Steel Insights, February 2023

CONTENTS

19 Scrap buyers stick to small import bookings

20 Pig iron production down 29% y-o-y in Januar y

21 India’s December sponge iron production up 11.8%

22 December crude steel production up 0.8% y-o-y

26 Tranche 6 sees 80 bidders for 25 blocks

28 Odisha iron ore offers remain firm

29 New Year brings in cheers to automakers

31 Iron ore handled by ports down 20% till December

32 Railways’ coal handling up 13% till December

33 Global crude steel output up 1.15% in December

39 BHP’s July-December iron ore realisation down 25%

40 US Steel sees stimulus-led sector rebound in 2023

43 Boston Metals raises funds from ArcelorMittal, Microsoft Climate Fund

45 Scrap use in steel to grow to 50% by 2047: Steel minister Scindia

51 JSPL bullish on longs as rebar pricing stays strong

53 JSW sees improved margins in Q4

23

FEATURE

Higher coal imports to push up power costs

Govt sees ‘unprecedented’ rise in power demand.

Budget bonanza: The `1 millioncrore push

Aims at reviving domestic demand and public investments

34

INTERVIEW

“AM/NS India grows stronger as self-reliant steelmaker.”

Interview of Amit Harlalka, Chief Financial Officer, AM/NS India.

37

INTERVIEW

“We are betting big on exports and plan to expand to newer markets.”

Interview of Brij Bhushan Agarwal, VC and MD, Shyam Metalics and Energy Ltd.

48

CORPORATE

Tata Steel sees visible signs of demand revival

Continues to focus on cost optimisation, operational improvements.

Budget bonanza

The `1 million-crore push

Sumit Maitra

The Union Budget for 2023-24 aims at reviving the domestic demand and public investments to propel growth as the world is gripped by the fear of a possible recession.

The announcements made by Union Finance Minister Nirmala Sitharaman while presenting the Union Budget 202324 focuses on increased spending on infrastructure and rural housing, reigning in the deficit and bringing the economy back on track apart from job creation.

Capital Investment outlay has been increased by 33 percent to `10 lakh crore, which would have a multiplier effect on the economy and drive demand for steel.

Hiked outlays on infrastructure and agriculture will have a force multiplier impact on the economy while increased outlay towards energy transition, Railways, affordable housing and urban infrastructure will trigger the enablers for growth, analysts said.

The Budget also said 50 additional airports, helipods, water aero drones, advanced landing grounds will be revived to improve regional air connectivity and the outlay for PM Awas Yojana is being enhanced by 66 percent to over `79,000 crore.

These are steps in the right direction and would support the growth of infrastructure sector, the major sector consuming steel, industry experts believe.

“Demand from the infrastructure and affordable housing, accounting for 40 percent of cement and 35 percent of steel demand, is set to see robust 10 percent-12 percent growth in upcoming fiscal,” CRISIL Research said in an analysis.

On the logistics front, 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified.

They will be taken up on priority with investment of `75,000 crore, including `15,000 crore from private sources. This will support the growth of logistics infrastructure.

Decision to facilitate availability of raw materials for the steel sector, exemption from Basic Customs Duty on raw materials for

manufacture of CRGO Steel, ferrous scrap and nickel cathode is being continued.

Similarly, the concessional BCD of 2.5 percent on copper scrap is also being continued to ensure the availability of raw materials for secondary copper producers who are mainly in the MSME sector. These will provide further impetus for growth of the metals sector.

The recently launched National Green Hydrogen Mission, with an outlay of `19,700 crores, will facilitate transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this sunrise sector.

To encourage sustainable behaviour, a Green Credit Programme will be notified to incentivize environmentally sustainable actions by companies, individuals and local bodies, and help mobilize additional resources for such activities.

This, along with the Budget plan for `35,000 crore priority capital for the energy transition are steps towards green transition.

In furtherance of the vehicle scrapping policy mentioned in Budget 2021-22, the budget has allocated adequate funds to scrap old vehicles of the Central Government. States will also be supported in replacing their old vehicles.

The capex focus

The FY24 Union Budget focuses on sustainable economic recovery through infrastructure creation.

On the domestic front, the capex of `10 lakh crore and the capital outlay of `2 Lakh crores put up for the modernisation and expansion of the Indian Railways is the highest ever outlay.

The Budget has also proposed to set up an urban infrastructure development fund with an annual allocation of `100 billion to develop urban infrastructure in tier II and III cities.

The government has maintained its focus on capital expenditure with a budgeted growth of 37 percent in FY24 Budget Estimates to `10 lakh from from FY23 Revised Estimates of `7.3 lakh crore.

“Speaking specifically for the stainlesssteel industry, we are grateful that the Finance Minister has continued the exemption on ferrous scrap and stainless steel scrap. This is a saving grace for industries where input materials are domestically not available/ inadequate, and who still have to compete with duty free imports of subsidised finished goods. The unfair dumping practices of neighbouring Asian economies has not been addressed, but we are hopeful that remedial measures will be taken,” Abhyuday Jindal, MD, Jindal Stainless

Higher coal imports to push up power costs

Steel Insights Bureau

To take care of any shortfall in domestic coal supply, Power Ministry has directed a minimum 6 percent blending of imported coal till September. It has also ordered emergency procurement of power from imported coal-based power plants during April-May period, when availability of power in the day-ahead market is expected to be less than the demand.

‘Unprecedented’ rise in power demand

Grid India (POSOCO) has reported to the government that energy demand has increased sharply and is expected to remain

at increased level during the first half of FY24. India’s coal-based power generation grew 15.5 percent to 49,757.10 million units (MU) during the first half of January 2023 compared to 43,080.78 MU during the first half of January 2022, according to CEA.

On a month-on-month basis, coal-based generation till January 15, 2023 was up by 8 percent as compared to 46,062.85 MU during the same period of December 2022.

During April-January 15, 2022, thermal power generation has risen by 11.6 percent at 896,152.25 MU compared to 803,070.99 MU during the corresponding period of 2021.

Between FY23 and FY30, CEA expects electricity demand to grow at a CAGR

Coal Ministry

of 7 percent. “Although coal supplies has increased during Q4, it is not adequate to meet the unprecedented increase in the demand for electricity,” Power Ministry said.

Steps to procure 1,500MW from imported coal-based plants

Power Ministry has decided to procure 1,500 MW from imported coal-based (ICB) power plants during April-May 2023 period, being seen as the ‘crunch period’ as during that time availability of power in the day ahead market (DAM) is expected to be less than the demand.

NTPC Vidyut Vyapar Nigam Ltd, a wholly-owned subsidiary of NTPC Ltd has been nominated as the nodal agency to facilitate the procurement of 1500 MW.

“This would ensure sufficient supply in the Day Ahead Market, which in turn is expected to have moderating effect on clearing price,” the Power Ministry said on January 23.

The seller of power, to be selected through

“Due to recent surge in demand and consumption of electricity, the share of coal-based generation has increased. Although the supply of coal from all sources has increased, it is not consummate with the requirements of thermal power plants.”

Arcelormittal Nippon Steel India grows stronger as

self-reliant steelmaker

Growth ambitions of the steel sector, which aims to exceed 300 million tons by 2030–2031, have unlocked plenty of opportunities for the industry players with ArcelorMittal Nippon Steel India (AM/NS India) – a joint venture between two global steelmakers ArcelorMittal and Nippon Steel – committing to play a pivotal role in nation’s growth journey and contribute to ‘Atmanirbhar Bharat’ aspirations. The integrated steelmaker has been undertaking a series of initiatives – from carrying out the debottlenecking exercise, expanding its capacity, controlling inputs costs with effective supply chain management, to acquiring critical assets – all leading to strengthening its position as a self-reliant manufacturer.

The capacity and volume growth are being complemented by financial discipline and efficiency while the company tackled external headwinds with prudent and effective steps. Amit Harlalka, Chief Financial Officer, AM/ NS India, spoke to Tamajit Pain about the approaches and strategies that the company has been implementing to offer ‘Smarter Steels for Brighter Futures’, besides sharing his outlook for the company and the sector.

Since inception, AM/NS India has strengthened its portfolio as an integrated steel manufacturer and drawn plans to expand its operations. How has been the growth path and what is the plan going forward in both organic and inorganic ways?

We have made considerable progress in strengthening our operational and financial performance over the past three years. Today, AM/NS India is among the leading integrated steelmakers in the country, with a profitable business and a robust balance sheet, well-positioned to grow domestic market share and play a leading role in the growth of the Indian steel industry. We are committed to produce smarter steels with a promise of creating brighter futures.

“We are betting big on exports and plan to expand to newer markets.”

Shyam Metalics and Energy Ltd (SMEL) is a leading integrated metal-producing company based in India with a focus on long steel products and ferro-alloys, which has been charting its organic expansion plans as well as growing inorganically by acquiring stainless steel maker Mittal Corp and wire rod maker Ramsarup Industries. Headquartered in Kolkata, the company is the largest coal-fired player in terms of sponge iron capacity in India and ranks amongst the largest producers of ferro-alloys in terms of installed capacity in India. SMEL is also one of the leading players in terms of pellet capacity and in January it implemented its 1.2 million tons pellet capacity 8 months ahead of Schedule. Brij Bhushan Agarwal, Vice Chairman and Managing Director, who is spearheading the company, shares with Sumit Maitra the current strategies to operationalise its growth plans.

Share the status of the expansion project to increase the existing integrated installed facility of 8.85 million tons to 14.45 million tons by 2025.

SMEL announced the expansion of its integrated steel production capacity from the existing 8.85 million tons per annum (mtpa) to 14.45 mtpa of which value-added long steel capacity shall enhance to 2 mtpa from the present 1.47 mtpa.

To meet our growth targets, SMEL’s present capex aims at growing to `10,000 crores in the next five years. We initially announced a capex roadmap of `3,950 crores, but our capex is expected to grow towards `10,000 crores in the next 5 years to meet the organic and inorganic growth plans through internal accruals.

Out of the current investment of `7,500 crore, the company intends to invest approximately `5,000 crores in its primary West Bengal-based plant at Jamuria near Asansol. Also, we are the largest producer of coal-fired sponge iron in the country with a present capacity of 2.1 million tons (mt). Post the planned expansion the capacity shall produce 3 mt of iron.

How your product mix will improve following the expansion plan?

SMEL is the leading and fastest-growing integrated metalproducing company in India. We have a strong presence in the steel sector with a focus on long steel products and ferro alloys.

By H1 of CY2023, we will also aim to boost the capacities of pellet capacity from 3.6 mt to 6.0 mt, sponge capacity from 2.10 mt to 2.90 mt, billet capacity from 1.47 mt to 2.00 mt, finished steel capacity from 1.47 mt to 2.0 mt.

The Captive Power Plant capacity to be enhanced from 267 MW to 357MW. In FY24 and FY25 the coke oven plant, blast furnace plant and ductile iron plant capacities shall also be added to our production capabilities.

Tata Steel sees visible signs of demand revival

Steel Insights Bureau

Tata Steel’s consolidated revenues in the first 9 months of FY23 were up 3 percent year-on-year (y-o-y) to `1,80,391 crores despite volatile operating environment across geographies.

Consolidated EBITDA stood at `25,472 crores, with an EBITDA margin of 14 percent. Consolidated Profit after Tax stood at `6,509 crores. During the December quarter, consolidated revenues was `57,084 crores. EBITDA was `4,154 crores, with a margin of 7 percent.

“Profitability was affected by sharp drop in realisations and spreads in Europe,” the company said in a release.

Domestic crude steel production touched 5 million tons (mt) in Q3 for the first time with commissioning of Neelachal Ispat Nigam Ltd (NINL).

Executive Director & Chief Financial Officer

Capex status

Tata Steel is presently expanding capacities across multiple sites at Kalinganagar, NINL and the Electric Arc Furnace at Ludhiana in Punjab and at downstream plants across India.

India deliveries stood at 4.74 mt, up 7 percent y-o-y primarily driven by 11 percent growth in domestic deliveries, which has also enabled an improvement in product mix. The company saw record sales of industrial products and projects growing by 15 percent y-o-y basis.

Active engagement and expanded product range led to 17 percent growth in oil and gas, lifting and excavation, preengineered buildings.

Value-added products make up around 40 percent of industrial volumes and supplier of steel for marquee government infrastructure projects across India.

In branded products and retail, microsegmentation is driving demand in the face of market volatility with sales to MSMEs growing by 25 - 30 percent in last 2 quarters. During the 9 months of this year, 36 new products were developed.

The company has spent `3,632 crores on capex during the quarter. At Kalinganagar, phased commissioning of 6 million tons per annum (mtpa) pellet plant has begun while work on 2.2 mtpa Cold Roll Mill complex and 5 mtp expansion is ongoing.

In Punjab, work has commenced on enabling activities with respect to 0.75 mtpa Electric Arc Furnace, an important milestone for Tata Steel’s journey towards reducing emissions.

NINL begun operations and is being ramped up to rated capacity of around 1 mtpa.

Tata Tiscon rebars are being made from NINL billets.

“We continue to invest in capacity growth in India, taking our capital expenditure to `3,632 crores for the quarter and `9,746 crores for the year to date,” Koushik Chatterjee, Executive Director & Chief Financial Officer, said.

“We continue to invest in capacity growth in India, taking our capital expenditure to `3,632 crores for the quarter and `9,746 crores for the year to date,” Koushik Chatterjee,

Tata Steel Meramandali, India

JSW sees improved margins in Q4

Steel Insights Bureau

Rising steel prices and stabilising of input prices will help JSW Steel report improved margins in the fourth quarter of FY23, the company has said.

Steel prices are coming back to a level at parity with global prices where margins will become a little bit more livable, top management told analysts during a conference call following the announcements of the results.

“We are seeing the prices increase from January 1 and in some of the products maybe mid-January as well. You will see this probably play out in this quarter which is seasonally a better quarter,” Jayant Acharya, Deputy MD, JSW Steel told analysts.

The domestic price rise is a reflection of global price movement.

“On a dollar basis, China moved up by about $100. European CFR also, we have seen move up in the range of $140-plus. And we are seeing a reflection of that in India. Primarily, the cost increase, some of that had become unsustainable, and therefore, the steel prices are coming back to a level where margins will become a little bit more livable,” he said adding that there is parity between domestic and global prices.

“From an import parity perspective, I think we are by and large similar to the international offers now. International offers have also increased. Therefore, since the international prices have gone up, we do see an opportunity for some increases in the domestic,” he said.

As realisation improves, raw material costs are also coming down which will improve margins in Q4.

“The full benefit of lower prices of consumables, fluxes, and other items have

not fully come in Q3. So, those benefits will flow more or fully in Q4,” Seshagiri Rao, Joint MD and Group CFO at JSW Steel, said.

Major costs to stay range bound

“As far as coking coal is concerned, we have been able to get an advantage of $100 in the last quarter. It will be flattish this quarter. We don’t expect too much of movement, it will be range bound. As far as iron ore is concerned, I think we have already seen the prices going up and we expect this also to remain in the range-bound manner in this quarter. It has already moved up in the last few weeks, Jayant Acharya said.

Power costs will remain more or less in the same range as in Q3. In Dolvi, JSW has started a 60 MW power plant, which will bring down power costs marginally.

Posts y-o-y fall in Q3 net profit

JSW Steel has posted 86 percent fall in its December quarter consolidated net profit to `474 crore, down from `4,516 crore in the year-ago period, it said in a regulatory filing.

Saleable steel sales for the quarter

stood at 5.63 million tons (mt), higher by 21 percent year-on-year (y-o-y) driven by higher domestic sales, but lower by 2 percent quarter-on-quarter (q-o-q).

The company registered revenue from operations of `39,134 crores and operating EBITDA of `4,547 crores, with an EBITDA margin of 11.6 percent.

“The increase in EBITDA q-o-q is attributable primarily to a reduction in coking coal prices. The decline in sales realisation partly offsets the benefit from lower costs,” the company said in a release.

Production and sales

Crude steel production on a stand-alone basis was 5.32 mt, showing a growth of 7 percent. The steel plants were operated at 92.5 percent capacity utilisation. Bhushan Power and Steel improved its capacity utilisation to 85 percent as against 72 percent in the previous quarter.

On a consolidated basis JSW posted crude steel production, highest ever, of 6.06 mt, showing a growth of 9 percent q-o-q with a capacity utilisation of 91 percent. On the sales side, on a stand-alone company basis, it had 4.95 mt.

On a consolidated basis including Bhushan Power and Steel, it was 5.55 mt.

“We sold 5.163 mt, highest ever domestic sales, showing a growth of 2 percent in volume terms. But the overall volumes are lower because exports have fallen,” Rao said.

Exports have fallen by 32 percent y-o-y basis and as a percentage of sales, touched 7