India snaps up Aussie rail freight concept

Indian coal and steel conglomerate Jindal Steel & Power to boost capacity with Aussie-grown rail freight innovator STS

India snaps up Aussie rail freight concept
India snaps up Aussie rail freight concept

By Anna Game-Lopata | August 16, 2012

India has provided a big win for Aussie rail freight system design company Sustainable Transport Solutions (STS).

The innovative track and locomotive developer has signed a ‘preferred supplier’ memorandum with Indian conglomerate Jindal Steel and Power for steel components as well as a contract to build its first commercial rail freight system.

Jindal will own and operate the rail track network, with STS the project developer.

At a cost yet to be determined, but potentially
around the $100 million mark over three years, Jindal has agreed to bear the risk of the STS concept where Australian mining companies would not.

STS Executive Director Michael McBride says the Indian steel giant and miner has been looking for a rail based system to grow its coal capacity in Raigarh from 3.5 to 6 million tonnes per annum for some time.

"The proposed STS system comes with an
inherent capacity of 10 million tonnes per annum," McBride says.

With 2.2 billion tonnes of coal reserves in India alone, along with mines in Australia and Indonesia, McBride says Jindal sees great potential for more projects down the track.

"Jindal has the capacity to do 50 million tonnes per annum of thermal coal out of Mozambique where it has very large scale, long distance projects," he says.

"In India, Jindal has the largest sponge iron making facility in the world. It is listed on the Mumbai Stock Exchange with $3.5 billion in sales and a billion in profitability."

Based on the STS system comprising a light-weight elevated rail track supported by steel tension cabling and electric-powered, automated rolling stock, the Jindal system will be slightly modified to incorporate a driver, achieving a cost reduction of between $750,000 and $1 million per kilometre.

Under ten
STS locomotives will replace 350 trucks which currently carry 3.5 million tonnes of coal per annum the forty kilometres from Jindal’s open cut mine to its Raigarh steel facility and back, carrying the ash by-product used for backfill.

Since mid-July, STS and Jindal have been in the process of a jointly funded, five-month feasibility study to ascertain which of Jindal’s steel products would be most suitable for the Raigarh project.

McBride says Jindal’s fabrication yard can manufacture components for the wagons, locomotive and provide the steel required for the freight system’s track support and pre-tension structures.

"Potentially Jindal could manufacture the light-weight S24 rail track which is all their system would need," he says.

But with many rail projects under its belt, including the recent Deli metropolitan rail network and the world’s longest single piece of continual rail at 121 metres, Jindal may also choose to go with the 52 kg rail it already produces.

For STS the deal is the best possible result of a ten year journey comprising committed development and a protracted search for a mining partner in Australia.

"A lot of the companies we were dealing with are now facing their own challenges," McBride says.

"Some are
suffering a 50 percent decline in value compared with last year, so the companies that were emerging and looking strong have been hit by the drop below the $120 iron ore price
they had written in to make their projects viable."

McBride says Jindal is best placed to absorb the risk of a new concept like that proposed by STS and to profit from it.

"We have ended up at the other end of the supply chain because there’s a lot more in there for a steel manufacturer to build its business while simultaneously improving its logistics and supply chain than for a miner
looking at an unproven system," McBride says.

"We’ve been able to retain the equity in our company, eighty percent or so of
which we would have expected to use to build a much smaller system than the one proposed for Jindal.

"We have also gained the commercial integrity of a partnership with
a large miner and steel manufacturer. Most importantly, we’ve moved from proof of concept to having someone prepared to stand up and say they think our
system is the best one for them.

"It will significantly reduce Jindal’s costs, while increasing production reliability and safety, and reducing carbon footprint. It will also provide a long-term revenue stream and project pipeline."

McBride says the feasibility study will be complete by December this year, with construction planning to begin in 2013.

Construction will begin in 2014, with the system de-bugged and fully operational by 2015.

As SupplyChain Review reported in April 2011, the original STS system is a fully automated, rail solution combining rolling stock and an elevated track structure to form a network the company says can be built at half the price of a traditional railway.

Being elevated tracks can be narrower and the local environment can be preserved while eliminating problems related to topology and natural disasters.

Electric-powered engines are accompanied by small, two-tonne axel trains which travelling at higher speeds and frequency than traditional rail freight, can deliver 50 million tonnes per annum.

The system reduces energy consumption by 90 percent compared with trucking, can sustain inclines of 10 percent, requires 80 percent fewer materials to construct and delivers low maintenance.

The product of thirty years of development, STS was rewarded for its concept in February 2012, winning an international Golden Chariot Award for 'Excellence in Innovation for Sustainable Transport Engineering'.

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