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EDITORIAL Dear readers, The latest world steel production figures for 2012 are out. India maintained its status as the fourth largest producer of steel in the world in 2012 after China, Japan and the United States. Tata Steel and SAIL bettered their rankings in the list of top 25 global producers of the metal in 2012 to stand at 11th and 24th fourth positions respectively. But the future does not look rosy. Indian steel demand grew 3.5 percent year-on-year in April 2013 and continues to remain weak. The demand growth is following the trajectory of 3.3 percent growth recorded in 2012-13. India consumed 5.6 million tons of steel during April 2013.
Indian steel imports are down sharply during April 2013. This is primarily on account of weaker domestic steel prices. Indian domestic prices were at a discount of 5-10 percent during the past 2-3 months and this has made imports less attractive.
While Indian steel prices have remained largely flat over the past 2-3 months, global steel prices have come down by 7-8 percent. It is expected that domestic steel prices will remain at marginal discount to the import parity, given that steel demand is unlikely to improve significantly in the near term. ‘While there was a weaker demand environment across the sectors, autos and capital goods were two key drags on domestic steel demand in 2012-13. While steel consumption in the auto sector was flat year-on-year, capital goods saw a demand drop of 8-10 percent as per our estimates. These two sectors contribute 20 percent of steel demand in India. Analysts expect Indian steel demand growth to remain under pressure at five percent in 2013-14 and start to pick up from 2014-15. At this juncture, Tata Steel also took a $1.6 billion non-cash impairment charge for the financial year that ended March 31, due to weak economic and market conditions in Europe, its main market. The company said the above underlying condition is expected to continue over the near and medium term, and has led to the downward revision of cash flow expectations underlying the valuation of the European business. Therefore, it needs to be seen how the steel mills cope with the situation and plan capacity additions in this sluggish environment. Tata Steel has recently implemented three million tons per annum (mtpa) brown-field expansion at Jamshedpur taking the plant capacity to 10 mtpa. SAIL is also in the process of hiking its capacity by five million tons to 19 mt in the current fiscal. Coming back to Steel Insights, we concentrated on the impact of the import duty of 2.5 percent on scrap imports imposed by the Ministry of Finance recently. Apart from a free-wheeling interview of Zain Nathani, vice-president of the Metal Recycling Association of India, the edition also delves into how domestic iron ore prices have de-linked from the behavioural trends being followed internationally.
Disclaimer: This document is for information purpose only. Certain information herein has been acquired from various external sources believed to be reliable. While we have taken reasonable care to compile this report, we in no way assume any responsibility for any error or discrepancy in regards to information contained herein. Readers are requested to make appropriate judgment without any prejudice or compulsion.
(Rakesh Dubey) Steel Insights, June 2013
Contents 2 8 European Commission imposes duty 29 Most steel consuming sectors still show sluggish growth 31 Auto sector slowdown to continue in H1 of FY14 33 Spot coking coal prices at rock bottom levels 34 India’s coking coal imports to rise 35 Ferro alloy market remain subdued 37 Induction furnace industry reels under duty, power costs 38 Posco hails SC ruling, but hurdles may still remain 39 Danieli Automation to launch ‘QDRIVE’ medium voltage drives 41 Danieli to supply PLTCM to Yieh Phui China 42 Tata Steel swings to `6,528.51 cr loss 43 JSW Steel Q4 net profit down 24% 45 JSPL Q4 net hit by higher interest costs 46 SAIL commissions projects worth `5,500 cr in FY13 48 Steel & allied sectors’ profit mostly dips in FY13 49 Texmaco Q4 net profit slides 69.72% to `8.80 crore 50 Go slow in India, speed up on overseas assets 51 Traffic handling by major ports down 6.21% in April 52 Railways ore handling falls 14% in April m-o-m 53 Macroeconomic indicators of India 54 Global crude steel production down 1.81% m-o-m in April
4 Steel Insights, June 2013
6 | Cover Story
Recyclers scrape to find solutions as duty bites Impact of 2.5 percent customs duty to be fully felt in 2013-14.
18 | Interview
“Govt would realise that imposing duty on scrap was a mistake” Once structured, domestic metal scrap industry can offer the economy ‘a mine on the earth’, Zain Nathani
24 | SPECIAL FEATURE Days of cheap iron ore are over
Domestic prices are unlikely to see sharp falls like international prices in the near term
27 | Feature
India remains 4th largest steel producer in the world India maintain status as the fourth largest producer of steel.
36 | Feature
Japan based foundries keen to set up base in eastern India MoUs are slated to be signed when a foundry delegation from Japan will visit India.
Recyclers scrape to find solutions as duty bites Tamajit Pain
he Union government recently imposed a 2.5 per cent import duty on various types of scraps â€“ melting steel, stainless steel and aluminium â€“ and has withdrawn exemption of the special additional customs duty (SAD) on brass scraps. The measures were taken through two different notifications by the Ministry of Finance (MoF), which did not give reasons for making these changes except that these were done in public interest. Besides, the government also revoked the exemption of SAD on brass scraps,
6 Steel Insights, June 2013
which means that such importers will now have to pay the existing SAD, levied at the rate of four per cent. "In exercise of the powers conferred by sub-Section (1) of Section 25 of the Customs Act, 1962, the central government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments...," said the notification, while imposing the 2.5 per cent import duty on steel and aluminium scraps. Since 2003, the import duty on melting steel scraps was nil, while on stainless steel
scraps, the duty was reduced to zero in Budget 2011. The decision, taken at a time when the steel industry is undergoing a sluggish phase, has taken the metals recycling industry by surprise. According to industry data, India imports about seven million tons (mt) of melting steel scraps and about 1-2 mt of stainless steel scraps. However, no such data could be secured for aluminium or brass scraps as these are scattered and belong to the medium and small scale industries.
Steel Insights is a monthly magazine providing he widest coverage of the Indian steel industry. From iron to finished steel, technology for...