Steel Insights, December 2016

Contents 19 Safeguard duty imposed on select imports, MIP extended 22 Iron ore price revival not in sight 23 Demonetisation: Real estate stands its ground 24 Challenging times ahead for India steel players: ICRA 25 Auto sales cross cash bump riding order books in Nov 26 Indian ferro chrome makers gain from China demand 27 Gross NPAs in steel sector at `1.15 lakh crore: Govt 28 Coking coal offers continue to sizzle in Nov 29 Govt extends implementation of quality control order by 2 months 30 Steel makers eyeing export market as rupee tumbles 31 Tata Steel inaugurates ferro-chrome plant in Gopalpur 33 Corporate updates 35 Nucor Steel upgrades automation, drives in carbon steel plate mill 37 65 Indian mining blocks ready for auction: Mines secy 38 SteelMin plans time-bound shift to digital mode 39 Iron ore Oct handling by major ports down 39% m-o-m 40 Indian Railways’ Oct iron ore handling up 17% m-o-m 41 Global crude steel output up 3% in October m-o-m 42 MIP to lend support to steel prices, input costs worrisome 48 Price data 49 Ferro alloy data 50 Production data 52 Consumption data 53 Import data 54 Import-export data 56 Export data

4 Steel Insights, December 2016

6 | COVER STORY

Coaxing the most out of coking coal ADD on met coke and sharp jump in coking coal prices are forcing steel mills to rejig their procurement strategy.

20 | FEATURE

Demonetisation to impact steel & consuming sectors Govt’s demonetisation move will impact steel industry and its consuming sectors hard.

21 | FEATURE

India extends steel floor price till Feb 4

28 | INTERVIEW

India has yet again extended the floor price of imports of steel products for a further two months.

India may surpass Japan to be No.2 in steel output by 2017 Domestic steel market ready to go to next growth trajectory riding on demand from the infrastructure and machinery sectors.

43 | INTERVIEW

Iron ore mining ban lift offers opportunities for mining gear Demand for power, metals and infrastructure in India is likely to keep mining equipment industry buoyant.

Cover Story

Coaxing the most out of coking coal Tamajit Pain

6 Steel Insights, December 2016

Cover Story

I

ndia recently imposed anti-dumping duties on coke imports from China and Australia, which will be effective over the next five years, according to a statement released by the country’s Ministry of Finance.

Duties of $25.20 per ton and $16.29 per ton will be levied on imports from China and Australia, respectively, starting November 25.

The anti-dumping application had been filed in December by the Indian Metallurgical Coke Manufacturers Association, whose members include coke-makers Saurashtra Fuels Pvt Ltd, Gujarat NRE Coke Ltd, Carbon Edge Industries Ltd, Bhatia Coke and Energy Ltd and Basudha Udyog Pvt Ltd, which together account for more than half of India’s merchant coke output.

This proposal was based on the recommendations from the Director General of Anti-Dumping (DGAD) on October 20, 2016 on investigations into low ash metallurgical coke imported from China and Australia based on the petition filed by the domestic Indian Metallurgical Coke Manufacturers Association.

But market participants stated that the duty of $25.20 per ton imposed on Chinese coke imports was only a small fraction of the current price and might not boost the competitiveness of Indian alternatives.

Indian steel-makers were already mulling output cuts as most were exposed to soaring Australian coking coal prices in the last two quarters, sources said.

Next on the agenda for coke and steel producers will be petitioning for the scrapping of the 2.5 percent import duty on coking coal, an Indian coke-maker said.

Measure not sufficient

This measure of the anti-dumping duty on met coke being dumped by China and Australia is seen as a welcome move but more needs to be done to end the suffering of the domestic met coke industry in the country, the Indian Metallurgical Coke Manufacturers’ Association (IMCOM) said in a statement.

Terming the move as insufficient for safeguarding the interests of the domestic industry, IMCOM has requested the government to remove the 2.5 percent import duty on coking coal. It said the investigation had considered a period from April 2014 to June 2015 with the then prevailing prices.

According to IMCOM, the duty imposed is based on the investigations into imports during April 2014 - June 2015 and the prices of dumped met coke and coking coal since then have undergone a sea change today, which negates much of the benefit.

“However, the prices of coking coal and met coke have undergone a sea change today, which negates much of the benefit,” it said.

The price of met coke today is $350 per ton from $121 in January 2016, (a jump of 2.9 times), while the price of coking coal has risen much more sharply to $315 per ton

today from $90 in January 2016 (a 3.5-fold increase).

It may also be noted that 1.5 tons of coking coal are required to produce 1 ton of met coke, hence, the price of met coke should be at least 1.5 times the price of coking coal to cover the conversion cost.

IMCOM has also requested the government to remove the clean energy cess of `400 per ton on coking coal.

“The domestic metallurgical coke industry hence requests the government to remove the 2.5 percent import duty on coking coal. IMCOM has also requested the government to remove the clean energy cess of `400 per ton on coking coal. It is to be noted that India meets over 80 percent of its coking coal needs through imports which is used in producing met coke for blast furnace steel production,” the statement mentioned.

Moreover, there is no substitute for imported coking coal for production of metallurgical coke. In the met coke production process, no carbon is burnt and hence no carbon dioxide is produced as all the carbon of coking coal is retained by met coke. Hence, there is no case for imposition of a clean energy cess.

Met coke-makers raise alarm

What has for long remained a source of despair for the Indian steel industry is now taking a heavy toll on local merchant producers of metallurgical coke, used as a fuel

Anti-dumping duties on met coke Sl. No

Subheading

1.

270400

Low ash metallurgical coke excluding metallurgical coke with ash content in excess of 18%.

People’s Republic of China

2.

270400

Low ash metallurgical coke excluding metallurgical coke with ash content in excess of 18%.

3.

270400

4.

Description of goods

Unit of measurement

Currency

25.20

Metric Ton

US Dollar

Any

25.20

Metric Ton

US Dollar

Any

Any

25.20

Metric Ton

US Dollar

Australia

Any

Any

16.29

Metric Ton

US Dollar

Australia

Any country other than subject countries

Any

Any

16.29

Metric Ton

US Dollar

Any country other than subject countries

Australia

Any

Any

16.29

Metric Ton

US Dollar

Country of origin

Country of export

Producer

Exporter

People’s Republic of China

Any

Any

People’s Republic of China

Any country other than subject countries

Any

Low ash metallurgical coke excluding metallurgical coke with ash content in excess of 18%.

Any country other than subject countries

People’s Republic of China

270400

Low ash metallurgical coke excluding metallurgical coke with ash content in excess of 18%.

Australia

5.

270400

Low ash metallurgical coke excluding metallurgical coke with ash content in excess of 18%.

6.

270400

Low ash metallurgical coke excluding metallurgical coke with ash content in excess of 18%.

Amount

Steel Insights, December 2016

7

FEATURE

Move aims to curb cheap imports

India extends steel floor price till Feb 4

Steel Insights Bureau

I

ndia has yet again extended the floor price of imports of steel products for a further two months as the government tries to protect the domestic industry from cheap overseas shipments, especially from China.

The floor price, or the minimum import price (MIP), was introduced for six months in February, the first time the government had taken such a step in more than 15 years. It was extended from its initial expiry in August to October 4, and then till December 4.

The third extension until February 4, announced by the commerce and industry ministry late on Saturday, is a sign that India is growing increasingly protectionist as it tries to support local players in the world’s only major growing steel market.

Top domestic steel-makers such as JSW Steel Ltd, Tata Steel Ltd and Jindal Steel & Power Ltd had lobbied with the government hard to adopt more measures to protect their margins hit hard from cheap imports from China, Japan and South Korea.

Extend MIP: ISA

Earlier, the Indian Steel Association (ISA) has urged the government to extend the MIP imposed on certain steel products by another six months to offset the expected dent in demand and production due to factors like demonetisation and the anti-dumping duty on met coke.

“We have urged the government for continuation of the MIP regime for six months, pertaining to imports of 66 HS codes of iron and steel,” ISA said in a statement here.

The complete material impact of MIP – imposed for the first time on 173 HS codes in February 2016 – has not yet trickled down to boost domestic demand for the said products, it added.

Recent developments, including liquidity crunch among consumers on account of the currency demonetisation as well as imposition of the anti-dumping duties on imports of metallurgical coke into India, are expected to further dent the demand and production situation respectively, ISA Secretary General Sanak Mishra said.

While domestic prices of hot rolled coils (HRC) did begin to recover from February 2016 onwards, they witnessed a drop from June 2016 - August 2016 on account of sluggish construction activities during the monsoon.

After subsequent extensions on a limited set of 66 HS codes in August 2016 and October 2016, the prices rose marginally, primarily on the back of a more than threefold jump in international spot prices of coking coal from around US$ 90 per ton in July 2016 to around US$ 300 per ton in December 2016, while the demand for steel continued to remain weak.

The same can be substantiated from the fact that India’s consumption of total finished steel grew by a meagre 2.8 percent during April-October, 2016-17 over the same period last year, as per figures published by the Joint Plant Committee of the Union steel ministry.

Additionally, the rightful imposition of anti-dumping and safeguard duties by the government on various steel products over the past few months have come through after comprehensive investigations and stakeholder discussions by the designated authorities and their assessment of the injury caused to the domestic industry.

The same should not be construed as sops being doled out to the industry, majority of which continue to be financially distressed, ISA said.

These measures, being either product specific or country specific, also cannot be considered as adequate replacement for the MIP in offering a level playing field, it added.

The Indian Steel Association is the premier body of Indian steel-makers which represents 60 percent of steel capacities in the country.

Steel Insights, December 2016

21

Interview

India may surpass Japan to be No.2 in steel output by 2017

T

he Institute for Steel Development and Growth (INSDAG) is a research unit promoted by the Ministry of Steel, India. INSDAG feels that the domestic steel market is ready to go to the next growth trajectory riding on demand from the infrastructure and machinery sectors. The Indian steel market is expected to grow at 7-8 percent per annum while other two steel manufacturing countries in Asia – Japan and China – are going to face negative growth. Even though demonetisation adversely impacts the steel market, in the long run, it will benefit the industry, Sushim Banerjee, Director General, INSDAG, tells Diptoshree Sengupta. Excerpts from an interview:

Currently, the Indian steel market is going through a challenging phase. What kind of growth are you expecting in the next couple of years?

The Indian steel market can experience a big jump in 2017, depending on infrastructure and industrial growth. Here we are not only talking about carbon steel but all varieties of iron and steel such as stainless steel, which is being used in domestic areas as well.

Even though the first and second quarters did not do well for the steel market, the situation will change for the better in 2017. The domestic steel market is expected to grow at a 7-8 percent CAGR next year. This is quite a significant growth while a number of countries are running into negative zone.

Recently, credit rating agency Moody’s released a report saying that India is the only area of strength in the subdued Asian steel market aided by rising demand and government measures to curb imports like MIP and anti-dumping duties. However, the agency kept the outlook for the Asian steel market negative mainly because of decline in production and lower profitability.

Another two steel giants – China and Japan – may register a decline in steel growth. As a result, by 2017, India may surpass Japan and become the second-largest steel producer in the world. Currently, the difference between Indian and Japanese steel production is 15-20 million tons (mt). The difference can be covered by the end of next year. Moreover, the Japanese steel market is

mostly export-based while in India domestic demand leads the way of steel production.

Which sectors will drive growth for steel consumption?

The growth of the steel industry is directly related to the overall economic growth (GDP) of the country. The infrastructure sector consumes 60-62 percent of the total steel production in India. Currently, construction and developmental activities are taking place in a number of states, which is expected to boost steel demand. Initiatives like constructions of bridges, flyovers, industrial corridors, ports, etc also indirectly propel steel demand. Development works also boosts two important steel consuming sectors – machineries and logistics.

Steel Insights, December 2016

43

Interview

Iron ore mining ban lift offers opportunities for mining gear How big is the market for mining equipment in India?

The mining industry in India is estimated at around $23 billion in 2016 and forecasted to grow at 6 percent through 2020. Primarily, the two big contributors are coal and iron ore. Coal’s share is around 700 million tons (mt) and iron ore is at about 135 million tons.

Iron ore prices have fallen quite a bit over the last five years – these were at say $115 per ton and today, are languishing at around $50 per ton!

T

he Sandvik Group recently merged its mining and construction equipment businesses into one entity, Sandvik Mining and Rock Technology (SMRT), to milk the synergies of both. There is a demand for power, metals and infrastructure in India, catapulted by the increased consumption trends from the middle class while governmental policy decisions are likely to keep demand buoyant. And Sandvik is geared to seize the opportunities thrown up by such factors, Subhasis Das, Vice-President and Head of the Sandvik Mining and Rock Technology business in India, tells Madhumita Mookerji. Excerpts from an interview:

How do you see the market panning out in India, say over the next three years? At what rate would the market grow? What will be the enablers and the challenges?

The total contribution of mining to the country’s GDP is around 2.2 to 2.5% percent. With the country’s GDP growing at +7%, the need for increased power supply exists. So demand is there. Even with production of 700 mt of coal, the country is importing about 200 mt of the fuel. It is true that the government recently softened its ambitious plans of 1 billion tons of coal production by 2020, the reason being oversupplies at ports. However, with the recent surge in international prices, the

industry in India will have to come back on track soon.

We definitely have phenomenal coal reserves. Since India’s consumption of coal is primarily by the utilities and other service players, the need for power will only go up because consumption by the middle class will definitely increase. Also, policy decisions like ‘Power for All 24x7’ by the government are pointers to increased electricity consumption in future. These are the enablers that will keep demand buoyant.

In that case, how do you see the mining equipment industry cashing in on such opportunities, going ahead?

Where capex is concerned, the companies follow a cyclical investment trend. So I anticipate a growth that will be proportional to the production trends. We at Sandvik have also grown over the last two years.

The growth will significantly depend on the mining leases and permissions granted in the near future and subsequently opening up of bids from the mine developers-cum-

Steel Insights, December 2016

45

58 Steel Insights, December 2016

Tear along the dotted line

Tear along the dotted line