Steel Insights, June 2022

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Imported scrap trade remains low Pig iron production up 9.5% y-o-y April sponge iron production up 6% y-o-y April crude steel production up 6.2% y-o-y Sluggish steel demand, export duty drag down iron ore, pellet offers Seaborne coking coal offers volatile in May Auto sector on revival mode with promising May sales Iron ore handled by major ports down 17% in April Indian Railways’ iron ore handling up 8% in April Global crude steel output up 1.06% in April SteelZero initiative signs up Volvo, major RE players Kobe Steel goes for major hydrogen ecosystem BHP to support blue carbon market Emirates Steel Arkan to set up UAE’s first metallurgical lab for steelmaking SAIL revenue in FY22 crosses `1 lakh-crore mark JSW Steel to see pressure continuing on margins JSPL to focus on exports despite input duty hike Shyam Metalics to complete capex by September Kamdhenu gets nod for biz restructure Corporate Update Government update Import Export data Price trends Ferro Alloy data Production data Consumption data Import data Export data

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6 | COVER STORY

Steel sector awaits duty rollback Export levy likely to be reversed once inflation cools down

13 | COVER

“Duty withdrawal to inspire industry’s global expansion.”

Dilip Oommen, President, ISA, shares industry body’s views on current developments

20 | FEATURE

Coal India to set up new CCL washery, renovate BCCL facility Capacity of 5.5 million tons per annum to come on stream.

30 | INTERNATIONAL

IEA defines Near Zero steelmaking processes Report a key step to establishing future policy mechanisms.

54 | CORPORATE

NMDC steel plant faces glitches, may get delayed Air Separation Unit suffers major breakdown.

COVER STORY

Steel sector waits for duty hike fallout to blow over Sumit Maitra

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COVER STORY

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t was a matter of when, not if. Growing consumer resistances to high steel prices, and also protests, in some cases, as highlighted in our previous cover story, forced steel ministry to levy export duty of 15 percent on steel intermediaries and on major steel products effective May 22.

This move led steel prices to fall by `5,000-`,5500 per ton in May itself after the announcement.

Clearly, the export duty has been levied with a view to control inflation.

This is not the first time that it is being done.

“A parallel can be drawn with 2008 wherein similar types of export duties were levied at that time also to tame inflation.

In CY08, the duties were short lived, as they (export duties) were revoked that time partially within a month and completely within five months,” said analysts with ICICI Securities.

So, will the measure be short-lived this time too?

Industry sources indicate that the 15 percent export duty is likely to be a temporary measure and will be reversed once the high inflation falls to comfortable levels.

However, no specific timelines have been given for the reversal of export duties.

“Steel companies have also indicated that they are looking more long term and would continue to export albeit at a moderate pace,” the analysts said.

For example, in FY22, JSW Steel’s export share in overall volumes was at 28 percent, which the company expects to moderate to 15-20 percent levels this year.

Majority of the listed large steel companies are also planning to continue their announced capex plans as domestic demand is likely to grow at a healthy pace over the medium to long term horizon.

“I am sure once the government is satisfied, they will again relax the duty structure. It is too early to comment on the impact of the measures as in the international markets, too, steel prices are falling,” V R Sharma, Managing Director, Jindal Steel and Power told Steel Insights.

The order

As per the new order, an export duty of 15 percent will be levied on hot-rolled and coldrolled alloy and non-alloy flat steel products (of 600 mm or more width).

Similarly, a 15 percent duty will be levied on exports of hot-rolled bars and rods, other bars and rods of iron or non-alloy steel, flatrolled products of stainless steel, bars and rods of stainless steel, angles, shapes and sections of stainless-steel.

Iron ore exports (for all grades and including concentrates) will attract a 50 percent duty.

A 45 percent export duty has been levied on iron ore pellets. The duties come into effect from May 22.

As a relief to the steelmakers including sponge-iron and secondary steel makers, the government also cut levies on all grades of coal imports (coking and metallurgical) and pulverised coal.

High energy cost – because of rising prices of imported coal – has been a common complaint from manufacturers.

Steel companies had been increasing prices citing costlier coking coal and rising energy cost. Iron-ore prices, too, have been hovering around their historic highs. With the duty tweak, domestic steel prices are expected to cool.

Typically, a `1,000/ton cost reduction in iron-ore works out to be `1,600/ton reduction in steel prices, all other input costs remaining the same.

Indian Steel Association welcomed removal of import duties on raw materials but said export duty over a range of steel products will have a chain of economic consequences and is likely to affect new investments in steel capacity creation and also the Atmanirbhar Bharat Abhiyan for steel.

“As steel exports valued at $23 billion in FY22 in jeopardy, we request the Government to review imposition of export duty,” it said.

The industry body also requested permitting exports in the pipeline.

Impact on exports

In FY22, India’s finished steel exports

“I am sure once the government is satisfied, they will again relax the duty structure. It is too early to comment on the impact of the measures as in the international markets, too, steel prices are falling.”

V R Sharma, Managing Director, Jindal Steel and Power. jumped 25 per cent year-on-year (y-o-y) to 13.5 million tons (mt).

With domestic mills opportunistically tapping export markets, finished steel exports have so far accounted for 10-11 percent of India’s finished steel production in the last two fiscals.

“However, the imposition of the 15 percent export duty would make exports significantly less attractive going forward, which in turn could exert pressure on domestic steel prices and industry capacity utilisation levels,” rating agency ICRA said.

Interestingly, the Government has chosen to keep steel semis out of the ambit of export duties.

ICRA believes export of semis, which declined by 26 percent y-o-y in FY22 to 4.9 mt is likely to witness a significant increase in the current fiscal.

In FY22, Indian mills recorded a 25 percent y-o-y growth in finished steel exports as they took the benefit of elevated seaborne prices.

Europe, Vietnam and the Middle East were the three largest destinations for Indian steel exports, together accounting for around

Steel Insights, June 2022

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COVER STORY

“Export duty withdrawal to inspire industry’s global footprint expansion”

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n a bid to tame inflation, the Union government recently announced a host of measures that included reducing import duty on key raw materials for steel and imposing a 15 percent export duty on steel to increase availability. While end users of steel hailed the decision, the move dealt the steel industry a blow, hitting 95 percent of the steel export basket. The duty will also jeopardise the ambitious $5 trillion economy, the much-promoted PLI scheme as well as the National Steel Policy that aims to make India a leading, self-reliant, steelmaking nation and export hub with production capacity of 300 million tons per annum (mtpa). The immediate impact of the decision would be that the industry would be reviewing its massive expansion plans, as India is a net exporter.

Last year, India exported over 13.5 mtpa of finished steel. If semifinished steel is included, then exports would be more than 18 mt.

Dilip Oommen, President of Indian Steel Association (ISA), representing major steel companies, in a freewheeling interview with Tamajit Pain of Steel Insights, said existing capacity utilisation itself has to be curtailed. He said steel prices had already corrected 10 percent before the export duty imposition. With input prices coming down due to import duty cuts, the steel prices would further come down, which would have been passed on to the customers.

He appealed to the government to review the decision, and hold consultations with the industry players to find out a comprehensive solution that would benefit all stakeholders. The export market that we are forced to vacate will be taken by other countries, especially China. What concerns him more is that it will also dent India’s credibility as an increasingly strong and stable steel exporter. In addition to this - it has made India vulnerable as the exports cannot happen and at the same time FTAs with different countries allow import duty free.

Steel Insights, June 2022

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FEATURE

Coal India to set up new CCL washery, renovate BCCL facility

Steel Insights Bureau

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oal India has decided to set up a new coking coal washery of capacity 3 million tons per annum (mtpa) on Build-Own-Operate (BOO) concept at Rajrappa within Central Coalfields Ltd and renovate the existing Madhuban coking coal washery of 2.5 mtpa capacity at Bharat Coking Coal’s Dhanbad district on Renovate-Operate-Maintain (ROM) model.

Separate tenders have been floated by Coal India arm CMPDIL recently for these two projects.

Rajrappa coking coal washery

Construction of the washery has to be

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completed in 36 months (including trialrun and commissioning) from the date of signing of agreement or handing over the site while the winning bidder has to operate and maintain it for 18 years.

“CCL intends to set up a coking coal washery with raw coal linkage from Rajrappa OC on BOO concept. The assured raw coal throughput of the washery will be 3 mtpa on ‘as received basis’ (ARB). The expected monthly average ash content of raw coal is around 25.1 percent on air dried basis (ADB) and likely to vary within the range of 24.8 to 35.0 percent on ADB. The range of moisture varies from 0.86 percent to 4.89 percent,” the tender said.

The washery will be designed to produce

CIL will set up a new coking coal washery of 3 mtpa on Build-OwnOperate (BOO) concept at Rajrappa within Central Coalfields Ltd and renovate the existing Madhuban coking coal washery of 2.5 mtpa capacity at Bharat Coking Coal’s Dhanbad on RenovateOperate-Maintain (ROM) model. three products viz. washed/ clean coal, washed coal (power) & rejects.

The plant should be capable of efficient performance with additional raw coal feed to an extent of above 20 percent over the throughput capacity, commensurate with the fluctuation in mine production in different seasons, the tender said.

Thus, the plant shall have the provision for handling raw coal equivalent to daily throughput capacity (i.e. 9000 tons) + 20 percent of daily throughput capacity.

Washed/ Clean Coal Washed/clean coal with monthly average target ash content of 18 percent (ADB) and total average moisture content not exceeding 9.0 percent (day-to-day basis) should be produced.

However, depending on need, ash percentage of washed/clean coal can be reduced further.

INTERNATIONAL

IEA defines Near Zero steelmaking processes in policy guide for G7 Steel Insights Bureau

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nternational Energy Agency, in its latest report - Achieving Net Zero heavy industry sectors in G7 members - focuses on the implementation of policies aimed at drastically lowering CO2 emissions from heavy industries in the G7 and beyond.

The report focuses on two key areas for achieving Net Zero heavy industry sectors in G7 members, both of which are priority areas for Germany’s 2022 G7 Presidency. The first is a toolbox of policies and financing mechanisms to initiate and sustain the industry sector transition.

The second is a series of common and practicable definitions of what constitutes Near Zero emission steel and cement production – a key step to establishing future policy mechanisms, irrespective of the exact mitigation pathway or the specific technologies chosen.

Importance of emission reduction in heavy industries

Emissions from heavy industry sectors are hard to abate.

Industry’s direct CO2 emissions are currently around 9 giga ton (gt) of CO2 per year, or about one quarter of total energy system CO2 emissions.

Heavy industry sectors – steel, cement and chemicals – account for around 6 gt (or around 70 percent of industrial emissions), meaning that reaching Net Zero emissions is impossible without dramatic reductions in emissions from heavy industries.

Yet, demand for these products is set to grow in the context of a sustainable future for the energy system, given their extensive use

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in the construction of wind farms, nuclear power plants, transmission lines, electric vehicles and other clean energy infrastructure.

Heavy industry is responsible for more than 15 percent of coal use and about 10 percent of oil and gas use in G7 members.

This makes the Net Zero transition in heavy industry an important pillar for reducing the reliance on fossil fuels in the G7 in the wake of Russia’s invasion of Ukraine. The war has caused turbulence in global energy and commodity markets, posing risks for the industry sector transition, but also reinforcing the impetus for it.

“Russia’s war in Ukraine bolsters the case for heavy industries to reduce their dependence on fossil fuels, with energy security concerns echoing the thrust of climate-oriented motivations,” IEA says.

Challenges to decarbonisation

Heavy industries face unique challenges when it comes to substantially reducing emissions.

Four key obstacles need to be overcome for heavy industry sectors to be able to reduce emissions at a scale that is compatible with achieving a net zero emissions energy system. ♦ Technology constraints: Many technologies required for the industry sector’s transition are still at prototype or demonstration stage and not yet ready for deployment at scale.

Technologies which are not yet available on the market at the scale needed – hydrogen, direct electrification technologies, and carbon capture utilisation and storage (CCUS) – take the world most of the rest of the way to Net Zero. Technologies at the prototype and demonstration phase today account for

“Heavy industry is responsible for more than 15 percent of coal use and about 10 percent of oil and gas use in G7 members.

This makes the Net Zero transition in heavy industry an important pillar for reducing the reliance on fossil fuels in the G7 in the wake of Russia’s invasion of Ukraine.” about 60 percent of emissions reductions by 2050 in the Net Zero Emissions by 2050 scenario.

In the G7, hydrogen-based direct reduction is the leading Near Zero emission primary steel production route in 2050, followed by CCUS-equipped routes, although there are important differences by country reflecting each G7 member’s own circumstances.

In the cement sector, CCUS-equipped production does the heavy lifting across the world, but the G7 moves faster: 12 percent of production is CCUS-equipped by 2030, compared with 9 percent for the rest of the world.

By 2050, uptake of innovative technologies has largely converged across regions, but the first movers in G7 economies have the opportunity to establish early lead markets: around 25 million tons (mt) per year each of Near Zero emission primary steel production

CORPORATE

Shyam Metalics to complete capex by September Steel Insights Bureau

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hyam Metalics and Energy Ltd, leading integrated steel and ferro allo ys producer, will complete investing its capex announced so far by September.

The company is the fourth largest sponge iron player and a leading player in terms of pellet capacity.

Shyam Metalics has incurred a capex cost of `1,529 crore till March and capitalised `894, accounting to 39 percent of the total capex envisaged , ie `3,950 crore.

The remaining amount of `1430 crores would be invested in coming days.

Shyam Metalics had further announced capex of `990 crores in March for expenses in pellet capacity, coke oven plant and additional line of captive railway siding.

“This capex to be completed by September of FY23. We spend `793 crores

on capex this year and for the next year the Capex additional spend will be `1,100 to 1,200 crores. The same is over and above the portion of `230 crores which is to be paid for the acquisition of Ramsarup Industry Ltd,” Deepak Kumar Agarwal, Executive Director, Finance, told analysts.

The company is on track to increase the existing integrated installed facility of 7.76 million tons (mt) to 14.45 million tons by 2025 through brownfield capacity expansion.

It currently has 1 manufacturing plant located in Sambalpur, Odisha and 1 manufacturing in Jamuria, West Bengal with aggregate installed capacity of 7.66 mtpa comprising of intermediate and final products.

The company also has a small plant in Mangalpur, West Bengal with aggregate installed capacity of 0.1 mtpa.

These plants also include captive power

plants with an aggregate installed capacity of 267 MW. Captive power plants aggregate installed capacity is being raised from 267 MW to 357 MW. These proposed expansions are expected to become operational between FY23 and FY25.

Railway sliding including 2 additional tracks at both Jamuria & Sambalpur plants, at an aggregate cost of `180 crores are being developed.

Shyam Metalics has also commissioned an aluminium foil rolling mill at Pakuria in West Bengal with an installed capacity of 0.04 mtpa and the plant is now operational.

The capex envisaged for the project is `360 crores.

Following the completion of the expansion plan, share of value-added products will increase.

“Company has ample land available for expansion for the next 5 years,” it said in a presentation to investors.

Acquisition of Ramsarup’s facilities

Bid to takeover assets of Ramsarup Industries Ltd has been approved by National Company Law Tribunal.

Capex progress (in ` crore)

Steel Insights, June 2022

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CORPORATE

NMDC steel plant faces glitches, may get delayed

Steel Insights Bureau

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he largest state-run iron ore miner National Mineral Development Corp Ltd (NMDC) is likely to demerge and commission its Nagarnar steel project by Q3 of the current financial year.

The commissioning of the steel plant has been delayed further due to a problem with the air separation unit (ASU), the company management has told analysts during a conference call.

While the plan was ready for coke pushing, a heavy 11 KV motor at the ASU has suffered a major breakdown and got burned out, an uncommon occurrence in a steel project.

“As a result, of course that there will be a lack of availability of nitrogen and as you know that this coke oven is to be dry cooled, dry quenching has to be done with nitrogen.

So, we are looking for alternative ways including getting nitrogen through tanker,” Amitava Mukherjee, Finance Director, told analysts.

The motor has already been sent to Bhopal works of BHEL.

Robust growth in FY22 underpinned by robust volume & pricing

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