Steel Insights, February 2022 by mjunction services ltd

CONTENTS 16 Imported scrap trade improve 17 India pig iron production up y-o-y in December 18 December sponge iron production up 2% m-o-m 19 India December crude steel production up 0.9% y-o-y 23 Country not to pursue UG coal gasification: Coal Minister Joshi 24 Domestic iron ore, pellet prices move up 25 Seaborne coking coal offers surge in January 26 Year starts on a low key for auto sector 34 Iron ore handled by major ports down 27% 35 Railways’ iron-ore handling up 11% till December 36 Global crude steel output up 11% in December m-o-m 37 China aims 15% steel output via EAF by 2025 41 Tata Steel sees demand driving prices in Q4 45 SAIL sees higher steel prices in March 49 AM/NS to plough back profits into brownfield project 51 JSW sees strong Q4 volume growth 54 Costs not to rise in Q4: JSPL 57 Jindal Stainless eyes exports to counter dumping 59 Corporate update 61 Government update 63 Import Export data 67 Price trends 68 Ferro Alloy data 69 Production data 71 Consumption data 72 Import data 73 Export data

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6 | COVER STORY

Union Budget FY23: Boost to capex, green transition A comprehensive look at impact on steel sector.

20 | FEATURE

Steelmakers step towards hydrogen-based steelmaking Industry accelerating decarbonisation.

28 | INTERVIEW

“Industry proactive on carbon footprints reduction” Alok Sahay, Secretary-General, ISA, shares thoughts on current state of the sector.

38 | INTERNATIONAL

POSCO to review India ops, eyes H2 production Sees prices holding firm.

46 | CORPORATE

NMDC sees 50 mt ore production in FY23 Lower ore prices drag down Q3 EBITDA.

COVER STORY

Union Budget FY23:

Boost to capex, green transition Sumit Maitra

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COVER STORY

t a time when there was a heightened expectation of significant outlay to support weak domestic consumption, the Union Budget for FY23 presented by the Finance Minister Nirmala Sitharaman kept revenue expenditure growth under check and continued with the effort to propel capital expenditure for the second consecutive year. Boost to capital asset creation, investments in logistics through the transformative GatiShakti initiative and creation of an enabling environment for energy transition are the key focus areas for the Union Budget for FY23 which would not only drive demand for metals in the medium term but, more importantly, would enable the steel sector, a major emitter, to transition to a green and sustainable future. GatiShakti’s transformative approach fired by the seven engines of roads, railways, airports, ports, mass transport, waterways and logistics infrastructure is expected to trigger major demand for the metal. “Increase in capex to `7.5 lakh crore in Budget will be a demand driver and growth enabler for steel industry. PM Gatishakti masterplan for the expressways, via a multimodal approach, will pull forward the economy and create more job opportunities,” Steel Minister Ram Chandra Prasad Singh said. To calm steel prices, anti dumping Duty/ countervailing duty on certain steel, stainless steel products has been revoked. Due to revocation of duty on steel scrap, raw material availability gets a boost, especially to secondary steel producers and remelting facilities, Singh said while commenting on the rationale behind the Budget proposals. Boost to capex

Revenue expenditure growth is budgeted to grow by just 0.9 percent year-on-year (y-o-y) in FY23 compared to a 2.7 percent growth in the revised estimate for FY22. In contrast, capex is budgeted to grow 24.5 percent y-o-y in FY23 following 41 percent growth in the revised estimates for FY22.

“The government’s capital spending, thus, has more than doubled to `7.5 trillion in FY23 from `3.4 trillion in FY20. Since the total government expenditure is budgeted to grow just 4.6 percent in FY23, higher growth in capex indicates improved quality of spending. Total capital spending of the government is budgeted to rise to 19 percent of total spending, marking the highest share in 18 years from just 12-13 percent in the pre-Covid years,” analysts with Motilal Oswal said. “The Budget essentially makes way for capex by tightening the belt around revenue expenditure. In general, the government has refrained from giving any direct consumption support in this budget. Yet, frontloading infrastructure spending could bring about faster growth,” rating agency CRISIL said. Pursuing this path would enhance the growth potential and, it is hoped, will bring endurance to growth in the medium term, though refraining from giving a direct consumption support could curb the pace of economic recovery in the short term, the rating agency said. Industry players belonging to sectors like steel, real estate and cement highlighted the efforts to increase spend on infrastructure sector to usher in overall growth in the economy. The Budget has made a strong push for infrastructure-led growth with capital outlay for infrastructure projects raised by 35 percent in FY2023. Investments centered around the Gati Shakti Master Plan in core sectors have the potential for spurring demand for steel with higher cumulative allocation to flagship schemes like PMAY and Jal Jeevan Mission would drive for steel products. “Government’s push on infrastructure and increase in outlay for capital expenditure will support growth for steel, cement and other related sectors in the coming year,” VR Sharma, Jindal Steel & Power MD said. “Government’s infrastructure push in the recent budget, increased rake availability and rising private capex should further boost domestic steel demand. This

“The Budget essentially makes way for capex by tightening the belt around revenue expenditure. In general, the government has refrained from giving any direct consumption support in this budget. Yet, frontloading infrastructure spending could bring about faster growth.” CRISIL bodes well for JSPL with two-thirds of its product portfolio catering largely to India’s construction & infrastructure sector,” JSPL told investors. “With 18 percent growth in steel production in 2021, the Budget provides a strong base for a continuation to India’s growth story,” Sumit Deb, CMD, NMDC said. According to Hiren Patel, Chairman, Nuvoco Vistas: “The Budget has reemphasised India’s growth story with a focus on infrastructure as a key enabler. Projects like Gati Shakti will lend muchneeded power, speed and efficiency to mega infrastructure projects launching India on the path to economic success.” “The bulk of the stepped-up expenditure in FY23 has been allocated for capex. Grants-in-aid for the creation of capital assets and expenditure on the capital account together are `2.27 trillion higher in FY23 than the revised estimates for FY22. This

Steel Insights, February 2022

FEATURE

Steelmakers step towards hydrogen-based steelmaking

Steel Insights Bureau

ajor steel makers like Tata Steel and JSW have taken initial steps to move towards replacing coking coal with hydrogen as an initiative to achieve Net Zero. To test gases in steel making before going for hydrogen, Tata Steel has initiated trial for continuous injection of CBM gas in one Blast Furnace at Jamshedpur. While Tata Steel has developed this first-of-its-kind CBM injection technology in-house, JSW’s pilot project for Green Hydrogen set up in collaboration with Australia’s Fortescue group is nearing completion. As part of its continuous efforts to move toward sustainable steel production, Tata Steel has initiated the trial for continuous injection of coal bed methane (CBM) gas in one of the blast furnaces (E blast furnace) at its Jamshedpur Works, making it the first such instance in the world where a steel company has used CBM as injectant. “This process, part of the larger effort to enable hydrogen-based steel making, is yet another step towards achieving the

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company’s vision of net zero emissions,” the company said in a release. The process is expected to reduce coke rate by 10 kg/thm, which will be equivalent to reducing 33 kg of CO2 per ton of crude steel. The trial will take place over the next few weeks. The technology, design, and development of the entire system at E Blast Furnace for facilitating CBM injection has been done by the in-house team of Tata Steel. Debashish Bhattacharjee, Vice President, Technology & New Materials Business, Tata Steel, said: “The conversations around climate change have gained unprecedented momentum in the recent years. Given this imperative, the steel industry, also considered hard to abate, too will need to urgently explore sustainable options to mitigate its environment footprint. At Tata Steel, we are on a journey to decarbonise and this initiative is yet another step towards this objective. We will continue to innovate and make investments to transition towards sustainable manufacturing.” Uttam Singh, Vice President, Iron making, Tata Steel, said: “Technologies to decarbonise steel at scale are not ready

“Initiative of CBM injection in blast furnace will provide us with useful insights into Blast Furnace operation with hydrogen-based injectants and help reduce emissions. We are on a mission to bring down the CO2 emissions to 1.8 ton of CO2 per ton of crude steel by 2030.” Uttam Singh, Vice President, iron making, Tata Steel yet. Tata Steel has undertaken various technology initiatives including pilots and trials to explore new and scalable solutions for decarbonisation. This initiative of CBM injection in blast furnace will provide us with useful insights into Blast Furnace operation with hydrogen-based injectants and help reduce emissions. We are on a mission to bring down the CO2 emissions to 1.8 ton of CO2 per ton of crude steel by 2030.” This trial will help in quantification of the reduction in coke rate used in the blast furnace, its impact on productivity and will provide useful insights regarding operation of blast furnaces with hydrogen-based injectants, the company said. These insights will be used to design a

INTERVIEW

“Steel industry proactive on carbon footprint reduction; policy enablers to give further boost”

teel industry veteran and former Executive Director of Steel Authority of India, Alok Sahay has joined Indian Steel Association as its SecretaryGeneral to provide new direction to the sector at a time when the steel sector is reinventing itself as a provider of infinitely recyclable metal in a sustainable environment. Even as the association promotes new usage of steel with emphasis on life-cycle cost advantage, decarbonisation of its manufacturing process is being actively addressed. Sahay shares with Tamajit Pain ISA’s views on the current state of the sector, preparedness to achieve the ambitious targets set under the National Steel Policy and how the industry is coping with the current volatility.

What would be the likely crude steel production and consumption in FY22 and FY23 based on the current trends? We expect crude and finished steel production in CY 2022 likely to touch 125 million tons (mt) and 111 mt respectively.

Our expert group is working on this and will be able to project figure for FY23 shortly. The production and consumption figures for previous three financial years and April to December 2021 have been given in the accompanying table and are self-explanatory.

Steel production and consumption Financial Year 2018-19 2019-20 Change % ( Over CPLY) 2020-21 Change % ( Over CPLY) Apr-Dec20 Apr-Dec21 Change % ( Over CPLY)

Crude Steel Production 110.921 109.137 -1.635 103.044 -5.913 73.417 87.069 15.680

Source: JPC

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Finished Steel Production 101.287 102.621 1.300 95.122 -7.884 67.351 82.209 18.073

(in million tons)

Consumption 98.708 100.171 1.461 94.140 -6.406 65.404 75.851 13.773

How do you see the exports performing with the traditional markets showing signs of slowdown? Will India be able to maintain its net exporter status and continue to show double digit growth next fiscal? The finished steel exports by India has Steel import and export

(in million tons)

Financial Year 2018-19 2019-20 Change % (Over CPLY) 2020-21 Change % (Over CPLY) Apr-Dec20 Apr-Dec21 Change % (Over CPLY) Source: JPC

Imports 7.835 6.768 -15.765 4.752 -42.424 3.209 3.438 6.661

Export 6.361 8.355 23.866 10.784 22.524 8.314 10.329 19.508

INTERNATIONAL

POSCO to review India ops, eyes H2 production Steel Insights Bureau

OSCO of Korea will be reviewing its investments in India in consideration of maintaining competitiveness in eco-friendly infrastructure and will explore hydrogen production with the Adani group along with setting up an integrated steel mill. The decisions are part of POSCO’s business plan for its overseas operations revealed during the announcement of the company’s financial results. Separately, POSCO has revealed business areas to be explored jointly with the Adani group. Korean steel major’s current India operations includes POSCO Maharashtra Steel, a 1.8-million-ton cold-rolled and

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galvanised mill regarded as one of the most advanced automotive steel supplier in India, and four processing centres in Pune, Delhi, Chennai and Ahmedabad. Established in 2012, POSCO Maharashtra provides high quality galvanised and galva annealed steel that are applicable to all varieties of industries, such as construction, home appliance, and automotive industries. In 2021, POSCO Maharashtra’s profit reached its highest level as price soared supported by the market and high-end sales expanded. Auto sheets product price increased by 53 percent year-on-year. Market outlook: prices to hold firm

POSCO sees market price holding firm as demand recovers while low carbon trend restrains further supply expansion.

Expect global growth of 2% supported by economy stimulus trend - EM restocking demand to rebound and vaccination spreads supports economy recovery. China to hold ground y-o-y as sluggish demand since second half of 2021 continues. Domestic demand to see an upturn by H1 of 2022.

CORPORATE

Tata Steel sees demand driving prices in Q4 Steel Insights Bureau

ndian steel prices are expected to remain resilient in the fourth quarter (JanuaryDecember) of FY22 on the back of sustained improvement in demand and cost push while European steel prices are likely to remain steady, supported by higher input prices even as steel supply and demand becomes more balanced, Tata Steel has said following the announcement of its financial results for the third quarter.

The steel major sees a stable fourth quarter despite volatile raw material prices. The company has detailed its outlook in its presentation to analysts made following the announcement of the financial results for Q3. Outlook for Q4

Demand Global steel demand will continue to grow in Q4 on the back of ongoing recovery especially in World ex-China.

India steel demand to remain supported by government’s push for infrastructure spending and consumer demand. EU steel demand to continue to improve on strong fundamentals and to sustain above pre-Covid levels. Overhang of Covid, slowdown in China and uncertainty related to geopolitics, supplychains and tapering of liquidity support and rate hikes remain a risk. Steel prices Asian steel prices are expected to be driven by improving demand across segments, ongoing restrictions on China’s output & export and volatile raw material prices. Indian steel prices are expected to remain resilient on the back of sustained improvement in demand and cost push. European steel prices are expected to

Regional steel prices moderated

Raw material prices off peak, but volatile

Steel spot spreads have softened

China Steel production continued to decline

Steel Insights, February 2022

CORPORATE

NMDC sees 50 mt ore production in FY23

Steel Insights Bureau

he largest iron ore producer of India, National Mineral Development Corp Ltd (NMDC) has raised production volume guidance to 44 million tons (mt) for FY22, up from 42 mt earlier while 47-50 mt of iron ore is likely to be produced in FY23 though NMDC wants to achieve 70 mt volume in that year. The company had earlier set a target to touch 100 mt production by 2030. The guidance was shared by the top company management with analysts during a conference call post the announcement of financial performance of the company for the nine months ending December of current financial year. The environmental clearance for 10 mt output in Kumarswamy is yet not received, the company has a so shared.

Lower ore prices drags down EBITDA

NMDC’s operating profit or EBITDA for

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the third quarter (Q3 of FY22) dropped 6 percent year-on-year (y-o-y) and 16 percent quarter-on-quarter (q-o-q) due to lower iron ore prices, partly offset by higher volume, according to analysts with Centrum Institutional Research. Net sales declined 13.5 percent due to lower average iron ore prices (net of statutory duties), which declined 20 percent q-o-q, or `1,202/ton to `4,752/ton, offsetting higher volumes (up 9.8 percent q-o-q to 9.8 mt). Average iron ore fines prices fell by `1,195/ton to `4,240/ton while iron ore lumps prices fell by `1,275/ton q-o-q to `5,834/ton amid fall in global prices and excess supply in the domestic market In the nine months period till December, NMDC registered a 125 percent growth in turnover to `19,179 crore compared to `8,522 crore achieved during the corresponding period of FY21. Profit Before Tax (PBT) for the nine months was `10,101 crore reflecting a growth of 118 percent against `4,633 crore for the year ago period.

“Coke oven battery has been lit up and production can start from April onwards. MECON will be consulting in the operation of the plant. The demerger process for the steel plant is expected to be completed by Q1FY23 and value unlocking will happen 2-3 months after demerger once it gets listed on the stock exchanges.” Profit After Tax (PAT) for the 9 months increased to `7,583 crore, 122 percent over `3,415 crore reported during the first nine months of FY21. NMDC produced 10.65 mt and sold 9.85 million tonnes mt of iron ore in the third quarter of FY22. Cumulative production and sale figures for the first three quarters stood at 28.33 mt and 28.28 mt respectively. “Operational and financial figures are the strongest nine months performance in NMDC’s history,” the company said. Commenting on the performance, Sumit Deb, CMD, NMDC said, “This strong performance was achieved on the back of enhanced production under challenging times and should reach the production target this fiscal. We continue to be committed to

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