There might be better times to open a pipe mill, but don’t tell that to the folks at Welspun, the India-based conglomerate that cut the ribbon on its $150 million plant in the Arkansas city of Little Rock last April.
Amid plenty of fanfare from grateful local and state officials and residents, B.K. Goenka, the CEO of parent company Welspun-Gujarat Stahl Rohren Ltd. and his staff made clear their determination to fulfill its commitment to open its first American plant despite the worsening global recession. Conceived barely two years ago when the pipeline industry was in the midst of an enormous boom that had many wondering if they could acquire line pipe at any price, few would have blamed Welspun if it had preferred to hold off on opening its new plant. According to The Wall Street Journal, capacity utilization at U.S. steel mills has fallen to 43%, a level not seen since the Depression.
Orders from energy producers have fallen 30% or more since last year because of the decline in exploration, the Journal noted. Short-term prospects don’t appear to offer much encouragement although the U.S. Department of Energy has estimated that more than 40,000 kilometers of new oil and gas pipe will be needed during the next four years.
Built with the encouragement of tax incentives from both the state and city, Welspun Tubular LLC’s state-of-the-art spiral pipe-making plant is spread over 740 acres of land next to the Little Rock Port Authority. It includes external and internal coatings as well as a double jointing facility. Earlier this year, the plant began commercial production of 240,000 tons of 80-foot spiral weld pipe for the Ruby Pipeline Project. About 300 people are employed at the plant which is designed for 500 workers.
In a wide-ranging interview with P&GJ, Goenka talked about his vision for the pipe mill and his determination to see the project through.
P&GJ: What were your thoughts as the facility was dedicated?
Goenka: It was a moment of pride for everyone at Welspun. We could see the launch of the Little Rock facility as a big step toward our vision to be the largest and the most respected company in the world in line pipe production.
P&GJ: From conception to completion took just two years. What made this possible?
Goenka: A clear strategy and a concrete road map were in place even before we scouted for land to set up this greenfield project. Once we decided on the location of the project and resolved the logistical and financial issues, we were fully dedicated to the timely completion of the project.
P&GJ: What are some of the unique characteristics of this facility?
Goenka: We have substantial capacity in our Arkansas facility, which is fully integrated with our pipe plants in India. In Arkansas, we have capacity to produce 350,000 tons of spiral weld pipes per year, with facilities for double jointing and coating. In India, we can produce more than 1 million tons of large-diameter pipe. Working together, we can meet the needs of even the largest and most demanding pipeline projects in the world. Capacity to produce grades X80 to X100 (API 5L certified); diameter 24-60-inches; thickness 6-25 mm (0.250-1 inch); length 12-24 meters (40-80 feet), with the world’s best technology and equipment.
P&GJ: What are some of the energy projects that you are now involved with?
Goenka: We are working on a number of projects with our key clients in North America. The Keystone Project of TransCanada is one we are proud to be associated with. We are just now wrapping up the delivery of this important energy project and are hopeful to participate in additional strategic energy supply projects to help North America’s energy plans.
P&GJ: What is your outlook for the pipeline construction market over the next 12-18 months?
Goenka: The pipeline construction market looks very interesting and promising in the next 12-18 months. With more and more oil and gas discoveries across the world, the need for line pipe will increase.
P&GJ: How did Welspun become acquainted with Little Rock and Arkansas?
Goenka: Welspun has a long association with Arkansas due to our relationship with Wal-Mart, as a major supplier of household textiles such as towels and bedding. While exploring a number of port-based locations for our line pipe facility to ease transportation for our raw materials and finished products, we reached the City of Little Rock and the support for us from the city and state governments and the local population was tremendous.
The support for this effort and natural advantages proved decisive. Logistics for road, rail and water are ideal. The Little Rock port facility has natural waterways and connections with important rivers like the Mississippi and by being adjacent to the port, intermodal transfer is very easy. It is centrally located in the U.S. with easy access to many likely pipeline rights of way. The labor force, local facilities and good government, favorable tax policies and a culture of cooperation are all advantages to this state and region of the country. We were also able to purchase a large parcel of land for our current plant and the possibility of expansion.
P&GJ: What do you think more states and cities can do to attract foreign businesses such as Welspun?
Goenka: Local and state governments should be able to ascertain and fulfill the requirements of businesses. Competition in development and site location is important for economic development, and Arkansas understands this clearly. They listened carefully to our needs and found ways to meet them fairly. In this economic climate, the flexibility to allow companies to combine local and international resources to improve competitiveness played a very important part in our decision to invest in Little Rock. Besides, the availability of required local talent and attractive economic packages are the essentials for foreign investment.
P&GJ: What is the history of Welspun and what was behind the decision to enter the pipe business?
Goenka: It all began in 1999 when Welspun (already among the largest manufacturers and exporters of home textiles in the world), decided to venture into the business of infrastructure and zeroed in on line pipe servicing the oil and gas industry. Since then, there has been no looking back.
P&GJ: What was the role that your father played in building Welspun and what is your background?
Goenka: My father was a visionary. He was the prime architect of all Welspun facilities, particularly Anjar where he spent the last few years of his life. In difficult times, he was a pillar of strength. He encouraged and gave me the confidence to overcome some of my most difficult challenges. Though not an engineer by profession, he had great affinity for machines and could virtually talk to them. I entered my father’s business of food grains when I was 18 years old, but soon realized that there was more in store for me. I shifted to Mumbai and started Welspun, our first synthetic yarn business, in 1985 with my cousin. Since then, there has been no looking back.
P&GJ: How will the Little Rock plant work in conjunction with your other facilities? Will this enable you to offer a turnkey job to clients?
Goenka: So far as HSAW pipes are concerned, the Little Rock facility is capable of handling its own clients with its capacity. It is a one-stop destination for our clients in and around the United States. The know-how and technical expertise achieved in Welspun’s two other pipe facilities in Gujarat India would be shared and add value to position this facility among the best in the world. With our facilities in India and Arkansas working closely together, we can be as capable as any company in the world in meeting our customers’ needs.
P&GJ: Looking back on this project, what did you learn, what were some of your biggest challenges, and what would you do differently if given the chance?
Goenka: The most important lesson we learned is – if we have clear strategies and strong determination in place, we can achieve our goals in any part of the world. During the last year, the meltdown of financial markets across the globe led to immense loss of confidence among various stakeholders. But Welspun maintained its unflinching commitment to quality and service, and remained focused on our goals to complete the project on time.
Since language is not a barrier to our success in America, we had a natural advantage in completing the project. Despite the obvious cultural and legal challenges of building a major manufacturing plant in a new country, we did not come across any major issues. I give full credit to the people of Arkansas for allowing us to complete our project on time. Their friendship and “can do” attitude not only helped us complete this plant on time, but will make it as good as it can be in the future.
Welspun, with the support of state government, delivered on its commitment to the people of Arkansas. When the whole world is talking of de-growth and job losses, Welspun has put up the plant overcoming all odds. This showcase plant, one of the most modern facilities in the world, is the true epitome of our American dream. It is an American corporation, employing American people, paying American taxes, helping with American education and infrastructure, providing a base for growth in transportation, logistics and other services and helping to restore manufacturing in America.
Welspun has expanded its reputation as a truly global enterprise with a presence in 34 countries, employing 22,000 people of 24 different nationalities. From Hong Kong to Houston, London to Little Rock and from New Zealand to New York, we serve the entire world. We are the second-largest line pipe company and second-largest home textile company in the world. We eagerly look forward to serving our customer’s needs and will grow accordingly despite the world economic climate – our slogan is “Dare to Commit” and I believe our actions back up our words!