Steel Insights, August 2019

Contents 16 Danieli Universal Endless

6 | COVER STORY

24 Domestic scrap market remain volatile 25 Pig iron production up 3% in Q1FY20

Need for a tech-tonic shift

26 June sponge iron production up 7.15% on year, down 4.1% on month

Digitalization to enable touching optimum efficiency

27 Crude steel production up 7.1% in June 37 Motown plagued by low demand in July 39 Seaborne coking coal offers plummet in July 40 India may face iron ore shortage in H1FY21 41 Government update

20 | COVER

Hot Dip Galvanizing Line for automotive applications Industry veteran Sanat Bhaumik writes about potentials of GI/GA strips usage

42 Global crude steel output down 2.32% in June

28 | FEATURE

43 Traffic handled by major ports up 1.5% till June

Global steelmaking capacity to rise in 2019-21: OECD

44 Indian Railway’s iron-ore handling in June up 13% 45 RINL starts heating of coke over battery 5 47 JSW Steel EBIDTA down 23% on poor sales, prices

India to become second largest steel economy

31 | FEATURE

49 Electric Vehicles adoption to drive copper demand: HCL head

Steel sector margins to shrink in FY20: Crisil

51 NMDC to resume Donimalai mine operations

Inadequate monsoon, slowing global growth, sluggish Q1 data to bring down domestic GDP growth

52 Corporate update 54 Ferro alloy data 55 Price data 56 Production data 58 Global production data 59 Import export data

4 Steel Insights, August 2019

33 | FEATURE

SAIL modernisation, expansion project on verge of completion About 20 new products and grades were developed during FY19

Cover Story

Steel industry needs tech-tonic shift to touch optimum efficiency Tamajit Pain & Sumit Maitra

6 Steel Insights, August 2019

Cover Story

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teelmaking is a primal industry that requires huge amounts of heat and energy. As such, it isn’t the first sector that springs to mind when it comes to energy efficiency and sustainability.

Nevertheless, the industry is taking steps to improve its eco-credentials, employing a range of innovative technologies to reduce the environmental impact of steel production.

One example of this is the use of Organic Rankine Cycle (ORC) turbines at the Ori Martin steel plant in Brescia in northern Italy, which produces hot-rolled steel for the mechanical and automotive industries.

During summer operations, the ORC system generates enough energy from waste heat to meet the electricity consumption needs of 700 local families. In winter, the waste heat is used to heat up 2,000 households through the local district heating network.

This reduces the factory’s carbon footprint by 10,000 tons of CO2 a year, as well as eliminating the need for watercooling.

The heat recovery system, which have been installed by a third party, and the ORC turbine, which have been installed

by Mitsubishi Heavy Industries Group company Turboden, capture the exhaust gases and turn them into electrical energy and thermal power.

They are based on the conventional steam turbine systems found in power plants.

Instead of generating steam from water, however, the ORC system vaporizes an organic fluid. This not only removes the need for water, it also enables the turbines to run at lower speeds and pressures – using less energy – while minimizing metal erosion. It’s a lowcost system requiring limited maintenance, which doesn’t need a qualified operator as it runs automatically.

Circular economy

Recycling is another way in which the steel industry can contribute to a cleaner and more sustainable future.

Steel in itself is 100 percent recyclable.

It can be used repeatedly without loss of integrity. The industry has long been taking advantage of this by using scrap steel as an additional element in the steel making process, forming a circular loop where nothing is wasted.

But steel production generates high volumes of waste materials like dust, fines

and mill scale, all of which need to be handled and disposed of effectively. And byproduct recycling solutions are one way to convert residual production materials into a useful and profitable resource.

At Ori Martin in Brescia, for example, the dust accumulation and by-products of manufacturing are recycled. The plant is also fitted with a high-temperature water recycling circuit to avoid wasting water used for cooling steel bars as they emerge from the foundry.

Adopting such a resource-efficient approach to manufacturing is not only economical, but also lowers the industry’s impact on the environment.

Clearing the air

In addition, steel companies are also finding ways to literally “clean up” their production process to meet increasingly stringent environmental protection regulations.

For every metric ton of steel produced, 10 to 25 kilograms of dust accumulates, which then enters the atmosphere through production exhaust air.

Gas cleaning is a highly efficient dedusting solution that cleans dust from exhaust air and keeps production within strict pre-set emissions limits. A reliable dedusting system lowers operating costs and helps make the steel production process more sustainable.

Smart steelmakers

Technological advances are boosting the industry’s efficiency in other ways, too.

The fourth industrial revolution is allowing technology to work in ever-closer harmony with different aspects of metals production, transforming the way steel is made.

As well as converting traditional production environments into highly automated “smart” plants, digitalization enables the different parts of the steel manufacturing process to interact and perform at their full potential.

A digitalized plant’s production management systems use sensor technology, digital production planning tools and sophisticated AI-driven diagnostics to monitor each smart component. Output is optimized for maximum overall performance and, as part of this process, each function within the plant is continually analyzed and refined for incremental improvements in efficiency.

Future systems will use machine learning to discover the optimum way to produce steel with minimum resources.

Along with efficiency improvements, this will also help reduce the environmental impact of steel making across the whole manufacturing journey.

Interpretation of Digitalisation/ Industry 4.0 for Steel Industry

Single plant cyber physical production system (CPPS, vertical integration) leads to 100 percent traceability of intermediate and final products and intelligent product with knowledge of its own quality and production history (one aspect of end-to-end engineering).

Digitalization also leads to intensive networking and communication of all plants (horizontal integration inside company).

Intensive communication along the complete supply chain (horizontal integration outside company) leads to suitable handling and usage of all data and de-central instead of central solutions, which ultimately leads to self-organization.

In the era of the so-called Fourth Industrial Revolution, factories have become “smart”, embracing the digital transformation. The “steel plant of the future” looks like a place where value is produced through the integration of the enabling technologies of Industry 4.0 into the workplace. For the metals industry, greater connectivity and data sharing will play a significant role in alleviating a number of issues presented by their nature: from remote locations and widespread supply chains, to fluctuating markets and potentially hazardous working environments.

This shift in the business model is triggered by innovative partners which is working with the aim to make plants always more intelligent and connected, to offer services of high added value by analyzing the data from machines to optimize production, and to help customers to fulfill their business objectives.

The clean, safe and green technology is very efficient and generates a minimum amount of waste. Moreover, the machine has modern design features and minimal hardware components that optimize the design for assembly and manufacturing, with the majority of the technology residing in the control software.

Steel Insights, August 2019

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FEATURE

Global steelmaking capacity to rise in 2019-21: OECD India to become second largest steel economy Sumit Maitra

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fter a marginal drop in in 2018, global steel capacities is likely to rise by 4-5 percent is all of the current ongoing projects are completed, Organisation for Economic Co-operation and Development has said in its latest report.

Data available with OECD suggest global steelmaking capacity in nominal crude terms declined marginally in 2018 to 2,233.7 millon tons (mt) from 2,240.1 mt in 2017 as some investment projects were postponed.

However, many investment projects continue to take place around the world and others are in the planning stages. Should these projects be realized, global steelmaking capacity could increase by approximately 4-5 percent between 2019 and 2021 in the absence of closures amounting to additional capacity ranging from 88 to 110 million tons during this period, the report said.

“Globally, 87.8 mt of gross capacity additions are currently underway and could come on stream during the three-year period of 2019-21. An additional 22.4 mt of capacity additions are currently in the planning stages for possible start-up during the same time period,” it said.

Asia is expected to experience a considerable increase in steelmaking capacity with over 53.4 mt of gross capacity additions currently underway and 10 mt in the planning stages for 2019-21.

Several capacity investments are also taking place in the Middle East region, where investment projects amounting to 25.1 mt of capacity are currently underway, and due for completion in the next three years.

Some investments are also underway in Africa and Europe, a total of 2.9 mt and 4.1 mt of capacity that could come on stream during the period, respectively.

The CIS, Latin America and NAFTA regions could also see an increase in capacity,

28 Steel Insights, August 2019

with 1.8 mt, 0.2 mt and 0.3 mt of gross additions currently underway in each region, respectively.

“The decline in global steelmaking capacity in 2018 follows a deceleration in capacity growth since 2013 and results from both capacity reductions and slower capacity growth in some parts of the world,” the report points out.

Capacity Utilisation

The gap between global capacity and production is likely to have narrowed in 2018 in view of the slight reduction in global crude steelmaking capacity (-0.3 percent), while global steel production increased by 4.6 percent in 2018.

“In view of these developments, the gap between capacity and production is expected to have declined to 425.1 mt in 2018. As a result, global production of steel as a per cent of capacity may have increased from 77.2 percent in 2017 to 81 percent in 2018.

India capacity

Capacity in India has been expanding at a fast rate in recent years and further growth is expected over the short- to medium-term due to increasing demand, notably from infrastructure investments, the report states.

Among recent additions, the report talks of Steel Authority of India completing 3 mt expansion of BOF facilities at the Bhilai Steel Plant. In August 2018, India’s Mono Steel launched new facilities in its Kutch plant with a capacity of 0.25 mt.

OECD considered National Mineral Development Corporation’s delayed greenfield steelworks in with capacity of 3 mt Shree Uttam Steel and Power Ltd’s greenfield capacity of 1.55 mt in Maharashtra. All these are expected to be operational in 2019.

In addition, JSW Steel has started an expansion project at Dolvi in Maharashtra, raising capacity by 5 mt by 2020. JSW Steel

also announced a plan to increase capacity of its Vijayanagar Works by 3 mt, which is likely to be completed by 2020. “As a result of investment projects that are underway, steelmaking capacity in India could reach 137.6 mt by 2021, in the absence of closures.

If this materialises, India could become the world’s second largest steel economy in terms of steelmaking capacity,” the report says.

World Steel production up 4.6% in June

World crude steel production for the 64 countries reporting to the World Steel Association (Worldsteel) was 159.0 million tons (mt) in June, a 4.6 percent increase compared to June 2018.

World crude steel production was 925.1 mt in the first six months of 2019, up by 4.9 percent. Asia produced 660.2 mt of crude steel, an increase of 7.4 percent over the first half of 2018. The EU produced 84.7 mt of crude steel in the first half, down by 2.5 percent compared to the same period of 2018. North America’s crude steel production in the first six months of 2019 was 60.1 mt, an increase of 1.4 percent compared to the first half of 2018.

The CIS region produced 50.5 mt of crude steel in the first six months of 2019, the same as in the first six months of 2018.

China’s crude steel production for June was 87.5 mt, an increase of 10 percent compared to June of 2018.

Japan produced 8.8 mt of crude in June, down 0.4 percent on June 2018. South Korea’s crude steel production was 6 mt in June 2019, a decrease of 2.6 percent from June 2018.

In the EU, Germany produced 3.4 mt of crude steel, down by 5.8 percent from June 2018. The US produced 7.3 mt of steel in June 2019, an increase of 3.1 percent compared to June 2018.

Asean uptick

Crude steelmaking capacity has expanded rapidly in the Association of South East Asian Nations (ASEAN) region over the past decade and could continue to increase from 54.1 mt in 2017 to 64.8 mt by 2021 (a growth of 21.2 percent).

In the Philippines, SteelAsia Manufacturing started the construction of a new 0.8 mt EAF plant at Compostela Works in Cebu which is expected to begin operation in 2020.

FEATURE

Steel sector margins to shrink in FY20: Crisil

Steel Insights Bureau

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ith the Indian economy caught in crosswinds, rating agency CRISIL expects gross domestic product (GDP) to grow 6.9 percent this fiscal, or 20 basis points lower than what the agency had envisaged earlier.

“The revision factors in a triangulation of downside risks: inadequate monsoon, slowing global growth, and sluggish highfrequency data for the first quarter,” CRISIL said in its India Outlook 2019 report.

And that’s bad news for the steel sector which would see its margins contract during the year, the report has predicted.

“In fiscal 2020 revenue is expected to grow much slower, at 7.5-8 percent on-year.

This is largely because of a moderation in sales volume in key consumption sectors such as automotive, softening of commodity prices affecting the metals sector, and a lack of fillip to export-linked sectors from the currency,” the report says.

Profit, though, is expected to outpace revenue growth in fiscal 2020, rising 10 percent on-year, compared with 9 percent growth in 2019, riding on improving profitability in consumer discretionary

sectors such of airlines and telecom, which saw sharp contractions last year the report predicts.

“Softening metal and coal prices will support margin expansion in these sectors.

Margins of the construction and steel sectors, though, are expected to shrink,” the India Outlook report states.

Attributes of slowing revenue growth in FY20

♦♦ Significant slowdown in construction commodities, as steel prices weaken in FY20 from the peak of 2019 ♦♦ Consumption-linked sectors, especially high-ticket purchases, to moderate in FY20 ♦♦ Export-linked sectors return to real growth led by rupee stabilization.

Cement Despite a sharp slowdown in sales volume growth, from 12 percent on-year in FY19 to 6-7 percent on-year in FY20, revenue and profit are expected to expand at a healthy pace on improving realisation (5-6 percent) and lower power and fuel cost.

Construction Margins are expected to deteriorate because

of a change in the revenue mix; revenue will be driven by less profitable sectors such as roads, power transmission and distribution (T&D), water supply, and irrigation.

Steel Lower on-year realisation because of weak global cues and rising iron ore cost are expected to weigh on the sector’s revenue and profitability in FY20.

Commercial vehicles Moderation in volume growth, especially of the medium and heavy commercial vehicle (MHCV) segment, will weigh on growth in FY20. The axle norms created 20 percent additional capacity in this sector, leading to volume decline, more so in the MHCV segment. Further, rail BTKM (billion tons km) also shows a moderating trend, led by a slowing Index of Industrial Production that aggravated the problem for transporters and, hence, commercial vehicle (CV) sales.

Passenger vehicles and two-wheelers: Despite flat growth in passenger vehicle sales volume, revenue is projected to grow 5 percent this fiscal on rising vehicle prices and inter-segmental shift. Revenue growth of two-wheelers is expected to moderate significantly to 3 percent from 13 percent on-year in FY19, primarily because of sales

Steel Insights, August 2019

31

FEATURE

SAIL modernisation, expansion project on verge of completion

Steel Insights Bureau

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teel Authority of India, which returned to profit in FY1 9 after posting losses for three consecutive years, is set to achieve another milestone by completion of its moderisation and expansion plan, chairman Anil Kumar Chaudhary has said.

“The 300 MTPA steel production capacity for India by 2030 as envisioned in National Steel Policy 2017 is commensurate with this growth projection. SAIL has also started its plans for increasing its capacity commensurate with the National growth,” the chairman said in his address to shareholders in the annual report of the company for FY19.

Turnaround initiatives

SAIL bounced back to profits in FY19 with net profit of `2,179 crore, after being in red for three consecutive years.

The company has been taking a number of strategic initiatives for its turnaround, growth and sustainance.

SAIL had launched a company-wide turnaround program ‘SAIL Uday’ in FY17 which laid the roadmap for improvement in the areas of raw materials, operations, sales and marketing, supply chain and logistics and Human Resource, has been developed and deployed culminating in the performance during FY19.

It adopted a multipronged approach that includes organic growth, brown-field projects,

technology leadership through strategic alliances, ensuring raw material security by developing new mines, diversifying in allied areas.

Some of the strategic initiatives include MoUs for setting up of Pellet Plants, manufacturing of capital goods in the Country, setting up of hydro power plant, closure of in-operative and non-performing Joint Ventures and Subsidiary Companies.

The improvement in financial performance in FY19 was based upon the improved operational performance indicated by increase in saleable steel production (7 percent), increase in net sales realisation for 5 plants (16 percent), higher share of concast production, improved product-mix, reduction in Coke Rate, reduction in specific wage bill.

However, these benefit has been partially offset due to increase in imported coal rate, purchased power rate, higher expenditure on repairs and maintenance, stores and spares, security expenses, loss on account of foreign exchange variations, higher imported coal in blend, provisioning towards various mining related issues, provision for entry tax in Uttar Pradesh following a court order and increase in interest and depreciation costs, the chairman said.

On the production front, FY19 saw number of new records being created.

The production improved substantially with the ramping up of new facilities and SAIL achieved its highest ever production of hot metal of 17.5 million tons, crude steel of 16.3 million tons and saleable steel of 15.1 million tons.

It also clocked an all-time best performance of ContinuousCast steel production of 13.8 million tons with a growth of 8 percent over previous best of 12.8 million tons achieved in 2017-18.

Modernisation and expansion plan

The modernisation and expansion plan at Rourkela, Burnpur, Durgapur, Bokaro and Salem Steel Plants have been completed and various facilities are under operation, stabilization and ramp up, the chairman said in the report.

With the project on the verge of completion, the modernised and expanded Bhilai Steel Plant (BSP) was dedicated to the Nation by the prime minister in June, 2018.

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62 Steel Insights, August 2019

Tear along the dotted line

Tear along the dotted line