Steel Insights, April 2015

Contents 2 6 Cold-rolled body seeks duty rationalisation 27 India Inc waiting for policy action before investing: S&P 28 Steel Ministry moots hike in import duty 29 DGS rejects JSL’s import safeguard application 30 Coking coal offers plummet in March 31 Polish mining equipment makers keen to reenter India 34 Auto sector starts new fisc on positive note 36 Govt must expedite smart city project 37 Ferro alloy prices decline on low demand 44 India’s major ports on a spree to increase draft 45 Vizag port witness sharp fall in iron ore handling in FY15 46 Traffic handling by major ports up 4.64% in April-February 47 Railways’ Feb iron ore handling down 22.38% 48 Global crude steel production falls 4.11% in February m-o-m 49 PM Modi dedicates modernised RSP to nation 51 Tata Steel produces 10 mt of hot metal from single location 52 Tata Steel bags PM’s Trophy for Best Performing ISP 53 NMDC Nagarnar plant to be ready by Dec 2016 54 RINL unveils 120-MW pollution-free captive power plant 55 NALCO achieves highest ever turnover 56 4 change agents MET to share their stories 57 5 Arvedi ESP lines in China for high-quality hot-strip production 60 ITmk3: An elegantly simple, leapfrog technology 63 WSA steel production figures hog limelight 64 Price data 65 Ferro alloy data 66 Production data

4 Steel Insights, April 2015

6 | COVER STORY

Will mine auctions help judicious use of natural resource?

Passage of MMDR Bill in Parliament to pave way for higher iron ore production.

19 | SPEACIAL FEATURE

Sponge iron: Pipe dream or reality?

De-nationalization of coal blocks will benefit steel and sponge iron sectors.

24 | Feature

LARR: The ground realities LARR Bill to delay projects because of consent clause; cost of projects to rise.

39 | INTERVIEW

Stainless Steel imports from China may touch 2.5 lakh tons this fiscal It is imperative to create a level playing field between domestic and Chinese producers: NC Mathur

42 | INTERVIEW

IOCL unveils Make-in-India metal cutting solution Company claims the metal cutting market will be revolutionised with entry of Indane Nanocut

Cover Story

I

ndia’s natural resource management is up for scrutiny with the passage of the Mines and Minerals (Development and Regulation) Amendment Act, 2015.

The new Bill, when enacted, is set to pave the way for transparent auction of minerals in a way similar to that of coal . This, in turn, will help ensure supply of raw materials.

The auctioning of coal mines has ensured

a certain amount of security in sourcing of the critical input for power, steel and cement industries from the indigenous mines.

After the process of auctioning of a large number of 204 mines is over in another four months’ time, coal availability may improve.

This may also impact coal imports to a certain extent, according to industry experts.

However, for coking coal, the import

dependence would have to continue on account of limited domestic reserves of the material and to sustain the energy consumption and productivity of the steel plants.

Global prices of coking coal in the second quarter of 2015, at $109.50 per ton, for supplies to SAIL and RINL from Australia are 5 percent lower than in the first quarter prices of 2015.

Will mine auctions help judicious use of natural resource?

Tamajit Pain

6 Steel Insights, March 2015

Cover Story With SAIL increasing capacity at its plants, RINL investing for higher availability from the new structural and wire rods mills and others like Tata and JSW increasing capacity, the import volumes for coking coal would be larger. However, non-coking coal availability is likely to increase, provided the allotted mines commence physical operation expeditiously by the next few months.

Meanwhile, the draft regulations on the auction of mines, including iron ore, have been prepared and will be sent to states to seek their views by the second week of April, Mines and Steel Minister Narendra Singh Tomar said.

“The draft rules and regulations have been finalised and will be sent to the states for suggestions within a week. The states will be given a time-frame within which they can reply,” Tomar said.

Mines and Minerals (Development and Regulation) Amendment Act, 2015, empowers the Centre to prescribe terms and conditions and procedures for bidding which include production sharing or royalty payment or a combination of both.

Tomar said, “Since mines is a state subject, auctioning of mines will be conducted by states in which the role of the Centre would be limited to framing the rules to be followed in the process.”

The government has roped in investment banker SBI Capital Markets to suggest rules for auctions as well as the bidding parameters.

The Indian Bureau of Mines, an organisation in the Ministry of Mines, will act as the nodal agency to help the state governments in auctioning as well as doing an assessment of the mineral deposits.

The Ministry of Mines has already identified 199-200 mines which contain minerals like iron ore, bauxite and manganese ore that can be allocated through the auction route. These are located in mineral-rich states such as Karnataka, Madhya Pradesh, Odisha, Gujarat and Maharashtra.

The minister further said that the five PSUs, including SAIL and NMDC, may be engaged in the process of exploration of mines besides the Geological Survey of India.

Tomar said the states will not require approval from the central government for the auctions. “This is a state subject and they will deal with it.” The minister added that if the states desire they can set aside mines for their PSUs besides participating in the auction

process. Thus, with the new mining law in place, states can grant lease for major mineral extraction, including iron ore, through auctioning on their own without waiting for the Ministry of Mine’s permission.

The states, which want to give mining lease permissions, are now only required to take permission from the Ministry of Environment and Forests (MoEF). Once the states get the MoEF nod, they can go ahead with grant of permission for lease through auctioning, according to industry sources.

Earlier, all major minerals extraction required the Ministry of Mines permission.

Now, by allowing the states to grant lease permissions without seeking the Centre’s approval, the delay in granting licences has been eliminated. However, the states must strictly follow the auction route for granting permission.

Odisha to renew 18 mines

India’s top iron ore producing state Odisha is likely to renew the licences of 18 iron ore mines shut since last year, according to reports.

A panel of senior government officials in Odisha has recommended reopening of the mines, which were closed last year due to non-renewal of years-old leases. The renewals are expected to be completed in 10 days, sources said.

Re-opening of the 18 mines will raise iron ore output in Odisha to 70 million tons this fiscal, about the same level seen before the mines were shut, from the 51 tons produced in 2014-15.

The panel has also recommended an extension of the lease period for eight separate mines in the state, which belong to Tata Steel, Steel Authority of India and Odisha Mining Corp and are currently operating under a so-called temporary express order.

The Supreme Court last year ordered the closure of nearly half of the 56 mines operating in Odisha because they were operating without a renewal of years-old leases.

Reports also said mineral-rich states have identified 168 limestone blocks, 16 bauxite mines, 12 iron ore mines and 3 manganese ore mines, most of which may be auctioned in the first round after the rules and regulations are finalised.

These 200 mines are mainly concentrated in Rajasthan, Jharkhand, Madhya Pradesh, Chhattisgarh, Karnataka, Gujarat and Orissa. The auction process by the states may begin in June.

The Ministry of Mines has asked the states to furnish the list of mines, functional and non-functional, mineral-wise and clearance-wise with their present status after the MMDR Bill got passed in Parliament.

Focus on mineral-bearing states

With the passage of the Mines and Minerals (Development and Regulation) Amendment Bill, 2015 by Parliament, the action will now shift to respective mineral-bearing states for further action. Though it is expected that the new Act will pave the way for higher iron ore production, a lot more depends on how quickly state governments set the ball rolling in terms of auction of mining leases.

According to the Ministry of Mines, as many as 199 mining concessions, including 15 iron ore leases, are expected to be auctioned by various state governments in the next few months.

Unless the state governments act immediately, production of iron ore in the coming year is unlikely to be better than in the last few years.

According to the Federation of Indian Mineral Industries (FIMI), the apex body of the mining industry, iron ore production is estimated at 135 million tons in 2015-16, a mere 8 percent growth over the current year.

In 2014-15, the production is estimated at 125 million tons. Of this, Odisha will be the major contributor at 50 million tons and is followed by Chhattisgarh at 25 million

Indian steel industry : Production for Sale (in million tons) Category

2009-10

2010-11

2011-12

2012-13

2013-14

April-December 2014-15*

Pig Iron

5.88

5.68

5.371

6.870

7.950

6.081 (5.868)

Sponge Iron

24.33

25.08

19.63

14.33

18.20

13.276 (13.413)

Total Finished Steel (alloy + non alloy)

60.62

68.62

75.70

81.68

87.67

65.197 (64.190)

* Provisional; figure in () is value in same period of last year

Source: Joint Plant Committee

Steel Insights, April 2015

7

SPECIAL feature

Sponge iron: Pipe dream or reality?

Kingshuk Banerjee

C

ould India realise its dream of producing 94 million tons of sponge iron by the year 2025-26?

Could India fulfill her agenda of making 300 million tons of steel by the year 2025-26?

In an ideal situation both the answers are supposed to be yes straightaway. But the labyrinth of various ifs and buts have made the issue rather an edge-of-the-seat situation. But as the experts have rightly pointed out, this ambition ought to be part of a much bigger canvas in which India emerges

as a truly global economic powerhouse in the coming years. Therefore, the nation has to overcome these hurdles because stakes are indeed very high.

Economists are unanimous in the opinion that the future of the global economy would be in the hands of Asian giants like China, India, Japan and South Korea. And a massive investment in infrastructure would be needed to make that happen.

Global analyst firm Goldman Sach has estimated nearly $2 trillion investment on infrastructure in the current decade in India alone. In that projected infrastructural

spending roadmap of 2010-2019, the firm has estimated that India needs to spend $272 billion in building and modernizing airports, $288 billion in power generation, $150 billion for internet and telecommunication network building, $94 billion in port building and modernization, $427 billion for road building and maintenance, $281 billion for railways modernization, $272 billion for implementation of proper irrigation facilities and $154 billion for providing safe drinking water.

And needless to say, with every aspect of these infrastructure projects, steel is embedded. Being an intermediary, sponge iron is interlinked too in this process. As World Steel Association (WSA), the global body of steel manufacturing nations, has put it, steel is inextricably linked with economic growth and prosperity. Various studies have shown time and again that economy prospers as per capita steel consumption increases.

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19

feature

LARR: The ground realities Steel Insights Bureau

T

he much-debated Land Acquisition, Rehabilitation and Resettlement Bill, 2012 (LARR Bill) was cleared by the lower House of Parliament in the first half of the Budget Session. This crucial Bill seeks to replace the archaic Land Acquisition Act of 1894 with a fresh legislation wherein the component of compensation for resettlement and rehabilitation of project-affected families is added.

The Narendra Modi-led government managed to get the amended Land Acquisition Bill passed in the Lok Sabha on the basis of its brute majority in the Lower House. This Bill is an amended version of the original Bill introduced and passed in 2013 by the previous government.

There are six key aspects of the Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015: yy The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015 seeks to amend the LARR Act, 2013.

24 Steel Insights, April 2015

yy There are five special categories of land use according to the Bill. These are namely: Defence, rural infrastructure, affordable housing, industrial corridors and infrastructure projects, including public-private partnership projects where the government will own the land. yy The Bill exempts the above five categories of land use from the provisions of LARR Act, 2013 which requires obtaining of the consent of 80 percent of land owners for private projects and 70 percent of land owners for PPP projects. yy The Bill also allows exemption for projects under these five categories from “social impact assessments” to identify those affected and, two, from restrictions on acquisition of irrigated multi-cropped land imposed by the LARR Act of 2013. yy The Bill also brings in provisions for compensation, rehabilitation and resettlement under other related Acts such as the National Highways Act and the Railways Act in consonance with the LARR Act. yy The Bill changes acquisition of land for private companies as mentioned

in LARR Act, 2013 to acquisition for “private entities”. A private entity could include companies, corporations and non-profit organisations.

Due to a long-standing demand from industry to relax some provisions which made land acquisition difficult, expensive and time-consuming, and thus harming industrial growth, the ruling party brought in some changes by the means of an Ordinance.

Normally, any Ordinance has to be brought to Parliament within six months of it being issued, to be passed again by Parliament to make it into a law.

The new Bill had nine additional amendments or concessions, plus two additional clauses made by the government to appease its allies and the Opposition to some extent to gain some consensus before introducing it in the Rajya Sabha.

The amendments are as follows: yy Limiting the industrial corridor to 1 km on both sides of highways and railway lines. This is limited to industrial corridors being set up by the government only. yy Employment for at least one member of farm labour families which are affected due to displacement and land acquisition. yy Removal of exemption from the consent clause extended earlier to five sectors has been taken away from social

Interview

Stainless steel imports from China may touch 2.5 lakh tons this fiscal: ISSDA

T

hough stainless steel has moved out of Indian kitchens on to railways wagons, coaches and the processing industry, the main challenge, at present, lies in the huge volumes of imports from China, Korea and ASEAN countries like Vietnam, Thailand, Malaysia and Indonesia which enjoy nil import duty under the free trade agreements while their Indian counterparts have to pay a 2.5 percent duty even on basic raw material like nickel and scrap.

Consequently, imports from China may almost double from 1.13 lakh tons seen in the last fiscal. It is thus imperative to create a level playing field between domestic manufacturers and the Chinese producers, N C Mathur, President, Indian Stainless Steel Development Association (ISSDA) and Chairman, Steel Furnace Association of India (SFAI), tells Madhumita Mookerji of Steel Insights. Mathur has worked in India with leading industrial houses for over 48 years and has been associated with the stainless steel industry for the last 40 years. He has been associated for 10 years with the Market Development Committee as well as the Economics & Statistics Committee of the International Stainless Steel Forum, a global stainless steel industry association based in Brussels, Europe What initiatives have ISSDA taken to promote usage of stainless steel in India?

Stainless steel has undergone major changes in India over the last two decades in terms of perception and production volumes in India. The Indian Stainless Steel Development Association (ISSDA) has been successful in creating awareness and has changed the perception of stainless steel from being seen as a material that is good only for kitchenware, to a wonderful engineering material that lasts for decades and gives you value for money.

Today we see use of stainless steel not only in Indian Railways and Metro Rail coaches, wagons, tankers, various products for building and construction and the process industry but also in sectors such as nuclear, power, oil and gas where high

quality and grades that are indigenously produced and supplied, are being used.

Such a change of fortunes for this material has made been possible through unremitting efforts of ISSDA and its member companies over the years who worked hard to create awareness about the benefits of using stainless steel. ISSDA has access to vast technical resources which enable us to guide users of stainless steel in the selection of proper grade of stainless steel for various service environments, as well as matters related to fabrication. This service is provided free of charge.

ISSDA organises workshops for specific end-use applications of stainless steel targeted at designers, material specifiers, engineers, architects, maintenance personnel; workshops for improving the

The organisation introduced the concept of life cycle costing (LCC), explaining how stainless steel can turn out to be less costlier than other competing materials.

quality of welding and fabrication. It holds international conferences for increasing awareness on applications in the stainless steel industry. The technical strength of ISSDA is derived from its close association with the Nickel Institute, the International Stainless Steel Forum and close collaboration with more than 20 national stainless steel development associations (SSDAs) around the world.

How has been the journey of ISSDA so far?

When ISSDA was formed in 1989, the overall production in India was merely 2 lakh tons and more than 90 percent of stainless steel was used for manufacturing kitchenware which has since replaced conventional materials like copper, brass, iron etc. At that time, there was widespread perception amongst engineers, architects and others that stainless steel was very expensive and good only for kitchen and food contact areas.

ISSDA started its efforts to break this mindset by holding a large number of workshops across the country, explaining

Steel Insights, April 2015

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70 Steel Insights, April 2015

Tear along the dotted line

Tear along the dotted line