Steel Insights, January 2017

Contents 24 MIP, dumping duty keep Indian steel afloat in 2016

6 | COVER STORY

26 Manganese ore miners’ profitability to slide marginally

Globally allied

27 FIMI seeks level playing field in imports of raw materials 28 Iron ore prices likely to be under pressure: study 29 Steel ministry, Railways in slurry pipelines tie-up 30 Iron ore headed for better days?

33 Consumer durables sector grapples with demonetization 34 Demonetisation puts car sales in back gear in Dec

The Indian ferro alloys industry is well integrated with the global market.

22 | FEATURE

India’s per capita steel consumption touches 63 kg in FY16 Country’s crude steel stood at 121.97 mt in 2015-16.

35 Hope floats for realty developers in 2017

25 | FEATURE

36 Coking coal offers turn cold 37 Steel ministry for lower raw material import duty

MOIL to invest `150 crore in new explorations

38 Exide looking for 50 acres for expansion in Haldia

Company has approached MP government for exploration.

40 Tata Steel to acquire Odisha-based Brahmani River Pellets 42 Corporate update 44 Tata Steel IJmuiden orders new continuous slab caster 47 Iron ore handling by major ports up 55% m-o-m in Nov 48 Global crude steel output falls 3% in Nov m-o-m 49 Will global steel ride China rail to turnaround?

51 Price data 52 Ferro alloy data 53 Production data 56 Consumption data 57 Import data 58 Import-export data 60 Export data

4 Steel Insights, January 2017

31 | FEATURE

Iron ore export duty takes centrestage ahead of Budget Iron ore miners seek lower export tax in the country’s annual budget.

46 | GOVERNMENT

Steel PSUs depend on R&D to improve performance There has to be a linkage between future marketability of the R&D projects, Steel Minister.

Cover Story

Globally allied

Indian ferro alloys industry well integrated with world market Tamajit Pain

6 Steel Insights, January 2017

Cover Story

A

fter protracted stagnation, prices in the global steel and raw material markets are showing an uptrend. The ferro alloys industry, a major contributor to the steel-making process, has been behaving in tandem.

A price rise in materials like manganese and chrome ores has put the non-integrated ferro alloy producers in a difficult position.

Producers are also being forced to deal with high power tariffs and low demand in a bid to stay afloat.

However, the events of 2016 have clearly indicated that the Indian ferro alloys industry is fully integrated with the global ferro alloys and downstream markets. The Indian industry is no longer insulated and, importantly, has emerged as a strong global contender.

Ferro alloy demand is primarily linked to consumption of steel and stainless steel.

While growth in both these end-user industries will pick up slightly, domestic steel demand is expected to grow faster compared to stainless steel demand in the near term.

With steel demand poised to increase over time to 111 million tons by 2020, ferro alloys demand is expected to increase over time.

Thus, growth in demand for manganese alloys will be higher compared with chrome alloys, which is used mainly in stainless steel manufacturing.

The industry will continue to see weak exports and growing imports. Lower realisation and rise in working capital requirements will keep the pressure on margins and debt-servicing indicators.

Ferro alloys are used in steel-making and consist of less than one percent of the total raw material required for producing the metal.

Despite being a very low constituent, ferro alloys are vital additives in steelmaking. The principal function of ferro alloy addition is to increase the resistance of steel to corrosion and oxidation.

It improves hardenability, tensile strength at high temperatures, wear and abrasion resistance and increases other properties like creep strength etc.

Ferro alloys are generally used to impart engineering properties to steel. They are vital inputs for producing all types of steel and are used as raw material in the production of special steels, alloy steels, apart from, of course, stainless steel.

The sharp drop in manganese alloy prices has been offset, in India and elsewhere, by a downward shift in the prices of key inputs, particularly of metallurgical coke and manganese ore.

Steel Insights, January 2017

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feature

India’s per capita steel consumption touches 63 kg in FY16

Steel Insights Bureau

T

he per capita consumption of total finished steel in India has risen from 58 kg in 2011-12 to 63 kg in 201516, according to the latest year-end review of the Ministry of Steel (MoS).

According to the review, the country’s crude steel capacity stood at 121.97 million tons in 2015-16 while production of crude steel was at 89.79 mt during the same year.

India is currently also the world’s largest producer of direct reduced iron (DRI) or sponge iron, a status it has maintained every year since 2003.

The country was also the third-largest consumer of finished steel in the world in 2015 (preceded by China and the US) and is expected to maintain the said status for 2016 also.

India is the third-largest steel producer globally and is likely to be the second-largest steel producer in a few years. The sector contributes about 2 percent to the country’s GDP and employs over 6 lakh people.

22 Steel Insights, January 2017

India has been a net importer of total finished steel every year since 2007-08 with the exception of 2013-14.

Over the last few years, the steel sector has been adversely impacted by the global steel glut which resulted in predatory pricing and a surge in steel imports into the country.

“Over the last few years, the steel sector has been adversely impacted by the global steel glut which resulted in predatory pricing and a surge in steel imports into the country.

However, on account of timely intervention by the government and industry through various trade-related measures like antidumping and safeguards as well as other policy initiatives, the impact of the global glut were significantly mitigated,” the review paper said.

“The government has been proactive in ensuring adequate raw material availability at reasonable prices and explored ways of reducing input, logistic and infrastructure cost of steel production. The government is also working on ways to reduce the financial stress in the steel sector by reducing imports,

increasing exports as well as examining strategies of increasing steel demand,” the ministry said in its review.

To provide a level playing field to the domestic steel producers, the government has extended the minimum import price (MIP) on 19 steel products till February 4, 2017. The government has also imposed a provisional anti-dumping duty on imports of flat products (hot rolled & cold rolled) and on wire rods from China, Japan, Korea, Russia, Brazil, Indonesia and Ukraine.

Such measures have aided in the decline in steel imports by 38.28 percent between April-November, 2016 while exports have increased by 59.96 percent during the same period. Overall, steel production also grew by 8.8 percent between April-November, 2016 compared to the same period last year.

Major protective measures by government

The government also initiated a slew of protective measures to safeguard the industry from the onslaught of cheap imports,

FEATURE

Iron ore export duty takes centrestage ahead of Budget Steel Insights Bureau

T

he iron ore export duty has moved back to centre-stage in India, with iron ore miners calling on the government to announce a lower export tax when the National Budget is unveiled on February 1.

In response to the finance ministry’s invitation for inputs from all sectors, iron ore miners have put forward that the forthcoming Budget should either prune the 30 percent export tax on high-grade iron ore and 10 percent rate applicable for lower grade ores and fines, or scrap the duty structure for exports of the raw material.

Quick to counter the miners has been the Indian Steel Association (ISA), the representative lobby organisation of Indian steel producers. The ISA believes that not only should the export duty be continued, a uniform higher rate should be imposed irrespective of the raw material grades to ensure adequate supplies to the domestic market to foster steel production growth, Iron ore production, stocks at mine-heads, demand, imports, net demand, surplus available (million tons) Year (1)

Production (2)

Stocks at mineheads (3)

2011-12 2012-13 2013-14 2014-15 2015-16

168.58 136.61 152.18 128.91 155.90

123.80 120.20 124.37 128.66 143.98(P)

P = Provisional

Domestic demand (4) 96.61 100.48 108.33 113.48 115.00

Demand Exports (5) 61.74 18.37 14.42 6.12 4.50

Total demand (6) 158.35 118.85 122.75 119.60 119.50

Imports (7)

Net demand (6-7)

Surplus available (e)

0.98 3.05 0.36 12.09 7.09

157.37 115.80 122.39 107.51 112.41

134.03 174.70 154.16 150.06 187.47

Source: IBM, FIMI

Steel Insights, January 2017

31

market report

Will global steel ride China rail to turnaround?

Kingshuk Banerjee

W

ill the global steel industry hope achieve a turnaround in 2017 riding on Chinese rail?

Amidst rumours of a bleak global industrial scenario, the outlook for global steel production for 2017 looks to be marginally better. As per World Steel Association (WSA) data, global steel demand would grow by a marginal 0.5 percent to 1,510 million tons (mt) in 2017 compared to 1,501 mt in 2016.

And the very basis of this optimism rests on China. The world could hope for lower volumes of dumped steel from Beijing in 2017 as the Asian giant would be getting into massive logistics infrastructure building, which would entail use of much of it steel production.

According to a recent report, China would produce 825 mt of crude steel in

2017, 0.5 percent up from 2016 and in all probability would consume 87 percent of this production.

A lion’s share of steel production would be utilised in building a 30,000-km nationwide rail network incurring $504 billion, connecting 80 percent Chinese major cities within 2020. Of this, $117 billion is likely to be invested in 2017 alone. As a result, Chinese domestic demand would narrow the global steel market surplus to 3.2 mt in 2017 from 10.9 mt in 2016.

Citing the overall near-term steel demand as stable and improving, global analysts noted that infrastructure spending has been increasing, while reduced property inventories in lower-tier cities should result in a rise in new start-ups. Globally, many regions are showing signs of improved demand, from the economic recoveries in Brazil and India.

Terming these potential investment as credit stimulus, a recent research report notes that this kind of positive vibes on the macro economy can be expected to last for 4-5 years when injected through infrastructure plans. This is because it can take longer to build railways, subways and other steel-heavy projects.

Another good tiding is the emergence of India, Russia and South Korea in the global steel export market.

A recent report has indicated that rising trade barriers have had significant impact on sales of steel into the Asian market, with Chinese exporters facing increasing competition from Indian, Russian and Korean competitors, eroding Chinese exporters’ market share.

As experts have pointed out, export premiums were strong in SeptemberOctober but collapsed in late November and early December before recovering as the year ended. If the overall picture is put into analysis, recent price movements have shown a softening of export prices and a rise in domestic prices suggesting the market is responding to greater competition in exports and an inability, due to input costs, to compete as effectively in exports.

Another factor is the northward price

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62 Steel Insights, January 2017

Tear along the dotted line

Tear along the dotted line