EDITORIAL Chief Editor Rakesh Dubey, Tel: +91 91633 48159, E-mail: email@example.com Executive Editor Tamajit Pain, Tel: +91 91633 48065, E-mail: firstname.lastname@example.org Editorial Board Dr Abhirup Sirkar, Professor Economics, Indian Statistical Institute (ISI) Dr Amit Chatterjee, Consultant and former Advisor to MD, Tata Steel Jayant Acharya, Director (Commercial & Marketing), JSW Steel K. Ranganath, CMD, KIOCL Vikram Amin, Executive Director (Strategy and Business Development), Essar Steel Advertising Soumitra Bose, Tel: +91 92310 00232, Email: email@example.com Sumit Jalan, Tel: +91 91633 48243, Email: firstname.lastname@example.org Subscription Anustup Lahiri, Tel: +91 91633 48013, E-mail: email@example.com Design Debal Ray, Ishawer Kumar Sriwastva, Sobhan Jas For suggestions, feedback and queries, please write to firstname.lastname@example.org
Registered Office mjunction services limited, Tata Centre, 43 J L Nehru Rd, Kolkata 700 071 Website: www.mjunction.in Corporate Head Quarters: Godrej Waterside, 3rd Floor, Tower 1, Plot V, Block DP, Sector V, Salt Lake, Kolkata 700091, Tel: +91 33 6610 6100, Fax: +91 33 6610 6187 Bhilai: Room 321, 3rd Floor, Ispat Bhavan, Bhilai Steel Plant, Bhilai 490001, Tel: +91 788 6451066, Tele/ Fax: +91 788 2221071 Bokaro: Room 19, Old Admin Bldg., Bokaro Steel Plant, Bokaro 827001, Tel/Fax: +91 654 2226132 Burnpur: SAIL - IISCO Steel Plant, Materials Building, Order Department, Ground Floor, Burnpur 713325, Telfax: +91 341 2240107 Chennai: Basement, Begum Ispahani Complex, New No 91, Old No 44, Armenian Street, Chennai 600 001, Tel: +91 44 64624733-35, Fax: +91 44 25216536 Durgapur: Room 618, Ispat Bhavan, Durgapur Steel Plant, Durgapur 713203, Tel: +91 343 6510185, Tele/Fax: +91 343 2586946 Jamshedpur: Kashi Kunj, Ground Floor, Road No. 02, Contractors Area, Bistupur, Jamshedpur 831001, Tel: +91 657 6519985/86/90/91, Fax: +91 657 2230040 Mumbai: Jolly Bhavan II, 403, 4th Floor, 7 New Marine Lines, Mumbai 400002, Tel: +91 22 66510663, Tele/Fax: +91 22 66510662 New Delhi: C127, 2nd Floor, A One Plaza, Naraina Industrial Area, Phase I, New Delhi 110028, Tel: +91 11 65661774/65413288, Tele/Fax: +91 11 25897000 Noamundi: C/o TATA Steel Limited, Mines Purchase Cell, PO: Noamundi, Singbhum (West), Jharkhand 833 217, Tel: +91 9204791638/9234368606 Rourkela: Administrative Bldg., Room 624, 6th Flr, Rourkela Steel Plant, Rourkela 769011, Tel: +91 661 6514142/6511412
mjunction believes that all junctionites, customers, suppliers, partners, etc should practice the highest ethical standards in their daily operations. Report a concern to email@example.com
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.
Dear Readers, As we step into the New Year and take up new challenges, some old concerns keep haunting us. In 2012, much would depend on how we, as an economy, deal with these issues – not all economic in nature. It has been a stalemate period for the UPA government at the Centre. First, the embattled government hung the ‘Open’ sign for foreign retailers. Then it failed to pass the Lokpal Bill, which has been presented ‘eight times’ but never been passed. Next, it needs to be seen what the UP poll holds for the Congress. It will also be of interest to see whether Mayawati can repeat the 2007 stunner. Will Mulayam retrieve lost ground and what happens to the BJP and Congress revival missions and will a hung verdict in Lucknow trigger new deal-making in Delhi? Meanwhile, the European countries are yet to recover from the sovereign debt crisis. The crisis which began in early 2010 and engulfed Greece has found its latest prey in Italy. The contagion effect from failure of Italy is too big to fathom. With the world economy under stress, BRICS are being looked at to fund the Eurozone bailout. It needs to be seen whether the world economy can contain the Europe crisis. Back home, the year 2011 would be remembered by the steel industry for the crisis on the raw material front – be it supply of coking coal from Australia or the mining ban in iron ore producing regions of Karnataka and the fall in steel demand owing to the prevailing economic crisis globally. Internationally, the crude steel capacity utilisation ratio of the 64 countries declined to 73.4%, -2.8 percentage points down from October 2011. The current issue of Steel Insights delves into whether 2012 brings any cheer to them? According to World Steel Association (WSA) estimates, in 2012 India’s steel use is forecast to accelerate by 7.9 percent. The Special Focus section features the views of experts from steel, foundry and coke industries. Happy reading. Warm regards, Rakesh Dubey Chief Editor d e iron deman trade”, “Spong in x th re on Co op ns io dr crap prices eel commiss The articles “S ht my and “Essar St ” ug ca 20 s, 20 ht by sig y rgel Steel In to shoot up la 2011 issue of e November module”, in th ally helpful it would be re attention. d, ne er nc igarh co ampa and Ra onge iron is As far as sp ipur, Durg, Ch iron Ra e ge th on on sp y e ther th ial stud and , to have a spec ld be helpful to know whe gy lo Corex techno wou Area. Also it e can use the od m ng lli ro and industry, SMS . e cost involved what will be th Regards
G.N.BIHANI er (Purchase) General Manag Power Ltd. SKS Ispat & G) (C Raipur
6 | Cover Story
25 Foundry industry on growth path 26 Steel demand to impact mineral price
Steel markets hinge on raw materials in 2012
28 Rashmi Group to invest Rs 1930 cr in steel biz
After a slowdown in 2011, Indian steel is expected to grow 7.9% in 2012
30 Essar Steel expands capacity at Hazira
29 BSP exports 0.253 mt till Nov 31 RINL scouting for iron ore, coal mines 33 NTPC seeks to opt out of ICVL
24 | SPECIAL FOCUS
34 Electrotherm sells DI pipe business to SaintGobain
Steel consumption slated to grow 4-5 percent in 2011-12: INSDAG
34 Demag Cranes brings new new DR-Bas rope 35 NMDC’s 50% Legacy stake cleared
Growth will be curbed by subdued growth of consuming sectors
36 PP Rolling Mills upbeat on future market trends
27 | Corporate UPDATE Little headway in Posco project
Hardly any progress despite best efforts of centre and the state government
38 Iron ore export duty raised to 30% 39 Scrap import prices stay firm 40 Spot coking coal prices ease in December 41 Ferro chrome makers seek curbs on chromite ore export 43 High input costs continue to plague ferro alloys 45 Indian auto sector to post zero growth in FY12 46 Steel may see positive change post Feb-Mar
32 | Corporate UPDATE
50 Land, skilled labour biggest hurdles facing Indian steel sector
SAIL, Kobe Steel sign 50:50 JV deal
51 Port traffic up 1.3% y-o-y in Apr-Nov
Companies to carry out detailed feasibility study for a commercial ITmk3 iron making plant in India
56 Marco economic indicators of India
54 Railway cargo rises 4.4% m-o-m in Nov 58 Steel Production falls on weak global cues
47 | expert speak
Virtual Steel Mill – a new risk management model The concept encompasses risk management from producer to end user
STEEL INSIGHTS 4 January 2012
59 International flat products market 61 International long products market 62 Domestic flat and long markets 64 Ferro alloys price trends 65 Iron ore export data for December 2011 66 Market price data December 2011
Steel markets hinge on raw materials in 2012 Tamajit Pain
or the Indian steel industry, the year 2011 would be remembered for the crisis on the raw material front – be it supply of coking coal from Australia or the mining ban in iron ore producing regions of Karnataka and the fall in steel demand owing to the prevailing economic crisis globally. Internationally, the crude steel capacity utilisation ratio of the 64 countries declined to 73.4 percent, -2.8 percentage points down from October 2011. This is its lowest point for two years. Compared to November 2010, the utilisation ratio in November 2011 decreased by -2.6 percentage points. The fall in steel
capacity utilisation was evident from the output cuts by international steel makers. Though 2011 has been a tumultuous year for Indian steel makers, will 2012 bring any cheer to them? It's better to wait and watch. With inventories low and production taken off stream, steel markets are expected to strengthen in the New Year, although initial upward moves will be slow and downside risks remain. According to World Steel Association (WSA) estimates, in 2012 India’s steel use is forecast to accelerate by 7.9 percent.
STEEL INSIGHTS 6 January 2012
Cover Story A quick round-up The prospects for Indian steel companies looked bright at the beginning of calendar 2011. The year started off on an eventful note even as the Australian floods continued to cause havoc on supplies of coal to countries across the world and led to a rise in domestic steel prices across the segments. Australian mines, which account for more than 56 percent of the world’s total coal supplies, came to a grinding halt. Till February, only seven of the total 58 mines were made operational. The Indian government, meanwhile, took steps to propose a duty hike for iron ore export to 30 percent. The year 2011 began on a positive note for the auto makers, who witnessed record sales growth of over 11 percent. However, February witnessed the onset of problems for supplies of iron ore as Chhattisgarh aimed to seek a ban on iron-ore mining as illegal mining was rampant. The month saw another hike in prices for steel products. On March 11, Japan was struck by one of the worst tsunamis ever. The news sent shock waves across the markets, disrupting supplies to major sectors especially steel and automobile industry. With threats for radio-active leaks looming large, the country had little option but to increase its dependence on coal which was already scarce. With these events coming into effect, it was the third straight month that saw another round of price hikes in steel products.
The impact of the tsunami saw growth dropping sharply, as increased prices resulted in lower sales, and the Indian auto majors cut production due to reduced supplies of critical Japanese components. Crude oil hit record levels at $113 per barrel, as nuclear power faced worldwide criticism. Towards the middle of the year, Maoist rebels disrupted supplies from Chhattisgarh mines, while mills in Karnataka faced closure due to unavailability of iron ore. While the government was reviewing its MMDR policies, the Steel Ministry deferred the FPO of SAIL citing unhealthy market conditions. Meanwhile, China encountered one of the worst power shortages in seven years and power companies reduced output in the face of expensive coal prices. Towards the second half of the year, Reserve Bank of India (RBI), seeing the precarious state in commodity prices, intervened to raise its repo rates by 0.25 percent to 7.5 percent. It hoped to control the high rates of inflation which were prevalent at 9.06 percent. India’s fiscal deficit also grew worse and stood at 5.4 percent of GDP. The month of July witnessed the first of the many closures of mining as per Supreme Court directives, in the Bellary region. RBI again increased its lending rates, this time by 50 basis points as counter-inflationary measures. Further, data from the ministry revealed that while imports had fallen year-on-year, exports had witnessed a rise. However, the big news was when US was about to reach its trade debt ceiling,
Production, imports, exports, availability & apparent consumption of finished steel (provisional) – April - November, 2011 PRODUCERS
Non-Alloy Steel (Carbon) 2011 - 12 (Prov.)
2010 - 11
2011 - 12 (Prov.)
a) Prod. of main producers
(in '000 tons)
Alloy Steel Percent Variation
2010 - 11
2011 - 12 (Prov.)
2010 - 11
b) Prod. of major producers Others Less : IPT/Own consumption 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
STEEL INSIGHTS 8 January 2012
Cover Story and if not raised, its economy was set to collapse and creditworthiness to be down-graded. As the year went on, India’s inflation hit a record high of 9.78 percent. US witnessed another natural calamity when it was hit by hurricane Irene. Major coastal regions were damaged, and estimated losses were in the billions. China’s GDP also dropped to 8.7 percent, as industry estimates global expenditure is on the decline. India’s inflation rate shattered previous records and was prevalent at 9.78 percent. RBI refused to intervene at this juncture. Due to staggered demand, JSW Steel cut its output by a third. Further, 90 percent of Orissa’s sponge units closed down due to unavailability of iron ore. In October, RBI again hiked rates once more to control the situation, the 13th time in the last 20 months. Iron ore auctions by NMDC got tepid response as buyers rejected high prices, saying such prices would make steel-making a loss. The situation turned bleak towards the year-end as sluggish sales owing to the global economic crisis coupled with high input costs such as coking coal and iron ore exerted pressures on the companies' margins. The Indian steel-makers bore the brunt of high input costs, mainly coking coal, as prices hit the roof due to flooding of mines in Queensland, Australia, a key producer of the commodity used in making steel. As a result, the profits of Indian vendors came under pressure that intensified further towards the latter half of the year, when the rupee got devalued significantly against the dollar. The inability of the steel companies to pass on the cost burden for major part of the year, amidst uncertainty in demand scenario, did add to their margin pressure. Demand from sectors such as construction, infrastructure, automobile
STEEL INSIGHTS 10 January 2012
According to the latest data available from World Steel Association, in the first 11 months of 2011, world crude steel production touched 1372.75 million tons (mt), an increase of 18 percent as compared to 1166.8 mt produced in the same period of 2010. During the period, Asia produced 878.9 mt of crude steel, an increase of 19 percent compared to the same period of 2010, while EU produced 165.179 mt of crude steel between January and November of 2011, up by 13 percent compared to the same period previous year. North America’s crude steel production in the first 11 months of 2011 was 109.255 mt, about 17 percent higher than the same Crude Steel Production Growth Rate (Y-o-Y) period in 2010. China which was the single largest producer between January and November 2011 produced 632.111 mt of crude steel an increase of 20 percent as compared to the corresponding period in 2010. However, the world crude steel capacity utilisation ratio of the 64 countries in November 2011 declined to 73.4 percent, -2.8 percentage points down from October 2011. This is its lowest point for two years. Compared to November 2010, the utilisation ratio in November 2011 decreased by -2.6 percentage points. The fall in the steel capacity utilisation was China Rest of the world except China Total 64 countries evident from the output cuts by international steel makers.
and consumer durables slowed down considerably during the year. The successive hikes in interest rates by the Reserve Bank of India to tame inflation also cast a spell on the steel demand. Indian companies were expecting double-digit growth in 2011 on the back of strong performance in the previous year. This was reflected in the projections for the World Steel Association, an apex body of global steel-makers, in pegging the demand at 13.7 percent towards the initial part of calendar. However, as events unfolded tracking the changing macroeconomic conditions and the demand slowed down, the WSA scaled down estimates in latter half of the year to a growth of mere 4.3 percent at 67.7 million tons (mt). Broadly in line with the WSA projections, steel consumption has grown by 4.2 percent to 45.20 mt in the April-November period, according to the Joint Plant Committee statistics. Production during the period has grown by about 8.2 percent to 46.27 mt. Exports have grown by 31.5 percent to 2.71 mt, while imports are down by 17.6 percent to 4.2 mt during the period, according to JPC. The WSA has predicted that consumption will accelerate and pick up in 2012 to 7.9 percent.
Major steel output cuts in Europe
uropean steelmakers have announced several production cuts in the face of weaker demand, and more furnaces are likely to be idled in coming months. Some producers have announced restarts and even an expansion, but curtailments are likely to dominate as consumers prefer to run down their stocks in an uncertain economic environment. Below are some details of the major steel cutbacks, or related announcements, along with limited restarts in Europe: ARCELORMITTAL On October 21, ArcelorMittal, the world's largest producer of steel, said it would temporarily close a blast furnace at its plant in Dabrowa Gornicza, Poland, due to weaker steel demand in Europe. The company said the furnace would restart as soon as market conditions allow. On October 3, the company confirmed it will halt production at its plant in Sestao, Spain, in November and December. The company had said the previous week it was in talks with trade unions over a temporary shutdown at Sestao. The complex includes two electric arc furnaces and seven rolling mills and has a capacity of 1.8 million tons of hot rolled steel coils and 600,000 tons of pickled coils per year. At the end of September, ArcelorMittal said it would temporarily idle an electric arc furnace and some steel production lines at its long carbon steel producing mill in Madrid on weak demand. Earlier in the month, the company said it would shut blast furnace No. 1 at its plant in Eisenhuettenstadt, Germany, and a second blast furnace at its Florange plant starting in October due to weak demand. On September 27, it announced it would idle temporarily the electric arc furnace (EAF) and cut some steel re-rolling lines at its Schifflange and Rodange plants in Luxembourg due to poor demand from the construction sector. The steelmaker announced in June a temporary output stoppage during Q4 at its plant in Liege, Belgium. On October 12 it said it had decided to shut for good its two blast furnaces near Liege in part due to the worsening economic situation. In 2010, ArcelorMittal produced 92,629,000 tons of steel, of which 37 percent was in Western Europe and 11 percent in Central and Eastern Europe. CELSA Spanish steelmaker Celsa is considering cutting production at some European steel plants in the next few months in response to apparent lower consumption, it said. The firm, the seventh largest steelmaker in Europe, is operating at an average capacity of 70 percent in Spain and France and slightly more in the rest of Europe.
SALZGITTER On September 29, Germany's second largest steelmaker, Salzgitter AG, said it would cut flat steel production by 10 percent, or roughly 300,000 tons, in 2011. The company said some flat steel production had been cut already in Q3, with the rest to come in Q4. On October 12 it said it was still producing liquid steel at full capacity, but added it was "constantly monitoring the production situation." SSAB Sweden's SSAB told Reuters it had yet to restart one of its three blast furnaces in Sweden, which it shut temporarily in summer 2011 for relining. The steelmaker is running just below 70 percent of its total production capacity of 3.7 million tons per year. On October 12 the company said it would produce less ordinary steel and more products such as quenched and tempered steel as niche grades are more resistant to economic slowdown. TATA STEEL Tata, the world's No. 7 steelmaker, announced in December it would mothball a hot strip mill at its Llanwern site in Newport, south Wales on weak demand for steel and a poor economic outlook. The company had already cut production capacity from 85-90 percent in the first half 2011 to 80-85 percent in the second half. In September, 2011, Tata Steel's European unit, Corus, shut down one of its four blast furnaces in Scunthorpe. Another blast furnace at the site was idled a few years ago on a long-term basis, while the two remaining furnaces are currently operating. Tata Steel Europe is the second largest steel producer in Europe with an annual capacity of 18 million tons. THYSSENKRUPP ThyssenKrupp, Germany's biggest steelmaker said it had brought forward planned maintenance at blast furnace 9 in Duisburg, Germany, due to a decline in steel flat products orders. The works will take about five months, it said. The blast furnace in question has capacity of 5,000 tons per day of steel or almost 2 million tons per year. ThyssenKrupp Steel Europe was producing crude steel at about 75 percent of its capacity in December 2011 down from 100 percent in January of the same year while hot-rolled mills were working at more than 80 percent of capacity, a spokesman said. US STEEL US Steel said in its second-quarter results that a blast furnace in Serbia that had been shut for planned maintenance early in the quarter remained idled due to reduced spot market prices and weaker demand.
STEEL INSIGHTSâ€‚ 12â€‚ January 2012
Cover Story Steel raw materials Iron ore Iron ore, the key steel making raw material, underwent a tumulus year in 2011. The government has shown an inclination to conserve resources, though it does not support a blanket ban on exports, largely because the domestic steel industry does not have the technology to use ore fines. India mostly ships fines to China. In 2011, India's government tried to cut down on illegal iron ore mining and shipments but favoured better tracking and monitoring along with higher taxes rather than blanket bans on exports. It raised the export duty to 20 percent in February 2011.
In April, the Supreme Court overturned an export ban imposed by Karnataka's state government in July 2010, but shipments have yet to pick up because of administrative delays. The court later banned mining in some parts of the state due to environmental worries and allegations of illegal mining, allowing only state-run NMDC to mine in the areas. Such regulatory uncertainty deflated industry confidence of India being a stable supplier. Indian ore exporters say the government policy makes little sense as domestic steelmakers can hardly use fines. Moreover, India's steel demand is likely to grow by only 6 percent in the current fiscal year, nearly half the earlier forecast, as higher interest rates squeeze demand from the automobile and construction sectors. On the last working day of 2011, India announced a 50 percent jump in export duties on Monday to 30 percent, prompting traders to slash their forecasts for exports for the year to March 2012 to around 50 mt from 65 mt. That was already down from 97 mt last year. India's iron ore exports are likely to be 75 percent lower than previously expected in the quarter ending in March as a rise in export duties kicks in as part of the government's push to conserve supplies for domestic steelmakers.
Given that India had exported about 45 mt in the nine months to December, it is likely to ship only another 5 mt in the three months to March 31, top industry body, Federation of Indian Mineral Industries, said. India is one of the world's biggest exporters of iron ore, with much of it bought by China, which has the world's largest steel industry. The shortage is expected to push up global prices by 7 to 10 percent over the current $140 per ton, traders said. "We are shocked at the decision to hike export tax on iron ore as such volatility in policy does not promote India's image as a reliable supplier," according to Glen Kalavampara, secretary of the Goa Mineral Ore Exporters' Association. Goa is India's biggest exporter of iron ore. "Absence of supplies from India will help Australian and Brazilian suppliers to consolidate their domination of the global market." Indian exports were already down around a third from last year primarily due to legal wrangling over stalled shipments from a key producing state and efforts to conserve supplies. The curbs on iron ore mining imposed by the Supreme Court in Bellary, Karnataka, on environmental grounds disrupted supplies to JSW Steel and other producers dependent on the region. Though monitored iron ore sales have commenced through electronic auctions and that the country's largest miner NMDC has been allowed to operate two mines in the region, the steel-makers may take some more time to normalise their operations. Ferrous scrap After ending on a high note in 2010, ferrous scrap prices remained subdued for the major part of 2011 only to stage a rebound at the fag end of the year. The global economic uncertainty cast a shadow on the international scrap market. Also, the depressed rebar demand and appreciation of the US dollar led to a softening of the prices in the major markets, especially in the second half of the year. Prices witnessed a
STEEL INSIGHTSâ€‚ 14â€‚ January 2012
Cover Story prolonged slump before bottoming out in late November. Displaying a trend similar to the previous year, scrap prices staged a rebound in December 2011 and stayed firm early January 2012. Turkey remained the most active player in 2011 while Europe, China, India, Middle East and East Asia were the other prominent consuming pockets. Prices of ferrous scrap imports into India largely followed the overseas cues during the year, but remained at a slightly lower level. The poor steel demand for the better part of the year depressed the market sentiment. Most of the steel mills maintained only limited scrap inventory. The steelmakers faced margin pressure due to increased raw material prices. The latter factor prompted the industry to go for a steel price rise in early 2011. Overall, prices of scrap imports in India dropped by around $10 to 20 per ton cfr Nhava Sheva during the year, and ended at $465 to 475 per ton cfr for shredded scrap and $455 to 460 cfr for HMS 1&2 (80:20).
According to Arun Kumar Jagatramka, chairman of Gujarat NRE Coke Ltd, coking coal supply disruptions from Australia had been solved during 2011 and this has resulted in the easing of hard coking coal prices from $330 per ton in April-June quarter (2011) to $235 per ton in the January-March quarter (2012) of 2012. “However, it took a lot of time to reach the lower price level in contrary to our expectations,” he said. This has in turn resulted in the easing of met coke prices to `18,000 per ton levels in the western Indian market from `20,000 to 22,000 per ton levels two months back, he said. However, it will be difficult to predict coking coal prices for 2012-13 as the range of resistance and peak levels could be higher in the next cycle, he said. The majority of steel projects in India are blast furnace based and new technology can reduce the coke rate to some extent but it cannot replace the use completely, he claimed.
Coking coal The coking coal market saw interesting movements in 2011. Towards the beginning of the year supply constraints because of the floods in Queensland region of Australia pushed up prices to the peak of around $330 per ton fob Australia in the April-June quarter. However, with the supply situations improving from the July-September quarter, markets eased with the contract prices for October-November of 2011, coming down to $285 per ton fob Australia and to $235 per ton fob Australia in the January-March quarter of 2012. According to industry experts, coking coal imports would likely end up at around 35 to 36 mt in 2011, up from 25 to 26 mt in 2010, in line with the steel capacity expansion projects in the country.
Ferro alloys The domestic market for ferro alloys remained mixed in 2011 in line with the movement of steel demand scenario. The ferro alloy segment started the year on a firm note but eased as the year progressed. Towards the end of the year, domestic ferro-chrome prices hovered around `66.5 per kg, while the ferro-molybdenum market across the country depicted more or less a steady trend in the concluding month of the year 2011 with demand being more or les stable for the item. Prices for ferro-molybdenum (60 percent min) prevailed at `1,095 per kg. The ferro-manganese market across the country remained more or less stable. The price of ferro-manganese in India (HC 65-70 percent) is prevailing around `48 per kg. The market for ferro-silicon has remained quiet across the country and at present, ferro-silicon (60/14) is prevailing at a price of `61 per kg. The domestic silico-manganese market has remained more or less stable at `48 per kg.
STEEL INSIGHTS 16 January 2012
Cover Story Capacity expansion plans (public sector)
The steel PSUs are in the middle of ambitious expansion plans. The major thrust of the modernisation and expansion plans is to adopt the best modern technology, which in addition to being cost effective should also be energy efficient and environment friendly. The expansion plans would increase the capacity of SAIL from 12.84 million tons per annum (mtpa) in 200607 pf crude steel production to 21.40 mtpa in the first phase to be completed by 2012-13, at an estimated cost of around `70,000 crore, which includes `10,000 crore for mine development. Rashtriya Ispat Nigam Limited (RINL) is at an advanced stage of commissioning it crude steel capacity expansion project from 2.9 mtpa to 6.3 mtpa. The project is likely to be completed by 2010-11 at an estimated cost of `15,525 crore. NMDC plans to increase the production of iron ore from the present level of around 24 million tons to 40 million tons by 2014-15. NMDC is setting up a 3 mtpa capacity Integrated Steel Plant at Nagarnar, Chhattisgarh at an estimated cost of `15,525 crore. NMDC is also setting up a 1.2 mtpa capacity pellet plant at Donimalai, Karanataka. Capacity expansion Current position India currently remains the fourth largest producer of crude steel in the world as against the eighth position in 2003 and is
31 [All Mines]
58 [All Mines]
Source: Steel Ministry
expected to become the second largest producer of crude steel in the world by 2015, according to steel ministry estimates. India also maintained its lead position as the world’s largest producer of direct reduced iron (DRI) or sponge iron. Ministry’s National Steel Policy (NSP) 2005 projection of 110 million tons of finished steel production per annum by 2019-20 is likely to be exceeded by 2015. Going by estimate of `4,000 crore investment per million ton of additional capacity, intended steel capacity build up in the country is likely to result in an investment of `8,70,640 crore by 2020. A total of 222 MoUs have been signed with various states for planned capacity of around 276 million tons by 2019-20. Major investment plans are in the states of Odisha, Jharkhand, Karnataka, Chhattisgarh and West Bengal. The steel sector contributes to nearly 2 percent of the GDP and employs over 5 lakh people. The per capita steel consumption during the last six years has risen from 38 kg in 2005-06 to 55 kg in 2010-11. Expansion Notwithstanding the demand-supply scenario, Indian steel makers such as SAIL and Tata Steel invested in capacity expansion with a view on long term prospects. The ongoing modernisation will increase SAIL's capacity to 24 mt by 2013 even as the country's largest steelmaker is eyeing newer projects. Similarly, Tata Steel, which will see its capacity expand to 10 mt by March 2012, is building a 6 mt steel project in Orissa. Essar Steel, a part of the Essar group, has doubled its capacity to 10 million tons per annum (mtpa) at its plant located in Hazira, Gujarat. This expansion makes the Hazira Steel Complex, the largest single location flat steel producer in India and the fourth largest single location flat steel producer globally. In fact, with this expansion, the complex will be able to offer the entire range of flat
STEEL INSIGHTS 18 January 2012
Cover Story products from thin strips and thick plates to pipes, cold rolled and coated products. “We would like to dedicate this plant to the nation. When I first ventured into Hazira, it was my desire to put India on the global steel map and today that dream has come true. Our world-class steel complex is a testament to the hard work put in by the Essar family and our small contribution to the steel industry and India’s growth story,” said Shashi Ruia, chairman of Essar group. Capacity expansion plans (private sector) (in mtpa) Companies
Capacity after Expansion
Essar Steel Limited
Jindal Steel and Power Ltd. (Raigarh)
Ispat Industries Ltd.
Bhusan Power and Steel Ltd.
Bhusan Steel Ltd.
Jindal Steel and Power Ltd. (Angul)
6 (3MTPA by 2013)
Jindal Steel and Power Ltd. (Patratu)
6 (3MTPA by 2013)
Source: Steel Ministry
Collaborations with global partners Indian player
Steel plant and high end steel
High end automotive steel technology
Steel plant: automotive steel technology
Automotive steel technology
Development of heavy structural
Steel plant and high end steel
Corporate developments There is a move between domestic and international players looking at a greater pie of the value added segment. This has resulted in collaborative efforts with international players. Other developments in the public sector place include Maharashtra Elektrosmelt Ltd (MEL), the 99.12 percent subsidiary of Steel Authority of India Limited (SAIL), has been merged with SAIL and SAIL Refractory Company Limited’ – a subsidiary company of SAIL for transfer of the Refractory unit of BSCL incorporated in August, 2011 Towards the end of 2011 SAIL entered into a JV with Kobe Steel for ITmk3 Technology envisages installation of a 0.5 MTPA Iron Nugget plant at ASP, Durgapur. This unit will produce premium grade Iron Nuggets from iron ore fines and non-coking coal. Proposal for formation of a JV Company with M/s Kobe Steel (50:50 equity participation) has been put up for consideration.
STEEL INSIGHTS 20 January 2012
Cover Story Another significant development was the allotment of Hajigak Iron Ore Deposits, Afghanistan to SAIL led consortium. SAIL led Consortium which submitted bid in September 2011 has been alloted mining blocks B, C & D of the Hajigak Iron ore deposits (reserve of 1770 mt). The total investment estimated at $10. 8 billion in phases (includes development of mine, installation of 6.12 mtpa steel plant in two phases, 800 MW power plant, rail and road infrastructure and CSR activities). Special purpose vehicle The International Coal Ventures Ltd comprising SAIL, RINL, CIL, NTPC and NMDC has been set up for acquisition of coal mines in overseas territories, with an equity base of `3000 crore to be leveraged with around `7000 crore of debt. The ICVL will function like a Navratna company with powers to clear proposals involving investment of up to `1500 crore. The company has already initiated efforts to acquire coal properties abroad with specific countries like Australia, Mozambique, Canada, Indonesia and USA. Disinvestment of steel PSUs Disinvestment of 10 percent government of India’s shareholdings in MOIL has been completed. The government earned `618.76 crore by disinvestment of MOIL.
In accordance with the Cabinet Decision, 51 percent shareholding (i.e. 736,638 shares) of Government of India in Eastern Investments Company Limited (EIL) under Bird Group of Companies was transferred to Rashtriya Ispat Nigam Limited (RINL). Thus RINL has become the holding company of Eastern Investments Company Limited (EIL) and its subsidiaries Orissa Minerals Development Corporation (OMDC) and Bisra Stone Lime Company Ltd. (BSLC) are now subsidiaries of RINL w.e.f. January 5, 2011. However, the struggle of global steel-makers such as Posco and ArcelorMittal to gain a foothold into the Indian market continues. Though Posco got the clearance almost after a sixyear wait for its Orissa plant, the land acquisition is yet to be complete. Posco's another venture in Karnataka has also faced land acquisition issues. Expectations for 2012 Though 2011 has been a tumultuous year for Indian steel makers, will 2012 bring any cheer to them? It's better to wait and watch. Chinese steel mills had been expected to replenish stockpiles before their New Year holidays, which start on January 22. China's iron ore imports are expected to rise 6 percent to a record 720 mt in 2012, according to analysts. Finished steel prices have declined although prices are
STEEL INSIGHTS 21 January 2012
Cover Story now thought to have hit their low point in many regions. With inventories low and production taken off stream, steel markets are expected to strengthen in the New Year, although initial upward moves will be slow and downside risks remain. According to WSA estimates, in 2012 India’s steel use is forecast to accelerate by 7.9 percent. Recent production cuts mean that a floor in prices is now visible even in the weakest markets. However, macroeconomic uncertainty continues to cloud the near-term outlook. Output reductions in China have helped to limit price falls. China’s central bank has reduced the banks’ required reserve ratios, signaling an easing in monetary policy. Meanwhile, auto majors have already decided a price rise in vehicles with the onset of January. This has created much buzz in the consumer market, and buyers may be scrambling to buy before the price increases. Keeping this in mind, steel producers are also tempted to follow suit but are scared. The current global scenario has lead prices to fall as steel demand continues to drop. Producers in China, Europe and South-East Asia have already reduced production capacities as inventory costs are increasing. If such a sentiment prevails, and raw materials are scarce, Indian producers cannot afford to scare away any of the present demand, which is already dwindling. The market in December was much subdued due to festivities, and there exists no eagerness among buyers even after trading has resumed. Buyers are reluctant to enter the market now. In such a scenario, if steel majors increase prices, it would be done after much thought and desperation. The long steel market is not expected to see much activity as the wounds inflicted by high inflation are yet to heal. The current demand is only due to constructions in progress. However, such demand is already being met by contractual prices which would not fluctuate. Further, as all new projects have been shelved, a revival of demand is not on the immediate cards. Even the Government has put on hold new projects, and the same goes for scheduled expansion in various steel plants. Until a demand is evident, such projects are of no use and would render companies into huge losses. Meanwhile, seaborne iron ore supply is set to remain tight in 2012, with a lack of significant expansion tonnages and solid
demand from Chinese steel mills likely to underpin index prices, market observers say. Rio Tinto and BHP Billiton could bring on less than 20 mt per year combined of new production in Western Australia next year, while Brazilian miner Vale's output in 2012 is tipped to fall by some 8 mt per year from this year. Though Indian shipments recovered towards the end of this year, the ongoing clampdown on illegal mining that has curbed exports is likely to continue into 2012. The Federation of Indian Mineral Industries has predicted that year to-endMarch 2012 iron ore shipments will fall by nearly 40 percent on the previous year. Analysts and iron ore producers expect the price of 62 percent Fe fines to stay in the $140-150 per ton cfr China range in 2012 on the back of steady demand from mills and constrained seaborne supply. However, in the domestic market, when exports are still scarce, a demand-supply overflow of iron ore is currently present. Every month we witness exponential drop in ironore handling at all major ports. This has even forced domestic players to succumb to pricing terms set by steel majors, sometimes even at losses. The gap has further widened due to drop in steel demand around, as the country continues to battle high rates of interest and inflation. With such a sentiment, iron ore scarcity is not possible in the near future. Coking coal has much the same picture, but internationally. Demands have fallen drastically. Even when contractual prices are being offered at approximately $235 per ton prices to the tune of $220 per ton are being offered in the spot market. Such prices have even failed to attract bids. Do domestic steel producers make use of these price drops is still argumentative. Since contractual prices have already witnessed a drop for the final quarter of 2010-11, much is not expected from the same. A drop has occurred in prices, and it is here to stay. Meanwhile, industry insiders feel that coking coal imports will further go up to 35 to 40 mt in 2012 as more and more steel capacities come onstream. The scrap steel market has shown a marginally downward trend over the month. With imports being rejected, ingot prices have generally gone up due to the depreciation of the rupee. Producers have contemplated a slight rise in the opening weeks of January, as cost of steel making has gone up. Even though imports have become cheaper, profits have not materialised due to exchange rate fluctuations. The future for scrap steel is expected to be stable in the coming few weeks. Going forward, market sources said, the restocking and tight supply in the international market may keep prices firm early 2012. In the following months, much would depend on the rebar demand in respective markets and global macroeconomic scenario, among others. Meanwhile, Indian companies may be seen scrambling for approvals from the Government to buy assets overseas. Steel majors like SAIL, Tata Steel and Jindal Steel have already sought approvals and have even been successful in out-bidding competitors for mines, both iron ores and for collieries.
STEEL INSIGHTS 22 January 2012
Steel consumption slated to grow 4-5% in 2011-12: INSDAG
ndia’s steel consumption is expected to grow 4-5 percent in 2011-12 against a target of 8-10 percent owing to the subdued growth of the consuming sectors of construction and manufacturing, according to Sushim Banerjee, director general, Institute for Steel Development & Growth (INSDAG). According to latest provisional data from steel ministry, steel consumption grew 4.2% to 45.20 million tons (mt) in Sushim Banerjee the April-November period. Director General, (INSDAG) However, things may change for the better from next financial year with rebound in the consumption pattern after held up projects start moving, Banerjee said in an interview to Steel Insights. INSDAG is jointly promoted by the ministry of steel and steel producers. With the mining and land acquisition bills up for approval, steel production capacity is expected to improve as work in the held up projects start off. Steel demand is also expected to improve when the held up infrastructure projects get started, Banerjee said. “If the Land Acquisition Bill and Mining Bill are passed, then the country’s steel industry would have a stable year next fiscal, as after that many pending projects of various steel companies will be cleared. There will be capacity expansions of several steel makers with the greenfield projects coming up. We expect 201213 to be a stable year after the slowdown in 2011-12,” he added. The steel industry has been plagued by many problems. Many projects are delayed due to pending regulatory clearances in various states. Also, increased focus of government agencies in enforcing mining and transportation regulations to curb illegal mining has led to decline in production of iron ore and disrupted supply, resulting in shortage of the raw material for steel production. Banerjee said due to these problems, the country’s steel production, targeted to grow by about 8 to 10 percent, was expected to grow by 4 to 5 percent this fiscal. “Industry is forecasting about 70 million tons (mt) production at the end of this financial year against the targeted 78 mt,” he said. The Indian government has introduced in Parliament a draft legislation that proposes to make mining companies pay higher compensation to people displaced by mining activities. The bill also seeks to empower state governments to constitute special courts for the purpose of providing speedy trial of offences relating to illegal mining.
Steel consumption Meanwhile, India’s rural average per capita consumption of steel is as low as 9.78 kg, Banerjee said. He was referring to the recent draft report by the Indian Market Research Bureau on the patterns and trends of steel consumption in rural India. The draft report has been submitted to the steel ministry after completion of the survey. State-wise patterns showed that UP had the highest per capita consumption of 9.5 kg, while Bengal was among the lowest with 7 kg. Banerjee said the difference in steel consumption pattern is very high in rural areas when compared to urban areas where the per capita consumption is about 100 kg. However, he said steel consumption has reached a saturation point in the urban areas and the future growth in demand lies in the rural areas. Stating that steel industry in the country was only confined to the cities, Banerjee said villages had to be converted into cities as centres of consumption. According to Banerjee, INSDAG has taken up skill and entrepreneurship development programmes to train the rural youth about steel fabrication work to help growth of steel consumption in the rural areas. INSDAG has tied up with the Institute of Welding for this purpose. “We will also provide them assistance to procure steel from Essar and JSW outlets in the rural areas,” he said. INSDAG will also train the rural youth to prepare project reports to obtain loans from rural branches of the State Bank of India (SBI), he added. He said INSDAG, in association with the West Bengal government’s micro, small and medium enterprises (MSME) department, has set up two steel fabrication units to impart training to local entrepreneurs. “We are aiming to set up one or two fabrication units in every state in the next six months,” he added. INSDAG estimates that the programme will enable around 20 tons of steel consumption from each of the units every month. Steel policy The draft first report of the proposed National Steel Policy will be presented before the steel ministry, according to Banerjee. Different committees for demand/supply, raw materials, technology and logistics had been set up with stakeholders and experts to look at different aspects of the industry. The new steel policy will replace the old policy, which has been obsolete under the present circumstances when the country is targeting double digit growth rates. The draft report will be placed with the different ministries, stakeholders and experts for their feedback and further improvement, he added.
STEEL INSIGHTS 24 January 2012
Foundry industry on growth path Tamajit Pain
he Indian foundry industry is expected to be in the driver’s seat with demand for castings increasing every passing day, chairman of the Indian Foundry Association (IFA), Pawan Sureka, told Steel Insights in an interview. A foundry produces metal castings. Metals are cast into shapes by melting them into a liquid, pouring the metal in a mold, and removing the mold material or casting after the metal has solidified as it cools. The most common metals processed are aluminium and cast iron. According to Sureka, there are around 500 foundries in West Bengal alone. This is followed by the next big foundry region of Coimbatore followed by Jalandhar, Ludhiana, Pune, Kolhapur and Rajkot. Size of foundries range from 50 tons per month to 5,000 tons per month, he said. The industry estimates that this core sector industry with more than 5,000 units in India has an installed capacity of more than 10 million tons per annum. Mostly, the foundry industry caters to railways, pumps, sanitary castings and automotive sector, Sureka said. “The main products include castings for pumps/valves, sanitary castings, auto, small engineering castings, ingot moulds and bottom plates among others” he said. The sector exports its products to 26 countries including the US, Europe, Australia and Middle East, according to Sureka. “The high growth of the automotive sector, and other subsidiary industries like the auto component industry, are also growing faster than ever before. This is aiding the growth of the foundry industry, Sureka said, adding that the secondary growth will also drive the demand of the global foundry industry. Moreover, Chinese companies are producing a single product in huge quantity, thereby lacking in variety of the product range. In India, one company is producing different types of products from very small to large volume. Globalisation has resulted in increase in manpower cost by three to four times in China than ever before. As a result, the cost of the products is also more than in the past and now it is at par with India. This has led foreign buyers to seek another opportunity in India for developing their products, which now Indian manufacturers should grab. • West Bengal: sanitary casting segment. • S outh India: automobile and other value added castings for engineering industry. • N orthern and Western India: high precision and non-iron based castings like brass, stainless steel, aluminium machine tools etc.
However, in order to survive in this highly competitive market environment, one has to adopt the latest technology. “The cost and availability of skilled manpower is a major hindrance to the growth of this industry. As such, the industry has no choice but to use advanced and automated production lines, with computer aided online testing and designing capability,” said Sureka. Entrepreneurs have not kept Pawan Sureka, Chairman, pace with the growing global Indian Foundry Association and domestic scenario and do not cater to the needs of quality conscious customers. Various incentives schemes, which help technological upgradation, especially to SSI units like the MSME schemes, have to be more easily available to struggling industries. Entrepreneurs have to come forward to harness various financial schemes offered by the government and the financial institutions to upgrade their infrastructure. Safety precautions are rarely adopted in many Indian foundries where workers rely only on strength and bare hands. However, Sureka begged to differ. He added that entrepreneurs today are aware of the need for staff welfare and they value their manpower and provide adequate safety measures. One will be surprised to note that certain foundries also have soothing music playing on the foundry floor even during production hours, to help workers relax. Meanwhile, the Indian Foundry Association is playing a pivotal role in eastern India by establishing a foundry park in Ranihati Howrah, which will be the single largest foundry cluster in India over almost 924 acres of land. The park is expected to establish more than 150 factories and would have common facility centres, R & D centres, tool rooms, training facilities, etc. These would help primitive and ailing industries in the region to regain their competitiveness. Out of this infrastructure development in 300 acres of land has already been completed, Sureka informed. The foundry park, when completed, would help in employment generation for 30,000 people directly and around 1,00,000 indirectly. According to Sureka, this core sector should also be given some special treatment in the export policy as it is helping the country earn foreign funds by exporting its products and creating employment opportunities.
STEEL INSIGHTS 25 January 2012
‘Steel demand to impact mineral price’
he coking coal contracts for the January-March quarter have been settled at $235 per ton, down $50 per ton quarter on quarter. However, chairman of Gujarat NRE, Arun Jagatramka, owner of 650 million tons (mt) of hard coking coal resources in Australia, feels that the health of the world steel industry will Arun Kumar Jagatramka necessarily have a decisive CMD, Gujrat NRE Coke Ltd influence on the mineral price. The contract rate fall is, therefore, to be seen in the context of world steel capacity use in November dropping to 73.4 percent from well over 80 percent in the first six months of 2011. November world steel production was down to 116 mt from nearly 124 mt in the previous month. What must also be having some bearing on coking coal prices is close to 10 mt fall in Chinese steel production in November to 49.88 mt from the January level. Daily Chinese output continued to decline in December, as many mills have advanced their repairing and maintenance schedules in order not to add steel supply in a falling market. Indian monthly production, however, remained at nearly 6 mt and steel prices, unlike in China and Europe, are maintained, though in a disappointingly low demand growth environment. In a discussion with Steel Insights, Jagatramka said he will not make a guess as to for how long steel will remain in a low demand trajectory. “It could be six months, nine months or more before steel fortunes revive. In the worst case scenario, coking coal will find bottom out at $200/ton. But at what point it will hit the ceiling remains a subject of speculation,” he said. It has been seen more than once how notoriously volatile steelmaking raw materials could be impacting the sustainability of the steel industry. Giving the example of 2004 when coal rose to $480/ton from the previous year’s low of $90/ton, Jagatramka said, “You will see coal moving to a new highly elevated level from every dip.” Otherwise, why should Gujarat NRE be investing nearly $200 million in upgradation of its two mines in Australia to achieve a production of 6 mt by 2015 from an anticipated 2.5 to 3 mt in 2012-13, he said. Installation of long wall mining facilities will cut the coal raising cost for Gujarat NRE by half. Simultaneously, the company, a merchant producer of coke in India, is awaiting environmental clearances to start building a 1.5-mt coke oven unit in Andhra Pradesh. It presently has coke plants in Gujarat and Karnataka of a combined capacity of 1.5 mt. According to Jagatramka, metallurgical coke consumption in India is expected to be in the region of 30 to 31 million tons (mt) in the current year. “Typically coke consumption remains in the region of 25 to 30 mt with imports in the region of 4 to 5 mt. This year,
we expect the consumption to be around 30 to 31 mt and the imports to be in the region of 2 to 3 mt,” Jagatramka said. The majority of steel projects in India are blast furnace based and new technology can reduce the coke rate to some extent but it cannot replace the use completely, he claimed. Jagatramka expects coking coal imports to be around 35 to 36 mt in 2011, up from 25 to 26 mt in 2010, in line with the steel capacity expansion projects in the country. “Coking coal imports will further go up to 35 to 40 mt in 2012 as more and more steel capacities come onstream,” he said. Jagatramka said the coking coal supply disruptions from Australia had been solved during 2011 and this has resulted in the easing of hard coking coal prices from $330 per ton in the April-June quarter (2011) to $235 per ton in the January-March quarter (2012) of 2012. “However, it took a lot of time to reach the lower price level in contrary to our expectations,” he said. This has in turn resulted in the easing of the met coke prices to `18,800 per ton levels in the western Indian market from `20,000 to 22,000 per ton levels two months ago, he said. However, it will be difficult to predict coking coal prices for 2012-13 as the range of resistance and peak levels could be higher in the next cycle, he said. To cope with the growing demand for coke from steel mills in India and abroad, Gujarat NRE is planning both brownfield and greenfield expansion. The company currently has a 700,000 tons per annum (tpa) coke plant at Gujarat and 700,000 tpa coke plant at Karnataka. The company is looking at increasing the capacity of its coke plant in Gujarat to 1 mt in the next two to three years. “We have the required infrastructure for expansion at Gujarat,” Jagatramka said. However, there is no scope for expansion in Karnataka, he said, adding that apart from supplying coke to the steel mills in India, the company is exporting around 250,000 tons of coke to Brazil. Gujarat NRE is also awaiting clearance from the environment ministry for its proposed coke plant in Andhra Pradesh (AP). “We are waiting for the environmental clearance of the Andhra Pradesh plant. We are expecting to get it within two to three months”, Jagatramka said. The Andhra Pradesh plant would have the capacity to produce 1.5 mtpa of coke, he said. The plant would also have a 100 MW waste heat recovery plant. The total investment in the AP plant would be `1,100 crore. Whatever improvements happen on CDI here and the success we may have in employing new age technologies like Corex and Finex, India’s import requirements of metallurgical coal, according to a study, will climb to 90 mt by 2015 from around 30 mt now. The import projection is based on the perception of the country’s steel production growing at an annual clip of 10 percent. As India’s imports treble in the next four years, it will move ahead of Japan and China, now leading the group of importing countries. China is likely to import 70 mt in 2015.
STEEL INSIGHTS 26 January 2012
Little headway in Posco project
Steel Insights Bureau
espite the best efforts of the Centre and the state government, the integrated steel plant project of Korean steelmaker Posco in Odisha made little progress in December. The Union mines ministry sought a status report on the project recently and the state steel and mines department submitted it, providing the latest information on the progress of land acquisition, diversion of forest land and number of families displaced, among others. The state government, in its report, claimed that 2,000 acres of land has been acquired so far, and that of the total 3,719 acres land required for setting up of the steel plant, only 10 percent belonged to private persons. The remaining land, it said, belonged to the state government under illegal possession of some villagers. The state government also said that about 720 families were likely to be displaced for the project, but a handsome rehabilitation package had been made for them. However, the state government informed that the company was yet to get the raw material linkage due to a court case over the prospecting license (PL) for Khandadhar iron ore reserve in Sundergarh district. Meanwhile, there was hardly any progress in the construction work on the coastal road at the project site. “We have not received the ground report from the district administration where the construction work on the coastal road has been halted,” chief secretary B.K. Patnaik said. The work on the coastal road had taken off on December 14, but has since been halted after a violent incident broke out due to the clash between the supporters and opponents of the Posco project, resulting in the death of one person.
the construction work of the Posco steel project on the 2,000 acres of land in Nuagaon and Gadkujang panchayats. New site office All that the company could achieve in December was to open a site office at Nuagaon village in Jagatsinghpur district. The company proposes to build the steelworks at this site. The opening of the office was held amidst mounting tension over the conflict between anti and pro Posco groups. Orissa Industrial Infrastructure Development Corporation (IDCO) officials skipped the inauguration that was held without police protection. This new office will help facilitate smooth communication with villagers over matters relating to land acquisition for the project, sources said. The office will also have representatives from the Orissa IDCO, which is responsible for acquiring land for the project. MoU hangs fire
Posco seeks admin help In order to expedite the construction work at the proposed site, Posco India CMD YW Yoon has sought the intervention of the district and police administration. Kujang police have imposed restrictions on entry of Posco officials to the site through a notice on December 15. Yoon has reportedly sent a letter to the district and police administration, asking for permission to enter the site and security cover for Posco officials. This, he said, was required to expedite the construction work at the Nuagaon and Gadkujang villages. Yoon further said that both the Centre and state governments had expressed interest in expediting
Meanwhile, Posco and the Odisha government are yet to renew their memorandum of understanding for the project, despite the original agreement having expired in June 2010. Following the incident over the construction of coastal road project, the state government has stopped talking about renewal of MoU with Posco. Earlier, the state government had announced that the MoU will be renewed by the end of the year. “We have sought a report from the ground. The government will review the situation before taking any decision on resumption of activities at Posco’s proposed plant site,” Patnaik said.
STEEL INSIGHTS 27 January 2012
Rashmi Group to invest `1930 cr in steel biz Steel Insights Bureau
ashmi Group, which has interest in steel, sponge iron, pig iron, TMT, cement and ductile iron pipe, is planning to invest around `1930 crore for setting up beneficiation, pellet, ferro alloys and captive power plants in three states, including West Bengal. “We plan to invest around `930 crore in West Bengal and another around `1000 crore in Odisha and Madhya Pradesh over the next one to five years,” president (business development) of Rashmi Group, R.C. Behera, said at a press conference in Kolkata. The group, which is also into trading (import and export) of mineral (iron ore and coal) and mineral based products and is currently fighting a legal case over alleged violation of rules for export of iron ore, plans to finance the projects with 30 percent equity and 70 percent debt. “We have, however, no immediate plan to raise funds from the market and equity part of the investment will come from internal accruals,” Behera said. The group, founded by Sajjan Kumar Patwari in 1966 with a re-rolling mill, is currently running a cement grinding plant of 3.6 lakh tons per annum (ltpa) capacity and a direct reduced iron (DRI) or sponge iron unit of 3.0 ltpa with 18 MW captive power plant at Jhargram in West Bengal. It also operates a 0.5 million tons per annum (mtpa) mini steel plant with ductile iron (DI) pipe making facility at Kharagpur in the same state. Giving details of the upcoming projects, Behera said,”We will set up a ferro alloy plant at Jhargram and another 18 MW captive power plant at an investment of `130 crore, which is already under implementation.” The group is also in the process of setting up a 1.5-mtpa beneficiation plant, 1.2-mtpa pellet plant, 1.2-ltpa wire rod and 12 MW power plant at Kharagpur at an investment of around `300 crore within the next one year, he said. “We will initially invest another around `500 crore for setting up another 0.5 mtpa mini steel plant facility at Jamuria in Burdwan district of West Bengal. These projects will create employment for around 2000 people directly and indirectly,” Behera added. About the projects in Odisha and Madhya Pradesh, Behera said these projects comprising an iron ore beneficiation plant Expansion projects Project Ferro Alloy with 18 MW CPP Beneficiation (1.5. mtpa) and Pellet (1.2) plant, 1.2 ltpa wire rod and 12 MW CPP Mini-Steel Plant Beneficiation and Pellet plant Ferro Alloy plant with CPP Total:
Source: Rashmi group
Location Jhargram (West Bengal) Kharagpur (West Bengal) Jamuria, Burdwan (West Bengal) Orissa Madhya Pradesh
Investment (`crore) 130 300 500 1000 1930
R.C. Behera,President-Business Development, Rashmi Group (second from left) addressing a press conference in Kolkata.
along with a pellet plant (1.2 mtpa) in Odisha and a ferro alloy plant with captive power plant in Madhya Pradesh, will come up in the next five years. He pointed out that the thrust of the expansion programme will be to upgrade the skills and quality in the value chain and become an active partner in the growth story of the country. Asked where from they expect to get iron ore for their expansion projects, especially at a time when there is huge crunch in availability of ore because of mining ban in Karnataka and restrictions in Odisha, Behera said, “We feel that current situation will not last long and very soon there will be a solution. Moreover, we have been allotted prospective license (PL) for six iron ore and manganese ore mines. Once the mining leases are allotted, we will be self-sufficient in iron ore to a large extent.” Asked how the group is managing the terrorism activities in Maoist dominated areas where there existing plants are located (Kharagpur and Jhargram), the group’s director (project) P.K. Chakraborty said, “Rashmi is among the first few companies that have played a significant role in creating investment and employment opportunities in Maoist dominated districts like West Midnapore. We have created employment for more than 2,000 people.” The group has undertaken different social responsibilities to upgrade the life of the people in the nearby villages in Kharagpur and Jhargram and one such initiative was the programme developed to provide short-term technical training for the development of skills among the young and offer 80 percent of the land loser with jobs so as to meet the rapidly changing requirements of the industry, he said. “We have also undertaken the task of establishing a green belt around our integrated steel plant at Kharagpur by planting nearly 1 lakh trees. Ambulance facilities and primary medical assistance are provided to the local people,” Chakraborty said. He said the group also offers assistance to local education institutes to finish their unfinished classrooms and has also constructed a link-road between NH-6 and Malancha for use by the people of the nearby villages.
STEEL INSIGHTS 28 January 2012
BSP exports 0.253 mt till Nov Sanjukta Ganguly
hilai Steel Plant, one of the biggest integrated steel plants of Steel Authority of India Ltd (SAIL), exported a total of 0.253 million tons (mt) of steel during the first 11 months of 2011, a senior official of BSP told Steel Insights. “The export loading till November is significantly (59%) higher than total export of 0.159 mt steel during the entire 2010,” the official said. The exports during the first eight months (April-November) of 2011-12 stood at 0.172 mt and the value of exports stood at `612 crore. Of the total exports during the first eight months of 201112, plates (high tensile, mild and ABS ship-building grades) accounted for 0.137 mt to Singapore, Taiwan, UAE, Syria, Italy, Belgium, UK, Spain, Netherlands and Sudan, he said. Another 14,000 tons of rails was exported to Sri Lanka, 2,700 tons of TMT bars to Sudan, and 18,800 tons of wire rods and billets to Nepal, the official added. “The total export of around 14,000 tons of rails in 2011 so far, is the best ever performance and surpassed the previous best of 7,531 tons achieved in 2001,” the official further added. Special products on offer According to the official, the exports of special steel plates from Bhilai are for a variety of applications including manufacturing of ships and railway bogies. In fact, Thyssen, a Germany-based company, is sourcing high-strength steel plates from Bhilai with low sulphur content and with dual certification (ABS & DNV) for manufacturing the hull of ocean-going ships. The high tensile ship building quality in grade AH/EH 36 was made with low sulphur content (<0.010%). Another company Siemens Transport Systems, is also sourcing plates from Bhilai with low temperature impact toughness to be used in manufacturing railway passenger
N.K. Nanda interim chairman of NMDC
he steel ministry has appointed N.K. Nanda as interim chairman and managing director of the country's largest iron ore miner, NMDC Limited. Nanda currently serves as director (technical) at the state-run miner, and will hold the additional charge for three months from January 1, or until appointment of a regular chairman, the company said over the weekend. The outgoing chairman Rana Som retired on December 30. "Rana Som, Chairman-cum-Managing Director, NMDC, has retired from the services of the company on attaining the superannuation age of 60 years on December 31," a company statement said.
bogies for an overseas order. The chemistry of this grade, named BSEN 10025-2 S 275J2+N has been suitably formulated to achieve high impact energy values with moderate mechanical properties, the BSP official informed. Currently, Titagarh Wagons Limited is another company which is sourcing weldable fine grain pressure vessel plates from Bhilai Steel Plant for fabricating High Speed Light Wagons for export to France. The steel required to fabricate high speed light wagons with micro alloying was produced with strict control of sulphur. Impact properties for this grade, named DIN EN 10028-3: P355 NL1 were achieved at extra low temperature of (-) 50°C. BSP has also developed and supplied the new grade of steel channel 400x100 in BS EN 10025-2 S 235 JR+AR grade to BHEL for their overseas project at Sudan. Another new grade of plate is being developed in BS EN 10028-2 P355 GH with PED certification. This steel has very low sulphur and requires tensile properties at elevated temperatures for Thermax. The samples were tested at RDCIS, Ranchi and the yield strength obtained at 300°C was conforming to the stipulated requirements. Apart from this, many of the grades developed by Bhilai have also been substituting imports. A special atmospheric corrosion resistant steel plate in JIS 3114 SMA 490BWN grade has been alloyed with chromium, copper and nickel for BEML. It has been produced for manufacturing bogie frames for Delhi Metro Railway Corporation Ltd. These plates which are being supplied in normalised condition with impact toughness at 0°C will be substituting the present imports from Korea. The total order quantity is 1130 tons in the thickness range 9 to 70 mm. New offering for the Railways Another new product that will be substituting imports is the End Forged Thick Web Asymmetric Rail for the Indian Railways. Thick Web Switches, used in high speed and heavy haulage tracks for changing the track of the locomotives and rakes, are basically manufactured from Thick Web Asymmetrical rails, which are suitably forged at one end (Endforged) to match the original symmetrical section of the track. At present, these switches are being imported by Indian Railways. On request from the Indian Railways, BSP has successfully developed the End-forged Thick Web Asymmetrical Rails. In fact, the Railway Board has already approved the trial order for 60 Kg thick web switches, 10 pairs each for Western, South-Central and Northern Railways, company sources informed. With so many new products already on offer and few others coming up, the potential of this integrated steel plant is undoubtedly on the rise. Hence, according to expertsBSP will definitely continue to play a major role in fulfilling the dream of the Indian steel industry in the coming days as well.
STEEL INSIGHTS 29 January 2012
Essar Steel expands capacity at Hazira
ssar Steel, a part of the Essar group and a 14 million tons per annum (mtpa) global producer of steel, is a fully integrated flat carbon steel manufacturer—with presence in Canada, USA, India and Indonesia. The company has recently doubled its capacity to 10 mtpa at its plant located in Hazira in Gujarat, making Hazira the world’s fourth largest single location flat steel complex, company sources informed Steel Insights. This expansion also makes the Hazira Steel Complex the
ESML’s iron ore reserves at 1.77 billion tons
ssar Steel Minnesota LLC (ESML), a private resources company engaged in the development and mining of iron ore and part of the Essar Group, has reserves of 1.77 billion tons, with a grading of 31.78 percent total iron, along with inferred mineral reserves and resources estimated at 201 million tons (mt) making it a leading iron ore resource party in the North American Basin, the company said in a statement recently. This is confirmed by the National Instrument ("NI") 43-101 Mineral Resources and Mineral Reserves Report prepared by Met-Chem Canada Inc., an international consulting engineering firm providing all phases of geology, mining, mineral processing and engineering services, the statement said. "The measured, indicated and inferred resources of nearly 2 billion tons at Essar Steel Minnesota’s iron ore project exceeded our expectations,” said Madhu Vuppuluri, President and CEO of Essar Steel Minnesota. “We are also pleased to learn that 95 percent of total measured and indicated resources are made up of mineral reserves. We believe that our project contains sufficient reserves and resources not only to increase the planned production of iron ore pellets from 4.1 mt to 7 mt annually, but also will enable us to evaluate options to further utilize our increased mineral resources ,” the CEO added. ESML’s project is a taconite iron ore project located at Nashwauk, Minnesota in the western part of the Mesabi Range. All permits for the construction and production of 4.1 mt of iron ore pellets annually have been received. Applications have been filed for a second phase expansion to add an additional 2.9 mt of iron ore pellets production annually, the statement said. The reserves are sufficient to provide long term raw material security for the company, it added.
largest single location flat steel producer in India. In fact, with this expansion, the complex will be able to offer the entire range of flat products from thin strips and thick plates to pipes, cold rolled and coated products. “We would like to dedicate this plant to the nation. When I first ventured into Hazira, it was my desire to put India on the global steel map and today that dream has come true. Our world-class steel complex is a testament to the hard work put in by the Essar family and our small contribution to the steel industry and India’s growth story,” said Shashi Ruia, chairman of Essar group. Domestically the complex will provide world-class steel to meet the diverse needs of various industries, while also making the Hazira Steel Complex a national hub for Essar Steel to provide a range of steel products to the rest of the country. Raw material security Essar has adopted an integration and securitisation strategy that has enabled it to keep its costs low even with the expanded capacity. A bulk of its iron ore needs have been secured through offtake agreements with key players like NMDC and captive mines in Jharkhand and Chhattisgarh. In addition, the iron ore beneficiation plants have been set up by the company to facilitate usage of low grade iron ore fines abundantly available in the country. For its energy requirements, Essar has long-term power purchase agreements and will soon have access to source cheaper coal based power from its captive plants. The off-take agreements combined with the captive mines and easy availability of low grade iron ore dumps provides Essar the necessary raw material security to operate its steel plant in the most cost-effective manner, a senior official of Essar Steel told Steel Insights. Fully equipped with three iron making technologies – HBI/ DRI, Corex and blast furnace, Essar Steel has also an added flexibility in their raw material inputs, be it iron ore or energy. Low capital investment This company has invested over `37,500 crore in the business including the recent project expansion. Essar Steel incurred a cost of just $750 per ton of steel, which includes steelmaking, beneficiation, pelletisation and downstream capabilities. On a like-to-like basis, Essar Steel has managed to create this asset at a significantly low capital cost, according to company sources. In fact, in some cases, the costs are lower than other steelmakers by as much as 50 percent. Complemented by well-entrenched distribution network with last mile reach and world-class sustainability practices, Essar Steel has added a new chapter in India’s infrastructure growth story. With further expansion plans on the cards, this story is set to continue.
STEEL INSIGHTS 30 January 2012
RINL scouting for iron ore, coal mines Steel Insights Bureau
ashtriya Ispat Nigam Ltd (RINL) is scouting for iron ore and coal mines in Andhra Pradesh, Jharkhand, Rajasthan, Chhattisgarh, Odisha and Uttar Pradesh, according to a recent statement by RINL. The state governments of Rajasthan and Uttar Pradesh are actively considering RINL’s iron ore lease applications, the statement said.
Zimbabwe govt clears Essar project
Steel Insights Bureau
he government of Zimbabwe (GoZ) has reached an agreement with Essar Africa Holdings Limited (“EAHL”) on immediate implementation of the Zisco Transaction, minister of industry and commerce, Professor Welshman Ncube, said in a statement recently. The implementation plan, which has been endorsed and adopted by the Cabinet of GoZ will result in the transfer of agreed assets and agreed liabilities from Zimbabwe Iron and Steel Company ("ZISCO") and BIMCO to the two new companies inaugurated to undertake the project, namely New Zim Steel and New Zim Minerals. Essar will assume day-to day management control of operations with immediate effect while the procedural actions giving rise to the transfer of the agreed assets and liabilities is being completed in a time bound manner. The adoption of the implementation plan by GoZ and Essar marks yet another important milestone in the process, which started with the public tender for a majority of GoZ’s shareholding in ZISCO and results in the commencement of the revival of the operational assets of Zisco. Ncube noted that, “The implementation of the agreements will bring hope to the employees of Zisco, the communities of Redcliff, Kwe Kwe and Chivhu and Zimbabwe as a whole.” Earlier, GoZ and EAHL announced the launch of two entities: NewZim Steel Private Limited and NewZim Minerals Private Limited. NewZim Steel (NZS) will be owned 40 percent by GoZ and 60 percent by EAHL. This company will acquire the existing assets of ZISCO and will revive and expand ZISCO’s steelmaking capacity in two phases, according to information available with Steel Insights.
RINL CMD A.P. Choudhary, who met mines minister Dinsha J. Patel, requested him to recommend the leases soon after the file reaches the ministry of mines from the respective state governments. The minister assured all help to RINL and informed that the applications will be considered favourably for allocation of mines, the statement said. According to information available with Steel Insights, Choudhary also called on Vishwapati Triwedi, secretary, mines, and Alok Perti, secretary, coal, and requested for a favourable consideration in allotting mines and coal blocks to RINL.Responding to a query by Perti about the surrendered coal blocks of Mahal and Tinighat Jhirki, Choudhary informed that it is not feasible to operate these two blocks because of the prevailing faults, geological disturbances and bare minimum availability of reserves. Choudhary further informed that those two blocks are neither economical nor safe to operate and accordingly returned those blocks after taking expert opinion. Perti assured allotment of new blocks which are potential/ good for operating and investing by RINL by end of January,the statement added.
STEEL INSIGHTS 31 January 2012
SAIL, Kobe Steel sign 50:50 JV deal Steel Insights Bureau
teel Authority of India Limited (SAIL) and Kobe Steel Limited of Japan have agreed to establish a joint venture company to carry out a detailed feasibility study for a commercial ITmk3 iron making plant in India, according to a statement in Kobe Steel’s website. Provisionally called SAIL-Kobe Iron India Private Limited, the proposed 50:50 joint venture will be headquartered in New Delhi, the statement said. The two companies have so far been jointly working on a preliminary study to utilise the ITmk3 process developed solely by Kobe Steel since signing a memorandum of understanding in March 2010. Kobe Steel and SAIL will now carry out the detailed feasibility study to bring about the early implementation of the project. The project consists of one ITmK3 iron making plant and associated facilities. With a capacity to produce 500,000 tons of iron nuggets per year, the plant would be constructed at SAIL's Alloy Steels Plant in Durgapur in West Bengal. The project would use iron ore from SAIL's mines. Non-coking coal, sourced within India, will be used as the reductant in the ITmk3 process.
SAIL, MOIL form JV to set up ferro alloys plant
AIL and MOIL have formed a joint venture company namely – SAIL and MOIL, Ferro Alloys Private Limited, to set up a ferro alloy plant for production of high carbon ferro manganese and silico manganese at village Nandini, Bhilai (Chhattisgarh), steel minister Beni Prasad Verma said recently. In a reply in the Lok Sabha he said, Maharashtra Elektrosmelt Ltd (MEL), located at Chandrapur in Maharashtra, with a capacity of 100,000 tons of ferro alloys, was a subsidiary of Steel Authority of India Limited (SAIL) has now been merged with SAIL with effect from April 1, 2010 and has been renamed as Chandrapur Ferro Alloy Plant (CFP). The merger of CFP with SAIL is expected to align the development of the unit and related investments in line with the ferro alloy requirements of SAIL, he added. MOIL currently operates 10 mines in the country – six in the Nagpur and Bhandara districts of Maharashtra and four in Balaghat district of Madhya Pradesh. The company also meets about half of the total requirement of dioxide ore in the country.
After the detailed feasibility study is completed with the environmental permits having been obtained, plant construction is likely to commence in 2013 at the earliest and the plant will go into operation in 2015, the statement added. ITmk3 technology is the latest generation iron making technology where iron nuggets are produced by using iron ore fines and non-coking coal. Conventional BF route requires iron ore lumps, sinter and coking coal to produce pig iron. ITmk3 technology produces high quality iron nuggets and the technology is also environment-friendly. Kobe Steel and SAIL will have the right to utilise the iron nuggets produced at the Durgapur plant in proportion to their equity share in the joint venture for their own use, or the joint venture may sell the nuggets directly to the market. Both the partners – SAIL and Kobe Steel – have finalised all the commercial terms and conditions for the venture and are willing to invest `1,500 crore in the project which is likely to be operational in 2014. "It is my earnest wish that our new iron making technology - ITmk3 - will contribute, through this joint venture project with SAIL, to further development of Indian Steel industry as well as of India itself,” said, Mr Sato, president of Kobe Steel Ltd. “Further, I do hope this ITmk3 JV Project will become a golden opportunity for the both companies to explore other fields where we can collaborate for mutual benefits" he added. On the other hand, C.S Verma, Chairman of SAIL said, "The joint venture will bring about an era of path-breaking technological collaboration between the two advanced and modern companies, heralding a new dawn for the Indian steel industry.”
STEEL INSIGHTS 32 January 2012
NTPC seeks to opt out of ICVL Steel Insights Bureau
he ministry of power has recently intimated Ministry of Steel that NTPC Limited may be allowed to opt out of the International Coal Ventures Ltd (ICVL), steel minister Beni Prasad Verma, told Parliament on December 13. The proposal of the ministry is presently under examination. In the event of NTPC Ltd opting out of the JV, restructuring of ICVL may be necessary, the steel minister said. ICVL, a joint venture company, has been set up with the approval of the government of India for the purpose of acquisition of coal companies, coal mines and coal assets/ blocks in overseas territories. In fact, ICVL was promoted by five state-owned firms two years ago to buy coal mines overseas. While Steel Authority of India Ltd (SAIL) and Coal India Ltd own 28 percent each of ICVL, NTPC, Rashtriya Ispat Nigam Limited (RINL) and NMDC Ltd own 14 percent each. The 14 percent share of India’s largest power generation utility in the consortium,
MoEF nod for Adhunik arm
Steel Insights Bureau
which hasn’t managed to close a single purchase, is expected to be split proportionately among the remaining partners. ICVL was floated on the coal ministry’s initiative and has an initial equity capital of `3,500 crore and authorised capital of `10,000 crore. The promoter companies of ICVL are the Steel Authority of India Limited (SAIL), Coal India Limited (CIL), Rashtriya Ispat Nigam Limited (RINL), NMDC Limited and NTPC Limited. The coal produced from these assets is intended for imports into India primarily for meeting the requirements of coal by the promoter companies of ICVL. NTPC’s decision comes at a time when the country is faced with a coal crisis in terms of metallurgical and thermal coal. In case of NTPC, while the power producer needs thermal coal to fuel its power projects, ICVL’s other stakeholders are largely interested in metallurgical coal reserves to feed their steel mills. Moreover, the thermal coal offered to it does not meet the utility’s technical requirements. Hence, this might have been a reason for the company’s opting out of ICVL. This break-up will definitely pose a challenge to “the efforts of the government to create a sovereign fund like arrangement and create a unified acquisition resource pool in the form of ICVL,” an industry expert said.
dhunik Metaliks Ltd said that its 100 percent subsidiary Orissa Manganese & Minerals Ltd’s (OMML) 50:50 joint venture project with B C Dagara has received forest approval from the Ministry of Environment and Forest (MoEF) to start mining operations at the Suleipat iron ore mine in Odisha. B C Dagara is the lessee of Suleipat Iron Mine, and the MoEF permission is to start mining operation in 294 hectares of forest land, Adhunik Metaliks said in a release. The joint venture had earlier deposited the required net present value to the government to obtain necessary approvals to start the mine and had in October last got working permission to start mining in 70 hectares nonforest area, the release added. With the latest clearance, the joint venture has all the clearances to produce 0.6 million tons (mt) of iron ore annually and it is working to scale up the production to 3.0 million tons per annum, the mining plan for which has already been approved by Indian Bureau of Mines (IBM), the release said. Suelipat iron ore mine is located at Rairangpur in Mayurbhanj District of Orissa and the mines are spread over an area of 618 hectares with estimated resources of more than 80 mt of high grade ore of average Fe content of over 63.5 percent.
STEEL INSIGHTS 33 January 2012
Electrotherm sells DI pipe business to SaintGobain Steel Insights Bureau
lectrotherm (India) Limited, the Ahmedabad-based induction melting furnace maker, has sold its ductile iron pipe business to the French major Saint-Gobain. In a statement, Electrotherm said that it has executed binding agreements pursuant to which Saint-Gobain Produits
Pour La Construction SAS, France, will acquire the DI pipe business and 100 percent stake in a subsidiary of Electrotherm for `950 crore, plus the value of working capital at closing. The transaction will be subject to the terms and conditions as set out in the binding agreements entered into by the parties. The transaction will enable Electrotherm to focus on its core businesses of engineering and steel and also to reduce debt. KPMG Corporate Finance was the exclusive financial advisor to Electrotherm (India) Ltd. Founded in 1986, Electrotherm is now India's largest manufacturer of induction melting furnaces and refining equipments. More than 18 million ton of steel are produced on equipment supplied by Electrotherm every year. The company diversified into steel manufacturing in 2005 and achieved sales of over `2,300 crore in FY 2010-11. The company is also a leader in India in the electric two wheelers manufacturing segment. Saint-Gobain first came to India by acquiring a majority stake in Grindwell Norton in 1996, and thereafter went on to consolidate and strengthen its presence within the country. The group has adopted a systematic focus in launching its individual businesses in India and currently operates in three business sectors: flat glass, high performance materials (collectively known as innovative materials) and construction products.
Demag Cranes brings new DR-Bas rope Steel Insights Bureau
s an active step towards extending its portfolio of products, Demag Cranes has launched the DRBas rope hoist that is specifically designed to meet the demand of the Indian and Chinese markets. Along with this, Demag Cranes is also launching Bas crane sets from the Bas Suhas Baxi, CEO and MD product family, which, Demag India besides the DR-Bas rope hoist, also include drives and the complete electrical equipment for crane installations. All crane components supplied with Bas crane sets are perfectly matched and can be assembled on the plug-&-play principle, company sources informed Steel Insights. “We aim to add further products to our Bas product family this business year,” said Aloysius Rauen, CEO of Demag Cranes AG. “Our activities clearly focus on local customer and market requirements. This goal was already reflected in the first steps of the strategy. All products in the Bas family have been developed by international teams of engineers, thus representing a perfect blend of local expertise and European technology,” he added. The launch of DR-Bas is the next step in the implementation of Demag Cranes’ growth strategy that is focused on India and China. This aims to offer crane and lifting solutions tailored to meet the needs of customers in all segments and sectors of industry. With its Demag Bas product family, the company aims to achieve above-average growth in the attractive midsegment and the goal is to supply customers a complete range of products and services in their markets, said a senior official of the company. The Demag Cranes Group, one of the world’s leading suppliers of industrial cranes and crane components, harbour cranes and terminal automation technology sees its core competence in the development and construction of technically sophisticated cranes and hoists as well as automated transport and logistics systems in ports and terminals, the provision of services for these products and the manufacture of highquality components in the coming days as well.
STEEL INSIGHTS 34 January 2012
NMDC’s 50% Legacy stake cleared Steel Insights Bureau
ustralia's Foreign Investment Review Board (FIRB) has cleared state-run NMDC's proposal to acquire 50 percent stake in Legacy Iron Ore. NMDC had earlier said it would invest $18.9 million in order to acquire a 50 percent interest in Legacy, a Perth-based iron ore explorer. In a filing to the Australian Securities Exchange, Legacy Iron said that its board has agreed to the NMDC proposal though the deal would be subject to regulatory and shareholder approval. India's largest iron ore miner is looking to lock in iron ore supplies, and had inked an MoU with Legacy on May 24 to acquire 50 percent equity in the Australian firm, according to information available with Steel Insights. "This is only an initial investment into Legacy and NMDC's involvement will depend on various projects that may be taken up later," said Kumar Raghavan, NMDC company secretary. NMDC and Legacy will jointly develop the Mt Bevan iron ore project in Western Australia. Mt Bevan is considered to hold excellent potential for iron resources that are located close to existing road, rail and port facilities, according to Legacy.
In fact, NMDC’s efforts to acquire this 50 percent stake at the Legacy iron ore mines has also received a boost up with NMDC’s three senior executives joining the Australian firm's board as directors. "Legacy will be unique among Australian public companies in having this level of Indian representation on our board. The three senior executives of NMDC will bring in excess of 75 years worth of managerial and mining experience to Legacy at a time when the company is seeking to develop its current assets and secure additional resource projects," Sharon Heng, Legacy’s Managing Director said. "Following shareholders' approval, the placement to NMDC will potentially give Legacy improved access to development funding and ongoing acquisition opportunities offered through the NMDC network, underpinning the future growth of the Company and development of its assets," she added. “The appointments will represent a significant turning point in Legacy's growth, and an ability to take the company to the next level in global resources industry,” she further added.
STEEL INSIGHTS 35 January 2012
he PP Rolling Mills (PPRM) has been providing complete solutions for the design, manufacture and supervision of erection and commissioning of rebars, wire rods and section rolling mills for the past 26 years. It can currently service rolling mills with capacities up to 500,000 ton per annum (tpa). With its product range covering almost every kind of equipment used in the steel rolling mill, the company has supplied more than 150 TMT systems and many turnkey projects in India as well as abroad and its market share is growing day by day, the managing director, Pankaj Khanna, told Steel Insights. Khanna informed that after developing a strong global as well as domestic client base, PPRM is now looking at developing an infrastructure base in the Middle East Countries. The company, in fact, has already opened its marketing offices in Iran and Tunisia to grasp the opportunities in these markets. PPRM’s global clientele includes the likes of Uniroll in Bahrain, Sheema Steel and AMk Steel of Bangladesh, Magnum and Metropolitan of Pakistan, Goenka Steel and Jagdamba Steel of Nepal and Al Ittefaq of Saudi Arabia. The domestic clientele consists of Bharat Heavy Electricals Limited, Tiruchirapalli, Tata Steel Limited, Jamshedpur, Larsen & Turbo Limited, Rourkela, Danieli India Limited, Kolkata, Sunflag Iron & Steel, Nagpur, Metso Minerals (India) Pvt Ltd, MID India and Gujarat NRE Coke, Gandhidham, among others. Working closely with global equipment builders like SMS, VAI, Sulzer Hydro and with top Indian companies like Larsen and Tubro Ltd, Tata Growth Shop, SAIL, MECON and M.N. Dastur has made PPRM conversant with their best practices in design, manufacturing and stringent quality standards, Khanna said. He said the Indian steel sector is gearing up to meet the incremental demand coming up in the near future. About 70 million tons per annum (mtpa) of steel capacity is scheduled to be added in the next five years, with an expected incremental production of 57 mtpa. To meet this requirement, there will be demand for more rolling mills in India as well, he added. If all the projects come on stream as per schedule, India is expected to become the second largest steel producing country in the world by 2014-15, he said. Khanna said the company has identified the need to adopt the latest technology in the field, and has taken the initiative to develop the high productive mills indigenously on a turnkey basis. In this direction, it has already developed the technology in association with Italian and German designers. He informed that the company’s technical collaborators include Human Engineering, Environmental Products & Production (HEE&P), which is the technology partner in the field of iron and steel making, Pankaj Khanna, MD high production rolling mill,
downstream production and iron and steel waste recycling. PPRM has tied up with HEEP&P for the iron & steel making plants, continuous cast plants, conventional rolling mills, downstream industry and iron & steel waste recycling plants. The other collaborators are Dr- Ing. Wolfgang Mudersbach, Germany, Schweitzer Rolling Technology, USA for Roll Pass Design & Commissioning, HERBERT ROTHE Consulting for TURBOQUENCH and CRM Belgium for TEMPCORE. The domestic and business construction activities as well as industrial growth, have all opened up the opportunities for steel mill industries. The spurt in the automobile sector has created a demand for alloy steel. Also, many countries in Africa, Gulf, Bangladesh and south East Asian nations are trying to source their steel rolling mill from India, Khanna informed. He said that in spite of low steel demand, there is still a huge demand-supply gap. As times became difficult, the company adopted the strategy of providing good quality equipment at a moderate price. It not only opted for technology collaboration with many partners, it also included the best machineries to produce good quality machinery. For example, the company has the latest European machine tools including Table Type Scharman CNC Horizontal Boring Machines updated with the latest Siemens 840D controls & Floor Borers from SKODA & Schiess. It also has the best HOFLER gear grinding machine capable of grinding gears up to maximum diameter of 2000 mm and 25 module, GOULD AND EBERHART, LIEBHERR & PHAUTER gear hobbing machines capable of cutting gears up to maximum diameter of 3000mm and 25 module. The company’s facilities also include MAAG CNC gear profile testers, SCHENK
STEEL INSIGHTS 36 January 2012
Corporate update project, Khanna informed. The specific products are: ♦♦ Housing-less (horizontal and vertical) mill stands ♦♦ Conventional and pre-stressed mill stands ♦♦ High speed blocks and laying head ♦♦ Complete TMT System with a relationship with CRM, Belgium ♦♦ Pinion Stands & Reduction Gear Box ♦♦ Coilers (Eden Born & Garret) ♦♦ Coil Conveyors ♦♦ Roller Tables & Tilting Tables ♦♦ Shears (Flying & Rotary) for Crop and Cobble and Cooling Bed Dividing Operations ♦♦ Cooling Bed (Turnover Type & Rake Type) and Bar Handling Equipment ♦♦ Hot Saws (Pendulum & Horizontal Type) ♦♦ Cold Shears up to 500 Tons Capacity ♦♦ High Speed Delivery System (Twin Channel) and Bar Braking Pinch Rolls ♦♦ Wire Rod Blocks (for speeds up to 70 m/sec), laying heads and coil collecting and handling systems
dynamic balancing machines, stress relieving and shot blasting chambers. These facilities help to provide customers with quality product at low cost, he added. The company is currently servicing Al-zazzera ambition factory, Saudi Arabia, Supe Steel Iraq and Razaque Steel Pakistan, Khanna informed. He said that the company has been achieving a 15 to 20 percent growth in turnover each year. As far as expansion is concerned, the company is putting up two new manufacturing facilities at Faridabad with new technology machines. Product range The company’s product range covers every kind of equipment in the steel rolling mill, barring a few standard products such as propeller shafts, couplings, rolls, roller guides, etc. It has its standard range of equipment to meet the requirements of the Material specification for convertible stands ♦♦ reinforcement wire rod in coils ♦♦ standard DIN 488 ♦♦ plain and ribbed rebars in coils ♦♦ diameter of bars plain 5,5 to 13,0 mm ♦♦ diameter of bars ribbed 8,0 to 13,0 mm ♦♦ coil diameter : 1250 mm outside, 850 mm inside ♦♦ preconditions: tolerances of charged round max. 80 % of final rod tolerances ♦♦ temperature difference between tail and head end of charged bar max. 50 °C
In its efforts to introduce new technology, PP Rolling Mills has updated the designs and launched the following new products: ♦♦ Wire Rod Block ♦♦ Automatic Cooling Beds and bar handling equipment ♦♦ Horizontal & vertical Housing less Mill stand. Khanna said the company is also planning to develop in association with its collaborator, convertible stands which find advantage in mass production. It is also planning to develop reversible mill Grip Tilter to handle hot blooms etc. The stands are arranged in such a way that the rolling stock does not need to twist during the process of rolling. The stands are configured to locate at 90 degrees so that stock enters straight instead of conventional twisting. The block design is “X” which is known for its advantages to easy roll changing, compactness and rigidity. The wire rod block has three main design characteristics. All roll units are driven via a group drive, with no adjustable permanent relation between the roll revolutions of the roll units. It is designed for twist free rolling between the roll units, and therefore the roll shafts are staggered from roll unit to roll unit by 90°. Thirdly, the roll units are of the cantilever type, and the roll ring and roll force are supported by two bearings left or right of the CL of the pass line in comparison to double supported roll rings, where the pass line and the roll force is supported between the bearings on left and right sides. Asked about his future plans, Khanna said the company plans to develop the following in the near future to address the needs of alloy steel rolling mills: ♦♦ Convertible stands for high productive multi product rolling mills; ♦♦ 2 high reversible blooming mill for alloy steel mills; ♦♦ Trough tilters; ♦♦ Grip tilters for handling, tilting and feeding the stock.
STEEL INSIGHTS 37 January 2012
Iron ore export duty raised to 30% Steel Insights Bureau
n a major setback to the mining industry, the ministry of commerce has raised the export duty on iron ore fines and lumps to 30% from the existing 20%, effective December 30. With 20% duty, export had declined 28% in the first eight months of the current financial year. However, this move to discourage export would help the domestic steel industry, which was finding difficult to get the ore it required due to the mining ban in Karnataka’s Bellary district, analysts feel. India exported around 40 million tons (mt) of iron ore in April-November of 2011-12. Overall exports are expected to decline 50% this year from the 97.6 mt of last year. Total iron ore production was 212.6 mt in 2010-11 and India exported around 97.6 mt during the financial year. The proportion of lumps in iron ore produced has come down from 43% in 1995-96 to 39% in 2010-11, whereas the proportion of fines has increased from 47 to 61% (including concentrates) in the same period. Deeper mining means higher generation of fines. It is 70-75% in India. Unless fines are evacuated from the mines, the production of lumps cannot be maintained or increased to feed the domestic steel industry, according to iron ore exporters. The reduction/stoppage of
Major facts about iron ore PRODUCTION ♦♦ India produced 212.6 mt of iron ore in 2010-11 ♦♦ India exported 97.6 mt in 2010-11 ♦♦ There are about 500 mines in the country, half of which are operational ♦♦ These are held by about 80 companies ♦♦ High-grade ores with 62-65 percent iron are produced mainly in the east and south ♦♦ Low-grade ores with 50-60 percent iron are produced in the west and south ♦♦ The largest mining firm is state-run NMDC, which produces about 29 mt annually EXPORTS ♦♦ India is the world’s third-largest exporter after Australia and Brazil ♦♦ Goa is India’s biggest exporter ♦♦ China is India’s biggest buyer ♦♦ India sells the bulk of its iron ore via the spot market ♦♦ The largest exporting company is Sesa Goa ♦♦ Other large producer/exporters are Essel Mining, Rungta Mines, V.M. Salgaocar, MSPL and Chowgule ♦♦ Miners in Goa have lower costs as mines are located near the port, and so avoid road and rail charges Source: FIMI, industry members and Ministry of Mines.
export of fines by increasing the export duty would, therefore, also affect the availability of lumps to the domestic market, hitting the domestic steel industry, according to some people. According to top officials at steel companies, the increase in export duty is expected to boost supply of iron ore to the domestic steel industry, (perhaps) at lower prices. The price of fines declined 30-40% in September-November. However, exporters feel that the rise in export duty would increase under-invoicing of shipments. Since low grade iron ore is not exported from any other destination, Indian exporters to China will try to hide the actual price to remain competitive in Chinese markets. According to industry analysts, Sesa Goa’s profits are expected to be affected adversely following the hike in iron ore export duty. However, there will be no impact on NMDC’s financials as exports are not significant. Sesa Goa generates 90% of its net sales from iron ore exports. Hence, the export duty hike would increase the company’s export duty expenses without any corresponding increase in iron ore prices, said an analyst report. Price trends Despite tumbling in the fourth quarter amid weakening demand for finished steel and a slowdown in China as the government tried to cool the property market, seaborne iron ore prices are still up this year compared to 2010. Iron ore prices of 62% Fe grade peaked in the early part of the year as China’s output of crude steel and finished products crossed record levels. Prices of the 62% Fe grade bottomed in October, falling below $120/dmt for the first time since July 2010. On a quarterly basis, Q4 prices averaged $141.80/dmt cfr north China, down 20% from $177.56/dmt in Q3 and 11% from $159.48/dmt a year ago. Outlook Seaborne iron ore supply is set to remain tight in 2012, with a lack of significant expansion tonnages and solid demand from Chinese steel mills likely to underpin index prices, according to market observers. Rio Tinto and BHP Billiton could bring on less than 20 million tons per year combined of new production in Western Australia next year, while Brazilian miner Vale's output in 2012 is tipped to fall by around 8 million tons per year from this year. Though Indian shipments recovered towards the end of this year, the ongoing clampdown on illegal mining that has curbed exports is likely to continue into 2012. The Federation of Indian Mineral Industries (FIMI) has predicted that year to-end-March 2012 iron ore shipments will fall by nearly 50% on the previous year with the rise in export duty to 30%. Analysts and iron ore producers expect the price of 62% Fe fines to stay in the $140-150 per ton cfr China range in 2012 on the back of steady demand from mills and constrained seaborne supply.
STEEL INSIGHTS 38 January 2012
Scrap import prices stay firm
Steel Insights Bureau
fter bottoming out in late November, ferrous scrap prices made significant gains in the international market last month and is expected to stay firm during January, market sources said. Accordingly, scrap import prices for India also increased in recent weeks and remained steady in the first week of January. As of January 4, Indian import of HMS 1&2 (80:20) hovered around $455-465 per ton cfr Nhava Sheva, a significant hike over $410-420 per ton cfr quoted a month ago. Shredded scrap prices too jumped to $465-475 per ton in the first week of January from $435-445 per ton reported early December. Sources said that the recent hike in prices has made buyers tentative about making fresh commitments, in view of the poor demand in the finished product segment. The December hike exceeded market expectation and was mainly driven by global competition among buyers after a prolonged market slowdown. Prices are likely to stay largely steady at higher levels in the current month. Elsewhere, Turkish market showed a similar trend over the recent weeks. Scrap import prices moved up by around $15-20 per ton cfr main Turkish port during December and touched $455-470 per ton for HMS 1&2 (80:20). The Turkish mills started restocking the materials late November amid reports of a shortfall in inventory and increased sale of rebars in its major markets. However, after a significant hike in prices, buyers preferred to wait and watch the finished product demand before making fresh commitments. Also, the Christmas and New Year holiday week slowed down demand leading to a flat movement in prices. In the EU, prices of HMS 1&2 (80:20) exported from Rotterdam increased to $395-410 per ton in December,
registering a gain of $10-15 per ton fob over end November. Shredded scrap prices were up to $405-415 per ton end December. Prices firmed up in Spain and staged a rebound in Germany during last month. In Asia, the Chinese domestic market saw price cuts due to over supply of the material amid a fall in demand for finished products. Going forward, the market is likely to see further softening in the current month. Similar is the case with Taiwan, which saw fewer bookings post New Year, mainly due to weakness in the rebar market and a sharp rise in offer prices (by around $20-25 per ton cfr) in the last few weeks. According to reports, offer prices for US-origin HMS 1&2 (80:20) was hovering around $450-455 per ton cfr in late December, compared to $425-430 per ton cfr in early December. Vietnam, on the contrary, showed appetite for fresh buying for restocking at steel mills. During January, the ferrous scrap prices are likely to stay at increased levels in the international market, but may vary in various consuming pockets depending on the finished steel demand.â€‚
STEEL INSIGHTSâ€‚ 39â€‚ January 2012
Spot coking coal prices ease in December Steel Insights Bureau
pot coking coal prices fell over 3 percent in the international market in December on lack of interest from buyers in India and China. The Indian steel mills are faced with iron ore shortage owing to the ban in ore mining in three districts of Karnataka. This has resulted in lower capacity utilisation and lesser demand for coking coal. The depreciation of rupee against the US dollar has also pushed up import prices resulting in lesser imports of the steel making raw material. Big steel companies are being hurt the most as a large part of their coking coal requirement is met through imports. In 2010-11, domestic steelmakers imported close to 27 million tons (mt) of the raw material. The depreciation of the rupee is likely to offset any advantage companies may have gained due to a softening of coking coal prices in the second quarter, industry experts said. The rupee has fallen almost 20 percent against the dollar in the last few months. Adding to this, the lower demand for steel finished products has forced steel mills to roll over prevailing prices. This in turn has forced them to curtail capacity utilisation levels to let ends meet, resulting in lesser demand for coking coal. Offers for Premium Low Vol was quoted at to $220 per ton fob Australia from high of $231 per ton FOB at the beginning of December. Prices of the semi soft variety of coking coal remained firm at $146 per ton fob Australia in December. Although a section of the market feels that the market has stabilised, some traders say that buyers would be unlikely to consider buying spot above the new January to March 2012 AUSTRALIAN COKING COAL PRICES
benchmark price, which is $235 per ton fob Australia for topquality material. Sources said small amounts of buying interest from India was there in spite of the weakness of the Indian rupee against the US dollar, which is limiting local companiesâ€™ import purchasing power. Coke makers say that although the companies are being 50 percent hedged on currency, the fluctuations are having a severe impact on budgeting. There are reports that some coke makers are operating at 75 percent capacity utilisation level. Meanwhile, met coke import prices fell in December owing to falling prices of key raw material coking coal and low demand from steel mills. While the import prices of met coke were hovering around $363 per ton, in the domestic market prices were around `18,000-19,000 per ton, a coke marker informed. LAM coke demand, which is currently at 33 million tons per annum (mtpa) domestically, is expected to shoot up to 58 mtpa in the next five years, as steel makers increase capacity, according to industry estimates. Coking coal price trends
Premium hard HCC Peak coking coal Down fob prices (premium Australia low vol) fob ($/Ton) Australia ($/ton)
HCC 64 Mid Vol fob Australia ($/Ton)
Low Vol PCI fob Australia ($/Ton)
Semi soft coking coal rates fob Australia ($/ton)
Met coke price cfr India (($/ ton)
STEEL INSIGHTSâ€‚ 40â€‚ January 2012
Ferro chrome makers seek curbs on chromite ore export
Steel Insights Bureau
aking a cue from government’s decision to increase export duty on iron ore to 30 percent from 20 percent, the Indian ferro chrome makers feel that a similar tax should be imposed on export of chromite ore or there should be complete ban on its export so that the material is freely available in India. “Either there should be a complete ban on export or export duty should be hiked. Or else some other kind of restriction like issuance of non-transferable licenses to government owned commodity traders such as MMTC and STC should be started in India on the lines of coal export license issued in China,” an official of a leading ferro chrome maker said. Besides imposing restrictions on export of chrome ore, the ferro chrome makers feel that the price of chromite ore also needs to be controlled or fixed at a certain level i.e. cost of mining plus profit of 20 percent or 30 percent maximum unlike the existing practise wherein domestic chrome ore is benchmarked at the international price level. “It is extremely important to impose restrictions as a number of existing holders of mine leases for chromite ore are interested more in exporting the material rather than supplying to domestic ferro chrome makers,” the official said. “Ferro chrome makers without captive chrome ore mines are facing a difficult situation for the last two years as they are not getting chrome ore from Orissa Minerals Corporation (OMC), which is not mining at all at its six mines in order to keep the prices at par with international prices. Some of the other lease holders too are not mining the ore to their full capacity,” said another manufacturer. “But it cannot be like that. Today the ferro chrome industry needs chrome ore and thus the lease holders will have to mine and supply and sell,” he added. He pointed out that in order to restrict rampant export of chrome ore, the government had some time ago come out with a policy decision that the licences of those chrome ore miners, who do not have linked ferro chrome plants, will not be renewed. Following this, some of the lease holders, who did not have linked plants, had set up small ferro chrome plants. “But they do not operate it or produce ferro chrome,” said a third manufacturer. “It’s understood that you need mines for your plants, but there has to be an assessment as to how much ore one will need during the next 10 or 20 years. Keep that amount of reserve for
them and allot or distribute the balance of the reserve to those who do not have captive mines of chrome ore,” he added. “But in the absence of any strict policy, some of the existing chrome ore mine holders are exporting up to 3 lakh tons of the material as per government regulations, but at the same time they export unlimited amount of concentrates on which there is no restriction,” he said. The comments and response of the ferro chrome makers came at a time when steel minister Beni Prasad Verma made it clear at the beginning of December that there is no proposal at present for imposing a complete ban on export of chrome ore. Replying to a query in the Rajya Sabha, Verma said the production of chrome ore in the country is more than its consumption by the domestic steel and ferro alloy industry and therefore, is sufficient to meet the present requirement of the steel sector. The minister, however, said that in order to discourage export of chrome ore for long term utilisation by domestic end
STEEL INSIGHTS 41 January 2012
Plea for reversal of CV duty on chrome, Mn ore lumps
Steel Insights Bureau
erro alloy makers in India feel that there is an urgent need for reversal of the government policy that imposed a countervailing (CV) duty on imports of manganese ore and chrome ore lumps. “Today even lumps are being treated as concentrates and CV is being imposed by the customs department, which has increased the cost of the material by around 10 percent,” an official of a ferro alloy makers said. “A material cannot be considered to be a concentrate unless it is chemically processed, but the government or the customs department says that since lumps are coming after being sized, it automatically becomes concentrate and this is costing us dearly,” the official said. He pointed out that CV is not a problem if the finished product is used or sold within India because it gets offset with excise duty, but most of the ferro chrome is being exported and thus the opportunity to offset CV is not available. India’s manganese ore reserves are mainly of low grade or medium grade, from which only normal grades (60:14) of silico manganese or 65-70 percent grade of ferro manganese can be obtained. But to produce higher grades of silico or ferro manganese, higher grades of manganese ore is required, and that is being imported. “Already the cost of high grade manganese ore is quite high in the international market as most of the reserves are with only a few miners like BHP, Vale and CML. In such a situation, if there is an additional burden in the form of CV duty, it severely affects the domestic ferro alloys industry,” the official added.
use industry, the government has imposed an export duty of `3000 per ton on chrome ore and has also put an annual export ceiling of 3 lakh tons. Quoting figures from Indian Bureau of Mines, Verma said India’s chrome ore production was estimated at 4.262 million tons (mt) in 2010-11 compared with 3.425 mt in 2009-10 and 4.073 mt in 2008-09. The domestic consumption was estimated to be around 2.857 mt in 2010-11, up from 2.344 mt in 2009-10 and 2.162 mt in 2008-09 whereas exports was estimated to have fallen to 0.173 mt in 2010-11 from 0.689 mt in 2009-10 and a high of 1.899 mt in 2008-09, the minister said.
Meanwhile, another ferro chrome maker said, “India has one of the largest reserves of chromite ore and we are one of the leading miners. But the reserves are held by only a few companies. The biggest company with the highest reserve of chromite ore is OMC, which controls about 65-70 percent of the country’s total reserves spread across many places. According to him, the problem with OMC is that it is running only one of its mines for mining of chromite ore at South Katrapaani. The mines or deposits lying with OMC are neither being used by them nor being given to actual users or ferro chrome makers as a result of which actual users are suffering. “The ferro chrome alloys industry will be immensely benefited if they get some of the unutilised mines of OMC on royalty basis to service the country. Today, OMC is not mining the ore and as a result labourers are going idle and dependence of users on OMC is increasing manifold. As a result, Indian companies have to depend on only one supplier,” said an industry source. “So, if the government comes out with some kind of policy under which the unused mines of OMC are given to actual ferro chrome makers who can mine at their own cost and pay a certain royalty to OMC, it would increase the availability of the important ore and at the same time help manufacturers to survive,” the source said. Another industry source pointed out that at present there are eight ferro chrome makers, excluding OMC, who have their own chrome ore mines, but all of them are not mining the mineral. Some among the balance are mining the ore, but not selling it in the domestic market. The ferro chrome makers who have got mines are IMFA, Tata Steel Ltd, Balasore Alloys Ltd, JSPL (for its Kotwalsa plant), FACOR India, IDCOL, BC Mohanty and Misri Lal Jain. Of the eight companies, FACOR is not mining the ore due to its inability to run the mines because of financial crunch and is buying the material from the market. It is to be noted that except Balasore Alloys, all the companies have right to sell chromite ore in the market. “An assessment should be done on how much ore the eight companies would require in future and after that the excess holding should be distributed among the non-captive ferro chrome makers,” they suggested and alleged that some lease holders are not running their linked ferro chrome plants and are exporting the entire mined ore, which is fetching them higher prices. As a result of this, ferro chrome makers like Rohit Ferro Tech (1.50 ltpa), Visa Steel (0.6 ltpa), JSPL (Jajpur 2.5 ltpa) (they have captive mine for Kotwalsa), Navbharat (0.5 ltpa), Vasavi Industries (0.5 ltpa), Chronimet India (0.30 ltpa) and Andhra Ferro Alloys (0.3 ltpa) are suffering, industry sources said. These seven companies with a combined ferro chrome production capacity of 0.62 million tons per annum (mtpa) do not have captive mines, but they need around 1.2 mtpa of ore and right now OMC is the only supplier.
STEEL INSIGHTS 42 January 2012
High input costs continue to plague ferro alloys
he current economic slowdown in Europe has led to recessionary pressure and depressed market conditions all over the world. Although the Indian economy has a strong base, the global slowdown is also affecting its growth performance, which is expected to stay in the range of 7 to 8 percent in the current fiscal. This slackness in the economy has in turn reduced the demand for steel and resulted in a sluggish market condition and low off take. The Indian steel scenario seems to be bottoming out and so is the ferro alloy production industry. The ferro alloy industry acts as an intermediate industry for iron and steel sector. Ferro alloy is used in the production of steel as a de-oxidant and alloying agents. As a result, demand for and prices of ferro alloys depend on steel demand. Globally, the demand and supply of ferro alloys is inversely proportional to steel demand. Thus, the prospect of ferro alloys industry is interlinked with the steel industry. Looking at the future demand forecast for the steel sector, both in India and globally, the Indian ferro alloy makers had engaged in expansion of production capacities during the last decade, especially for manganese alloys. However, the industry has not got the support it needed from the government to make their prices competitive internationally. The main deterrent which prevents them from successfully competing in the international market is that of high input costs. The estimated production capacity of all bulk ferro alloys is about 4.03 million tons (mt) in the domestic market and the production is around 3.30 mtpa. These include manganese alloys, chrome alloys and rest of the other ferro alloys and noble alloys, among others. Since the domestic demand is only 2.28 mt, the remaining production is being exported to the international market. Hence, the industry can be said to be partially dependent on domestic market and partially on export market. In view of future demand forecast for ferro alloys, more new ferro alloys units are coming up in the country, especially for manganese alloys. Most of the projects are under initial
project stage. Altogether, an additional production capacity of 0.7 mtpa is in the pipeline in various states such as West Bengal, Andhra Pradesh, Odisha, Madhya Pradesh and Karnataka. According to an estimate, the domestic demand is increasing by about 17 to 18 percent every year, while the production capacity is growing by 35 percent. High power tariff, huge shortage of raw material (viz manganese ore, chrome ore, coke) and high market competition are some of the concerns facing this industry. The major inputs required to produce ferro alloys include power and ore. Since ferro alloys industry is very power intensive, the power cost accounts for about 35 to 40 percent of the total production cost. The balance is attributable to the cost of ore and other ingredients required for producing ferro alloys. The power tariff in India is 3 to 5 percent higher in comparison to the competing countries. Globally, ferro alloy plants are situated geographically where power tariffs are moderate. In view of the fact that the current power tariff in various states is quite high, it is recommended that the industry should get power at moderate rate to enable the domestic industry to compete in the international market. Looking at the present market condition and slow demand, the production of ferro alloys does not look lucrative at this juncture. The producers have cut down production up to fifty percent and are operating furnaces below rated capacity. The other major raw material required to produce ferro alloys is ore like manganese ore (for manganese alloys) and chrome ore (for ferro chrome) and also coke, quartz and fluxes, among others. As for manganese ore, India has limited resources. The reserve of high grade ore is rapidly plummeting. Due to huge demand for ore and the scarcity of good quality ore, the entire domestic requirements of raw materials for the industry could not be fully met from the domestic market. In India, manganese ore is mainly supplied by MOIL Ltd., a government owned company and the largest ore producer in the country. Other manganese ore producers are Orissa Mining Development Corporation, Tata Steel, Mysore Minerals Ltd and Sandur Manganese in Karnataka. Also, some small private mine owners operating in Madhya Pradesh, Orissa and Karnataka produce a little quantity. Due to the shortage in domestic production, the industry has to depend on imports to fulfill its requirements. MOIL currently accounts for around 40 percent of Indiaâ€™s
STEEL INSIGHTSâ€‚ 43â€‚ January 2012
fEATURE total domestic production of ore, estimated at 2.86 mt. MOIL has produced about 1.15 mt during 2010-11 and 1.09 mt in the previous year. The rest of the miners produce small tonnage. Against this, the total domestic demand for ore is estimated at about 4.02 mtpa. There is a huge gap between demand and supply. Hence, the country started importing the ore from 2005 and the volume of imports is increasing day by day. The industry had imported around 1.3 mt of ore during the last fiscal year. Coke is most widely used as a reductant in ferro alloys production; Ferro alloys consume roughly 0.6 to 0.7 tons of reductant per ton of ferro alloys. Coke and coal of Indian origin has high ash and volatile matter. Due to indigenous non-availability of low ash and low phosphorous coal and metallurgical coke, the industry largely depends on imports from China and Australia. Besides the availability of raw material, high logistics cost is another concern for the industry. The logistics cost element for procuring raw material or exporting finished products is quite high in India. The government’s Exim policy also does not favour the ferro alloys industry. Despite excess production of ferro alloys in the country, the government has reduced the import duty on ferro alloy from 20 percent to 5 percent. Hence, cheap imports from China and other competitive countries are increasing steadily. As per official data, the import value of ferro alloys increased from `263 crore in 2004-05 to `1,516.3 crore in 2009-10. The industry has urged the government to impose a customs duty of at least 10 percent on imports (except on nickel) to provide the domestic producers a level playing field. It is also strongly recommended that any measures applied to the steel industry should also be indiscriminately applied to ferro alloys, a vital input for the steel sector. The ferro alloy industry should be given equal treatment as far as imports are concerned. Levy of a higher import duty will fetch more revenue to the government. It is to be kept in mind that imports of ferro alloys have increased whenever basic customs duty was reduced. Now, the duty has been kept at a nominal level. As the manufacturers are faced with sagging demand and prices, ferro alloy units are facing the brunt of the liberal import regime for the finished intermediates. This may not be enough to curb imports. The industry is asking for at least 10 percent custom duty on import, so that it gets a “level playing field”. Moreover, the duty should necessarily be calibrated in tune with the changing trade reality. After meeting domestic demand for ferro alloys, the surplus production is exported by the domestic producers.
This helps to fetch direct revenue of foreign exchange for the country and the government. As per ministry, the export value of ferro alloys stood at `4,348 crore during 2009-10. It is therefore necessary that the government takes promotional measures to safe guard the domestic industry. Although there is a huge shortage of manganese and chromites in the country, the government is charging 2 percent import duty on manganese and chrome ore imports. This 2 percent spread increases the costs for Indian industry vis-àvis competing countries such as South Africa, Kazakhstan and Russia. Meanwhile, MOIL recently requested the government to hike the import duty on manganese ore. The PSU requested to increase the import duty five times to 10 percent so that its domestic market remains intact. This was done in the interest of the company which is facing competition from cheap imports or quality ore into the country. If the Indian government acceded to MOIL’s demand for an import duty hike, it would deal a severe blow to the ferro alloys industry. The industry has already been affected by additional cost burden due to spiraling input costs in the last couple of years. The increase in fuel prices has resulted in additional freight burden towards transportation of raw materials. The major problem facing the industry is high input costs of power, non-availability of ore (against excess production capacities), stiff competition in the domestic and export market and the government’s Exim policy. (Devanand Chauragade is the general manager (marketing) of Hira Group of Industries, Raipur)
STEEL INSIGHTS 44 January 2012
Indian auto sector to post zero growth in FY12 Steel Insights Bureau
fter a 24 percent drop in October, domestic car sales in India posted a 7 percent jump in November 2011, raising hope for the automobile industry battered by high fuel prices, increased interest rates and a slowing economy. However, industry analysts warn that the rejuvenation may rather be short-lived and the industry may end up with a zero growth in 2011-12. “There is some revival in demand (in November). But this is not enough to turn around the industry,” said Sugato Sen, senior director at the Society of Indian Automobile Manufacturers (SIAM). “We may not see a decline in car sales for the entire fiscal. The numbers may be just at the same level of last fiscal….we may just break even,” he added. SIAM has already indicated it would revise its growth estimates during the Delhi auto expo in January 2012. Earlier, the industry body scaled down its projections to 2 to 4 percent in October from 10 to 12 percent in July and 16 to 18 percent in April. The demand revival in November, according to SIAM, was due to the low base effect, ie poor numbers reported for November 2010. “The base was low specifically for passenger cars, which created quantitative growth,” said Sen. This is further corroborated by the December numbers reported
Maruti Dec sales drop 7.12% y-o-y Maruti Suzuki India Limited has sold a total of 92,161 vehicles (including 14,686 units for export) in December 2011, recording a drop of 7.12% in sales from 99,225 vehicles sold during the corresponding month of the previous year, the company said in a statement. However, Maruti Suzuki India’s export surged by 50.5% in December 2011 to 14,686 units from 9,756 units in the year-ago period, the company statement said. On a year-on-year basis, during the first nine months (April-December) of the current financial year, the company’s total auto sales dropped by 16.6% and stood at 7,73,361 as compared to 9,27,665 vehicles sold during the corresponding period of 2010-11. The company was closed for its bi-annual maintenance shutdown for 6 days during the month of December 2011 (Dec 26-Dec 31), the statement added.
by Maruti Udyog Ltd (MUL), showing more than 7 percent decline year-on-year. The Delhi auto expo may however boost sales of cars due to a number of new launches. Accordingly, the industry body expects car sales to improve in the first few months of 2012. This factor, industry analysts said, would help offset the declines seen in the recent months. November figures up According to data provided by SIAM, domestic sales of passenger cars rose by 7 percent to 171,131 vehicles in November 2011 as against 159,939 units sold in the same month last year. This increase came as a relief to the industry which saw a steep decline in October, mainly due to the labour unrest at Manesar plant of MUL. Along with car sales, motorcycle sales grew by 22.70 percent to 869,070 units during the month, compared to 708,476 units in the same month last year. Total two-wheeler sales were up 25.3 percent to 1,163,294 units from 928,660 units sold in November 2010, the data showed. Sales of Commercial Vehicles (CV) which include trucks and buses jumped 35 percent to 66,264 units from 49,087 units sold in the year-ago period. Overall, total automobile sales across categories rose by 22.2 percent to 1,489,714 units in November 2011 from 1,218,885 units in the same month last year. Commenting on the high growth, Sen cited the low base effect and said, “The base was low specifically for passenger cars, which created quantitative growth.” During April-November this fiscal, domestic car sales declined by 3.5 percent to 1,219,509 units from 1,264,142 units in the year-ago period. However, not all the segments could report higher numbers for November 2011. For instance, sales in the entire mini car segment (hatchbacks with engine displacements of up to a litre) dropped to 52,502 units from 63,269 units. Sales of Chevrolet Spark, combined sales of Maruti’s M800, A Star, Alto and WagonR reported declines. Along with these, some segments in two wheelers also showed signs of a slowdown. Unlike the uptrend in scooters, total scooterette output fell to almost half at 1,491 units (2,147 units) and sales also declined to 982 units (1,934 units) in November. Honda Motorcycle & Scooter India (HMSI) as well as TVS took a hit in the 125-250 cc motorcycle range. While HMSI sold 12,298 units (12,478 units), TVS sold 32,731 units (36,376 units). Amid the overall gloomy picture, the only bright spot is perhaps the steady growth in diesel car segment. Following the hike in fuel prices, the consumer preference seems to have decidedly shifted to the diesel variants. Sen said the market share of diesel cars is expected to increase to 33 percent in 2011-12 from 27 percent last year.
STEEL INSIGHTS 45 January 2012
Steel may see positive change post Feb-Mar Steel Insights Bureau
he Indian steel industry, particularly non-integrated steel companies, is set to witness a positive change from existing depressed situation from February-March onwards following increase in export duty on iron ore that will increase availability of ore, reversal in rising interest rate regime; and an expected industry friendly budget that will jack up demand in the country, a number of steel makers contacted by Steel Insights, said. “It was just a matter of time before the government started listening to the woes of steel makers after it was completely pushed to the wall following a higher interest rate regime, higher price of iron ore due to mining ban in Karnataka and restriction in supplies from Orissa, and lack of growth in steel demand as government spending on infrastructure projects came to a standstill,” an official of a Kolkata-based company said. “There had been a spate of events that had severely impacted medium and small sized steel manufacturers during the past six to seven months, prompting a number of them to close down or reduce their operation levels substantially,
Fate of announced projects uncertain, feel officials
espite exuding confidence about overall prospect of the steel industry, a number of officials in steel industry contacted by Steel Insights feels that a large number of announced projects in the country may not see light of the day due to various reasons. “None of the projects, whether they have already been announced or not, will be up and running during the next five years, if they have not got possession of land and started at least some work,” an official of a Kolkata-based steel maker said. On Steel Ministry’s estimates that around 150 mt of capacity are likely to be added from the projects of more than 1 mtpa capacity in next 5-7 years, he said. “You can easily ignore the big 15-20 mtpa projects of ArcelorMittal and Posco. So if those projects are deducted from the total, you are left with only around 40-50 mtpa worth of projects. And according to me India’s steel making capacity by 2016-17 will not be more than 110 mtpa,” he added.
especially after the restriction on movement of iron ore from Orissa,” said another official of another steel maker. The prices of iron ore had shot up significantly, making a number of small units unviable and had also significantly reduced profit margins of bigger players, including JSW Steel. According to them, the things are expected to improve gradually starting with expected increased availability of iron ore from February-March at a reasonable price following 50 percent hike in export duty on iron ore from 20 percent to 30 percent recently. Post increase in duty, the government is expected to solve the issue of mining ban in Karnataka, he said. Till now, mines were being closed one after another. But things may look up after the next Supreme Court hearing in February-March. If one mine opens in Karnataka, things may start falling in place. After February, the reliefs will start coming in and once that happens, India will have enough availability of iron ore. The availability will increase also because the export of ore is likely to come down significantly due to low demand from China. That is because Indian prices will no longer be competitive and if exports are not viable, the availability of iron ore in the local market will increase significantly, they said. “The only negative that is envisaged, as of now, is that there will be an increase in Railway freight in the next budget,” said one of the officials. According to the officials, the higher interest rate regime will also end. The rates had been rising continuously on quarter on quarter for the last 10-12 quarters, but with inflation under control and RBI having almost made it clear that there would no further hike in rates, the interest rates would start falling again in the same line in which it had risen, they added. An indication to this was already visible in the last monetary policy of RBI when there was no increase in interest rates. So from budget session till next general elections that will take place after two years, the government will focus on clearing all the industrial projects, they felt. That will put them back on recovery path. There will be increased availability of iron ore in India and the consumers of iron ore will heave a sigh of relief as there will be less exports and India’s steel demand will continue to grow by at least 6-7 percent even if nothing is done by the government, they felt. The funds under various government schemes like MNREGA and loan waiver etc had gone to people living below the poverty line and now the benefit of food security bill will also go to them. This section of people generally find difficult to save money they earn and will definitely spend on something or other. So there will be demand for all products in the country as consumption will go up heavily.
STEEL INSIGHTS 46 January 2012
Virtual Steel Mill – a new risk management model John Banaszkiewicz
he global steel industry is facing the biggest challenge in its history and is set for a period of radical change not seen so far. Over the years, steel has been seen as traditional and conservative, particularly in procurement, favouring a combination of long-term contracts and annual pricing to secure its supply chain. This system worked well when prices were stable and demand certain, but the future will not be like that. The future of steelmaking and trading will require the use of risk management across all raw materials and finished products. The drivers to this are a huge increase in spot price visibility for iron ore, steel, coking coal and freight and increased volatility in prices not just of raw materials but of finished products too. Going forward, the increasing price volatility will increase the margin uncertainty for steel mills like never before. As a result of these emerging changes, steel success in future will depend largely on improved market intelligence
The Virtual Steel Mill concept encompasses risk management from producer to end user, combining cash-settled swaps for iron ore, coking coal, scrap, freight and steel products, each tradable on their own or linked to provide hedging along the supply chain
Chinese Rebar 790
High: $786.36/t Low: $677.47/t
Source: Cleartrade, Freight Investor Services
and research and the greater use of risk management through access to derivatives markets. To help steelmakers, traders and importers come to terms with the new reality, Freight Investor Services (FIS) – one of the world’s leading hybrid inter-dealer brokers in the freight and commodity derivatives markets – has developed the Virtual Steel Mill concept. It encompasses risk management from producer to end user, combining cashsettled swaps for iron ore, coking coal, scrap, freight and steel products, each tradable on their own or linked to provide hedging along the supply chain. Based on the changes going on in the global steel vertical, it seems the time is right for the industry to embrace Virtual Steel Mill concept. On the demand side, there is a growing marketplace comprised of financial players (banks and funds), physical players (mills and mines) and service providers (ship owners and trading houses). Macro-economic uncertainty is creating interest to trade on both a hedging and speculative basis. In Asia in particular, there is increased interest in trading freight and commodities together, with dedicated teams of traders emerging. As noted above, volatility and volume is increasing, creating the conditions for improved risk management. On the supply side are hybrid voice/screen brokers such as Freight Investor Services, regulated electronic trading platforms such as Cleartrade, clearing houses with freight and commodity expertise such as LCH.Clearnet and SGX AsiaClear. Don’t forget that these Nov-11 Dec-11 are regulated markets (by the FSA in the UK, MAS in Singapore) that are in step with changes taking place in financial regulations.
STEEL INSIGHTS 47 January 2012
increased use of cash-settled iron ore swaps by producers, traders and mills alike. The growth in this market has been phenomenal. More than $8.7bn or 56m tons of iron ore swaps, options and futures contracts have been traded against the TSI contract alone, with considerable additional volumes settled against the Metal Bulletin and Platts indices. In 2011, total liquidity in cleared iron ore swaps could be as high as 48m tons.
TSI Iron Ore China Delivery 62% Fe
190 180 170
160 150 140
Movement in coking coal prices
High: $191.90/dmt Low: $116.90/dmt
110 100 Jan-11
Source: The Steel Index, Freight Investor Services
Volatility in iron ore prices
After iron ore, coking coal is the second ‘new’ ingredient in the Virtual Steel Mill with an established physical market which is moving towards spot pricing and embracing risk management. Global steel production Nov-11 Dec-11 is highly dependent on coking coal, with 70 percent of the steel produced today using it as a raw material. World crude steel production was 1.4bn tons in 2010, accounting for around 721m tons of coking coal demand. Just like iron ore, a swaps market is emerging to help producers and consumers manage risk. The first coking coal swap was traded in August 2011 and total volume of swaps traded so far is around 87,000 tons. The liquidity of the physical market means there are some 26 coking coal price indices produced daily by Argus and Platts. Alongside the OTC market, there are three contracts listed on CME for mid and low vol products all basis FOB Australia. Coking coal swaps participants include coal suppliers, steel mills, commodity traders and financial institutions.
In 2011 iron ore delivered into China has seen highs of $191.90 per tonne and lows of $116.90 per ton, a difference of 39 percent. Australian origin coking coal has seen highs of $336.25/t and lows of $246.15/t (27 percent). Chinese reinforced bar steel has seen highs of $786.36/t and lows of $677.47/t (14 percent). So for a 50,000-tons iron ore cargo, the $75 difference between the high and the low of 2011 represents a potential loss (or saving) of $3.75m. In 2009 some 80-85 percent of iron ore was sold under annual, fixed price agreements, with just 15-20 percent sold spot. By 2011, just 15-20 percent was being sold on a spot basis and Coking Coal Spot Prices ( fob Australia) 350 70-80 percent was sold under index-linked contracts of varying duration. The move to index pricing, driven by the 325 iron ore producers was made to reflect the volatility in pricing caused first by increased demand then by price weakness. The major 300 iron ore producers are increasingly keen to move from quarterly pricing to index-linked sales as they seek to track the spot price. The 275 iron ore majors have made clear that this move is a one-way process, with limited High: $336.25/dmt opportunities to revert to quarterly pricing Low: $230.09/dmt 250 in future. Steel mills are opposed to frequent changes in pricing but will increasingly 225 find themselves dealing with suppliers Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 whose prices are index-linked to provide transparency. This has created the conditions for Source: Argus Media, Freight Investor Services
STEEL INSIGHTS 48 January 2012
Expert SpeAk Capesize Freight Tubarao - Qingdao
High: $30.73/t Low: $16.56/t
The less mature parts of the Virtual Steel Mill like coking coal, scrap and finished steel can learn from the experience of the freight market. The volume of cleared Forward Freight Agreements (FFA) including freight options traded could be as high as 2.5 billion tons in 2011. Key FFA players already include many of the same participants who are looking at the Virtual Steel Mill, spanning the supply chain from mine to mill. FIS believes that steel industry players need new ways of working. Volatility means price risk and the chance that your margins will be wiped out between buying raw materials and producing finished steel.
Emergence of derivatives market
Source: Baltic Exchange, Freight Investor Services
The physical and derivatives markets are closely linked, so that the forward curve, which shows prices at a range of future dates provides not just a view on price direction but a real competitive advantage in the physical market. Using hedging means that users can shift the focus in physical negotiations away from purely price and onto an added value relationship – physical relationships are not only maintained but strengthened. Hedging is accomplished by means of a cleared, over
S markets, the first FFA trade was concluded in 1992 and it took another 10 years for clearing to emerge. Today physical and paper market volumes are close to 1:1 parity. The first iron ore swap trade took place in 2008, with clearing added a year later. Physical to paper parity is around 1:0.16. In the thermal coal market, the ratio is 1:4. In the crude oil market, by comparison, the ratio is 1:10.
FIS believes that steel industry players need new ways of working. Volatility means price risk and the chance that your margins will be wiped out between buying raw materials and producing finished steel.
the counter, cash-settled swap. The OTC swap is traded in conjunction with and not in place of a physical trade. The swap is submitted for clearing to a clearing house meaning that default risk is covered. The swap is cash-settled, meaning there will be no physical delivery associated with it. By trading OTC swaps in parallel to trading a physical product, a buyer can lock in the future price they pay and a seller can lock in the future price at which they sell in the physical market. Trading OTC swaps without a parallel physical position is known as speculation. Despite some bad associations of that term, most experts agree that markets need a certain amount of speculation to generate liquidity and volume. Speculators are there to absorb the risk that hedgers wish to offload. Comparing freight and metals to other commodity
A new reality
Taking steel as a single commodity market, it is second only to oil in size and therefore represents a huge opportunity for increased risk management. We foresee a situation in the not too distant future where steel industry participants are trading a ‘blast spread’ across raw materials and finished products in the same way that other commodity producers and consumers trade the 'crack spread’ in the oil market or the ‘crush spread’ in agricultural products. This new reality is still emerging but the direction is set. All serious steel market participants need to embrace the Virtual Steel Mill and all the benefits it will bring.
(John Banaszkiewicz is the managing director and founder of FIS. Founded in 2002, FIS is one of the world’s leading hybrid inter-dealer brokers in the freight and commodity derivatives markets. FIS has a leading position in the dry bulk FFA market and helped to pioneer the iron ore swap. FIS is taking the lead in developing derivatives markets for finished steel, ferrous scrap and coking coal and has broked the first derivative trade in all of these new markets. FIS offers the steel industry the opportunity to trade the virtual steel mill, managing price risk from mine, across the ocean, through mill, to end-user)
STEEL INSIGHTS 49 January 2012
Land, skilled labour biggest hurdles facing Indian steel sector Steel Insights Bureau
Steel Insights has recently 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.
and acquisition hurdles, lack of skilled labour and slow technology absorption are some of the biggest problems inhibiting the growth of the Indian steel industry, according to industry experts. In a recent discussion mooted by India Steel Market Watch (ISMW) on LinkedIn, about 38 percent participants voted for land acquisition as the biggest hurdle, while 30 percent cited skilled labour shortage and slow technology absorption as the major cause. The other factors held responsible are shortage of inputs (mainly iron ore and power), environment clearance and planning, lack of demand and high cost of capital equipment, among others. The majority of participants who voted for land acquisition as the biggest hindrance blamed it on faulty government policies and lack of vision of both central and state governments as factors creating this problem. “It is only the land acquisition problem and governments', both central and state, lack of vision and policy frame work in this sector (that) are causing all the major problems in the country,” said Jaydip Ghosh, owner, JG On-line Media Solutions. Ghosh, who is also a consultant at ISR Infomedia and
Steel prices likely to remain flat in 2012
n a separate survey conducted by ISMW on LinkedIn, the majority of the participants (68 percent) projected steel prices in India to remain flat in 2012 vis-à-vis 2011. A lesser number of participants (23 percent) expected prices to increase to a new base level, while only 11 percent forecast a decline in average prices versus the level witnessed in 2011. Commenting on the likely trend, Amitabh Tiwari, analyst at BNP Paribas, said, “In India, prices should remain flat. Globally prices would be under pressure due to weak demand environment. However, in India, decline in prices should be compensated by the depreciation of the rupee. Key thing to watch out is the status of various capex projects and iron ore ban situation in Karnataka.”
tracks the steel sector, further elaborated, “A steel making factory needs huge space to be set up along with good railroad communication and nearby water sources….Mainly due to petty political issues and interests, this is one major area where the country is lacking the most and as a result many a good steel project currently in the pipeline are hesitating to take off.” In contrast to his views, Giovanni Hua, export manager at Mayapple International Industrial Limited (a Chinese supplier of steel tubes, steel pipes and weld tube made components), made a case for lack of skilled labour in the Indian steel vertical. “The core problem,” he said, “is (the lack of) skilled labour force, skilled workers. India is an ore exporter and does not lack ore in domestic market; and has enough land and cheaper labour force. But they export ore to China and buy steel tubes from China. The major reason is the (lack of) skilled workers.” This phenomenon, he added, is not seen only in the tube industry. “In nearly all industries like construction, machinery etc, I think they need train their workers.” Much along the same lines, Thomas Coyne, owner of T.C. Inc. (an international engineering and project development firm in the mining and metals sectors), blamed slow technology absorption and lack of quality consciousness as the major pain points. Drawing instances from his four-year stint as Director of Projects for a mineral processing plant in India, he said “India has the intellect and the schooling and the learning from their people that have gone to every part of the world but have not brought home the results or the learning to complete the task of producing quality goods.” In this respect, Coyne put on equal footing the quality of Chinese and Indian products being sold in overseas markets. Other participants such as Rajiv Bhutara, Director at Maharishi Alloys P Ltd, said “demand uncertainty and power availability for secondary producers without captive power plants” were the major impediments for the steelmaking sector. Commenting on the various problems highlighted in the survey, Hua said, “Every country has its (own) problems; some problems cannot be found through economic theory by academicians. When one day India finds the core question and knows where the problem is (exactly and correctly)…just solve it, you can be a big power!”
STEEL INSIGHTS 50 January 2012
Port traffic up 1.3% y-o-y in Apr-Nov Steel Insights Bureau
he 12 major Indian ports have handled 370.682 million tons (mt) of traffic during the April-November period of the current financial year, 1.33 percent higher than 365.812 mt during the corresponding period of last year. According to data released by the Indian Ports Association (IPA), the movement of thermal coal through the major ports was up 14.8 percent to 32.06 mt during April-November 2011, compared to 27.94 mt achieved during the same period last year. The volume of coking coal, however, declined by 2.57 percent to 19.04 mt during the same period, the data showed. Among the major ports, Paradip port had the distinction of handling the highest quantum of thermal coal of around 10.19 mt during the period. Visakhapatnam port, on the other hand, shipped the highest quantity of 4.82 mt of coking coal during the period. Movement of coking coal through Visakhapatnam, Kolkata, Chennai and Kandla ports declined during the period when compared to the corresponding period last year. Movement of iron ore through the major ports showed a significant drop of 15.9 percent during the period under review. The major ports together handled 42.36 mt of iron ore during the AprilNovember period compared to 50.36 mt in the corresponding
period last year. Mormugao port handled the highest volume of 17.91 mt of iron ore during the April-November period of the current fiscal. This volume, however, was about 2.9 mt less than the iron ore traffic moved during the same period last fiscal. The port has shown a negative growth of 10.7 percent during the period. Movement of container traffic both in terms of tonnage and TEUs showed an increase during the April-November period. The major ports handled 79.52 mt, besides 5.18 million TEUs during the period under review compared to 73.464 mt of tonnage and 4.995 mt of TEUs respectively. Seven major ports showed positive growth in traffic handling during the April-November period of the current fiscal, while the remaining five showed negative growth on a year-on-year basis. In terms of growth, Ennore port topped the list with a record 43.02 percent increase in cargo throughput. New Mangalore port’s growth was lowest at about 0.67 percent during the period. In terms of traffic volume, Kandla port clinched the top rank with a cargo volume of over 53.76 mt recorded for the period. The Mormugao port registered the highest decline of 10.66 percent in traffic handling during the period.
Traffic handled at major ports (During April to November, 2011* vis-a-vis April to November, 2010) (*) Tentative
(in ' 000 tons) APRIL TO NOVEMBER
% VARIATION AGAINST PREV. YEAR TRAFFIC
KOLKATA Kolkata Dock System
Haldia Dock Complex
STEEL INSIGHTS 51 January 2012
Logistics Traffic Handled At Major Ports (During April To November’2011* Vis-A-Vis April To November’2010) (*) Tentative PORT
(In ‘000 Tnnes) TRAFFIC PERIOD
TRF APRILNOV.'2011 TRF APRILKOLKATA NOV.'2010 TRF APRILNOV.'2011 TRF APRILNOV.'2010 TRF APRILTOTAL: KOLKATA NOV.'2011 TRF APRILNOV.'2010 TRF APRILPARADIP NOV.'2011 TRF APRILNOV.'2010 TRF APRILNOV.'2011 VISAKHAPATNAM TRF APRILNOV.'2010 TRF APRILNOV.'2011 ENNORE TRF APRILNOV.'2010 TRF APRILNOV.'2011 CHENNAI TRF APRILNOV.'2010 TRF APRILNOV.'2011 TUTICORIN TRF APRILNOV.'2010 TRF APRILNOV.'2011 COCHIN TRF APRILNOV.'2010 TRF APRILNOV.'2011 NEW MANGALORE TRF APRILNOV.'2010 TRF APRILNOV.'2011 MORMUGAO TRF APRILNOV.'2010 TRF APRILNOV.'2011 MUMBAI TRF APRILNOV.'2010 TRF APRILNOV.'2011 J.N.P.T. TRF APRILNOV.'2010 TRF APRILNOV.'2011 KANDLA TRF APRILNOV.'2010 TRF APRILNOV.'2011 ALL PORTS TRF APRILNOV.'2010 % Variation from previous year
STEEL INSIGHTS 52 January 2012
% VAR. AGAINST 2010-11
Tear along the dotted line
Tear along the dotted line
Railway cargo rises 4.4% m-o-m in Nov
Steel Insights Bureau
he cargo traffic movement through the Indian Railways during the month of November 2011 stood at 81.08 million tons (mt), which was about 4.38 percent higher than 77.68 mt carried during the previous month, according to information made available to Steel Insights by the Indian Railways. In cumulative terms, transportation of freight traffic was up and stood at 618 mt during the first eight months (April-November) of this fiscal, compared to 593.44 mt in the corresponding period last financial year. This is an increase of about 4.14 percent year-on-year, according to the latest data released by the Railways. As far as transportation of iron ore is concerned, during November 2011, the Railways transported a total of 8.36 mt of iron ore, recording 4.63 percent increase as compared to 7.99 mt transported during a month ago. Out of the total volume carried in November 2011, 0.18 mt of iron ore was carried for exports, 5.23 mt for steel plants and 2.95 mt for other domestic users. During November 2010, iron ore carried for export, steel plants and domestic users stood at 1.80 mt, 3.8 mt and 4.19 mt, respectively. The Railways carried 2.62 mt of pig iron and finished steel from steel plants and other points during the month of November 2011. This was down by 4.38 percent as compared to 2.74 mt carried during October. Of the total traffic transported in November 2011, 39.03 mt was coal cargo. The volume of coal cargo was about 8.06 percent higher as compared to 36.12 mt transported in October. This was also higher than 35.35 mt of coal cargo carried by the Railways during the corresponding month of the previous year. Out of the total coal cargo carried in November 2011, 3.94 mt was catered to the steel sector, 0.11 mt to washeries, a major chunk of 26.05 mt to the thermal power plants and the
remaining 8.93 mt for public uses. The corresponding figures for November 2010 stood at 3.68 mt, 0.11 mt, 24.69 mt and 6.87 mt, respectively. Movement of cement through the Railways during November 2011 stood at 8.8 mt which was 3.93 percent down from 9.16 mt transported during October, but up by 13.26 percent from 7.77 mt carried during November 2010. There was also a decline in the transportation of food grains during November 2011. The Railways carried 2.92 mt of food grains during the month under review, registering a 18.44 percent fall versus 3.58 mt carried during the previous month. The container service movement through the Railways during the month stood at 3.09 mt. Overall, the Indian Railways have generated `43,106.76 crore of revenue from commodity-wise freight traffic during April-November 2011 as compared to `39,452.32 crore during the corresponding period last year, registering an increase of 9.26 percent. During the month of November 2011, total earning of the Railways from commodity-wise freight traffic stood at `5,713.88 crore, according to the Railways data.
STEEL INSIGHTS 54 January 2012
Macro Outlook INR movement against select major currencies
Macroeconomic indicators of India
INR vs GBP
INR vs USD, Yen
11 pr -
A pr -1 6-
Steel Insights Bureau
-1 18 1 -M ay -1 1 1Ju n11 15 -J un -1 29 1 -J un -1 1 13 -J ul -1 1 27 -J ul -1 10 1 -A ug -1 24 1 -A ug -1 1 7S ep -1 21 1 -S ep -1 1 5O ct 19 11 -O ct -1 1 2N ov -1 16 1 -N ov -1 30 1 -N ov -1 14 1 -D ec -1 28 1 -D ec -1 1
Source: rbi The INR fell drastically to more than 53 per USD as investors globally opted for USD as a safe haven for investment in the face of US sovereign debt downgrade and the increased uncertainty in the Euro Area. This affected foreign investors investing in India’s equity markets as a weak rupee or a strong USD erodes the return which foreign investors make in terms of USD. Depreciation in the INR however helped India’s exports especially the IT exports. The INR is expected to continue with its weakening trend even in the coming few months despite the RBI taking steps to curb the INR’s volatility in order to prevent outflows in FII investment.
Foreign Exchange Assets
Inflation Rate in India
in Rs crore
in million $
in Million $
O ct o
us t-1 1
Se pt em
ay -1 1 M
A pr il11
ar ch M
ry -1 1 Fe br ua ry -1 1
Ja nu a
D ec em
in Rupees crore
Source : OEA, GoI, Ministry of Commerce & Industry
WPI based inflation in India, despite easing sharply in November, continued to stay above 9 percent for the 12th consecutive month, with economists expressing concern over the persistence of inflationary pressures in the non-food manufactured products group. Headline inflation in November eased to 9.11 percent, down from the previous month’s 9.73 percent annual rise, as the price levels of food items dipped on account of items such as cereals, vegetables and fruits. With food inflation declining well below 1 percent, the finance minister, Pranab Mukherjee, said the overall inflation would drop to 6 percent by March end.
India’s foreign exchange reserves stood at $300.863 billion as of December 23, down from $302.100 billion in the previous week, as per the Reserve Bank of India. India’s foreign exchange reserves nearly hit a nine-month low and fell by $5 billion for the week ended December 16, on account of revaluation in foreign currency assets. Foreign exchange reserves also dropped in the previous week by almost $69 million to $306.77 billion on the same grounds. However reserves rose for the week ended December 2 rose to $306 billion largely on higher valuation of gold in reserves and also due to revaluation of non-dollar assets in reserves.
Index of Industrial Production
Wholesale Price Index (Selected Categories) 205
INR vs GBP
INR vs USD, Yen
6A pr -1 1 20 -A pr -1 1 4M ay -1 18 1 -M ay -1 1 1Ju n11 15 -J un -1 29 1 -J un -1 1 13 -J ul -1 1 27 -J ul -1 10 1 -A ug -1 24 1 -A ug -1 1 7S ep -1 21 1 -S ep -1 1 5O ct -1 1 19 -O ct -1 1 2N ov -1 16 1 -N ov -1 30 1 -N ov -1 14 1 -D ec -1 28 1 -D ec -1 1
Mining & Quarrying
Source : OEA, GoI, Ministry of Commerce & Industry
Source : Govt. of India, MoSPI
India’s wholesale price index (WPI) (Base 2004-05=100) rose very marginally in November to 156.9 as compared to 156.8 in the month of October. Also WPI for September was revised to 156.2 this month. The index for primary articles group fell by 1.57 percent to 201.1 from 204.3 in the previous month largely due to fall in prices of food articles. The index for manufactured products group however rose by 0.50 percent to 139.8 from 139.1 in October. Fuel and power index rose 0.94 percent to 171.6 while index for basic metals and metal alloys rose by 1.54 percent to 158.1 on rising prices of the product globally. Steel index however remained unchanged.
India’s industrial output shrunk by 5.1 percent in October 2011 from 11.3 percent in October last year, after witnessing a sustained slowdown over the past few months, led by a steep fall in production of almost all sectors, particularly manufacturing, mining and capital goods. The index of industrial production (IIP) was 158.1 points. November IIP may show some improvement as the base in November 2010 was 158, and as industrial production is expected to show slight growth in November. The IIP contracted for three months this financial year, rose in two months and remained flat in one month sequentially.
STEEL INSIGHTS 56 January 2012
Steel production falls on weak global cues Chandrika Mitra
World crude steel production Jun-11
European Union (27) 15,858 14,976 Other Europe 3,057 3,068 C.I.S. (6) 9,282 9,280 North America 10,234 10,321 South America 4,140 4,277 Africa 1,191 1,207 Middle East 1,665 1,587 China 59,932 59,300 India 5,960 6,160 Japan 8,886 9,152 South Korea 5,665 5,661 Taiwan, China 1,900 1,960 Asia 82,343 82,233 Oceania 571 561 Rest of the world 68,409 68,210 except China Total 64 countries 128,341 127,510
(in '000 tons)
12,616 3,035 9,452 10,218 4,123 1,200 1,677 58,752 6,160 8,909 5,519 1,911 81,251 668
14,674 3,213 9,060 9,839 3,997 1,103 1,661 56,700 5,950 8,889 5,478 1,738 78,754 626
15,174 3,324 9,495 9,853 4,061 1,206 1,681 54,673 6,150 6,150 6,087 1,800 78,188 473
14,244 3,089 9,140 9,885 3,880 1,090 1,641 49,883 6,000 8,695 5,785 1,740 72,103 434
Nov 11/ Nov 10 (% Change) -2.79% 9.35% -2.06% 9.41% 6.45% -25.75% 1.23% -0.58% 10.52% -3.25% 12.42% 3.82% 0.97% -32.82%
Crude steel production growth rate (Y-o-Y) 50.00%
Rest of the world except China
he global steel market, which has witnessed a slide for the past several months, once again has led to a drastic fall in crude steel production in most of the markets globally. World steel production is expected to fall further in the next two to three months as weakening demand for steel may continue in the face of slowing economic growth worldwide. World crude steel production for the 64 countries reporting to the World Steel Association (Worldsteel) was 115,506 tons in November 2011 much lower as compared to 123,455 tons reported in October 2011. However crude steel production for November 2011 was almost 1.1 percent higher than November 2010. Leading the decline, with regard to quantity, has been China which registered 8.76 percent month-on-month drop to 49.883 million tons (mt) in November as compared to the previous month. This was followed by Japan which registered a fall of 8 percent to 8.695 mt and South Korea which recorded a 5 percent fall in crude steel production to 5.785 mt in November as compared to a month ago. India also recorded a 2 percent decline in production to 6 mt in November as compared to October. Overall, Asian markets, which have a production share of around 64 percent, recorded 8 percent decline in production of crude steel as the region closed the month with crude steel production of 72.103 mt. Leading steel producer Russia recorded a fall of 3 percent m-o-m in November producing 5.58 mt, while Ukraine witnessed a m-o-m fall of 5 percent. In The EU, Germany witnessed a m-o-m production fall of 6 percent to 3.455 mt of crude steel while Italy’s crude steel production dropped by 5 percent to 2.566 mt in November as compared to the previous month. France produced 1.345 mt of crude steel in November 2011, 5 percent less than October 2011. The US, however recorded a marginal rise of 0.29 percent producing 7.177 mt while Mexican crude steel production rose
Total 64 countries
slightly by 0.2 percent to 1.53 mt m-o-m in November. In the first 11 months of 2011, world crude steel production touched 1372.75 mt, an increase of 18 percent as compared to 1166.8 mt produced in the same period of 2010. During the period, Asia produced 878.9 mt of crude steel, an increase of 19 percent compared to the same period of 2010, while EU produced 165.179 mt of crude steel between January and November of 2011, up by 13 percent compared to the same period previous year. China which was the single largest producer between January and November 2011 produced 632.111 mt of crude steel an increase of 20 percent as compared to the corresponding period in 2010. The world crude steel capacity utilisation ratio of the 64 countries in November 2011 declined to 73.4%, -2.8 percentage points down from October 2011. This is its lowest point for two years. Compared to November 2010, the utilisation ratio in November 2011 decreased by -2.6 percentage points. Average daily production and m-o-m variation in '000 tons
15,174 3,324 9,495 9,853 4,061 1,206 1,681 54,673 6,150 6,150 6,087 1,800 78,188 473 123,455
M-o-M Variance 500 111 435 14 64 103 20 -2,027 200 -2,739 609 62 -566 -153 529
October European Union (27) Other Europe C.I.S. (6) North America South America Africa Middle East China India Japan South Korea Taiwan, China Asia Oceania Total 64 countries Rest of the world except China
STEEL INSIGHTS 58 January 2012
14,244 3,089 9,140 9,885 3,880 1,090 1,641 49,883 6,000 8,695 5,785 1,740 72,103 434 115,506
M-o-M Variance -930 -235 -355 32 -181 -116 -40 -4,790 -150 2,545 -302 -60 -6,085 -39 -7,949
International flat product markets
Mixed trend amid uncertainties
Steel Insights Bureau
he global flat steel market witnessed mixed trends amid a phase of anxiety as the global economic environment remained shrouded in great uncertainty. There is genuine concern about the economic health of several major economies and this is likely to impact the demand for steel products significantly. The initial signs of such an impact are already apparent in the flat steel segment. Chinese and Middle East markets remained quiet. However, Europe, US and Turkish markets showed some strength on marginal rebound in sentiment. Chinese markets quiet China’s domestic hot rolled coil market is expected to quieten in January with prices pegged at current levels, partly because the time for business is limited. Given the calendar and Chinese New Year holidays – January 1-3 and 22-28 respectively – this month has only 17 working days. Moreover, as some participants are likely to leave the market earlier at around January 14-16, effectively only about one working week remains to strike deals. Market watchers say traditional winter restocking among dealers and end-users was practically non-existent in December due to the negative outlook most held for the market in early 2012. Traders did not restock because of weak market confidence and tight liquidity. Buying is likely to shrink further in the January holiday season too. However, sources believe Chinese HRC prices are unlikely to fluctuate too much during the period given low inventories. Certain traders might purchase some volumes before Chinese New Year because deals can be concluded at comparatively low levels in this weak market. Endusers have low stocks too, so there could be restocking downstream should their markets recover after the holidays. Currently, offers of Q235 5.5 mm HRC are around RMB 4,220-4,240 per ton ($670-674 per ton) with 17% VAT in Shanghai and RMB 4,300-4,320/t with VAT in Lecong. Traders predict prices will remain around RMB 4,200 per ton in Shanghai and RMB 4,270-4,300 per ton in Lecong in January. Meanwhile, Chinese hot-dip galvanized (HDG) coil prices have continued to soften in December on weak demand and uncertainty about the post-Chinese New Year (22-28 January) market. Producers cutting prices in an attempt to attract
bookings and dispose of stockpiles have also contributed to the weak spot market. Offer prices of 1.0mm HDG are prevailing at RMB 4,8004,950 per ton ($759-783 per ton) with 17% VAT in Shanghai, and RMB 4,950-5,050 per ton with VAT in Guangdong Lecong steel market. Optimistic market watchers believe HDG prices will stabilize early next year once mills have completed this process. Beijing has reiterated its determination to meet its affordable housing construction target in 2012, which could help encourage demand for white goods and therefore benefit the HDG market. Traders continue to look longer-term and will keep stocks low until the market trend becomes more evident after the Chinese New Year holidays. The plateauing of domestic steel prices in China has encouraged some hot rolled coil producers to increase their HRC export offer prices for March shipments. Whether they will be successful is a moot point however, with export traders warning the mills will face considerable resistance from foreign buyers. Some mills in northern and eastern China lifted their export offer prices for boron-added HRC by $10-15 per ton to $620-622 per ton fob for their March shipments. However, because Chinese materials are already unattractive at present prices, any increases in price will be difficult to accept. US sheet prices rise US sheet prices moved up in December and lead times for hotrolled and coldrolled sheet shortened, according to information available with Steel Insights. Prices increased across the board for HRC to $702/s.t and CRC to $791/s.t and hot-dip galvanized to $839/s.t. Prices for HRC are now up $52/s.t over the last four weeks while CRC and HDG are up $32/s.t and $37/s.t, respectively, over the same period.
For classified advertisements, contact
Ph: 91633 48243 Email: firstname.lastname@example.org
STEEL INSIGHTS 59 January 2012
Market Report HRC lead times fell from 5.8 to 5.5 weeks and CRC lead times fell from 6.4 to 5.8 weeks. HDG lead times increased from 5.1 to 5.8 weeks. Europe market remains strong Northern European reference prices remained strong in December, while southern European coil prices have also gained. In northern Europe, the average of daily HR coil reference prices was €16 per ton up, while CR coil was 2% higher at €581 per ton ($758 per ton). Northern European plate reference price ex-works is €3 per ton higher. Average lead-times for all coils are between five to six weeks. The average of daily HR coil reference prices ex-works in southern Europe is just above average at €467 per ton ($609 per ton), while CR and HDG coil reference prices ex-works increased by around 1%. Average lead-times for all coils are shorter. Southern European plate reference price ex-works is €1 per ton higher, at €567 per ton ($740 per ton). UAE remains slow Coil trading in the United Arab Emirates remained very slow in the last week of 2012 and there is unlikely to be any significant improvement in the first quarter despite some buying in January, according to market sources. Import offer prices into the region have ticked up recently following global increases, as reported: hot rolled coil is
currently being offered into the UAE at $620-650 per ton cfr (€476-499 per ton), while hot dip galvanised offers are $800860 per ton cfr. While local mills have not announced any changes in prices for orders placed this month, they are expected to increase January offers, in line with the global trend and higher HRC prices. Local producer Al Ghurair is still selling HDG at $885-900 per ton and Asian Ispat’s price is $850-900 per ton delivered for local material and fob for exports, for tonnages produced in February. Turkey prices firm Domestic Turkish hot rolled coil prices have increased $10 per ton but the market is hesitant as the Turkish lira is losing value against the US dollar. Local mills are selling HRC at $640-660 per ton ex-works at present. Some traders believe prices could continue to increase into 2012, with buyers returning to the market in the second week of January when import offers are announced and people return from Christmas and New Year holidays. Blast furnace producers have an advantage in terms of production costs, as scrap prices have increased to about $470 per ton cfr Turkey. Some sources said high scrap costs could support prices, while others suggest global coil prices are affected by iron ore, rather than scrap.
STEEL INSIGHTS 60 January 2012
International long product markets
Europe rebounds in otherwise dull scene
Steel Insights Bureau
he international long steel market showed mixed trends in December in line with the uncertainties in the global economic front. While China witnessed stable trends of rebar and wire rod prices among its different regions, Europe and East Asia saw some rebound in demand and prices. However, demand remained sluggish on Taiwanese markets. China rebar prices stable Spot rebar prices in northern China were stable but lacking momentum ahead of the calendar New Year holidays from January 1-3. In Beijing’s spot market offers for 18-25 millimetre HRB335 rebar sourced from Hebei Iron & Steel (Hegang) were around RMB 4,080-4,090 per ton ($648-649 per ton) with 17% VAT. Hegang, north China’s leading construction steel producer, triggered price hikes on December 28 when it raised earlyJanuary 2012 delivery prices by RMB 30 per ton ($5 per ton). In spite of the poor demand predicted for this month, extremely low inventory levels will continue to support rebar prices in the short-term, a second trader predicted. Buying in north China wound down in December as plunging temperatures cooled construction activity. Steel demand is expected to reach bottom this month, before China’s Spring Festival holidays (22-28 January). Spot rebar prices in eastern China have experienced marginal declines. Rebar prices dipped as traders scrambled to liquidate inventories during the last week of 2011. Meanwhile, billet prices in northern China failed to sustain their recent uptrend as the steel futures market. In Hebei province’s Tangshan city, ex-works prices for 150x150 millimetre Q235 billets from major mills, which rose RMB 30 per ton increased by another RMB 10 per ton ($2 per ton). But this rise was short-lived as prices fell back to settle at RMB 3,730 per ton ($590 per ton). The prices include 17% VAT, on a cash-payment basis. Europe stable with firm orders European steel mills’ order books are filling up for January rollings on the back of restocking and they are also achieving higher prices, according to market sources. However, the longer-term outlook remains bleak as global industrial production slowed. Mills are succeeding in pushing through price increases of around €20 per ton – reaching €620-640 per ton ($803-829 per ton) delivered, for category one January rollings in northwestern Europe. Stockists are accepting the higher prices because of the rising cost of scrap. Some end users are also beginning to accept price increases; according to stockists, this is partly a result of construction companies running down their stocks over recent weeks. Two
Dutch Tata Steel stockholders, Reesink Staal and Vlietjonge, both recently announced they would increase their end user prices by €20-30 per ton. However, the larger picture remains bleak. It is only restocking activity that allows these price increases, as underlying demand remains weak. Furthermore, the slowing down of global industrial production may cause raw material prices to fall, especially if the retardation of the Chinese economy continues. According to latest reports, southern European rebar reference price ex-works is €4 per ton higher, at €515 per ton ($672 per ton). East Asia offer prices rise Offer prices to East Asia for imported rebar have increased significantly on rising scrap costs. Korean theoretical-weight rebar was last offered at $680 per ton cfr, while Turkish rebar offers are prevailing at $700 per ton cfr and more. Transacted prices for rebar from these countries were around $650 per ton cfr in November 2011. Buying activity is currently thin because of the holidays and importers are uncertain about the future of the construction sector. Many traders said they have not heard of any deals recently, while some believe Chinese boron-added rebar was booked at $630-635 per ton cfr Singapore. Property prices are softening in Hong Kong. This will affect demand for construction steel, according to sources. Meanwhile, Chinese mills exporting 5 .5 mm SAE 1008 drawing quality wire rod are making offers at $645-650 per ton fob ($670-680 per ton cfr SE Asia). Some bookings concluded from small Chinese mills at $645-650 per ton cfr Vietnam. Russian-origin wire rod was booked at $655 per ton cfr Philippines. Chinese-origin wire rod was offered at $660-675 per ton cfr. Taiwanese rebar demand to slow down Major Taiwanese rebar producers are expecting a demand slowdown this month as construction activities ease prior to the start of the Chinese New Year holidays at end-January. Feng Hsin Iron & Steel, in central-west Taichung, maintained its local SD 280 rebar list price at TWD 20,500 per ton ($677 per ton) ex-works. Hai Kwang in southern Kaohsiung is keeping its selling price for the same product at TWD 20,000 per ton ex-works. A company spokeswoman says Hai Kwang is following Feng Hsin’s price direction and expects a quieter market this month due to the Spring Festival holidays. Tung Ho Steel Enterprise – which produces rebar in Kaohsiung and in Taoyuan in Taiwan’s northwest – has left its domestic delivered rebar price at TWD 21,000 per ton.
STEEL INSIGHTS 61 January 2012
Domestic Flat & Long Markets
Mixed trend in prices across categories Anondo Kumar Dutta & Sanjoy Chakraborty
Price trend as observed in the auction held at metaljunction for flat products: Following graphs show the price trend observed in the auction services of metaljunction for the months of November and December 2011 for different HR and CR products. Percent change for hot-rolled flat products (m-m, q-q, y-y basis): Products Cobble Plate Def. Plate Def. HR Plate Semi Rolled Plate SRP Coil Form Def. HR Coil Def. HR Sheet
Nov’11 Price (Avg.)
Dec’11 Price (Avg.)
% change (M-M)
% change Qtr-Qtr)
% change (Yr-Yr)
HR Products Price Trend
34000 32000 30000 28000 26000 24000 Nov'11 Week 1
Nov'11 Week 2
Nov'11 Week 3
Nov'11 Week 4
Nov'11 Week 5
Dec'11 Week 1
Dec'11 Week 2
Dec'11 Week 3
Dec'11 Week 4
Defective HR Plate-Rourkela
Semi Rolled Plate
Cobble Plate Def. Chequered Plate
Defective HR Plate-Bokaro
Price in `/t is basic
Percent change for cold-rolled flat products (m-m, q-q, y-y basis): Products Def. CR Coil Def. CRNO Sheet CR Coil End SPM-I CR Coil End SPM-II Def. CR Sheet CR Sheet Cutting
here was a slight uptick in demand in the domestic flat products market in the month of December. Transaction prices of IS 2062 grade A/B structural HRC of 3mm and above thickness averaged `34,000-35,000 per ton ex-works. However, based on supply volumes and customers involved, mills have been offering discounts to the tune of `100-600 per ton throughout December. Producers were tempted to raise their prices as the recent uptrend in market sentiments and buying activity coupled with a weak rupee created room for such a price rise. However, others felt that any thought of such a move would damage the new found demand in the market. However, coil importers were shying away from fresh bookings due to continued softness of the rupee against the dollar. Offers for Chinese-origin 3mm and above thickness boron-added SS400 HR coils presently averaged at $650-660 per ton cfr. In the month of December, the long steel market remained under pressure as it grappled under the weight of shortage of raw materials. Market sentiments remained feeble due to continuous thinning of transactional activities. Many units in Orissa and Raipur have progressively closed shop due to unavailability of iron ore, as the market was not ready to accept high priced products even when prices of raw materials increased. Even the ingot market showed no support for producers as prices kept more or less stable in the month across various regions.
Nov’11 Price (Avg.)
Dec’11 Price (Avg.)
% change (M-M)
% change (Qtr-Qtr)
% change (Yr-Yr)
CR Products Price Trend
29000 Nov'11 Nov'11 Nov'11 Nov'11 Nov'11 Dec'11 Dec'11 Dec'11 Dec'11 Week Week Week Week Week Week Week Week Week 1 2 3 4 5 1 2 3 4
CR Coil End from SPM - I
Defective CR Coil
UACE from HDGL
CR Coil end from SPM-II
Def CR Sheet
Defective CRNO Sheet
Price in `/t is basic
STEEL INSIGHTS 62 January 2012
Market Report Outlook Over the month, the flat steel market exhibited mixed trends. While HR products have clearly shown a fall in prices, CR products have shown a stable trend. Plates have especially shown a downward trend in the closing weeks of the month. CR products have been able to recover all lost grounds over the month. In view of the current scenario, a slight increase in prices is expected in the opening weeks of January but whether the price rises do get accepted in this droopy demand scenario is yet to be seen. Price trend as observed in the auction held at metaljunction for long products:
Wtd. Avg. Price(Rs./MT)
Long Products Price Trend
Following graph shows the price trend observed in the auction services of metaljunction for the months of November and December 2011 for different long products. Percent change (m-m, q-q, y-y basis): Nov’11 Price (Avg.)
Dec’11 Price (Avg.)
% change (M-M)
% change (Qtr-Qtr)
% change (Yr-Yr)
TMT Bar Cutting
MM End Cutting
The long steel market has shown a comparatively stable trend. Prices have dropped marginally, as sellers try desperately to maintain them. The construction market has kept a steady but subdued demand of various products. However, such materials are already pre-booked. Previously commissioned constructions are in phase while new projects have been delayed. In light of such feeble response, a remarkable jump in prices is not expected in the coming few weeks.
2 4 5 2 3 k1 k3 k4 k4 ek ek ek ek ek ee ee ee ee We We We 1 We We 1 W ' 11 W ' 11 W ' 11 W 1 11 ' 11 ' 11 ' 11 ' ' t t t v v v c c c c c O O O No No No De De Defective Billet MM end Cutting Plate Cutting
TMT Bar Cutting Rejected Bloom
Price in `/t is basic
Price trend in domestic flat & long steel sector on a quarterly basis Kolkata Dec’10 Mar’11 Jun’11 Sep’11 Dec’11 Delhi Dec’10 Mar’11 Jun’11 Sep’11 Dec’11 Mumbai Dec’10 Mar’11 Jun’11 Sep’11 Dec’11 Chennai Dec’10 Mar’11 Jun’11 Sep’11 Dec’11
Billet 100*100 Bloom mm 150*150 mm
Wire Rod 6 mm
TMT Bar 10 mm
Angle 50X50X6 mm
Joist 125*70 mm
Channel 75*40 mm
HR Coil 2.00 CR Coil 0.63 mm mm
GP Sheet 0.63 mm
GC Sheet 0.40 mm
34260 37250 36930 37920 38810
32650 35435 35240 36200 37685
35875 43345 44045 43935 44140
36360 41770 42490 42735 45230
37590 40730 41125 41330 42930
37775 41120 41530 41485 42850
37740 41565 42130 42275 44430
43975 44595 42395 42280 45785
45200 47400 46670 47640 51205
48570 54060 53825 53210 54370
50385 55505 55255 54790 55685
35160 37360 37860 37880 38860
33480 35660 36140 36180 37790
35900 44060 44975 45410 45005
37015 41990 43395 43870 46035
37925 40890 41150 41590 43255
38620 41060 41500 41940 43845
38540 42040 42455 42630 45305
44915 45695 43070 43210 47430
46760 49180 47840 48980 51660
48630 53100 52140 52140 53280
51270 56510 55280 55550 54665
34810 38260 38100 38260 39950
31990 36100 36000 36200 38265
36915 44165 43905 45725 45850
36580 41860 42140 44465 46155
37800 40980 42325 42530 43760
38215 41440 42940 42935 43990
38105 41805 42230 43350 45345
43625 44245 47300 42295 47810
44040 47240 54070 47100 51410
49160 53470 55710 54745 55775
50610 55470 57200 56905 56350
34300 36895 37470 37330 38960
31640 34930 34520 34875 36790
36350 44070 45450 45045 45205
36210 41420 44020 43535 45665
38100 40510 42220 42595 43875
38470 41330 42425 42625 44080
37785 41310 42955 43005 45455
42430 42960 42120 42000 47550
46700 47110 47320 46975 52070
52765 56725 59070 58640 60470
53745 58710 60580 60620 61385
Source: JPC. All prices quoted above are in `/t, all inclusive.
STEEL INSIGHTS 63 January 2012
Ferro alloys price trends Steel Insights Bureau
Ferro Alloys & Metals
HC Ferro Chrome (Cr - 60%) LC Ferro Chrome (C - 0.1%, Cr - 65%) Ferro Silicon (Si - 75%) HC Ferro Manganese (Mn - 70%) Silico Manganese (Mn - 60%, Si - 14%) MC Ferro Manganese ( Mn - 70%, C -1.5) LC Ferro Manganese (Mn - 70%, C - 0.1) Manganese metal (Mn - 95% lump) Ferro Vanadium Moly Oxide (Mo - 57% min) Ferro Titanium (Ti - 30%) CPC (FC - 98%, S - 1.2%, size 0-10mm)
Ex-works Rs/ ton 68000
CIF in US$/lb of cr 1.15
CIF in US$ / ton 1450
Ex-works Rs/ ton 50000
Ex-works Rs/ ton 47000
Ex-works Rs/ ton 74000
Ex-works Rs/ ton 149000
CIF in US$ / ton 3380
Ex-works Rs/ kg 730
CIF in US$/lb of moly 14
Ex-works Rs/ ton 146000
Ex-works Rs/ ton 28000
STEEL INSIGHTS 64 January 2012
Iron ore export data for December 2011 Steel Insights Bureau PORT
DATE 1-Dec-11 4-Dec-11 6-Dec-11 13-Dec-11 19-Dec-11 20-Dec-11 23-Dec-11
EXPORTER Presidency Export Core Minerals Expendable Enterprise Shaping Dreams Royal Line. L.Stone Get Mineral / SM niryat Atha / Anurag / Bagadiya
19-Dec-11 23-Dec-11 24-Dec-11 26-Dec-11
JSPL Core Minerals EMIL EMIL OMC MML ORECAST BAGA ATHA MINES BAGA ANURAG/BAGA
114600 55000 7700 52150 32000 66000 20000 22500 57200 55837 51800 37000
7-Dec-11 10-Dec-11 12-Dec-11 13-Dec-11 15-Dec-11 20-Dec-11 26-Dec-11
METAL IMPEX INDIA ISPAT INDUSTRIES MMTC ISPAT INDUSTRIES ROYAL LINE RAJ MAHAL LOGAN, SPONGE & ANIMESH
457187 21000 40000 41000 43900 79200 36500 40000
CCL SESA RAW MIN FRPL SESA VMS SESA VMS CCL SFI
30000 185000 72900 41310 67000 150000 65000 157800 55000 53950 90000
4-Dec-11 6-Dec-11 7-Dec-11 9-Dec-11 12-Dec-11 Paradip
Vizag Total Kakinada Kakinada Total
1-Dec-11 2-Dec-11 Mormugao
QTY (in Tons) 16400 12000 14000 22300 17000 12000 20900
4-Dec-11 6-Dec-11 7-Dec-11
MAGNUM MINERALS PRIME MINERALS SESA VMG SESA VGM CCL PTI SESA VMS FRPL PTI SESA VMS RNSB CCL CCL FRPL SESA SFI VMS VGM
52000 92000 220000 57000 80000 55500 126000 48000 250000 56000 72000 58000 150000 50000 49500 75000 105000 70000 165000 72500 55000 55000
PTI PTI SESA GOA ROTOMAX GLOBAL VMS ROTOMAX GLOBAL SESA TRAFIGURA VELINCAR SEA GULL TIMBLO
2951460 89500 143000 90000 59500 76000 54000 75000 51000 30000 76000
2-Dec-11 9-Dec-11 13-Dec-11
RATA ORE & MINERALS SAMRUDHA RATA
744000 54000 55000 54000
11-Dec-11 12-Dec-11 14-Dec-11 15-Dec-11 18-Dec-11 Mormugao
21-Dec-11 23-Dec-11 24-Dec-11 25-Dec-11 28-Dec-11 29-Dec-11 30-Dec-11
3-Dec-11 4-Dec-11 5-Dec-11 9-Dec-11 10-Dec-11 15-Dec-11 17-Dec-11 18-Dec-11
Panaji Total Redi
QTY (in Tons)
Diclaimer: The data provided here which has been compiled from various sources, is correct to the best of our knowledge. The data, however, is not exhaustive, and errors may creep in during the process of data collection, or may even lie in the source itself. In case of any discrepancy, we urge our readers to use their discretion and check their facts. While we have taken adequate care to provide correct data, we accept no responsibility for any error that may have inadvertently crept in.
STEEL INSIGHTS 65 January 2012
Market price data December 2011 Steel Insights Bureau Market
TMT 10 mm
TMT 10 mm
TMT 10 mm
TMT 10 mm
STEEL INSIGHTS 66 January 2012
Steel Insights is a monthly magazine providing he widest coverage of the Indian steel industry. From iron to finished steel, technology for...