Annual Report for 2011-2012 - Vizag Steel

30 th Annual Report 2011-12
A sharp decrease in global steel prices due to a global recession and a greater than expected slowdown
in China, leading to a surge in imports due to better Indian demand, could adversely affect the profitability
of domestic steel producers and might result in a negative outlook. In the process, the Company need to
trade off among the influencing factors to achieve an optical profit margin.
The Key Issues for 2012-13:
The demand is likely to grow at 6% to 7% only in 2012-13 consequent to growth in construction
sector and deferral of corporate capital expenditure.
The prices of input materials like coal etc., may be stabilized around $ 235 while the depreciating
Indian Rupee may eat away the advantage of stabilized prices.
The Steel prices are likely to remain under pressure in 2012-13 due to subdued domestic demand
& global nature of the market coupled with oversupply and weak demand in the international market.
Sovereign concerns in Europe may also cap global steel prices as troubled nations in Europe cut
spending to contain their fiscal deficits, thus hitting demand and resulting in the profitability to have
a muted growth.
While the depreciating rupee has discouraged Steel imports, it has also made imported raw materials
more expensive.
The capacity addition in 2012-13 is expected to be around 30 million tonnes due to completion of
brown field sites which may put pressure on steel prices resulting in reduced profitability.
Considering the above key issues in a dynamic environment, the Company has taken few initiatives as
detailed below:
Initiatives taken by the Company :
Pursuing for Iron ore assets with various State Governments (viz AP, Jharkhand, Odisha, Karnataka,
Rajasthan and Uttar Pradesh)
MOU with Andhra Pradesh State government for Mining assets and establishing partnership with
State Mineral Development Corporations for Iron ore assets.
Pursuing the JV route for setting up of Steel Plants with SAIL, NMDC & BHEL
MOU with Power Grid Corporation of India for joint venture to produce TLT.
Containing / Reducing Manpower Cost per Tonne of Steel produced by (a) increasing the capacity of
Plant to 6.3 Mt; (b) adding further 1 Mt with revamping, (c) adding further capacity of 4 Mt
subsequently; (d) next phase of Expansion to include Bigger size Blast Furnaces and other downstream
units, and (e) taking full advantage of Automation etc.,
To enter into Flat products business while adding more capacities and making suitable changes in
product mix.
Wider range of products like Special steel products, CRNO,CRGO, Electrical Steels, Axles for Railways
etc.,
MOU with NMDC.
6. RISKS & CONCERNS:
Demand for our products is affected by global and national economic conditions. Any development
which decelerates the demand for steel products would have an adverse impact on our Company.
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