Sanjeev Gupta bounces back after being smelted by Covid
It took a frightening bout of COVID-19 to temporarily stop the unstoppable businessman Sanjeev Gupta. Now he’s marvelling at a V-shaped recovery that has left him riding high again.
“I’m full of antibodies! I’ve got about 120 thousand antibodies, more than anybody else I know. I feel like I should be selling some, or donating blood.”
Global industrialist Sanjeev Gupta calls in from Dubai, where COVID-19 temporarily stopped the unstoppable businessman in his tracks.
Days ahead of the release of his group consolidated March 2020 results for his GFG Alliance, Gupta is riding a rebound in steel prices from a surprise V-shaped recovery. And he has his foot to the floor on plans for his Whyalla expansion in South Australia.
Christmas, though, was a reality check. “I caught COVID-19 on Christmas Eve” says Gupta. The family had flown to Dubai for the break. “Then we got stuck here while I was recovering, then the UK closed down and we decided not to go and stay here until schools reopened.
Gupta shares his personal run-in with the virus. “It was a horrible experience, if I’m honest. I’ve never actually been properly ill in my life. I’ve never had a fever for example. It was the first time in my life that I had experienced a proper fever. I was up to almost to 104, 104.5 degrees, which was quite weird because you get delusional.
“The fever lasted about five or six days, but then afterwards my chest got infected. I had 30 per cent pneumonia in my chest. They were threatening to hospitalise me but thankfully they didn’t. And then I got better. It lasted about two weeks, then another three weeks when I was recovering.”
It says something about the maturing of Gupta’s sprawling GFG Alliance, made up of steel business Liberty Steel, aluminium business Alvance and energy business SIMEC, that the top man could step back for five weeks.
In May last year, Gupta had warned The Australian of dire global conditions in the steel market. He now marvels at the V-shaped recovery driving construction demand. Last week in Australia, BlueScope Steel delivered its second earnings upgrade in two months.
“I didn’t think we would come back this quickly,” Gupta admits. “I didn’t think that we would have the vaccine that quickly.” He cites both the pent-up demand for steel and the money sloshing around in institutions and in everybody’s back pocket. “There has never been cheaper money on this planet ever before, either cheaper or in the quantities where it’s available,” he says. “I expect this to continue. My only concern a little bit is the current lockdowns in Europe … but I think we’ll ride it through.”
The steel boss is proud of the group’s response to last year’s horror June quarter, when plants were forced into shut down. He imposed a 30 per cent across-the-board efficiency drive but managed to largely avoid job losses.
“We reacted very quickly, pulling back on production, even looking at all our contracts, how we do them, what we do. It has made all the businesses more efficient because they had to be.”
Gupta will be issuing interim numbers for this year along with his 2020 results. “We have the savings which are already banked, so our profitability is even better than had it not been for COVID-19. Sometimes these curses are blessings in disguise in terms of a business performance point of view.”
During COVID-19, Gupta says, the business performed better than its peers because the exposure was mainly to construction rather than the auto industry or consumer goods. He sees prices continuing to be robust thanks to China’s strong recovery and the global stimulus, set to be around for some time.
“China has been pulling a lot of iron ore but also in steel. From being an exporter (of steel), they are more or less either even or sometimes even an importer. I call it the Roaring Twenties.”
Sanjeev Gupta’s longstanding passion as an industrialist is “green steel” — working to make steel manufacturing carbon neutral. Today this is done by recycling scrap steel, but he says there is potential to do more. Australia exports more than a million tonnes of scrap a year. “But green steel has two bookends,” he continues. “One is recycling and the other is in the future, producing hydrogen steel.”
Last month, when billionaire Andrew Forrest used his Boyer lecture to call for homegrown green steel manufacturing using hydrogen, Gupta could have been forgiven for wondering if Twiggy had taken a leaf out of his playbook. “I’m very happy he’s agreeing and sponsoring it,” Gupta responds. “It’s a no-brainer. What he is saying is absolutely correct.”
As community pressure for carbon neutrality grows, Gupta argues that the business case for hydrogen steel production, done in Australia, will become compelling. That is because of the danger and costs of transporting hydrogen — both far higher than transporting natural gas.
“The most efficient form of using hydrogen and the biggest bang for the buck is to use it to turn iron ore into steel without using coal. That is greatest impact on CO2 that hydrogen can have. And that is to be done in situ, either in the Pilbara or in South Australia.”
Unlike recycling steel, producing hydrogen steel is expensive, however. The ultimate enabler, according to Gupta, is to put a price on carbon. Under a Trump-led America this was never possible, he says, “but now that Biden is committed, I’m very hopeful that there will be a move towards a global carbon price.”
Gupta’s green mission is to be carbon neutral as a group by 2030, known as “CN30”, and much of the work is in converting three big blast furnaces requiring coal into electric arc furnaces. These electric arc furnaces are then fed with recycled scrap iron.
“Recycling your own steel, produced domestically, using renewable energy: that is the easiest way of have zero carbon steel,” he says.
The acquisitive Gupta is always on the lookout for another electric arc furnace to add to his portfolio. Where not enough scrap can be sourced, furnaces are fed with direct reduced iron, or DRI, which is made from iron ore using natural gas. In future the plan is to use hydrogen. “We are blessed in South Australia with magnetite ore which is better suited to DRI production, so we are in an even more fortunate position compared to WA,” he enthuses.
The showcase for CN30 is Whyalla, and Gupta has recently decided to fast-track the various projects. To his surprise, the Whyalla team have shifted the old steelworks into the black — and for the first time, he says, it is making money. As a result, Gupta now wants the DRI plant built at the same time as an electric arc furnace and new rolling mill, in a three-year timeline.
There will be great interest in the group’s upcoming newly consolidated results, especially from the sceptics of Gupta’s extraordinary growth-by-acquisition strategy. He has a €1.5bn ($2.4bn) offer for Thyssenkrupp’s steel unit in Germany. Yet the combined global stimulus of low interest rates and fiscal pumping by governments are ideal settings for him. He predicts the rising steel market will lift results higher than budget — and he can’t say anything about an IPO of his Australian Infrabuild business this year.
From his dire predictions last May, the pressure on the business through COVID-19, to his own personal battle with the virus, it seems that for Sanjeev Gupta, what doesn’t kill you makes you stronger. “GFG works best under pressure, so when we come under pressure we really come into our own. No matter how big the crisis, or how big the problem.”
