Rs. 1 bn investment:

Steel Corp launches Sri Lanka's first GI mill

by Lalin Fernandopulle

The Onyx Group which owns the Ceylon Steel Corporation Limited (CSCL) is building a 500-room hotel and apartment complex in Dubai with an investment of $ 250 m, said CSCL Chairman Nandana Lokuwithana.

CSCL Chairman Nandana Lokuwithana

He said the hotel built on prime land which is home to international hotel chain operators such as the Hyatt Regency Group, comprises 360 rooms with five restaurants, a night club, a ball-room with a capacity to accommodate 1,000 guests, a 400 capacity car park. The apartment complex will comprise 140 rooms.

"A large section of the project has been completed and we hope to launch it by April next year," Lokuwithana said.

The hotel which is being built by the Marriott Group will cater to high-end clients. The hotel will be commissioned by President Mahinda Rajapaksa.

Lokuwithana said that there is enormous scope for tourism in Dubai. Hotel occupancy at any given time is over 70 percent in Dubai. "We hope to cater to the discerning travel class with our unmatched services", he said.

The steel manufacturing industry was introduced in Sri Lanka over 50 years ago by Ceylon Steel Corporation Limited which is the pioneer in the production of high quality steel products in the country.

The Onyx Group, a world renowned manufacturer of steel and building material related products invested $ 80 m in CSCL in 2009 on a three-year strategic plan to increase its presence in the local and international market.

Inside the steel mill

The Onyx Group is also a major industrial contracting company with many years of extensive expertise that deals in specialised sectors in the construction industry. It is into Amano roofing sheet manufacture, real estate business and the hotel sector in the UAE.

The Onyx Group operates a fully equipped, state-of-the-art steel manufacturing complex in the International Airport Free Zone in Sharjah which produces high-grade construction products such as steel roofing, aluminium roofing and wall cladding.

The Group's three-year strategic plan consists of developing the rolling mill, foundry, wire mill and galvanised pipe and tube mill.

The Onyx Group bought CSCL from a Korean company which took over from the government in 1996. The steel rod industry has expanded with the construction boom in the country. The quality of construction depends on the strength of iron rods. CSCL has raised the strength of its steel rods from 250 mega pascal MPA to 550 MPA which helps to save a lot on construction costs.

CSCL manufactures around 11,000 tons of steel a month saving around Rs. 5 m in foreign exchange to the country which imports 15,000 metric tonnes of billets a month to manufacture steel rods. The country spends around $ 1,300 on a metric tonnes of rods.

Lokuwithana said the high cost of production due to the staggering energy prices such as electricity and furnace oil is a huge challenge to develop the industry.

The cost of production in industrial steel manufacturing countries such as India, Pakistan and Bangladesh is low due to cheap energy.

An aerial view of the 183-acre facility at Athurugiriya

"We offer better products than the countries in the region despite the high cost of production. Our aim is to be a the industrial leader in the region. The use of scrap metal to produce steel iron rods which compromises the quality is a huge challenge to the industry," Lokuvithana said.

Around seven companies manufacture steel rods in the country. The Ceylon Steel Corporation has invested Rs. 1 b on a galvanised iron pipe (GI pipe) manufacturing mill. The company hopes to manufacture around 3,500 to 4,000 metric tonnes a month.

We will initially cater to the domestic market and then focus on the export market.

Lokuwithana said that the company has the capacity to meet the entire domestic demand. CSCL sells its products under the brand 'Lanwa', a diminutive based on the Sinhala language term for Lanka Steel.

Experts in the construction industry said that the high import taxes on steel products have made housing costly.

Lokuwithana said that CSCL has achieved many milestones. "We have invested heavily on our facility in Athurugiriya which is currently an industrial village providing employment to over 1,000 people", he said.

CSCL is spread over 183 acres which also includes a hospital, quarters for over 70 staff members, a sports centre, a restaurant and many guest houses.