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Dear Readers, The crude steel output in May was 131 million tons (mt) in the 62 countries covered by the World Steel Association. This shows that year-over-year growth slowed from 1.2% in April to 0.7% in May. The JanuaryMay total of 635 mt was only 0.8% ahead of 2011’s equivalent production figure. Capacity-use for the 62 countries in May dipped just below 80%. This was down from 81.3% in April and 1.4 percentage points below May last year. While global crude steel production – on a daily basis – fell by about 2% in May, consumption too is probably falling, seemingly with more companies destocking than restocking. Buyers, including traders, continued to face unclear finished demand and price movements, and so have been reluctant to commit to new purchases. Though analysts at the World Bank are, for now, forecasting a 2-3% rise in global GDP this year, it is uncertain to what extent this will boost steel demand. Back in India production of crude steel during April-May 2012 was at 12.95 mt, a growth of 6.5% compared to AprilMay 2011. Real consumption in the domestic market rose 8.9% year-on-year at 11.88 mt during the period. However, India remained a net importer of steel during April-May 2012 with imports of 1.52 mt, a growth of 68.5% compared to last year. Exports during the period declined 14.9% to 0.65 mt reflecting the overall bearish appetite for steel internationally. In this backdrop, we at Steel Insights examined the growth prospects of specialty steel sector. In 2012, the International Stainless Steel Forum expects a marginal increase in global stainless steel production from 32.1 mt produced in 2011. Macquarie Commodities Research expects global stainless steel production at 35.4 mt in 2012. However, despite the slowing growth rates the specialty steel sector still remains an attractive proposition because of its wider margins and niche but growing consumer base. Meanwhile, India is set to be a shining story in stainless steel consumption map of the world in the years to come. The low per capita consumption of stainless steel in India which was 2.1 kg as compared to 7.5 kg in China and a world average of 4 kg, all in the 2011-12 fiscal constitutes a huge opportunity for growth in this sector. This issue also includes Tata Metalik’s vice-president Sudhin Mitter’s opinion about the current trends and outlook of the pig iron industry in general and the company in particular. Happy reading!
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.
Contents 26 Chandrapur ferro alloy unit to expand production
6 | Cover Story
28 Sesa, Sterlite shareholders approve merger
Margins keep specialty steel afloat
29 Exxonmobil launches SSP to tap Indian steel sector
Specialty steel makers hopeful of rise in demand as they increase product basket
31 SAIL, Kobe incorporate JV 32 Jindal Steel to exit Bolivian project 32 Panel to probe RINL fire 36 Car sales growth dip to 2.8% in May 37 Howrah cluster foundry owners seek to go the China way 38 Posco gives up on ore export, may kick start plant in H2 40 Ferro alloy prices to be under pressure in Q3
22 | Interview
‘Pig iron output to depend on margins’ The demand for quality pig iron will always remain with the positive outlook of the casting industry
33 | Corporate
41 Ferro alloy maker calls for cancellation of OMC mining leases 42 Coking coal likely to soften further
Impex Metal plans 3 new units
43 Vietnam to host show for manufacturing industries 48 Sponge iron making: better use of ore 50 India’s steel production targets may be over ambitious: ISMW 51 Iron ore handling by major ports down 29.2% in April-May 52 Railways commodity freight revenue up in May 53 Macro economic indicators of India 54 Global crude steel production up 1.4% m-o-m
The total investment has been earmarked at over `1000 crore
39 | Feature
Iron ore imports may move up as output drops continues Low domestic output pinching local industry.
44 | Case Study
55 International flat and long product markets 58 Domestic flat and long markets
Thermographic studies on nonrecovery coke ovens
60 Domestic raw materials market 62 Production data 64 Ferro alloys and metals price trends
Different plants have been trying different methods for better performance.
65 Iron ore export data
See Pg 49
STEEL INSIGHTS 4 JULY 2012
he global financial turmoil has affected the entire global economy, and the steel sector has not escaped its clutches. Demand for steel has taken a hit post the economic downturn, leading to production cuts by major steel producing companies globally. However, there is one sector which is fast gaining significance with many major steel producers concentrating on expanding their product basket. And that is the specialty steel sector, and the primary reason behind this is the wider profit margin. While mild steel production has been curtailed, specialty steel production volumes have been kept intact so far to attract consumers who operate in the niche market. Although there has been marginal decline in production of specialty steel, steel makers are increasingly hopeful about this sector. Specialty steel industry is cost intensive in nature. However, currently with some of the raw material prices taking a dip, producers are viewing it as a favourable proposition to invest in newer products within the specialty steel segment. Many steel makers are
planning to diversify to best manage their financials and market share during these crisis days. Primary steel producers are fast trying to go up the value chain and bring specialty steel into their product basket. Given the margin pressure that these steel makers are facing owing to recent slash in price, major players are trying to get market share in niche segment. This is quite a preferred mix for most of the players. Cash flow is taken care of from the commodity trade (mild steel) whereas specialty steel helps to maintain margins. The optimism which prevails amongst the producers of value added products has led some of them to engage in forward integration of their existing facilities and gather greater brand visibility for their products. While in most developed nations, greater stress is laid on the production of value added steel, the Indian specialty steel production figures have remained more on the conservative side, which is why the current activities undertaken by specialty steel producers is getting highlighted. Most of the specialty steel makers are quite hopeful about the demand in the domestic market. With the government taking all possible steps to revive the slowing economy, demand for specialty
Margins keep specialty steel afloat Steel Insights Bureau
STEEL INSIGHTSâ€‚ 6â€‚ JULY 2012
Cover Story steel would surely see better days, at least, The making of as compared to last year, feel experts. stainless steel Given the potential and planned government expenditure to build infrastructure and possible auto sales growth in India, along with other crucial sectors including oil and gas, the domestic market is quite hopeful of a decent demand growth this year. At the same time, the cost competitiveness and superior marketing skills are also opening significant export market for Indian value added specialty steel products. One more advantage is that government currently levies 5 percent import duty on imports of stainless steel. Considering the market potential both within and outside the country and cost competitiveness, Indian players are fast moving ahead to make innovative specialty steel products. And the best part is that players from both private and public sector are in the fray. On one hand, some players are coming up with new products at quite a fast pace. On the other, existing specialty steel producers are busy expanding their market share leveraging on their existing product base. However, in the global scenario, one can come across stray cases where future investments and expansion plans have been curtailed somewhat, keeping in mind the existing challenges. However, the journey of stainless steel was also full of uncertainties as the economic downturn combined with the deterioration of consumer spending and household purchases, caused many stainless steel consumers to introduce a variety of temporary and permanent production stoppages and cost reduction measures. Interesting enough, the ride of stainless steel industry has been tougher as compared to mild steel. Nickel, one of the major ingredients used in making stainless steel, witnessed rise in price. Stainless steel producers were left with little choice but to look for alternate inputs and they zeroed in on nickel ferro alloy, a cheap alternative of nickel. Along with this, many stainless steel makers also started shifting their focus from high nickel containing stainless steel to relatively less nickel containing stainless steel. How is it made? Stainless steel is produced in an electric arc furnace where carbon electrodes contact recycled stainless scrap and various alloys of chromium (and nickel, molybdenum etc. depending on the stainless type). A current is passed through the electrode and the temperature increases to a point where the scrap and alloys melt. The molten material from the electric furnace is then transferred into an AOD (Argon Oxygen Decarbonisation) vessel, where the carbon levels are reduced (remember stainless has a much lower carbon level than mild steel) and the final alloy additions are made to make the exact chemistry. Exhibit 1 shows the process from melting and casting either into ingots or continually cast into a slab or billet
form. Then the material is hot rolled or forged into its final form. Some material receives cold rolling to further reduce the thickness as in sheets or drawn into smaller diameters as in rods and wire. Most stainless steels receive a final annealing (a heat treatment that softens the structure) and pickling (an acid wash that removes furnace scale from annealing and helps promote the passive surface film that naturally occurs). Life cycle The fact that stainless steel has a great resistance to corrosion means that using stainless will result in a very long life compared to mild steel. Structures made from stainless steel will last many times the normal life (well over 100 years in most cases). So, while stainless steel is probably more expensive to buy in the beginning – because it lasts a long time, it is usually cheaper in the long run because there is little or no maintenance and repair costs. Once the useful life is over, stainless steel is 100 percent recyclable. Scrap stainless steel is recharged into the electric furnaces for re-melting back into stainless steel, which makes stainless steel a truly "full life cycle" material. Mechanical properties (Annealed condition) Stainless
Tensile Strength ksi
Elongation in 2" (50.80 mm) Hardness in Rockwell B
Benefits • Corrosion resistance: Lower alloyed grades resist corrosion in atmospheric and pure water environments, while highalloyed grades can resist corrosion in most acids, alkaline solutions, and chlorine bearing environments, properties which are utilised in process plants. • Fire & heat resistance: Special high chromium and nickelalloyed grades resist scaling and retain strength at high temperatures.
STEEL INSIGHTS 8 JULY 2012
Cover Story • H ygiene: The easy cleaning ability of stainless makes it the first choice for strict hygiene conditions, such as hospitals, kitchens, abattoirs and other food processing plants.
Top 20 stainless steel companies
• A esthetic appearance: The bright, easily maintained surface of stainless steel provides a modern and attractive appearance. • S trength-to-weight advantage: The workhardening property of austenitic grades, that results in a significant strengthening of the material from cold-working alone, and the high strength duplex grades, allow reduced material thickness over conventional grades, therefore cost savings. • E ase of fabrication: Modern steel-making techniques mean that stainless can be cut, welded, formed, machined, and fabricated as readily as traditional steels.
Stainless steel production in other Asian countries showed • I mpact resistance: The austenitic microstructure of the 300 a very slight decrease (0.6 percent) to 2.2 mt in the first quarter series provides high toughness, from elevated temperatures of 2012. The Western Europe/Africa region showed an even to far below freezing, making these steels particularly suited to Stainless crude steel production (ingot/slab equivalent) cryogenic applications. in ‘000 metric tonnes
• L ong-term value: When the total life cycle costs are considered, stainless is often the least expensive material option.
In the full year of 2011, global stainless steel production stood at 32.1 million tons. According to the latest figures from International Stainless Steel Forum (ISSF), which released preliminary data, stainless steel production shrank by 2.8 percent in the first three months of 2012. Total production was 8.6 mt for the quarter, down from 8.8 mt in the corresponding period of 2011. The biggest drop appears to have happened in the Americas region with a 22 percent drop in production during Q1 2012 compared to the same period last year. Total production is reported to be 0.6 mt. However, there are some discrepancies in US stainless crude steel production statistics which ISSF is investigating. China also showed a decline in production of 1.2 percent to 3.4 mt compared to the first quarter of 2011.
World p = provisional
STEEL INSIGHTS 10 JUNE 2012
Cover Story Stainless crude steel production
(in ‘000 tons)
Q-o-Q +/- (%)
Asia (excluding China)
First quarter 2012 (p)
Y-o-Y +/- (%)
Region Western Europe/ Africa Central and Eastern Europe The Americas
Source: International Stainless Steel Forum (ISSF)
smaller decline in production of just 0.3 percent. Stainless production fell by 15 percent in Eastern Europe in the yearon-year comparison. There is some improvement in production when the first quarter of 2012 is compared to the last three months of 2011. Western Europe/Africa (+16.5 percent), the Americas (+9.0 percent) and Asia excluding China (+2.3 percent) all increased production. Eastern Europe (-9.8 percent) and China (-5.0 percent) showed declines. Overall, stainless steel production was up 2.7 percent in Q1 2012 compared to the quiet final quarter of 2011. Outlook for stainless steel demand ISSF does not expect the negative growth rates to continue for the remainder of 2012. The current perception is that markets will be driven by real demand and some restocking will occur in the second half of the year. For the full year 2012, ISSF expects a slight increase on the record production level achieved in 2011. Macquarie Commodities Research has cut its forecast for global stainless steel production to 35.4 mt for 2012, down from its earlier prediction of 36 mt, according to its report
issued recently. The new forecast would mean a 4.1 percent growth for this year, instead of 5.9 percent. Most of the cuts were made to its second and third quarter forecasts for the year. The recent fall in nickel prices has set in motion a sharp fall in stainless orders and production, with mills planning sharp output cuts in Europe, Asia and North America, said Macquarie. Mills are reporting weaker order books in all main regions, partly due to weaker nickel and ferro chrome prices, which in turn lead to expectations of weaker stainless prices. The deterioration is also being driven by a further slowdown in economic growth, particularly in Europe, it said. However, it expects a rebound in production in the fourth quarter on seasonality, a steadily improving Chinese economy and some restocking by stainless buyers “once the expectation grows that nickel and stainless steel prices have bottomed out.” Stainless steel output (Thousand tons) 2011
Source: Macquarie Commodities Research
Indian stainless steel story
India is set to be a shining story in stainless steel consumption map of the world in the years to come, according to a presentation by N.C. Mathur, senior advisor at Jindal Stainless Limited, at a conference in New Delhi, recently. By 2020, estimates suggest Indian GDP Stainless steel raw materials – Price volatility (2000 – 2010) could rise to $4 trillion, taking India to the fourth place behind the US, China and Japan by the size of the economy. High level of infrastructure spending and consumer spending in areas like housing, auto and consumer durables is a positive signal for the steel industry in the country. Quoting research reports, Mathur said the construction sector is expected to grow by 22 percent annually to reach $335 billion by 2016, while the auto component sector is expected to grow by 17 percent annually to reach $84 billion by 2016 and electronics sectors is expected to grow by 23 percent to $363 billion by 2015. Source: ISSF STEEL INSIGHTS 12 JULY 2012
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Cover Story Mathur said that the low per capita consumption of stainless steel in India which was 2.1 kg as compared to 7.5 kg in China and a world average of 4 kg, all in the 2011-12 fiscal year, constitutes a huge opportunity for growth in this sector. According to Mathur, Indian stainless steel consumption will grow at a compounded annual growth rate of 9.7 percent reaching 3.4 million tons per annum (mtpa) by 2015, outstripping global consumption growth of 6 percent to 34.12 mt. Global stainless steel consumption per capita
which plans to launch both stainless steel freight wagons and railway coaches in the next five years. Meanwhile, with the transportation sector in India growing fast, the country is likely to see huge consumption of stainless steel from this particular sector. Revamping of city buses and tourist buses will generate new consumption points for the industry. With the growing popularity of Metro rail, and especially since its successful launch in Delhi, it is likely to come up in other metropolitan and smaller cities like Chennai Mumbai, Bangalore, Hyderabad, Kochi, Ahmedabad and Ludhiana, among others, creating another consumption point. This particular sector is also witnessing participation from the private sector. Delhi Metro has 240 (301LN) coaches in service at present. The manufacturing of these coaches will require 11 tons of stainless per coach. Moreover, the industry is also witnessing considerable consumption in the bicycle range and in architecture. This is not the end of the story, as the domestic stainless steel industry also plans to use stainless steel to produce value added products like pipes and tubes. New development areas for stainless steel
Indian consumption of stainless steel has been mainly driven by the kitchen and catering segment, consuming 71 percent of production against a world average of 33 percent. However, industrial consumption of stainless steel in India was just 8 percent against a world average of 27 percent. The Indian construction sector accounted for just 4 percent of stainless steel against a world average of 16 percent.
ABC •SS roofing sheets •Decorative and color coated SS •Street furniture •Escalators, elevators •Claddings •Railings •Airports •Railway station up gradation
ART •Luxury Bus bodies •Auto chassis, trims, suspension parts, fuel tanks, catalytic convertors •Railway wagons and coaches •Metro coaches
Process & Engineering
•Nuclear grade SS for fuel containment and waste handling
•India as hub for white goods manufacturing
•Super critical boilers in power plants
•SS used as components
•Water treatment and drinking water supply •Desalination applications
Stainless steel consumption pattern (%) Source: ISSF
Upcoming consumption points In the existing depressed scenario, consuming sectors like construction and infrastructure have witnessed a setback globally. However, India has been able to look out for and identify new points of consumption of stainless steel. A major consumption point will be the Indian Railways, STEEL INSIGHTS 14 JULY 2012
Cover Story Kitchen appliances continue to be the major consuming sector and this is likely to continue in the coming years. Market experts feel that the consumers who shifted to substitutes when nickel prices were at historic highs can come back to stainless steel, thanks to nickel prices now which have fallen drastically. This can also positively affect the stainless steel consumption growth. A number of new development areas for use of stainless steel are coming to the fore over time like for example roofing sheets, luxury bus bodies, process and engineering sector and consumer durables sector among others. Economic growth and increasing consumption of stainless steel will help in the overall growth of the sector. The growth areas of architecture, building and construction and new applications will fuel growth for the sector by overriding the challenges of raw material volatility and slow infrastructure development in India.
Indian producers Among the domestic producers, Jindal Stainless accounts for about 50 percent of the total production. Other major players include Salem Plant of SAIL, Viraj Steel and Mukand Ltd, while rest companies have smaller production units. Jindal Stainless Ltd Jindal Stainless, the country’s largest integrated stainless mill, has undertaken ambitious expansion plans to fuel growth in the segment. The high level of integration, state-of-the-art technologies, wide spectrum of products – precision strips, blade steels and coin blanks and market development for the applications would help in the growth of the company. JSL – Focus on mining to end-user
Shift in trend Over the past few years, the stainless steel market has seen major changes in the type of stainless produced. The sharp hike in nickel prices during 2006 and 2007 forced the industry away from high chromium-nickel grades (300 series) to low nickel (200 series) or nickel-free grades (400 series). As a result, chromium stainless steels and chromium-manganese grades have become increasingly important. The scenario was no different in India. On other hand, as the primary consumption area is kitchenware, the 200 series has primarily very popular in India, locally known as bartan quality. Currently, 80 percent of the total stainless steel produced in India is of 200 series, 15 percent 300 series and remaining the 400 series.
Estimated market share of stainless grades, 2008 (as % of total) Grade Category
Quarter Quarter Quarter Quarter 1 2 3 4
JSL plants in India
Chromium nickel (CrNi)
Chromium nickel (CrNi)
Chromium manganese (CrMn)
At present, the 400 series is gaining popularity across the world. In tandem with the growing popularity for this particular grade, industry experts are hopeful that India will soon shift its attention towards this particular grade. India has its own chromium reserves. A shift towards the 400 series would reduce the cost of production for the stainless steel companies. Moreover, with absolutely no presence of nickel in India along with volatile prices, such a shift would benefit the Indian stainless steel producers.
Mukund Steels Mukund Steels is a highly acclaimed manufacturer of pipe and pipe fittings and supplies all ferrous and non-ferrous metal products like stainless steel pipes, stainless steel tubes and steel flanges, among others. Some of the widely accepted products of the company include stainless steel pipes and
STEEL INSIGHTS 16 JUNE 2012
Cover Story Odisha - Focus on cost competitiveness
of Steel Authority of India Ltd., pioneered the supply of wider width stainless steel sheets and coils in India. The plant can produce austenitic, ferritic, martensitic and low-nickel stainless steel in the form of coils and sheets with an installed capacity of 70,000 tons per year in the cold rolling mill and 186,000 tons per year in the hot rolling mill. In addition, the plant has the country's first top-of-the-line stainless steel blanking facility with a capacity of 3,600 tons per year of coin blanks and utility blanks and circles. Product mix Product-mix items
tubes, butt and fittings, forged fittings, flanges, fasteners, plates and sheets, round bars and many more. The company designs and fabricates these products on a customised basis for the special industrial requirements of its clients. The user industries for sheets and plates are chemicals, fats and fertilisers, sugar mills and distilleries, cement industries, ship builders, paper industries, pumps, petrochemicals, oil and natural gas organisation in terms of the specific materials and technology. The company is also engaged as importers, exporters, stockists and supplier of stainless steel angles. The company also stocks stainless steel, carbon and alloy specialty steels supplied in rolled, annealed and normalised conditions. It offers cut to size and heat treatment through its service centre. The company also stocks flat, hexagon, triangle bar, square, half round products in various dimensions and grades. Mukund is one of the leading importer and exporter of pipe fittings. It makes butt weld stainless pipe fittings, socket weld stainless fittings and screw type stainless steel fittings in a variety of sizes.
Cold rolled stainless steel flat product (Coils/Sheets/Blanks)
Hot rolled stainless steel/carbon steel flat product (Coils/ Sheets)
Total Saleable Steel
Facilities & capacity Area
Hot Rolling Mill
• Walking Beam Reheating Furance • Roughing Mill • Steckel Mill • Down Coiler • Roll Shop
Cold Rolling Mill
• Coil Build up Line • Bell Annealing Furnaces – 3 no.(with 8 bases) • Annealing & Pickling Lines – 2 no. • 20-High Sendzimir Cold Rolling Mills – 2 no. • Roll Shop • Strip Grinding Line • Skin Pass Mill • Shearing Line • Slitting Line
The SAIL plants Alloy Steel Plant: The pioneer in the production of alloy and special steels, Alloy Steels Plant (ASP), Durgapur was commissioned with an initial capacity of 100,000 tons of ingot steel and 60,000 tons of saleable steel. Through two phases of expansion and modernisation, the capacity has been revised to 2.46 lakh tons of liquid steel and 1.78 lakh tons of saleable steel. ASP has the capacity to produce slabs, blooms, bars, plates and forged items of over 400 grades in a wide range of sizes. It also produces value added items like cold rolling mill rolls, Concast rollers, crane wheels, springs, hammers, grate bars, hot saw blade, shear blade, bright bar and stainless steel liner plate, among others. ASP also supplies import substitution item components to many customers through established conversion agents. Salem Steel Plant: Salem Steel Plant, a special steels unit
• • • •
Blanking Press Rimming Machine Annealing Furnace Pickling and Polishing Machines • Counting Machines
Hot rolled Stainless Steel/ Carbon Steel Coils
Cold Rolled Stainless Steel Coils / Sheets Hot Rolled Annealed and Pickled Stainless Steel Coils / Sheets
Cold Rolled Stainless Steel Coin Blanks / Utility blanks
Capacity/Annum (in Tons)
The expansion and modernisation programme of the Salem Steel Plant is going on currently. The plan envisages installation of steel melting and continuous casting facilities to produce 180,000 tons of slabs along with expansion of cold rolling mill complex, enhancing the capacity of cold rolled stainless steel products from 65,000 tons per annum (tpa) to 146,000 tpa and an additional roll grinding machine for hot rolling mill for increasing production to 364,000 tpa.
STEEL INSIGHTS 18 JULY 2012
Cover Story VISL: Visvesvaraya Iron and Steel Plant (VISL) is a pioneer in production of high quality alloy and special steels and pig iron. Steel is produced through BF-BOF-LRF-VD route. The facilities include vacuum degassing, vacuum oxygen decarburisation, ladle refining furnaces, continuous casting machines, 1600 tons-hydraulic-high-speed forging press, a fully automatic horizontal long forging machine with high programmable Logic Controller (PLC) system for a semiautomatic and automatic mode of operation. VISL has an installed capacity of 77,000 tons of alloy and special steels and 205,000 tons of hot metal. Usha Martin: Started in 1961 in Ranchi, Jharkhand as a wire rope manufacturing company, today the Usha Martin Group is a $1-billion conglomerate with a global presence. The group has set new standards in the manufacture of wire rods, bright bars, steel wires, speciality wires, wire ropes, strand, conveyor cord, wire drawing and cable machinery. With continuous growth in both the domestic and international markets, Usha Martin, the Group’s flagship company has emerged as India’s largest and the world’s second largest steel wire rope manufacturer. In 1979, the company set up a steel plant with wire rod rolling mill at Jamshedpur, to benefit from business integration. This ensured a steady supply of steel for the manufacture of value added products. Today, the Jamshedpur unit has an integrated speciality steel manufacturing facility of 700,000 mtpa. With local success come global aspirations. Currently, the company has overseas manufacturing operations in Thailand, UK and Dubai, besides a vast network of distribution centres and marketing offices spread across the globe to support an ever growing worldwide customer base. The company exports over 60 percent of the wire rope output and about 20 percent of the total wire rods produced. Usha Martin’s future plans are focused on its operations in Jharkhand. Future priorities include product mix enrichment, cost reduction and infrastructural improvements. Already flourishing in its recent foray into mining operations, the company is planning to invest in its iron ore and coal mines, Operational data Q4 FY12 (MT)
12M FY12 (MT)
12M FY11 (MT)
Source: Usha Martin
sinter plant, pellet plant, power plants, while also enhancing its steel making and value added products capacity with an investment of `2,100 crore. In FY 2011-12, the company commissioned a bar mill for special steel rolling at Agra and Stoves in Blast Furnace 1 at Jamshedpur. It also obtained further approvals from major OEMs for steel products. The company registered net sales increase by 10.4 percent on consolidated basis and 12.4 percent on a standalone basis. The operational performance suffered due to difficult business conditions, higher cost of metallic, coke, coal and slowdown in key market segments. Implementation of new projects to further enhance competitiveness in specialty steel segment is underway – beneficiation, pellet, coke oven, DRI and waste heat power. Anti-dumping duty Jindal Stainless, the largest domestic stainless steel producer, has sought imposition of anti-dumping duty on imports of the metal alloy from China. "We have requested the government to impose antidumping duty on cheaper imports of stainless steel from China. Their price is much below the cost level. This is hurting the industry," Jindal Stainless president and executive director Ramesh Nair, has said. He added that their demand is for imposing anti-dumping duty on cold rolled flat stainless steel, which accounts for about 80-85 percent of domestic consumption. Currently, India has a surplus stainless steel production capacity at about 3.5 mtpa, of which about 0.8 mtpa gets exported. Despite this, the industry estimates that imports from China, amounting to about 2.5 to 3 lakh tons in a year, is taking place largely due to cheaper prices offered by the Chinese manufacturers. In November last year, government had imposed antidumping duty on flat stainless steel from European Union, South Africa, the US and Taiwan to protect the domestic industry from cheap imports from abroad. The level of duty on the product varied from country-to-country. The government currently levies 5 percent import duty on imports of stainless steel. As per the industry estimates, China currently produces about 12-13 mtpa, which is much more than their consumption at about 9 mtpa. This is expected to rise to 20-25 mtpa in twothree years. "At current rate of 5 percent import duty, there is a threat of India becoming a dumping ground for Chinese manufacturers but the safeguard duty should get imposed only as a shortterm measure," said N.C. Mathur, president of industry body Indian Stainless Steel Development Authority (ISSDA). He further said that long term solution would depend on government taking proactive measures on increasing the usage of stainless steel in various infrastructure and consumer durables segments including rail, automotive and white goods.
STEEL INSIGHTS 20 JULY 2012
‘Pig iron output to depend on margins’ Tamajit Pain
Promoted by Tata Steel, Tata Metaliks began its commercial production in 1994 to become India’s number one pig iron manufacturing and selling company over the years. Through its joint venture with Kubota Corporation of Japan, it has promoted a new company called Tata Metaliks Kubota Pipes Ltd and has entered into the business of manufacturing ductile iron pipes since 2007. The company is in the process of setting up a sinter plant at its Kharagpur plant to produce about 4 lakh tons of sinter per annum. The project is scheduled to be commissioned by September 2012. Tata Consulting Engineers Pvt. Ltd is the consultant for this project. The use of sinter in the blast furnace burden will help in utilisation of iron ore fines and other waste materials, to improve blast furnace productivity and reduce coke rate. The company is also in discussions with various parties to put up a 10,000 tpm capacity coke oven within its plant premises at Kharagpur on BOOT basis. The State High Level Clearance Committee (SHLCC ) in its meeting has approved Tata Metaliks Limited’s project of setting up a 3 million tons per annum capacity integrated iron and steel plant in Haveri District, Karnataka in association with Tata Steel. In a free wheeling interview with Steel Insights, the Tata Metaliks vice-president Sudhin Mitter spoke about the current trends and outlook of the pig iron industry in general and the company in particular.
Excerpts: In FY12, India’s pig iron production was 5.78 mt, up 1.8 percent y-o-y. In April-May 2012, production was around 1.04 mt, up 5.6 percent y-o-y. Why did production go up in April-May even as prices were flat in the last six months? There has been a moderate growth of 5 percent approximately in production of pig iron, primarily contributed by the integrated steel plants. Pig iron manufacturers have not been able to increase prices in spite of increase in inland freight and significant upward surge in raw material prices primarily iron ore. Taking current trends into account do you see India’s pig iron production surpassing FY12 levels in FY13? Revised global forecast for 2015 suggests that world casting production will reach 93.5 million tons (mt) from 80.34 mt in 2009. The Indian casting industry, being the second largest casting producer (7.4 mt in 2009) should further strengthen itself, resulting in higher consumption of pig iron. Presently the pig iron industry is suffering on the raw material front, due to the long and continuing ban on mining activities in Karnataka resulting in abruptly high pricing of quality iron ore. Pig iron plants are not finding it viable to operate as the cost of production of quality pig iron is higher than the selling price. The capacity utilisation is around 55 percent and several pig iron plants across the country have preferred to keep their plants shut. If this situation continues, we do not see any significant change in pig iron production. Improvement in capacity
Sudhin Mitter Vice-president, Marketing & Sales, Tata Metaliks
utilisation can only be seen, once pig iron producers are able to realise better prices to improve their margin, which is constantly under pressure. In the entire value chain, there is a significant contraction in the margin for the producers of intermediate products such as pig iron while on the contrary there has been a significant increase in the margin being enjoyed by the raw material suppliers and a moderate increase in the margins for the finished goods manufacturers. How do you see pig iron demand panning out in FY13? What is the pig iron market scenario in India currently? As things stand now, the basic grade pig iron produced by the primary producers are finding its way more into the market and the casting manufacturers are trying to maximise the use of basic grade pig iron. Secondary producers of pig iron, who essentially produce foundry grade pig iron meant for the foundry industry, are finding it difficult to compete with the ISPs. However those producing high grade castings necessarily need quality foundry grade pig iron and there are not many manufacturers of pig iron who are finding it economically viable to produce prime grade pig iron because of the pressure on margins. There is therefore still a demand-supply gap in prime grade pig iron used for making high end castings. This might result in upward movement of pig iron prices in the near future because of restriction in the supply side. On the whole, the demand for quality pig iron will always remain with the positive outlook of the casting industry. Further there is positive demand for SG grade pig iron required for producing ductile grade castings, especially for windmill
STEEL INSIGHTS 22 JULY 2012
interview sector, which is expected to grow 25 percent annually, as per a study by the Indian foundry industry. Also China being the largest producer in the world, is now focusing on domestic demand created by its recent $1.5-trillion investment in the infrastructure development. This temporary diversion of Chinese output has created a vacuum in the international market, which is an opportunity for Indian foundries. However, India needs to strengthen its foundry, both in terms of quantity and quality to compete with Turkey, Poland, Mexico and Russia. India’s finished steel production in FY12 was 73.41 mt. In April-May FY13 it was 12.44 mt. Taking current trends into account will India’s pig iron producers raise capacity? In the domestic context, the production capacity of pig iron is not getting utilised fully, and hence there is not much point in adding new capacity, till such time when domestic pig iron producers both in primary as well as secondary sectors are fully utilising the present capacity. What are Tata Metaliks’ current pig iron making capacity and plant locations? Are there any plans to ramp up capacity in the current or new locations in the current fiscal? We are currently focusing on Kharagpur operation, where we have a capacity to produce 3.60 lakh tons per annum. We are in the process of ramping up capacity to 4.30 lakh tons in the next one year. What is Tata Metalik’s raw material procurement strategy? From where do you procure coking coal? Our raw material procurement strategy is based on optimising raw material inventory levels by developing new raw material resources, continuously tracking low price alternatives, and by having our own coke oven plant. Presently we are sourcing coal from Australia through our stabilised linkages. What are your expectations about international coking coal prices?
to ensure consistent inflow for domestic consumption. India does not have enough coking coal mines. Keeping coking coal under the purview of the steel ministry should help in improving domestic availability of coking coal. Please give us a brief idea about your new initiative ‘green pig iron’. It has always been an endeavour of the Tata Group to keep environment issues in mind and come up with innovative products and services. As a part of the group’s legacy, we have launched Tata eFee, the world’s first branded pig iron. Our effort has been well appreciated and accepted by our customers. Encouraged by such response, presently we are working on the next version of Tata eFee, for which we have identified some vital parameters which will surely help foundry for sustainability in longer run. How do you see the pig iron market behaving internationally? Internationally pig iron prices are trending downward. There is weak demand seen across the markets. However, due to weakening of the local currency (rupee), Indian pig iron exporters’ average realisations for pig iron producers are improving. How do you see the DI pipe unit performing in FY13?
I think prices will remain mostly stable with marginal fluctuations.
There is an improvement in capacity utilisation, with a comfortable order booking position.
Some steel makers are advocating that the government should bring coking coal under the purview of the steel ministry. What is your view on this?
What is the status of the steel project in Karnataka in collaboration with Tata Steel?
The government may take stake in coking coal field abroad
We are awaiting allotment of iron ore mines from the Karnataka government.
STEEL INSIGHTS 24 JULY 2012
Chandrapur ferro alloy unit to expand production Sanjukta Ganguly
teel Authority of India Limited’s (SAIL) Chandrapur Ferro Alloy Plant (CFP) is all set to expand of its ferro alloys production capacity by about 70 percent over the existing level of 100,000 tons per annum (tpa), a company source informed Steel Insights. At present, CFP has an installed capacity of 100,000 tpa of ferro manganese. The product range of CFP includes high carbon ferro manganese, silico manganese and medium or low carbon ferro manganese. The plant is accredited with Quality Assurance Certificate ISO 9001:2008. CFP’s major production facilities include two 33 MVA submerged electric arc furnaces for the production of ferro alloys, two manganese ore sintering plants, furnace gas based power plant, G.S. Gill, ED, SAIL-CFP Chandrapur at the Bhoomi Pujan ceremony along mechanised crushing and screening system for with GM (projects), GM (works), GM (P&A), GM (MM & Mktg) and GM (F&A) ferro alloys and 1 MVA Electric Arc Furnace for the production of MC/LC ferro manganese with lime calcination and manganese ore roasting unit. “Centre for Engineering & Technology” Ranchi apart from To initiate the expansion process, a Bhoomi Pujan ceremony large number of employees of CFP. was held on June 22, 2012 by G.S. Gill, executive director of SAIL-CFP Chandrapur in the presence of GM (projects), GM Expansion initiatives (works), GM (P&A), GM (MM & Mktg) and GM (F&A). The The new furnace envisages state-of-the-art technology function was attended by representatives from renowned for various equipment. The furnace will have computer technology supplier from South Africa – Tenova Pyromet controlled operating features for optimum usage of raw and their consortium member in India Ghalsasi Smelting Pvt. materials and energy. It shall also include latest Air Pollution Ltd Pune, representative from in house consultant of SAIL Control Equipment such as Bag Filters, Gas cleaning Plants and Dry Fog Dust Suppression system. The project will Products manufactured at CFP also adopt zero waste water discharge concept and would Chemical specification Size in Product implement rainwater harvesting scheme to all the building mm Manganese Carbon Silicon Phosphorous sheds for conservation of water, according to information High made available by the company to Steel Insights. 10-150 Carbon 70-74% and 1.5% 40-100 6-8% 0.43% max CFP has several unique infrastructural facilities, which Ferro 74-78% max 12-25 includes sintering of manganese ore fines for gainful utilisation Manganese of the ore fines, furnace off-gas based power plant for energy Low efficiency and mechanized crushing and screening system for Carbon 10-150 70-74% and 1.5% 2% max 0.4% max ferro-alloys. The plant produces manganese based ferro alloys Ferro 40-100 74-78% max through 33 MVA Submerged Arc Furnaces and supplies the Manganese same mainly to the integrated steel plants of SAIL. Medium In order to meet the enhanced requirement of ferro alloys Carbon 10-150 70-74% and 1 - 3% 2% max 0.4% max Ferro 25-50 74-78% emerging from SAIL’s massive expansion plan to enhance the Manganese steel production capacity to 24 million tons from the present 10-150 level of about 13 million tons, expansion plan at CFP has also 60-65% and Silico 40-100 2% max 15-20% 0.35% max been outlined. The proposed capacity addition is the first Manganese 65% Min 12-25 phase of CFP’s expansion. STEEL INSIGHTS 26 JULY 2012
hareholders of Sesa Goa and Sterlite Industries have approved the Sesa Sterlite merger, culminating a process which began in February 2012, when Vedanta Resources, the promoter of Sesa Goa and Sterlite Industries, had approved the merger of these two companies in order to simplify the group’s holding structure and lower its debt. According to the proposed structure, the merged entity (called Sesa Sterlite) will fully take over the loss-making Vedanta Aluminium (at an enterprise value of `32,695 crore). Also, the merged entity would take over Vedanta Resources’ 38.8 percent stake in Cairn India at a nominal consideration of $1 along with the associated Cairn-acquisition debt of $5.9 billion. The deal is now subject to approvals by the high courts of Madras and Goa. While 91.7 percent of the Sesa Goa shareholders present at last week’s meeting in Goa voted for the merger, 92 percent of Sterlite Industries’ shareholders approved the deal. The latter had voted on June 21 in Tuticorin, Vedanta said in a release. Once the merger is done, Anil Agarwal-led Vedanta Resources will hold 58.3 percent stake in Sesa-Sterlite. As per the arrangement, Sterlite shareholders will get three shares of Sesa Goa for every five shares held according to the swap ratio. Cairn India, Hindustan Zinc, Balco, Vedanta Aluminium, Madras Aluminium, Talwandi Sabo Power and Australian Copper Mines will become subsidiaries of Sesa Sterlite after
the restructuring. Only Konkola copper mines of Zambia would stay out of the restructuring, according to information available with Steel Insights. The merger will lead to Vedanta’s debt burden reducing by about 61 percent to $3.8 billion (`21,850 crore). Its debt service liability will also drop to $180 million (`1,035 crore) from the current $500 million (`2,875 crore). Its total cumulative debt would still be a staggering $14 billion (`80,500 crore). The company which had first announced its plans to restructure its operations in February, is currently looking at a cost saving of `1,000 crore annually. This is second restructuring exercise being attempted by the Vedanta which has yielded results, as its first attempt in 2008 had failed due to objections raised by some minority shareholders over valuation of a group firm, Konkola Copper Mines. Sesa Goa is one of the largest producers and exporters of iron ore in the private sector in India and is on course to be in the league of top four iron ore producing companies in the World. Apart from Iron ore it also produces pig iron and metallurgical coke. On the other hand, Sterlite Industries (India) Limited is one of the largest non-ferrous metals and mining companies in India and is one of the fastest growing private sector companies. Sterlite’s principal operating companies comprise of Hindustan Zinc Limited (HZL) for its fully integrated zinc and lead operations; Sterlite Industries India Limited (Sterlite) and Copper Mines of Tasmania Pty Limited (CMT) for its copper operations in India/Australia; and Bharat Aluminium Company (BALCO), for its aluminium and alumina operations and Sterlite Energy for its commercial power generation business. Hence, the merger of Sesa Goa and Sterlite, two leading companies of the Vedanta group is undoubtedly going to be one of the most important strategic moves on the part of both the companies to consolidate its business in the country, according to experts.
STEEL INSIGHTS 28 JULY 2012
Exxonmobil launches SSP to tap Indian steel sector
Steel Insights Bureau
n a bid to tap the growing Indian steel market, Exxonmobil has launched its Steel Sector Programme (SSP) which offers a comprehensive package of lubricants and greases for the steel manufacturing plants. SSP is part of ExxonMobil’s global marketing programme for the steel sector and will help increase productivity and profitability of the Indian steelmakers, a company spokesperson said. The programme offers a comprehensive range of lubricating oils and greases supported by technical know-how and application expertise from ExxonMobil’s team of experts, she said, adding that this will be a one-stop solution to consolidate ExxonMobil’s steel sector offerings in India. “The rapid growth of the Indian economy coupled with major infrastructural development, is driving the market demand for iron and steel in India. Today, India is the fourth largest crude steel producer and the largest producer of sponge iron or DRI in the world. It is predicted that the crude steel capacity in the county is likely to be 140 million tons by 2016-
17. The steel industry, as a pillar of India’s national economy, will demand higher-quality lubricants and greases to address key industry challenges,” a company statement said. The lubricants and greases come from the stable of ExxonMobil Lubricants and Petroleum Specialties Company, a division of Exxon Mobil Corporation, a global leader in oil and gas sector. ExxonMobil is a leading marketer of finished lubricants, asphalts and specialty products, as well as the world’s largest supplier of lube basestocks. “New developments in the steel industry present more serious challenges for lubricants products,” said Paul Grives, Global Industrial Marketing Advisor, ExxonMobil. “From continuous steel casting, to steel plate rolling, to cranes - products must deliver in harsh environments like high temperatures, heavy workloads and pollution. ExxonMobil oils are designed to provide outstanding performance that exceeds industry expectations and ensures sustained reliability of equipment at peak performance.”
STEEL INSIGHTS 29 JULY 2012
Looble Along with SSP, Exxonmobile has launched its online industrial lubricant selector Looble. Looble is a user friendly, online industrial lubricant selector designed to help maintenance professionals make informed lubricant decisions for optimising equipment performance and minimizing unplanned downtime. Looble simplifies the lubricant selection process by providing targeted Mobil-branded product recommendations with performance ratings based upon users’ specific industries, applications and equipment. With just a click of the computer mouse or a touch on most Internet-capable smartphones, Looble enables users to access: ♦♦ L ubricant recommendations and application guidance based on their specific applications and operating conditions for a wide range of industries; ♦♦ O riginal Equipment Manufacturers’ recommended lubricants and schematics for numerous types of equipment makes and models; ♦♦ D etailed descriptions and five-star performance ratings for each recommended lubricant; and, ♦♦ Printable recommendation reports. Global distributor selector Exxonmobil has also launched its new online Global Distributor Selector which will help companies find distributors with expertise in their industries. Featuring the latest mapping technology and user interface, the new Global Distributor Locator can help current and future customers of Mobil™-branded lubricants connect with more than 700 authorised distributors in 85 countries. “Our commitment to our customers extends well beyond simply providing industry-leading lubricants. It also includes providing exceptional resources to help our customers maximize their productivity as well as developing tools, like our new Global Distributor Locator, that save time and deliver enhanced convenience,” said Jeffrey Biamonte, global marketing advisor, ExxonMobil Lubricants & Specialties. STEEL INSIGHTS 30 JULY 2012
SAIL, Kobe incorporate joint venture Steel Insights Bureau
tate-owned Steel Authority of India Ltd (SAIL) and Japan’s Kobe Steel have incorporated a 50:50 joint venture company for their proposed ironmaking operations in India based on the latter’s ITmk3 technology. The JV – named SAIL-Kobe Iron India – is headquartered in New Delhi. It paves the way for SAIL’s maiden JV with an overseas partner for iron/steelmaking operations in India. The JV is carrying out detailed feasibility studies for a 500,000 tons per year ITmk3 iron nuggets plant to be built at the premises of SAIL’s alloy steel works at Durgapur. The report is expected to be ready by October. The process uses iron ore fines and non-coking coal to produce a solid pig iron feedstock for electric arc furnace or oxygen converter use. The incorporation of the JV follows from an agreement the two partners signed last December when Kobe officials visited SAIL’s Delhi headquarters. At that time, Kobe expected to begin plant construction work in 2013 and commercial
operations in 2015 following completion of the study and subject to securing environmental approvals. Iron ore will come from SAIL’s captive mines in the region. Nuggets produced at Durgapur will be consumed by the two partners or sold directly into the market. SAIL expects to feed some of the nuggets into its electric arc furnaces at Durgapur and also at its Salem stainless steel works in Tamil Nadu, sources said. According to the steel secretary D.R.S. Chaudhary, the investment in the proposed facility will be around `1,500 crore. SAIL will need high grade ferruginous material as scrap substitutes (in future due to 100 percent continuous casting, scrap generation in its plants will come down significantly) for melting in EAFs and as coolants in basic oxygen furnaces, a company source informed. Details such as management and organisation structure of the JV and the price of ore procurement are yet to be finalised. SAIL and Kobe had also signed a Memorandum of Understanding (MoU) in November 2010 for setting up a 1.2 mtpa gas-based steel plant to produce steel for auto sector. Financial viability of the venture is being worked out. However, there was no official confirmation in this regard so far.
RSP modernisation reviewed Steel Insights Bureau Steel secretary D.R.S. Chaudhary has reviewed the progress of the ongoing `12,000-crore modernisation and expansion programme at the Rourkela Steel Plant of Steel Authority of India Ltd (SAIL) which would increase the plant's capacity to 4.5 million tons (mt). Being one of the oldest steel companies of the country, SAIL should utilise the opportunities to enhance its competitive advantage, a press release quoting Chaudhary issued by RSP said. Citing the examples of world class steel companies, Chaudhary advised SAIL to gear up to meet international norms in various fields. The `12,000-crore update programme will take RSP's hot metal production capacity to 4.5 mt from the existing 2 mt. As part of the modernisation programme, a state-of-the-art new plate mill will come up in RSP, besides other facilities like a new blast furnace complex which would be among the biggest in the country, a raw material handling plant, new sinter plant no. 3, 7-metre tall coke oven battery and strand slab caster in SMS-2.
STEEL INSIGHTS 31 JULY 2012
Jindal Steel to exit Bolivian project
Panel to probe RINL fire Steel Insights Bureau
Steel Insights Bureau
indal Steel Bolivia has decided to exit the El Mutún iron ore project in Bolivia, parent company Jindal Steel & Power Ltd (JSPL) said in an official letter to the Bolivian government. According to the company statement, the contract required a total investment of $2.1 billion. The main reason for ending the contract was the non-fulfilment of the contractual obligations on the part of the Bolivian government, it alleged. A lack of natural gas supply also weighed on JSPL's decision, since it was demanding 10 million cubic metres per day (MCD), while the Bolivian government was willing to commit only 2.5 MCD. The Indian company informed Bolivia it has 30 days to present a resolution on these issues, and JSPL can terminate the contract within seven days thereafter. The contract, signed in 2007, was to invest in iron ore and produce 10 million tons per year of pellets, 6 million tons per year of DRI, and eventually 1.7 million tons per year of steel. However, none of the goals were reached. In fact, the Bolivian government has fined JSPL $18 million twice, claiming it did not meet timetables for investing. However, JSPL claims it has invested the entire amount required so far of $600 million. According to JSPL, Bolivia has not signed an agreement for supply of natural gas to the company's project. It was to sign an agreement for supply of 10 million cubic metres a day (mcd) within 180 days of signing of the project contract. “The government of Bolivia is now willing to commit only 2.5 mcd of gas from 2014 onwards due to non-availability of gas in the country, whereas the company is being asked to make investments as per capacities originally envisaged under the joint venture contract,” the statement said. Jindal Steel and Power Ltd said that it has set up offices and deployed manpower soon after entering into a contract with Bolivia in 2007. It has invested more than $90 million on this project and made commitments to invest an additional $ 600 million till March 2012 for purchase of technology, machinery and other equipment and advances to vendors, it said. “There is a strong sentiment among the people of Bolivia that Jindal should stay in Bolivia and invest. After watching recent interview of our CMD Mr. Naveen Jindal on a Leading TV channel of Bolivia, 91 percent of the people surveyed wanted that the government of Bolivia should not allow JSPL to leave the country,” a company source said. As per terms of the joint venture contract, we have served our intent to terminate the contract on June 8, 2012 and the of Bolivia has 30 days’ time to resolve the issues failing which JSPL can terminate the contract within 7 days thereafter.
teel minister Beni Prasad Verma has announced the constitution of a high-level enquiry committee to investigate the incident of fire at New Oxygen Pressure Reducing Station near SMS-2 of RINL on June 13, 2012, according to a government statement. Verma, who visited the injured in hospital in Visakhapatnam, said the committee will ascertain the sequence of events and determine the cause of the fire, which occurred in the new oxygen pressure reducing station. A total of 19 persons were affected out of which 12 are from VSP, four from D’Co., two from Bluestar and one from SMS Siemag. Out of the total, 11 cases have been fatal and the remaining eight have been injured persons and are undergoing medical treatment. This is the third fire accident in less than two months and the fourth this year. The committee will investigate the incident, ascertain the sequence of events and determine the exact cause of fire, ascertain whether all the trial runs were conducted as per the requirements and proper safety protocols were followed, Verma said. It will also identify the agency/person(s) responsible for the accident and make specific recommendations, so that such incidents do not occur, he added. The enquiry committee will comprise Dr S.R. Jain, exchairman, SAIL, K.K. Mehrotra, Chairman, MECON and HOD of Mechanical Engineering Department, IIT, Delhi/Kanpur Safety audits will be carried out by the government to examine all the safety aspects and suggest corrective measures. The government will also carry out an audit to examine all the safety aspects and suggest corrective measures. Apart from the normal compensation of around `20 to 30 lakh, an ex-gratia of `20 lakh will be paid to the next of kin of the deceased.
RINL raises prices in June Steel Insights Bureau RINL has increased prices of rounds, wire rods and pig iron in June, according to the latest notification by the company. Ex - Vizag prices `/ ton Billet 125x125 mm Channel 200x75 mm Rebar 8mm Round 20.64 mm Round 40mm Wire rod 7 mm Wire rod 8 mm Pig Iron
Grade IS 2830 IS2062 Gr.A IS1786 Fe500D 55Si7 SAE1018 PC115 EQ LSB
June 2012 40250 47900 50050 46750 44350 47500 48450 28090
May 2012 40250 47900 50050 46250 44350 47000 48150 27753
Increase 0 0 0 500 0 500 300 337
The above prices are incl. ED/cess and excl. VAT/CST, etc.
STEEL INSIGHTS 32 JULY 2012
Impex Metal plans three new units Steel Insights Bureau
mpex Metal and Ferro Alloys, a SK Patni Group company, is planning to set up two ferro alloy plants, one pellet plant and also wants to expand its existing steel production capacity at an investment of over `1,000 crore. The director of Rohit Ferro Tech Ltd, another group company of SK Patni Group, Rakesh Agarwal, told Steel Insights that the company plans to set up a new medium carbon ferro manganese plant and one low carbon silico manganese plants via furnace route at Bishnupur in West Bengal. Impex Metal already has a ferro alloys plant in Bishnupur where it operates four furnaces of 9 MVA. “We will also set up a pellet plant of 0.35 million tons per annum (mtpa) capacity in Orissa and double the existing stainless steel making capacity at Bishnupur plant to 0.2 mtpa from 0.1 mtpa at present,” Agarwal said. Giving details of the proposed pellet plant, the director said, “We have already selected a Chinese technology. Hearing for pollution clearance has already been done and we will start the project on getting environmental clearance.” Vizag plant operational
“We have been supplying ferro silicon and ferro chrome to almost all the leading steel makers of the world during the last few months. They are satisfied with us and now they are assessing annual contracts with us,” he said. “We expect to sign the contracts from January 2013,” he said, adding that such contracts will significantly reduce their market risk. “We are exporting around 22,000 tons of ferro alloys per month and this is a tough job,” he added. Agarwal said the company is currently selling 40 percent of its total production via quarterly contracts and the balance 60 percent in spot deals, but they want to reverse the ratio to supply up to 60 percent of total production by long term contracts. Rohit Ferro is India’s largest ferro alloy maker with a capacity of 300 MVA and produces around 25,000 tons of various alloys that makes it one of the largest producers in India. “We are the only company in India that produces all bulk ferro alloys. No one else in India does this,” Agarwal said.
Meanwhile, another group company Rohit Ferro Tech Ltd, which is India’s leading ferro alloys maker, has commenced operation at its Ferro Silicon (FeSi) plant in Vizag after getting power connection, but the production could not be streamlined due to inadequate availability of power. “Both our furnaces are on and are currently on heating. However, since power is not available in adequate quantity, we are unable to produce at full capacity,” Rohit Ferro’s director Rakesh Agarwal said. Oman project Meanwhile, Agarwal said that the company has decided to go slow on setting up a Ferro Alloys plant in Oman as the overall market situation is not that favourable and they are waiting for an improvement in market conditions. Earlier in April this year, Agarwal had said that they will set up in Oman a ferro alloys plant with four furnaces of 33 MVA each, a power plant and a steel plant at a total investment of about `3,000 crore. The company had planned to initially set up two furnaces of 33 MVAs and then a power plant and finally a steel plant in joint venture with Sohar Bank. Long term supply contracts Agarwal said the company aims to enter into long term contracts with leading steel makers for supply of ferro chrome and silico manganese from 2013.
STEEL INSIGHTS 33 JULY 2012
Car sales growth dips to 2.8% in May Steel Insights Bureau
hile the April numbers had dashed the revival hope for the new financial year (2012-13), the car sales figures for May have put to rest such aspirations, at least for the time being. After a 3.4 percent rise in sales in April 2012, car sales growth in India has dropped further to 2.8 percent in May. If the macroeconomic scenario does not show significant improvement, especially in Europe, industry sources anticipate a similar or marginal growth in coming months. According to data released by the Society of Indian Automobile Manufacturers (SIAM), automakers sold 163,229 cars in the domestic market in May 2012. Sales of trucks and buses rose 9.1 percent in May to 62,025 vehicles. Motorcycle sales rose 7.2 percent to 887,634 vehicles. The domestic sales of vehicles, however, reported better numbers. The overall growth in domestic sales during AprilMay 2012 was 10.26 percent over the same period last year. Passenger vehicles segment grew by 8.42 percent during April-May 2012 over the same period last year. Sales of passenger cars were up by 3.10 percent, utility vehicles by 51.05 percent and vans by (-5.31) percent during April-May 2012 as compared to the same period last year. The overall commercial vehicles segment registered a growth of 6.81 percent in April-May 2012 as compared to the same period last year. While medium & heavy commercial vehicles (M&HCVs) registered negative growth at (-11.07) percent, light commercial vehicles grew at 20.18 percent. The data showed that three wheeler sales recorded degrowth at (-0.88) percent in April-May 2012. Passenger carriers grew by 3.82 percent during April-May 2012 and goods carriers registered negative growth at (-15.77) percent during this period. Two wheelers registered a double digit growth of 11.17 percent during April-May 2012. Mopeds, motorcycles and scooters grew by 8.04 percent, 6.89 percent and 32.35 percent respectively in the period of April-May 2012. Production & exports Meanwhile, the cumulative production data for April-May 2012 shows a growth of 8.15 percent over the same period last year. The industry produced 1,783,384 vehicles in May 2012
Car sales growth in 2012 (%)
25 20 15 10 5 0
as against 1,613,872 in May 2011. In April 2012, the industry recorded a production growth of 5.81 percent over the same period last year. The industry produced 1,721,627 vehicles in April 2012 as against 1,627,039 in April 2011. During April-May 2012, the dismal economic scenario in Europe and some other developed countries had an adverse impact on the Indian market. Overall automobile exports from India registered a marginal growth rate of 2.87 percent. Passenger vehicles and two wheelers grew by 9.54 percent and 8.65 percent respectively during April–May 2012. Commercial vehicles and three wheelers recorded de-growth at (-10.59) percent (-30.37) percent respectively. In the month of April 2012, overall automobile exports registered a marginal growth rate of 1.29 percent. Passenger Vehicles registered negative growth at (-10.47) percent in the month. SIAM’s suggestions Concerned at the dismal growth performance, SIAM has asked the government to reduce the differential between petrol and diesel prices. This difference has increased significantly in the recent past and created a huge imbalance in car demand pattern after the latest petrol price hike. S. Sandilya, president, SIAM, said that in the Union Budget 2012, excise duties on all vehicles, including diesel cars has been hiked by as much as 2 percent to 5 percent, with the maximum hike of 5 percent being in the case of cars which are more of than 1500 cc engine capacity, including all large diesel cars. This has taken up the total excise burden on mid-sized and large cars to 27 percent. Furthermore, as diesel cars are more expensive by up to Rs 1 lakh, they contribute much higher revenue to government as compared to petrol cars. Therefore, there is no case for a further hike in excise duty on diesel cars as is being suggested once again by certain quarters. This is the highest excise duty on any state-of-the-art, manufactured engineering product, Sandilya added.
STEEL INSIGHTS 36 JULY 2012
Howrah cluster foundry owners seek to go the China way Steel Insights Bureau
orporates may be confused looking at the present global economic turmoil and India may be downgraded by rating agencies, but for small entrepreneurs, it is an opportunity to make a turnaround. A visit to China by the foundry owners of Howrah cluster in eastern India was part of a plan to replace age-old practices to regain customer confidence and increase market share through long term measures. A team of 19 foundry owners under the leadership of Raj Kejriwal, managing director of Kiswok Industries Pvt Ltd and supported by A.K. Ray, national treasurer,The Institute of Indian Foundrymen, visited Chinese foundries to explore areas of improvement and work out an action plan to implement the learnings. The visit incidentally acted as an eye-opener and with this learning they have plans to improve their work processes, a key area which the international buyers are looking at to enroll new vendors. Incidentally, eastern region has only 12 percent of the total 4,600 organised foundry manufacturers in India and recent experience have shown customers were moving out from eastern region and getting quality castings from far-off places. The eastern region foundry owners have observed that customers buying castings have become more demanding and they were rejecting vendors who do not have the right processes in place to manufacture quality products. New customers like Volvo, Mercedes Benz, for instance, are only approving vendors who actually follow good manufacturing processes and this is gaining importance over the product itself. China incidentally is the market leader in casting production. As per data in 2009, China, with its 26,000 foundries, exports 35.5 million tons (mt) of casting per annum. Comparatively nine other leading countries producing casting has a combined capacity to produce 35.11 mt of casting. Indian production is much smaller in scale as with 4600 foundries in the organised sector, India manages to produce only 7.4 mt of casting per annum. After their China visit, the team of 19 foundry owners decided to bring about a change in management style, labour relation activity, product mix decision, IT culture and above all environmental friendly work culture to make a difference. Learning from China Productivity even in small Chinese foundries was found to much higher than a medium sized foundry of the Howrah belt. The visiting team found a small foundry in China with 50 people producing as high as 500 tons of castings per month. In contrast, a medium sized foundry in Howrah with 450 people produces 450 tons of castings per month. The difference, according to the visiting team, was facilitated by the use of
sand plant, continuous mixture and no bake process. Also government involvement, willingness of the owner to invest in modern equipment both in production and IT fields, disciplined work culture and above all, a centralised marketing and R&D pool accessible to the small foundry owners, helped to enhance productivity. All foundry owners in China were willing to invest on improving quality and this is evident from the large scale usage of CNC machines unlike in the Howrah belt. Discipline also came from their uniform dress code which not only the workers, but also the management team followed. The visiting team learnt that having more greenery surrounding the foundry was mandated by the government. Concrete floors at the foundries unlike sand floors at Howrah helped to keep the shop floor neat and clean. Added to this, cheap power, better coke, use of air filter, eco-friendly resins also helped to create better environment standards. With this learning, the team decided to become more process oriented, invest in emerging technology both in production and IT space coming back in order to increase their customer confidence. Focus on long term return Investment in best-in-class practices and technology without expecting early return was thought to be the key challenge to take the China learning forward. Common R&D, learning centres and marketing wings were the other areas which could be explored, as per the visiting team. Even buying after aggregating the demand sounded a better solution. With this concept, costs which are higher for individual companies to bear can be shared. mjunction initiative Sensing an opportunity to develop a bidder base, a team from mjunction services limited recently conducted a bidders’ meet with 20 foundry owners and executives at the Jalan Industrial Complex in Howrah. The effort was to build a relationship with vendors and spread awareness among them regarding the buyjunction platform, the procurement division of mjunction services limited. Most participants were foundry owners in the Howrah belt producing either molten metal or finished CI casting or machined products and eager to move up the value chain. If they enroll as bidders they can participate in the bidding of tenders floated by steel mills through buyjunction platform to procure castings. Following the meeting, about 18 foundry owners expressed interest for enlistment as bidders for participating in tenders floated by steel mills.
STEEL INSIGHTS 37 JULY 2012
Posco gives up on ore export, may kick-start plant in H2
Steel Insights Bureau
fter a long drawn battle, Posco India seems to have come to terms with the ground realities of the Odisha project. After hanging on to its terms of doing business for pretty long, the company has recently given up on the controversial provision of iron ore exports from the country. This strategic retreat, however, has opened so-far-closed doors for the Korean steel major and may enable it to finally start the project work by the end of 2012. “We will sign a Memorandum of Understanding (MoU) very soon with Posco-South Korea and Posco-India for initial 8 million tons per annum (mtpa) capacity steel mill near Paradip as the company has agreed for a new swapping clause doing away with the earlier export provision,” Odisha mines minister Raghunath Mohanty has been recently quoted as saying. Under the new clause agreed by the company, Posco India would give up on its claim for ore exports and will be allowed to swap up to 30 percent of the required ore only within the country. The swapping will be made through the Orissa Mining Corporation (OMC), the minister said. Earlier, the MoU signed on June 22, 2005 (expired in 2011) had the provision that the company could export as much as 30 percent of iron ore from the state and would have to import a similar quantity.
This export clause in the previous agreement caused inordinate delay in the renewal of the pact. Former environment minister Jairam Ramesh had advocated that the Odisha government negotiate the new agreement in such a way that the export clause is completely avoided. Also, the opposition parties in Odisha were opposed to the idea. As the company has now decided to sacrifice the clause, the Odisha government is in the final stages of signing a new agreement with South Korea’s Posco and its Indian unit. The new agreement will replace the now lapsed MoU. As of July 4, the tripartite pact is awaiting the nod of Chief Minister Naveen Patnaik. With the major hurdle solved, industry sources believe the remaining impediments would be sorted out in due course. Company officials, however, could not be contacted for comments on the development. Meanwhile, the company has decided to come up with the project in phases. Initially, a smaller plant would be set up with a capacity of 8 mtpa. This may be expanded later on to reach the 12 mtpa capacity planned initially. Land glitch While the project continues to suffer from local resistances, sources said the state government may now take increased interest in facilitating land transfer. The company required around 4,000 acres of land for the full size project. A reduced capacity (8 mtpa) would also cut down on the requirement to 2,700 acres. Of this, the government is trying to expedite 1,500 acres of land shortly. Another 700 acres would be acquired soon. If these efforts fructify, it would end a seven-year long tussle between the company, government and the locals. No reaction from the local populace was immediately available to the latest development. However, Posco is believed to have agreed to employ local people in the proposed steelworks and to establish downstream industries near the plant site. Maharashtra plant Meanwhile, Posco has completed the construction of its first Indian plant in the state of Maharashtra last month. The new steel mill will have a capacity to produce 450,000 tons of hot galvanized steel plate per year for cars and household goods This will benefit the large auto plants set up by various Indian and overseas automobiles manufacturers. According to media reports, the company plans to open a 300,000-ton electric steel plate facility by October 2013 and a 1.8 mt cold-rolled mill by June 2014 in the state.
STEEL INSIGHTS 38 JULY 2012
Iron ore imports may move up as output drop continues Steel Insights Bureau
ngoing restrictions on iron ore production in various Indian states, following investigations into alleged illegal mining, crimped the country’s ore output by more than 18 percent year-on-year last fiscal year. India produced 169.7 million tons (mt) of iron ore during the April 2011-March 2012 year, down from nearly 208 mt the previous year, according to the latest figures from the Indian Bureau of Mines. Not surprisingly, the largest decline in ore production was seen in Karnataka where all producers, barring state-owned NMDC, have had to suspend mining operations since last August. Karnataka produced around 13.3 mt of ore in 2011-12 fiscal, down 65 percent from 37.9 mt the previous year. Odisha (formerly Orissa) also saw ore output fall 12 percent year-on-year to about 67.2 mt. Investigations by the state government, restrictions on ore transport by trucks in the state, high rail freight rates for ore exports, and falling international prices led local miners to scale down production. Ore output in southwest India’s Goa state fell some 6 percent year-on-year to 34.4 mt. Declining ore output in India, once the world’s third largest exporter, has resulted in local steelmakers resorting to imports to feed their mills. There is a domestic demand of around 90 mt of iron ore. The low output is pinching local industry. The rates have doubled within a year to `7,000 ton. It has also taken a toll on small and medium level sponge iron producers, who have either temporarily shut down or are running at minimal capacity. Lack of adequate ore supplies have also led to many direct reduced iron (DRI) producers shutting their plants. India is the world’s largest DRI producer with an output of 21.22 mt during April-December 2011, compared to 26.71 mt
during the 2010-11 fiscal year, according to the steel ministry’s latest annual report. SA to surpass India in exports Meanwhile, South Africa is poised to overtake India this year as the world’s third largest exporter of iron ore, Morgan Stanley said after cutting estimates for seaborne supply from the South Asian nation. Indian shipments of the steelmaking raw material by sea will be 41 mt, 40 percent less than the 68 mt predicted in March. The investment bank said that South African seaborne exports will come to 53 mt, 4 mt more than its prior forecast. Morgan Stanley figures show that India has ranked third among ironore exporters after world leader Australia and Brazil since at least 2004. According to the data, Indian shipments are declining after higher export duties were introduced in December. Exports from the country peaked at 114 mt in 2009. Canadian exports of the ore by sea will come to 36 mt, more than double the 15 mt estimate made three months ago, the report showed. Total seaborne supply of iron ore this year was projected at 1.02 billion tons by Morgan Stanley. Will India be an importer in long run? Globally, iron ore demand is strong but supply is responding as well, experts say. The supply constraints of 2011 are over and since the second half of last year slowing economic growth and increased supply availability have put pressure on prices. According to mining consultancy the Raw Materials Group (RMG) iron ore supply and demand are likely to be balanced in two years, slightly later than previously expected, as new projects are constrained by political risk and difficult logistics. For example, Rio, the second-largest miner of iron ore after Vale, is continuing to invest heavily in iron ore, which it sees as one of the most profitable commodities in its portfolio as prices remain historically high although lower than a peak hit in 2011. Rio said recently week it will spend $3.7 billion to increase iron ore output in Australia by a further 25 percent to 353 mt a year by 2015. It is expected there will be 700 mt of supply opportunity for producers to actually meet demand over the next seven to eight years. There is also a feeling among industry stalwarts and experts that India, one of the largest iron ore exporters, could become a large importer as domestic steel production grew. RMG says Indian steel output could grow to about 110 mt in 2020 from 72 mt in 2011 while its iron ore demand could grow to 175 mt in 2020 from 142 mt in 2009.
STEEL INSIGHTS 39 JULY 2012
Ferro alloy prices to be under pressure in Q3 Steel Insights Bureau
n expected low demand from Europe and South East Asian countries is likely to keep ferro alloys prices under pressure during the third quarter (JulySeptember) of 2012, an official of a leading ferro alloys maker and exporter of India said. “Overall market is weak at present and the trend is likely to be extended in Q3 as well as demand is low due to summer vacation in Europe, but the situation will definitely improve in Q4 (October-December),” the official said. “The price and demand levels in Q3 are expected to be lower than Q2 even as rupee has appreciated by around `2 to a US Dollar as buying from European and Japanese steel mills are unlikely to resume soon,” the official added. He, however, felt that with stock of ferro alloys at low levels with most of the European steel mills, it is expected that buying will resume once the officials are back from their summer holidays. As stocks with steel mills are low, the official expect that this will prompt the mills to start buying for fourth quarter in August and this will lead to a better demand situation for the quarter.
BHP yet to announce Aug manganese ore price
Indicative price trend of various ferro alloy types Name of Alloy
Price as on Jul 2, 2012
Apr 19, 2012
Dec 15, 2011
Silico Manganes (60-14)
Silico Manganese (65)
Ferro Manganese (70)
Ferro Manganese (75)
Ferro Chrome (60)
Ferro Silicon (70 %)
Source: Insights Research
Explaining the rationale behind his optimism about the fourth quarter, the official said steel plants in Europe are operating at slightly better capacity utilisation of around 70 percent on continued good demand from automotive demand. He, however, felt that demand from Japan and China is not on expected lines at present. “The demand from South East Asia is a little dull compared with Q2 (April-June), which should not have been. I presume this is because people there are planning to go for summer holidays,” the official added. However, he expects that from end-August, demand for ferro alloys will be seen as buying for Q4 will start after SE Asian and European buyers come back from their summer vacation. Q2 price movement
Steel Insights Bureau The world’s leading miner, BHP Billiton, has not yet declared the sale price of its manganese ore for the month of August, but is likely to do it soon, an official of a leading Indian ferro alloy maker told Steel Insights. “BHP had kept July prices of manganese ore (46 percent) unchanged at June level of $5.35 DMTU cif, but has not yet announced August prices. It will most probably do so during the next few days,” the official sid. The miner is expected to start its Tempco manganese ore mine in Australia in July and it is expected that the company would be under pressure to cut prices considering not so encouraging demand of ore from alloy makers, Steel Insights understands. “Manangese ore orice prices have not come down in recent time, but the prices of alloys are down significantly. In fact, prices of all raw materials have gone up in recent weeks, but alloys prices are down. Despite new production coming in and not so encouraging demand, BHP is unlikely to fix a lower price for August,” the official felt. “If manganese ore prices come down, the overall sentiment will turn further weak and in such a situation it is better that prices remain unchanged,” said another official.
Ferro alloy prices have fallen sharply during the first quarter (April-June) of 2012-13 on weak demand from Europe and South East Asia and are expected to remain soft with downward bias during the second quarter (July-September), industry experts believe. While prices of most of the ferro alloys have softened during the quarter on an average of 4-7 percent, the price of ferro silicon fell by more than 10 percent on sharp reduction in demand from Europe and that of ferro chrome by more than 9 percent on low Chinese demand, an exporter said. On one hand the prices of ferro alloys have softened, and on the other, the domestic price of chrome ore has remained unchanged. The price fixed by Odisha Mineral Corporation (OMC) for July-September quarter was unchanged at AprilJune quarter level of `11,000 per ton. Meanwhile, the price of imported chrome ore softened a bit to $260 per ton for 40-44 grade and that of 40-42 grade to $240 per ton fob as on July 2, 2012 compared with a price of $275 and $265 per ton for respective grade as on April 19, 2012. Despite the softness witnessed in imported chrome ore, Indian ferro alloy makers have not benefited much because of a depreciation in rupee value compared with US Dollar which offset the benefit of fall in import prices.
STEEL INSIGHTS 40 JULY 2012
Ferro alloy maker calls for cancellation of OMC mining leases Steel Insights Bureau
number of ferro alloy makers who do not have captive chrome ore mines have demanded immediate cancellation of mining leases held by Odisha Mining Corporation (OMC), alleging that the miner is deliberately producing less ore so that it can command higher prices. The ferro alloy makers also demanded a government directive to fix the prices of chrome ore to be sold by OMC. However, industry experts, contacted by Steel Insights, said this is not a new demand and it has been a continuing issue between ferro alloy makers and chrome ore miners. While Steel Insights could not get any comments from OMC, sources said, “OMC says that ferro alloy makers do not pay higher prices for ore when prices of their produce rises in the market and so they do not have any ground to allege that OMC is charging higher price at the cost of alloy makers.” Meanwhile, an official of a leading ferro alloys maker said, “OMC has at present 12 chromite mining leases, but it is operating only one mine citing various reasons. These unoperated mines should be taken away from OMC and given to those who need it or should be auctioned. Not only is OMC not starting production from all its mines, it is also charging extremely high prices for chrome ore from the consumers.” The ferro alloys makers also felt that the government might consider issuing a directive under which OMC can sell chrome ore only at cost plus basis. Meanwhile, some ferro alloy makers are considering taking up the matter with Competition Commission of India (CCI), which has recently issued an order asking 11 cement makers to cough up a penalty of around `6300 crore for forming a cartel to artificially keep cement prices high. e-auction price cancelled Meanwhile, OMC is believed to have cancelled the prices of chrome ore that was discovered in e-auction and has decided to roll over the prices for second quarter (July-September) of 2012-13, an official of a ferro alloy maker said. “The prices arrived in the auction held on June 22 was almost 20 percent lower than the fixed price of Q1 (AprilJune), but OMC has cancelled these prices,” the official said. “This means that OMC had pre-determined price and having failed to derive those levels in the auctions, they have cancelled the prices. This also shows their monopolistic attitude, which is killing the ferro alloys makers who do not have captive chrome ore mines,” the official alleged. “Even as OMC has rolled over the prices announced for Q1 to Q2 also, effectively it is a 10 percent hike for us because the
moisture content in chrome ore goes up during the monsoon,” he added. Industry sources said OMC had been following this practice of cancelling the prices arrived at e-auction for pretty long period citing among others low prices discovered in the auctions. The sources also said OMC could not earlier decide how to arrive at a fair price for chrome ore, but ultimately decided to follow the practice of e-auction which is also followed by companies like Coal India Ltd (CIL) for sale of coal to nonlinked consumers and also by NMDC for sale of iron ore. Incidentally, of the eight to nine major producers of ferro alloys in India, four – Tata Steel, IMFA, FACOR Alloys and Balasore Alloys – have their own captive chrome ore mines, but other leading makers like Rohit Ferro, Vasavi, Andhra Ferro, Navbharat , Chronimet etc do not have mines. Earlier on May 25, OMC had informed through a notice that henceforth it will sell chrome ore and chrome concentrate only through e-auction and only to those buyers who will participate and succeed in the e-auction. The transition to e-auction route was expected to bring in better price discovery. OMC had reserved 70 percent of the chrome ore to be sold through the e-auction for units in Odisha and the balance 30 percent for buyers outside Odisha. The units established and made operational/functional on or before December 31, 2009 were eligible for participation in the auction for chrome ore. However, for sale of Chrome concentrate, there was no cut-off date and no fixed quantity specifically earmarked for Odisha based units. OMC had been selling friable chrome ore in the domestic market on quarterly fixed prices that used to be approved after getting bids from buyers. OMC approved prices for friable chrome ore for Q1 S No
Grade in Cr2o3
54% & above
46 - 47.99%
44 - 45.99%
42 - 43.99%
40 - 41.99%
* The prices are including royalty, but excluding taxes, cess and duties Source: Insights Research
STEEL INSIGHTS 41 JULY 2012
Coking coal likely to soften further Steel Insights Bureau
ndian steel companies show trends of increasing coking coal imports as better supplies have helped ease prices. The steel makers want to sign contracts quickly at prevailing rates, expecting future price surge, said analysts and traders. In international markets, coking coal prices have come down by $10-$15 per ton to $220 per ton as supplies from Australia, the biggest producer, improved recently after miners there have restarted operation after sorting out labour strike and other problems. During April and May, Indian ports received coking coal cargo of about 4.8 million tons (mt), 15 percent lower than 5.7 mt imported in the previous comparable period. However, sources said, the imports went up in May from April, soon after the international prices slipped. There were reports that SAIL’s imports in May was at 97,000 tons up from 37,000 tons in April. Similarly, Nilachal Ispat, which had ordered one vessel of coking coal in April, bought two vessels of Australian coking coal in May, reports said. India imports about 30 mt coking coal every year, mainly from Australia, Indonesia and recently, from South Africa to meet the demand of its ever-rising steel industry and to feed the limited demand seen in power sector. Several industry bodies have forecast that 2012-13 imports would top 35 mt on better demand expected in the October-December quarter. Some analysts however argued that Indian importers did not really benefit by the price decline of coking coal as rupee fall made the dollar costlier. Rio ships first consignment Global miner Rio Tinto has started exporting hard coking coal from the Benga Mine in Mozambique's Moatize basin with a 34,000 mt cargo bound for an Indian steel mill from the port of Beira. The Benga mine is a joint venture with Tata Steel, which holds a 35 percent stake and offtake rights, with Rio Tinto acquiring the remaining majority stake through its takeover of Riversdale Mining last year. It had previously timetabled a kickoff of shipments by the end of the first half of 2012. Rio Tinto is working with the government of Mozambique to secure "development of comprehensive infrastructure for
efficient transport of coal from mine to port, which is a priority for the further development of the region," Rio Tinto Energy chief executive Doug Ritchie said in a company statement. Further details on transportation plans were not included. A March company document stated first coal exports would be made by the existing Sena rail line, with exports of coking coal at a 1 mt per year rate in 2012 coupled with trucking of thermal coal. Shipments would then increase to 3 mt per year, rising to 20 mt per year, as barging on the Zambeze is used from 2015. Expansion of existing rail and port corridors, and greenfield rail and port projects with shared access is to further boost capacity. Rio Tinto has an objective to reach 25 mt/year of coking coal exports by 2020 from stage 2 output increases at Benga and startup being considered at its nearby 100 percent-owned Zambeze coal project. Outlook bearish A more bearish outlook for premium low-vol coking coal is to be expected with price projections revised downward by 10 percent to $213 per ton fob Australia for 2013 and 5 percent to $205 per ton fob for 2014 due to supply growing faster than demand, according to analysts. This compares with current spot prices of $222.50 per ton fob. Demand will fall in the next two years, with global steel mills growing at a more moderate pace than expected. The exceptions were China and India which would continue to support global coking coal demand due to limited domestic availability, analysts said. China's steel industry, in particular, was more resilient than rest of the world with output at the end of 2012 expected to be some 2-4 percent higher than in 2011. Lower price expectations were based on coking coal supply, which was growing faster than demand. The medium- term supply growth should be dominated by Australia, Mongolia, Mozambique and China's Shanxi province. Analysts forecast for the price in the fourth quarter at around $215-220 per ton fob Australia. Much hinged on the BMA strike situation.
STEEL INSIGHTS 42 JULY 2012
Vietnam to host show for manufacturing industries Steel Insights Bureau
s Vietnam emerges as one of the leading destinations for foreign investors including Japan, the leader in automotive and electronics appliances, as well as many other countries from Europe and the US, an upcoming event, “METALEX Vietnam – NEPCON Vietnam 2012”, will provide an opportunity for manufacturing and supporting industries to showcase themselves. The event will be held during October 4 to 6 at the Saigon Exhibition & Convention Center (SECC) at Ho Chi Minh City of Vietnam, as per an official communication. The continued foreign direct investment in Vietnam is proof that the manufacturing and supporting industries here not only have a bright future but also play vital roles in the well-being of the economy, and thus the government has also put in a lot of effort to develop the sector, the communication said. The different shows that will be held during the three-day event are “The 5th Exhibition on Supporting Industries in HCMC”, “METALEX Vietnam,” the sixth edition of Vietnam’s Most Comprehensive International Machine Tool and Metalworking Technology Trade Exhibition and “NEPCON Vietnam,” the fifth edition of Vietnam’s only exhibition on Assembly, Measurement and Testing Technologies for Electronics Manufacturing. The event will be held with the primary objective of upgrading productivity, reducing costs and increasing profits in developing Vietnam’s supporting industry. The synergy between the manufacturing machinery and technology show and the event that featured Japanese buyers and Vietnamese sellers of industrial parts in the previous years, has proved to be a success formula that created a highly comprehensive event that drew in 11,410 industrialists from across Vietnam and many other countries to meet the exhibitors. As per the communication, both METALEX Vietnam and NEPCON Vietnam are making every effort to make the event useful for Vietnam’s manufacturing and supporting industries. METALEX Vietnam will strive to maintain its position as the most comprehensive machine tool and metalworking technology event with 500 leading brands from 25 countries. NEPCON Vietnam, on the other hand, will be the only exhibition in Vietnam on assembly, measurement and testing technologies for electronics manufacturing with 200 brands from 25 countries. The shows will also feature quality technologies in international pavilions from countries such as Singapore and Thailand. The visitors will also gain new knowledge and manufacturing trends in seminars and
technology presentations while expanding their business networks with the assistance of Business Matchmaking and Agent Wanted services. In addition, the visitors who are looking for industrial parts will find what they are looking for at the fifth exhibition on supporting industries in Ho Chi Minh City. “I personally believe in the growth potential of the supporting industries and how much their development will foster Vietnam’s manufacturing sector and economy in general. In 2015, all tariffs among ASEAN countries will be abolished. Vietnamese supporting industries will have more opportunities for development. In the short term, Vietnam will give priority to manufacturing high-quality moulds, auto parts, motorcycle parts, electronic appliances, oil and gas equipment, steel products, ship components, and plastic products. The country will integrate more deeply into regional and global supply chains,” one of the leading organisers of the event said. Managing director of Japan External Trade Organization (JETRO), Ho Chi Minh Office, Yoshida Sakae, said that JETRO in HCMC has been working towards trade and investment development between Japan and Vietnam for a long time. JETRO’s major targets are to support Japan’s direct investment in Vietnam, promote Vietnam and Japan trade relations and support development of market economy in Vietnam. Around 1,200 Japanese companies operate in Vietnam, half of them in manufacturing, and they need locally sourced feedstock and parts to reduce costs. For foreign companies in the manufacturing industry, they need raw material, parts and subcomponents to make or assemble their final products. So they need various kinds of suppliers of raw material, subcomponents and services. Director of The Investment & Trade Promotion Centre of Ho Chi Minh City, Pho Nam Phuong, said that: “The support industries exhibition, to feature around 100 Japanese and domestic companies mainly in the automobile, motorcycle, electronics and some other industries, is aimed at helping raise Vietnamese content in manufactured products. Considering the current economic challenge, a quality international exhibition is a great and cost effective investment tool for industrialists and manufacturers. Sellers use the exhibition as a tool to maintain brand awareness, market expansion, and entry into the desired target groups in a direct manner. Buyers visit the exhibition to see the machinery and technologies from all over the world which will give them ideas to develop and improve their capability and competitiveness. Over three days of the show, more than 10,000 visitors are expected.”
STEEL INSIGHTS 43 JULY 2012
Thermographic studies on non-recovery coke ovens
amage of metallic parts of a heat recovery –non recovery type coke oven plant continues to be its most endemic problem compared to conventional recovery type ovens wherein door body and door liners have much longer life. Different plants have been trying different methods for achieving better performance of the metallic parts like upper door, lower door, bridge pipe, headers etc. and have achieved various degrees of success in their respective units. The present study involves thermographic measurements and studies of various metallic parts and analyses based on the study.
Description & preparation The study has been conducted in a plant having eight batteries with 12 ovens each. The plant produces about 1200 mt of coke per day for use in blast furnace, the undersize being diverted to sinter plant. The plant was operated on rated capacity achieving complete carbonisation and the temperatures of different zones were measured with a thermo vision camera. The author with his team has been struggling hard to contain the damages of these vital metallic parts and has achieved considerable amount of success in controlling the damages and also keeping the plant at its peak performance level.
Upper & Lower Doors
Upper & Lower door – Oven no: 59 Pusher side
Upper & lower door oven no -51 . Pusher side
STEEL INSIGHTS 44 JULY 2012
Case Study Upper & Lower Doors
Upper & lower door oven no -51. Coke side
We have shown here two sets of doors of oven no 59 and oven no. 51. It is necessary to understand that the upper though removable is not generally disturbed during normal charging–pushing operation of the ovens. On the contrary, the lower door is repeatedly opened and closed during every charge-push operation. It is also necessary to understand that the upper door is covering the free space, which is the main combustion zone of the oven and it is the hottest area inside the oven. Both thermo graphic diagrams are indicating higher skin temperature for the upper door and lower skin temperature for the lower door which covers the coal-cake area. However in all the cases the junction line between the upper and lower door displays highest temperature because there is a distinct slit gap, which is sealed by ceramic blanket. It has been categorically observed that even though the upper oven doors are consistently subjected to very severe thermal conditions compared to the lower door thermal conditions, the type of insulation is more or less similar for both upper and lower doors, which definitely indicates a basic deficiency in the selection of insulating material for the two different conditions. It is found that the skin temperatures of
the upper doors are ranging between 200ºC - 375ºC. The same for lower doors are ranging from 100ºC -200ºC. The damage has been found to initiate in the lower collar of the upper door where the temperature have been found to be the highest. There have been cases where the lower edges of the upper door have melted and the molten metal has tricked down to the lower door damaging the insulation as well as the upper edges and ribs of the lower door body in proximity of the upper door. One vital factor that governs the thermal regime of the free space is the air ingress in the region. Initially it is necessary to introduce air for initiating combustion. As the process of carbonisation proceeds air intake has to be slowly but steadily reduced to a point of zero intake on completion of the carbonisation process. This condition is often very difficult to achieve as the air regulation valves are manually operated and the sealing in between the two door segments are not always perfect. More over the carbonisation cycle time being too long (62-68 hours), exposure of the vulnerable regions to the thermal vagaries are more than usual creating havoc to the metal parts as well as insulations.
Coke side bridge pipe of oven no. 50
STEEL INSIGHTS 45 JULY 2012
Pusher side Bridge pipe of oven no. 71
It can therefore be concluded that the upper door insulation material has to be superior enough to take care of the thermal severity to which this zone is subjected. Another pertinent point is to save the bottom collar of the upper door from melting down. In our plant we have used some fabricated doors without the bottom collar. This has definitely given some degree of success. But problem still requires further study and remedial action to root it out altogether. Bridge pipe Bridge pipes are refractory lined metallic attachments for transferring hot flue gas exit the oven via sole flue and uptakes to the Branch headers which ultimately join the common header carrying the flue gas to the waste heat boiler system and chimney. Bridge pipes are installed on oven top in between arches, one end connected to the oven refractory wall uptake and the other end is connected to the Branch header through a flange and a turn plate or sliding gate valve for regulation of gas flow. Here we have shown the thermo graphic view of bridge pipe of oven no. 50 coke side. The hottest skin temperature of 190ºC has been indicated near the
flange connecting the piece to the branch header. The skin temperatures of the outer shell of the bridge pipe have been found to range between 80ºC and 200ºc. In fact the higher temperatures indicate partial failure of the internal insulation. The temperature of the flue gas inside the bridge pipe is about 900-1000ºC. Sine the failures have been found to be more near the flange joints of the bridge pipe upper end and branch header nozzle, special care is needed for lining the junction as these are the areas of maximum turbulence and eddies are formed disturbing streamline flow of gas. Branch headers Branch headers are a pair of flue gas headers – one on pusher side and another on coke side which receive the exhaust gas from the coke oven battery after complete combustion inside the oven arch and sole flue via uptake and bridge pipe. The branch headers join a common header which carries the gas to the waste heat recovery system. A new branch header which is freshly lined with ceramic fibre folded modules display a skin temperature around 80ºC for a considerable length of time and is considered to be normal. Slowly over the years on continued use for three to four years, the
End segment of battery no.7 displaying higher temperature after use of couple of years
STEEL INSIGHTS 46 JULY 2012
End segment of freshly replaced battery no. 5
skin temperatures slowly increase with gradual deterioration of the insulating properties of the lining material. Damage of branch headers have been found to be more near the end pipes first and then just opposite the bridge pipes due to flame impingement or damage of nozzles connecting the bridge pipes and branch header. The dead end segments are the first victim probably due to a stagnant gas pocket which has a tendency to be at higher temperature compared to the central segments. A freshly lined end segment show a much lower temperature of about 80ºC or below. It has been found that after fresh lining a replaced or new metallic header lasts for a minimum period of three years if not more. In our plat we have done complete replacement of the first header after 4 years of continuous operation with intermittent patch repairs in battery no 5 (we have 8 nos. such batteries). Common Header The common header has been in continuous use for more than
four years since inception without any significant damage not only to the metal pipe but also to the inner ceramic insulation as is evident from the temperatures which are well within control. The only locations which are showing temperatures a bit on the higher side are the flanges where the header isolating Guillotine valves are located. The valve bodies are lined with dense castable material which has inferior insulating property compared to the folded ceramic fiber modules. Conclusion Thermography is a modern technique for monitoring thermal conditions of metal bodies in high temperature use. It not only can help us to ascertain the actual thermal conditions of the subject areas of study but also help us in the selection of the right kind of insulating material for specific locations and increase the life of equipment. Abhijit Sen is vice president, coke ovens division, Bhushan Power & Steel Ltd, India
Note: The views expressed here are those of the author and not of Steel Insights. The publication does not take any responsibility for the article in part or in full.
STEEL INSIGHTS 47 JULY 2012
Sponge iron making: Better use of ore Manoranjan Behera
n view of the shortfall of good quality iron ore in India, it is not always possible for the sponge iron manufacturers to avail quality iron ore for their units. Hence, while searching for iron ore, generally a question comes to mind as to how much Fe(m)* can be obtained from a specified iron ore Fe(t)**. In this article we have derived a simple formula which will make it easy to calculate the same. In sponge iron making, the appearance of iron ore when converted into sponge iron changes completely, along with some changes in its composition. The hematite iron ore whose chemical formula is Fe2O3 is most suitable raw material for sponge iron. The oxide ore Fe2O3 during the reduction process is converted into metallic which is called the solution state of sponge iron. The iron and oxygen concentration in hematite ore is as follows: i.e, 55.85- molecular weight of iron ore, 16-molecular weight of oxygen. In hematite iron ore, there are 111.70 (2 x 55.85) parts of ferrous combined with 48 (3 x 16) parts of oxygen. Hence, 1 part of Fe contains 48/111.70 part of O2. Now let us consider an iron ore having Fe 65%. The percentage of O2 present in this iron ore = 48/111.70x65 = 27.93% During the reaction inside the kiln, O2 and LOI are removed and other elements remain with sponge iron. Hence, after reaction the product becomes lighter due to the removal of oxygen and zero value of LOI. Let us take a chemical composition of iron ore having 65 Fe(t)
other) of iron ore = 100% of sponge (in case of 100% reduction) Now the Fe content present is calculated in percentage relation to sponge = 65/70.52 x 100 = 92.17% (Fe(t) in sponge iron) In case of 100% reduction (metallization is known as the percentage of reduction) Fe(t) of sponge= Fe(m) of sponge iron. It is impossible for the sponge iron makers to reduce 100%. In general, for a smooth solid state reduction 88-92% reduction follows. Let us consider a reduction 90%. Here, we can get Fe(m) = 92.17 x 90/100 = 82.95%. More the reduction is, more will be Fe(m) and vice versa. In this way we can arrive at the following:
Generally iron ore is a heterogeneous material and practically it is not possible to find a single composition in every grain size of a sized iron ore. Generally to get a better result from this formula, you have to eliminate the pure laterite and mud content during the Fe(t) testing of iron ore. This is so because pure laterite (having no ferric percentage) goes with char after processing. In the same way, we can calculate for magnetic iron ore (Fe3O4).
*ferric (metallic) **ferric (total)
If we reduce 100% of this iron ore, then 65% Fe, 4.52% of Al2O3 + SiO2, 1% CaO + MgO+other present in iron ore remains in sponge and 27.93% of oxygen and 1.55% of LOI are removed. This implies, 70.52% (Fe + SiO2 + Al2O3 + CaO + MgO +
Manoranjan Behera has more than 13 years of experience in production of sponge iron also in projects from greenfield to commissioning with own drawing and design. He commissioned 13 sponge iron units of which 4 are greenfield projects. He completed diploma in metallurgical engineering from State Council for Tech. Education and Vocational Training, Orissa and did his graduation in metallurgy from Indian Institute of Metals, Kolkata. He worked with Baldev Alloys Pvt. Ltd, Raipur and has his own consultancy as Sarbamangala Consultancy at Raipur to deal with production related issues in sponge iron units.
Note: The views expressed here are those of the author and not of Steel Insights. The publication does not take any responsibility for the article in part or in full.
STEEL INSIGHTSâ€‚ 48â€‚ JULY 2012
India’s steel production targets may be overambitious: ISMW Steel Insights Bureau
Steel Insights has started a group on LinkedIn called India Steel Market Watch (ISMW). The readers are welcome to join the group and participate in daily conversations and surveys conducted by ISMW on the online forum. Steel Insights may, at its discretion, publish the results of such surveys and discussions for the benefit of a larger audience.
dull market, bearish demand and possible changes in government policies on iron ore imports dominated the discussion board on the ISMW platform on LinkedIn last month. The members of the group expressed doubt over the absorption capacity of the domestic market in view of the current demand scenario. This in turn raised doubt in some quarters about the 200 million tons (mt) of production target announced by the steel ministry for the year 2020. “200 mt by 2020 seems like a bullish outlook even with a ramp up in steel demand and planned capacity we think the number will be closer to 120 mt. If issues surrounding land acquisition, mining and other environmental concerns are addressed, we think it is possible for production to be ramped up at a faster rate,” said Vaseem Karbhari, analyst at The Steel Index, UK. Virendra K. Sharma, GM (Sourcing & Procurement), DSC Limited, drew attention to some Indian companies indulging in new capacity addition at huge investments despite the lukewarm market demand scenario. “While many large companies have been laggard in putting up additional steel production capacities due to various reasons, Electrosteel Steels is a curious recent case which has been working towards capacity addition of over 2 mt with Chinese technology. Although huge investment of over `8,000 crore has already been made as per company’s reports in the media, it is surprising that the plant operation has not started with repeated postponement of commissioning of blast furnace,” he noted. Removal of ore import duty? The finance ministry, meanwhile, has reportedly taken up the proposal of considering the removal of customs duty on iron ore, a move that would give some relief to steel companies facing raw material crunch. “Steel ministry is pitching for removal of import duty...we are examining it,” a ministry official was quoted as saying.
Drawing attention to the report, a group member noted that earlier the government had raised export duty on iron ore to 30 percent from 20 percent in the last budget to ensure availability of iron ore to domestic manufacturers. Although the measure was expected to provide some respite to steel makers, in reality, the availability of high-quality iron ore has continued to remain under pressure, primarily due to the mining ban imposed in states such as Karnataka. The current import duty on ore is 2.5 percent. Taking part in the discussion, Rajiv Bhutara, Director, Maharishi Alloys P Ltd, sought to know if the government is considering removal of duty on pellet as well. Bearish long steel market Sanjay Chakraborty, analyst, mjunction services limited, reported that the long steel market in the country was witnessing a bearish trend with no major movement in prices. Apart from poor demand scenario, the market is also witnessing a heavy liquidity crunch leading to huge fund crisis at the moment which is keeping the buyers away from purchase. Slow off-take of material is a prime reason along with the soaring power costs which is also considered to be a major dampener for the long steel market at present. Commenting on the issue, Bhutara said, “The demand for long products especially TMT Bars in south india market (Bangalore) has just vaporised in the last fortnight leading prices to fall by `1,500 per ton” in an interval of 10 days. Chakraborty said, “The ban on sand mining is an issue in South India (which) is keeping the construction activities at low at the moment. Few mills are also shut down in Vizag. The availability of finished steel is also low due to lower availability of raw material and reduced production level. The accident in the oxygen plant of Vizag Steel plant has kept its production shut at present and is expected to resume June 26 as per sources. Hence, there is no production from VSP at this moment. Moreover, power cut issues are also acting as a dampener at present for the South Indian steel market.
STEEL INSIGHTS 50 JULY 2012
Iron ore handling by major ports down 29.2% in April-May Steel Insights Bureau
ovement of iron ore through the 12 major Indian ports showed a significant drop of 29.20 percent in April-May due to restrictions imposed on mining and a hike in export duty on iron ore. The major ports together handled 10.55 million tons (mt) of iron ore in the April-May period compared to 14.90 mt in the same period last year. Mormugao port handled the highest volume of 6.54 mt of iron ore in April-May. This volume, however, was about 16.5 percent lower than the iron ore traffic moved through the port in the same period last year. The 12 ports together handled 94.05 mt of traffic during the first two months (April-May) of 2012-13, 5.7 percent lower than 99.74 mt recorded during the same period last year. According to data released by the Indian Ports Association (IPA), the country’s major ports handled a total of 4.86 mt of coking coal in April-May period, down 15.32 percent as compared with 5.74 mt handled in the same period last year. Movement of container traffic in terms of tonnage showed an increase in the April-May period, however, in terms of TEUs, it declined during the period. The major ports handled 20.31 mt of tonnage and 1.29 million TEUs in April-May period compared to 19.86 mt of tonnage and 1.31 mt of TEU in the same period last year. Among the major ports, Paradip port had the distinction of handling the highest volume of thermal coal of around 2.91 mt in April-May period. Mormugao port handled the highest quantity of 1.14 mt of coking coal during the period.
Traffic handled at major ports (During April-May, 2012* vis-a-vis April-May, 2011) (*) Tentative Ports
(in ‘000 tons) April to May traffic 2012*
% Variation against prev. year traffic
KOLKATA Kolkata Dock System
Haldia Dock Complex
Movement of coking coal through Paradip, Kolkata, Visakhapatnam, Ennore and Chennai ports declined during the period when compared to the corresponding period last year. Seven major ports showed positive growth in traffic handling during the April-May period of the current fiscal, while the remaining five showed negative growth on a yearon-year basis. In terms of growth, Ennore port topped the list with a record 37.41 percent increase in cargo throughput. JNPT port’s growth was lowest at about 0.70 percent during the period. In terms of traffic volume, Kandla port clinched the top rank with a cargo volume of 13.71 mt recorded for the period. The Kolkata port registered the highest decline of 21.55 percent in traffic handling during the period due to fall in iron ore export.
STEEL INSIGHTS 51 JULY 2012
Railways commodity freight revenue up in May Steel Insights Bureau
he Indian Railways’ revenue earnings from commoditywise freight traffic increased month-on-month in May due to higher transportation of coal, cement, foodgrains, iron ore and fertilisers. Revenue earnings from commodity-wise freight traffic during May 2012 stood at `7,195.62 crore, up 4.18 percent compared with `6,906.83 crore earned in April, according to information available with Steel Insights. The Railway’s revenue from transportation of coal rose to `3,194.66 crore in May from `3,167.82 crore in April. The Railways transported 41.62 million tons (mt) of coal in May compared with 40.33 mt transported a month ago. Revenue from transportation of iron ore for exports, steel plants and for other domestic user in May rose to `680.29 crore, up 7.31 percent from `633.93 crore in April. Also, the quantity of iron ore transported rose to 9.59 mt in May from 9.20 mt in the previous month. Revenue from transportation of cement in May dropped to `761.79 crore (9.53 mt) from `764.90 crore (9.22 mt) in April, while that from foodgrains transportation fell to `474.82 crore (3.33 mt) in May from `459.48 crore (3.26 mt) in April. The Railways revenue from transportation of fertilisers in May declined sharply to `253.16 crore (2.64 mt) from `218.79 crore (2.14 mt) in April. Revenue from transportation of petroleum oil and lubricant (POL) in May stood at `403.51 crore (3.48 mt), from
Railway revenue Commodity
Quantity (In mt)
i) for steel plants
ii) for washeries
iv) for public use
iii) for thermal power houses
Raw material for steel plants except ore Pig iron and finished steel
i) from steel plants
ii) from other points
ii) for steel plants
iii) for other domestic users
Mineral Oil (POL)
i) Domestic containers
ii) EXIM containers
Balance other goods
Iron ore i) for export
Total revenue earning traffic
pig iron and finished steel from steel plants and other points at `458.59 crore (3.03 mt). Revenue from container services was `315.07 crore (3.5 mt) and from transportation of other goods was `535.74crore (6.15 mt.
STEEL INSIGHTS 52 JULY 2012
macro outlook INR movement against select major currencies
Macroeconomic indicators of India
71 69 67 65
61 59 79
INR vs GBP
INR vs USD, Yen
49 47 45
Steel Insights Bureau
The Indian rupee fell to another record low against the US dollar during last week of June. This movement which started in September last year has seen the Indian unit losing more than 20 percent of its value without any consolidation in sight. With the US dollar rallying against most Asian currencies over the week, the Indian unit remained the under performer in the region.
Inflation Rate in India 11.00%
Foreign Exchange Assets
1550000 300000 1500000
Ma y- 1 1
in Rs crore
in million $
Inflation rate in India increased slightly to 7.55 percent in May 2012 from 7.23 percent in April 2012 based on 2004-05 as the base year. However, the rate of inflation was 9.56 percent in May 2011. Double-digit increase in prices of food and fuel pushed inflation higher in May compared to the previous month.
Index of Industrial Production
in Million $
Source : OEA, GoI, Ministry of Commerce & Industry
Ma y- 1 2
Ma r ch -1 2
Ja nu ar y-1 2 Fe bru ary -1 2
1 No ve mb er -11 De ce mb er -11
tob er -1 Oc
Se pte mb er
Au gu st11
Ju ne -1 1
in Rupees crore
India’s foreign exchange reserves fell by $768 million in the week ended June 22 compared with an increase of $2.01 billion in the previous week. As on June 22, the forex reserves, comprising predominantly foreign currency and gold, stood at $288.63 billion. The reserves stood at $289.39 billion for the week ended June 15.
Wholesale Price Index (Selected Categories)
200 190 180
150 140 130
PRIMARY ARTICLES Basic Metals Alloys & Metal Products
ALL COMMODITIES FUEL & POWER
Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12
Mining & Quarrying
Apr-11 May-11 Jun-11
MANUFACTURED PRODUCTS Steel
Source : OEA, GoI, Ministry of Commerce & Industry
Source : Govt. of India, MoSPI
The index of industrial production (IIP) during April 2012 stood at 166.4 recording a fall of 11 percent from a figure of 187 in March 2012. This plunge is accounted to a fall in IIP so far as mining, manufacturing and electrical segments are concerned.
The wholesale price index (WPI) (Base 2004-05=100) for the month of May 2012 rose by 0.49 percent and stood at 163.9 (provisional) from 163.1 in April (provisional). The index for manufactured products rose to 144.3 (provisional) in May 2012 from 143.6 in April 2012.
STEEL INSIGHTS 53 JULY 2012
Global crude steel production up 1.4% in May Sumit Kedia
orld crude steel production for the 62 countries reporting to the World Steel Association (Worldsteel) was 130.566 million tons (mt) in May 2012, up 1.44 percent as compared to 128.707 mt reported in April 2012. However crude steel production for May 2012 was higher by just 0.72 percent compared to May 2011. In May 2012, Asia produced 84.475 mt of crude steel, an increase of 2.24 percent over May 2011. The EU produced 15.3 mt of crude steel in May 2012, down by 5.5 percent compared to the same month of 2011. North America’s crude steel production in May 2012 was 10.639 mt, 6.16 percent higher than the corresponding month of 2011. China, the single largest producer, produced 61.234 mt of crude steel in May this year, an increase of 2.45 percent as compared to the corresponding period in 2011, when production stood at 59.769 mt. However m-o-m production saw a rise of 1.09 percent as compared to April’s produce of 60.575 mt Elsewhere in Asia, Japan produced 9.228 mt of crude steel in May 2012, an increase of 1.98 percent compared to the same month last year. India’s production for May 2012 stood at 6.2 mt, up 3.92 percent compared to May 2011. South Korea produced 5.973 mt during the same period, a 2 percent increase on the same month 2011. Overall, Asian markets, in comparison to January to May 2011 recorded a 1.6 percent increase in production of crude steel as the region closed the January to May 2012 period with crude steel production of 409.403 mt. In the EU, Germany produced 3.713 mt of crude steel in May 2012, a decrease of 9.7 percent on May 2011. Italy’s crude steel production for May 2012 was 2.568 mt, down by 3.31 percent on May 2011. France’s crude steel production for May 2012 was 1.475 mt, an increase of 1.24 percent compared to May 2011. Spain produced 1.293 mt of crude steel in May 2012, 13.86 percent lower than May 2011. EU’s total production between January and May this year stood at 74.204 mt, a
World crude steel production Dec-11 European Union (27)
Asia Oceania Rest of the world except China World
decrease of 4.38 percent as compared to January and May 2011. However, compared to April 2012, production dropped by 2.37 percent. The world crude steel capacity utilisation ratio for the 62 countries in May 2012 slid to 79.6% from 81.3% in April 2012. Compared to May 2011, it was 1.4 percentage points lower. During the past 18 months, the ratio was at its highest in April 2011 with 82.8% and the lowest ratio was in December 2011 with 70.7%. It is to be noted that the March, April and May 2012 data covers 62 countries against 64 in March, April and May 2011. In January and February 2012, only 59 countries are covered as three African countries, Algeria, Libya & Morocco while two Middle East countries Iran & Qatar did not provide monthly production statistics.
Crude steel production growth rate (Y-o-Y)
Rest of the world except China
(in ‘000 tons)
0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 -0.05 -0.1
STEEL INSIGHTS 54 JULY 2012
Steel capacity utilisation ratio
International flat & long product markets
Prices remain weak on subdued demand Steel Insights Bureau Domestic prices of the same size and specification plate in Shanghai and Tianjin in north China have dipped to the range of RMB 3,9004,000 per ton including 17 percent VAT, according to the market sources. Production cuts from mid-year maintenance work at major Chinese plate makers such as Nanjing Iron & Steel and Jinan Iron & Steel are expected to provide little support for plate prices. US sheet makers sentiment improving
ajor international flat steel producers witnessed subdued demand and have left June prices stagnant and propose to continue with the same subdued trend in the month of July. A slowdown in economic growth is pressuring domestic demand and hurting market sentiments. Mills are offering discounts to keep their stocks rolling in a market where demand is almost absent. However, others feel that such discounts are pointless as raw material prices are high and demand does not seem to improve. Downtrend in China plates Rising inventories at retailers are likely to put prices of medium plate under downward pressure, both within China and for export sale. Stocks of plate grew by another 27,600 tons or 1.8 percent over the week of June 18-22 to 1.52 million tons nationwide, a Beijing steel research institute reported, quoting the latest China Iron & Steel Association statistics. At the same time the country’s demand for medium plate remains depressed. The hot summer in July-August will depress demand further and seems likely to soften plate prices in tandem. Steel traders in east China’s Shanghai noted that export prices of 20mm boron-added commodity-grade plate had already dropped some $10 per ton over the past two weeks to $590-595 per ton fob.
US sheet makers – having watched spot hot rolled coil prices fall some $100 a short ton since the beginning of May – appear to be drawing a line in the sand, as they sense domestic market sentiment improving. Sources from US sheet mills said they were less willing to negotiate in recent days, as buyer inventories dwindle, activity picks up and capacity is being taken offline for maintenance. Currently, companies are selling HRC slightly above $600/s.t. Sources say mills, in general, have been holding the line around $600/s.t for HRC, as there’s been slightly more buying activity this week and a growing sense the market has bottomed. Europe markets uncertain The HRC market in Northern Europe remained fairly uncertain, as demand is weak and all buyers are currently only placing orders for material they need, avoiding any kind of stocking activity. Nevertheless, all major integrated mills are reported to be firm in their offer prices, looking to achieve some slight increases during the current quarter. Sources in Germany, Benelux and France confirmed that all mills are currently offering HRC S235Jr at €520 per ton ex-works base for August deliveries (July rollings), while targeting €540 per ton exworks base for September deliveries. This level is slightly lower than the one officially announced by major mills ten days ago, when they confirmed their attempt to increase prices. Nevertheless, the latest offers
STEEL INSIGHTS 55 JULY 2012
Market Report still show a slight increase compared to mid-June’s transaction levels. Meanwhile, import offers from southern Europe, CIS and UK continue putting pressure on the market, as a purchasing source reported that in the current uncertain environment, people are open to order material from a number of sources, being willing to compromise on quality to a certain extent. The southern European coils market remained subdued with low demand and new prices that are struggling to be absorbed due to weak demand for coils. According to traders, Ilva in the domestic Italian market is trying to offer €500 per ton ex-works base, up €5-10 per ton from 10 days ago, as it is convinced the bottom of the market was reached last month and prices are ready to rise, triggered by ArcelorMittal’s announced price increase. ArcelorMittal is holding firm on its new asking prices across southern Europe, but it has not managed to pass them through there.
China rebar subdued
Turkish demand low Turkish flat rolled steel demand remained low, with prices unchanged. The flat product market is yet to follow lupturn in Turkey’s long product segment on the back of re-stocking activity. Hot rolled coil is offered by producers at $620-630 per ton ex-works. HRC prices are expected to fall to $600 per ton in July, after which there should be an upturn owing to increased industrial activity in September and beyond. Long product market The international domestic long steel market is under severe stress as demand remained low. The Chinese rebar market remained subdued on sluggish demand as the summer heat is expected to hamper construction, further deteriorating demand, market sources have very little confidence in prices going forward. European prices for merchant bar decreased on very poor demand and lower raw material costs. Waiting times for standard measures are short at four to seven days. ArcelorMittal to increase sections prices ArcelorMittal has informed its sales staff and customers that it will increase sections prices in Europe by €25 per ton effective with orders booked after July 10. The base price increase applies to all categories of sections and merchant bars. Extras are unchanged. The cost of production is partly driving the increase. The fall in scrap prices appears to be turning around and section mills based on oxygen steel are using iron ore purchased a quarter ago at prices that now look relatively high. The slide in scrap prices has led the market down and the average price of category 1 sections fell from some €630 per ton in the spring to about €590 per ton currently.
China’s rebar futures prices slightly rebounded on June end after a continued slide. But the small rally did not help drive spot market prices up, as demand failed to improve. Given the sluggish finished steel market, billet prices in northern China even fell slightly. On Beijing’s spot market, traders were currently offering 18-25mm diameter HRB400 rebar sourced from Hebei Iron & Steel (Hegang) at about RMB 4,150-4,160 per ton but more traders were moving towards the lower end of the price range. Prices for Hegang-sourced 18-25mm HRB335 rebar were hovering at about RMB 4,070-4,090 per ton. Both prices include 17 percent VAT. Wide-flange beam prices in eastern China have remained volatile as they lack strong backing from end-user demand. As the summer heat is expected to hamper construction, further deteriorating demand, market sources have very little confidence in prices going forward. In Shanghai’s spot market, current offers for 200x200mm H-beams sourced from Ma’anshan Iron & Steel (Magang) were approximately RMB 3,920 per ton, with 17 percent VAT. In comparison with end-May, the prices were down by roughly RMB 80 per ton. European merchant bar prices subdued European prices for merchant bar decreased month-onmonth on very poor demand and lower raw material costs. Waiting times for standard measures are short at four to seven days. In Germany the Benelux prices for an average merchant bar 235 JR lengths of 6-12m are reported to be around €570 per ton delivered effective at the moment. Prices for Southern European merchant bar have also declined, with producers reporting that there is “no market” there. Prices are reported to be around €560-570 per ton exworks effective.
STEEL INSIGHTS 56 JULY 2012
Domestic Flat & Long Markets
Prices witness bearish trend Anondo Kumar Dutta
Long product market Billet offers in the country have either shown downward trend or remained unchanged. Buyers wish to wait and watch the further movement of prices. Buyers at Raipur are reluctant to make purchases at current offers and are asking for material at ` 300/MT less on account of re-bar being sold at lower price. The market has tried to remain positive but as fluctuating offers show no guidance for purchases, buyers are indecisive at current offers. Billet offers in Jalna and Durgapur have slipped due to falling scrap prices in international market. Overall activity of sales and purchases in billet has not been happening in good volumes. Dull finished steel market accounts as a major reason for low demand of the semifinished material. Price trend as observed in the auction held at metaljunction for flat products
Percent change for cold-rolled flat products (m-m, q-q, y-y basis) Products
May’12 Price (Avg.)
Jun’12 Price (Avg.)
% change (M-M)
% change (Qtr-Qtr)
% change (Yr-Yr)
Def. CR Coil
Def. CRNO Sheet
CR Coil End SPM-I
CR Sheet Cutting
Def. CR Sheet
36000 Wtd. Avg. Prcie (Rs./MT)
omestic coil producers have continued to keep their base prices for June unchanged as a weak rupee continues to stymie imports. Nevertheless, an anticipated slowdown in domestic demand owing to the monsoon season could compel mills to lower their prices in the coming few weeks. Since May, Indian producers have been offering IS 2062 grade A/B structural HRC, 3mm thick and above, at ` 36,000-36,500/tonne ($630-639/t) ex-works. Mills may roll over prices (starting July) but eventually prices are expected to come off by at least ` 500/t. Demand is anticipated to show a seasonal slowdown as rains are expected to intensify in the region in coming days.
Jun’12 Price (Avg.)
% change (M-M)
% change (Qtr-Qtr)
% change (Yr-Yr)
Def. HR Plate
Semi Rolled Plate
32000 30000 28000
Defective HR Plate-Rourkela Defective Plate Defective HR Plate-Bokaro Def. Chequered Plate
Semi Rolled Plate Cobble Plate HR Sheet
Prices are in `/t (basic)
CR Products Price Trend 37000
Wtd. Avg. Price (Rs./MT)
May’12 Price (Avg.)
Following graphs show the price trend observed in the auction services of Metal Junction for the months of May & June 2012 for different HR and CR products. Percent change for hot-rolled flat products (m-m, q-q, y-y basis)
HR Products Price Trend
35000 33000 31000 29000
CR Coil End from SPM - I UACE from HDGL Defective CRNO Sheet
Prices are in `/t (basic)
STEEL INSIGHTS 58 JULY 2012
Defective CR Coil Def CR Sheet
Market Report Outlook
Price Trend as observed in the auction held at Metal Junction for Long Products Following graph shows the price trend observed in the auction services of Metal Junction for the months of May & June 2012 for different long products. Percent change (m-m, q-q, y-y basis)
MM end Cutting
Price in `/t is basic
May’12 Price (Avg.)
June’12 Price (Avg.)
% change (M-M)
% change (Qtr-Qtr)
% change (Yr-Yr)
MM End Cutting
Long Products Price Trend 37000
Wtd. Avg. Price (Rs./MT)
The flat steel market is expected to keep base prices unchanged in the coming few weeks as the rupee continues to weaken, making imports unprofitable. Further, a slowdown in domestic demand is expected in July as the monsoons have set across various regions of the country. In the last few weeks , prices have picked up as consumers want to close books before monsoons set in & clear inventories. But this sudden rise in prices is expected to be temporary & a correction in increase is imminent.
The long steel market has seen a fall in prices in the last few weeks as demand in the construction sector continues to fall. With major projects slowing their progress, suppliers are facing reduced demand. Further, with the steel ministry urging major producers to take initiatives to control prices, a drop was imminent. Prices of long steel products had earlier increased at twice the pace of flat steel products. With the rains bringing in dark clouds over an already gloomy demand scenario, the subdued prices of long steel products is expected to continue in the coming few weeks.
STEEL INSIGHTS 59 JULY 2012
Domestic raw materials market
Weak rupee hits ferrous scrap imports
Pig iron Indian pig iron markets have shown no improvement for quite some time because of various reasons such as weak demand from automobile sector, poor availability of labor, low construction activities, government’s time taking decisions and ban on mining of iron ore in Karnataka. NINL at Cuttack, Odisha reduced steel grade offers by `300 per ton to `25,400 per ton w.e.f June 2 on sluggish demand, falling prices in international market and to liquidate their stock by making bulk sales as inquiries for lower priced material were good in number. Pig iron manufactured from Arc Furnace in Rourkela, Odisha is currently being offered at `25,500 per ton (basic price). Further, big plants such as Jaiswal Neco, Mesco Steel and Tata Metaliks, major producers of foundry grade along with plants in Chhattisgarh, Vizag and Goa have stopped selling in the open market on account of captive consumption. Price trend of ingot, melting scrap May’12 Wk 1 May’12 Wk 2 May’12 Wk 3 May’12 Wk 4 May’12 Wk 5 Jun’12 Wk 1 Jun’12 Wk 2 Jun’12 Wk 3 Jun’12 Wk 4
Ingot at Mandi 35556 34725 34271 35178 35681 35140 34409 34750 34705
Ingot at Ghaziabad 35594 34823 34439 35214 35455 35132 35114 35273 34337
Ingot at Raipur 32778 32746 32496 32673 32664 32296 31950 32046 31950
Ingot at Mumbai 34328 33886 33436 33796 33991 33736 33217 32759 32146
Melting Scrap at Mandi 30556 29725 29271 30178 30681 30140 29409 29750 29705
All prices quoted above are average price in `/t, basic
Price trend as observed in the auction held at metaljunction for scrap products Following graph shows the price trend observed in the auction services of Metal Junction for the months of May and June 2012 for different scrap products.
Ingot, M. Scrap Trend
38000 37000 36000 35000 34000 33000 32000 31000 30000 29000 28000
Ingot at Ghaziabad Ingot at Mumbai
Ingot at Raipur M.Scrap at Mandi
Ingot at Mandi
Percent change (m-m, q-q, y-y basis) Products CR Coil End WRM Material Side-End Shearing Pipe Cutting CR Gas Cut Coil End Cutting
Wtd. Avg. Price (Rs./MT)
weak rupee, lower-than-expected domestic industrial growth and lower offers from US East Coast suppliers are combining to create negative sentiment in the ferrous scrap export market. US offers for shredded scrap were heard from several sources at $405-410 per ton cfr Nhava Sheva. Compared to UK offers at $415 per ton cfr, a handful of uncompetitive Euro zone offers are prevalent at $425 per ton cfr. Recent sales were tagged at $415 per ton cfr Chennai in boxes for a sale of shredded scrap from the UK. Power shortages and the oncoming monsoon season in India are also limiting output among steel producers in the country, encouraging them yet further to hold off from buying.
Anondo Kumar Dutta
May ’12 Price (Avg.) 32440 31825 30516 -30881 30452
Jun ’12 Price (Avg.) 31125 30007 30144 28221 28933 27913
% change (M-M) -4.05 -5.71 -1.22 --6.31 -8.34
% change (Qtr-Qtr) -2.89 -6.02 -2.89 10.61 -0.39 -1.70
% change (Yr-Yr) -1.64 14.08 16.28 14.30 7.86 5.12
Scrap products price trend
CR Coil End WRM Material
Side-End Shearings Turning & Boring
CR Gas Cut Coil End Cutting
Price in ` per ton is basic
Outlook The secondary scrap steel market shows mixed trends in June. As exports were weak, the domestic market did not face any supply crunch, which helped prices to remain steady. However, with monsoons, ferrous rusting being a major problem for suppliers, a drop in demand is expected and a revision can be expected in the coming few weeks. International offers remain low, but until the rupee firms up a sudden hike in scrap imports is not predicted.
STEEL INSIGHTS 60 JULY 2012
Production, imports, exports, availability & apparent consumption (provisional) April - May 2012 Steel Insights Bureau
(in ‘000 tons) FINISHED STEEL PRODUCERS
Non-Alloy Steel (Carbon) 2012 - 13 (Prov.)
2011 - 12 (Prov.)
a) Prod. of Main Producers
Alloy Steel 2012 - 13 (Prov.)
2011 - 12 (Prov.)
b) Prod. of Major Producers $
b) Prod. of Other Producers $
Less : IPT/Own Consumption
d) Imports $
e) Exports $
e) Availability (c+d-e) f) Variation in Stock g) Apparent Consumption (e-f) Less : Double Counting Real Consumption
2012 - 13 (Prov.)
2011 - 12 (Prov.)
Total % Variation
c) Total Production for Sale
Source: Steel Ministry
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STEEL INSIGHTS 62 JULY 2012
2012 - 13 (Prov.)
2011 - 12 (Prov.)
Ferro alloys & metals price trends Steel Insights Bureau
Ferro alloys & Metals
HC Ferro Chrome (Cr - 60%)
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)
Moly Oxide (Mo - 57% min)
Ferro Titanium (Ti - 30%)
CPC (FC - 98%, S - 1.2%, size 0-10mm)
Ex-works Rs/ ton 73000
Ex-works Rs/ ton 55000
Ex-works Rs/ ton 56000
Ex-works Rs/ ton 79500
Ex-works Rs/ ton 112500
Ex-works Rs/ kg 830
CIF in US$/lb of moly 13.75
Ex-works Rs/ ton 152500
Ex-works Rs/ ton 25500
STEEL INSIGHTS 64 JULY 2012
Iron ore export data for June 2012 Steel Insights Bureau PORT
EXPORTER INFRASTIL GLOBAL
QTY (in Tons) 17,930
15-Jun-12 RUNGTA MINES
LORDS BLUETECH COMPANY
DOLPHIN / SPONGE & BAGADIYA
QTY (in Tons) 22,700 150,000 570,793
AKS MINERALS / PRESIDENCE / SHAPING
SM NIRYAT / KANDOI
25-Jun-12 PARADIP Total 5-Jun-12
MORMUGAO Total KANDLA
VIZAG 45,100 155,493
KANDLA Total Grand Total
STEEL INSIGHTS 65 JULY 2012
Tear along the dotted line
STEEL INSIGHTS 66 JULY 2012 Tear along the dotted line