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Dear readers, The burden of slow economic growth is still weighing heavily on India’s steel consumption. The preliminary figures released by the steel ministry show that steel consumption expanded by just 0.7 percent during the April-February period of the current fiscal to 67.25 million tons (mt) over the same period last fiscal. The country, the fourth-largest steel producing destination in the world, also reported a 31.1 percent dip in imports at 5 mt, while finished steel production rose 4.1 percent to 77.32 mt. India’s economy grew below expectations at 4.6 percent in the first nine month (April-December) of 2013-14, indicating that the base level demand conditions continued to be weak during the current fiscal so far. However, surprisingly, for the third successive month, domestic primary steel-makers raised product prices for March. Analysts point out that if the March quarter is being compared with the December quarter then demand has seen some mark-up but when compared with last year’s March quarter, demand continues to remain weak. Also, prices are still lagging behind while input costs have increased tremendously. On the cost side, prices of iron ore sold through e-auctions have increased. Coal prices have decreased to some extent but their benefit could not be felt by steel mills because of exchange rate fluctuations.
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Meanwhile, banks and financial institutions are still cautious on lending to the infrastructure, steel, textile and pharmaceutical sectors. This is becoming a cause for concern for steel mills, which are planning to expand capacity or are facing difficulties in servicing the loan. Taking this as the cue, we at Steel Insights asked Malay Mukherjee, who had been instrumental in the creation of the largest steel company in the world, ArcelorMittal, as to what could be a solution to the alarming NPA situation in the steel industry. Mukherjee called for a pragmatic view on the subject. It’s not that entrepreneurs are not honest in their endeavours. He feels banks will tend to lose everything unless they offer the necessary concessions. Mukherjee said technology on low grade ore is a must-have for the steel industry and there is a need to enhance consumption intensity in the country. Steel Insights also interacted with Sushim Banerjee of INSDAG to get an idea of what could be the steel consumption trends in India. Monnet Ispat’s Amitabh S Mudgal talks about the current fluctuations in the sponge iron market, dearth of raw materials and the way forward for the DRI industry in this difficult situation. The edition also delves into Tata Steel’s recently-unveiled brand outlet “Tata Tiscon Experience Zone” and the outlook for the long products market. Happy reading!
(Rakesh Dubey) Steel Insights, March 2014
Contents 6 Ministry rejects panel proposal 10 Ministries, PMAI go full pelt against pellets export duty 24 Realty & construction biz pins hope on new fund flows 27 Auto cos brace for gradual acceleration in March 28 Excise duty cut may not jump-start auto industry 29 Balmer Lawrie’s steel barrel biz may grow 3% 31 Coking coal prices drop to record low 32 Met coke prices plunge 33 Steel in his soul 42 Tata Steel’s Q3 net profit at `503 crore 42 Usha Martin Q3 net profit down 59.42 percent 43 JSL posts Q3 net loss of `300.59 cr 43 JSPL’s Q3 PAT down 36% despite higher volumes 43 SAIL’s Q3 PAT grows 10.12% y-o-y 44 Linde India Q4 net up 22.39% 45 Traffic handling by major ports inches up 1.41% in Apr-Jan 46 Railways’ iron ore handling up 4.39% m-o-m in January 47 Global crude steel output up 0.46% in Jan m-o-m 48 Ferro alloy market shows volatile trends 50 India gearing up to tackle US duty on steel 51 Iron ore fines, Goa e-auction become talk points 52 Price data 53 Production data
14 | feature
Difficult to procure iron ore, coal at right prices: Monnet Ispat The sponge iron manufacturer is feeling impact of the slowdown.
20 | Feature
The ‘long’ story of TATA Tiscon Tata Steel unveils new brand outlet, TATA Tiscon Experience Zone.
34 | COVER STORY
‘Tech on low-grade ore usage a must-have for steel industry’ Man of steel Malay Mukherjee calls for a master plan for the steel sector’s development.
39 | INTERVIEW
‘Significant consumption growth will be tough’ INSDAG Director General Sushim Banerjee holds forth on ways to increase steel usage.
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Rajarshi Chattopadhyay Yes Tata Centre, 43 J L Nehru Road Kolkata 700071
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4 Steel Insights, March 2014
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Ministry rejects panel proposal Move dispels fears that Odisha would face production curbs similar to those in Karnataka and Goa.
Steel Insights Bureau
recent report, that the mines ministry has rejected suggestions by the M B Shah Commission to ban exports of iron ore and limit output from Odisha, hogged the limelight lately. This dispelled fears that Odisha, the country’s top iron ore producer, would face curbs similar to those imposed elsewhere. The bans in two other producing states, Karnataka and Goa, helped increase sales by miners in Australia, Brazil and South Africa to top market China, pushing India to ninth position last year in the list of the world’s key exporters of the steel-making raw material. The Shah Commission asked the ministry to consider the restrictions to ensure that future generations are “not required to import iron ore” and to crack down on illegal mining, after recommending the same steps for Karnataka and Goa. Bans in these two southern states, following the findings of the Shah Commission which was set up in 2010, have already slashed India’s exports of iron ore by about 85 percent, or 100 million tons,
6 Steel Insights, March 2014
in the past two years, pushing the country from its 2011 ranking of No. 3 among world exporters to China. “The central government is not in favour of a blanket ban on export of iron and manganese ores,” the mines ministry said in reply to suggestions of curbs on the eastern state of Odisha. “Fixing a cap on the production of iron ore, solely on the basis of the reserves and resources identified at this point in time, will not be in the interests of the country,” the ministry further said. Meanwhile, Odisha is yet to hear from the central government on a follow-up action to the Shah Commission report, industry officials said. The state mines department is of the view that Odisha had already taken action against illegal mining over the past years but did not expect any change in the state’s forecast of a five percent hike in iron ore production, to more than 65 million tons, in the year ending March 2014. In Karnataka, annual production remains capped at 30 million tons and exports are banned, although the mining ban, levied in 2011, was lifted by the Supreme Court in April last year.
The court has also set up a panel to suggest curbs on output in Goa as part of an appeal to lift a ban on mining since September 2012. The Goa state government expects mining to resume before monsoon in June, but this may not mean an immediate resumption in shipments from what used to be the top exporter of iron ore in India. Goa e-auctions continue
Meanwhile, the e-auctions in Goa continued. In the second round of bidding, around 12 bidders, mostly traders, had registered with the Director of Mining & Geology in Goa ahead of the sale. Most of the material sold in the first e-auction was destined for China, industry sources say. The lower grade Goan ore in the second e-auction, rated at 45.54-59 percent Fe, is less favoured for local steel production. The Goa government’s initiative to e-auction as much as 15 million tons of iron ore has helped reduce inventories among the region’s miners, however, hopes remain that Goa’s mining embargo will come to an end in the next few months. However, the ore purchased is at the venue. So far, buyers have not signed contracts with foreign purchasers due to procedural hurdles. Sources said traders would take some time to execute any exports to China. Experts said the ore from Goa had eightnine per cent silica, an impurity that has to be removed with the help of coke, a costly raw material. The ore mined in Karnataka and Jharkhand had 2-3 percent silica. It is said six percent higher silica content will require 2-3 percent more coke, leading to a proportionate increase in the cost of steel production. Mills are bearing high costs for transporting due to the high content of slag and moisture. “India lacks large blast furnaces, in which a high quantity can be blended for steel-making. All these problems will make manufacturing from Goan ore unviable,” said an industry source. JSW Steel, which didn’t participate in the first round, is expected to stay away in the future as well. Industry experts say low grade, transportation hurdles and the unavailability of rakes were some of the issues that might keep steel mills away from the auctions.
â€˜Tech on low-grade ore usage a musthave for steel industryâ€™
34 Steel Insights, March 2014
alay Mukherjee, the eminent technocrat and Group CEO of Zamin Ferrous Limited, recently came to Kolkata, to attend a seminar of retired officers of the Steel Authority of India Ltd (SAIL). Steel Insight’s Tamajit Pain caught up with Mukherjee, himself an ex-SAIL executive before he joined hands with Lakshmi Niwas Mittal and played a pivotal role in the latter’s ascendency. He noted that, in the present global steel scenario, the world is looking towards India, Africa and Latin America for providing direction and support. Mukherjee expressed fear that the huge gap between technological and managerial expertise required by the country in meeting its ambitious target needs to be bridged immediately. Bridging the gap between knowledge and expertise is required to achieve 300-350 mt of steel production by 2035. Mukherjee continually emphasised on the relevance of the national steel target and dearth of expertise in the industry. He called upon the steel sector to draft a master plan and create a roadmap for development, taking into consideration the shortage of rich raw materials, environmental restrictions and to present the same for the government’s consideration.
Excerpts: What do you think is the main problem being faced by the Indian steel industry currently? There is a gap between knowledge and expertise. India is targeting 300-350 million tons of steel production by 20252035 and inadequate attention is being paid to metallurgy as a stream. The huge gap between technological and managerial expertise required by the country in meeting its ambitious target needs to be bridged immediately. In the present global steel scenario, the world is looking towards India, Africa and Latin America for providing direction and support. The expertise of steel professionals from India has been fruitfully utilised in Mexico and several places across the world and they command respect across the globe. Steel professionals in India must make a master plan and create a roadmap for the development of the steel industry in India, taking into consideration the shortage of rich raw materials, environmental restrictions and present the same for the government’s consideration. What strategies do you think the industry needs to adopt immediately? The industry has to start work on the process of using low grade iron ore with the help of adequate technology. Efforts should
be undertaken to see how one can start using low grade ore. The tailings of NMDC, for example, have 58 percent iron content. It is estimated that 120-130 million tons (mt) of such tailings are lying unused. Somebody has to take up this matter and see that these tailings could be used in a proper way. Also, large blast furnaces are coming up now-adays. We have to attune ourselves to the new technologies to deliver proper results. Management styles also need to undergo drastic changes in these trying times. How far has India attuned itself to technology, specifically with regard to the use of low-grade ores? Today, we do not have the technology. Some of the prime steel mills are making some progress in this area but we still need do a lot in this area. It’s a ‘must have’ for the industry to grow. I have been associated with a research wherein a prototype of a blast furnace, which can use up to 45 percent iron content successfully to make steel, has been tested at a research institute in France. We have to look for such technologies for growth. Capacities are not coming up as planned by the policy makers. Also, there is lack of demand within the country. Where have we failed? For example, take the Rowghat project of
Bhilai Steel Plant. In June 1992, I signed the agreement. Things have not happened still today! It’s a combination of failures. At the time, when clearances were being thought of, we failed to realise that we need to carry the ore from the mine to the mill. Discussion for railway lines started only in 2003-04. Unless we address issues speedily and get clearances urgently we won’t get investors. It’s not an issue of a lack of investments. A strong policy has to be in place and there will be investors. I am glad that unscrupulous miners have been identified and the Supreme Court has laid down guidelines for iron ore mining. I am now very optimistic about the country’s raw material security. Once there is a definite policy in place, investments are bound to happen. China had been continually increasing its capacity. Of late, there had been curbs in production. Do you think China will be able to consume its odd 800 mt production every year? I cannot vouch for 800 million tons. Its main consumption is towards urbanisation. This country has a target of bringing 3031 million people under its urbanisation programme. Thus, 300-350 mt of the production goes in for urbanisation. And China will continue with this. I am told engineering exports make up 100150 mt of steel consumption. Thus, you can see this makes up around 500 mt of consumption of steel. The rest must be going to infrastructure development. Also, China has many steel-intensive industries. Thus, we can pretty well say 650-700 mt of steel production is very much viable for China. How can the government help the steel industry in India? There is no quick-fix solution to the problem we are in. Policy-makers have to understand that the country will suffer if no progress is made by the steel industry. There is no infrastructure without steel. India is thinking of doubling its power production capacity. But 80 percent of the power producing equipment is imported. Let me also say that the imports are not of high quality.
Steel Insights, March 2014
Malay Mukherjee - Man of steel
alay Mukherjee, 65, is a known face in the global steel industry. Born on January 26, 1948, Mukherjee did his B.Sc. in Physics (1964-67) from the Indian Institute of Technology, Kharagpur and a Masters in Mining from the USSR State Commission, Moscow. Mukherjee has completed an advanced management programme conducted by the Commonwealth Secretariat in joint association with the University of Ottawa, Canada and the Indian Institute of Management, Ahmedabad. He is associated with the Zamin Group, which owns iron ore mines, and ArcelorMittal USA LLC. Malay Mukherjee was the Chief Executive Officer, Essar Steel Business Group, from 2009-2011. Previously, he was a member of the Board of Directors of ArcelorMittal and COO of Mittal Steel. He was instrumental in the creation of the largest steel company in the world – Arcelor Mittal. He has been instrumental in creating a world-class benchmark in many areas of steel plant operations at Ispat Mexican, Mexico. Before joining the Mittal Group, Mukherjee was associated with Bhilai Steel Plant, SAIL. He joined as the Chief Materials Manager in 1986 and rose to the position of Executive Director (Works) by 1992. He joined Mittal Steel in 1992, when the company was producing 1 million tons
Why have the steel industry’s plans mismatched in India? What has China done right? Yes, the plans have mismatched. This is because there is no proper planning. I will give a small example from China. Around 10 years back, China, for producing 3 million tons, used to have manpower resources of 300,000. Recently, when I visited this country, I saw it is producing 15 million tons and the total employee
36 Steel Insights, March 2014
per annum. By the time of retirement in 2008, the combined steel empire of ArcelorMittal had grown to a capacity of 120 mt per annum. During the period, he also held many prominent positions, including that of the President and Chief Operating Officer with Mittal Steel (2004-06), Ispat International (2001-04), Ispat Europe (1999-01), Ispat Karmet (1996-99) and Ispat Mexicana (1993-96). Malay Mukherjee is a Member of the Academy of Natural Sciences and Life Member of the Indian Institute of Metals. He was awarded the letter of appreciation from the President of Kazakhstan for work rendered in Kazakhstan from 1995-1999. He also received the Certificate of Honor from the Governor of Karaganda, Kazakhstan for various achievements in social work. Mukherjee also helped in Lakshmi Niwas Mittal’s rapid rise to become the world’s largest steel-maker. He quit ArcelorMittal in 2009 despite a “beautiful friendship” with Mittal and joined Essar Steel, only to leave in 2011. It has been a long, eventful career for Mukherjee, who started off with public sector behemoth SAIL, and at 41 became its youngest executive director. His meteoric rise through the ranks in the 90s is still the topic of discussion at SAIL’s Bhilai Steel Plant. That’s also where he caught Mittal’s eye. Now in his fourth innings in the steel industry, Mukherjee is hoping to help Pramod Agarwal build
strength within the plant is around 5,000! The rest of the employees are being engaged in other activities like logistics. This is what transformation is all about. What is the way forward for the Indian steel industry? You should not see the scenario as the result of just one key issue. All the issues need to be looked at. If you solve the raw material situation it does not mean the industry will
his growing portfolio of iron ore assets in Brazil, Uruguay, Australia and Indonesia with total production volumes of 45 mt. Zamin Ferrous has a history in mining and has four key production, development and exploration assets—Valentines (Uruguay), and Greystone, Zamapa and Susa (Brazil). ‘Cold Steel - Lakshmi Mittal and the Multi-Billion Dollar Battle for a Global Empire’, a book by Tim Bouquet and Byron Ousey, that vividly captures Mittal’s acquisition of Luxembourg-based Arcelor, acknowledges Mukherjee’s key role in the Mittal’s steel empire. “While the Mittals went after Arcelor, Malay Mukherjee would be holding the fort,” the authors wrote. He was a mining engineer not from the metallurgy side but his insight and overall understanding of the steel business proved to be an asset to Mittal. After Mittal’s audacious takeover of Arcelor in June 2006, Mukherjee became a part of the reconstituted group management board and became head of mining at ArcelorMittal. In Cold Steel, the authors also alluded to Mukherje’s skill of turning around rust buckets. When he finally quit in 2009 to join Essar Steel, the legend of MM was already well established. Though based out of India, Mukherjee is clued on to India’s steel scenario as Steel Insights caught up with the legend on the sidelines of a programme by the SAIL Retired Officers’ Association.
start growing. Do we have the manpower to run the industry? We have to understand why the industry is not growing. It is not that it is not growing but we have not been able to increase the boundary of steel consumption. The per capita consumption in the rural areas is 12 kg when in the other areas of India it is over 60-100 kg. So there is a gap. That means, we have not been able to market steel products affectively. That is what needs to be worked on, to enhance the steel consumption intensity.
Tear along the dotted line
Tear along the dotted line
58 Steel Insights, March 2014