Steel Insights December 2021

CONTENTS 12 Imported scrap trade pick up marginally as offers fall 13 India pig iron production down in October 14 October sponge iron production remained flat 15 India October crude steel production up 2.4% y-o-y 21 National Coal Gasification Mission for syngas in steelmaking 24 Q3 sales of steel cos to stay high, input costs to dent profits 27 IR’s freight share boost plan to benefit steel sector: report 29 Net Zero may lead to major consolidation in steel sector: study 32 Stainless steel makers seek restoring countervailing duty on flats 33 Mines Ministry allows individuals to identify mines for auction 35 Seaborne coking coal offers plunge in November 36 Cars sales in November end in dismal note 38 Iron-ore handled by major ports down 20% till October 39 Indian Railways’ iron-ore handling up 18% till October 40 Global crude steel output up 1% in October m-o-m 43 SAIL gets rating boost from deleveraging, cash accruals 46 JSPL EBITDA to cross `22,000 a ton in Q3 47 Corporate update 49 Government update 51 Import Export data 55 Price trends 56 Ferro Alloy data 57 Production data 59 Consumption data 60 Import data

4 Steel Insights, December 2021

6 | COVER STORY

What’s in store for 2022?

Demand-supply dynamics, sustainability to drive growth.

16 | FEATURE

Collaborations, policy intervention needed to reach 300-mt: study CII-E&Y study suggests export orientation, presence in attractive markets.

26 | FEATURE

Mission Coking Coal for import parity pricing Suggests incentives to encourage steel sector.

41 | INTERNATIONAL

UAE Steel Producers Committee formed SPC represents 15 manufacturers with combined 5 mt output.

44 | CORPORATE

NMDC initiates major capex projects Eyeing higher capacity utilisation, despatches.

COVER STORY

What’s in store for 2022?

Demand-supply dynamics, sustainability to drive growth

Sumit Maitra & Tamajit Pain

6 Steel Insights, December 2021

COVER STORY

M

etals, like most commodities, move in cycles.

The uptrend after the outbreak of Covid-19 has been nothing short of spectacular. US Midwest domestic Hot Rolled Coil steel prices jumped by more than three times since April 2020.

Among other metals, copper is up 44 percent since October 2020 on the London Metals Exchange while Aluminium is up 65 percent.

The pandemic was a giant demand killer but brought good tidings for metal companies after the initial hit as nations started stimulating their economies, pushing excess liquidity into commodities and other financial assets.

China cut back production of metals, especially steel, to protect its environment, even as governments such as India’s went on a construction overdrive to manage social distress from job losses due to pandemic lockdowns.

In India, average price of hot rolled coil (steel) rose 42 percent from `46,900 per ton in December last year to `66,700 a ton in December this year.

Cold rolled coil prices rose 30 percent to `72,200 per ton in December this year from `55,400 per ton in December 2020.

With prices showing no signs of abating, metal producers are laughing all the way to the bank.

In the first half of this financial year (April– September), listed metal and mineral companies reported an all-time high net profit.

The post-monsoon demand recovery in India has been showing positive signs, with the monthly finished steel consumption in October reaching a seven-month high of 8.8 million tons (mt) representing a sequential uptick of around 7 percent over the previous month.

However, taking a cue from the correction in Chinese export offers, domestic steel prices have witnessed corrections.

in operating profits of primary steelmakers in the next financial year following expected correction in steel and coking coal prices.

Jindal Steel & Power’s operating profit or EBITDA is likely to fall from `21,216 per ton in the second quarter of the current year FY22 to `13,771 per ton in FY23 as per estimates of Centrum Research.

Steelmakers are going back to October levels in terms of pricing but effecting a price correction of `2,500-3,000 a ton depending upon the type of steel,” said the head of a steelmaker.

For Hot Rolled Coils, the prices are currently at import parity level, the official said.

Input prices softening

Prices of both coking coal and iron ore have started softening.

Premium seaborne coking coal offers have dropped to $316 per ton FOB Australia on November 30 as against $404 per ton on October 29.

NMDC’s fines prices have fallen by `2,000/ton from July to December.

“Our calculations suggest that consumption cost of coking coal is expected to increase by around 65-70 percent sequentially in the third quarter. Though price of iron ore has been coming down, it will not be able to entirely compensate for the steep rise in coking coal costs. The gross spreads for a primary steel producer, who is dependent on market purchase of raw material, would be sequentially lower by around 10 percent in the current quarter, and the industry’s third quarter earnings would be lower than the high watermark achieved in Q2,” Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA, said.

“We should see some effect on the domestic prices also but there won’t be too much of a pressure on domestic prices,” NMDC head Sumit Deb told analysts.

Weakening demand

Analysts expect major price corrections

Analysts are factoring in a significant drop

“Near-term demand is tepid and demand decline is seen, especially last month, due to the ban on construction in the NCR region

“We expect a price recovery in Q4 as pent-up demand and unfinished projects are revived. However, the resurgence of Covid remains a key concern, with fears related to the Omicron variant leading to the postponement of consumption.”

Motilal Oswal due to severe pollution levels, an extended monsoon, weak sentiment in the international market with consumers adopting a wait-andwatch policy, and sufficient inventory lying with traders, who, in a falling market, would try and liquidate rather than accumulate,” analysts with Motilal Oswal said.

The government, however, is bullish about the economy.

“India is the world’s fastest growing economy! India’s GDP registers a remarkable 8.4 percent growth for the July-September quarter. Amplified by goverment’s policies, India’s growth trajectory continues to rise sharply pointing towards a V-shaped recovery,” the Ministry of Mines tweeted.

Steel prices down from peak

Jindal Steel & Power recently told analysts that pricing for longs products has corrected by `4,000/ton while rebar has corrected to `58,000/ton from `62,000/ton in November.

Flats are currently being exported at $815/ton CFR, while China is offering $780/ton.

On the other hand, domestic prices stand at $902/ton.

Steel Insights, December 2021

7

METALS ROUNDUP

Imported scrap trade pick up marginally as offers fall Steel Insights Bureau

T

he global downtrend had put Indian imported scrap prices under pressure.

As prices went down, imported scrap trade picked up slightly.

However, limited deals were heard to have been concluded at a lower price while inquiries were slightly better.

Buyers are preferring to book high-seas cargoes due to volatility in imported scrap prices. However, these cargoes may take time to deliver and till the time they arrive, the market price might change. Frequent changes in freight rates and container availability kept buyers away. The negative sentiments in the domestic market slowed down trading activities.

Fresh offers for UK/EU-origin shredded material are at $547/ton CFR NhavaSheva.

HMS 1&2 (80:20) offers stood at $484/ton CFR NhavaSheva.

Dubai-origin HMS 1 offers were heard at around $474/ton CFR NhavaSheva.

HMS 1&2 (80:20) material from the UAE is being offered at $469/ton CFR NhavaSheva. Imported scrap is expected to gain momentum given the improved sentiments in the finished steel market.

Domestic market

Although limited transactions for semifinished steel kept domestic scrap offers range-bound but a shortfall was seen in scrap supplies recently. Scrap prices are likely to remain supported in the short term.

Domestic melting scrap HMS (80:20) prices are recorded at `36400 per ton in Alang and `35500 per ton in Mumbai. Offers for local HMS 1&2 (80:20) are quoted at `35500 per ton in Mandi Govindgarh and Durgapur based material was quoted at `36600 per ton.

12 Steel Insights, December 2021

India scrap imports down 8.1% in April-October

In April-October period of FY22, scrap imports stood at 2.790 million tons (mt) as against 3.035 mt in the same period previous fiscal, according to provisional steel ministry data. Re-rollable scrap imports stood at 62800 tons during April-October FY22 as against 69,400 tons in the same period previous fiscal, the data showed.

Scrap use

The National Steel Plan for India, released by the country’s Ministry of Steel, states ambitions to increase steelmaking capacity to 300 mt per year by the 2030-31 financial year.

This shall increase requirement of steel scrap from present level of around 25-30 mt to around 60-70 mt by 2030.

The supply shortage of domestic steel scrap in India is set to expand and this may lead to more imports of the commodity.

India’s shortage of domestic scrap supply in

FY20 was at 6.55 mt and in FY21 imports stood at 5.571 mt, according to steel ministry data.

However, with the coronavirus outbreak and resultant lockdowns, the estimates are bound to differ in line with the steel production in the country.

Major scrap suppliers to India are the UAE, the US, UK and South Africa.

The use of scrap in each ton of steel saves 1.1 ton of iron ore, 630 kg of coking coal and 55 kg of limestone besides resulting in a 40 percent saving in energy and water consumption and 58 percent reduction of GHG emissions.

Meanwhile, India has removed the import tax on ferrous scrap until March 31, 2022 to counter the impact of Covid-19 on the economy.

Measures required for availability

Most of the scrap supply in India today happens through unorganised sector. At present, 25 mtpa of scrap is being supplied from domestic unorganised scrap industry and 5-7 mt is being imported.

There is potential to harness this 5-7 mt of scrap from the domestic market itself.

This shall require adequate collection centres, dismantling centres shall work in a hubspoke model and feed to the scrap processing centres.

Prices of Scrap-HMS (80:20) in various markets during the past six months (`/ton) (Prices are basic, exclusive of taxes) Name of the market

Price `/ton as on Price `/ton as on Price `/ton as on Price `/ton as on Price `/ton as on 11-Nov-21

10-Nov-21

3-Nov-21

14-Oct-21

13-May-21

Mandi Gobindgarh

35,500

35,900

37,100

38,300

38,200

Kolkata

30,200

30,400

31,500

33,400

32,300

Alang scrap yard

38,900

38,900

39,500

39,400

39,400

Ludhiana

33,100

33,500

34,700

35,900

34,800

Mumbai

36,800

36,400

37,400

38,000

36,700

Durgapur

38,400

38,600

39,700

41,600

35,600

Source: Compilation from various sources & ISMW data

Scrap imports to India (in ‘000 tons) Product Re-rollable scrap Scrap Source: Steel Ministry

Non-alloy (prime + defective) April-Oct FY22

Non-alloy (prime + defective) April-Oct FY21

Growth %

62.8

69.4

-9.5

2790.4

3035.9

-8.1

FEATURE

India October crude steel production up 2.4% y-o-y

Steel Insights Bureau

I

ndia’s crude steel production stood at 9.793 million tons (mt) in October 2021, up 2.4 percent over October 2020 and was up by 3.5 percent over September 2021, provisional steel ministry data showed.

With 81 percent share, the private sector (53.922 mt, up by 22.6 percent) led crude steel production compared to the 19 percent contribution of the PSUs. Hot metal production stood at 6.342 mt in October 2021, up by 0.9 percent over October 2020 but remained unchanged against September 2021.

With 69 percent share, the private sector (30.764 mt, up by 17.8 percent) led hot metal production, compared to the 31 percent contribution of the PSUs. Finished steel production stood at 9.503 mt in October 2021, up by 3.9 percent over October 2020 and was up 4.8 percent over September 2021.

With 84 percent share, the private

sector (53.068 mt, up by 26.4 percent) led production of total finished steel, compared to the 16 percent contribution of the PSUs. Contribution of the non-alloy steel segment stood at 58.897 mt (94 percent share, up by 28.5 percent), while the rest was the contribution of the alloy steel segment (including stainless steel).

In the non-alloy, non-flat segment, in volume terms, major contributor to production of total finished steel was bars & rods (24.708 mt, up by 39.2 percent) while growth in the non-alloy, flat segment was

led by HRC (26.526 mt, up by 22 percent) during this period.

Exports stood at 1.055 mt in October 2021, up by 90.1 percent over October 2020 but was down by 22.1 percent from September 2021.

Volume wise, Non-alloy HR coil/strip (3.972 mt, down by 16.9 percent) was the item most exported (49 percent share in total non-alloy).

Vietnam (1.157 mt) was the largest export market for India.

Imports stood at 378,000 tons in October 2021, up 4.4 percent over October 2020 but was down by 7.6 percent from September 2021.

India was a net exporter of total finished steel in April-October 2021.

Volume wise, non-alloy GP/GC sheets/ coils (0.455 mt, up by 23 percent) was the item most imported (27 percent share in total non-alloy).

Korea (1.176 mt) was the largest import market for India (43 percent share in total).

Consumption stood at 8.751 mt in October 2021, down by 6.9 percent over October 2020 and was upby 6.9 percent over September 2021.

Contribution of the non-alloy steel segment stood at 53.525 mt (92 percent share, up by 24.1 percent), while the rest was the contribution of the alloy steel segment (including stainless steel).

In the non-alloy, non-flat segment, in volume terms, major contributor to consumption of total finished steel was bars & rods (24.329 mt, up by 29.7 percent) while growth in the non-alloy, flat segment was led by HRC (22.051 mt, up by 23 percent) during this period.

Steel production data (in ‘000 tons) Oct 2021 (prov)

Oct 2020 (Final)

Variation %

Oct 2021 (prov)

Sept 2021 (prov)

Variation %

Apr-Oct FY22

Apr-Oct FY21

Variation %

Crude steel

9793

9562

2.4

9793

9465

3.5

66805

53522

24.8

Hot metal

6342

6283

0.9

6342

6345

0

44808

36478

22.8

Finished steel

9503

9146

3.9

9503

9065

4.8

62877

48405

29.9

Consumption

8751

9395

-6.9

8751

8190

6.9

57899

45933

26.1

Import

378

362

4.4

378

409

-7.6

2751

2347

17.2

Export

1055

555

90.1

1055

1354

-22.1

8809

7099

24.1

Production

Source: Steel Ministry

Steel Insights, December 2021

15

LOGISTICS

Iron-ore handled by major ports down 20% till October

Steel Insights Bureau

T

he 12 major Indian ports handled 30.762 million tons (mt) of iron-ore during April-October 2021, down by 19.8 percent from 38.388 mt recorded for the corresponding period of previous year, according to data released by the Indian Ports Association (IPA).

Paradip Port handled the highest volume of iron ore at 12.495 mt (16.946 mt).

Total traffic handled by major ports during April-October 2021 stood at 406.98 mt, up by 14.6 percent over 355.16 mt recorded for the corresponding period of previous year.

Movement of container traffic in terms of tonnage April-October 2021 increased 33.28 percent to around 95.988 mt (74.14 mt).

Thermal coal handling by the major ports was up by 36.48 percent April-October 2021 at 56.251 mt, against 41.216 mt achieved April-October 2020.

Pradip Port handled the highest volume of thermal coal, at around 15.886 mt (12.948 mt).

38 Steel Insights, December 2021

Coking coal handled by major ports April-October 2021 was up 7.57 percent at 28.222 mt (26.235 mt).

The 12 major Indian ports handled 31 mt of iron-ore during April-October 2021, down by 20% from 38 mt recorded for the corresponding period of previous year.

Paradip Port handled the highest volume of coking coal, at 8.461 mt (6.093 mt).

Of the 12 major ports, Ennore Port showed the highest growth at 76.63 percent in traffic handling April-October 2021, followed by JNPT Port at 30.4 percent.

None of the ports saw decline in traffic handling during the period.

In terms of traffic volumes, Deendayal Port clinched the top rank with POL volumes of 34.306 mt recorded AprilOctober 2021.

Traffic handled at major ports (during April to October, 2021* vis-a-vis April to October, 2020)

(*) Tentative

Ports

(in ‘000 tons)

April to October traffic 2021*

2020

% variation against prev. year traffic

April to October traffic 2019

CAGR#(%) between 2019-20 and 2021-22

SMP, KOLKATA Kolkata Dock System

8332

7937

4.98

10199

-9.62

Haldia Dock Complex

23521

23581

-0.25

26079

-5.03

TOTAL: SMP, KOLKATA

31853

31518

1.06

36278

-6.30

PARADIP

65279

61967

5.34

64467

0.63

VISAKHAPATNAM

39251

38807

1.14

41185

-2.38

KAMARAJAR (ENNORE)

22132

12530

76.63

18044

10.75

CHENNAI

27556

22386

23.09

28588

-1.82

V.O. CHIDAMBARANAR

20267

18960

6.89

21277

-2.40

COCHIN

19041

15122

25.92

19465

-1.10

NEW MANGALORE

20992

19474

7.80

20587

0.98

MORMUGAO

10653

10173

4.72

8737

10.42

MUMBAI

33355

28631

16.50

35631

-3.25

JNPT

42606

32666

30.43

39849

3.40

DEENDAYAL

73998

62926

17.60

71093

2.02

TOTAL

406983

355160

14.59

405201

0.22

(#) CAGR = Compound Annual Growth Rate between Apr to October 2019 and Apr to October 2021.

CORPORATE

NMDC initiates major capex projects

Steel Insights Bureau

N

ational Mineral Development Corporation Ltd (NMDC) has major expansion projects being initiated following some key sanctions coming in the past 3-4 months.

Investments would go into shifting of crushing plants, setting up slurry pipelines and starting two coal blocks that NMDC was allotted, CMD Sumit Deb told investors during a conference call post earnings announcement.

NMDC is also concentrating on improving capacity utilisation and despatches, Amitava Mukherjee, Director Finance, said.

“Our capex in these projects have just started and one should see in the impact

44 Steel Insights, December 2021

of debottlenecking and enhancement of capacity by late FY23,” NMDC officials said.

“NMDC stays ahead of the curve with rapidly evolving technology. The company continues to aggressively pursue capacity augmentation & technology upgradation initiatives across its projects for a quantum increase in output and improve overall efficiency,” Deb tweeted.

In the first of FY22, NMDC has spent around `1,000 crore in capex.

NMDC has awarded the contract for setting up of its third screening plant at an investment of `2,200 crore which will raise screening capacity by 12 million tons, Deb said.

Another `1,500 crore would be spent on relocating the crushing plants.

“Major capex plans have been sanctioned and to take them to the execution stage, it would take about 6-8 months in terms of deciding on specifications and tendering.”

Amitava Mukherjee, Director Finance The slurry pipeline is a `3,000-crore project of which `1,500 crore project involving laying the pipeline at a cost of `1,000 crore has already been awarded.

The rest of the project is at advanced stage of tendering.

“Major capex plans have been sanctioned and to take them to the execution stage, it would take about 6-8 months in terms of deciding on specifications and tendering,” Amitava Mukherjee said.

For FY22, NMDC is planning to invest `3,720 crore of which `2,150 crore is for the steel plant project.

For the next year, NMDC expects to invest `2,500 crore depending upon the extent to which execution of sanctioned projects take place.

So far, NMDC has invested `19,000 crore in its steel plant of which `400 crore was spent in the first half.

NMDC is also relocating 2 crushing plants at a cost of `600 crore each.

“These projects have just been sanctioned and tendering is at an initial stage,” Deb said.

62 Steel Insights, December 2021