Contents
6 | COVER STORY
20 Domestic demand ensuring drop in chrome ore exports 22 Not much progress made in saved licences
Ferrous wheel
29 Scrap prices may rise `500-700 per ton in Dec 30 Pig iron market to stay stable in subdued Dec 31 Sponge iron October production down y-o-y, m-o-m 32 Steel procurement policy saves `8,000 crore import bill 33 India’s Oct crude output remains almost flat 34 Moody’s maintains stable outlook for Asian steelmakers
India’s ferro alloy industry being squeezed by weak demand, high power cost and difficulty in accessing local mineral resources
24 | Interview
IoT, AI the next big thing in construction technology industry Technology adoption in the CE market fills up productivity gap, says Ajay Aneja, Brand Leader, CASE Construction
26 | SPECIAL FOCUS
38 November slowdown for Motown as sales take backseat
Dry bulk cargo freight rates to stay flat in short term
40 Seaborne coking coal prices remain firm 41 Indian coking coal demand to rise: ISA 44 Surplus iron ore stocks clearance can enhance output: FIMI 46 Tata Steel begins phase-II expansion of Kalinganagar plant 48 JSPL records net profit of `279.17 cr in Q2 49 Corporate 50 Required: a paradigm shift in mineral policy 52 Katowice summit to hammer out rule book to 2015 Paris agreement 56 Global crude steel output up 3% in Oct m-o-m 57 Traffic handled by major ports up 5% in April-October 58 Indian Railways’ Oct iron-ore handling up 15.5% y-o-y 59 Price data
4 Steel Insights, December 2018
35 | Feature
Q4 outlook is bleak but improvement expected in the Baltic Dry Index in H2 of 2019 on lower fleet growth prospects
Collaborative research required between coal, power & steel sectors Coking coal security is must for steel sector but its scarce availability means making best use of steam coal through research
43 | Feature
‘India to become largest coking coal importer by 2022’ Demand for the fuel projected to grow to over 70 mt from about 56 mt at present, within this time-frame
Cover Story
Ferrous wheel India’s ferro alloys industry being squeezed by weak demand, high power cost and difficulty in accessing local mineral resources Madhumita Mookerji
6 Steel Insights, December 2018
Cover Story
T
he ferro alloys industry is one whose scales are unevenly weighed. While the ferro chrome industry seems to be doing fine, earning substantial revenues riding the stainless steel wave, all is not well with the ferro manganese players. The dichotomy in the story, perhaps, has to do with access to the basic input materials, policy short sightedness and the extent to which players can control the pricing mechanism. The decade prior to 2007 was one characterized by mineral exports out of India. Then came the mantra of value-addition and India embarked on the same for an effective utilisation of resources. The country gradually became a success story in carbon steel over 2007-2017, reaching the 100 mt club in steel production and is well slated to become the second-largest steel producer next year. The compound annual growth rate (CAGR) of carbon steel production achieved in India is probably one of the highest by any country in this decade. The growth in the stainless steel segment too has been quite phenomenal. Both consumption and production have grown at a CAGR of 8 percent over 2007-2017. With per capita consumption of steel and stainless steel still low compared to that of other countries, India can expect its ferro alloys industry to grow further, based on future demand.
Indian scenario
Indeed, the rising steel production presents a perfect platform for ferro alloy production in India and the same has grown in leaps and bounds in the recent past. India produces around 4-4.5 mt of manganese alloys and chrome alloys together per annum. If we want to put a perspective to the value this industry brings to the table, then it is almost a `50,000-crore market annually. In 201617, India’s total production capacity in ferro alloys was 5.15 mt. With abundant resources and the government’s plans to increase steel production to 300 mt by 2030, there is a huge potential in the Indian manganese ore, chrome ore and ferro alloys sector. The manganese alloy industry will have to play a key role in the immediate future in the development of the National Steel Policy. “With India having set a target of 300 mt of crude steel production by 2030, the
demand for manganese ore is expected to rise commensurately by 10 mt per annum in the coming years,” says a source. “Fortunately our country is endowed with huge resources of manganese ore to the tune of 498 million tons and chrome ore of 344 mt as in April 2015. However, it is ironical that despite possessing such huge resources, domestic mining industry remains underharnessed. And the ferro alloys industry is compelled to import these two raw materials. Despite significant additions of manganese and chrome over the last decade, ore production in both these cases has been more or less stagnant, with manganese ore slightly increasing from 3.05 mt in 2010-11 to 3.1 mt in 2017-18. Chrome ore dropped from 4.32 mt in 2010-11 to 3.46 mt in 2017-18. The gap in domestic production and consumption is increasingly met through imports and huge stockpiles of low grade ore has been built up at the mine-heads. Thus, there is a pressing need for the industry to beneficiate these low grade ores for utilisation by the domestic ferro alloys industry,” says Sunil Duggal, President, FIMI. Duggal was speaking at the Manganese/ Chrome Ores And Ferro Alloys Summit, 2018, organised by the Federation of Indian Mineral Industries (FIMI) in Kolkata recently. Where manganese alloys are concerned, India produces 2.5-3 mt but imports constitute a significant majority of the imports of ore. India is a net importer of manganese ore. If we dig deeper, of the 100-odd mt of carbon steel that India produces, it consumes 25-30 kg of manganese alloys for producing 1 ton of long products and may be 7-8 kg for making flat products. So, almost 1.3 mt and 1.5 mt of manganese alloys consumption are required (in long and flats) for a self-sustaining carbon steel production scenario.
In the chrome alloy segment, the stainless steel industry is mainly the final customer. If we look at the supply chain, India produces almost 1.3 mt of ferro chrome of which around 50 percent is exported out. Majority of the chrome alloys is made from the ore produced in India. Imports of chrome ore are negligible from India. So, since India produces around 3 mt of stainless steel per annum, majority of the requirement of chrome alloys is selfsustained and produced in India. Indeed, there are two sides to the `23,000-crore ferro alloys story in India. “The ferro chrome industry in India is largely stable. Perhaps because of an efficient supply chain. The manganese alloy industry is not in such a comfortable position. And if we aspire to be a 300-mt of steel producing country in 12 years it would mean 3 times the manganese alloys production. With India importing such a large volume of manganese ore, it is a challenge as to how to sustain the growth that will happen from the manganese alloys perspective. As a result, the next decade is going to be extremely challenging, especially for the manganese alloys industry in countering the global forces. The writing is on the wall. If the Indian ferro alloys producers do not sustain their own production capacities, become self-sufficient in their ore sourcing, the time would not be too far away when India would start importing manganese alloys as well,” warns T V Srinivas Shenoy. Chief of Marketing & Sales, Ferro Alloys & Minerals SBU, Tata Steel Limited. Shenoy too was speaking the FIMI summit in Kolkata. “The ferro alloy industry in India is being squeezed by weak demand, high power cost and difficulty in accessing local mineral resources…. Clearly, there is a huge
The ferro chrome industry in India is largely stable. Perhaps because of an efficient supply chain. The manganese alloy industry is not in such a comfortable position. And if we aspire to be a 300-mt of steel producing country in 12 years it would mean 3 times the manganese alloys production. With India importing such a large volume of manganese ore, it is a challenge as to how to sustain the growth that will happen from the manganese alloys perspective. As a result, the next decade is going to be extremely challenging, especially for the manganese alloys industry in countering the global forces
Steel Insights, December 2018
7
INTERVIEW
IoT, AI the next big thing in construction technology industry
W
ith around 70 percent growth seen in the first half of 2018, construction equipment maker CASE Construction is eyeing the Centre’s ambitious programmes like Bharatmala and Sagarmala, state and rural road development and maintenance projects, railways, Metro Rail development among others. These projects have had a positive impact in terms of increased demand of construction equipment. The estimated sales of construction equipment in the first half of 2018 increased by 33 percent as compared to 2017, but a similar growth trend may not be supported in the second half of 2018, Ajay Aneja, Brand Leader, CASE Construction, tells Ritwik Sinha. Excerpts from an interview:
What is your immediate outlook on the Indian construction equipment (CE) sector? How do you think the market is performing in the current fiscal and what are your predictions for the next fiscal? Start of 2018 was a great period for the construction industry. The industry outlook for the construction equipment (CE) sector has been promising and allotment of an increasing number of road and highway projects is expected. Fuelled by a demand for roads and irrigation projects, CE manufacturers have also speeded up in terms of adding new and technologically efficient products to their product line. The estimated sales of construction equipment in the first half of 2018 increased by 33 percent as compared to 2017. However, a similar growth may not be supported in the second half of 2018. The rainy season and elections in Chhattisgarh, Madhya Pradesh and Rajasthan at the end of 2018 might have a negative impact on demand, while sales may also be moderate as the country approaches general elections scheduled in mid-2019.
24 Steel Insights, December 2018
What are the critical factors for success in the construction industry in India? Construction is one of the major industries in India and is an important indicator of a country’s development as it creates investment opportunities across various related sectors. Regular maintenance, operators’ visibility, after-sales support, customer feedback, R&D are identified as key factors for developing the construction industry worldwide and to improve its effectiveness. Government’s support for awarding roads and infrastructure projects is a must-do factor which contributes to the success of the construction Industry. We have already seen around 70 percent growth in first half of the year, compared to last year. This can be credited to the government’s focus on developing world-class infrastructure, backed by its ability to facilitate quick project implementation, financing and simplification of procedures for project awards and clearances. How important is the government’s role in the construction sector? We feel the government has a vital role to
play in the sector. The present government is focused on developing world-class infrastructure, backed by its ability to facilitate quick implementation of projects, financing and simplification of procedures for project awards and clearances. Schemes and projects like Sagarmala Pariyojana (port modernisation, connectivity, portlinked industrialisation), Bharat Mala, Jal Marg Vikas, Smart Cities, AMRUT, Housing for All, expressway network, Diamond Quadrilateral for high-speed railways, Dedicated Freight Corridors, river linkages and waterways etc are some of the enterprising programmes being implemented across the country that have increased demand for construction equipment. The policy and administrative decisions of the current government to speed up the pace of infrastructure development has showed positive results and sales have increased. As per reports, roads and highway construction logged a robust 18 percent year-on-year (y-o-y) growth in the first seven months of the ongoing fiscal, taking the
SPECIAL FOCUS
Dry bulk cargo freight rates to stay flat in short term Although Q4 outlook looks bleak, significant improvement is expected in the Baltic Dry Index, particularly from the latter part of 2019 on lower fleet growth prospects Steel Insights Bureau
T
h o u g h freight r a t e s struggled with overcapacity and weak demand in 2016, in 2017, the dry bulk market underwent a remarkable recovery while 2018 saw the overall market improve in the first three quarters. However, in the short term, freight rates would remain flat with the Baltic Index average of 2018 at 1,300-1,400 points, as per Ravi Chopra, Director, InterOcean. The reasons for the flat trend, Chopra said, were that Chinese iron ore and coal imports were not looking bright in the short term. “There has been a 5 percent decrease in Chinese iron ore imports till October 2018 compared to the same period in 2017. China has already restricted imports of coal into 2018 to 2017 levels which stood at 471 million tons. Total imports till October 2018 stood at 251 mt. Chinese imports of US soya beans have been almost non-existent in the recent past,” he said. Chopra was speaking at the 12th Indian Coal Markets Conference, organised by mjunction services limited recently. Media reports also say that China’s imports of soyabeans for this season will drop to 84.7 mt, down 10.79 percent from last year. Thus, these lower volumes mean there will be weaker demand across vessel segments. The IMF has lowered the outlook for the Chinese economy for next year to 6.2 percent
26 Steel Insights, December 2018
from 6.6 percent in 2018. The IMF also expects the US economy to fall to 2.5 percent growth next year from 2.9 percent this year amidst the country’s escalating trade war with China. Bleak Q4 outlook
In 2018, overall, the dry bulk market improved in the first three quarters of 2018, despite trade war fears. The average freight rates during the third quarter was generally higher than in the second quarter of 2018 and Q3 of 2017.
However, the speculation of robust growth in the fourth quarter (Q4) of 2018 has more or less evaporated. The current market environment has overcapacity. As on November 22, 2018, the average daily earnings (weighted time charter average) for Capesize declined to around $8,951 per day, Panamaxes stood at $11,018 per day and Supramaxes at $10,964 per day. Capesizes recorded yearly high on August 6, 2018 at $2,783 per day. It’s all about China. Or is it?
The Baltic Dry Index is within a whisker of crashing through the 1,000 points for the first time since April. Despite only modest expansion in fleet capacity, the usual culprit when rates collapse, this time it is about waning growth in Chinese demand. China buys more than a million tons of iron ore and coal annually. While imports expanded 1.8 percent this year, growth in 2017 was 5.5 percent. At the same time, the Chinese government has restricted imports of coal used in power plants as it seeks to curb pollution. The nation is also buying fewer US agricultural products, hurting smaller ships. The daily average rate for a giant Capesize vessel hauling iron ore to
Baltic Dry Index 2018
Source: Baltic Exchange, BIMCO, Press Search, Bloomberg
FEATURE
Collaborative research required between coal, power & steel sectors
Steel Insights Bureau
C
oal is a commodity which drives an economy and the steel industry is a little worried that if the first preference of supply of coal, especially coking coal, should go to the power sector, and not the steel industry. Steel can be purchased. But power cannot be, reminded Subrata Mitra, Joint Managing Director, M N Dastur & Co (P) Ltd, while speaking at the 12th Indian Coal Markets Conference, which was organised by mjunction services limited recently. Endorsing that this was a vast subject, Mitra said steel in particular demands coal and its scarcity is a huge hindrance to its development. Because, he emphasised, the steel industry has to grow if the country has to grow. It is well-know by now that India has a target to take its crude steel production to 300 mt by 2030-31. To achieve that goal the steel mills will require a lot of iron ore,
deposits of which are ample in the country. But India does not have good quality coking coal which increases the operating cost, and impacts quality of the end-product, Mitra said. The Jharia belt is the only coking coal supply resource in India. “But the best of that coal used to be utilised in running steam engines for decades. At that time, there was no steel demand. The coal was only sourced from Jharia and Raniganj belts. Jharia coal was the best and the top part near the surface has hard coking coal which is desired for making coke. Over the years, that hard coking coal has diminished. And we now have with the inferior varieties in the Jharia belt which has called for beneficiation and washing. Washing has been there for the last 100 years but it has to increase,” Mitra emphasised. But why is coal so important for the steel industry? First, coal is converted to lump coke in a coking oven. Then raw iron is made by reducing (removing the oxygen from) iron ore (iron oxide) by reacting it at high temperature with coke in a blast furnace. About half of the carbon in the coke combines with the oxygen from the iron ore to make CO2. Since we do not have enough coking coal, we keep on importing it. “It is cyclic and the import cost goes into
Quality comparison of typical Indian and imported Australian coking coal Coal/coke parameters
Australian coking coal
Indian washed coking coal
1-2
2 – 2.5
7.5 - 9.8
15.24 – 18.03
19.3 - 24.3
18.58 – 24.84
Remarks
A. Proximate Analysis Moisture (%) Ash (%) Volatile Matter (%)
Higher in Indian coals. It is upto 40% to 45% before washing
B. Ultimate Analysis Carbon (%)
88.3 - 90
70.9 – 75.1
Hydrogen (%)
4.67 - 5.0
4.03 – 4.23
Nitrogen (%)
1.8 - 2.06
1.08 – 1.57
Sulphur (%)
0.55 - 0.7
0.57 – 0.83
0.007 - 0.07
0.026 – 0.18
Vitrinite (%)
55 - 70
46.5 – 55.0
Liptinite (%)
0-1
0 – 4.4
Phosphorous (%) C. Petrographic Analysis
Exinite (%)
Lower in Indian coals.
0
0
27 – 42
38.1 – 45.6
Higher in Indian coal.
Mineral Matter (%)
2–4
5.9 – 9.9
Higher in Indian coal
Vitrinite Reflectance (Rmax)
1.17 – 1.55
0.98 – 1.3
Lower in Indian coal.
Inertinite (%)
Source: M. N. Dastur & Co. (P) Ltd
Steel Insights, December 2018
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66 Steel Insights, December 2018
Tear along the dotted line
Tear along the dotted line