodities Carried by Indian Railway (Mt)

Other Commodities

Limestone & Dolomite

Iron & Steel

Fertilisers

Foodgrains

Mineral Oils

Cement

Iron Ores

CoalSource: Railway Statistics

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Country-Wise Comparison of Rail Infrastructure

16.2 16.2 15.7 14.0

12.0 10.7

0.0

5.0

10.0

15.0

20.0

Wagon Length (meters) 185

154

87 71 63

38

0

50

100

150

200

Number of Wagons per Train

37 32

26 25 20 20

0

10

20

30

40

Average Train Speed (km/hr)

Source: Johncke, 2012

3.00 2.50

1.05 1.05 0.68 0.60

- 0.50 1.00 1.50 2.00 2.50 3.00 3.50

Max Train Length (km)

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Country-Wise Comparison of Rail Infrastructure

0%

20%

40%

60%

80%

100%

020406080

100120140

USA

Can

ada

Po

lan

d

Ru

ssia

Ind

ia

Ch

ina

Wag

on

We

igh

t (t

)

Gross Payload Ratio

12.4 10.6

3.0 2.7 3.3

0.4

2.4 2.4

4.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

UP BNSF NS CNR CPR PKP RZD IR CR

US Canada PollandRussia India China

1.0

00

tkm

/wag

on

p.a

. 2.1

1.5

2.2 2.3

1.0

0.6 0.8

0.5

0

0.5

1

1.5

2

2.5

India China Russia USA

Freight Yield USCents/Total Tonne-KM atnominal prices

Freight Yield USCents/Total Tonne -KMadjusted for PPP (India=1)

Comparison of Wagon Weight and Payload to Gross Weight for Select Countries

Tariff structure in Railways is seriously distorted

Source: World Bank (2012)

Source: Johncke, 2012

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Issues in Rail Transportation

• Lower Haulage capacity • Low current axle load ~22.82 • Low tare weight to pay load ratio = 1: 2.7

• High lead time • Restricts quantity hauled

• Sharing of railway line for both passenger and goods

• Cross subsidizing freight earnings • Frequent changes in rail freight

• High punitive charges for overloading • Lack of rail connectivity to ports • Slow pace of implementation of rail projects

• Delays and congestions for goods traffic

• Exorbitantly high logistic cost by rail

• Constraint for long term planning

• Under loading of rakes • Loss due to dead freight

payment • Forced use of road alternative

• 33 lakh Km. long road network – 2nd largest in the world

• Carries about 65 % of all freight and 80 % of passenger traffic

• Road networks in India consists of (i) national highways (NHs), (ii) state highways (SHs), (iii) major district roads (MDRs) and (iv) rural roads (RRs)

• National Highways account for only about 1.7 % of the Road Network but carry about 40 % of traffic

• Only 23% of their total length is wider than two lanes

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Road Transport Infrastructure

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Challenges in Road Transport

• Narrow and congested highways • Poor surface quality • Under funded road maintenance • Weak, narrow, and distressed bridges/ • culverts

• Low avg. speed of 30-40 kmph

• High cost of vehicle maintenance

• High transport cost

• Dispersed fleet ownership • Lack of professionalism • Lack of access to cheap credit for

investment

• Inefficiencies in material carrying

• High lead time and cost • Insufficient availability of

trucks at times

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Port Infrastructure

China: Province-wise GDP per Capita Ranking India: State-wise GDP per Capita Ranking

Top 20 Top 11-20 Others Top 20 Top 11-20 Others

Parameters China India

Port Capacity 30x x

Costal GDP 3x x

Share of waterways in domestic transport 25-26% 2-3%

Logistics cost as % of manufacturing GDP x 3x

Source: EIU, National Bureau of Statistics, State Information, Analyst Reports, Secondary Research, OECD, IPA, World Bank Report

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Industries with Strong Linkages to Port

1 Includes Food, Fertilizer, Chemicals, Cement & Other Dry Bulk Cargo Types

Source: Basic Port Statistics of India, Transport Research Wing, Government of India, 2013-14

• Most major ports have very high dwell time and are running at more than 90% capacity

• Low level of mechanised loading process

• Age old infrastructure causing frequent breakdowns

• Low availability of draft to handle capesize vessels

• Poor rail connectivity in some ports like Belikeri, Karwar, Krishnapatnam

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Issue with Port Infrastructure

• High throughput time

• High turnaround time for ships

• Slower loading rates

• Delays due to break-downs

• Port congestions

• Higher incidence of demurrage costs and overall high costs

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Agenda

Infrastructure Issues in India

Possible Solutions

Case Studies - Thriveni

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Possible Solutions - Rail

0.0

0.5

1.0

1.5

2.0

2.5

2005 2006 2007 2008 2009 2010 2011 2012

Public Investment in India

Capital Investment in China

55

60

65

70

75

80

85

90

95

100

1990 1995 2000 2005 2010 2014

India China

Rail Capacity (route kilometres, ‘000) Investment in Railways (% of GDP)

Pressing need for unprecedented capacity expansion in Railway

Source: World Bank

• Transport reforms are needed in pricing and fiscal areas

• Stable & realistic freight regime

• Segregation of passenger and freight traffic

• Procure or set up factory for high capacity locomotives

• Manufacture of higher axle load wagons

• Use of stainless steel wagons

• Human resource development

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Possible Solutions - Rail

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Dedicated Freight Corridors (DFC)

Linking Ludhiana in Punjab to Dankuni in West Bengal in Eastern Corridor and linking Mumbai and Delhi in Western Corridor

Construction of 3,338 kms of dedicated freight lines

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Dedicated Freight Corridors (DFC)

Parameters Existing On-DFC

Avg. speed 25 kmph 70 kmph

Axle loads 25 tons 32.5 tons

Track loading density 8.67 t/m 12 t/m

Train length 700 m 1500 m

Train load 4,000 t 15,000

Major Commodity Movements, direction-wise

Major Features of DFC

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Possible Solutions - Road

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Possible Solutions - Road

• Port capacities to be enhanced

• Loading & unloading facilities to be modernized & mechanized

• Synchronization between port capacities and rail-road infrastructure

• Regular dredging to improve drafts to handle higher capacity vessels

• Develop transshipment hub port near international shipping route

• Need to promote coastal shipping 25

Possible Solutions - Port

Steel Scenario 2015

Steel Scenario 2020

Source: OD Study

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Sagarmala Project

Port Modernization

Port-led Industrial

Development

Coastal Community

Development

Port Connectivity

Improvement

Formulated by GoI to promote port led development of hinterland along with integrated development of port connectivity through Road, Rail, Inland Waterways and Coastal Shipping

1 2

3 4

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Port Modernization

Activities Undertaken Key Initiatives

• Port Capacity Augmentation (FY 2015-16)

• Target: 30 projects (162.20 Mtpa additional capacity)

• 14 projects awarded (33.15 Mtpa additional capacity)

• Major Ports Operational Efficiency Improvement

• 104 initiatives identified for implementation • ~115 MMT incremental volume to be

unlocked

• Development of New Ports New sites identified: Sagar island (West Bengal), Vadhavan (Maharashtra), Colachel (Tamil Nadu), Tadadi/Belekeri (Karnataka)

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Port Connectivity Improvement

Activities Undertaken Key Initiatives

• Establishment of Indian Port Rail Corporation Limited (IPRCL)

• Incorporated with equity participation of Major Ports & RVNL

• 7 projects already tendered for implementation

• DPR preparation initiated for 15 projects

• Origin-Destination (OD) Study for Key Cargo Types

• Traffic scenarios for 5, 10 and 20 years being developed

• Higher coastal shipment

Activities Undertaken Key Initiatives

• Port-led Development • Port-based Smart Cities • Port-led Industrial Development • Coastal Economic Zones (CEZ)

• Coastal Community Development • Skill development • Community Development Fund • Lighthouse tourism development • Fisheries development projects

Port-led Development & Coastal Community Development

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Inland Waterways Transport (IWT)

• Only 0.4% cargo moved through IWT vs. 5.6% in EU, 8.3% in US & 8.7% in China

• Environment-friendly

• Much cheaper as compared to rail and road transportation

• Goa is the only significant user of IWT for iron ore movement

• Efforts to be made to develop adequate Least Assured Depth (LAD) for commercial movement of cargo

• Build more IWT terminals and link them with rail/road

• Increase bridge height to improve vertical clearance

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Slurry Pipeline

• Environment friendly - do not cause noise, dust pollution or negative visual impacts

• Ease of long distance transportation of the ultra-fine concentrate

• Almost zero wastage of raw material

• High availability, low maintenance requirement and minimum requirement of land

• Crippled by disruption from naxalite attacks

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Agenda

Infrastructure Issues in India

Possible Solutions

Case Studies - Thriveni

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Thriveni Earthmovers

Thriveni has over 20 years extensive expertise in Mining & Crushing of Minerals like Iron Ore, Copper, Coal, Bauxite, Lignite, Blue Metal, Limestone, Granite, Quartz and Armour rocks for Break water Construction. Collectively, Thriveni is working as MDO for 40 MTPA Environmental clearance capacity for various esteemed clients. Turnover of 225 Million USD during 2013-14.

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MDO Iron Ore

• Largest iron ore MDO in India

• Over 10 years of operation in Iron ore

• + 40 Mtpa capacity

• + 1 Bt Reserve

• 8 operating mines

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Mine Development and Operation

• Mine Planning and Engineering design

• Equipment Supply and maintenance

• OB removal, Ore extraction and Transportation

• Quality control and production scheduling

• Inventory management

• Mine safety,training,workforce management

• Environment and Community Management

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Indonesia Coal Operation

• Thermal coal mining operation in Jambi in South Sumatra, Indonesia, since 2010

• 2 Mtpa, expanding to 5 Mtpa – Open pit operations

• + 500 staff in Thriveni’s coal mining projects

• Coal exploration (including drilling)

• Coal processing, stockpiling & transportation

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Infrastructure Construction

• In-house infrastructure construction and management capability

• Freight infrastructure management (road and river barging)

• Deep water loading

• Export

• Breakwater construction (for Indian Navy with Hoch tief (Germany)

• Planned construction of 24 Mtpa slurry pipe line for 240 kms to port in Odisha (Feasibility Completed)

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Thriveni Road Projects: NH 215 – From Bhadrasahi to Gandhalpada

• Length – 18.29 km • Location - Joda Circle in the District of Keonjhar • Project Cost – Rs.10 Cr.

Within one year 2009-10, Thriveni reconstructed the stretch of road with a 7 mtr width and the additional width ( 2 mtrs)of the road. In spite of millions of tonnes of Iron Ore passing through the stretch it still is in excellent condition

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Thriveni Road Projects: Odisha

Bamebari PS to Kalimati

This road caters to the total dispatching from Unchabali &Balda and other Mines to the nearby railway sidings and distant end user plants, of more than 55,000 tonnes per day

NayagarhChowk to Chadakmara Chowk through Jalpaposi & Unchabali (Circular)

This 6 kms road was constructed considering the future traffic in mind. The huge surge in mineral transporting vehicles to the sidings will have an alternate way of returning to the mine head at Unchabali &Balda through the above road

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Thriveni Road Projects: Nayagarh Railway Siding ( Ring Road)

A ring road to cater to the one way traffic inside the Nayagarh Railway siding has been constructed by Thriveni Earthmovers Pvt Ltd, so that loaded vehicles arriving at the Siding don’t have to take the same route to come back but will have a passage to come out after unloading to reach the main road. The cost of constructing this 1.5kms stretch is 2.5 crores.

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Thriveni Road Projects: Approach Roads to Railway Sidings

Constructed quality roads at Banspani (180 mtrs), Jaroli (300mtrs), Nayagarh (200 mtrs) Railway sidings. These sidings cater to the mines of Indrani Patnaik at Unchabali, Serajuddin & Co – Balda, Kalinga Mining Corproration – Jurudi, KJS Ahluwalia – Nuagaon and R P Sao – Guali. In addition Thriveni has taken up the work of improving the infrastructural facilities like high mast lighting, fixed sprinklers for dust suppression, Diesel Generator Sets and other facilities at these siding

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Quick Dispatch System

This system was brought about to avoid fines imposed by the State Govt on overloading of trucks, tippers beyond the allowed quantity. In this system excavators placed on top of a structure takes out or puts in the required quantity to get the exact permitted quantity to be dispatched in tipper/truck. This has saved huge time lost earlier due to manual adjustment.

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Transportation at Thriveni Indonesia

Barges of 220 feet with 2,500 MT to 3,000 MT carrying capacity at 2.5 meter draft (water level) are used to transport coal from mines in Jambi (PT. Minemex Indonesia) to Port at Talangduku which is 145 Nautical Miles distant. Two number of owned barges and hired 8 number of Barges are used. Barges of 300 feet with 8,000 MT to 10,000 MT capacity are also being used from Port to Mother Vessel Anchorage at Muara Sebak which is 100 Nautical miles away.

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Conclusion

Efficient

Sustainable

Economical

Safe

Reliable

Environment Friendly

Integrated Approach

0

Progressive Regulations

Timely Execution

Heightened Efficiency

GOAL STRATEGY

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