4 Steel Insights, August 2022 CONTENTS 16 Impor ted scrap offers rise 17 India pig iron production down y-o-y in June 18 India’s June sponge iron production up 6.6% y-o-y 19 India June cr ude steel production up 6.3% y-o-y 20 Coal Ministr y to auction 43 broken-up mines 22 Seabor ne coking coal offers fall in July 23 July sales glitter ahead of festivities 25 Iron-ore handled by major por ts down 33% in Q1 26 Indian Railways’ iron ore handling down 15% in Q1 27 Global cr ude steel output down 6.73% in June m-o-m 31 China sets up PSU to control iron ore pricing 33 ArcelorMittal Brazil co buy to benefit from hydrogen hub plan 35 The economics of workplace safety 37 Tata Steel EBITDA up on higher realisation 39 Tata Metaliks doubles ductile pipe capacity 42 JSL eyes new stainless usages to fight dumping, expor t tax 43 Expor t duty hurts AM/NS performance 44 Expor t duty, deferred purchases impact JSW operations 49 Shyam Metalics EBITDA falls 12% y-o-y 50 Destocking, discounts pull down APL Apollo ear nings 52 Corporate update 54 mjunction to organise steel meet in physical mode 55 Gover nment update 57 Impor t Export data 61 Price trends 62 Ferro Alloy data 63 Production data 65 Consumption data 66 Impor t data 68 Expor t data 28 | INTRNATIONAL BHP iron ore output rises on capacity ramp up To explore low-carbon steelmaking with Tata Steel. 44 | CORPORATE Export duty, deferred purchases impact JSW ops Cuts down discretionary, special project capex. 6 | COVER STORY Steel prices bottoming out? Sector awaits restocking. 42 | CORPORATE Coal India setting up 10 washeries Now operating 14 washeries of 30 mtpa capacity. 47 | CORPORATE Higher royalty pulls down NMDC profit margins Untimely steel plant commissioning expected.
6 Steel Insights, August 2022 Steel bottomingpricesout?Sectorawaitsrestocking COVER STORY Sumit Maitra
userfeelpsychological“Theamongtheindustries is that prices have stabilised. We are seeing traction on the long products side with SteelMDSeshagirialreadyforlookingincreasingenquiriesandpricesup.Thedemandlongproductshavecomeback,”Rao,Joint&GroupCFO,JSW
“In India, steel prices have now stabilised. We do see a few green shoots, which should improve performance in the second half of the year but the heightened volatility makes it difficult to assess the exact impact,” T V Narendran, CEO & MD, Tata Steel
Steel Insights, August 2022 7 After a quarter of moderated production, rising inventory of unsold export consignments and falling sales realisation, the steel sector is seeing green shoots scattered across the steel valueWhilechain. the scenario looks gloomy considering the depressed pricing levels, there is a silver lining which is the gradual resumption in consumption. In May-June, the user industries were expecting that the prices would fall, and with that the apparent steel consumption was lower. They were not carrying the costly inventory and the inventories at the retail segment – the distributors – came down. With this, the inventories went up with the Theproducers.scenario is now improving, believes Seshagiri Rao, Joint MD & Group CFO, JSW“TheSteel.psychological feel among the user industries is that prices have stabilised,” Joint MD of JSW Steel said while addressing a webinar on the steel sector. The steel users, Rao believes, would start making enquiries again as they believe prices are not going to go down any further. T V Narendran, CEO & MD, Tata Steel also believes prices have bottomed out. “In India, steel prices have now stabilised and are at lower levels, and the pent-up demand or the demand which was postponed because steel prices were dropping is slowly coming back,” he told analysts during a postearnings conference call. According to him, sectors like automotive continue to do well, and the underlying demand from end users remains strong. And believes demand would further pick up post the monsoon period and with the early onset of the festive season. What triggered the steel price correction? “Imposition of export duty has brought in a big psychological factor in the user industry,” Rao told analysts. On May 21, the government imposed export duty of 15 percent on steel products in order to increase domestic supply and reduce domestic prices. This disrupted trade for 10-15 days and discouraged exports. “This along with destocking at consumer’s level and deferred domestic demand led to fall in overall steel volumes by 22-34 percent q-o-q in Q1FY23,” said analysts with Centrum Institutional Research. Raw material price correction is lagging the fall in steel prices while high energy costs and supply chain disruptions are impacting steel demand and prices, JSW told investors recently.“Ifyou see country-by-country overall trade flows, there is more production, more exports, falling demand and reducing imports. So, this has caused a fall in the steel prices. There is a fall of over 20 percent in the global steel prices, maybe in Europe and US, it is much more,” said Rao. Moderation in steel prices across key regions and input cost dynamics weigh on spot spreads, Tata Steel told investors. The price hikes taken in April and May helped to offset fall in prices in June and average Q1FY23 steel prices were up 4-7 percent sequentially. Coking coal prices started falling from May-end and fell from $520/t to $270/t now, it said. Growing expectations of restocking “We expect inventory restocking to resume, helping prices move up. And hence, while we do expect margin compression in the second quarter, we see volume expansion also to happen in the second quarter. We will start seeing the liquidity improve with inventory translating into sales,” Rao said. “We do see a few green shoots, which should improve performance in the second half of the year but the heightened volatility makes it difficult to assess the exact impact,” Narendran said during the conference call. “We are seeing traction on the long products side with enquiries increasing and prices looking up. The demand for long COVER STORY
28 Steel Insights, August 2022 INTERNATIONAL Steel Insights Bureau
BHP iron ore output rises on capacity ramp up
Global mining major BHP’s iron ore production in the June quarter has risen by 8 percent year-on-year to 64.2 million tons (mt) on capacity ramp up and improved logistics availability, the company has said. “Higher volumes at Western Australian iron ore (WAIO) reflects record production from the mining area C hub with the continued ramp up of south flank and improved supply chain performance,” the company said. “Our preventative maintenance programs continue to underpin the strength of the WAIO supply chain, delivering increased car dumper, reclaimer and ship loader availability year on year and enabling record sales volumes of 284 mt (100 percent basis).
South Flank ramp up to full production capacity of 80 mtpa (100 percent basis) is ahead of schedule with an average rate of 67 mtpa achieved in the June 2022 quarter contributing to record production from the Mining Area C (MAC) hub and record lump sales,” the company said. Production for the full year FY23 isn’t expected to rise much after remaining flat in FY22 at 253.2 mt. “Production for FY23 is expected to be between 249 and 260 mt,” the company said. Metallurgical coal Production by BHP-Mitsubishi Alliance (BMA) at Queensland decreased by 9 percent to 29 mt (58 mt on a 100 percent basis). Significant wet weather impacts across most BMA operations and labour constraints, including Covid-19 related absenteeism impacted stripping and mine productivity but was more than offset by record production at the Broadmeadow mine. BMA is Australia’s largest producer and supplier of seaborne metallurgical coal and is owned 50:50 by BHP and Mitsubishi Development.
BMA operates seven Bowen Basin mines (Goonyella Riverside, Broadmeadow, Daunia, Peak Downs, Saraji, Blackwater and Caval Ridge) and owns and operates the Hay Point Coal Terminal near Mackay. Following the automation of Daunia’s truck fleet in November 2021, the automation of Goonyella’s pre-strip truck fleet was completed in March 2022 with the Goonyella coal truck fleet expected to be fully autonomous by the end of the December 2022Productionquarter. for FY23 is expected to be between 29 and 32 mt (58 and 64 mt on a 100 percent basis). A long wall move at Broadmeadow mine is scheduled for the September 2022 quarter. Thermal coal New South Wales thermal coal production decreased by 4 percent to 14 mt, reflecting lower volumes due to an increased proportion of washed coal to capitalise on higher margins for higher quality coals, Covid-19 related labour constraints which impacted stripping performance and mine productivity, and wet weather.“Higher quality coal now make up “The near tripling of top-end royalties has Officer,Henry,ininvestmentregimes,highestonewhatworsenedwasalreadyoftheworld’scoalroyaltythreateningandjobsQueensland,”MikeChiefExecutiveBHP
Steel Insights, August 2022 37 Steel Insights Bureau Tata Steel Ltd on a consolidated basis reported EBITDA of `15,047 crores. On a quarter-on-quarter (q-o-q) basis, EBITDA margin improved to 24 percent while EBITDA on a per ton basis increased by `3,780 to `22,717. Consolidated profit after tax stood at `7,714 crores. EBITDA margin increased q-o-q from 22 percent to 24 percent and EBITDA per ton increased from `18,937 to `22,717. In India, standalone revenue stood at `32,021 crores and EBITDA was `9,616 crores. Deliveries were down 17 percent from 8.01 million tons (mt) in the March quarter to 6.62 mt in the June quarter due to lower volumes in India and Europe operations. Revenues increased on per ton basis driven by higher steel realisations in India and Europe while raw material costs increased primarily due to higher coking coal consumption cost across key entities. Other expenses decreased to `19,273 crore in the June quarter from `20,607 crores in the March quarter on lower power costs, consumption of stores and spares. The 6 million tons per annum (mtpa) pellet plant at Kalinganagar will be commissioned in 3QFY23 followed by the Cold Roll Mill complex and the 5 mtpa expansion, the company said. Tata Steel Long Products, a subsidiary of Tata Steel, has completed the acquisition of Neelachal Ispat Nigam Ltd on July 4. Tata Steel’s domestic deliveries were marginally lower by 2 percent year-onyear (y-o-y) due to moderation in exports following the imposition of 15 percent export duty.Consequently, domestic deliveries were successfully ramped up by leveraging the company’s strong marketing network. Revenue per ton rose by `8,534 q-o-q to `83,625 per ton due to long term contracts and product mix. Reported EBITDA stood at `9,582 crores, which translates to an EBITDA per ton of `23,557. In Europe, Tata Steel’s revenue per ton increased by £154 q-o-q to £1,248 per ton due to long term contracts and product mix. European operations achieved highest ever quarterly EBITDA at £621 million, which translates to an EBITDA per ton of £290. Production growth plans Tata Steel Kalinganagar’s 5 mtpa expansion is like to get commissioned by end FY24. It will lead to optimised portfolio of 2.2 mtpa of CRM and the expansion will drive product mix enrichment in flats. Market share in hi-end auto and engineering segments to grow, the company said. The company is focussed on meeting customer requirements related to lightweighting and safety standards. Neelachal Ispat acquisition is helping ramp-up of long products which will drive high-margin retail business. The business will benefit from significant pan India growth in infrastructure and retail housing growth in semi urban India ♦ Upstream: Pellet capacity to increase from 7 mtpa to 13 mtpa post Kalinganagar Phase II (TSK Ph mtpa II) completion; Iron ore mining to double from 30 mtpa to 60-65 mtpa Tata Steel EBITDA up q-o-q on higher realisation Key profit & loss account items (All figures are in Rs. crores unless stated otherwise) India1,2,3 Consolidated 1QFY234QFY221QFY221QFY234QFY221QFY222,3 Production (mn ton)4 4.924.904.637.74 7.62 7.88 Deliveries (mn ton) 4.075.124.156.62 8.01 7.11 Turnover 34,01538,48029,37763,430 69,324 53,465 Reported EBITDA 9,58212,53913,92415,047 15,174 16,185 Reported EBITDA per ton (Rs. Per ton) 23,55724,46933,56822,71718,93722,779 Adjusted EBITDA5 8,27011,94213,59514,34815,891 15,892 Adjusted EBITDA per ton (Rs. Per ton)20,33223,30532,77421,661 19,832 22,366 PBT before exceptional items 7,90310,80011,88111,94512,139 12,259 Exceptional Items (gain)/loss 5576(153)39274 182 Reported Profit after Tax 5,7837,8999,1127,714 9,835 9,768 1. India includes Tata Steel Standalone and Tata Steel Long Products on proforma basis without intercompany eliminations; 2. Tata Steel Standalone numbers have been restated from April 1, 2019 to reflect Tata Steel BSL’s merger into Tata Steel. 3. Figures for previous periods have been regrouped and reclassified to conform to classification of current period, where necessary. 4. Production numbers for consolidated financials are calculated using crude steel for India, liquid steel for Europe and saleable steel for SEA; 5. Adjusted for fair value changes and revaluation of offshore liabilities on account of FX rate movement. Domestic deliveries (in mt) CORPORATE
♦ Offering of coking coal blocks for production to private sector (including some discontinued mines) on revenue sharing basis through MDO route.
Tenders for setting up coking coal washery of capacity 3 mtpa on Build-OwnOperate (BOO) concept at Rajrappa within Central Coalfields Ltd and for renovation of existing Madhuban coking coal washery of 2.5 mtpa capacity at Bharat Coking Coal’s Dhanbad district on Renovate-OperateMaintain (ROM) model were recently floated.
Coking Coal Mission to meet domestic demand
The government has taken following steps to introduce clean coal technologies in Coal sector to contribute in future energy security of theThecountrygovernment has launched coal gasification mission with a target to gasify 100 mt by 2030. Under this mission, surface coal/lignite gasification projects are being constructed.CoalBed
Name Subsidiary Capacity(MTPA) State TopaCCL4.0JharkhandSawangDhoriCCL3.0JharkhandNewTapinBasantpurWasheryKatharaMoonidihBhojudihBCCL2.0Datherdih-lIBCCL2.5JharkhandMadhubandBCCL5.0JharkhandWestBengalNewBCCL2.5Jharkhand(New)CCL3.0Jharkhand-CCL4.0JharkhandRajrappaCCL3.0Jharkhand(New)CCL1.5Jharkhand Subsidiary-wise coking & non-coking coal production (in million tons) Company Coking Non-Coking 2021-222020-212021-222020-212021-222020-21Total ECL 0.0140.01532.41544.99032.42945.005 BCCL 29.04123.3841.4701.27230.51124.656 CCL 17.16415.04351.68247.54668.84662.589 NCL 0.0000.000122.431115.041122.431115.041 WCL 0.1580.18157.55150.09457.70850.275 SECL 0.2250.219142.289150.386142.514150.605 MCL 0.0000.000168.167148.013168.167148.013 NEC 0.0000.0000.0280.0360.0280.036 CIL 46.60238.842576.032557.378622.634596.220 * It includes production from Gare Palma IV/2&3 OC for which Coal India Ltd. was appointed akin to a designated custodian (through SECL)
government has set a target of production of 105-mt production by CIL and 35 mt by others leading to a domestic availability of 140 mt by According2030.to the Coal Ministry, CIL has also taken the following steps to increase the output/production of domestic raw coking coal: ♦ Constant efforts to enhance coking coal production by capacity addition of existing coking coal producing mines and by opening new coking coal blocks.
40 Steel Insights, August 2022 CORPORATE Steel Insights Bureau
♦ Mass production technology has been introduced in coking coal producing UG mines of CIL to enhance the raw coking coal production.
Steps to encourage indigenous clean coal tech
The government has launched the Coking Coal Mission to meet the demand for domestic coking coal, Coal Minister Pralhad Joshi recently told the Lok Sabha. Under this mission, 12 coking coal washeries are being constructed having capacity of 30 mtpa. He said the government has taken steps to explore new coking coal blocks, auction of new coking coal mines, enhance raw coking coal production, and enhance coking coal washing capacity. CIL has undertaken constant efforts to enhance coking coal production by capacity addition of existing coking coal producing mines and by opening new coking coal blocks, minister Joshi said. According to National Steel Policy 2017, to achieve steel making capacity of 300 million tons (including 180 mtpa through Blast Furnace route) by 2030, 170 mt coking coal will be required by 2030.
Methane gases from coal New projects
washery
CIL is presently operating 14 washeries with total washing capacity of 30 mtpa including Madhuband (5 mtpa) which became operational in July. These were disclosed in the recently released annual report of Coal India.
Coal India (CIL) is setting up 10 new coal washeries including: 3 in Bharat Coking Coal Ltd having total capacity of 7 mtpa, 6 coking coal washeries in Central Coalfields Ltd with total capacity of 18 mtpa and another noncoking coal washery at Ib Valley, Lakhanpur in Mahanadi Coalfields Ltd, which is under advanced state expected to be up this year.
Under Mission Coking Coal, the
Coal India setting up 10 washeries
Steel Insights Bureau
Standalone quarterly volumes (million tons)
“We should bring down the discretionary and special projects capex until situation improves. So, we have moderated our capex by `5,000 crores in this year from `20,000 crores to `15,000 crores,” Sheshagiri Rao.
44 Steel Insights, August 2022 CORPORATE
JSW Steel Ltd’s sales volume in the June quarter was lower by 21 percent quarteron-quarter (q-o-q) on imposition of export duty in May 2022 and deferral of procurement by user industries due to falling steel prices, the company has said. However, net sales realisation was higher in the June quarter by 9 percent q-o-q driven by higher global prices due to elevated energy and input costs.
The company’s plants, excluding Dolvi Phase 2, operated at 93 percent capacity utilisation, down from 98 percent during the March quarter due to pre-ponement of certain scheduled shutdowns. “Considering volatile market conditions, JSW preponed certain shutdowns that were scheduled during the year, which lowered the average capacity utilisation (excluding Dolvi Phase-II) for Q1 of FY23 to 93 percent from 98 percent in Q4 FY22. The 5 mtpa Dolvi Phase-II expansion continued to ramp up and will drive volume growth as demand recovers in the coming quarters,” the company said in a release. Consolidated sales (including operations of Bhusan Power & Steel Ltd) increased by 25 percent year-on-year (y-o-y) aided by contribution from BPSL and Dolvi Phase-II. On q-o-q basis, sales dropped 27 percent due to volatile market conditions. Similarly, domestic sales increased 52 percent y-o-y and declined 24 q-o-q. Exports fell 27 percent y-o-y and 35 percent q-o-q on imposition of export duty in May 2022, and elevated exports in Q1 of FY22 due to Value-addedCovid.steel share was maintained at 57 percent of sales mix. Domestic revenue from operations rose 32 percent to `38,086 crore for the June quarter as against `28,902 crore in the corresponding quarter of last fiscal. Revenue was `46895 crore in Q4 of FY22. PAT declines 86% JSW saw 85.8 percent decline in its consolidated net profit to `838 crore for the June quarter, down from `5,904 crore net profit in the year-ago quarter (Q1FY22). It had posted a net profit of `3,234 crore in the March 2022 quarter. In Q1FY23, the company’s domestic steel consumption was at 27.36 million tons (mt), down by 5.6 percent sequentially. While exports dropped by 26 percent to 2.88 mt, due to weaker global demand and imposition of export duty. Production During the June quarter, the firm’s consolidated crude steel production came at 5.88 mt. Saleable steel sales stood at 4.61 mt, impacted by a sharp reduction in exports due to the levy of export duty and a fall in apparent consumption due to destocking at the user “Duringlevel.the first quarter of FY23, high inflation across major economies on the back of supply chain disruptions and the RussiaUkraine conflict has impacted the global economic outlook. While India has been relatively resilient with economic activity recovering from the Covid-induced slump, high inflation and policy rate tightening
Export duty, deferred purchases impact JSW operations
Steel Insights, August 2022 47
Steel Insights Bureau
NMDC profit margins Operational and financial performance Particulars 2022-23 (Q1)2021-22 (Q1)Variance(%) Iron Ore Production (LT) 89.2089.10 0.10 0.12 Iron Ore Sales (LT) 78.0194.49(16.48)(17) Export Sales (LT) Domestic Sales (LT) 78.0194.49(16.48)(17) Average Domestic Realisation (Rs./T)6,0506,813(763) (11 ) Average Sales Realisation (Rs./T) 6,0506,823(773) ( 11) Iron ore Sales 4,7206,447(1,727)(27) Revenue from Operations 4,7676,512(1,745)(27) Interest Income 81 87 (6) (8) Other Income 65 57 8 15 Total Income 4,9136,656(1,743)(26) Operational Expenses & stock adjustment605 377 228 60 Royalty and other Levy 1,1341,021 113 11 Additional/Premium Royalty 1,228 995 233 23 Total Expenses 2,9672,393 574 24 EBITDA & Margin (%) 2,046 (43%)4,322 (66%) (2,276)(53) Profit Before Tax 1,9464,263(2,317)(54) Profit After Tax 1,4693,193(1,724)(54) CORPORATE
Impact of export duty hike NMDC has reduced the price of iron ore fines/lumps by `2,350/`2,200 per ton since the imposition of export duty of 15 percent on steel (mostly flats, non-alloy) and 50 percent on iron ore (all grades), and 45 percent on “Unlesspellets.thepellet exports resume, India will continue to have a marginal surplus of iron ore. The change in the export duty structure on iron ore doesn’t lead to a big change in our view as the export duty of 30 percent was anyways present on lumps and fines over 58 percent Fe. The lower Fe content ore is hardly used by the industry, and hence the impact of a change in export duty on iron ore is not meaningful,” Motilal Oswal said in a report. However, the impact of pellet exports and the rising cost of thermal coal has led to lower DRI production in Q1 of FY23, impacting iron ore sales for the industry as well as for NMDC, the report added. down
EBITDA for the quarter was at `1,900 crore, down 55 percent y-o-y. EBITDA/ ton for the quarter was at `2,436/ton, up 11 percent q-o-q but down 45 percent y-o-y.
“With 5 mt expansion of JSW in Dolvi and additional 5 mt HRC coming up at Vijayanagar, commissioningtheof the steel plant of NMDC will further add to the already surplus market for MotilalHRC.”Oswal
“The decline in EBITDA margins was on account of higher royalty outgo. Over the next couple of years, we expect NMDC’s EBITDA margin to hover at 34-35 percent level,” ICICI Securities said. Net profit for the quarter was at `1,470 crore, down 19 percent q-o-q and 54 percent y-o-y. NMDC sales down 10% in July y-o-y NMDC’s sales stood at 2.95 mt in July 2022, a decrease of 10.3 percent from 3.29 mt in the corresponding month last year, the company said in Therelease.iron ore miner reported 2.05 mt production in July 2022, down 33 percent as against 3.06 mt produced in the same period last Theyear. state-owned miner’s sales stood at 10.62 mt during April-July of FY23, down 17.5 percent from 12.87 mt during the same period last year. While production during April-July 2022-23 stood at 10.97 mt, a decrease of 8.3 percent as against 11.96 mt produced during the same period last year. Sector Production (in mt)Sales (in mt) Jul 2022Jul 2021Jul 2022Jul 2021 Chhattisgarh1.122.081.382.31Karnataka0.930.981.570.98Total2.053.062.953.29
For the June quarter, NMDC has reported a better-than-expected performance, primarily on the back of higher-than-expected blended iron ore realisations.Ironore realisations for Q1 of FY23 were at `6,050/ton, up 13 percent quarter-onquarterDuring(q-o-q).thequarter, iron ore sales volume was 7.8 million tons (mt), down 17 percent year-on-year (y-o-y) and 36 percent q-o-q. Topline of `4,767 crore was down 27 percent y-o-y and 29 percent q-o-q.
Higher royalty pulls
EBITDA margin for the quarter was at 39.9 percent compared to 64.1 percent in Q1FY22 and 40.1 percent in Q4FY21.
70 Steel Insights, August 2022