Steel Insights, July 2017

Contents 21 Govt might fix output floor for iron ore mines 22 Australian, Brazilian quality ore driving seaborne trade 24 RBI asks banks to refer high NPA accounts under insolvency code 25 Coking coal prices plunge in June on higher supplies 26 June car sales decelerate amidst new tax regime 27 GST brings cheer to Motown 28 Indian realty on radar of foreign investors 29 Tata Steel crude steel production up 16% in Q1 30 JSW Steel outlines capex program to expand capacity 32 New US steel import duty: will it prove costly for US again?

34 Global crude steel output marginality up in May m-o-m 35 Traffic handled by major ports up 5.56% in April-May 36 Indian Railways’ May iron-ore handling up 8.87% y-o-y 37 Steps on to achieve 300 MT steel output: Steel minister 38 Steel ministry to focus on R&D for valueadded steel 39 Hot Dip Galvanizing Line at ARVEDI producing AHSS over 800 Mpa 43 4th Generation Plate Leveler (SuPerLevelerTM) of JP Steel Plantech 47 Charter Steel to enter SBQ straight bar market with Primetals Technologies upgrade 49 Price data

4 Steel Insights, July 2017

6 | COVER STORY

Material handling industry walks a tightrope Material handling industry walks a tightrope as sluggish demand & project implementation.

16 | COVER STORY

Elecon to be selective in choosing projects Company looking at equipment space & selective on large material handling projects.

17 | INTERVIEW

RINL not to pursue Bhilwara iron ore mine RINL focusing on ramping up production, completing modernization program.

19 | FEATURE

Steel mills expect GST to push up demand levels Industry hopes GST will improve competitiveness & reduce transportation time.

31 | CORPORATE

JSW Steel proposes slurry pipeline to transport iron ore, coal Slurry pipeline can be set up within 24 months at estimated cost of `2,100 crore.

Cover Story

Material handling industry walks a tightrope Madhumita Mookerji

H

ave you ever experienced what it feels like walking the tightrope?

There is always the danger of falling off the precipice, imparting a certain edgy precariousness to the rope walker’s predicament. That is exactly how the market for the bulk material handling equipment (MHE) looks like at present.

While certain segments of this large industry has seen growth, overall, the sluggish demand for steel and thus iron ore, and the tardiness with which projects are lining up for resumption, the bleak power offtake scenario are all combining to take the sheen of an industry that had looked

6 Steel Insights, July 2017

positivity in the eye even 3 years back, when the new Narendra Modi government had just assumed office and there was an expectation that the new dispensation would remove all hurdles that were delaying infrastructure project implementation.

However, despite the misgivings, one of the most positive pointers that this industry is poised for long-term growth, especially in relation to iron ore handling, is the fact that India’s production of this key steelmaking raw material is expected to touch a substantial 200 million tons (mt), and may perhaps even cross 206 mt in the current financial year (2017-18). This would be a

4 percent growth over 192 mt recorded in the previous financial year (2016-17) and a considerable jump of over 28 percent when compared to 156 mt registered in 2015-16.

In fact, India’s iron ore output was estimated to have surged 23 percent yearon-year in FY2017 over FY15. This was on account of the lifting of the mining ban by the Supreme Court clamped in Karnataka, Odisha and Goa on account of illegal mining of this precious national resource.

It may be recalled that mining activity had resumed sharply following the lifting of the mining ban in Goa by the Supreme Court in 2015. In fact, the DMG had conducted 21

Cover Story e-auctions under which more than 12 mt of low grade iron ore had been sold.

The apex court had banned illegal mining in Karnataka too as part of measures to curb illegal mining in this iron-ore rich state. Furthermore, several restrictions had been introduced which inter-alia included a cap of mining 30 mtpa of the steel-making raw material per annum within this southern state. However, even after a lapse of over 4 years, the current rate of iron ore production in Karnataka is still around 27 mtpa, far lower than the demand by the user industries, as per industry sources.

The Supreme Court had banned mining in Odisha too from 2015, putting a cap of 80 mt per annum in place. The ban, however, was lifted in 2015 and production resumed from 2016.

Odisha is estimated to have produced 94 million tons, Chhattisgarh around 30 million tons and Karnataka around 25 million tons in the last fiscal. Other states like Jharkhand produced around 21 million tons and Madhya Pradesh, Maharashtra, Andhra Pradesh and Rajasthan produced around 6 million tons altogether, industry sources said.

The objective of the restrictions imposed by the Supreme Court is to curb illegal mining, facilitate sale of iron ore in a transparent manner and to make available adequate amount of iron ore to the user industry.

From 2011-12, mining in these states had been severely hampered because of not only the mining bans but also due to tardy regulatory approvals and environmental and forest clearances. New projects were very hard to come by because of the strict laws. So, accordingly, the market had been affected. There were clampdowns on exports as well. Consequently, if one travelled around

Odisha, Karnataka, Goa, one would have seen a long line of these large equipment lying idle because of the Supreme Court ban on mining!

With declining exports, analysts expect a domestic surplus of 18 million tons in FY18, adding to the surplus of 14 million tons in FY17. Last year’s iron ore exports were estimated at 25 million tons of mostly lower grades, in the range of 52-58 percent Fe (iron) content.

Thus, the story is rosy so far as the iron ore scenario is concerned.

Government initiatives

The second pointer that the MHE industry is poised for growth lies in the fact that the government has identified around 71 major mineral blocks in 7 states that will be auctioned off in the course of the current fiscal. As per the Ministry of Mines, there will be 8 iron ore mines (1 in Jharkhand and 2 in Maharashtra and 5 in Odisha) and 27 limestone blocks (9 in Gujarat, 4 in Andhra Pradesh, 7 in Chhattisgarh, 3 in Jharkhand, 7 in Maharashtra, 1 in Odisha and 7 in Rajasthan) on offer.

Mines Secretary Arun Kumar said at a recent meeting of the Coordination-CumEmpowered Committee (CCEC) of the major mineral producing states in New Delhi that a large number of merchant mining leases have elapsed due to Section 10A (2) (c) of the Mines and Minerals (Development & Regulation) Act, 1957. These mines should now be disposed of through the auction route only.

Kumar also said that states need to submit their plans for continuing production of essential minerals as a large number of merchant mining leases will come up for auction on March 31, 2020.

An official statement said that the auctions conducted so far will fetch `85,250 crore to the states. Out of this, the additional contribution from the e-auctions will be `67,501 crore accrued over the licence period of 50 years. Just 4 states constitute 90 percent of this takeaway and other states need to expedite their mining auctions.

Apart from the e-auctions, another factor that is expected to push up growth in the MHE sector is the fact that the Union government, in its Budget for 2017-18, has allocated a record `396,135 crore in infrastructure, an amount that was up by 10 percent over the revised estimate of the previous fiscal of 2016-17.

This outlay, along with the government’s various programmes like Make-in-India, Smart Cities, Housing for All, it is expected, will give a strong push to domestic steel demand, which, in a cascading effect, will lead to more demand for iron ore and the material handling equipment (MHE) industry consequently.

In fact, as per an industry report, the market for material handling equipment in India was slated to grow at a compound annual growth rate of almost 16 percent through 2011-15 on the strength of increased industrialisation prospects across states.

“The bulk material handling industry is poised for big growth thanks to long overdue capital expenditure in mining, power, iron ore, coal, cement, steel and fertiliser, keeping in mind the requirement of building infrastructure requirement in India,” J S Patel, CEO, Elecon Engineering, told Steel Insights.

“Outlook is bright as the cumulative demand for adding capacity is increasing, especially if you see the gap in per capita consumption of steel, power, cement etc

Mineral Auctions State Andhra Pradesh

Gold

Limestone

Bauxite

Graphite

Emerald

Iron Ore

Manganese

Copper

Total Blocks

2

4

-

-

-

-

-

-

6

Chhattisgarh

-

7

4

-

-

-

-

-

11

Gujarat

-

9

3

-

-

-

-

-

12

Jharkhand

1

3

1

1

2

1

-

-

9

Maharashtra

1

7

4

1

-

2

2

2

19

Odisha

-

1

-

1

-

5

-

-

7

Rajasthan

-

7

-

-

-

-

-

1

8

Total

4

38

12

3

2

8

2

3

72

Steel Insights, July 2017

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Cover Story

Elecon to be selective in choosing projects

What is the share of iron ore in Elecon Engineering’s portfolio of bulk material handling business?

Our share in iron ore equipment handling is around 20 percent.

The government recently announced a slurry pipeline proposal. What do you feel about it?

We are a bulk material handling player.

Slurry pipeline is not in our portfolio but it will have positive impact on the iron ore industry.

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What is the emerging trend in the kind of equipment required in India?

Conceptually, conveyor designs have under gone a sea change and nowadays high-speed specialised pipe/open belt conveyors with horizontal and vertical curves are the order of the day. Elecon has indigenised such specialised conveyors.

What will be the impact of GST on material handling?

E

lecon Engineering, established in 1951 is today one of the largest manufacturers of material handling equipment and industrial gears in Asia, serving industries like iron ore, power, steel, cement, sugar, ports, Defence, extrusion industries, fertilisers etc. However, the market for material handling is going through a rough patch because of delays in project implementation as contractual obligations and financial constraints have slowed down its pace. The company has been facing tough times for the last 3 years. But going forward, Elecon is looking at the equipment space besides being selective on large material handling projects to keep afloat, J S Patel, CEO-MHE Division, Elecon Engineering, tells Madhumita Mookerji.

there is demand for specialised long distance single flight conveyors, wagon tippers, wagon loaders, screens, stackers -Reclaimers and apron feeders.

GST will facilitate smooth execution of projects/orders. Therefore, at a net level, it will have a positive impact.

What is the scenario with regard to iron ore handling?

Of late, steel plants planned are hanging fire for many years now and overall delays will remain for a few more years.

So, naturally, the iron ore material handling industry is facing an uphill task.

However, we have successfully completed a very specialised high-speed downhill conveyor of 4.8 km single flight for NMDC’s Donimalai iron ore mine. It was for a very specialised downhill conveyor, in fact, it was one of the special conveyor systems in the world.

The delay in project execution has an impact on overall costs and getting into contractual compulsions is difficult of late.

At times, material handling players find the going very tough because of the nature of the contracts.

What is the outlook for the material handling industry with regard to iron ore in particular?

The future is bright but unless the demand for steel goes up globally, as things stands now, I do not see any upturn in the scenario for material handling in iron ore in India.

Which products find more usage in India considering the small nature of the iron ore mines?

So far as iron ore equipment are concerned,

How has Elecon Engineering performed in the last year in terms of its material handling business?

Elecon has sustained its operations through difficult times over the last 3 years. Several orders were given but then projects went into hibernation for long periods. In fact, it is a matter of pride that the situations at times were quite unmanageable but we did not abandon any project to keep our reputation intact despite financial constraints.

So, going forward, any plans?

We shall be selective in choosing projects, our focus shall be in supply of equipment like wagon tipplers, crushers, screens, stackers – reclaimers, portals scrappers and bagging machines, hauling equipment, semimobile crushers and all other equipment related to bulk material handling.

This would help us to add value to the equipment and become competitive.

What is the turnover target for FY18?

Our turn over target is expected to be around `1,100 crore with a growth of 10-15 percent year-on-year.

Are you looking to enter any new product in material handling?

Yes, we are. We have plans and are working on products to keep pace with the latest technology. However, I cannot divulge the details.

Interview

RINL not to pursue Bhilwara iron ore mine

A

fter a long sluggish spell, the steel industry is expecting a rebound, riding short-term measures like the minimum import price (MIP) and antidumping duties and more long-term initiatives like the National Steel Policy, 2017 – which will provide an integrated policy framework for growth in sync with major government initiatives.

Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant and a navratna public sector enterprise under the Ministry of Steel, is thus focusing on ramping up production, and completing its modernisation and consolidation programme.

Plans are afoot to enter the next phase of expansion but these will depend on market conditions, P Madhusudan, CMD, RINL, tells Tamajit Pain & Madhumita Mookerji in a freewheeling interview: Excerpts:

How was the past year for the steel industry in general?

The past year for the Indian steel industry was fairly good with the finished steel output registering a growth of about 11 percent. However, domestic demand grew around 3 percent only, as a result of which there was growth in finished steel exports from India. India’s export of finished flat and long steel products increased by around 76 percent and 62 percent respectively. Capacity utilisation improved from 74 percent in 2015-16 to 77 percent in 2016-17.

The imposition of trade barriers like the minimum import price (MIP) and anti-dumping duty led to a decline in finished steel imports. Therefore, India emerged as the net exporter of finished steel.

However, in view of the stagnant domestic demand, prices were under pressure, particularly for longs. Further, with raw material prices, especially coking coal, skyrocketing to almost three times, the margins were impacted severely.

What sort of revenue targets have you set for FY18?

We have set a 30 percent increase in revenues for the financial year 2018.

How had the MIP brought relief to RINL in terms of price cushions? But how viable are MIPs and other short-term measures?

The MIP certainly helped to arrest imports at predatory prices. As a short term measure, it was helpful in securing a sustainable operating environment for the Indian steel industry and RINL as well.

Steel Insights, July 2017

17

feature

Steel mills expect GST to push up demand levels Steel Insights Bureau

T

he implementation of the goods and services tax (GST), with effect from July 1, will benefit the domestic steel industry as it will improve the sector’s competitiveness and reduce the transportation time by up to 45 percent, according to Steel Minister Birender Singh.

Under the new tax regime, the cost of raw material is set to come down as the GST rate for iron ore, a key steel-making raw material, and other inputs has been kept at 5 percent from around 11-12 percent previously. This will further add to the competitiveness of the Indian steel sector.

“Under the new tax regime, there will be a reduction in the logistics cost as well as in the transportation time. At present, whenever a

steel product crosses a state border, there are a number of check posts which delay supply of goods to the customer. Under GST, a unified standard rate of tax will reduce cost and delay,” Singh said.

The steel ministry feels the GST rollout will not cause any decline in steel consumption even in the short-term; on the contrary, it will see an upward trend.

The GST rate for the steel sector has been kept at 18 percent, which is nearly similar to the present effective tax rate of 18.1 percent taking into consideration the prevailing excise duty and VAT rates. Both excise duty and VAT would be subsumed under the GST, going forward.

Rating agency ICRA does not expect any material impact of the GST rate on endusers of steel products.

Steel cos expect GST to put economy on growth path

Steel-makers expect the incoming GST regime to put the economy on a high growth trajectory, resulting in higher demand for the alloy.

JSW Steel Chairman Sajjan Jindal said the new tax structure will simplify and rationalise the current tax regime, enhance efficiencies and boost competitiveness, and put the Indian economy on a high growth trajectory over the medium term.

This will be supportive for higher demand for steel, Jindal said.

The biggest benefit of this tax reform would be the onboarding of the informal economy into the mainstream economy and broad-basing the tax net, a Tata Steel spokesperson said in a statement.

Steel Insights, July 2017

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Tear along the dotted line

Tear along the dotted line