Steel Insights, August 2017

Contents 23 Centre to focus on 46 Sagarmala projects in FY18 27 Coking coal surges in July on Chinese buying 28 New car launches, GST impact propel car sales in July 30 Real estate sentiments take hit owing to ambiguity in policy issues: report 31 War clouds looming over global steel trade?

32 Global crude steel output dips 1.59% m-o-m in June 33 Traffic handled by major ports edge up 5% in Q1 34 Railways’ June iron-ore handling up 15% y-o-y 35 Dumping duty likely to continue, says Junior Minister 36 Primetals Technologies sells third copper rod mill to Southwire 38 Tata Steel completes Hartlepool SAW pipe mills sale 39 Centre gives go ahead to disinvestment of 3 SAIL units 40 Essar Steel’s flat steel output grows 29% in Q1 41 JSW Steel registers 43% fall in net profit in Q1 42 JSW not keen on sell-off as US biz stages comeback 43 Corporate update 45 Price data 46 Ferro alloy data 47 Production data 50 Consumption data 52 Import data 54 Import-Export data 56 Export data

4 Steel Insights, August 2017

6 | COVER STORY

Indian steel waits for next tech revolution

18 | COVER STORY

Is the Indian steel industry waiting for a sure-shot engineering breakthrough on which it could ride to glory?

Automotive steel, CRGO should be top priority Most Indian steel majors are definitely lagging in the areas of R&D, Sanat Bhaumik.

20 | COVER STORY

Focus must be on duplex stainless steel

21 | COVER STORY

Today, needs have changed. There is a demand for steels other than those of standard grade, Sushim Banerjee.

Integrating small steel players in production is way forward For steel-makers, getting to know their customer and not owning mines should be the way forward, says Dr Susmita Dasgupta.

25 | FEATURE

OMC targets higher iron ore production OMC has set a target to achieve the highestever production of 8 million tons of iron ore.

Cover Story

Indian steel waits for next tech revolution Madhumita Mookerji

C

an steel become the new gold?

In what may eventually become a reality, two countries across the global spectrum are working on two bold innovations that could usher in a brave new world where steel manufacturing costs could go into a tailspin.

In what could be called a disruptive technology, a predominantly logistics company based out of Saudi Arabia is feverishly working to crack the CH4 code in the huge amounts of petroleum waste it is saddled with.

On the other hand, there is good old China, and predictably so. Experts feel once

6 Steel Insights, August 2017

the cost of energy spirals down, then China, in all probability, will crack iron oxides from the reserves of the dust and tailings in the iron ore it has accumulated from across the world.

The dragon is toiling hard on this technology but being high-cost, its commercial launch is being delayed.

Interestingly, if we track the geographical location of Saudi Arabia in the Middle East and China in South East Asia, we may notice that this was the ancient medieval route for the alchemists! So, are we headed towards revisiting that route metaphorically once again? Are these two players going to once again, after hundreds of years, strike gold

from the bowels of the earth in more ways than one?

For the modern steel industry, like any other under a capitalist production regime, the major driver is technology, as per the foundational thesis of Joseph Alois Schumpeter, an Austrian-born American economist and political scientist (11831950). According to this theory, whenever there is a rise in the technological innovation graph, then industry does very well, with increasing returns to scale. Thereafter, comes an inevitable period of stagnation, a timeband in which industry keeps on producing the same products which people consume

Cover Story at a certain level of income. Concomitantly, there is no remarkable spurt in demand, unless that income rises very fast. Thus, there is satiation in terms of consumption of the same old product.

And, once the steel manufacturers imbibe the technology, in a vicious cycle, the knowledge barrier erected by the high levels of technology automatically gets broken, allowing the entry of many players into the field, resulting in production glut. But, if there is a sudden boost in technology, then the industry index jumps up once again in a cyclical reflex.

Is the Indian steel industry, in that case, waiting for a technological Godot, “something to turn up”, a sure-shot engineering breakthrough on which it could ride to glory once again?

We do not yet know when the Saudi or Chinese crack codes will come to India but experts feel that Indian innovation in steel can happen not by cracking energy atoms – in short, not around the chemistry periodic table – but around machines. Redesigning machines, in fact !

“India is very good at redesigning machines, though it may not originally design a particular one. We can adapt, reinvent, retro-fit and refashion an existing technology, somewhat like churning lassi in a washing machine. That is also innovation!” Dr Susmita Dasgupta, Joint Chief Economist, Joint Plant Committee, Ministry of Steel, tells Steel Insights.

In fact, delving into the memories of the 1950 and 60s will reveal that the technology with which India was manufacturing steel at that juncture was all derived. This was the era when India’s steel industry was taking shape along with the emergence of the country’s infrastructure developmental profile.

As observes Sushim Banerjee, Director General of the Institute for Steel Development & Growth (INSDAG), India was a late

entrant into the steel-making technology scenario. “From Bessemer’s technology in the 1860s till the Linz–Donawitz (LD) process, we in India just borrowed. The LD technology had been adopted by the Steel Authority of India’s Rourkela Steel Plant (RSP). The basic oxygen furnace (BOF) technology was taken from Russia and plants like Bhilai and Bokaro were set up based on it. Durgapur Steel Plant was, of course, set up using British technology,” recalls Banerjee.

But there was a reason why the steelmaking technology was primarily borrowed at this period in the country’s economic history. The overseas countries had the know-how in manufacturing cost-effective steel and India conveniently borrowed to successfully internalised the same. In 195060, when the steel industry was evolving in India, the technology thus was at par with that available internationally. Indigenisation at that juncture would have taken a lot of time, because fundamental research in steel takes a lot of time. India’s steel requirement was increasing and so one option open before the government was to allow imports of the entire volume but since this was not viable (would have led to copious foreign exchange outflow) the next best option was import of the technology instead. That’s how German and “Soviet” steel technologists came to India, stayed for a few years and imparted the technology to Indian steel mills.

The integrated route through the basic oxygen furnace (BOF) and huge blast furnaces (BF) came in from Russia, based on coal, iron ore along with limestone, dolomite and other fluxes, says Banerjee, recalling that the emphasis was on maximising productivity.

And the beauty of these technologies is their longevity – they are still relevant today!

A huge advantage of the Russian technology was that even if the blast furnace’s nameplate capacity was 3 million tons, it could actually go up to 4 mt. This

We do not yet know when the Saudi or Chinese crack codes will come to India but experts feel that Indian innovation in steel can happen not by cracking energy atoms – in short, not around the chemistry periodic table – but around machines. Redesigning machines, in fact!

hidden capacity of 0.5-1 mt came into play when the plants needed to expand but did not necessarily have to further invest in a new blast furnace. Instead, they could increase production in the existing capacity.

In the German LD technology, which was implemented at RSP, the advantage was that liquid steel production was very costeffective in terms of ingot rolling.

The Indian steel-makers opted for continuous casting in the 1960s, which enabled them to produce kiln steel with no impurities.

“Tata Steel was the front-runner in following the blast furnace technology.

Though later, in the 1990s and 2000s, we saw a lot of new technologies emerging, for instance, Corex, which was implemented in South Africa and at POSCO. There were one or two experimental plants but this technology was successfully followed at JSW and later on, in Essar,” reminded Banerjee.

Later, through 1985-1990, the government had given permission for setting up mini steel plants of 0.5-1 mt based on the Chinese mini blast technology. This was the period when the electric arc furnace (EAF) technology was brought into India where the units did not require iron ore but non-coking coal but the downside was that electricity consumption was very high.

“Selection of steel-making technology is determined based on techno-economic considerations. However, such technology should be conducive to effective and efficient utilisation of domestic resources with minimum damage to the environment.

While the leading integrated steel plants like JSW Steel, Tata Steel, SAIL, RINL, Essar Steel, NMDC Nagarnar, etc put maximum effort into adapting modern technology for production of steel, many small and medium-sized steel plants are not able to keep pace with such evolving technologies – mainly due to economic considerations and low production volumes,” observes Sanat Bhaumik, Director, Sales Marketing, Steel Plantech India.

A technology that originated in Iran but came to India was direct reduced iron (DRI), or sponge iron, which surfaced as a raw material around the same time as induction furnaces. Many of India’s major private sector entrepreneurs had set up sponge iron units. In fact, the pattern then was to set up a sponge iron unit, then a rolling mill and

Steel Insights, August 2017

7

Cover Story

Automotive steel, CRGO should be top priority

M

ost Indian steel majors are definitely lagging in the areas of R&D in developing high-end products which can compete in developed geographies such as Europe, Japan, the US and Korea. Where indigenous production of CRGO steel is concerned, there is still a long way to go. Extensive adaption of technologies like Finex and ITmk3 should be beneficial in iron ore because these processes can use fines and non-coking coal to produce liquid iron or high-grade iron nuggets, Sanat Bhaumik, Director, Sales Marketing, Steel Plantech India, tells Tamajit Pain.

Excerpts: How modern is our steel-making technology in relation to the western world in terms of the gamut – mining, iron ore beneficiation, steel manufacturing etc? Have we been able to keep pace with evolving technologies in the west or are we majorly lagging behind?

Selection of steel-making technology is determined based on techno-economic considerations. However, such technology should be conducive to effective and efficient utilisation of domestic resources with minimum damage to environment.

While the leading integrated steel plants like JSW Steel, Tata Steel, SAIL, RINL, Essar Steel, NMDC Nagarnar, etc put maximum effort in adopting modern technology for production of steel, many small and medium-sized steel plants are not able to keep pace with such evolving technologies, mainly due to economic considerations and low production volumes.

Where is India lagging behind in particular and in which areas do Indian steel majors and technology providers need to put stress on, going forward?

Most of the Indian steel majors are

18 Steel Insights, August 2017

definitely lagging in the areas of research and development (R&D) in developing high-end products which can compete in developed geographies such as Europe, Japan, the US and Korea.

In construction and engineering applications, Indian steel majors are gradually making a mark to establish their branded products but for high-end applications like automotive, electrical appliances and electrical steel (CRGO), consumers prefer to use imported steel.

Since growth prospect in demand does not look too bright, companies are stressing on cost optimisation. In that case, which areas should companies look at?

With cost of input raw materials increasing every day and due to high competition,

the selling price is not showing an upward trend. The only way to remain competitive will be to reduce cost of production which is possible if plants use the latest technology and automation. For production of hot rolled (HR) coils or long products, combining processes like casting and rolling will definitely reduce both capex and opex.

What sort of innovations is your company looking to bring to India and how costeffective are they likely to be?

Our company, JP Steel Plantech Co (SPCO) is a joint venture of 4 Japanese companies – JFE Engineering, Kawasaki Heavy Industries, Hitachi Zosen and Sumitomo Heavy Industries. SPCO makes full use of the experience and knowledge accumulated by each of these companies to promote its future development. Japan is an earthquake-prone country and designing of lighter structures through use of higher strength steel is their basic requirement.

Use of HSS, AHSS and UHSS in automobiles has become compulsory to meet the norms of fuel efficiency and reduce emission. But, in Japan, use of high strength steel is prevalent everywhere because they need to design earthquakeresistant buildings, bridges, flyovers, roads, etc. This drives companies like JFE Steel and Nippon Steel Sumitomo Metals to thrive for development and production of higher strength steels.

Use of robotics and other highly mechanised methods, on the other hand, could result in lesser manual involvement and lower employment level/generation. How can these two aspects be tackled?

In a country like India, impact on employment is definitely a major factor in the steel industry but many activities may

The only way to remain competitive will be to reduce cost of production which is possible if plants use the latest technology and automation. For production of hot rolled (HR) coils or long products, combining processes like casting and rolling will definitely reduce both capex and opex.

Cover Story

I

ndia has brought about technological revolution in induction arc furnaces and reinvented the production matrix in ferro alloys and yet these very areas are a neglected lot today, with China’s reinvention of the blast furnace adding to the steel sector’s woes. But, for steel-makers, getting to know their customer and not owning mines should be the way forward, Dr Susmita Dasgupta, Joint Chief Economist, Joint Plant Committee, Ministry of Steel, reveals to Madhumita Mookerji. Excerpts from an interview:

Integrating small steel players in production is way forward In India, in which areas did India lead in terms of steel technology?

Ironically, the player which invents the technology is the winner. In India, if we track the technology we had led in, we realise that those are the ones which had lifted the country from the 8th -largest to the 2nd-largest position in steel!

For example, in ferro alloys, the industry is struggling though it was at one point in time the world leader. It was a global exporter and under Chapter 72, ferro

alloy was the leading foreign earner in the past. Of course, this industry bought the technology from Elkem in Norway and Outokumpu in Finland for making ferro manganese. The ferro alloy industry is mainly dominated by private players in India.

It may be recalled that India, in the 1960s, was not manufacturing large volumes of stainless steel.

Then came the Ferro Alloys Corporation Limited (FACOR) and the

Steel Insights, August 2017

21

FEATURE

OMC targets higher iron ore production

Steel Insights Bureau

T

he state run Odisha Mining Corporation (OMC) has set a target to achieve highest ever production of 8 million ton and sale of iron ore during the ongoing fiscal.

Odisha Chief secretary A P Padhi reveiwing the activities of OMC said beating the global market slowdown, the Corporation could sell around 7.7 million tons of iron ore during 2016-17 against the total sale of 4.5 million tons the previous fiscal.

The sale of iron ore up to July 31 of the current year (2017-18) has crossed 2.14 million tons thereby recording an increase of 9 per cent over the same period of last year.

OMC has also started its business operation for sale of around 1 mt chromites during 2017-18 against 0.8 million ton of sale in the last financial year inspite of the drastic fall in ferro-chrome price.

The sale value of this production is expected to be around `2800 crore which also would be highest in comparison to last five years, he said.

OMC has scaled up its net profit to `846 crore during 2016-17 after paying all taxes. In the first quarter of the current fiscal, OMC has already paid `300 crore towards royalty, dividend and sales tax.

The corporation, Padhi said, has

constantly enhanced its production of iron ore over the last five years. In 2013-14 the total iron ore production was around 1.8 mt which increased to 3.1 mt during 2014-15, to 6 mt in 2015-16 and further to 6.4 mt during the year 2016-17.

He advised the corporation to enhance its production to 8 mt during the current year and directed the engineers and officers of the department to adopt innovative methods for scaling up mining operations and business transactions.

Target was set to produce around 3 mt of ore from Daitari zone, 2.6 mt from Gnadhmardan area and 2.4 mt from Kurmitar mines. Similarly, the target was set for enhancing the chromites production up to 1.16 million tons from the mines like south Kaliapani, Sukurangi and Bangur.

OMC managing director Vineel Krishna said that during 2015-16 the company paid `1415 crore to the state government towards royalty, DMF, NMET, dividend, sales tax and income tax. During the year 2016-17 OMC paid `1548 crore to the state under the same heads.

Padhi, who reviewed the activities of OMC at its corporate office, said the State PSU has constantly improved its production of iron ore in the last five years.

OMC has already set up Odisha Mineral Exploration Corporation Ltd (OMECL), a 100 per cent subsidiary, to take up

exploration activities in new mining sites.

Four manganese blocks in Balangir, four bauxite blocks in Rayagada, seven iron ore blocks in Khandadhar and one iron ore block in Thakurani-A have been identified for exploration through OMECL. Karnataka may seek higher cap on iron ore output

Meanwhile, Karnataka may seek higher cap for iron ore production as its mines department has supposedly said the steel industry is in a state of flux over the increasing demand for iron ore but no available production, industry sources said.

The government has asked the mines department to prepare a plan of action (POA) for the purpose of resolving the issues of the industry.

The state’s mines ministry feels there is a huge gap in the demand and supply of iron ore for the steel industry and said the government is trying to find a viable option to circle around the cap on production of iron ore which is placed by the Supreme Court-appointed central empowered committee (CEC).

The state is looking at a demand of no less than 54 mt by 2020. After 2011, there has been a huge drop in the production of iron ore that has created a lot of unfulfilled orders to the steel industries.

The state needs to get reprieve from the CEC which has placed a cap of 30 mt per year, sources said.

JSW Steel wins five iron ore mines in Karnataka

Meanwhile, JSW Steel has won five iron ore mines in Karnataka with an estimated reserve of 111 million tons. The steel major has also secured Moitra coking coal mine through an auction in Jharkhand. The mine has total extractable coal reserves of around 30 mt.

“The company has won five mines in the auctions of C-category iron ore mines in Karnataka. Two mines (0.71metric tons per annum (MTPA) capacity) will be operational by first half of 2017-18 and the remaining three will be operational by the end of the fiscal. All five mines are expected to produce approximately 4.7 MTPA iron ore,” JSW Steel said in its Annual Report 2016-17.

It is in the process of seeking all statutory clearances for commencement of mining operations. The company believes this will enhance its raw material security.

Steel Insights, August 2017

25

58 Steel Insights, August 2017

Tear along the dotted line

Tear along the dotted line