Green steel to renewable energy group GFG Alliance, which has considerable interests in Wales, said it was making steel “sexy and fashionable” again as it looks to significantly ramp up its production of recycled steel in UK.
Speaking at Cardiff Breakfast Club, Nirmal Chhabria, a director of Simec Group and Liberty House Group – businesses which come under Sanjeev Gupta’s GFC Alliance ‑ said that the business, which moved into the steel market from commodity trading with the acquisition of the then mothballed former Mir Steel steel mill in Newport in 2013, is looking to take its production of recycled scrap steel in the UK (currently more than one million tonnes) to five million tonnes over the next five years.
Mr Chhabria, a successful entrepreneur in his own right and a former Western Mail Young Business Achiever of the Year, said the recycled scrap steel model, which unlike primary steel making doesn’t require the costly importation of raw materials such as iron ore and coking coal, had a viable long-term future, with Mr Gupta having the vision to enter a marketplace which people were exiting.
With a biomass plant at Uskmouth in south Wales, next to its Liberty Steel arc furnace steel operation, and the former Caparo steel tube works at Tredegar, the group is committed to a three year £700mn investment on renewable power asset via its energy arm Simec, including a new windfarm in Scotland.
Mr Chhabria described its green steel model as a “closed loop system of creating sustainable steel from sustainable resources.”
He said: “Over the past few years Sanjeev has not only been buying up iconic steel plants, which were struggling and distressed, but buying up lots of renewable energy resources like in tidal, hydro, biodiesel and waste energy.
“We aim to produce 1 gigawatt of power in the next 2-3 years, and the power will solely be used in producing steel.”
On Mr Gupta’s steel strategy he said: “He spotted a mature market that produces an awful lot of scrap… 10 million tonnes which is about to go to 20 million. At present 70% of that is simply exported to Eastern Europe and the Far East and comes back in semi-finished goods. He wants to melt that scrap in the UK and make the UK a competitive player. The aim is to get capacity up to 5 million tonnes.
“We are looking for assets with growth potential and creating a more sustainable anti-cyclical future for the industry”
He said though the strategy had raised some eyebrows.
Mr Chhabria said: “People immediately started to question his sanity. However, the great attribute of an entrepreneur is that he or she sticks to their guns and in the case of steel Sanjeev proclaimed it was the future. It is about spotting a gap in the market and in case of Sanjeev he has an insatiable desire to keep plugging gaps.”
He added: “However, if he was going to revive the steel industry it was desperately in need of skills. One of the problems we faced is that skills are not easily available. People are not entering the steel sector as it is not fashionable and sexy.
“Experience like this is hard to find. You can teach the skills, but what you cannot teach and buy is the experience. But people are staying with us and we are one big family.”
On how the business has secured funding for its rapid expansion Mr Chhabria said: “We are often asked how we do we secure financial backing for projects. But if the project is right and the vision is right backers will come.”
Liberty House was one of the bidders for Tata UK’s steel business, which directly employs 6,000 in Wales.
However, the sales process was abandoned last year with Indian-owned Tata now in merger talks for its European steelmaking business with German conglomerate ThyssenKrupp.
Mr Chhabria said if a merger didn’t materialise, Liberty would remain interested in bidding for the business.
Fear and being kidnapped
Mr Chhabria, who first moved to Wales in 2005 to study for a masters at Cardiff University, described how he was forced to re-evaluate his attitude to fear and his approach to business after being kidnapped for 21 days while on business in Lago.
He said: “My hands and legs were tied and I was blindfolded for a certain amount of time. It was more than scary… and you start thinking of what you could have done [in life].
“It was nightmare and in the first three days they made a point of beating me twice a day, which was awful. But I got to a point where I realised something, that the point of maximum danger is the point of minimal fear. I got to a point where fear was not a concern for me.
“It just became a routine and I was not sure when I was going to get out and I didn’t know if I was ever going to get out. My father made the drops for money and he didn’t even know if I was alive.”
“Based on this fear, when I came back to the UK to a business that was pretty much down in the dumps and failing, I turned it around within four months.
” A lot of people say did you take therapy, but there was no time. I had a lot of people pinning their hopes on me to turn the business around and a lot of investors that wanted to get paid back. I said there was no time to get over anything.”
And he said that business success all came down to hunger.
Recalling his first job in south Wales he said: “It was in Barry where I knocked on 842 doors before I sold a policy. For me it all comes down to being hungry [in business] and not being ready to give up.”
Cardiff Breakfast Club is sponsored by Blake Morgan, Effective Communication, Lloyds Banking Group, the Western Mail and Stills Branding.