Kryptonite & Men of Steel
As a rule, a comedian should never come close to a furnace that takes in boiling iron ore. It is about as red hot and molten as an audience that isn’t laughing at jokes. I, however, had the good fortune of being up close and personal within the heart of one of corporate India’s giants producing the very thing that’s built India. Literally.
I visited the country’s most famous steel plant in Jharkhand from where steel is shipped around the world.
It is a testament to India’s great private sector giants that from the bowels of mind-bogglingly bizarre infrastructure provided by the state, they are able to create something world class. It is through those uneven medieval roads (almost no cell phone signal), with no special train for its employees, that steel gets to every world city on time and forms the backbone of every skyscraper from London to Cape Town.
Way before ‘Make in India’ became a hip anthem, these guys were making in India and actually dealing with what Make in India entailed: obstacles that would make Sisyphus give up.
Leaving aside the Herculean task of running gigantic blast furnaces and steel plants and employing hundreds of thousands of people, India Inc involved in manufacturing has to deal with mad logistics unique to us. The truck carrying gazillion tonnes of some refined construction metal gets pulled over because the local politician’s son wants to make a detour. Middle of production, some petty feud between two MLAs means there is no electricity for a week.
A sudden court order and no mining. Absolutely anything in India that can go wrong, does go wrong. Then, just for fun, some more things go wrong.
Then there are the factory towns. Regardless of how many jobs are created, world-class factories and plants are usually in mineral-rich towns in the interiors. In places where promises of airports have remained promises, the trains are reasonably unreliable and most road transport is so bad that politicians arrive by helicopter.
So, to run any plant, India Inc has to build a whole city and essentially become the state.
Which begs the question: what can frighten these people? They have manufactured in darkness, on deadlines that would make city office-goers jump out of a window, with threats to life and family. The answer is one word: China.
The world economy today looks like a Bigg Boss episode. Sad, broken, maligned people under the spotlight of a salivating juvenile-desperate camera, trying to make something out of idiocy. Sure, we can name and shame Indian industrialists who can’t pay off their loans, and surely some of it is deceit. But a lot of it is the global economy punching them in the face.
This world, the newspaper you are holding, the computer these opinions are typed on, the home you are in, the car that’s driving you, the glass skyscraper you work in that pays your bills, were all built with three things: oil, gas and steel.
And that same world today is rejecting those three things. Cars on oil are pretty much over. Planes may soon follow. Oil prices are so low that even Saudi Arabia has started thinking, “Ok, what else are we good at? Can anyone juggle?” During the economic boom, China was building and the world was supplying it steel. That was the world order. Everyone laughing. China’s demand for world steel was so much that South Korean steel companies were willing to move to Orissa.
Suddenly, what lay beneath India — our ore and minerals, however remote and impossible to get to — became global hot property. Everything seemed okay as long as Beijing and Shanghai grew taller and taller. Till suddenly one day, it didn’t.
The Chinese said, “We’re done.” And it all started unravelling. Steel barons in debt, shut down plants, reduced size, exited nations, banks saw loans balloon, South Koreans said no thank you to Orissa. One committed suicide.
And the Chinese weren’t done. They reversed the game. They said we don’t need this extra steel and started dumping it around the world at ridiculously low prices. So low that the west that profited from selling steel to the Chinese were now using that money to buy Chinese steel. A perfect mad loop.
One doesn’t know what the future holds. But, currently, the world’s biggest men of steel, many of whom are Indian, suddenly find the steel game they’ve mastered over a hundred years is unplayable not because the game got tough but because there is no game. Just three terrifying words: Made in China. Capital projects are an essential contributor to chemicalcompany growth: witness the half-dozen new ethylene crackers being built on the US Gulf Coast. Such large-scale projects get a lot of top-management attention. But they account for just over half of the chemical industry’s $400 billion in annual capital spending.
There is another category of capital expenditure that chemical companies have struggled to manage: modest outlays for sustaining and maintaining assets as well as for smallto-midsize growth projects. Chemical companies have an opportunity to capture significant additional value by better managing their portfolios of small-to-midsize projects.
Projects with a value of $50 million or less add up to a major portion of chemical-company spending. These account for 80% of all capital projects by number, and up to 50% of capital-spending value. In our experience, improving the way the projects are selected and managed can deliver savings of 15-30%, and the savings can be redirected to more value-creating projects.
Such projects can have return-on-investment rates much higher than many larger ones: debottlenecking, for example, can earn high returns because they sell into familiar markets. Done right, this kind of action can also boost return on invested capital by as much as four percentage points.
From “Small equals big: Unlocking savings in small to midsize capital-project portfolios in chemicals”
On the bucket list: ‘Spill’ by Subodh Gupta, 2007