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EDITORIAL Chief Editor Rakesh Dubey, Tel: +91 91633 48159, E-mail: rakesh.dubey@mjunction.in Executive Editor Tamajit Pain, Tel: +91 91633 48065, E-mail: tamajit.pain@mjunction.in Editorial Board Dr Abhirup Sirkar, Professor Economics, Indian Statistial Institute (ISI) Dr Amit Chatterjee, Consultant and former Advisor to MD, Tata Steel Ltd Jayant Acharya, Director (Commercial & Marketing), JSW Steel Ltd K Ranganath, CMD, KIOCL Vikram Amin, Executive Director (Strategy and Business Development), Essar Steel Ltd Advertising Soumitra Bose, Tel: +91 92310 00232, Email: soumitra.bose@mjunction.in Sumit Jalan, Tel: +91 91633 48243, Email: sumit.jalan@mjunction.in Subscription Rachita Das, Tel: +91 91633 48045, Email: rachita.das@mjunction.in Toll Free No.: 1800 4192 000 1. Press 8 for publication Email: publication.tbss@mjunction.in Design Debal Ray, Sobhan Jas For suggestions, feedback and queries, please write to steelinsights@mjunction.in

Dear Readers,

In

line with expectations, global steel output slipped in June as the industry grappled with weak demand and falling prices. Crude steel production declined by 0.1 percent to 128 million tons (mt) during the same month over a year ago, Worldsteel data showed. Top producer China’s crude steel output for June rose 0.6 percent yearon-year to 60.2 mt, which is also a slower growth level compared with previous months. Back home, India’s crude steel production in June 2012 was up 2 percent year-on-year at 6.38 mt and real consumption of finished steel was apparently around 6.50 mt, according to data available from Joint Parliamentary Committee of the steel ministry. In view of this lowly performance, one cannot expect much improvement in monthly output during July-August, or for that matter in the September quarter. Recently, a Fitch report said the outlook for domestic steel producers will remain stable in the second half of the current financial year. Although the demand growth may reach 6-7 percent (with higher activity after the monsoons), the rating agency said the margins would be under pressure due to rise in production cost. “Profit margins will remain under pressure in H2, given persistent increases in production cost and producers’ limited ability to pass on higher costs due to subdued demand from enduser industries,” it said, adding pressure will be greater on non-integrated steel producers.

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The current market scenario (and the prolonged demand slump in the world market) sometimes casts doubts over the ambitious long term projections for steel in the country. At this juncture, we at Steel Insights have tried to examine what would be India’s steel demand and producing capacity at the end of the current decade (2020). As of 2011-12, the terminal year of the Eleventh Plan, crude steel production capacity was around 90 mt, while production was at 73.9 mt. As the Eleventh Plan came to a close, the government formed a working group on steel to take stock of the situation and set targets for the new Plan period. Based on the assessment of past trend and the current ongoing projects, both in greenfield and brownfield, the Working Group projected that the crude steel capacity in the country is likely to be 140 mt by 2016-17 and has the potential to reach 149 mt if all requirements are adequately met. However, the much hyped 200 mt capacity by 2020 seems to be a distant dream, at least in view of the current market scenario. This edition also captures the views of Essar Steel CEO & MD Dilip Oommen about the steel capacity in India. The technology section revolves around the pathbreaking technology for flat steel production from Danieli. Happy reading,

Copyright: All rights reserved. No part of Steel Insights can be reproduced or copied in any form or by any means without the prior permission of mjunction services limited. Please inform us if any copyright has been inadvertently infringed. 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, August 2012

3


Contents

6  |  Cover Story

32 Mixed trend in Q1 performance 38 Tata Steel rides high on Indian

How real is the 200 mt figure?

operations

The much publicized capacity addition target for 2020 seems difficult to reach, given the ground realities

39 JSPL terminates Bolivian contract 40 SAIL, Kobe ink final pact 46 Stamp Duty Act revision to iron ore miners 48 Spot coking coal price crash in July 49 Ferro Alloy prices remain weak 50 Maruti crisis casts shadow on auto sector growth

24  |  Interview

Next phase of expansions will all be greenfield: Essar Raw material linkage, land acquisition, regulatory delays are key bottlenecks to growth

28  |  Corporate

52 Low demand, falling input costs may pull down steel prices

JSW Steel FY12 saleable steel output rises 28% y-o-y

54 Iron ore handling by major ports down 33.3% in April-June 55 Railways commodity freight revenue down m-o-m 56 Macro Economic indicators of India 58 Global crude steel production down 2.04% in June 60 International flat & long product markets 64 Domestic flat & long markets 66 Domestic raw materials market 67 Production data 68 Ferro Alloys & Metals price trend 69 Iron ore export data for June 2012

4 Steel Insights, August 2012

The company aims to capture a substantial share of value added steel

42  |  TECHNOLOGY

Pathbreaking technology for flat steel production DWU is positioned to provide right selection of rolling & processing plants industry.

47  |  FEATURE

India’s Q1 steel imports up 43%, China tops list Chinese import was up 75% during the quarter


Cover Story

How real is the 200-mt figure? T

he Indian steel industry has entered into a new development stage from 2007-08, riding high on the resurgent economy and rising demand for steel. Rapid increase in production has resulted in India becoming the fourth largest producer of crude steel and the largest producer of sponge iron or DRI in the world. As of 2011-12, the terminal year of the Eleventh Plan, crude steel production capacity was around 90 mt, while production was at 73.9 mt, according to steel ministry sources and Steel Insights research. As the Eleventh Plan came close to expiration, the government formed a Working Group on steel to take stock of the situation and set targets for the new Plan period.

6 Steel Insights, August 2012

The vision for a developed India@2020 includes a strong capacity addition in the steel sector. But just how strong is strong? Well, the magic number is 200 million tons (mt), a figure more than double the current capacity of 90 mt. Now, where has this number come from? Is it an ornamental figure or is it based on sound calculations? And whose target is this? Is it achievable or is it merely wishful thinking? Tamajit Pain does an in-depth analysis of the ground realities to find out if India is being overambitious.

A Working Group was formed which studied the National Steel Policy 2005 that had envisaged a steel production of 110 mt by 2019-20. The Working Group felt that a lot has changed since the release of the National Steel Policy (2005) and it needs to be re-worked keeping in mind the rapid developments in the domestic steel industry (both on the supply and demand sides) as well as the stable growth of the Indian economy. Meanwhile, in line with the change in economic circumstances over the years, the steel ministry had been aiming at a production capacity of 200 mt by 2020 to meet the growing demand for steel for infrastructure development in the country. The Working Group was given

the mandate to suggest ways for multifold growth of the sector to meet the country’s requirement. After thorough deliberations with the group members, which included people from different ministries, steel companies and industry associations, the Working Group came out with a report on estimations for the Twelfth Plan period. As per the report, there are a number of factors that could raise per capita steel consumption in the country, currently estimated at 55 kg (provisional). These include among others, an estimated infrastructure investment of nearly a trillion dollars, a projected growth of manufacturing from current 8 percent to 11-12 percent, increase in urban


Cover Story the next five years, Estimated requirement of raw materials and other demand will grow inputs by 2016-17 at a considerably Additional Estimated Estimated higher annual Input Materials Unit Consumption Consumption Requirement average rate of by 2016-17 2016-17 2011-12 10.3 percent Coking Coal Million tons 43.2 90.2 47.0 as compared to around 8.1 percent Non-coking Coal Million tons 35.3 28.4 growth achieved Iron Ore Million tons 115.0 206.2 91.2 during the last two Natural Gas MMSCMD 7.2 13.541 6.341 decades (1991-92 to 2010-11). Ferro Alloys in ‘000 tons 2152 3673 1521 Along with Refractories Million tons 1.29 1.97 0.69 domestic demand, Source: Steel working group report India may also tap the demand from in mind, the Working Group estimates export market. were worked out based on historical The report said that the country has trends as well as an objective assessment the potential, necessary resources and dependent upon the following factors: capabilities to become a global supplier of quality steel. There exist ample • Actual extent of land already market opportunities in the neighbouring acquired for the new units; regions of Asia, Africa and the Middle • Availability of investible funds with East. The policy framework, while the respective enterprises to support according top priority to meet domestic the planned increase in existing demand, should also take into account capacity; the large export possibilities, they felt. Availability of infrastructural network • Also, the domestic production would at the project site; and depend on demand for imported steel. External factors Availability of key raw material • In the last 20 years, import of steel In its report the Working Group said linkages. as a percentage of total consumption the demand for steel has been worked in India, has varied between a high of out on the basis of the observed Raw materials over 13 percent in 2007-08 and a low relationship between steel consumption of 4.8 percent in 1998-99 and 2001-02. Based on projected production of crude and selected macroeconomic variables Import of steel during the Twelfth Plan steel, total and additional requirement under four scenarios of GDP growth (i.e. is expected to be around 5 mtpa. of raw materials have been worked of 8 percent, 8.5 percent, 9 percent and A strong steel industry can emerge out according to process routes and 9.5 percent) by 2016-17. only if it can take on international average norms of consumption. In the most likely growth scenario competition and develop overseas However, in view of the fact that there i.e. 9 percent GDP growth, the demand markets. Keeping this in view, net exists large scope of improvement in for steel works out to be 113.3 million exports of 2 mt has been assumed in operational efficiencies and also due tons (mt) by 2016-17. It is likely that in the Twelfth Plan. to the fact that there are possibilities Estimated demand and capacity creation of changes in technology adopted, the Ground realities (million tons) estimates of input requirements are population to 600 million by 2030 from the current level of 400 million, and emergence of the rural market for steel (currently consuming around 10 kg per annum) buoyed by projects like Bharat Nirman, Pradhan Mantri Gram Sadak Yojana, Rajiv Gandhi Awaas Yojana among others. To understand the future trend, the Group also needed to be see how the sector performed in the Eleventh Plan. The National Steel Policy had set a production target of 110 mt to be achieved by 2019-20. But it was estimated that the Indian steel industry may achieve double digit growth in consumption and surpass this production target by 2016-17 well ahead of the target date. Based on the assessment of past trends and the current ongoing projects, both in greenfield and brownfield, the Working Group projected that the crude steel capacity in the county is likely to be 140 mt by 2016-17 and has the potential to reach 149 mt if all requirements are adequately met.

S.No.

Item

2010-11

2016-17

1.

Demand for Carbon Steel

62.14

108.3

2.

Demand for Alloy/Stainless Steel

3.47

5.0

3.

Total Domestic Demand for Steel

4.

Net Export

5.

Production (net of double counting)

6.

Category-Wise Consumption (Carbon Steel)

65.61

113.3

(-)3.34

2.0

62.27

115.3

Total Long

31.16

54.3

Total Flat

30.99

54.0

Total Carbon Steel

62.14

108.3

-

142.3

78.0

149.0

7.

Total Requirement of crude steel

8.

Likely Capacity of Crude Steel

Source: Steel Working Group report

8 Steel Insights, August 2012

However, industry sources felt it is difficult to forecast capacity creation, especially in the private sector because of the deregulated environment. Also, capacity creation is sensitive to u n f o l d i n g domestic as well as global market conditions. Keeping these

only indicative. According to the Working Group report, India is endowed with abundant iron ore resources, the basic input for steel making. Of late, large scale exports of iron ore have raised concerns about future availability of iron ore resources to meet the fast rising domestic steel demand. Large quantities of iron ore fines are exported due to mismatch between domestic production and consumption and also lack of adequate sintering and pelletisation facilities for steel making. The steel industry confronts the problem of depletion of high grade ore deposits and lack of domestic technological capabilities


Cover Story to process low grade iron ores. In the larger national interest of conservation of natural resources and environment, efforts are being made to preserve and utilise the precious iron ore fines for domestic production of steel and at the same time the ministry has taken measures to discourage export by imposing higher tariffs and special levies etc. The domestic availability of coking coal, a critical raw material required by steel industry is limited and therefore the Indian steel industry has to depend heavily on imported coking coal to meet its needs. Currently, domestic steel makers meet 70 percent of their coking coal requirement through imports. The quantum of imports may go up significantly in the Twelfth Plan as steel production in a large number of new projects is likely to be through the BF-BOF route. To ensure raw material security and minimise the impact of volatility in coal prices, it is desirable to acquire overseas coking coal assets. International Coal Ventures Limited (ICVL), a joint venture company promoted by SAIL in 2008-09 and consisting of RINL, NMDC, CIL and NTPC to achieve the above objective has not made much progress so far but it is imperative to make this venture more effective. In view of the limited availability of coking coal in the global market and the fact that its supply is controlled by a few large companies, it will be extremely important to increase the domestic production of coking coal and upgrade its quality to meet the requirements of steel making. Technologies which require less coking coal and lower grades of it will need to be encouraged. Non-coking coal used for production of sponge iron is also increasingly becoming scarce in the country. With the demand for non-coking coal from priority sectors like power and fertilisers going up further, its availability for steel making is likely to be limited during the Twelfth Plan. While sponge iron producers may opt for import of coal, the economic viability of this sector may be under pressure due to higher prices of imported coal. Moreover, the gas based DRI units face restricted supply of CNG, largely due to priority allocation of gas to power and fertiliser sectors. Supply of CNG to this sector is a major concern for its growth and these units

10 Steel Insights, August 2012

may have to depend more on imported source of fuel supply. Many existing and new producers propose to create additional capacity manifold under gas based route in Twelfth Plan period. Infrastructure The Working Group also noted that development and growth of Infrastructure sector is critical for rapid growth of domestic steel industry in the country. The steel industry is a major user of infrastructural facilities especially of Railways, roads, power and ports. Besides, the competitiveness of the domestic steel industry depends heavily on the expansion and provision of efficient infrastructural facilities. As per the Working Group projections, the steel production in the country will nearly double within the next five years. This requires rapid growth of railways, roads, ports and power facilities. The existing infrastructural facilities are not adequate. The domestic steel industry meets 70 percent of its coking coal requirement from imported sources and if the same trend is maintained, nearly 50 mt of coking coal will have to be imported by 2016-17. There is urgent need for expansion of port capacity to handle the raw materials and finished goods of steel sector. The steel plants which are likely to come on

stream in the Twelfth Plan period will need to transport 85 to 90 mt of iron ore from the mines and also deliver 45 to 50 mt of finished steel from steel plants to distribution centres. Therefore, there is immediate need for substantial upgradation of infrastructural facilities to meet the increasing requirements of the steel industry. Investments of around $1 trillion have been proposed in the infrastructure sector in the Twelfth Plan. An investment of this scale and size is likely to generate higher domestic demand for steel and at the same time help build necessary infrastructure required for the steel industry. Large investments of this nature suffer from gestation lags, constraints in mobilisation of financial resources, land acquisition issues and hurdles in obtaining statutory clearances in case of mega infrastructural projects. These need to be sorted out since the development of infrastructure sector has strong forward and backward linkages and contributes significantly to overall growth and development of the economy. Investment The cost of supporting an additional capacity creation of about 60 mt will be approximately `250,000 crore during the Twelfth Plan and securing such large


Cover Story investible funds at a reasonable cost will be a challenging task. FDI in the steel sector has been lagging behind, despite massive investment intentions by some major global steel majors. In order to ensure sufficient availability of financial resources for the growth of the Indian steel industry, it is imperative to review steel related sectoral caps of the banking sector. The government may also consider easing of norms connected with external borrowings (ECBs). Special purpose long term financing facility may be created to finance huge investment in new steel plants. Technology and R&D A cursory examination of the present status of performance indices shows that the technological performance of Indian steel plants in terms of specific consumption of raw material/ consumables, specific energy/power consumption, environmental and pollution norms is significantly lower than those in the advanced countries. The poor performance standards of the domestic industry are primarily attributable to poor quality of raw materials, prevalence of obsolete technology and lack of R&D to overcome the technological gaps. The major areas where the attention of the industry and

the government are required in the Twelfth Plan are as follows: • Iron ore quality in terms of high alumina content and high alumina to silica ratio is a serious concern. • There is a need to reduce the coal ash substantially to make our coals suitable for coke making and iron making operations. • It is suggested that the improvement in raw materials be achieved through selection of appropriate beneficiation process and improvement in operational practices of ore beneficiation/coal washing circuit. • Above 20 percent of the ROM (run of mine) which is known as ‘slime‘, has low percentage of iron (less than 55 percent). The size of slimes is lower than 150 micron and further beneficiation is difficult and not economical. There is an immediate need to find out solutions for the realisation of iron value from slimes. Alternative iron making process such as FASTMELT or ITmk3 may be useful to realise the iron value efficiently. • Use of mine wastes such as Jhama coal in iron and steel production will be helpful to increase the mine life. Coal gasification of non-coking coals and recovery and utilisation of CBM are some of the steps to address

Top 10 steel-producing countries Rank

Country

2011

2010

Growth %

1

China

695.5

638.7

8.9

2

Japan

107.6

109.6

-1.8

3

United States

86.2

80.5

7.1

4

India

72.2

68.3

5.7

5

Russia

68.7

66.9

2.7

6

South Korea

68.5

58.9

16.2

7

Germany

44.3

43.8

1.0

8

Ukraine

35.3

33.4

5.7

9

Brazil

35.2

32.9

6.8

10

Turkey

34.1

29.1

17.0

Source: World Steel Association

issues such as coal/coke shortage and carbondioxide emissions. • Large size blast furnaces with stateof-the-art facilities have done well in terms of productivity, consumption norms and hot metal quality. With installation of such furnaces in future, the need for agglomerated burden (sinter + pellet) is likely to increase. The improvement in burden quality will facilitate higher injection of coal fines and thereby reduction in metallurgical coke requirement and overall fuel rate. • The units that have adopted DRI – HM – EAF and DRI – IF routes for iron making are suffering due to non-availability of hard iron ore lump, high cost of natural gas, nonavailability of good quality coal, absence of good scrap and rising prices of raw material inputs for BF. To alleviate the shortages of iron ore lump, there is a need to put up pellet plants. Coal gasification is believed to be a good option to replace natural gas for the production of synthesis gas (reducing gas in shaft kiln process). • Large quantity of slag is produced in BOF/EAF. It is not easy to dispose of the steel making slag due to the presence of free lime and high percentage of iron oxide. Technologies have been developed (ORP, MURC) in Japan to reduce the generation of slag and reduce the ‘Phosphorous’ level below 0.010 percent. Some of the technologies for reuse in the form of ‘brick for pavement/construction of dykes‘,

12 Steel Insights, August 2012


Cover Story ‘flux/iron bearing material in cupola‘ and construction material after sufficient aging can be adopted to gainfully utilise the slag. There is also a possibility to recover the iron values through smelting reduction. • D RI – EIF route suffers from lack of refining capacities. The steel melted by the process has higher percentages of phosphorus and nitrogen. Rotary kiln DRI-EIF route needs to improve its technology substantially to avoid obsolescence, market acceptability due to poor quality and to reduce its adverse impact on the environment. There is a dire need for technology upgradation in the secondary steel sector in general and the EIF sector in particular to make them competitive in terms of productivity, quality and environment friendliness. • D ynamic soft reduction and near net shape casting will result in quality improvement and energy saving respectively and these emerging technologies are likely to be adopted in the coming years by the steel industry. • Due to increasing demand for high strength steel, the current BAF (Batch Annealing Furnace) technology may get replaced with Continuous Annealing Technology. • Environmental concerns will be a major criterion for the selection and adoption of new technology in near future. Therefore the steel industry may have to carry out research in the areas of carbon footprint, carbon dioxide absorption and sequestration. • T here is a need to develop sound indigenous capacity to develop technologies to suit indigenous raw materials, improve energy input norms through energy-efficient technologies and meet national norms for emission per ton of Share of private sector in domestic crude and finished steel production Year

Share of Private sector in Total Production Crude Steel

Finished Steel

1992-93

37%

67%

2000-01

49%

68%

2010-11 (P)

75%

80%

Source: Steel Working Group report

14 Steel Insights, August 2012

Break-up of XIth Plan production by producers Producer (million tons)

2007-08

2008-09

2009-10

2010-11

2011-12

SAIL

13.96

13.41

13.51

13.76

13.35

RINL

3.13

2.96

TATA STEEL

5.01

5.65

JSW

3.15

3.22

JSW ISPAT

2.83

2.2

ESSAR

3.56

3.34

JSPL

1.46

OTHER PRODUCER (EAF/ COREX/BOF/IF)

22.21

26.2

TOTAL

53.86

58.44

Source: Steel Ministry & Insights Research

products and comply with global responsibilities for carbon foot print. • T he Research and Development systems should also match the composite structure of the steel industry in the country. While some large corporate houses which could afford in-house R&D and acquire plants overseas could adopt global approaches for developing and acquiring technologies, R&D and technology needs of several small units engaged in manufacturing remain unaddressed. Small enterprises are not able to leverage the benefits of improved technologies and this explains their poor performance standards when compared to national and international benchmarks. • P re-competitive research in steel related technologies for energyefficiency, emission control, solid waste minimisation, more efficient use of Indian coal resources and value addition to indigenous raw materials in public and private sector R&D would need to be promoted through a Challenge Award Scheme. International Science & Technology cooperation in the area of steel making technologies would be necessary considering that the number of Indian experts engaged in R&D in steel making is significantly low. Synergies within the country and through international cooperation may need to be developed for growing industry-relevant R&D activities.

Environmental management

The Working Group said the Indian steel 3.21 3.24 3.13 industry is currently at a 6.56 6.86 7.13 crucial stage 5.26 5.85 7.36 with challenges of climate 2.69 2.38 2.47 change. While 3.47 3.37 4.31 the industry is expected 1.96 2.27 2.76 to accelerate 29.18 31.85 33.39 ramp up steel production to meet the needs 65.84 69.58 73.9 of its population by infusion of additional capacity, global issues like climate change necessitate guided growth through low carbon intensive routes for steel production. It is, therefore, imperative that all steel makers across the country adopt energy efficient and environment friendly technologies in all areas of iron and steel making. It is also necessary that all protection measures are adopted at the planning stage itself, as the cost of correction at a later date will be very high. Existing plants need to evolve short term and long term action plans to phase out the old and obsolete facilities by state-ofthe-art clean and green technologies with an aim not only to achieve higher standards of productivity but also to harness all waste energy with minimised damage to the environment. Since the cost of measures for energy and environment management is expected to be high, it is imperative that the government evolve suitable measures in the form of capital subsidy or incentives to promote adoption of such measures. Safety measures The report said the safety policy adopted in the iron and steel industry in India is comparable to the policy followed internationally. However, implementation and monitoring of these policy guidelines at the ground level leave much to be desired. As a result, the number of accidents, casualties, disabilities, loss to plant and machinery and consequential loss of man-days and production is quite significant. It


Cover Story calls for introspection and review of the whole situation. It has been observed that adherence to safety measures and policy is lacking due to many factors, viz. indifference on the part of management and workers, financial problems, lack of awareness, complicated and slack legal machinery, use of outdated technologies and lack of adequate statutory provisions. Role of government The group members also noted that the government has an important facilitating role in the development of the steel industry. As steel making is a highly capital intensive and complex process requiring large-scale investment, historically the industry has evolved with government support. While direct government involvement in the steel making process may no longer be required, the state will have to provide the necessary policy support to the sector to achieve the object of the National Steel Policy to make India a global Steel producer. Some of the important areas, where government support is required, are providing essential infrastructure facilities; assuring easy availability of critical inputs such as iron ore, coal, gas and power; provision of training facilitity for manpower development and creation of a consolidated and reliable data base for informed decision making by all stakeholders.

Year-wise Requirement of crude steel production and capacity for the XIIth Plan

(million tons)

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Demand for finished steel

66.5

77.3

85.05

93.6

103.5

113.3

Production of Crude Steel

73.7

85.9

94.5

104.0

114.5

125.9

Crude Steel Capacity

81.9

95.4

105

115.6

127.2

139.9

Demand for finished steel

66.5

75.3

84.6

94.1

105.1

115.3

Production of Crude Steel

73.7

83.7

94.0

104.6

116.8

128.1

Crude Steel Capacity

81.9

93.0

104.4

116.2

129.8

142.3

Scenario 1

Scenario 2

Source: Steel working group report

Current status However, to find out whether the recommendations of the Working Group were achievable, one needs to understand the current position of the industry. The Indian iron and steel industry with its strong forward and backward linkages contributes significantly to overall growth and development of the economy. As per official estimates, the industry today directly contributes 2 percent of India‘s Gross Domestic Product (GDP) and its weightage in the official Index of Industrial Production (IIP) is 6.2 percent. Globally also, over the last two decades, the industry has been able to carve out a niche for itself. From a country with a fledgling status of 1 mt

of capacity at the time of Independence, it has today become the world‘s fourth largest producer of crude steel preceded only by China, Japan and the USA. In spite of being one of the largest producers of steel in the world, India has been lagging behind other major steel producing countries in terms of intensity of steel usage in overall economic activities (i.e., per unit of GDP) or per capita consumption of steel. In 2010 the country’s per capita consumption of steel was only 51.7 kg as against the world average of 202.70 kg. There is tremendous potential for improvement in the domestic steel consumption given the economy‘s large untapped markets especially in rural areas. This is reflected in the steady rise in consumption levels over the last few years at a rate faster than the world average growth rate. Evolution At the time of independence in 1947, the country had three integrated steel plants (TISCO, IISCO and VISL) and a few Electric Arc Furnace (EAF) based plants in the secondary sector. During the initial planning years i.e. from 1950 to the 1970‘s, large integrated steel plants were set up in the public sector at Bhilai, Durgapur, Rourkela and Bokaro. With the opening up of the economy and deregulation of the steel sector in the 1990‘s, many private companies (Essar, Ispat, Jindal etc.) set up large integrated steel plants. This post liberalisation phase led to rapid growth in domestic steel making capacities with many new entrants joining the race and the established players undertaking

16 Steel Insights, August 2012


Cover Story Projected crude steel capacity year-wise till terminal year of the XIIth Plan State SAIL Vizag Steel Plant (RINL)

Andhra Pradesh

NMDC Nagarnar

Chhattisgarh

Tata Steel, Jamshedpur

Jharkhand

Tata Steel, Kalinganagar

Orissa

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

12.84

13

15.27

20.75

20.75

20.75

20.75

2.82

2.82

6

6

7

7

7

10

10

10

2

3

3

6.8

7.62

9.22

10

1

3.05

5.5

6

JSW Vijayanagar

Karnataka

6.8

8.93

10

10

10

12

12

ESSAR Steel

Gujarat

4.6

6.3

8.5

8.5

9

10

10

4

4

5.2

5.2 43.85

JSPL Raigarh

Chhattisgarh

2.4

3

3

3.5

4

JSPL Angul

Orissa

1.5

2

2

3

4

ElectroSteel Steel Limited, Siyaljori Bokaro

Jharkhand

1.7

2.2

2.2

2.2

2.2

Bhushan Steel Limited Angul-Dhenkanal

Orissa

1.5

2.3

2.3

4

5.2

Jindal Stainless

Orissa

0.6

0.8

0.8

0.8

0.8

32.5

34.13

35.83

37.91

39.79

41.77

2

2

4

Others

Multi-Location

Tata Steel Gopalpur

Orissa

JSW SALEM

Tamil Nadu

1

1

1

1

1

1.6

1.9

JSW ISPAT

Maharashtra

3.3

3.3

3.3

3.3

3.3

4

4.5

JSPL Pattratu

Chhattisgarh

1.5

2

3

3.5

POSCO INDIA

Orissa

4

Bhushan Power & Steel, Sambalpur

Orissa

1.2

1.8

2.5

2.5

2.5

2.5

2.5

Uttam Galva

Maharashtra

0.8

1.1

Monnet Isapat, Raigarh

Chhattisgarh

0.3

0.6

0.9

1.5

1.5

1.5

1.5

Visa Steel, Kalinganagar

Orissa

0.5

0.5

0.9

1.5

1.5

1.5

1.5

Others- Medium Scale (Jai Balaji, Kalyani, Mukand, MSPL, Brhamini etc)

Multi-Location

1.5

2

2.5

2.5

4

4

4.5

Total (Firm Projcets)

78.06

89.00

103.80

117.56

126.19

135.52

140.00

Additional Capacity not firm but possible

0.00

0.00

1.71

2.90

6.40

10.10

17.60

Realisable Capacity considering Possible Slippages

78.06

89.00

104.66

119.01

129.39

140.57

149.00

Note: Expansions shown in shaded region are not firm and therefore Realisable capacity has been calculated as - Realisable Capacity=Capacity from Firm Projects + Additional Capacity from Not firm Projects*0.5 Source: Steel Working Group report

modernisation and expansion of capacities at the same time. In the course of its evolution over the last several decades, the structure of the Indian iron and steel industry has become extremely diverse in terms of scale of operation/size, integration levels, process routes and levels of technological sophistication. In consonance with the stages of evolution of the industry and keeping in view the requirements of inter-temporal continuity in systems of data collection, the Joint Plant Committee (JPC) has classified the Indian steel producers into three broad groups for dissemination of official data. The scheme is as follows:

18 Steel Insights, August 2012

The main producers: This category includes public sector integrated plants of Steel Authority of India Ltd (SAIL) (with its various subsidiaries) and the Rashtriya Ispat Nigam Ltd (RINL) along with the private sector producer Tata Steel Ltd. The main producers – all dating back to the pre-deregulation era – have a combined capacity of around 22.55 mtpa with current capacity utilisation rates exceeding 100 percent. Majors: This category includes integrated steel plants (other than the Main Producers) with crude steel capacity of 0.5 mtpa and above – irrespective of technology routes - like JSWL, Essar, JSW Ispat Steel Ltd (erstwhile Ispat

Industries Ltd) and JSPL. Estimated total crude steel capacity of these producers is around 17.40 mt. These are primary steel makers using diverse technology routes like DRI-EAF DRI/BFEAF, COREX/BF-BOF etc. Other producers: This category includes the mini steel plants – mainly the Electric Arc Furnace (EAF) and Induction Furnace (IF) units – with capacity below 0.5 mt as also all EOF units. Besides it also covers the standalone processors without backward integration of steel making like the Re-rolling (RR) units, Cold Rolling (CR) units, GP/GC Sheets units, Pig Iron & Sponge Iron Plants, etc.


Cover Story Recent growth rates of production of selected steel consuming industry groups: 2008-09 to 2010-11 Item Group

Growth rates (%)

Steel Products used

LPG Cylinder

HRC

Drums & Barrels

CR

Complete Tractors

HRC/

Strls.

(-)0.4

Refrigerators

CR

Power Transformers

CRGO

Commercial Vehicles

CR/Plate

Passenger Cars

HR/CR/

Plate

2008-09

2009-10

2010-11

5.7

55.0

13.9

(-)21.4

42.7

(-)2.5

26.3

23.9

Scenario 1: assuming zero trade balance in steel i.e. imports and exports of steel in volume terms balance each other.

3.1

25.8

9.8

Scenario 2: including an export demand of 7 mt (net export of 2.0 mt) by end of Twelfth Plan or 2016-17. As per JPC data, the total installed capacity for crude steel in the country was 78 mt in 2011 and therefore the incremental capacity required by the terminal year of the Twelfth Plan (i.e. by 2016-17) to meet the projected demand is 61.9 mt under scenario 1 and 64.3 mt under scenario 2, respectively, implying an annual average increase of around 10 to 11 mt in capacity. As far as future growth in capacity is concerned, if it is assumed that crude steel capacity will continue to grow at

(-)1.9

16.5

13.4

(-)23.6

36.0

32.8

6.7

26.0

28.4

Auto Ancillaries & Parts

HR/CR

25.0

Motor Cycles

CR

Agricultural Implements

HR/Plate

Material Handling Equipment

Plate/ HRS/ Strls.

Washing Machines

HR / CR

Diesel Engines

HR/ Plate / Strls.

4.6

24.2

24.7

(-) 26.6

(-) 11.1

(-)28.2

(-)3.5

22.9

(-)8.4

8.1

26.4

(-)0.8

18.8

5.3

11.2

Source: Commerce Ministry

While the first category includes units in both public and private sectors, the other two consist only of private sector producers. In fact, today domestic steel making is dominated by the private players. During 2010-11 the private sector units accounted for 75 percent of the total crude steel production and 80 percent of finished steel production in the country. Total steel demand The World Steel Association, which has been monitoring production, consumption, of steel the industry in each country since the 1980s, also projects short-range outlook for steel at regular intervals. These projections are inclusive of demand for alloys and stainless steel and take into account contemporary developments affecting steel demand. A look at the data provided by JPC shows that the consumption of alloys and stainless steel has been hovering between 3 mt and 3.5 mt over the past few years. For projecting total demand by the end of the Twelfth Plan, the Working Group decided to add 5 mt of alloy and stainless steel (phased progressively year-wise over the entire period) to the demand for finished carbon steel projected for the

20 Steel Insights, August 2012

terminal year 2016-17. Accordingly, based on projected growth of 10.3 percent in carbon steel consumption, the total demand of finished steel in the country has been estimated under two scenarios.

Summary of demand supply projections (alloy & non-alloy) (million tons)

S.No.

Item

2010-11

Demand for Carbon Steel

2.

Demand for Alloy/Stainless Steel

3.47

5.0

3.

Total Domestic Demand for Steel

65.61

113.3

4.

Net Export

(-)3.34

0.0

62.27

115.3

24.44

43.6

5.62

9.3

5.

Production (net of double counting)

6.

Category-Wise Consumption (Carbon Steel) Bars & Rods Structurals Rly. Materials Total Long Products Plates

62.14

2016-17

1.

108.3

1.1

1.4

31.16

54.3

4.76

7.2

13.07

22.6

CR coils/sheets (excl. double counting)

6.00

11.2

GP/GC

4.74

8.8

Electrical Sheets

0.49

0.8

Tin Plate/TFS

0.40

0.60

Pipes

1.54

2.80

HR Coils/Skelp/Sheet (excl. double counting)

Total Flat Products

30.99

54.0

Total Carbon Steel

62.14

108.3

-

139.9

78.0

140.0

7.

Total Requirement of crude steel

8.

Likely Capacity of Crude Steel

Source: Steel Working Group report


Cover Story Raw materials requirement for projected iron and steel production (base case)

(million tons)

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

73.70

85.90

94.50

104.00

114.50

125.90

6.13

6.88

7.66

8.54

9.38

10.00

115.03

135.70

149.43

166.66

185.24

206.18

Coking Coal

43.25

52.29

57.91

67.49

77.23

90.16

Non-Coking Coal (for Sponge Iron Sector)

35.31

37.86

36.50

34.71

33.92

28.41

PCI Coal

1.95

2.40

2.66

3.20

3.83

4.54

Manganese Ore

4.03

4.53

4.98

5.57

6.18

6.82

Chromite

2.64

2.90

3.19

3.52

3.93

4.31

Ferro Chrome

0.56

0.61

0.67

0.74

0.84

0.92

Ferro-Manganese

0.46

0.51

0.57

0.64

0.70

0.74

Silico manganese

1.26

1.42

1.56

1.74

1.94

2.16

Ferro Silicon

0.23

0.26

0.28

0.31

0.34

0.38

1.29

1.42

1.56

1.72

1.89

Crude Steel production Pig Iron for sale Iron Ore

Refractories

a historical rate of 8.4 percent annually as actually achieved in the postderegulation period, then crude steel capacity will grow to 133 mt by 201617. Most importantly, in that case, India will continue to remain a net importer of steel in the Twelfth Plan period. However, a growing economy like India cannot afford to plan for lower capacity, especially when there are significant opportunities to add to per capita consumption. Therefore, the report projected a likely capacity of around 140 mt driven by a demand growth of 10.3 percent per annum as opposed to the assumptions of Business As Usual (BAU) supply-side growth of 133 mt by 2016-17. With appropriate policy interventions by the government and discipline in project implementation, the industry has the further potential to achieve a crude steel capacity of 140 to 150 mt by 2016-17 enabling India to become a net exporter of steel. Based on available information, the year-wise crude steel capacity build up from 2011-12 to 2016-17 are estimated. While a large number of steel projects have been listed by the existing and prospective investors which as per their

22 Steel Insights, August 2012

assessment are likely to come on stream by 2016-17, a realistic assessment on supply side has been made based on the following factors: • Actual extent acquired;

of

land

already

• Availability of investible funds with respective companies to support the planned increase in existing capacity; • Availability of infrastructural network at the project sites and • Raw material linkages. The growth of various industry groups under each broadly defined consuming sector is also indicative of the growth trend to be projected. Based on the growth trends the final demand-scenario in the country by 2016-17. Taking into consideration that raw materials are crucial in determining the competitive growth of any industry, the Working Group noted that requirement of major raw materials in the steel industry is determined not only by the rate of growth in output but also by the technology adopted for making the required steel.

Choice of technology, in its turn, is influenced by the relative costs of raw materials, energy, labour, capital and more specifically by the entire logistics of movement of raw materials and finished products. But at another level, for obtaining access to basic raw material linkages, especially of iron ore and coal, the industry also has to depend on potential intervention by the state and consensus building within the larger social space. Conclusion As per market experts, though it may be realistic to achieve a production capacity of 140-150 mt in 2016-17, 200 mt by 2020 seems a little difficult. Industry insiders feel that access to raw material, procedural delays, fund mobilisation and infrastructure are likely to be the biggest stumbling blocks. In fact, they feel that it is also very unlikely that steel demand will touch 200 mt by 2020 as that would entail a CAGR of more than 13 percent over last year’s (FY12) demand of around 72 mt. Demand and capacity will be more or less at par over the next few years, they feel. According to industry and steel ministry sources, of the current production capacity in the country of around 90 mtpa, around 45 mt of capacity is with the major integrated players (SAIL, JSW, Tata, Essar and JSPL) and the rest lies with the secondary players. Industry sources feel that the current raw material supply in India is slightly uncertain with innumerable players and the widely reported problems of illegal mining. Moreover, the steel industry is highly capital intensive, very volatile and has a long gestation period. Given these factors, most steel makers that are expanding capacity are looking at assured raw material supply for the new capacity. Mining leases are paramount and without them, the investments will not take off. All existing players in the market have gone in for brownfield expansions but the next phase is likely to see all greenfield expansions, as per experts. For that to happen, however, the procedural bottlenecks need to be eliminated, they added. 


interview

Next phase of expansions will all be greenfield: Essar Tamajit Pain

E

ssar Steel is a fully integrated flat carbon steel manufacturer – from iron ore to ready-to-market products – with a current capacity of 14 million tons per annum (mtpa). Its products find wide acceptance in highly discerning consumer sectors such as automotive, white goods, construction, engineering and shipbuilding. The company is one of India’s largest exporters of flat products, exporting to the highly demanding US and European markets, and to the growing markets of South East Asia and the Middle East. The company’s clients include companies such as Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway and Maruti Suzuki. CEO & MD, Essar Steel India Limited, Dilip Oommen, spoke at length with Steel Insights on the country’s steel capacity targets and whether production capacity can

24 Steel Insights, August 2012

match demand in the next seven to eight years. He also discussed raw material requirements to meet the company’s capacity targets and the constraints that need to be overcome to achieve the desired results. Excerpts: India’s steel demand is expected to reach 200 million tons (mt) by 2020. Will production capacity be able to match demand by that time? How far is this achievable? Achieving production capacity of 200 mt, though not impossible, seems difficult. The major constraints that India may witness are access to raw material, undue delay in approval process, land acquisition, raising capital and infrastructure to handle such large cargo. For instance, to increase the steel capacity from 90 mt presently to 200 mt, the investment required will be around $120 billion.

Even steel demand of 200 mt by 2020 seems optimistic. Last year’s steel demand was around 72 mt and to achieve a demand of 200 mt in 2020 would mean Dilip Oommen, CEO & MD, a CAGR of Essar Steel India Limited more than 13 percent. Given the current economic climate, this looks difficult. It seems that demand and capacity will go hand in hand over the next eight years; there may be some excess capacity in the short term but will more or less balance out by 2020. What is the official target set by the steel ministry? The official target set by the ministry still stands at 200 mt by 2020.


interview What is the current production capacity in the country and breakup between primary and secondary players? What are the constraints likely to be faced to achieve the target capacity? The current production capacity in the country is around 90 million tons per annum (mtpa). Of these around 45 mt of capacity is with the major integrated players (SAIL, JSW, Tata, Essar and JSPL) and the rest lies with the secondary players. As I mentioned earlier, lack of raw material linkages, land acquisitions issues, regulatory delays and an uncertain economy are likely to be the key bottlenecks in the growth journey. With increase in steel production, will raw material (both iron ore and coking coal) demand also increase? Are the miners and raw material traders prepared to meet the growing demand? The current raw material supply in India is slightly uncertain with innumerable players and the widely reported problems of illegal mining. Moreover, the steel industry is highly capital intensive, very volatile and has a long gestation period. Given these factors, most steel makers that are expanding capacity are looking at assured raw material supply for the new capacity. Mining leases are paramount and without them, the investments will not take off.

Most of the expansions that have happened in the recent times were brownfield in nature apart from a few like Kalinganagar and JSPL’s Angul project. Do you see any difference going forward? All the existing players including Essar have expanded capacity through brownfield expansions. The next phase of expansion beyond these programmes will primarily be greenfield in nature. A number of MoUs have been signed between the various state governments and steel majors testify to that. However, for the projects to kick off, the bottlenecks outlined above must be removed. So far most of the value added products demand was being met through imports. But recently many prime steel makers in India are planning to expand capacity in the value added segment. How do you see the value added production capacity growing in the next two to three years? The steel industry is becoming highly competitive. To be able to succeed in the market place, we have to produce value added products and move away from commodity grade steel. Essar Steel currently produces over 70 percent of its products in the value added segment. This is possible in India now primarily because all the plants that are put being

up have incorporated state-of-the-art technology and thus have reduced dependence on imports of steel. Again, taking the example of Essar, we have set up a very advanced plate mill capable of producing the most complex plate products in the market, many of which were being earlier imported. I expect this trend towards valued added steel to continue, at least among the primary steel makers. What is the company’s current production capacity and planned expansion? Essar Steel has recently completed an ambitious expansion programme and now has a production capacity of 10 mt at Hazira in Gujarat. In the near future, we do not plan to increase any capacity at Hazira. What is the current consumption of coking coal and iron ore and what will be the projected demand for expanded capacity? The current consumption of coking coal is around 45 mtpa and that of iron ore is around 115 mtpa. The demand in future will depend on how much capacity actually goes on-stream. If by 2020, we reach a production capacity of 150 mtpa, which looks more likely, then the iron ore and coal requirements would roughly be 250 mtpa and 110 mtpa respectively. 

26 Steel Insights, August 2012


Corporate

JSW Steel FY12 saleable steel output rises 28% y-o-y Sanjukta Ganguly

P

roduction of saleable steel at JSW Steel Ltd moved up 28 percent year-on-year to 7.82 million tons (mt) in 2011-12 with the value-added products, including cold rolled and coated steels, contributing nearly 22 percent. Demand for value-added steel in India would rise to about 12 million tons per annum (mtpa) by 2015 from about 9 mtpa presently and JSW Steel aims to “capture a substantial share of this,” chairman Sajjan Jindal said at the company’s annual general meeting. To this end, the steelmaker plans to build a 600,000 tons per annum (tpa) electrical steel plant at its 10-mtpa integrated steelworks at Vijayanagar in Karnataka. Its joint venture with Marubeni-Itochu Steel – JSW MI Steel Service Center – is planning for its first steel service centre in northern India to process hot rolled and coated products for just-in-time supplies to the automotive, white goods, construction and other value added segments. JSW Steel is also ramping up downstream capacities at its Vasind and Tarapur works in Maharashtra this fiscal year. At Vasind, two colour-coating lines with a total capacity of 225,000 tpa are to be commissioned. At Tarapur, cold rolling capacity across two lines will be tripled to 325,000 tpa from 110,000 tpa previously. Colour-coating capacity on two lines will be ramped up to a combined 276,000 tpa from 180,000 tpa. Tarapur will also host a new 200,000 tpa line to produce galvanised and galvalume steel. Steel consumption in India has contrasting characteristics, JSW Steel said. With per capita consumption at 59 kg compared to the world average of 215 kg, India qualifies as a developing nation. But the domestic consumption pattern of 49 percent flats and 51 percent longs resembles that of “near developed” countries.

28 Steel Insights, August 2012

The company’s standalone after-tax profits fell 19 percent year-on-year to `16.26 billion ($289 million). Expenditure on raw materials consumption rose 42 percent year-on-year to `209 billion ($3.7 billion) as crude steel production rose 16 percent year-on-year and iron ore and coking coal prices increased.

Sajjan Jindal, Chairman & MD, JSW Steel

Raw material security Non-availability and price volatility for critically essential raw materials namely coal and iron ore can affect production. The company procures iron ore primarily from the Bellary and Chitradurga regions of Karanataka. The government regulation banning iron ore mining in the Karnataka state severely stifled iron ore availability. The company proactively tracks the factors affecting availability and plans its sourcing strategy accordingly. The company entered into contracts with NMDC and actively participated in e-auctions to sustain the availability of this key input. In fact, JSW imports a majority of its coal requirement thereby broad-basing its sourcing geographies to eliminate major dependence on a single nation or company. Net profit The company recorded 69.35 percent slump in net profit during 2011-12 as compared to the previous fiscal, the company said in its annual report for

FY12. The company has recorded a net profit of `537.68 crore during 2011-12 while the figure stood at `1753.98 crore in FY11. The company’s total revenue from operations stood at `34368.05 crore in 2011-12 against `24105.89 crore in 2010-11. Projects & expansion plans The progress made on various projects of the company include the company’s Vijayanagar Works where the 3.2 mtpa expansion project at Vijayanagar works was completed and commissioned during the last financial year. Other projects completed during the year include 4.2 mtpa - Pellet Plant 2, 300 MW Captive Power Plant (CPP 4) while projects under progress include 2.3 mtpa – Cold Rolling Mill Complex, being executed in two phases, the first phase is expected to be commissioned in FY 2013-14 while second phase is

JSW Steel saleable steel output (in million tons) Products

2011-12

2010-11

Domestic

Export

Domestic

Export

Semis

0.304

0.105

0.305

0.039

Flat-rolled products

3.584

0.682

2.737

0.319

Long-rolled products

1.419

0.038

1.024

0.031

Value-added products

1.074

0.609

1.142

0.502

Total

6.381

1.434

5.208

0.891

Grand Total

7.815

Source: Company annual report

6.099


Corporate expected to come up in FY 2014-15. In addition to this, work on the second p(1.5 mtpa) of New Hot Strip Mill, taking the rolling capacity to 5 mtpa by September 2012 and second phase of Beneficiation Plant 2, taking total capacity to 20 mtpa by FY 2012-13 in phased manner are in progress. Roadmap for 2012-13 The company has set itself a target for the current fiscal and prepared the roadmap accordingly. According to company sources, at the Vijaynagar plant, among many other plans, the company plans to Commission Benefi ciation Plant phase 2, ensuring that more than 80 percent of the ore used in steel manufacture is benefi ciated using low grade fines. JSW Steel’s Vijayanagar Works boasts of the single largest coke manufacturing unit in a single facility with an annual capacity at 4.62 mtpa. In the coke making section, the Company adopted the vibro-compacting technology at its coke oven units, for improved product quality and higher productivity. Besides, the indigenously developed pilot coke oven plant – the first-of-its-kind in India – facilitated coal blending from diverse sources to develop a superior product and optimise production costs. Here the company plans to optimise the coal mix procurement from various sources to reduce production costs. For the Sinter plant, consolidation operations of all four units is on the

30 Steel Insights, August 2012

JSW Steel may absorb JSW Ispat JSW Steel expects to merge JSW Ispat with itself once the loss-making subsidiary becomes profitable. “We expect JSW Ispat to become profitable by the end of FY 2013. As soon as it becomes profitable, we will start looking at merging the same (with the parent),” JSW Steel chairman Sajjan Jindal said on the sidelines of the 18th Annual General Meeting. JSW Steel acquired a controlling stake in erstwhile Ispat Industries in December 2010 at an enterprise value of $3 billion to emerge as the country’s largest producer of the alloy with an annual capacity of 14.3 million ton (mt). “Once we complete the integration of facilities by the end of FY 2013, we expect the company to turn around,” he said. On the contentious issue of illegal mining, Jindal said the company has been a “victim” of illegal mining. Even after a presence of more than two decades in Karnataka, and investing over `35,000 crore, creating thousands of jobs, JSW Steel remains the only major steel company with no captive mines, he said. “Following the Supreme Court verdict in April (partially lifting mining ban in Karnataka), we hope that over the next two weeks, a few category ‘A’ mines (spread over 50 hectares or more) will start opening and over the next two-three months, things should normalise,” he said. With category ‘B’ mines expected to open this year, iron ore availability within Karnataka should cease to be a major hurdle in the short-turn, he added. The company purchased 10.68 mt of iron ore in e-auctioned and received 755 by March 2012. Going forward, JSW continues to scout for raw material assets within India and around the world, Jindal said.

cards. The company will install a mixing unit for homogenous material mixing of feed to the sinter plants. Moreover, JSW is set to install a waste heat recovery mechanism in the sinter cooling areas of sinter plants 1, 2 and 3, to generate steam for use in the blast furnace and other shop-floor processes. For the Salem plant, the company plans to receive approvals from OEMs in the automotive, heavy engineering and other sectors, increase capacity utilisation of the blooming mill and increase special steel production, extend the two bays at the SMS unit, complete the shed extension at the blooming mill, facilitating the storage of increased finished products. Apart from these, the company plans to complete online automated inspection system (Phase II) for the blooming mill, extend the material and finished goods storage shed, install the reducing and sizing block (Kocks Block) at the BRM unit to ensure that size, dimensions and surface quality are within the stringent tolerance levels specified by OEMs. Making concrete all roads within the plant, installing a wagon tippler and railway siding inside the plant for seamless movement of incoming material, installing a new boiler in the coke oven unit which will enhance the WHRB steam generation, utilising sensible heat from coke ovens to reduce the moisture content in final coke, securing product approvals from large global and Indian consumers of special steels which are under different stages of evaluation and entering into new special steel grades which cater to diverse sectoral applications are also on the cards of the company in the current fiscal. 


Corporate

Mixed trend in Q1 performance

J

Steel Insights Bureau

SW Steel Ltd posted a 90 percent fall in its net profit to `49.65 crore in the April-June quarter of 2012-13 from `485.16 crore in the same period last year due to a foreign exchange loss and higher raw material costs. Total income from operations during the first quarter stood at `9909.89 crore, up from `7432.38 crore in the same period last year. The company reported highest ever quarterly production of crude steel of 2.143 million tons (mt). Production volume grew by 27 percent in crude steel, 36 percent in rolled flat products and 27 percent in rolled long products relative to that of corresponding quarter of previous year. The availability and quality of iron ore in e-auction in Karnataka remained a bottleneck during Q1 of FY13 due to reduced inventory in stock pile being auctioned and delay in reopening of Category “A” mines, which led to loss of production and increase in cost. Vijayanagar works could operate at about 80 percent capacity utilisation during Q1 of FY13, the company said in a statement. The implementation of Phase-II of 20 million tons per annum (mtpa) beneficiation plant and Phase-II of 5-mtpa HSM-2 at Vijayanagar Works and two new colour Coating Lines at Vasind Works is progressing satisfactorily, to be commissioned in FY13, it said. Cold Rolling Mill (CRM-2) Phase 1 and 10 mtpa to 12 mtpa capacity expansion project at Vijayanagar is progressing satisfactorily and will be completed in FY 2014. Though a weak monsoon, slowing industrial activities and investments will certainly pose challenges for the Indian steel industry, however with the expectation of economic reforms being undertaken, the medium and long-term steel consumption should remain intact, the company said in a statement. JSPL Q1 profit dips 58% Jindal Steel and Power reported an over 58 percent decline in its consolidated net

32 Steel Insights, August 2012

profit to `385.33 c r o r e for the AprilJ u n e quarter mainly due to a one-time `574.12-crore impairment charge made against termination of its Bolivia project. The Naveen Jindal-led firm had reported a net profit of `918.79 crore during the corresponding quarter of 2011-12. “The investment made by company in El Mutun Joint Venture Project and other Operations (in Bolivia) have been impaired. As a matter of prudence, the company has made a provision of `574.12 crore in the quarter ended June 30, 2012,” JSPL said in a statement. The Bolivian project included 40year mining rights of El-Mutun iron ore mines, setting up of Bolivia’s first steel plant, an iron ore pellet plant and a sponge iron plant and required a daily gas supply of 10 million cubic metres from 2014. While terminating the contract on July 16, the steelmaker had cited nonfulfilment of contractual agreement by the Bolivian government on natural gas supplies as the main reason of termination. During the quarter, JSPL reported a 18.88 percent growth in its net sales to `4,680.41 crore vis-a-vis `3,937.08 crore of the corresponding quarter of FY12. The company’s hot metal production increased by 20 percent to 4.84 lakh ton, while its slab/round/beam production was up 26 percent to 7.66 lakh ton. Besides, the company reported a 51 percent rise in its power production. In terms of sales, the company reported an 85 percent rise in its power sales to 584 million kWh, while the steel products sale increased by 23 percent to 5.61 lakh ton. Earlier this month, the company has also commissioned third unit of 135 MW capacity at its power plant at Angul. Tata Sponge Q1 net profit up 32% Tata Sponge Iron reported a 32 percent

rise in net profit at `29.71 crore for the quarter ended June 30 on higher sales. The company, a Tata Steel a s s o c i a t e firm, had clocked `22.52 crore net profit in the corresponding period a year ago, it said in a BSE filing. Income of the company rose to `189 crore during the quarter under review compared to `146 crore in the AprilJune period of the last fiscal. Tata Sponge Iron’s total expenses increased to `152 crore in the June quarter against `117 crore in the yearago period. Tata Sponge Iron has manufacturing facility at Bilaipada in Odisha. Tata Sponge Iron’s total production capacity now stands at 3.9 lakh ton a year and a 26 MW power generation capacity. RINL turnover up 16% Rashtriya Ispat Nigam Limited (RINL), has posted a turnover of around `3000 crore during Q1 of FY13, registering a growth of 16 percent as compared to the turnover earned during the corresponding period last year, the company said in a statement. RINL also registered a growth of 7 percent and 6 percent growth in hot metal and liquid steel production, respectively during the period. On the other hand, the saleable steel and iron production registered a growth of 2 percent, the statement said. The growth in turnover was supported by 20 percent improvement in project sales, 42 percent improvement in byproduct sales and also improvement in value added steel sales during the quarter. On the techno-economic front, 22 percent reduction in water consumption could be achieved through a stream of water conversation measures.


Corporate Bhushan Steel marginally down

Q1

net

profit

B h u s h a n Steel reported a marginal decline of 1.9 percent in net profit to `205.97 crore for the quarter ended June 30, 2012, largely due to increase in interest payments while the net profit earned during the corresponding period of last fiscal stood at `209.96 crore, the company said in a filing to BSE. Net sales of the company surged by nearly 27 percent to `2,747.34 crore during April-June period against `2,165.85 crore in the first quarter of 2011-12. Sesa Goa Q1 net grows 14.6% Iron ore m i n e r S e s a G o a reported a 14.6 percent growth in net profit at `963.97 crore for the first quarter ended June 30, mainly on its share of profit in associate company Cairn India. The company had reported a net profit of `840.59 crore in the yearago period. Net profit of the company would have been down to `198.82 crore during the reporting quarter, if it had not received `765.15 crore as its share of profit from Cairn India in which Sesa Goa has 20 percent stake, it said in a statement.

The profit declined due to lower volumes, higher export duty, higher interest cost, foreign exchange losses and dip in iron ore price, which was partly offset by rupee depreciation, it added. Total income of the company came down to `1,732.63 crore during the quarter from `2,108.87 crore a year ago, it said, adding that both production and sales declined as a result of Karnataka mining ban and continued logistical constraints in Goa. Sesa Goa could not produce iron ore from its mines in Karnataka in the June quarter. Production was down from Goa to 2.8 million tons (mt) from 3.2 mt a year ago. During first quarter, iron ore production and sales were 3.4 mt and 2.9 mt, respectively. The decrease in production and sales volumes was primarily on account of Karnataka mining ban and continued logistical constraints in Goa. The company had produced 4.4 mt and sold 4.3 mt of iron ore during the April-June quarter of the last fiscal. SAIL’s PAT dips 18% in Q1 Steel Authority of India (SAIL) reported an 18% drop in profit after tax (PAT) to Rs 696 crore during the first quarter of 2012-13 (Q1FY13), compared to Rs 848 crore posted in the

Konecranes launches Power Pack Technology Pune based Konecranes India Pvt Ltd, offering a complete range of advanced lifting solutions, has launched new Hybrid Power Pack Technology which completes its full range of power options for RTG Cranes. Konecranes has introduced a Hybrid (diesel/electric) power option for its Rubber Tired Gantry cranes (RTGs), which can reduce diesel fuel consumption by over

34 Steel Insights, August 2012

same period last year. Profit Before Tax (PBT) stood at Rs 1,010 crore, 19% lower than Rs 1,240 crore recorded in the same period last year. The fall in profitability was mainly caused by higher input costs and foreign exchange fluctuations, which saw the Rupee weakening by a steep 21 percent in Q1FY13, a statement released by the company said. The turnover, however, was marginally up to Rs 11,912 crore in Q1FY13 from Rs 11,907 crore in Q1FY12. Overall outlook According to market analysts, there has been a mixed trend as is clear from the Q1 results of some leading corporates. During Q1 of FY13, global steel prices gradually dropped mainly due to escalating sovereign debt crisis in Europe. Steel prices in the US and CIS dropped by 10.9 percent and 13.0 percent, respectively, during MarchJune 2012. However, steel prices remained flat in India on account of a sharp depreciation of INR against the USD. On the raw material front, coking coal contracts for the second quarter of FY13 have been signed at $225/ton (+9.2 percent qoq). Iron ore contract prices for the second quarter of FY13 are expected to decline as spot iron ore prices have declined during Q1 of FY13. concerns owing to slowdown in the capex cycle, high interest rates.

60%. With the addition of this new power option, Konecranes now provides a full range of solutions for RTGs: Hybrid Power Pack, Diesel Fuel Saver, and two electric power options, the Cable Reel and Busbar, the company said in a statement. According to a company, Konecranes Hybrid Power Pack turns a fully-diesel RTG into a diesel/electric hybrid RTG. Whenever possible, the crane is operated with electrical power drawn from the energy store. Like a hybrid car, it takes the energy generated during braking and converts it into electricity to recharge the batteries. Depending on usage, this solution can significantly reduce diesel fuel costs. Put another way, the RTG can operate much longer on a tank of fuel. Konecranes not only provides a full range of power options, it also provides a full range of services for RTGs, including maintenance and retrofits. When Konecranes modernizes an RTG with a power option retrofit, the company makes sure that the power system is fully integrated with the mechanical and electrical systems. This ensures that the RTG continues to work reliably and efficiently, the company statement added.


Corporate

Tata Steel rides high on Indian operations

P

Steel Insights Bureau

rivate sector steel behemoth Tata Steel’s 2.9 million tons (mt) expansion project in Jamshedpur is expected to go on-stream during FY13, taking total capacity to 9.7 million tons per annum (mtpa). Also, the company’s new 6 mtpa greenfield steel plant in Odisha is under construction and, subject to essential captive mining approvals from the government, the first phase of 3 mt is scheduled to commence in 2014. Therefore, Tata Steel by 2014, will have a global steel capacity of 33.5 mt, and is going to add a further 3 mt on full implementation of the Odisha project, according to company sources. According to chairman of Tata Steel Limited, Ratan Tata, while Tata Steel’s operations in India are expected to remain strong, its operations in Europe will continue to be under enormous stress for the next year or two until the Western European economy recovers. The unprecedented rise in iron ore and coking coal prices coupled with the acute decline in market demand will continue to negatively impact the company’s European operations. Restructuring and capacity rationalising initiatives are under way to reduce costs and under-utilisation. The real growth will most likely be in Asia, Africa and Latin America, Tata said. According to company sources, Tata Steel has judiciously maintained its debt level despite ongoing capex outlay during the past fiscal. Gross debt at the end of FY12 was lower than that at the end of FY11, in spite of `12,138 crore ($2,386 million) capex spend. This was achieved through proactively prepaying debt and assuming new debt only to the extent required. Total liquidity at the end of FY12 was `17,087 crore ($3,359 million) including `4,887 crore ($961 million) in undrawn credit lines, facilitating the planned capex program of the company. The net debt to equity ratio for the Tata Steel Group reduced to

38 Steel Insights, August 2012

1.16 at the end of FY12 from 1.55 at the end of the previous year. Indian operations Tata Steel’s Indian operations recorded its best ever production of hot metal, crude steel and saleable steel in FY12, approximately 4 percent higher than in FY11, the company said in its annual report. Crude steel production was at 7.1 mt that exceeded the nameplate capacity in a year, when the Indian steel industry was impacted on account of a paucity of raw materials and higher power and freight costs. Indian operations recorded its best ever sales of 6.6 mt, exceeding the previous best of 6.4 mt, in spite of sluggish market conditions prevailing, with interest rates remaining high throughout the year. Flat product sales registered a 5.6 percent increase, reaching 3.7 mt. Sales in the automotive segment crossed 1 mt with highest-ever skin panel sales of 0.06 mt. The company continued its efforts to increase the proportion of valueadded products and worked in tandem with auto customers, meeting stringent technical specifications. With the newly institutionalised corporate quality assurance system, the company achieved its best-ever quality performance.

Expansion projects The various expansion projects undertaken by the company includes the brownfield expansion at Jamshedpur where crude steel capacity is to be increased from 6.8 mtpa to 9.7 mtpa. The project includes setting up a pellet plant with a capacity of 6 mtpa, a new blast furnace with a capacity of 3 mtpa, a new LD Shop and a Thin Slab Caster and Rolling Mill of 2.54 mtpa to produce hot rolled coils. The expansion project also entails augmentation of the Noamundi and Joda iron ore mines and the setting up of two coke oven batteries with a capacity of 0.7 mtpa each. The second project for the company is the blast furnace rebuild at Port Talbot. The rebuild of Blast Furnace No.4 at Port Talbot began during FY12. The project, at an estimated cost of approximately £185 million, will enhance the campaign life of the No.4 Blast Furnace by 20 years. The company is employing the best available technology from within the Group and from leading international technology suppliers. The greenfield expansion project at Kalinganagar, Odisha is expected to provide an addition of 6 mtpa to the flat product capacity. The execution of the project is in full swing, with clearances required for project execution, including environmental clearance, having been obtained. Orders for major technological packages like blast furnace, sinter and coke plant, steel melt shop and hot strip mill have been placed. The site work is making steady progress. Major piling work of the blast furnace has been completed and approximately 1.3 lakh cubic metres of concreting work accomplished. Riding on the company’s current operations and successful completion of the expansion projects, Tata Steel is expected to achieve several milestones in the coming days as it is doing now and has done in the past. “There is no doubt in my mind that the same spirit and commitment will enable Tata Steel to take its rightful place in the industry as one of the most cost-efficient steel producers – as the supplier of choice in the markets it serves – by differentiating itself, its products, its processes and its service to the customer,” Ratan Tata said while commenting on the company’s performance in FY12. 


Corporate

JSPL terminates Bolivian contract Steel Insights Bureau

J

indal Steel & Power Ltd (JSPL) has terminated its contract for the El Mutún iron and steel project with the Bolivian government, after a meeting between the two parties failed to resolve outstanding issues. According to the Indian company, “the non-fulfillment of contract conditions on the part of the Bolivian government” was the reason the deal collapsed. The four pillars of the contract breach were: lack of availability to provide the requested natural gas to run the project; the $36-million bank guarantees charged; not decreasing the steelmaking quantity with the lower amount of gas; and demanding that Jindal maintain the same investment. JSPL requested 4m cubic meters/ day (cm/d) of gas as a last attempt to continue the project in a slimmed-down form, and Bolivia could supply only 2.5m cm/d. In a statement, JSPL said the termination comes due to the noninvestor friendly attitude of the Bolivian government. The original contract signed in 2007 called for the development of and iron ore mine, pelletizing plant (10 mtpa), DRI plant (6 mtpa) and steelworks (1.7 mtpa).

When JSPL outbid rivals like Arcelor Mittal in 2007 to win rights to develop the El Mutun iron ore mines in Bolivia, people of the Bolivia were very hopeful of the resultsas Jindal had promised to invest around $2.1 billion- making it the largest ever foreign investment into the small country. With reserves of over 20 billion tons, the EL Mutun mines are amongst the few iron ore mines that remain untapped. However, after a span of five years, Jindal has made an equally unceremonious exit from Bolivia with both sides blaming on each other. “Jindal was simply trying to make investments on the basis of our potential. They did not have their own capital, they were just speculating with stock markets and trying to invest on the back of that,” Bolivia’s mining minister Mario Virreira said. “Now we want to find a company that shows us they’ve really got the capital to invest in Bolivia,” he added. According to the company statement, the contract required a total investment of $2.1 billion. The main reason for ending the contract was the non-fulfilment of the contractual obligations on the part of the Bolivian government, it alleged. A lack of natural gas supply also weighed on JSPL’s decision, since it was demanding 10 million cubic metres per day (MCD), while the Bolivian government was willing to commit only 2.5 MCD.

According to JSPL, Bolivia had not signed an agreement for supply of natural gas to the company’s project. It was to sign an agreement for supply of 10 million cubic metres a day (mcd) within 180 days of signing of the project contract. “There is a strong sentiment among the people of Bolivia that Jindal should stay in Bolivia and invest. After watching recent interview of our CMD Naveen Jindal on a leading TV channel of Bolivia, 91 percent of the people surveyed wanted that the government of Bolivia should not allow JSPL to leave the country,” a company source said. Jindal Steel and Power Ltd said that it has set up offices and deployed manpower soon after entering into a contract with Bolivia in 2007. It has invested more than $90 million on this project and made commitments to invest another $600 million till March 2012 for purchase of technology, machinery and other equipment and advances to vendors. Jindal’s exit from Bolivia, therefore, clearly underlines the challenges Indian companies are facing abroad in their exploration for raw material security, according to market sources. 

Steel Insights, August 2012

39


SAIL, Kobe ink final pact Steel Insights Bureau

I

n order to take forward their proposal to set up a 0.5 million tons per annum (mtpa) iron ore nugget plant at the Alloy Steel Plant (ASP) of the Steel Authority of India Ltd (SAIL) in Durgapur, SAIL and Kobe Steel of Japan entered into a memorandum of agreement (MoA) in Tokyo which came as SAIL inked the final pact with Japan’s Kobe Steel. The facility entailing an investment of `1,500 crore will use Kobe’s specialised technology ITmK3 (iron making technology mark three) to produce nuggets to be shared equally by the partners for captive use, an official release said. ITmK3 technology has successfully replaced coal as an input material for iron making and is recognised for its low energy consumption and environment friendliness. The agreement was signed by SAIL chairman C.S. Verma and Kobe Steel president & CEO H. Sato in the presence of steel minister Beni Prasad Verma in Tokyo. “The ITmK3 technology will also utilise dump iron ore fines, disposal of which is an environmental issue,” the statement said quoting the steel minister, who also expressed hope that there will be more projects for the Indian steel industry with the help of Japanese technology. Kobe Steel is one of the prominent steel makers of Japan, which is the world’s second largest steel producing country. It is also one of the largest suppliers of alloy steels to Japanese automobile companies.

40 Steel Insights, August 2012

“ T h e S A I L- K o b e steel JV project will harness the strengths of both the leading steel companies. While SAIL will contribute land, iron ore and other engineering services for the project, Kobe Steel will provide the technology for setting up the plant and its operation,” the statement said. A joint venture company “SAIL-Kobe Iron India Pvt Ltd” in which SAIL and Kobe Steel hold equal equity, has already been incorporated. The raw material for the joint venture will be supplied from SAIL’s Gua mines in Jharkhand. The statement added that the partnership with Kobe gives “an opportunity for Indian steel firms to enter

SAIL disinvestment cleared The Cabinet Committee on Economic Affairs has (CCEA) approved the disinvestment of 10.82 percent equity of Steel Authority of India Limited (SAIL) out of government of India shareholding of 85.82 percent through an offer of sale of shares through stock exchanges as per SEBI rules and regulations. After this disinvestment, the government of India shareholding in the company will come down to 75 percent, according to a government release. The paid up equity capital of the company, as on March 31, 2012 was `4130.53 crore.

into strategic relationships with Kobe Steel so that strengths of respective companies could be leveraged.” SAIL and Kobe Steel had earlier signed a pact on March 30, 2010 for conducting a joint feasibility study for exploring and commercialisation of ITmk3 technology developed by Kobe for production of iron nuggets used for steel production. Kobe technology SAIL is exploring Kobe Steel’s technology to modernise its Visvesvaraya Iron and Steel Ltd (VISL) plant located in Bhadravati, Karnataka, according to information available with Steel Insights. At present, SAIL is in talks with this Japanese steel maker to float a joint venture to increase its steel output. “The Japanese steel major is doing technofeasibility study of all our plants, once we get the report, it will help us devise a strategy for VISL plant modernisation,” said C.S. Verma, chairman of SAIL. “The VISL plant in Bhadravati is well suited for making alloy steel and specialty steel. Also it is located close to the port and is well suited for exports,” he added. According to company sources, under short-term measures, without much capital investments, the deficiencies in the operations would be eliminated, which would give a impetus to the plant. Here, `80-90 crore is to be spent to upgrade the existing machinery to commence steel production immediately. However, under longterm measures, it is planned to build proper capacity to work at full efficiency by capacity addition. Under this plan, `600-700 crore will be spent to bring in modern steel making technology and machinery for exports. After the longterm measures are implemented, the capacity of saleable steel is expected to go up to around 320,000 tons a year. 


technology

I

Sanat K. Bhaumik

ndia is at the centre of all attention in the global steel world today as huge investments have been announced for capacity increase of all major existing plants and installation of new plants. This also leads to installation of stateof-the-art new rolling mills and strip processing lines as well as upgradation and modernisation of existing mills. With the purchase of United Engineering on January 1, 1995, Danieli completed its strategic acquisition of assets and technologies for flat products in the United States. This route began in 1991 with a joint venture with United Engineering, followed by another joint venture with Wean industries in 1992 and acquisition of the later in 1993. The merger of this centennial design experience with the most advanced R&D activities, led Danieli Wean United (DWU) to become the most innovative company in flat products equipment since the beginning. This spirit and experience enable Danieli Wean United to design and supply any kind of equipment in flat hot and cold rolling and processing, such as: • Hot Strip Mills (HSM)

• Thin Slab Casting and Rolling plants (TSR, fTSR, QSP & ETR) • Plate Mills including all plate finishing lines • Steckel Mills for strip and plate production plants • Cold Rolling Complexes • Tandem and Reversing mills for cold rolling • Pickling lines for carbon and stainless steel • Electrolytic Tinning Lines • Galvanising Lines • Annealing Lines • Colour Coating Lines • Skinpass Mills for hot and cold applications

42 Steel Insights, August 2012

DWU is a specialist for supply of trendsetting technologies and equipment for flat products production, from caster to hot mills to cold rolling mills and processing lines. In this paper, efforts have been made to highlight some of the special features and recent installations of Danieli Wean United for cold rolling mills and processing lines. Cold Strip Mills Danieli Wean United is recognised worldwide as a leader for engineering and manufacturing of complete cold mill complexes for carbon and stainless steels. Starting from hot-rolled coils, DWU processing lines and cold mills are able to produce finished products more than 2.0mtpy (depending on the product mix), meeting the requirements of the most demanding markets, such as automotive industry (both for exposed and non-exposed parts), white goods, packing, and construction. All DWU processing lines and cold mills have reached their target performances in extremely short time after startup, granting the customers a very fast return of investment. DWU offers a full range of tandem rolling mills to process materials up to a maximum thickness of 6.5mm from

“coil to coil” to “continuous” type for the production of sheet material in order to fulfill the highest customer’s requirements. 4-high or 6-high mill stand configurations are provided with the latest technology for thickness and flatness control, and excellent strip surface quality. They also ensure to achieve a final product with the required mechanical properties at the lowest investment costs without compromising the product quality, for medium and large production volumes and varieties. DWU have reference installations of 106 cold strip mills totaling over 1000 stands in the following areas: • Tandem Mills and CTCM (Continuous Tandem Cold Mill) • PLTCM (Pickling line and Tandem Cold Mill) • 2-stand Reversing Mills • Single stand Reversing Mills • Hot Skin Pass Mills • DCR Double Reduction Mills • Temper Mill • Combination Reduction Temper Mills • Stand alone Skin Pass Mills • Inline Skin Pass Mills DWU tandem cold mills can be


technology • Work Roll and Intermediate Roll bending • Bending blocks are provided for both positive and negative bendings • Positive bending max 720KN (per each roll neck) • Negative bending max 720KN (per each roll neck) • Work Roll and Intermediate Roll shifting

Pickling Line coupled with Tandem Cold Mills (PLTCM)

• The total stroke for intermediate roll shifting will be + 200mm with Danieli Wean United OSRT (Optimised Shaped Roll technology)

Continuous pickling line coupled with tandem mill provides significant quality, productivity, yield, and cost advantages, eliminating intermediate storages for pickled coils and the necessity of strip threading for each coil entering tandem mill. The combination of these two lines is a mix of high efficient features. Our innovative design for high-speed (400 mpm) Turboflo® pickling process section makes Danieli Wean United continuous pickling lines the fastest lines worldwide. 4-high and 6-high mill stand configurations ensure excellent quality results in terms of flatness and thickness control. Continuous process eliminates the necessity to thread the strip head end between two consecutive coils resulting in higher line productivity, reduction of off-gauge material and reduction of coil handling.

• Shifting of counter intermediate roll developed by Danieli & C in joint cooperation with Yanshan University. Hot Skin Pass Mills

provided for conventional, continuous, and pickle line coupled applications for production capacities of up to 2,200,000tpy. Regardless of the configuration, DWU mills are provided with state-of-the-art gauge and flatness controls for the production of commercial and exposed sheet products as well as tin plate. Depending on the product mix and mill configuration, DWU reversing mills (one or two stands) are capable of producing 150,000 - 1,000,000 TPY of commercial, exposed application and tin plate products. Danieli cold mills are supplied with 4hi, 6hi, 18hi and 20hi configurations. The 4hi and 6hi mills are equipped with Optimised Shape Roll Technology (OSRT). The New Danieli 6-high 3C mill concept allows a superior range of control range with an original design for roll crossing in a stand of six-high configuration. The operational flexibility and favorable distribution of forces specific to the Danieli 6-high 3C mill allows rationalisation in the use of the stand actuators resulting in lower production and maintenance costs and improved plant efficiency. The 6hi technology of Danieli incorporates the following major features in the mill:

its use is beneficial to increase quality and reliability of the end product. With a large reference of Hot Skin Pass Mills worldwide, Danieli is able to supply high quality and state-of-the-art plants to meet the present and future requirements of the ever changing market demand.

Today’s demanding market is pushing steel strip processors to a new high. The requirements for steel strips are of reliable consistent quality at competitive price. This market demand leads to development of newer grades of material at competitive cost. To minimise the overall cost of production for the end users, wherever possible they would prefer to use hot rolled coils over cold rolled coils. This necessitates production of hot rolled coils with tighter tolerances and much better surface finish. For example, the use of hot rolled strip for pressed components and tube making has initiated requirement of good shape, yield point suppression and specific texture. In the hot rolling process it is not possible to control these parameters due to the fact that rolling takes place at higher temperatures. However, the end products from hot skin passing are produced at ambient temperature where the properties of material are different than at elevated temperature. To meet the continuously increasing demand for higher quality hot rolled coils by the end users, the hot skinpassing is now widely accepted as the means of improving shape and properties of hot rolled coils especially with respect to strip flatness, elongation and surface roughness. Hot rolled coils from conventional hot strip mills or thin slab casting and rolling plants need further processing like recoiling and skin passing to reduce the rejection rate. When the strip is used to produce pipes, pressed steel components, etc.

Pickling Lines (PPPL/CPL) Danieli’s solution for the pickling lines includes Push-Pull Pickling lines (PPPL), stand alone Continuous Pickling Lines (CPL) and Continuous Pickling Section as a part of PLTCM. For such Pickling lines, DWU has an impressive reference list of 103 installations. A Push-Pull line can handle a wider range of products than continuous lines – both heavy and light gauge, high carbon and mild steel, and high strength low alloy (HSLA) steel. For these reasons, as well as their lower cost, these are mostly favoured by customers in the secondary steel plants. However, these Push-pull lines also have applications in major steel plants, where they can be used to complement continuous, high production units or to replace older, less productive lines. A recent Danieli Wean United pushpull line uses Turboflo® pickling process, which removes the oxide layer very effectively, for unmatched cleanliness on strip surfaces and edges. A two-high temper mill improves strip shape and

Steel Insights, August 2012

43


technology further enhances the breakup of oxide scale for faster pickling process. Several units provided can be moved in and out of the line: a dry lube system that applies protective coatings and press working lubricants, a slitter capable of making up to seven cuts depending on gauge and yield strength, and an adjustable-width side trimmer for fast width changes. A turret type recoiler eliminates time-consuming in-line banding. Such lines can be designed for an all-in-one workhorse that is engineered to deliver higher product yields. A stand alone Continuous Pickling Lines (CPL) or the Continuous Pickling Section as a part of PLTCM will comprise of a double pass entry section, Laser or Flash-Butt welder for strip joining, sixstrand entry horizontal accumulator, scale breaker (tension leveler), pickling section, exit strip accumulator, side trimmer, etc. All pickling lines supplied by DWU presently are provided with Turboflo® which has the following advantages: • Turboflo® can process the light gauge strip (0.7/0.8mm) at speeds up to 400mpm without concern for maintaining emersion, as this system offers a flat, straight through strip pass line. • Turboflo® offers the shortest possible pickling system to meet the established parameters for the pickling line. • Because of the low volume of pickle liquor contained in the line pickle tanks, the total tank can be quickly drained for any situation. • Because the need to control strip tensions for catenary is eliminated, high tensions can be utilised through the pickling section which results in excellent strip tracking and less total horsepower required. • Turboflo® is very thermally efficient and keeps hot fresh pickle liquor in contact with the strip surface at all times. • Turboflo® provides total isolation of the pickle liquor from tank to tank. • The unique cover design

products (Galvanised/Galvalume), and many of today’s demanding products. Coils can be produced in a wide range of properties that include ductility, coating weights, and surface treatment. Because of this experience, DWU produce more galvanising lines than all their competitors combined. As a world leader, DWU holds the records for many firsts in galvanising lines, some are: • First Cook-Norteman Lines • First Dedicated Zinc-Aluminum Line Pickling section of a DWU PLTCM

eliminates the surge of fluid due to high strip speed toward the exit end of the tanks. • The special cover design also captures the surging of the pickle liquor due to the high speed of the strip and re-circulates this pickle liquor to achieve more turbulence. The higher the strip speed, the greater the pickle liquor turbulent action becomes. • Turboflo® eliminates the high surging of pickle liquor due to the high speed operation. Consequently, it does not place the wringer rolls under any high fluid pressure. Therefore, the sealing of the wringer rolls is greatly simplified and maintenance is significantly reduced. Galvanising Lines (HDGL) Danieli Wean United is a world leader when it comes to designing and manufacturing quality galvanising lines (more than 105 galvanising lines supplied since 1948). DWU experience in galvanising extends to thirty-five countries, over six continents. DWU builds lines that can meet the most stringent galvanising specifications with strip widths up to 72 inches (1830mm) wide and beyond. These galvanising lines produce coated strips for use in automobiles (Galvanised/ Galvannealed), appliances, home-building, b u i l d i n g

Galvanising and colour coating line at Marcegaglia, Italy

44 Steel Insights, August 2012

• First Minimum Spangle Coating • First Moveable Coating Pots • First Steam/Air Knives to Replace Rolls • First High-Speed Scrap Bailers • First Strip Side-Notchers Continuous Annealing Lines (CAL) The continuous annealing process represents the ideal solution for processing cold rolled strip (ranging from commercial quality to highstrength steel) and black plate with high production rates, high yields and substantial energy savings with respect to batch annealing process. Danieli Wean United history of more than 30 annealing lines ensures top material qualities and high process flexibility for the production of a broad range of steel grades and dimensions. Excellent annealing results, in the automotive sector especially, are achieved thanks to fully automated temperature control, specific annealing cycles and rapid cooling system. The present generation CALs for autobody quality strip production will generally consist of coil receiving ant entry, a double pass entry section, welder for strip ends joining, vertical looper, electrolytic cleaning section, annealing furnace, exit vertical looper, skin pass and tension leveling section, horizontal and vertical inspection station, coiling section followed by coil delivery system. At present, DWU has an Exclusive


technology ALLIANCE AGREEMENT with EBNER, Austria for Automotive CAL furnaces. Such annealing furnaces have very sophisticated and fully automatic following heating and cooling zones to achieve the mechanical properties: • • • • • • •

Pre-heating section Heating section Soaking section Slow cooling section Fast cooling section An overaging section A controlled cooling section

Brief details of the two most recent Continuous Annealing Lines (CAL) for automotive / appliances quality strips are given below: Customer : Usiminas ( Brazil): Start up year 2000, strip thickness: 0.4 – 2.3 mm, maximum strip width: 1865 mm, Grades : HSS/automotive, Furnace capacity : 220 mpm, production 147 tph (Furnace supplier : Nippon Steel) Customer : I/N Tek ( USA): Start up year 1990, strip thickness: 0.4 – 2.0 mm, maximum strip width: 1650 mm, Grades : appliances/automotive, Furnace capacity : 450 mpm, Annual production 900,000 tpy (Furnace supplier : Nippon Steel) Colour Coating Lines (CCL) DWU colour coating lines respond to the growing demand for pre-coated sheets with high throughput rates and top product quality. They continuously coat hot rolled, cold rolled and galvanised steel strips with a variety of coatings in an almost endless array of colours, patterns, and textures, and can be supplied as stand-alone lines

or combined with in-line galvanising process. The coatings are precisely applied through roll coating machines on both sides of the strip that can be coated simultaneously with either the same or different type of coating. The typical configuration with separate coaters with quick colour change feature and two ovens allow maximum flexibility in applying one or two coats on each side of the strip. Further highlights of Danieli technology are high flexibility for processing different strip dimensions and coating compositions, precise coating thickness, special design and control of curing ovens for high efficiency, excellent quality and enhanced environmental solutions. Danieli Wean United has supplied 26 Colour Coating lines since 1962. The most recent installation is the state-of-the-art galvanising cum highspeed painting line for the production of galvanised and painted coils at Marcegaglia’s Ravenna Plant in Italy. This 350,000tpy (150,000tpy painted coils) line will process strips up to 1550mm width in the thickness range of 0.4 to 1.4mm. The major advantages of such combined line are the low investment costs, high production flexibility (producing either only galvanised, or galvanised and colour coated), low operating costs (less coil handling, packaging, degreasing, manpower needs), installation cost reduction, and lower environmental impact. Electrolytic Tinning Lines (ETL) Danieli Wean United tinning technology is characterised by either tinning or chromium plating or a combination of

both. Tin plate is mainly used in the packaging industry for its excellent corrosion protection, appearance, strength, light weight, formability, and resistance to attack by organic substances both for food and non-food packaging products. The long experience of more than 100 projects, both for new lines and revamping activities, guarantees that Danieli Wean United equipment represents the state-of-the-art for electrolytic tinning lines, including cleaning and pickling equipment, tension leveler, tin free steel (TFS) and tin plating equipment, and finishing equipment. An innovative electrolyte process has been developed to meet the highest demands for top quality products and for healthier and safer operations thus supporting the industry’s effort to produce quality steel at competitive costs. Conclusion Danieli Wean United today is the most innovative supplier for flat product equipment in the global steel industry by converting all their innovations into action. This innovaction (innovation + action) is further strengthened for smooth implementation of all projects with the in-house automation and process control systems. Danieli also have state-of-the-art manufacturing workshops in Italy, Austria, Thailand and China. This in-house manufacturing facilities and automation competence make Danieli capable to manage the full supply including mechanical, fluids, process and electrics & automation. This is the best solution to cover the responsibility of the process and to have quick learning curve for the benefit of the end users. With trendsetting technologies in rolling and processing developed over decades of experience as a partner of the steel industry, Danieli Wean United is in a unique position to provide the right selection of rolling and processing plants to cater to the stringent requirements of new steel grades with the product quality required in the presently growing market.  Sanat K. Bhaumik is senior vicepresident (flat products), Danieli India.

Single Stand reversing cold mills

Note: The views expressed here are those of the author and not of Steel Insights. The publication does not take any responsibility for the article in part or in full.

Steel Insights, August 2012

45


Feature

Stamp Duty Act revision to hit iron ore miners

T

Steel Insights Bureau

o add to the already existing woes of iron ore miners, the Goa cabinet has approved an amendment to the Stamp Duty Act under which mine owners will have to pay 15 percent of royalty for next 20 years for getting renewal of the lease. The amendment is expected to mop up a revenue of `2,500 crore for the state this fiscal, resulting in additional revenue mobilisation. However, this is not good news for the miners as it will push up the cost of production and hit their margins. “The decision of the Goa cabinet to impose an additional 15 percent royalty for the next 20 years as part of renewing mining lease will definitely increase the cost of production,� the Federation of Indian Mineral Industries (FIMI) said. The amendment Bill will soon be tabled in the Assembly in the ongoing monsoon session. However, the overall quantity of exports from the state may not suffer as Chinese appetite for ore is high, they said. Of course exports from Goa will become less competitive in comparison to Australia and other markets. Goa exports around 35-45 million tons (mt) of iron ore to major steel

46 Steel Insights, August 2012

producing nations, out of which the majority is shipped to China. While the country exported around 117 mt ore in FY10, it dipped to around 98 mt in FY11. The exports slipped to as low as 60 mt in FY12, but that was largely owing to the Supreme Court’s ban on mining in many parts of the country following illegal mining operations. As a result of this, shipments are set to fall further this fiscal. Shortage from Karnataka Shortage of iron ore supply from Karnataka is posing a challenge to steel and pellet-making plants to maintain their production levels. Companies, such as BMM Ispat Ltd, Kalyani Steels, Kirloskar Ferrous Industries Ltd and pellet-making companies like MSPL Ltd, Sesa Goa and Dempo, facing acute ore shortage, hold raw material inventory for just 20-45 days. With barely 3 mt of ore left of the 25 mt reserved for e-auctions in the state, these companies might have to either close operations or look for high-cost ore from other states if mining does not resume immediately in Karnataka. The

companies are also under huge financial stress due to the high cost of material at e-auctions. However, a large portion of the remaining stock at the auction is of very low-grade ore (50-52 percent Fe) is unusable for steel mills. Even JSW Steel and BMM Ispat, which have beneficiation plants to enrich the ore, cannot use such low-grade ore. BMM Ispat, which is the secondlargest steel maker after JSW in Karnataka, is planning to bring ore from Chhattisgarh and Odisha, industry sources said. Kalyani Steels, which operates a 700,000-ton steel plant, also in Hospet, is currently operating at a third of its capacity, sources said. The quality of ore in the auction is poor and have a high percentage of alumina and silica, and cannot be used to make pellets, sources said. JSW Steel is the only company which purchased 14 mt at the e-auctions and currently has stocks for two months. Sources said the mid-size and small steel mills are under huge financial stress as they are forced to buy ore at e-auctions paying higher cost. They would also face more financial difficulty if they are to bring ore from other states. Presently, the auctioned material in Karnataka costs `8,000 per ton at the factory site. Buyers have to pay 12 percent forest development tax, 10 percent royalty, 5 percent value added tax and logistics cost over and above the auction price. NMDC may pare prices Pressure is mounting on NMDC to pare its domestic prices for iron ore fines and lumps for the July-September quarter. Steelmakers are clamouring for a reduction in contract prices in line with the decline in international levels, fearing that NMDC could look to lift local prices on ore supply constraints in India. Essar Steel presently has a longterm agreement of about 8 mtpa of iron ore from NMDC. JSW Steel procures some 300,000 tons per month (tpm) of ore under long-term contracts with the miner for the Dolvi works. For the April-June quarter, NMDC supplied 64 percent Fe fines at `2,800 per ton and 64 percent Fe lumps at `5,500 per ton, both on a free-on-rail basis.


feature

India’s Q1 steel imports up 43%, China tops list Steel Insights Bureau

S

teel imports into India moved up by a staggering 43 percent during April-June quarter of 2012-13, even as the domestic manufacturers continued to face a demand slump. Total imports during the quarter stood at 2.151 million tons (mt), compared to 1.5 mt recorded for the same period last year. According to provisional data released by the Indian steel ministry, of the total imports, around 25 percent came from China. The volume of imports from the neighbouring country was up Break-up of steel imports by products (in ‘000 tons) Products Billets, Slabs Re-rollable scrap

Total 69.48 76.59

Bars & rods

173.83

Structurals

14.34

Rly materials Plates HR Sheets

6.25 194.67 42.49

HR Coil/strip

415.21

CR Coil/sheet

419.89

GP/GC Sheet/coil

115.98

Elect. Sheets TM BP Tin Plates

80.19 0.12 32.37

Tin Plates w/w

5.77

Tin free steel

15.09

Pipes

21.12

Alloy steel

468.05

Fittings

112.31

Misc. steel items Scrap

798.05 2,047.64

Pig iron

1.82

Sponge iron

0.15

H B Iron Ferro alloys Total Source: Steel ministry

0.13 64.31 5,175.85

75 percent to 0.577 mt, against 0.329 mt in the same period last year. Other major sources of imports were Korea, Japan, Ukraine and Russia. These countries together exported 0.950 mt during the period. Korea had a share of 18 percent while Japan had 13 percent share in India’s steel imports. HRC imports Japanese and Korean-origin hot rolled coil/strip imports into India continued to surge during the April-June quarter, accounting for more than 43 percent of total coil arrivals into the country during this period, according to the provisional data. In June alone, Korean coils imported into India totalled 37,040 tons while the volume of Japanese imports stood at 31,370 tons, together accounting for more than 54 percent of the total 125,940 tons of India’s HR coil/strip imports that month. H o w e v e r , sources said this trend may be shortlived as domestic steelmakers have started to press the government to review the lower import tariffs granted to the two nations under their free trade agreements with India. Imports of certain alloy and non-alloy flat steel products into India presently attract a 7.5 percent import tariff. However, coil imports from Japan and Korea are taxed at lower rates averaging 3-3.5 percent.

Top HRC exporters to India (in ‘000 tons) Country

April-June 2012

Korea

97.5

Japan

82.48

Russia

65.18

China

60.42

Iran

47.1

Spain

25.94

Others

36.65

Total

415.27

Source: Steel ministry

Scrap, alloy steel A break-up of the country’s imports by products shows that scrap and alloy steel made up most of the imports of steel material to India in the April-June 2012 period. These two categories together accounted for 49 percent of total import by India, the data showed. This was followed by CR coil/sheet and HR Coil/strip imports which together had a share of 16 percent. Fittings and miscellaneous steel items also had sizable quantity during the period. 

Steel Insights, August 2012

47


feature

Spot coking coal prices crash in July Steel Insights Bureau

T

he spot coking coal market in Asia experienced a “mini-crash” in July with prices for premium hard coking coal falling $26 per ton over the month to just $182 per ton FOB Australia. Traders caught off-guard with positions were seen discounting sharply to cut their losses, and transactions were heard as low as $185 per ton CFR South China for high-CSR low-vol coal. Sources attributed the sudden decline to a strong mining performance in Australia, coupled with weak demand from global steelmakers given current shaky steel market conditions. Most steelmakers appeared comfortable relying on contract volumes, and spot appetite was therefore limited. China, which is often seen as the market of last resort, was particularly reluctant to consider imports, especially given steep declines in its domestic coking coal prices. In addition, the end of the labour dispute between

BHP Biliton-Mitsubishi Alliance and its workers and the likely increase in output from the world’s largest seaborne exporter also impacted trade sentiments. The correction on second-tier HCC was less pronounced with prices easing by $11.50 per ton to $158 per ton FOB. PCI prices saw a similar decline, with deals heard concluded in China in the $120 CFR China for 15-20 percent VM, 10-11 percent ash material. Low offers were similarly heard within the Indian domestic market. Australian premium HCCs were heard offered at `12,000 per ton delivered to mill in east India. This equates to approximately $204 per ton CFR East Coast India.

12-Jun

224.00

224.50

180.50

151.00

129.00

114.50

13-Jun

224.50

225.00

179.50

151.00

127.00

113.50

However, despite the low offer price, no taker was forthcoming. However, sources said the reticence in the market is not expected to last long as the Indian majors cannot postpone buying for more than a month with inventory levels depleting fast. Going against the trend, some Indian companies have been quick to grab this opportunity in a soft market. SAIL has issued a fresh tender for 50,000 tons of low ash metallurgical coking coal while Metals and Minerals Trading Corporation of India (MMTC) issued two tenders for 120,000 tons of coking coal. It can be termed as testing the market before they come up with major requirement.

Coking coal prices FOB Australia Date

HCC Peak Down Region

Premium Low Vol

(in $/Ton) HCC 64 Mid Vol

Low Vol PCI

Low Vol 12 Ash PCI

Semi Soft

7-Jun

222.00

222.50

183.00

151.00

127.50

120.50

11-Jun

222.50

223.00

182.50

151.00

128.50

120.50

14-Jun

225.50

226.00

179.50

151.00

126.50

110.50

Met coke prices ease

19-Jun

225.50

226.00

179.00

148.00

128.00

109.00

20-Jun

226.00

226.50

179.50

148.00

128.00

109.00

26-Jun

225.00

225.50

179.50

147.50

130.00

110.50

Lack of buying appetite continued to characterize the metallurgical coke market. Coke with 12.5 percent ash was quoted at $360 per ton CFR east India. Seaborne metallurgical coke prices slumped in July in view of a lower trade heard done in the market. Meanwhile, in the domestic market an Indian coke-producing source said he was selling 62 percent CSR and 64 percent CSR coke at `21,500 per ton and `22,500 per ton ex-works east India, respectively. 

28-Jun

221.00

221.50

176.50

147.50

127.50

108.50

5-Jul

219.00

219.50

175.50

145.00

127.50

109.50

11-Jul

215.50

216.00

171.00

143.00

128.00

105.50

18-Jul

210.00

210.50

170.50

139.50

126.50

104.50

24-Jul

190.50

191.00

165.00

138.00

116.00

102.50

25-Jul

187.50

188.00

163.50

136.50

113.00

102.50

26-Jul

181.50

182.00

158.00

132.50

109.00

95.50

48 Steel Insights, August 2012


fEATURE

Ferro alloy prices remain weak Anondo Kumar Dutta

F

erro alloy prices remained under pressure primarily on low demand. Prices are also unlikely to recover very soon as construction activity is slow owing to the monsoons. Ferro-molybdenum The ferromolybdenum market is holding in the range of Rs 1,080-1,100/kg for long-term deals although some aggressive spot dealers are believed to have accepted bids at Rs 20/kg lower. However producers state that accepting lower bids is not considered because there is no cheap material in the market at the moment, especially from dealers of imported material and domestic converters are also not under pressure to lower quotation. However, prices are unlikely to increase as construction activity is on a slowdown due to monsoon season. In the export sector, mainstream prices are stable in the range of $1,020-1,040 per ton fob India but owing to more enquiries being received from South East Asian countries, producers appear to be less under pressure to consider lower bids and many have rejected foreign bids at below $1,030 per ton fob India.

Ferro-manganese With semblance of exchange rate stability of the Indian rupee, highcarbon ferromanganese producers are considering raising export quotations by about $30 per ton to in the range of $1,050-1,070 per ton fob Indian ports. In the domestic market, however, end user demand is yet to improve and many prospective buyers are holding off purchases until after the monsoon season. Current mainstream prices for HC Fe-Mn 75%min grade material are around `55,000 per ton ex works. Producers are unlikely to consider lower quotations on the argument production cost remains very high and coupled with limited availability of power for production, the market is far from being in a glut that create fear and tempt some producers to liquidate material. Ferro-silicon Ferrosilicon 75% grade material market is stable but leaning weak with current offer prices from producers in the range of `68,000-69,000 per ton ex-works and dealers continue to lament dwindling margins in order to remain competitive. However, others have argued that as coke prices have dropped around 12% from $108 per ton to $95 per ton in

the international market, ferrosilicon producers cannot continue to insist on bids at `68,000 per ton ex works. Dealers are under pressure as end-users continue to insist on lower bids because of low economic activity. Even in our neighboring countries, like in Bhutan, producers have had to adjust downward their offer prices by at least `1000 per ton, to kindle any sort of demand. Silico-manganese Current silico-manganese 60/14 prices are hovering below `53,000 per ton exworks, and at these levels it becomes extremely difficult for producers to achieve any reasonable margins because of high cost of production ranging from high power tariff to coking coke. Due to lack of demand, traders continue to lament inability to achieve Si-Mn 60/14 bids at `56,000 per ton ex-warehouse, just as export prices are stable in the range of $1,025-1,035 per ton fob Indian ports, with many dealers not sure if they would insist on higher bids given current high production cost. Meanwhile, reports have come in of a closure of a single silico-manganese furnace due to harsh operating environment and reduced business. Ferro-chrome Ferro-silicon exporters have lowered their prices on account of reduced Chinese demand. Prices of high carbon ferro-chrome dropped further to US 9193 cents/pound cfr China, on sluggish Chinese demand. Suppliers have highlighted the fact that they have a lot of stocks & hence, have decreased prices because demand is not good. These prices, the lowest since February 2010, are on the backdrop of a global slowdown of stainless steel productions. Traders said prices are likely to fall further next week, amid lackluster demand and oversupply in Asia, as seen from falling prices of chrome ore. Because rates for the current quarter have stayed lower than planned, stainless steel producers have not been able to consume what they have bought from term contracts. 

Steel Insights, August 2012

49


fEATURE

Maruti crisis casts shadow on auto sector growth Steel Insights Bureau

T

he prolonged labour unrest at Maruti Udyog Limited’s (MUL) Manesar plant has dealt a blow to the growth ambitions of the Indian automotive industry. Although car production and sales numbers for the first quarter (Q1) show satisfactory growth, the industry was concerned at the recurring labour problem at the country’s largest automaker. Besides, the steel sector too was peeved at the developments which might affect their performance, going forward. Trouble at Manesar, which began a year ago over labour union issues, escalated into a riot on July 18 evening when factory workers and management representatives clashed. One person was killed and about 90 injured in the incident. Auto production at Manesar was halted following the incident and

50 Steel Insights, August 2012

subsequently the plant had to be shut down. The estimated monthly loss due to the shutdown, as per reports, is around `2600 crore. Any halt in production at Manesar would impact Bhushan Steel Ltd (BSL), which supplies about 8,00010,000 tons per month of cold rolled close annealed sheets to M a r u t i , sources said.

supplies about 25 percent of its overall output to the auto sector. Any impact on its steel supplies to the automaker would be felt only if the issues at Manesar go unresolved for more than a fortnight. The Manesar plant has an annual production capacity of 550,000 units. Maruti operates a larger factory in Gurgaon (some 18 km northeast) with an annual production capacity of 900,000 units.

E s s a r Steel’s sales to Maruti comprise some 8-10 percent of its total sales to the domestic auto sector, sources said. The steelmaker

Appalled at the labour unrest, the Society of Indian Automobile Manufacturers (SIAM) has come down heavily on the factory violence. In a statement, S. Sandilya, president, SIAM condemned the totally unprovoked and barbaric act of violence and called upon the State and Central Governments to take very strict action against the guilty. “Industry cannot accept such acts of

SIAM condemns violence


for April-June 2012 shows production growth of 7.65 percent over same period last year when the growth recorded was 18.43 percent. The industry produced 1,700,675 vehicles in June 2012 as against 1,597,082 in June 2011.

M&M registers 24% growth

violence no matter what the grievances are. All IR issues have to be sorted out only through mutual discussion. We understand from Maruti that the way the violence was carried out, it was premeditated and planned act of violence which cannot be tolerated,” he said. Sandilya appealed to the workers of Maruti not to resort to violence but

Mahindra & Mahindra Ltd (M&M Ltd), India’s leading SUV manufacturer, has registered a rise of 24 percent in its auto sales which stood at 126,029 units during the first quarter of 2012-13 as against 101,997 during the first quarter of 2011-12, the company said in a statement. During June 2012, the company’s total auto sales stood at 41,322 units, as compared to 35,584 units during June 2011, recording an increase of 16 percent. The Passenger Vehicles segment (which includes the UVs and Verito) has registered a growth of 23 percent, having sold 19,792 units in June 2012, as against 16,053 units during June 2011. “We are happy to have achieved a growth of 24 percent in the first quarter of FY’13 given the pressures and various uncertainties which the auto industry is currently facing. We expect the demand for utility vehicles industry to continue during the current financial year,” said Pravin Shah, Chief Executive, Automotive Division, Mahindra & Mahindra Ltd. “Our opinion in the current industry scenario is to not have any major changes in the policies, including fuel prices, in order to create an overall positive sentiment,” he added.

to resolve issues through mutual discussions. Q1 growth 7.6%

at

Meanwhile, the June numbers s h o w e d continued growth in production, sales and exports. The cumulative production data

Domestic sales The overall growth in domestic sales during April-June 2012 was 9.94 percent over same period last year. In AprilJune 2011 the growth rate was 15.14 percent. The passenger vehicles segment grew at 9.71 percent during AprilJune 2012 over same period last year. Passenger Cars grew by 5.22 percent, Utility Vehicles grew by 50.85 percent and Vans grew by (-9.60) percent during April-June 2012 as compared to same period last year. The overall commercial vehicles segment registered growth of 6.06 percent in April-June 2012 as compared to the same period last year when the segment registered a growth rate of 14.10 percent. While Medium & Heavy Commercial Vehicles (M&HCVs) registered negative growth at (-11.99) percent, Light Commercial Vehicles grew at 19.92 percent. Three-wheeler sales recorded marginal growth at 0.83 percent in AprilJune 2012 against 4.92 percent during April-June 2011. Passenger Carriers grew by 5.66 percent during April-June 2012 and Goods Carriers registered degrowth at (-15.09) percent during this period. Two Wheelers registered a double digit growth of 10.51 percent during April-June 2012 against 16.89 percent during same period in 2011. Mopeds, motorcycles and scooters grew by 6.60 percent, 6.79 percent and 29.14 percent respectively in the period of April-June 2012. Exports During April-June 2012 overall automobile exports registered negative growth at (-1.22) percent. Passenger Vehicles, Commercial Vehicles & two wheelers grew by 14.00 percent, 7.98 percent and 2.63 percent respectively in April–June 2012. Three Wheelers recorded de-growth at (-40.73) percent. 

Steel Insights, August 2012

51


social buzz

Low demand, falling input costs may pull down steel prices Steel Insights has started a group on LinkedIn called India Steel Market Watch (ISMW). The readers are welcome to join the group and participate in daily conversations and surveys conducted by ISMW on the online forum. Steel Insights may, at its discretion, publish the results of such surveys and discussions for the benefit of a larger audience.

F

Steel Insights Bureau

or a while, weak market sentiment and low demand have been the bane for the Indian steelmakers. There was low growth in consumption and production volumes. There was also concern over margins. Against this backdrop, falling raw material costs should have come as a relief. But the industry is hardly overjoyed, say the members of ISMW, as the softness in raw material prices has raised speculations of a contagion effect on steel prices. According to forum members, the prevailing conditions point to continued slackness in steel markets in coming months. Moreover, the weak steel demand may resist any price hike in primary raw materials – coking coal and iron ore – going forward. The members quoted a metaljunction report which stated that weak demand and fall in prices have led to production cuts by Indian steel mills. In the midst of this the southern regions of the country witnessed p o w e r cuts. In the recent w e e k s , billet prices have fallen by `2,000 per ton to `29,000 per ton (basic),

52 Steel Insights, August 2012

while sponge iron and construction products are all suffering due to the monsoon. Commenting on the glum scenario, a member noted that a number of mills are currently working only at night in 12-hour shifts to take advantage of cheaper energy and some of them are buying only local sponge iron rather than importing expensive scrap. There is steel overcapacity at the moment caused by a slowdown in the economy resulting in thin volumes of scrap exports to India. Scrap tonnages purchased have slowed too, with traders reporting little appetite for the $420 per ton cfr Nhava Sheva by North American shredded scrap suppliers. Mills in India are unwilling to pay even $10 per ton lower than the asking price, reports said. Spot coking coal prices down

Meanwhile, spot coking coal prices have continued to fall as traders offered discounts to clear inventories even as low demand crimped purchases from steel makers, an Indian coke maker said. At one stage, price of premium

low-vol hard coking coal fell $9 per ton to $190 per ton FOB Australia, depicting a $17 per ton drop in just two days. Market sources said these offers were from traders seeking to liquidate positions. With prices falling so fast, bearish sentiment was widespread in the market. In the ports, premium Australian mid-vol was heard offered at `11,500 per ton to a mill in east India, which comes to around $196 per ton cfr Paradip. Despite the low offers there were no takers as none of the major buyers were in the market. The soft market conditions prevailing across the markets and is likely to affect each producer countries. John Packard, publisher at Steel Market Update, said, “One area we tend to miss here in the United States is the impact world prices for commodities are going to have ultimately on US prices. Spot prices for coking coal and iron ore having been sinking like rocks in water and many Futures traders believe US flat rolled prices will be affected as we move into late third and early fourth quarter. Ore exports

A member reported that India’s estimated iron ore exports will be at 39 million tons (mt) in 2012-13 from last year’s level of 55.2 mt because of increased regulatory scrutiny. However, on the brighter side, mining is expected to restart in Karnataka in the next couple of months. Earlier this month, the Karnataka government recommended to the Central Empowered Committee that work on eight iron ore mines be resumed. The Supreme Court is supposed to take up the case on the Karnataka iron ore ban in early August. There has also been some respite with regard to the ban on iron ore transportation in Goa, with the ban being lifted on July 24, members said, adding that there are some clauses in the order, which created ambiguity. 


logistics

Iron ore handling by major ports down 33.3% in April-June

M

Steel Insights Bureau

ovement of iron ore through the 12 major Indian ports showed a significant drop of 33.3 percent in April-June due to restrictions imposed on mining and a hike in export duty on iron ore. The major ports together handled 12.96 million tons (mt) of iron ore in the April-June period compared to 19.45 mt handled in the same period last year, as per data released by the Indian Ports Association (IPA). Mormugao port handled the highest volume of 7.26 mt of iron ore in AprilJune. This volume, however, was about 25 percent lower than the iron ore traffic moved through the port in the same period last year. According to the data, the country’s major ports handled a total of 7.52 mt of coking coal in April-June period, down 11.04 percent as compared with 8.46 mt handled in the same period last year. The 12 ports have handled a total of 138.51 mt of traffic during the first three months (April-June) of 2012-13, 5.49 percent lower than 146.56 mt recorded during the same period last year. Movement of container traffic in terms of tonnage showed an increase in the April-June period, however, in terms of TEUs, it declined during the period. The major ports handled 30.66 mt of tonnage and 1.94 million TEUs in AprilJune period compared to 29.89 mt of

54 Steel Insights, August 2012

around 4.33 mt in April-June period. New Mangalore port handled the highest quantity of 1.66 mt of coking coal during the period. Movement of coking coal through Paradip, Kolkata, Visakhapatnam and Traffic handled at major ports (During April-June, 2012* vis-a-vis April-June, 2011) Mormugao ports declined during the period when compared to the (*) Tentative (in ‘000 tons) corresponding period last April to June traffic % Variation year. Seven major ports Ports against prev. showed positive growth 2012* 2011 year traffic in traffic handling during KOLKATA the April-June period of the current fiscal, while Kolkata Dock System 2743 3139 -12.62 the remaining five showed Haldia Dock Complex 7270 8737 -16.79 negative growth on a yearTOTAL: KOLKATA 10013 11876 -15.69 on-year basis. In terms of growth, PARADIP 11741 14637 -19.79 Ennore port topped the list VISAKHAPATNAM 14895 18642 -20.10 with a record 34.72 percent ENNORE 4175 3099 34.72 increase in cargo throughput. Kandla port’s growth was CHENNAI 13652 15096 -9.57 lowest at about 0.09 percent V.O. CHIDAMBARANAR 7274 7007 3.81 during the period. In terms COCHIN 4989 4385 13.77 of traffic volume, Kandla port clinched the top rank with a NEW MANGALORE 8611 8531 0.94 cargo volume of 21.16 mt MORMUGAO 9768 12102 -19.29 recorded for the period. MUMBAI 15453 13586 13.74 The Vishakhapatnam port registered the highest JNPT 16785 16457 1.99 decline of 20.1 percent in KANDLA 21163 21143 0.09 traffic handling during the TOTAL: 138519 146561 -5.49 period due to fall in iron ore export.  Source:IPA

tonnage and 1.95 mt of TEU in the same period last year. Among the major ports, Paradip port had the distinction of handling the highest volume of thermal coal of


Logistics

Railways commodity freight revenue down m-o-m in June The Railway’s revenue from transportation of coal fell to `3,017.4 crore in June from `3,194.66 crore in May. The Railways transported 39.26 million tons (mt) of coal in June compared with 41.62 mt transported a month ago. Revenue from transportation of iron ore for exports, steel plants and for other domestic user in June fell to `672.1 crore, down 1.2 percent from `680.29 crore in May. However, the quantity of iron ore transported rose

Steel Insights Bureau

T

he Indian Railways’ revenue earnings from commodity-wise freight traffic fell month-on-month in June due to lower transportation of coal and cement. Revenue earnings from commoditywise freight traffic during June 2012 stood at `6,925.5 crore, down 3.75 percent compared with `7,195.62 crore earned in May, according to information available with Steel Insights.

Commodity-wise revenue Commodity

Quantity (In mt)

Earning (`cr)

June’11

June’12

June’11

June’12

(i) for steel plants

3.4

3.83

145.26

222.99

ii) for washeries

0.15

0.1

2.05

0.98

23.14

25.26

1513.49

2101.51

8.97

10.07

499.86

691.92

35.66

39.26

2160.66

3017.4

1.19

1.29

87.61

130.34

(i) from steel plants

2.09

2.31

272.35

402.18

(ii) from other points

0.62

0.58

54

45.09

(iii) Total

2.71

2.89

326.35

447.27

(i) for export

1.08

0.58

287.33

140.99

(ii) for steel plants

3.69

5.19

117.49

228.16

(iii) for other domestic users

4.04

3.84

257.82

302.95

(iv) Total

8.81

9.61

662.64

672.1

Cement

8.33

8.15

513.35

650.82

Foodgrains

3.37

3.74

332.67

527.1

Fertilizers

4.18

3.39

323.34

338.27

Mineral Oil (POL)

3.55

3.49

311.12

415.3

(i) Domestic containers

0.66

0.63

68.07

65.46

(ii) EXIM containers

2.28

2.66

191.65

231.12

(iii) Total

2.94

3.29

259.72

296.58

Balance other goods

5.69

5.32

382.54

430.32

76.43

80.43

5360

6925.5

Coal

(iii) for thermal power houses (iv) for public use (v) Total Raw material for steel plants except ore Pig iron and finished steel

Iron ore

Container Service

Total revenue earning traffic

to 9.61 mt in June from 9.59 mt in the previous month. Revenue from transportation of cement in June stood at `650.82 crore (8.15 mt) from `761.79 crore (9.53 mt) in May, while that from foodgrains transportation rose to `527.1 crore (3.74 mt) in June from `474.82 crore (3.33 mt) in the previous month. The Railways revenue from transportation of fertilisers in June rose sharply to `338.27 crore (3.39 mt) from `253.16 crore (2.64 mt) in May. Revenue from transportation of petroleum oil and lubricant (POL) in June stood at `415.3 crore (3.49 mt), while the same from pig iron and finished steel from steel plants and other points was `447.27 crore (2.89 mt). Revenue from container services was `296.58 crore (3.29 mt) and from transportation of other goods was `430.32 crore (5.32 mt). 

Steel Insights, August 2012

55


macro outlook

INR vs USD, Yen

Steel Insights Bureau

73 71 69 67 65 63 61 59 57 55 53 51 49 47 45 43

89 84 79 74 69

Wholesale price index (Selected categories)

USD

220 210

YEN

GBP

Source: rbi

200

The Indian rupee fell to another record low against the US dollar during last week of June. This movement which started in September last year has seen the Indian unit losing more than 20 percent of its value without any consolidation in sight. With the US dollar rallying against most Asian currencies over the week, the Indian unit remained the under performer in the region.

190 180 170 160 150 140 130 120

320000

110

315000

Foreign Exchange Assets

1700000 1650000

PRIMARY ARTICLES FUEL & POWER Steel

Source : OEA, GoI, Ministry of Commerce & Industry

The wholesale price index (WPI) (Base 2004-05=100) for the month of June 2012 rose by 0.18 percent and stood at 164.2 (provisional) from 163.9 in May (provisional). The index for manufactured products rose to 144.8 (provisional) in June 2012 from 144.3 in May 2012.

Index of Industrial Production 205

1600000

305000

1550000

300000 295000

1500000

290000

in Rs crore

ALL COMMODITIES MANUFACTURED PRODUCTS Basic Metals Alloys & Metal Products

in million $

310000

1450000

285000

1400000

280000

in Million $

in Rupees crore

Source: rbi

India’s foreign exchange reserves rose by $589 million in the week ended July 20 compared with a fall of $872 million in the previous week. As on July 20, the forex reserves, comprising predominantly foreign currency and gold, stood at $287.34 billion. The reserves stood at $286.75 billion for the week ended July 13.

185

165

Inflation rate in India 11.00%

145

10.00% 125

105

INR vs GBP

Macroeconomic indicators of India

INR movement against select major currencies

9.00% 8.00% May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Mining & Quarrying Electricity

Manufacturing General Index

Source : Govt. of India, MoSPI

The index of industrial production (IIP) during May 2012 stood at 170.2 recording a rise of 3.34% from a figure of 164.7 in April 2012. Industrial production also rose by 2.4% as compared to May 2011, entering positive territory after two straight months of decline, but not enough to induce cheer among experts who said that it did not materially alter the picture of an economy in the grips of a severe slowdown. The data for May showed that the recovery in the industrial output was primarily helped by a small recovery in the manufacturing sector, which grew 2.5% in May after contracting 1.25% in the preceding month.

56 Steel Insights, August 2012

7.00%

9.51% 9.78%

10.00%

9.87%

9.46%

9.36% 7.74%

7.56%

7.69%

7.23%

7.23%

7.55% 7.25%

6.00% 5.00%

Source : OEA, GoI, Ministry of Commerce & Industry

Inflation rate in India for the month of June slowed to its lowest level in five months of 7.25 percent versus 7.55 percent in May. The easing of inflation, helped by slower increases in fuel prices, has added to pressure on the Reserve Bank of India from business leaders to cut interest rates to help revive the lacklustre economy.


market report

Global crude steel production down 2.04% in June Sumit Kedia

W

orld crude steel production for the 62 countries reporting to the World Steel Association (Worldsteel) was 127.9 million tons (mt) in June 2012, down 2.04 percent as compared to 130.566 mt in May 2012. However crude steel production for June 2012 was lower by just 0.1 percent compared to June 2011. In June 2012, Asia produced 83.437 mt of crude steel, an increase of 1.45 percent over June 2011. The EU produced 14.732 mt of crude steel in June 2012, down by 5.59 percent compared to the same month of 2011. North America’s crude steel production in June 2012 was 10.204 mt, 2.81 percent higher than the corresponding month of 2011. China, the single largest producer, produced 60.213 mt of crude steel in June this year, an increase of 0.47 percent as compared to the corresponding period in 2011, when production stood at 59.932 mt. However m-o-m production

saw a fall of 1.67 percent as compared to May’s produce of 61.234 mt Elsewhere in Asia, Japan produced 9.199 mt of crude steel in June 2012, an increase of 3.53 percent compared to the same month last year. India’s production for June 2012 stood at 6.38 mt, up 7.05 percent compared to June 2011. South Korea produced 5.895 mt during the same period, a 4.05 percent increase on the same month Steel capacity utilisation ratio 2011. Overall, Asian markets, in comparison to January-June 2011 recorded a 0.96 percent increase in production of crude steel as the region closed the January-June 2012 period with crude steel production of 492.585 mt. In the EU, Germany produced

World crude steel production European Union (27) Other Europe C.I.S. (6)

(in ‘000 tons)

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

14,039

14,157

15,763

14,945

15,300

14,732

3,357

2,907

3,342

3,090

3,307

3,154

9,402

9,064

9,365

9,000

9,305

9,265

North America

10,477

10,209

10,860

10,727

10,639

10,204

South America

3,743

3,790

4,211

4,130

3,990

3,764

Africa

1,201

1,202

1,299

1,256

1,282

1,235

Middle East

1,698

1,661

1,625

1,736

1,795

1,648

Africa/Middle East

2,899

2,863

2,924

2,992

3,077

2,884 60,213

China

56,733

55,883

61,581

60,575

61,234

India

6,100

5,700

6,200

6,000

6,200

6,380

Japan

8,630

8,612

9,324

9,077

9,228

9,199

South Korea

5,774

5,438

6,095

5,909

5,973

5,895

Taiwan, China

1,683

1,718

1,859

1,783

1,840

1,750

78,920

77,351

85,059

83,343

84,475

83,437

Asia Oceania Rest of the world except China World

58 Steel Insights, August 2012

3.729 mt of crude steel in June 2012, a decrease of 4.0 percent on June 2011. Italy’s crude steel production for June 2012 was 2.424 mt, down by 7.9 percent on June 2011. France’s crude steel production for June 2012 was 1.34 mt, an decrease of 2.1 percent compared to June 2011. Spain produced 1.275 mt of crude steel in June 2012, 8.8 percent lower than June 2011. EU’s total production between January-June this year stood at 88.937 mt, a decrease of 4.55 percent as compared to JanuaryJune 2011. However, compared to May 2012, production dropped by 3.71 percent. Russia recorded a rise in production of 0.31 percent in June producing 5.78 mt over last year, and Ukraine witnessed

490

454

459

480

473

460

66,594

64,912

70,402

68,132

69,332

67,687

123,327

120,795

131,983

128,707

130,566

127,900

a production rise of 3.39 percent to 2.87 mt of crude steel over June 2011. Turkey’s crude steel production for June 2012 was 2.936 mt, an increase of 3.98 percent compared to June 2011. The US produced 7.304 mt of crude steel in June 2012, up by 0.8 percent on June 2011. Brazil’s crude steel production for June 2012 was 2.749 mt, 8.49 percent lower than June 2011. The world crude steel capacity utilisation ratio for the 62 countries in June 2012 rose slightly to 80.4% from 79.7% in May 2012. Compared to June 2011, it was 2.5 percentage points lower. It is to be noted that the March to June 2012 data covers 62 countries against 64 in March to June 2011. In January and February 2012, only 59 countries are covered as three African countries, Algeria, Libya & Morocco while two Middle East countries Iran and Qatar did not provide monthly production statistics. 


Market Report

International flat & long product markets

Lukewarm demand keeps prices soft

to receive some orders for HRC from long-term relationship clients. According to sources, HRC export orders shrank by almost 70 percent from March levels, but steel companies cannot cut prices much further from current levels due to cost concerns. US sheet prices move up US sheet prices appear to be moving up, backed by reports of coming scrap price hikes, and bolstered by another price rise announcement by AK Steel. Hotrolled coil is up about $10/short ton from last assessment to $615630/s.t ex-works midwestern US mill. Coldrolled coil is similarly up $10 to $715-730/s.t, same basis. Shredded scrap is currently at $340345/long ton delivered, midwestern US mill. AK Steel, which hinted at another sheet price hike announcement while discussing its Q2 earnings announced it was increasing current spot market base prices for all carbon flatrolled products by $40/s.t, effective immediately with new orders. Turkey in wait-and-watch mood

M

Steel Insights Bureau

ajor international flat steel producers witnessed subdued demand last month, which led to either a fall or stagnation in prices. Industry sources agreed that the current trend is likely to persist for some time. The slowdown in economic growth is pressuring domestic demand and hurting market sentiments. Mills are offering discounts to keep their stocks rolling in a market characterised by either low or no demand. The only good news in the market was that the US sheet prices appeared to be moving up, backed by reports of ensuing scrap price hikes, and bolstered by another price rise announcement by AK Steel. Chinese plate prices fall Export prices of Chinese 20mm thick boron-added commodity-grade plate have dropped another $10 per ton though indications are that transaction

60 Steel Insights, August 2012

volumes were up following aggressive sales by the Chinese mills. Traders and plate sales officials from the domestic steel mills reported doing deals at $540-550 per ton fob China as of July 27, as against $550-560 per ton at July 13. This was also down $45-50 per ton from early this month. Plate prices have been on the decline both in domestic and overseas markets, mainly due to weak demand and overall pessimism about market prospects for rest of this year, sources said. On the other hand, poor overseas demand has led prevailing export prices of Chinese hot rolled coil grade SS400B 3mm thick and above to continue tracking downwards to $560-575 per ton fob, market sources said. According to traders, there were hardly any closed deals for HRC in the recent times. Meanwhile, another export dealer said he has stopped offering prices, saying it was better to take holidays until buying comes back. In some cases companies continued

Flat rolled steel market players in Turkey will be in a wait-and-watch mood until mid-August when Ramadan comes to an end and market direction becomes clearer. Product prices are expected to remain flat until then. Most Turkish flats producers have closed their order books for September, and are in no hurry to accept bookings for October. The latest price for hot rolled coil was $630 per ton ex-works. Demand is very weak in end user markets, so steel market players are planning to continue holding minimum stock until at least August-end in order to minimise risk. European plates under pressure A number of new offers from Indian and Chinese plate suppliers into southern Europe have put further pressure on the European plate market, as demand is quiet due to the summer holidays. With the latest Euro depreciation against the dollar the market was expecting imports to become even more uncompetitive, but sources believe the plate market is suffering across the board and this is triggering price decreases from Asia.


Market Report

A trader in the area confirmed transactions at €510 per ton cif southern Europe and commented that the market is “getting depressed”. Italian re-rollers are also under pressure and are believed to be selling at €510-530 per ton exworks base. Trade slow in UAE Flat rolled steel trade in the United Arab Emirates is very slow due to Ramadan, uncertainty over the future of prices and a lack of steel consuming projects. Product prices are stable, and there are no expectations for this to change in the new future. Hot rolled coil import offers are at $600-630 per ton cfr UAE. Buyers are not willing to purchase any material for the time being, as price movement is unpredictable. Some producers claimed prices have bottomed; however, some discounts have been heard offered. Long product market The international long steel market continued to remain under stress as demand remained low. In North China rebar prices remained depressed and Turkey’s rebar makers remained apprehensive on reports of low Chinese offers. The European engineering market also remained in a gloomy state. Looking towards August, market sources agreed that with the holiday season, the situation is likely to remain

62 Steel Insights, August 2012

as it is, or stagnate even further, until market participants return to business at the end of August. North China rebar prices depressed Hebei Iron & Steel (Hegang), the leading construction steel producer in northern China, has slashed its July contract price for rebar and wire rod but the settlement price remained above spot prices and this caused market dealers

in Beijing, suffering from half-a-month of continued price falls, to raise their offers. Hegang sliced RMB 340 per ton off of its July rebar contract price, leaving 1825mm diameter HRB335 rebar at RMB 3,760 per ton, while 18-25mm diameter HRB400 rebar was cut by RMB 320 per ton to RMB 3,820 per ton. 6.5mm Q235 wire rod prices declined by RMB 360 per ton to RMB 3,700 per ton, all with 17 percent VAT. On top of the cuts, the mill promised to award an additional RMB 20-60 per ton (depending on region) in August for agents which meet their booking targets for both July and August. Market dealers in Beijing followed the announcement by raising offers by RMB 10-20 per ton to approximately RMB 3,710-3,750 per ton, with 17 percent VAT, for Hegang-sourced 1825mm diameter HRB400 rebar. Market participants suggested that it is too early to see how strong the rebound would be and some were almost certain that prices will drop again after a shortlived rebound. Meanwhile, 150x150mm Q235 billet prices from major mills in Hebei province’s Tangshan city, remained stable at about RMB 3,280 per ton exworks, with 17 percent VAT and on a cash-payment basis. Europe prices continue to drop The European engineering steel market has slipped into an even more gloomy state since last month, when prices began softening amid weak demand. Offers for commodity grade C45 (50150mm) hot rolled bar have decreased to $610-620 per ton delivered for August. Demand is weak and EU mills are struggling as no new orders have come in, and prices have dropped by $1030 per ton in the region. Meanwhile, Russian importers now have too much material and since the beginning of this week have started offering it into Germany, undercutting market prices. According to EU traders, mills are grappling with overcapacity in the market. Market sources said that with the holiday season, the situation is likely to remain the same in August, or stagnate even further, until market participants return to business at the end of the month.


Market Report were because of seasonal slowdown due to monsoons, expensive cement which has discouraged new construction activities, liquidity crunch in the market as monsoon has arrived late this time, poor sales at retail counters and uncertainty on BIS standards. In the last two weeks, billet prices have fallen by `2,000 per ton. These levels were seen in September last year when M.S. billet was being traded at `30,700 per ton and rebar in the range of `33,400-500/MT (ex-works). Falling steel prices across the globe is another factor weighing on weak demand. Many producers in Durgapur are planning to stop production if buying volumes show no signs of improvement. Analysts say that buyers are not ready to place any bookings, even for low priced Billet as downward trend of prices continue.

Domestic Flat & Long Markets

Weak demand to keep prices soft

Price Trend as observed in the auction held at Metal Junction for Flat Products Following graphs show the price trend observed in the auction services of metaljunction for the months of June & July 2012 for different HR and CR products. Anondo Kumar Dutta

I

n the flat products segment, Indian buying interest for imported hot rolled coil has been rising lately, with some importers beginning to feel a seasonal pickup in domestic demand and prices. Transaction levels in the domestic coil market presently average `35,00035,500 per ton ex-works for Grade A/B structural HRC, 3mm thick and above. Steel majors, including SAIL have kept their prices stable; though have increased discounts on bulk purchases. However, in the import market, offers for Chinese-origin 3mm thick and above SS400 HRC presently average $570575 per ton cfr, including $30-35 per ton freight, for September shipment. The recent flurry of offers from China, accompanied by steadily declining prices, is tempering this enthusiasm as importers fear prices could fall further. Buyers also remain concerned at how New Delhi’s imminent quality control regulation, set to take effect from September 12, might impact coil imports.

64 Steel Insights, August 2012

Long product market Billet offers across India are hovering around a 10-month low due to sluggish demand in structural steel and rebar markets. The main reasons for downturn

Outlook The flat steel segment has seen a downtrend in both hot rolled and cold rolled sections. Prices have fluctuated though towards the end of the month

Percent change for hot-rolled flat products (m-m, q-q, y-y basis) Products Cobble Plate

June ’12 Price (Avg.)

July ’12 Price (Avg.)

% change (M-M)

% change (Qtr-Qtr)

% change (Yr-Yr)

31700

31361

-1.07

1.62

6.01

Def. Plate

29779

28036

-5.85

-7.47

3.58

Def. HR Plate

32230

28549

-11.42

-8.97

0.66

Semi Rolled Plate

30558

29941

-2.02

-3.72

13.22

--

31100

--

-9.15

5.63

Def. HR Sheet

Percent change for cold-rolled flat products (m-m, q-q, y-y basis) June ’12 Price (Avg.)

July ’12 Price (Avg.)

% change (M-M)

% change (Qtr-Qtr)

% change (Yr-Yr)

Def. CR Coil

35368

34150

-3.44

8.56

6.13

Def. CRNO Sheet

35398

34723

-1.91

5.91

-0.78

CR Coil End SPM-I

34838

33994

-2.42

-0.81

16.54

CR Sheet Cutting

30143

28518

-5.39

-10.70

--

--

--

--

--

--

Products

Def. CR Sheet


Market Report Percent change for long products (m-m, q-q, y-y basis) June ’12 Price (Avg.)

July ’12 Price (Avg.)

% change (M-M)

% change (Qtr-Qtr)

% change (Yr-Yr)

Defective Billet

32027

30574

-4.54

-7.51

6.39

Plate Cutting

32365

29215

-5.44

-13.40

8.62

MM End Cutting

30895

26909

-5.76

-6.03

6.65

Rejected Bloom

28553

30116

-6.95

-7.09

5.69

of July as traders looked to close the month with as few deals as possible. Apart from HR plates which were able to recover some of the lost grounds, all other HR products dipped by 3-6 percent over a month. In CR products, CRNO sheets have shown some fluctuations towards the end of the month. However, the other cold-rolled products saw a downtrend of 2-5 percent in prices. The future of imports is uncertain as traders are yet to receive clarity on BIS standards of imported coils.

reduce production much below their capacities. The future seems uncertain as these factors are not expected to go away in the next few weeks. However, as stocks deplete and producers refusing to drop prices, a marginal increase in prices is definitely on the cards. Steel prices will

Long Products Price Trend 35000

33000 Wtd. Avg. Price(Rs./MT)

Products

31000

29000

27000

25000

Price trend as observed in the auction held at metaljunction for long products HR Products Price Trend Following graph 36000 shows the price trend observed in 34000 the auction services 32000 of Metal Junction for the months of 30000 June & July 2012 for different long 28000 products.

Defective Billet

Wtd.Avg.Prcie (Rs./MT)

Defective HR Plate-Rourkela Cobble Plate Def. Chequered Plate

Semi Rolled Plate Defective HR Plate-Bokaro

Defective Plate HR Sheet

Price in `/t is basic

CR Products Price Trend 37000

35000 Wtd.Avg.Price (Rs./MT)

The long product market has seen prices move in tandem with the flat steel market. With multiple factors plaguing the demand of the long products, the scenario seems to be washed away in the coming few weeks. Heavy rains, increased prices of construction m a t e r i a l s , liquidity crunches and decreased construction activities have c o m p e l l e d producers to

33000

31000

29000

CR Coil End from SPM - I UACE from HDGL

Rejected Bloom

Plate Cutting

Price in `/t is basic

26000

Outlook

MM end Cutting

Defective CR Coil Defective CRNO Sheet

Price in `/t is basic

remain soft through August as weak global demand and the construction industry’s monsoon sluggishness put pressure on prices. According to the Centre for Monitoring Indian Economy (CMIE), the softening of steel prices – which began in April due to the slowdown in demand for steel in Europe and China – will continue at least till September. Steel companies have already reduced prices of finished products by 0.5-1 percent in July and the cuts would have been deeper had it not been for the slightly stronger domestic demand and a very weak rupee which diluted the impact. Steel production in Punjab is already set to fall by about 80 percent in coming days owing to the state’s recent move to ration electricity supplies to the sector. In late July, Punjab State Power Corporation Ltd announced that owing to insufficient rains, high temperatures and high demand, it will switch off supplies to electric arc furnaces, induction furnaces, and rolling mills for three days a week to divert power to agricultural sector. The same story is said to be true for other places of the country, following electricity supplies being diverted to more important sectors. 

Steel Insights, August 2012

65


Market Report

Domestic raw materials market

Scrap prices likely to remain flat and weak end users demand 38000 have affected pig errous scrap offers continued to iron prices across remain flat for the last two weeks 34000 all regions of the of July as suppliers were unwilling country. Primary to drop their prices due to liquidity producers have problems. HMS (80:20) is currently 30000 lowered their offers being offered at Rs 24,500 per ton by Rs 400 per ton (basic). Though buyers are asking for 26000 and currently, prices Rs 500-1,000 per ton discounts, scrap are hovering at suppliers are hesitant to cut the offers. around Rs 24,600A liquidity problem continues to exist 22000 25,000 per ton exin the market and scrap prices are likely ek 1 ek 2 ek 3 ek 4 ek 1 ek 2 ek 3 ek 4 2 We un'12 We un'12 We un'12 We 2 W e ul'12 W e 2 We 2 We J ul'1 J J ul'1 J ul'1 J un'1 J J J works, depending to remain at current levels, according CR Coil End Side-End Shearings CR Gas Cut on transaction to analysts. Scrap tonnages purchased WRM Material Turning & Boring Coil End Cutting volumes. Bids for have slowed, too, with traders reporting domestic traders little appetite for the $420 per ton cfr Price in ` per ton is basic are currently being Nhava Sheva indication given this week quoted below the by North American current domestic levels. shredded scrap Ingot, M. Scrap Trend Few project orders from the 37000 suppliers; mills in government, liquidity crunch in market 36000 India are unwilling and late payment issues is likely to to pay even $10 35000 keep pig iron markets dull for some per ton lower than 34000 more time. In the export front, Stemcor the asking price. In 33000 posted the highest-priced bid in MMTC’s the northern part of 32000 August 2 tender for pig iron at $408 per the country, ferrous 31000 ton fob India. Traders believe that MMTC scrap demand 30000 has yet to award the cargo. They say remains subdued 29000 that the sentiment in the market is soft on account of 28000 because spot iron ore prices are falling power cut issues. 27000 in the Far East. 1 2 3 4 5 1 2 3 4 1 2 3 4 k k k k k k k k k k k k k e e e e e e e e ee ee ee ee ee We We We We We We We We 2W 2W 2W 2W 2W Following graph shows the price 2 2 2 2 2 2 2 2 '1 '1 '1 '1 '1 1 1 1 1 1 1 1 1 Pig iron ' ' ' ' l' l' l' l' y y y y y n n n n Ju Ju Ju Ju Ma Ma Ma Ma Ma Ju Ju Ju Ju trend observed in the auction services Ingot at Ghaziabad Ingot at Raipur Ingot at Mandi Lower priced pooled Ingot at Mumbai M.Scrap at Mandi of Metal Junction for the month of June iron, reduced & July 2012 for different scrap products. production capacity, Source: NCDEX falling ingot prices Outlook Price Trend of ingot, melting scrap The secondary scrap steel market has Ingot at Ingot at Melting Scrap seen a marginal drop across all major Ingot at Mandi Ingot at Raipur Ghaziabad Mumbai at Mandi products in the month of July. Producers Jun’12 Week 1 35140 35132 32296 33736 30140 expect to keep prices stable and are reluctant to give any discounts; they say Jun’12 Week 2 34409 35114 31950 33217 29409 materials are being sold on cost-price Jun’12 Week 3 34750 35273 32046 32759 29750 bases. Prices are expected to remain Jun’12 Week 4 34705 34337 31950 32146 29705 stable and traders are looking forward Jul’12 Week 1 34282 33464 31582 31364 29282 to increasing prices marginally on the slightest notion of improved demand. Jul’12 Week 2 34481 33286 31273 31132 29481 Stocks look to be almost empty and Jul’12 Week 3 34146 33005 31009 31246 29146 buyers are scarce but regular quotations Jul’12 Week 4 32950 32264 30773 31141 27950 are being asked to check if prices have All prices quoted above are average price in `/t, basic bottomed out. Price(Rs./t)

66 Steel Insights, August 2012

Scrap products price trend

Wtd.Avg.Price(Rs./MT)

F

Anondo Kumar Dutta


PRODUCTION DATA

Production, Imports, Exports, Availability & Apparent Consumption (provisional) April - June 2012 Steel Insights Bureau (in ‘000 tons)

FINISHED STEEL PRODUCERS

Non-Alloy Steel (Carbon)

PIG IRON

Alloy Steel

Total

2012 - 13 (Prov.)

2011 - 12 (Prov.)

% Variation

2012 - 13 (Prov.)

2011 - 12 (Prov.)

% Variation

2012 - 13 (Prov.)

2011 - 12 (Prov.)

% Variation

2012 - 13 (Prov.)

2011 - 12 (Prov.)

% Variation

SAIL

2420

2289

5.7

63

70

-10.0

2483

2359

5.3

75

25

200.0

RINL

615

582

5.7

615

582

5.7

130

116

12.1

TSL

1386

1340

3.4

1386

1340

3.4

a) Prod. of Main Producers

4421

4211

5.0

63

70

-10.0

4484

4281

4.7

205

141

45.4

b) Prod. of Major Producers $

5392

4640

16.2

232

184

26.1

5624

4824

16.6

64

47

36.2

Others

10235

10349

-1.1

922

887

3.9

11157

11236

-0.7

1325

1303

1.7

b) Prod. of Other Producers $

15627

14989

4.3

1154

1071

7.7

16781

16060

4.5

1389

1350

2.9

Less : IPT/Own Consumption

2258

2257

0.0

129

83

55.4

2387

2340

2.0

28

21

33.3

17790

16943

5.0

1088

1058

2.8

18878

18001

4.9

1566

1470

6.5

d) Imports $

1534

1090

40.7

458

321

42.7

1992

1411

41.2

3

3

e) Exports $

917

1052

-12.8

89

135

-34.1

1006

1187

-15.2

62

116

-46.6

18407

16981

8.4

1457

1244

17.1

19864

18225

9.0

1507

1357

11.1

315

-181

-274.0

13

4

225.0

328

-177

-285.3

4

4

0.0

18092

17162

5.4

1444

1240

16.5

19536

18402

6.2

1503

1353

11.1

1196

1429

-16.3

145

253

-42.7

1341

1682

-20.3

16896

15733

7.4

1299

987

31.6

18195

16720

8.8

1503

1353

11.1

c) Total Production for Sale

e) Availability (c+d-e) f) Variation in Stock g) Apparent Consumption (e-f) Less : Double Counting Real Consumption Source: Steel Ministry

For Classified Advertisements contact

Sumit Jalan, +91 91633 48243 or sumit.jalan@mjunction.in

Steel Insights, August 2012

67


price trend

Ferro alloys & metals price trends Steel Insights Bureau

Ferro alloys & Metals

August ‘12

June ‘12

May ‘12

Ex-works Rs/ ton HC Ferro Chrome (Cr - 60%) 64500

73000

70500

Ex-works Rs/ ton HC Ferro Manganese (Mn - 70%) 54000

55000

58000

Ex-works Rs/ ton Silico Manganese (Mn - 60%, Si - 14%) 54000

56000

59000

Ex-works Rs/ ton MC Ferro Manganese ( Mn - 70%, C -1.5) 77000

79500

81500

Ex-works Rs/ ton LC Ferro Manganese (Mn - 70%, C - 0.1) 112500

112500

112000

Ex-works Rs/ kg Ferro Vanadium 830

830

720

CIF in US$/lb of moly Moly Oxide (Mo - 57% min) 13.25

13.75

14.15

Ex-works Rs/ ton Ferro Titanium (Ti - 30%) 162500

152500

142500

Ex-works Rs/ ton CPC (FC - 98%, S - 1.2%, size 0-10mm) 25500

68 Steel Insights, August 2012

25500

27500


export data

Iron ore export data for June 2012 Steel Insights Bureau

PORT

DESTINATION COUNTRY

DATE

UNIT PRODUCT FE PRICE (in CATEGORY CONTENT Rs/Ton)

DATE

UNIT PRODUCT FE PRICE (in CATEGORY CONTENT Rs/Ton)

QTY (in tons.)

FINES

53

3,199

1,400

54

4,810

12,760

FINES

63.5

6,521

24,000

13-Jun-12 LUMPS

60

5,470

60,300

53

3,199

1,120

14-Jun-12 LUMPS

54

4,891

79,200

3,829

17,000

16-Jun-12 LUMPS

56

5,391

79,200

4,103

5,000

18-Jun-12 LUMPS

46

1,915

11,000

6,509

24,000

3,282

6,000

46

1,915

11,000

3,829

10,000

55

3,774

10,100

63.5

6,509

23,000

52

1,750

18,000

54

54 14-Jun-12 FINES

16-Jun-12 FINES

7-Jun-12

MORMUGAO CHINA

FINES

22-Jun-12 LUMPS

59

5,197

60,300

27-Jun-12 LUMPS

55

4,267

47,437

28-Jun-12 LUMPS

55

5,106

79,200

29-Jun-12 LUMPS

46

1,944

MORMUGAO Total

22,000 708,356

54

3,829

2,700

18-Jun-12 FINES

55

3,774

1,750

1-Jun-12

FINES

6,379

20-Jun-12 FINES

63.5

6,646

20,000

4-Jun-12

FINES

6,379

1,000

2,626

1,470

15-Jun-12 FINES

3,491

25,700

3,173

1,400

6,090

13,500

1,750

4,000

6,140

36,500

2,626

7,530

2,899

20,000

55

3,774

5,841

52

1,750

5,000

54

3,829

13,020

26-Jun-12 FINES

63.5

6,619

20,000

27-Jun-12 FINES

52

1,750

5,000

1,778

1,000

21-Jun-12 FINES

53 52

22-Jun-12 FINES

23-Jun-12 FINES

30-Jun-12 FINES

53

63.5

7,166

KOLKATA Total

MORMUGAO CHINA

DESTINATION COUNTRY

5-Jun-12

63.5

CHINA

PORT

4-Jun-12

12-Jun-12 FINES

KOLKATA

QTY (in tons.)

18,814

PARADIP

FINES

54

4,688

45,311

2-Jun-12

FINES

54

4,745

48,048

4-Jun-12 5-Jun-12

FINES

54

4,810

19-Jun-12 FINES

22-Jun-12 FINES

3,545

1,750

6,209

31,220

PARADIP Total

138,670 8-Jun-12

FINES

63.5

6,563

11-Jun-12 FINES

63.5

6,509

286

6,509

46,460

25-Jun-12 FINES VIZAG

267,145 1-Jun-12

CHINA

28-Jun-12 FINES

LUMPS

59

4,798

44,691

VIZAG Total

LUMPS

54

4,807

72,709

Grand Total

63.5

71,300

6,564

34,040

6,618

108,560

54

3,829

7,905

57

4,814

9,000

6,564

484

CHINA 26-Jun-12 FINES

35,200

29,000

63.5

6,610

299 278,334 1,392,505

Steel Insights, August 2012

69


Tear along the dotted line

70 Steel Insights, August 2012 Tear along the dotted line


Steel Insights - Aug 2012  

Steel Insights is a monthly magazine providing he widest coverage of the Indian steel industry. From iron to finished steel, technology for...

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