Contents 20 IFGL seeks cut in import duty on raw materials 21 Scrap demand to remain weak 22 Pig iron prices to remain stable in Feb-Mar 23 Sponge iron in negative territory in Jan 24 India’s Decemeber crude output dips 0.6% 25 India becomes world’s second largest steel producer 26 Proposal of extending tax sops for affordable housing to boost steel demand 27 Indian Railways’ steel demand at 17 lakh tons in FY20 28 Margins to see correction; steel to reap consolidation benefits: Ind-Ra 29 Car sales see tepid growth in January 31 Govt against plan to lift export duty on iron ore 32 Seaborne coking coal offers ease in Jan on low demand 33 JSL sees bigger kitchenware play, focuses on eastern market 34 India’s steel production increase by over 14 mt in 3 years 36 Rising global demand for stainless steel to boost ferro chrome industry 38 Global crude steel output dips 1% in Dec m-o-m 39 Traffic handled by major ports up 4% in April-December 40 Indian Railways’ Dec iron-ore handling inches up 2% y-o-y 41 Tata Steel part-exits S-E Asia business in $327-million deal 42 JSW scores over peers, but industry woes cloud outlook 51 Bhilai Steel Plant stresses on rake turnaround time 55 Prakash Transport eyes 30% increase in biz volumes this fisc 57 Ferro alloy data 58 Price data
4 Steel Insights, February 2019
6 | COVER STORY
Refractory feels the heat
16 | COVER STORY
Weak market, raw material concerns, lack of quality human resource and environmental concerns are burning issues for the industry today
RHI Magnesita India eyeing acquisitions Co weighs plans of doubling topline by 2022, increasing production footprint, postmerger of Indian operations
18 | COVER STORY
IRMA joins hands with JPC to draft refractory white paper
45 | Interview
There is need for proper resource mapping of indigenous deposits, says Anirbandip Dasgupta, Senior Executive Officer, IRMA
‘Key areas of steel innovation are raw materials, process optimisation & operations’ US National Carbon Capture Center and Dastur to work jointly on coal gasification
53 | OPINION
India likely to add 24-26 mt steel capacity over next 5 yrs Indian steel demand is expected to stay healthy, based on overall fundamentals of the economy, says Prabhat Kumar, EIC-IBMD, Tata Steel
Cover Story
Refractory feels the heat Weak market, raw material, HR and environmental impact are burning issues for industry Madhumita Mookerji
R
efractory makers in India are breathing a little easy after a gap of about 15 months, when pollution control measures in China were choking supplies. In fact, it had been a double whammy almost two years back, when the steel industry was also moving at a sluggish pace, with prices languishing. Refractory, in fact, is a material that always walks a tight-rope, because of two
6 Steel Insights, February 2019
factors that are beyond its control. One is that it is almost entirely dependent on raw material supplies from outside the country, mainly from China, whose various policy measures thus directly impact producers in India. Second is the state of the steel industry which consumes 70 percent of the material. Thus, refractory’s fate is intrinsically linked to that of steel’s. Today, the steel industry is showings signs
of recouping, in that consumption is looking up. As per the Joint Plant Committee (JPC) data, crude production in April-December, 2018 grew 4.4 percent to 79.05 million tons (mt) year-on-year, while finished steel production rose 4.7 percent in this period. And, importantly, consumption grew a healthier 7.9 percent in the nine months y-o-y. In financial year 2017-18, crude steel production grew 4.5 percent to 102.33 mt
Cover Story y-o-y while finished steel output was up 3.1 percent to 104.97 mt. Consumption, in this fiscal, was also up 7.9 percent y-o-y. “At present, the steel industry is in better shape. There are expansions happening, new projects are coming up, Tata Steel’s Kalinganagar plant, for instance. The bad debts are being sorted out through the National Company Law Tribunal (NCLT). Plus, there is demand for steel in the market. Consumption has grown and there has been a relative increase in turnover in the refractory industry,” observes Anirbandip Dasgupta, Senior Executive Officer, the Indian Refractory Makers Association (IRMA). He iterates that steel consumption has gone up in FY18 as well as from April to December, 2018 and that cement consumption has also risen 15 percent while glass consumption has also gone up. Credit rating agency ICRA has said that the demand for cement in India is likely to grow by around 6 percent in the current financial year, which ends on March 31, 2019. In its latest report on the sector, it said this would be due to a pick-up in the affordable and rural housing segment and infrastructure, primarily in road and irrigation projects. “Some of the refractory makers which depend only on the glass industry are doing well,” quips Dasgupta, adding that the industry is dependent on steel because 75 percent of the consumption goes into this commodity. However, that’s about it. The cons seem
to weigh down this industry that is worth almost over `9,000 crore and manufacturers do feel the heat. The total size of the production volume/sales turnover of Indian companies is worth around `8,200 crore, which is an increase from `7,000 crore seen around 15 months back, registering a compound annual growth rate of 8-10 percent. In this corpus, `1,700 crore is the worth of exports, which is subtracted from this `8,200 crore, but `2,800 crore worth of imports are added. So the total tradeable market would be round `9,300 crore, informs Dasgupta. The total installed capacity of refractory in India is at 2.2 mt. India’s total domestic production is 1.3 mt per annum. Of this, 15-20 percent is exported. But, importantly, specific consumption of refractory is coming down to 7.5-7.8 kg per ton of steel and to less than 2 kg per ton of cement from the earlier 2.2 kg. As rues Dasgupta, the refractory industry is perhaps the only one that is penalised for its good work! Globally, in 2015-16, refractory brick production was 13 percent down as compared to mixes which were down by 6.7 percent in this period. In 2016, the refractory industry had seen a 4.5 percent decline in sales globally, which increased by 6 percent in 2017. Basically, thus, the market recouped to the 2015 levels. Around 50-odd Chinese companies recorded 3.7 percent decrease in sales turnover in 2016
but with a slight increase in profit. Because probably they realised supplying just the material does not have much meaning. They thus went in for value addition. Between the years 2005-2016, globally, the industry grew at a CAGR of 1.7 percent, indicating that the growth was nothing to write home about. But the peak that the industry witnessed in 2007-08 had been in relation to the Olympic Games held in China, when there had been a lot of infrastructural development in that country and steel production had picked up – and thus refractory demand too had increased in tandem. But, now, China is in decline, at least, it is not growing and the emerging trend globally is that refractory production will experience a stagnation going forward or will see a very small percentage of growth. This is primarily because of a drop in production in China. But players expect that that demand drop will be compensated by the rest of the world, mostly from India. But then this demand volume cannot really hold a candle to China’s voracious appetite and hence the flattish growth, going forward. Refractory, worldwide is a 20 billion euro industry as on date. Of this, 60 percent is consumed by the steel industry followed by 7 percent consumption by the glass industry, 8 percent in cement while 10 percent goes into the non-ferrous industry and the balance 15 percent into what is called energy, chemicals and environment (ECE). Within
Exports of refractory items 2013-14 m.t.
2014-15
Rs. Lakhs
m.t.
2015-16
Rs. Lakhs
m.t.
2016-17
Rs. Lakhs
m.t.
2017-18
Rs. Lakhs
m.t.
Rs. Lakhs
FIRE CLAY BRICKS & SHAPES
23640
3709
26160
3512
35450
6003
26950
4979
39200
5873
HIGH ALUMINA BRICKS & SHAPES
73750
30537
69260
40699
57280
39408
60930
51176
80690
61409
SILICA BRICKS & SHAPES
14240
3542
9890
1912
19320
5326
18090
4344
8070
1450
BASIC BRICKS & SHAPES
8335
4311
10897
6355
7719
3817
7068
4584
7634
5397
MONOLITHICS/ CASTABLES
62225
18760
65519
20000
75300
23399
17182
28480
128257
35101
SPECIAL PRODUCTS
16370
16198
16350
18698
18550
21619
20930
21873
20770
25319
OTHERS
105300
46826
131280
48567
80410
45939
101080
58289
81920
63355
TOTAL
303860
123882
329357
139744
294029
145511
252230
173726
366540
197904
Source: Export Import Data Bank, Department of Commerce, Ministry of Commerce & Industry, Govt. of India
Steel Insights, February 2019
7
Cover Story
IRMA joins hands with JPC to draft refractory white paper
T
he Indian refractory industry is 70 percent dependent on imported raw materials. Therefore, the need of the hour is proper resource mapping of indigenous deposits and beneficiation for which government support is a must, Anirbandip Dasgupta, Senior Executive Officer, Indian Refractory Makers Association (IRMA), tells Madhumita Mookerji. He also informs that a centre of excellence has come up in Varanasi that will help with third-party testing of refractory materials. Excerpts from an interview: IRMA is setting up a centre of excellence in Varanasi in a tie-up with BHU? What is the update on this project? Yes, IRMA signed a memorandum of understanding with IIT-Benares Hindu University to develop an excellence centre in this city. We have already set up the centre of excellence at Varanasi. Most of the equipment are in place. Hopefully, our lab would be functional within the next 2-3 months. What would be the role of this centre of excellence? Its main role will be that of third-party
18 Steel Insights, February 2019
testing. There are not very many good labs in India that offer prompt results on testing. Suppose a company has bought a certain material and wants to test its quality, it can get the material tested at this lab since the company may not have the testing facility at its end. Medium-scale companies usually do not have such facilities. So, they may opt for third-party testing to ensure it is getting good quality material. First, we will conduct third-party testing through a neutral person and the test will yield results within a very short period of time. This way, the quality of refractory will be maintained and the customers will also be benefitted.
Secondly, since it is IIT and thus associated with some of the best brains of the country, we will be training these students in refractory and material science. The bulk of the students these days focus on the IT sector, venture capital, finance etc. Our efforts are aimed at luring some of these students to the core sector. The refractory industry is truly challenged by the lack of quality manpower. So, will IRMA be instrumental in introducing a new course? No, not a new course. Because BHU already has a course. We will encourage our students to come to the lab to undertake some practical work, live projects etc. Why the tie-up with only IIT-BHU? Because it is the only institution in India which offers a course on ceramics.
FEATURE
JSL sees bigger kitchenware play, focuses on eastern market
Ritwik Sinha
A
fter the rollout of the goods and services tax (GST), which has helped the industry to become more organised, Jindal Stainless (JSL) is seeing big opportunities in kitchenware. Further, the company is focusing on the eastern and north- eastern regions of India with an expected additional consumption of 100,000 tons per annum in the next 2-3 years. The present size of kitchenware and similar appliances market is around 10 lakh tons (lt) per annum. Meanwhile, almost 80 percent of the market is unorganised. The annual demand of kitchenware and allied application of stainless steel in India is valued at `35,000 crore, of which kitchenware application demand is `14,000 crore. “We pioneered extensive growth of this segment by introducing the 200 series (chrome manganese) of utensil-grade stainless steel for domestic consumption and exports. Now, we are making deeper inroads in eastern India by adopting a three-pronged
approach; capitalising the coil route in manufacturing, increased dedicated capacities at our associate facility and facilitating growth for downstream industries in eastern India. With this, we will raise the overall quality standards in the industry, and thereby grow the contribution to the state exchequer through greater GST compliance,” Jindal Stainless Sales Head Vijay Sharma said. Of the major application segments of stainless steel in India, the kitchenware industry takes a lion’s share in usage of this metal. It constitutes nearly 40-45 percent of the total stainless steel used in the country. The end products comprise tableware, cookware, cutlery, gas stoves, sinks and similar applications. Considering the current high growth and immense potential of this metal in the country, Jindal Stainless is taking bold measures in eastern India to expand its presence in this sector, which has traditionally been run by small and medium sized enterprises. The company has already invested `240 crore to add capacity in two cold rolled mills
totaling 2 lt per annum at its Jajpur plant in Odisha. The plant will help the company in supplying cold rolled stainless steel to kitchenware fabricators of the eastern and north-eastern region at a more competitive price. The company, spearheaded by Ratan Jindal, has a 1.9 million tons (mt) capacity in two locations, Hissar in Haryana and Jajpur. With the new facility the cold-rolling capacity will go up to 1.1 mt from 0.9 mt. “The national annual growth rate for this segment is pegged at 7 percent. This segment has grown at about 3.5 percent in eastern India, namely, West Bengal, Odisha, Bihar, Jharkhand, and the eight north-eastern states. However, considering that this part of India has not witnessed downstream expansion of stainless steel, the availability of stainless steel in this region has been a challenge. This region therefore continues to use alternatives to stainless steel such as aluminium and plastics. This region is expected to grow at par with the national average, reflecting the immense growth potential for stainless steel,” Sharma added. Further, JSL is expecting a 20 percent growth in topline over the next 12 months as the company ramps up the sales of valueadded products and supplies to the railways. JSL, which earned `21,000 crore in revenues last year, believes it would be able to help grow the downstream kitchenware industry in the east. The company has a small subsidiary that showcases potential fabricators to promote downstream kitchenware. It is also evaluating co-branding options with the established players who make pipes, tubes, kitchenware, sinks and cookers. Globally, stainless steel is preferred over its major competitor aluminium for the kitchenware industry, as stainless steel is inherently hygienic, durable, corrosionresistant, and is certified for food safety. Largely unorganised, the kitchenware segment in India was traditionally marred by malpractices like under-invoicing, usage of substandard raw materials, and poor working conditions for labourers. However, this industry has now grown to be at par with other industries in the post-GST era. As per the current market trend, stainless steel competitiveness in this segment is marred by a glut of cheaper imports from China and ASEAN countries.
Steel Insights, February 2019
33
INTERVIEW
India likely to add 24-26 mt steel capacity over next 5 yrs
S
teel demand in 2019 in developed economies is expected to increase by 1.2 percent and in the emerging economies, excluding China, by 3.9 percent. India will have to ‘heavily depend’ on imported coking coal for its plan to produce 300 mt of crude steel by 203031. The outlook for the Indian steel industry is quite positive for FY20. Indian steel demand is expected to remain healthy, based on the overall fundamentals of the Indian economy. With elections round the corner, there could be some slowdown in government spending post-announcement of election dates. However, Prabhat Kumar, EIC-IBMD, Tata Steel, tells Madhumita Mookerji he expects a fast recovery from the second quarter of FY20 onwards. Excerpts from an interview:
India has been given a target of 300 mt of crude steel production by 2030. Will there actually be a demand for that 300 mt of steel by that time in India? Or is this an unrealistic target?
infrastructure, automobile and power sectors, including renewable energy; ♦♦ Increasing consumption levels – urbanisation trends and rural initiatives will further add to demand of steel;
The National Steel Policy, 2017 projects crude steel production capacity of 300 million tons (mt) by 2030-31 from the present level of about 120 mt and per capita consumption of 158 kilograms (kg) of finished steel as against the current consumption of 61 kg. India has the potential to generate demand exponentially given the economic scenario and government initiatives. The key factors that would determine the pace of demand growth would be thus:
♦♦ Government-led infrastructure initiatives such as Bharatmala, Sagarmala, Smart Cities, Pradhan Mantri Awas Yojna (PMAY ), Mass Rapid Transit System (MRTS) will boost steel demand;
♦♦ The ‘Make in India’ initiative will stimulate demand from the construction,
♦♦ Rising disposable income and willingness to pay a premium for convenience.
♦♦ Steel-intensive construction – like preengineered buildings (PEB) and Green buildings; ♦♦ Urbanisation and smart mobility; ♦♦ Digitalisation and Internet of Things (IoT); and
India is likely to add 24-26 mt of steel capacities over the next five years, leading to an aggregate steel capacity rise to 140145 mt by 2021-22. We need to watch out for the pricing environment against the backdrop of global overcapacity led by China. Steel being a cyclical industry with shortening cycles witnessed in the last decade, my take is that India, over the next five years, will achieve 6-6.5 percent annual growth, lower than the rate projected by the government till 2030. The two key challenges in the way of achieving that 300 mt are coking coal and iron ore. What does the govt/steel industry need to do on a war footing to address these two raw material challenges? The National Steel Policy aims at enhancing steel production to 300 million tons per annum (mtpa) by 2030-31, for which the projected requirement of iron ore would be around 437 mtpa, which will call for a thrust on evacuation of iron ore from the mines to the steel plants in a cost-effective, safe and environmental-friendly manner. The country needs to develop a more efficient iron ore evacuation infrastructure, including slurry pipelines, as against the present conventional evacuation methods through Railways, road and ports. India will have to ‘heavily depend’ on imported coking coal for its plan to produce 300 mt of crude steel by 2030-31. The Government of India must create enabling infrastructure and policies to increase the share of domestic washed coking coal and lower the dependence on imports to 50 percent by 2030-31. In addition, the government must facilitate scrap-based steel capacity addition with enabling policies. It will be more sustainable in the long term. Will Indian steel mills be able to mop up that much of capacity within this time frame since setting up greenfield capacity is a time-consuming proposition? When should the on-ground planning start for achieving this target? Investment in greenfield facilities has always been driven by a growth forecast which is quite robust in the current scenario.
Steel Insights, February 2019
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66 Steel Insights, February 2019
Tear along the dotted line
Tear along the dotted line