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Contents 6 Iron ore exports to go up as Goa prepares for e-auction 14 Sponge iron expects demand sheen to return 16 Will green signal start Posco’s project 18 Two-wheeler segment finds the going slightly easy 20 Construction industry outlook negative for 2014 22 Negative sentiment, sticky prices put pressure on realty sector 24 Coking coal continues ‘slide’ show in January 26 Flat steel producers play on low import, input costs 28 Long steel, semi-finished demand remain volatile 29 Tata Steel launches 2 branded ferro alloys 39 RSP doubles production capacity with slab caster from SMS Siemag 40 Siemens continuous caster starts operation at JSPL 52 JSW Steel Q3 net drops 47.3% 53 RINL sales increase 12% in January y-o-y 53 Outokumpu bags 700-tons order in India 53 JSPL Angul plant construction on track 54 Traffic handling by major ports up 1.91% in April-December 55 Railways’ iron ore handling up 4.34% m-o-m in Dec 56 Global crude steel output up 1.43% in December m-o-m 57 India remains 4th largest steel producer in 2013 58 Price data

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10  |  Special feature Iron ore scarcity still hunts

Analysts feel production to decline marginally in FY14 but rose 10-12% in FY15.

30  |  COVER STORY

Indian pellet-makers’ palette of woes Government’s imposition of 5% export duty on pellet has divided the steel industry.

41  |  INTERVIEW

‘Our focus is innovative conveying systems for mining applications’ Bevcon has drawn a clear strategy for next 5 years for high capacity conveying space.

46  |  INTERVIEW

Vikrant forges a secure future Vikrant Forge bullish on Indian market and feel it will grow at a faster clip in next two years.

50  |  INTERVIEW

‘Foundry needs a parent in the government’ IIF working for bringing industry under ambit of Ministry of Small & Medium Enterprises (MSME).


SPECIAL feature

Iron ore exports to go up as Goa prepares for e-auction Steel Insights Bureau

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ndia’s iron ore exports are set to increase as Goa prepares to auction unsold stocks, following the easing of a ban on sales of the steel-making raw material. “Bids will be invited for about 15 million tons of inventory that will be offered through online sales starting next month,” Goa’s Mines Director Prasanna Acharya said. “The buyers will be allowed to ship the ore overseas or sell locally,” he said. The Supreme Court, in November, had allowed sales of mined ore in Goa, while continuing the ban on extraction because of environmental concerns. Goa was the nation’s biggest iron ore exporter before the ban was imposed in September 2012.

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Goa’s mines department has sought applications from prospective bidders and it is expected to have the first auction in February, Acharya said. There is no timeline for completing the sale of the entire quantity. The revival in Goa’s exports comes as iron ore shipments from India are poised to tumble for a fourth year to less than 10 million tons in the year ending March from 18 million tons a year earlier. Government curbs, mining bans and higher export taxes are prompting buyers to secure the raw material from other producers. Sesa Sterlite Ltd, which owns its biggest iron ore mine in Goa, and rival miners mainly export their low-grade produce to China as steel-makers in India mostly lack the ability to process poor quality ore.

Steel firms register

Over a dozen steel firms, including Jindal Steel & Power (JSPL), Bhushan Steel and JSW Steel, have registered themselves with the Indian Bureau of Mines as the Goa government is all set to start the process of e-auctioning of around 15 million ton of iron ore lying idle in its stockyards. Goa’s ore under auction could support 7million tons of steel capacity annually. The Supreme Court appointed a threemember monitoring committee to oversee the e-auctioning process and said that the proceeds from the sale will be kept in a separate fixed deposit account by the Goa government till the apex court finally decides on the matter. However, the base price will be decided on the basis of iron ore grades. The auction will take place along similar lines of Karnataka. Goa’s ore has more than 55+Fe content, industry sources said. The domestic steel mills have traditionally preferred ores with higher iron content but are now also developing technology to use the low-grade ore.


SPECIAL FEATURE Indian steel-makers are raising their iron ore beneficiation and pelletisation capacities as they seek to expand the range of ore that their plants can handle. India has about 36 iron ore pelletisation plants operated by steel companies as well as standalone raw material companies such as KIOCL (formerly Kudremukh Iron Ore Company) with a combined capacity of around 62 million tons. Goa used to be India’s top exporting state, with sales of more than 40 million tons a year, mostly to China. But it has not produced or exported any ore since the Supreme Court imposed a ban to curb illegal mining. Recently, the government imposed a five percent tax on the export of iron ore pellets that may put brakes on the expansion plans of the country’s pelletisation industry, worth around `50,000 crore. India’s exports languish

Meanwhile, India’s iron ore exports have gone down by 28.16 percent during AprilDecember of the current fiscal to 11.17 million tons as gloom continues to hang over the sector due to the present regulatory scenario, according to the mineral industries body, the Federation of Indian Mineral Industries (FIMI). India, once the third-largest exporter of iron ore, had exported 15.55 million tons of the mineral in the corresponding period of last fiscal, according to FIMI data. “We expect the situation to continue as long as the government policy does not change. There is total gloom in the sector… no ray of hope,” FIMI Secretary General R K Sharma said. He added that this year’s iron ore exports are expected to come down by 20 percent to about 14-15 million tons from the levels of 18.37 million tons in 2012-13. Paradip (4 million tons), Vizag (3.84 million tons) and Haldia (1.58 million tons) are the major ports from where exports of the minerals were taking place, FIMI data showed. Indian iron ore exports have been badly hurt badly in the last few years due to mining bans in Goa and Karnataka, which led to a drastic fall in domestic production as well.

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Sesa Sterlite to resume sales Steel Insights Bureau Sesa Sterlite Ltd, which restarted its iron ore mines in southern India last month, will shortly resume sales of the steel-making ingredient from the region after a halt of more than two years. The company plans to start auctioning iron ore mined in the state of Karnataka shortly, officials said. The company, which was the biggest Indian exporter of the commodity until the court-ordered ban, may sell about 100,000 tons of ore in its first offering, industry sources said. Sesa Sterlite, controlled by billionaire Anil Agarwal, saw revenues from its iron ore business collapse after the nation’s courts ordered mining bans in Goa in October 2012 and Karnataka in August 2011, as part of probes into illegal mining and environmental degradation. Iron ore mining accounted for 98 percent of earnings at Sesa Goa Ltd, which, in August, merged with sister company and zinc, copper and aluminium producer Sterlite Industries (India) Ltd to form Sesa Sterlite. Mining in Goa is still suspended although companies have been allowed to sell inventory. The resumption in Karnataka will help ease shortages faced by local steelmakers. The company, owned by Londonlisted Vedanta Resources plc, has approval to produce as much as 2.29 million tons (mt) of iron ore a year, industry sources said, adding that output in the first three months of 2014 may reach 1.2 mt-1.5 mt from the restarted Karnataka mines.

Increase in the export duty to 30 percent on both types of iron ore, lumps and fines, in December 2012, had also impacted the sector. At present, low grade iron ore (or fines) are being exported from Odisha, Jharkhand, Rajasthan and Madhya Pradesh as mining is still banned in Goa. Export of the mineral is not permitted from Karnataka at present. A few days back, the Goa government had issued a notification to sell about 15 million tons of iron ore through exports, as per a Supreme Court order. Industry is estimating that India’s total iron ore production in the present fiscal will be around 130-140 million tons, almost the same as last year. Rusty global outlook

Iron ore may have outperformed other commodities last year, but the price of the metal used in making steel looks set to decline this year as China’s growth slows. China’s continued heavy spending on subways, bridges and other infrastructure kept demand for iron ore high last year. Exports to China from Port Hedland, Australia’s main shipment point for the metal, increased by 34 percent to 256 million tons. Overall, shipments of iron ore – including to Japan and South Korea – rose 26 percent to 318 million tons. Exports of the commodity reached record levels in December. Many analysts and traders have been surprised by the way iron-ore prices, buoyed by record Chinese demand, held up throughout 2013. Prices of other industrial commodities, such as nickel and coal, have tumbled, but iron ore has largely remained above $130 a ton. Although prices are still about a third lower than their all-time peak three years ago, they remain well above the sub-$90a-ton level they sank to in 2012 as China’s economy stuttered. But a less bright outlook for China’s economy this year, coupled with new ironore mines going online in Australia, is threatening to drag down prices this year. A decline would dampen the outlook for companies at a time when exports from India may see some uptick with the auctioning of stockpiles in Goa. 


Cover Story

Indian pellet-makers’ palette of woes Tamajit Pain

The government’s recent imposition of the 5% export duty on iron ore pellets has divided the steel industry.

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Cover Story

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he pellet industry, which had been slowly taking baby steps to bring in complete transformation of the steelmaking process in India, is in the limelight but for all the wrong reasons. The Indian government has recently imposed a five percent tax on the export of iron ore pellets in response to demand from the domestic steel industry. The Indian steel industry made representations to the government that a nil rate of duty on exports of iron ore pellets and a 30 percent tax on the export of iron-ore fines had led to a situation in which pellet exports were rising sharply through diversion of fines, leading to a shortage of raw material at the local steel mills. The differential rate of duty on ironore fines and pellets was showing divergent trends in export of the critical raw material. Taking advantage of a nil rate of export duty, iron ore pellet shipments from the country increased 111 percent to 435,000 tons during April-October, 2013, compared to 40,000 tons during the corresponding period of the previous financial year, with the mining industry expecting that total pellet exports during 2013-14 would touch a whopping 800,000 tons or so. During April-October, iron ore exports were estimated at 8.43 million tons, down 43.5 percent over the corresponding period of the previous year. India has about 36 iron ore pelletisation plants operated by steel companies, as well as standalone raw material companies like KIOCL (formerly Kudremukh Iron Ore Company Limited), with a combined capacity of around 63 million tons. The Indian government’s move came after the Associated Chamber of Commerce and Industry (ASSOCHAM), an industry representative body, wrote to Finance Minister P Chidambaram, pointing out the sharp rise in iron ore pellet exports, owing to the nil rate of tax, which had accentuated the shortage in the raw material faced by domestic steel companies at a time when several iron ore mines, in provinces such as Karnataka and Goa, continued to remain closed following investigations into illegal mining.

Decision a setback

The decision to impose a five percent export duty on iron ore pellets is a setback for the

The demand for pellets has increased from steel mills, resulting in the material’s prices rising uninterruptedly. This is likely to continue, on increased steel production. industry, which is known for upgrading the low grade ore into usable raw material, said pellet producers and pro-mining lobby bodies. “It is a huge setback for the pellet industry because, as pellet producers, we have to pay excise duty and now the export duty comes as an additional burden,” said N D Rao, Managing Director of Brahmani River Pellet Ltd (BRPL), a unit of Stemcor that has a 4-million-tons-per-annum (mtpa) pellet plant in Odisha. Taking advantage of the government’s incentives on import of pellet-making equipment and nil export duty, large capacities were added in the last two years, taking the total production capacity in the country to nearly 60 million ton from 28 million ton in 2010-11. Till 2012-13, exports of iron ore pellets were negligible. “However, in April-November, 2013, exports of iron ore pellets have risen sharply, causing an apprehension about shortage of iron ore in the country,” the finance ministry said in a statement. According to trade estimates, so far, nearly one million tons of pellets have been exported, which is less than 1.5 percent of the total installed capacity. KIOCL tops the list as the lead exporter, followed by Jindal Steel & Power Ltd (JSPL). Essar Steel and BRPL also export pellets in limited quantities to South East Asian nations. The mining lobby said the decision is skewed towards the steel-maker’s lobby. “The recent decision to impose the export duty on iron ore pellets shows that the Union government is influenced by the steel-makers’ lobby. This will hurt future investments in pelletisation capacity,” said R K Sharma, Secretary-General of the Federation of Indian Mineral Industries (FIMI). Pellet producers said, since many large steel-makers have their own pellet plants and others do not have the facility to use domestically available blast furnace grade

pellets, it will affect the pellet manufacturers and lead to a curb on productions. “Pellet manufacturers strongly feel the Union government is playing into the hands of a handful of steel-makers. We urge the government to reconsider its decision and exempt pellets from the export duty,” said S K Chatterjee, Secretary, Pellet Manufacturers’ Association of India (PMAI), in a statement. Pellet-makers talk tough

Some iron ore pellet producers said they may be compelled to shut operations if the government does not roll back the five percent duty imposed on exports of iron ore pellets. The shutdown would render futile nearly `35,000 crore of investments. While recommending the duty, the steel ministry had argued that iron ore was being exported in the garb of pellets, which virtually amounted to exporting the scarce mineral. It seems, the finance ministry imposed the duty despite objections raised by the commerce and industry ministry. In a letter dated January 7, the commerce ministry wrote to the revenue secretary, saying it does not support the export duty because pellet is a value-added product and it has been the ministry’s stance that there should be no export duty on the same. However, the commerce ministry replied that, out of an installed capacity of over 60 mt, barely 25 mt is domestically consumed. The lack of low domestic demand has, in fact, compelled producers to cut down their capacity utilisation to less than 50 percent. Leading pellet producers have told the finance ministry that while most plants would find it unviable to operate, bigger players may have to rethink on expanding the capacities unless the government addresses their concerns. Firdose Vandrevala, Executive ViceChairman of Essar Steel, said: “The government hastily announced the five percent export duty on pellets, despite the fact that entrepreneurs have invested thousands

Steel Insights, February 2014

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Cover Story of crores of rupees to create capacities and expand their operations. This action deepens investor’s fears of a stable policy. Flip-flop policies can turn investments sour overnight.” Malay Chatterjee, Chairman of the state-run Kudremukh Iron Ore, said his pellet project in Karnataka has a capacity of 3.5 mt and is a 100 percent export-oriented unit, which recently commenced overseas sales. For my company, the situation is even more worrisome. “My unit can only survive on exports. The duty will hugely impact commercial viability of our operations,” he added. Ravi Uppal, CEO of JSPL Group, said: “The move exhibits lack of consistency in government policies. It is a decision without

any rationale, which would do colossal damage to the pellet industry, which has invested over `30,000 crore during the last three years.” Industry experts said a little over one million tons of pellets have been exported till January this fiscal against the installed capacity of 60 million tons. “I fail to understand what motivated the steel ministry to recommend the duty and how much revenue would the government gain in imposing the same when exports are abysmally low,” said a pelletmaker on condition of anonymity. However, whatever be the reason or impact of the duty on the pellet-making industry in India, it becomes imperative to examine the need for growth of the pellet-

Five iron ore zones with respect to occurrences ♦♦ Zone A: Odisha and Jharkhand ♦♦ Zone B: Chhattisgarh and Maharashtra ♦♦ Zone C: Karnataka ♦♦ Zone D: Goa and Redi ♦♦ Zone E: Kudremukh, Bababudhan and Kudachadri in Karnataka

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making capacity in the country as India embarks on increasing its steel-making capacity to meet future demand. Pelletisation: A necessity

As India progresses towards higher levels of growth and more emphasis is being put on the development of the infrastructure and manufacturing sectors, the iron and steel industry is poised to see a rapid change in the years to come. The demand for steel, which had seen a slowdown in recent times to 4-5 percent owing to the economic slowdown, is expected to grow 8-10 percent once the economic cycle rebounds and the government tries to push forward with its stalled projects. The domestic steel production capacity is expected to grow from the present level of 96 million tons to 150 million tons by 201617. Alternative iron-making processes for steel production may change the pattern of use of material inputs and cause a significant shift in the share of lumps and agglomerated ore, ie, sinter and pellets. As fines constitute around 50 percent of total iron ore produced, pelletisation is the need of the hour. Iron ore – the basic raw material

Iron ore forms the basic raw material for the iron and steel industry. India has large reserves of good quality iron ore which can meet the growing demands of the domestic iron and steel industry and can also sustain considerable external trade. The United States Geological Survey (USGS) has estimated that world resources are estimated to exceed 800 billion tons of crude ore containing more than 230 billion tons of iron. India possesses haematite resources of 11,426 million tons of which 6,025 million tons are reserves and 5,401 million tons are remaining resources. About 2,823 million tons (25 percent) are medium grade lumpy ore resources while 915 million tons (eight percent) are high grade lumpy ore. Out of the fines resources, about 2,507 million tons (22 percent) are medium grade ore, 39 million tons (one percent) are high grade ore and 17 million tons (one percent) resources are of blue dust variety. The remaining are low grade, unclassified resources of lumps and fines or high, medium, low or unclassified grades of lumps and fines mixed etc. Major resources of haematite iron ore are located in Odisha (3,789 million tons or 33 percent), Jharkhand (3,044 million tons or 27


Tear along the dotted line

Tear along the dotted line

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Steel Insights Feb 14