South East Asia

Although the economy began to look up, the global financial crisis continued to have a dampening effect on the economies of South East Asia in the first half of the year. A quick response from Governments with huge stimulus packages helped mitigate the impact. However, a large part of the steel industry was negatively affected and underwent a demand contraction with Indonesia contracting by 27%; Singapore by 23%; Thailand by 20%; Malaysia by 9%; and the Philippines by 3%. The exception was Vietnam which grew by 30%. Despite a drop in demand, the second half showed indications of economic recovery when the effects of the stimulus packages kicked in. Demand for long products increased in the second half to near pre-crises levels.

NatSteel Holdings

The sales volume from operations in Singapore fell by 22% largely due to weak exports to Australia and a reduction in the domestic demand. Sales of its local downstream products also fell by 16%. Nonetheless, it continues to be one of the largest single location cut and bend centres in the world. The Xiamen operations in China reached new milestones in both its production and sales volume with an increase of 27% and 25% over last year respectively. Production at the Vietnam operations nearly doubled to 140k tonnes with sales volume registering a 67% growth and the unit generating a 30% ROIC.

In Australia, both of its subsidiaries, NatSteel Australia and Best Bar, suffered losses as Australian sales volume dropped by 32% against last year. Margins were negative because of the high cost of inventory bought prior to the crisis and price pressure from competitors. NatSteel’s management reduced its inventory level by about 100k tonnes which helped free up S$89 million of working capital for further investment opportunities. It also lowered its borrowings, thus reducing its burden of interest cost.

Continuous Improvement

NatSteel has always placed an emphasis on continuous improvement. During the year, Kepner Tregoe was engaged as a consultant to drive performance excellence through various focused projects targeted at achieving strategic objectives. Business processes continued to be strengthened. It also initiated knowledge management for synergy in knowledge sharing as well as daily management for improving operational performance. SAP was successfully implemented in NatSteel in September 2009 and will subsequently be rolled out to its subsidiaries.

NatSteel comissioned a new Fume Extraction Baghouse at its Singapore plant to improve the working environment. In Xiamen, a new series of earthquake resistant and high yield bars were launched. Capacity expansion and extension of the distribution network are currently in progress in line with the optimism in the construction industry. NatSteel and its subsidiaries have joined efforts in improving its supply chain management using the Theory of Constraint principle to achieve leaner and more effective operations.

Safety

NatSteel has made a remarkable improvement in its safety journey during the year reducing Lost Time Injury Frequency Rate (LTIFR) to 1.22 this year from almost 6 last year. With DuPont as its consultant, it will start on DuPont Process Safety Management to further improve its safety measures.

Tata Steel Thailand (TSTH)

The negative steel consumption growth and the struggling economy had a major impact on TSTH’s performance. However, despite the challenges, the company continued its growth and performance initiatives. The Mini Blast Furnace Project located at the NTS plant, a subsidiary company in the Chonburi province with a production capacity of 500,000 tonnes, was completed this year. This project, which is Thailand’s first hot metal based iron ore production plant, will enhance the company’s capability to produce high margin products.

The new billet grades SWRY11 and SWRH67B were also successfully produced as a trial lot. In terms of performance, the highest production rate of hot metal was approximately 1,190 tonnes per day, compared to the rated capacity of 1,450 tonnes per day (rate without oxygen enrichment).

Improvement Initiatives

TSTH moved aggressively towards the ‘Global Excellence Standard’, based on the Tata Business Excellence Model (TBEM). The ISO9001:2008 Programme for the procurement and marketing & sales areas was also launched. Additionally, a joint endeavour was undertaken with NatSteel to share best practices, in areas of safety, sales and marketing, procurement and rolling operations.

HR and people update

TSTH has built a foundation of four key pillars - viz branding, employee engagement & retention, business sustainability and service delivery. The organisational culture is driven by a concept called FIRST Culture (Flexibility, Innovation, Result Driven, Services and Speed, Teamwork Orientation), which serves as a work behaviour guideline for staff at all levels.

Recognising that safety and occupational health is an integral part of work, TSTH undertakes various activities to motivate and educate the staff. Every process is standardised to ensure safety and adequacy of personal accident protection. A ‘Health Safety and Environmental Committee’ determines policies, targets and work plans. Apart from conducting business in line with the Tata Code of Conduct, the company has followed the five principles of Good Corporate Governance issued by the Stock Exchange of Thailand.