Steel Insights, March 2021 by mjunction services ltd

FROM THE CHIEF EDITOR Chief Editor Dr Mahul Brahma, Tel: +91 85840 08241, E-mail: mahul.brahma@mjunction.in Editor Tamajit Pain, Tel: +91 91633 48065, E-mail: tamajit.pain@mjunction.in Associate Editor Sumit Kumar Maitra, Tel +91 85840 08181, Email: Sumit.Maitra@mjunction.in Editorial Board Jayant Acharya, Director (Commercial & Marketing), JSW Steel Ltd K Ranganath, former CMD, KIOCL Rana Som, former CMD, NMDC Ltd S K Basak, former ED (Collieries Division), SAIL Sushim Banerjee, Director General, INSDAG Vikram Amin, former ED (Strategy and Business Development), Essar Steel Ltd Senior Correspondent Ritwik Sinha, Tel + 85840 08234, Email: ritwik.sinha@mjunction.in Balaka Ghosh Chatterjee, Tel + 85840 08190, Email: Balaka.Chatterjee@mjunction.in Analyst Sanjoy Bag, Tel +91 85840 08215, Email: sanjoy.bag@mjunction.in Business Lead Soumitra Bose, Tel: +91 92310 00232, Email: soumitra.bose@mjunction.in Advertising Soudipto Malakar, Tel: +91 91633 48243, Email: soudipto.malakar@mjunction.in Sumit Jalan, Tel: +91 83369 25981, Email: sumit.jalan@mjunction.in Subscription Niladri Kar, Tel: +91 83369 96510, Email: niladri.kar@mjunction.in Email: publication.vspl@mjunction.in Toll free number 1800 41 920 001, press 6 for publication. Design Debal Ray, Sobhan Jas For suggestions, feedback and queries, please write to steelinsights@mjunction.in

Published by: mjunction services limited CIN: U00000WB2001PLC115841 Registered & Corporate Office: Godrej Waterside, 3rd Floor, Tower 1, Block DP, Sector V, Salt Lake City, Kolkata 700091 Tel: +91 33 6610 6100, Fax: +91 33 4409 1808 Website: www.mjunction.in mjunction believes that all junctionites, customers, suppliers, partners, etc. should practice the highest ethical standards in their daily operations. Report a concern to ethics@mjunction.in

Disclaimer: This document is for information purposes only. The information contained in this publication has been compiled from sources believed to be reliable. Whilst every effort has been made to ensure that the information is correct and that the views are sound, mjunction cannot be made liable for any loss incurred by users of this publication. Readers are requested to make appropriate judgment without any prejudice or compulsion. Copyright: ©mjunction services limited 2017. All rights reserved. No part of this publication (text, data or graphic) may be reproduced, stored in a data retrieval system, or transmitted, in any form whatsoever or by any means (electronic, mechanical, photocopying, recording or otherwise) without obtaining mjunction services limited’s prior written consent. Unauthorised and/or unlicensed copying of any part of this publication is in violation of copyright law. Violators may be subject to legal proceedings and liable for substantial monetary damages per infringement as well as costs and legal fees.

Dear Reader, The Indian Steel Markets Conference or ISMC is a marquee event of mjunction where the leaders of the steel and metal sectors congregate and discuss issues of the day facing the industry. Global industry leaders from within and outside the country as well as key government officials meet and discuss and deliberate over two days on the future of steel. The Covid pandemic that swept the globe in 2020 has not gone away. After a hosting the Indian Coal Markets Conference successfully in a virtual environment in December and then learning from the teething problems faced during the run-up to that event, my team at mjEdge, the department handling both the publications as well as conferences for mjunction, conducted ISMC 2021 on 25th and 26th of February. And it gives me great pleasure to share with you that the conference was equally successful with over 600 participants, listening to a galaxy of speakers from within and outside the country who discussed key challenges facing the industry and the opportunities that lie ahead. In a glitch-free virtual environment customised for the event, speeches were delivered, presentations shared and questions answered. The theme selected this year was ‘Indian Steel: Realigning to new normal’ that delved into how the sector is reinventing itself embracing digitalisation, new global trade dynamics, cost optimisation and emission concerns in a post-Pandemic world. These issues capture the essence of the discussions for you dear reader. I take this opportunity to thank the esteemed Speakers who joined us from different parts of the globe. I thank the participants and our sponsors for making it a success. I thank mjunction MD and CEO Vinaya Varma and COO Pankaj Mittal for their guidance. A special thanks to the metaljunction team headed by Anup Jagnania. Thanks to every member of my team both from conferences and editorial, including design, for their dedication and commitment. And last but not the least, a big thanks to you, dear reader, for your support and encouragement for us to keep going even in this troubled time. Please take care. Regards Dr Mahul Brahma Doctor of Letters, PhD

Articles are invited from industry partners for publication in Steel Insights. The selection of articles is subject to scrutiny by the editorial desk and its decision will be final and binding. The copyright of the published articles will be held by the publication.

Steel Insights, March 2021

CONTENTS 32 Pig iron production up 5% on month in January 33 India January sponge iron production down 4.5% 34 January crude steel production up 7.6% y-o-y

6 | COVER STORY

Indian steel: realigning to new normal Experts deliberate over issues and challenges facing steel during the Indian Steel Markets Conference 2021.

35 Steel sees headwinds in rising stocks: India Ratings 37 Car sales northbound in February 39 Seaborne coking coal offers ease in February 40 Traffic handled by major ports down 7% till January 41 Railways’ iron-ore handling down in April-January 42 Global crude steel output up 1.27% in January 43 BHP expects India demand to offset China slowdown over long term 46 China emission control plan to impact steel output 48 Tata Steel backs global framework for decarbonising heavy industries 50 AMl/NS signs MoU for integrated steel complex in Odisha 51 Corporate Update

Leader Speak Words of wisdom from speakers at the conference.

Digitalisation to transform steel market Opportunities for steel during 4th industrial revolution.

Consumption of special steel in automobiles poised for growth Proactive Budget, higher economic activity to drive alloy steel growth.

Marginal iron ore mines helping price discovery At high prices, smaller mines turning profitable.

53 Government Update 54 Import Export Data

Organised quality scrap generation a necessity

59 Price trends 60 Ferro Alloy data

Steel is a material most conducive to circular economy.

61 Production data 63 Consumption data

Publisher’s Statement Statement about ownership and other particulars about Steel Insights required to be published under Rule 8 of the Registration of Newspapers (Central) Rule, 1956. 1. Place of publication

: Kolkata

2. Periodicity of publication : Monthly

FORM IV (See Rule 8) Whether citizen of India Address

3. Printer’s Name Whether citizen of India

: Amit Surana : Yes

4. Publisher’s Name Whether citizen of India Address

: Amit Surana : Yes : Tata Centre, 43 J L Nehru Road, Kolkata 700071

5. Editor’s Name

: Tamajit Pain

: Yes : Tata Centre, 43 J L Nehru Road, Kolkata 700071

Names and addresses of : mjunction services ltd individuals who own the Tata Centre, 43 J L Nehru Road, Kolkata 700071 newspaper and partners or shareholders holding more than one per cent of the total capital

I, Amit Surana, hereby declare that the particulars given above are true to the best of my knowledge and belief. Sd/ Amit Surana Dated: March 2020 Publisher

4 Steel Insights, March 2021

COVER STORY

Indian steel: realigning to new normal Tamajit Pain and Sumit Maitra

he Indian steel sector is passing through a crucial juncture. It looks up to a new beginning by realigning its priorities as India awaits the end of the Covid pandemic. This phase of pain and difficulty has also been a period of innovation and transformation. The bold moves undertaken by the Ministry of Steel and industry to promote steel usage and generate demand from

6 Steel Insights, March 2021

different sectors of the economy have opened numerous opportunities – new demand patterns, innovative sales channels via digital mode, valued added products and many more. Delivering the welcome address at inaugural session of Indian Steel Markets Conference 2021 on February 25, Vinaya Varma, Managing Director, mjunction services ltd said, “There has been very significant developments that have taken

place in the last few months which will have far-reaching implications on the steel markets in the next few years.” There has been a significant recovery in steel production, demand and prices in the third quarter and current quarter as well. The announcement of ‘Atmanirbhar Bharat Abhiyaan’, focused on boosting indigenous industrial capabilities in steel and other sectors is a welcome step. The focus is on fostering steel usage in housing,

COVER STORY construction, aviation, defense, oil and gas, automotive, railways, rural and agricultural sectors. The industry realised that one of the ways to address challenges during pandemic is by adopting smart digital solutions to improve efficiency of production & supply chain systems. Recent measures announced in the Union Budget on infrastructure-led economic revival, with increased capex spending in a number of projects under the National Infrastructure Pipeline is expected to boost steel demand. Another significant development is removal of the import tax on ferrous scrap. The government has decided to bring in a voluntary vehicle scrappage policy and expects recycling of metals like steel, copper and aluminum from the scrapped vehicles to help reduce their imports. Getting the roads rid of old vehicles would also help lower pollution and the government’s oil bill, as the new vehicles replacing the old ones would be more fuel efficient. In light of these developments, there are numerous questions about prices, steel markets in the new normal era, sustainability of demand and growth of end use sectors in India and the global arena. There are questions on the roadmap for digitalization of steel supply chain, steel scrap recycling market, customization, steel solutions and value addition. The industry is interested to know the technology solutions required to reduce cost of production and how to cope with raw material disruptions posed by the pandemic. “In short, the industry is in the midst of a major transformation,” Varma said. Growth of steel to drive economic growth

According to Dr Bhaskar Chatterjee, Secretary General, Indian Steel Association (ISA), the steel industry has successfully negotiated the headwinds posed by the Covid 19 pandemic is expected to grow rapidly in 2021. Production and consumption of steel,

its raw material, its intermediary industry and its downstream units is an important indicator of economic progress. More so as steel has already held its dominant position among all metals. The Indian steel industry has always been at the forefront of industrial development and forms the backbone of our economy, he said. “Steel will also play a vital role in realising Prime Minister’s ‘Make in India’ and ‘Atmanirbhar Bharat’ program. As the country transitions into an economic powerhouse steel demand is poised to log a compound annual growth of around 7-7.5 percent between the fiscal’s 2022 and 2025,” Dr Chatterjee said. Dr Chatterjee expects a large part of the growth coming from the government’s `111 lakh crore national infrastructure pipeline initiative. The government’s initiative relating to housing, roads (Bharatmala), Sagarmala for ports, dedicated freight corridors, metro, bullet trains under the railways and aviation sector will provide the required impetus. Apart from the opportunity in these major end use segments, rising application of steel and new trends also open up new avenues. Mandatory road crash barriers in national highways, construction projects, use of pre-engineered buildings, design changes

in housing, all these would augment steel demand in the near term. Value added products

There also exists a very high potential for value added steel in India and to reduce dependence on imports. “Interestingly, India is the second largest steel producer in the world but our dependence on special steel imports is still high,” Dr Chatterjee said. While large varieties of value added steel are now being produced indigenously, the country is still dependent on imports of several value added and special products like electrical steel, automotive grade steel, steel for specialised use in defence, space and nuclear applications. With better demand prospects and mega expansion plans in the pipeline the focus should be on alloy and special steels as it guarantees better premium for both the makers and the consumers. “In this regard necessary efforts can be made to collaborate with foreign players for technical and strategic co-operation. The steel consuming sectors should look at the overall life cycle of value added steel products. There is a need to focus on value along with volumes in order to look at special grade steels,” Dr Chatterjee said.

There has been very significant developments that have taken place in the last few months which will have far-reaching implications on the steel markets in the next few years. Vinaya Varma, Managing Director, mjunction services ltd

Steel Insights, March 2021

COVER STORY

Digitalisation to transform steel market

Digital capabilities need alignment with organisational goals be it internal (processes and value chain, strucsure, people and culture) or external (supply chain, direct customers and end customers),” Shah said. Digitalisation opportunities in the steel value chain

Demand forecasting Demand forecasting can be done through machine learning model based on integration of a range of forward indicators. The analytical forecast will act as the starting point upon which key insights from customer testing are laid prior to discussion or planning meetings. Capacity forecasting A machine learning model that generates probabilistic view of capacity, highlighting risk and opportunity. The capacity forecast application is used by planners to select the monthly tons per shift figure, which is entered into the client planning system. Inventory optimisation The optimum inventory level is entered into the planning system as the target buffer volume, spare capacity therefore converted into inventory up to the target level. Dashboard

Tamajit Pain

fter going through three industrial revolutions that brought significant technological developments over a period of more than rwo centuries, the world is currently witnessing the fourth Industrial revolution, which is technology adoption by the world’s factories at a whole new level. The world has moved from point to point connection to analog to digital and now to intelligent connectivity, Satyen Shah, Associate VP, Sales and Marketing, IT and Digital transformation, JSW Steel Ltd, said while speaking at the Indian Steel Markets Conference on February 25.

22 Steel Insights, March 2021

Preparing for a digital future

“There is a paradigm shift in the way we source, produce, market, sell, and provide support and service. Digital revolution is now landscaping the way we engage with stakeholders.

It also helps create a dashboard by incorporating the latest forecasts, to provide a holistic view. It is easy to run, test and compare scenarios. Mapping digitalisation with customer needs

Customer needs quality and transparency

“Digital capabilities need alignment with organisational goals be it internal like processes or people or external like supply chain and end customers.” Satyen Shah, Associate VP, Sales and Marketing, IT and Digital transformation, JSW Steel Ltd

COVER STORY Scrap demand outlook

Organised quality scrap generation a necessity Steel Insights Bureau

teel is a material most conducive to circular economy as it can be used, re-used and recycled infinitely. While iron ore remains the primary source of steel making, used or re-used steel in the form of scrap is the secondary raw material for the steel industry. National steel policy aims to develop a globally competitive steel industry by creating 300 mt of steel production capacity by 2030. “We expect that 35-40 percent of the steel production will be from electric arc furnace (EAF), induction furnace (IF) route. Availability of right quality of scrap in adequate quantity is one of the critical factors for future growth of the sector. Recycling of scrap not only saves iron ore, coking coal but also leads to reduction in greenhouse gas emissions. The use of scrap as a main source of steel making helps in the sustainability of the steel sector and also leads to significant conservation of national resources,” Arunava Mandal, GM & Business Head, e-sourcing services, mjunction services ltd, said while speaking at the Indian Steel Markets Conference. Speaking at the conference, Yogesh Bedi, Chief, Steel Recycling Business, Tata Steel, said industries like steel, aluminium, petrochemical, fertilizers, and transportation are very energy intensive and are responsible for 30 percent of global carbon emissions. These industries may have to incur high cost associated with transitioning to a low carbon regime. There are many efforts going across countries for example renewable energy, energy efficiency, resource efficiency, use of hydrogen, demand reduction and recycling. “Tata Steel’s foray into steel recycling is primarily a sustainability initiative. Steel is fundamental to the circular economy. It can

be re-used, remanufactured, recycled over and over again without losing its properties,” Bedi said. In India, typically the primary producers make steel through the blast furnace route, which is carbon intensive. EAF route is more amenable to steel recycling and also less carbon intensive. As countries mature, share of EAF increases due to environment and sustainability concerns. Going forward it is expected that share of EAFs will increase because power cost and capex is high in other routes, Bedi said. Apart from contributing to sustainability, EAFs got a modular set up de-integrated production closer to markets. Also, it involves lower capex and land requirement is lesser than a blast furnace facility providing higher agility, he said. Scrap as a resource

India is a scrap deficient nation importing around 5-7 million tons every year. Around 30 million tons of ferrous scrap was imported in the last 5 years mainly from US, EU, UAE, and South Africa. “We are currently around 25 million tons and demand is expected to go up to 40 million tons by FY25,” Bedi said.

Currently, EAF’s share is not expected to rise much unless incentives are provided to help promote growth of EAFs. The growth drivers would be stricter implementation of quality norms for IFs leading to more usage of scrap, energy benefits and carbon credit savings from usage of scrap instead of other raw materials. The end of life vehicle (ELV) scrap market is set to rise due to ELV and VMP policies. Scrap supply outlook

Key scrap supply segments are ELVs, railways, shipbreaking, household and large industry. ELVs are currently in the news with the vehicle scrapping policy coming into the fore. ELV are expected to play a very important role for scrap generation while ship-breaking is mainly for re-rolling. According to Bedi, the current supply chain for scrap is long and complex. There are thousands of peddlers and agents. Scrap generated goes through a long supply chain and changes hands without much value addition. Cost of scrap increases primarily for the obsolete scrap. The industrial scrap has a smaller supply chain. But it is not still organised. Key concerns

The key concerns for scrap collection are lack of a formal system, high fragmentation, limited traceability, poor statutory compliance and risks of contamination.

“Tata Steel’s foray into steel recycling business is primarily a sustainability initiative. Steel is fundamental to the growth of circular economy. It can be re-used, remanufactured, recycled over and over again without losing its properties.” Yogesh Bedi, Chief, Steel Recycling Business, Tata Steel Ltd Steel Insights, March 2021

COVER STORY

Consumption of special steel in automobiles poised for growth

This policy will go a long way in post Covid-19 automobile sector recovery plan. This policy also supports India’s ‘Green India’ mission as it creates space for a cleaner fleet of vehicles, Krishnamoorthy said. Localisation of auto parts manufacturing: In the spirit of Atmanirbhar Bharat and due to the disrupted global supply chain, many auto OEMs are looking to localise more percentage of their parts sourcing from India and also use India as an export base. “Also there is preference for personalised vehicles,” Krishnamoorthy added. Exploring growth potential of alternative powertrains Alternative powertrains comprise a propulsion system that does not rely on the popular internal combustion engine. It consists of hybrid engines, electric battery, hydrogen fuel cells, compressed air, gasoline kits, and others. Increasing vehicle connectivity

Tamajit Pain

he Indian automotive and other sectors that consume special steel (alloy steel) are poised for good demand and growth, thanks to a proactive Budget and increasing economic activity, Sridhar Krishnamoorthy, Managing Director, Arjas Steel, said. The farming and rural sector provides a robust tractor market segment. Investments in infrastructure, railways and energy are also going to provide impetus to alloy steel demand, he said. “The push by government of India to be more local-focused is also embraced by India auto OEMs with an increased focus on localisation,” Krishnamoorthy said while speaking at the Indian Steel Markets Conference. “The various trends that are impacting the automotive sector globally are also happening in India in terms of Electric Vehicles and will take time to fully take

28 Steel Insights, March 2021

root. It will need charging infrastructure and newer and cheaper batteries,” he said. Trends in automotive sector

Launch of scrappage policy The scrappage program announced by the government have the dual aim of stimulating the automobile industry and removing inefficient, more polluting vehicles from the road.

A connected car can communicate with other vehicles or systems through a single device. Consumers can access internet and share data with other devices, with other devices both inside and outside the connected vehicle. This connected car trend is expected to accelerate with the number of connected cars estimated to reach 1.7 million in 2022, compared with 0.3 million in 2016, according to the Arjas head. Digital dealership Covid-19 pandemic has pushed car dealers to adopt digital transformation.

“In the spirit of Atmanirbhar Bharat and due to the disrupted global supply chain, many auto OEMs are looking to localise more percentage of their parts sourcing from India and also use India as an export base. Also there is preference for personalized vehicles.” Sridhar Krishnamoorthy, Managing Director, Arjas Steel

COVER STORY

Marginal iron ore mines helping price discovery Steel Insights Bureau

ower deliveries from the Big 4 global low cost miners – Rio Tinto, BHP, Vale and Fortescue - fuelled iron ore prices in 2020 due to several disruptions but as high ore prices are making marginal miners profitable, they are helping in price discovery, said Somesh Biswas, Chief, Raw Material Strategy, Tata Steel, at the conference. “Since there is little fight for market share among the Big 4 miners, the small producers at the higher end of the cost curve are helping in discovery of prices,” he said. In 2019, fight for market share by low cost miners kept iron ore prices in check. And with iron ore prices touching $165, Chinese beneficiation facilities having 1 billion ton of capacity that are technologically advanced to process even Fe grade of 30 percent or lower, would be producing more, feeding the Chinese steel industry, he said. “In 2019, these Chinese beneficiation plants, located close to the steel mills, producing close to 300 million tons of concentrates, were the price setters,” he said. In contrast, there is a lack of beneficiation facilities for low-grade iron ore because of availability of high-grade ore domestically. Domestic steel industry could have benefitted is such facilities were there as high iron ore prices would have made such highcost facilities profitable.

Reasons behind iron ore price rally

There was higher variability witnessed in global iron ore prices in FY21. And supply disruptions were not the only factor. “Since iron ore is a very liquid commodity at exchanges, every disruption suffered by major producers led to speculations at the markets,” Biswas said. Iron ore supply in Q1 and Q2 of calendar 2020 remained stable at around 557 million tons quarterly. However the low cost suppliers’ share dropped from 50 percent in Q4 of 2019 to 40 percent in Q1 of 2020 due to Cyclone Damien hitting Western Australia coupled with heavy rainfall in Brazil. In Q2 of 2020, Pandemic impacted iron ore dispatch in Brazil (Vale’s Itabira complex was closed for 2 weeks) though higher supplies from Australia could offset the shortage in Brazilian mines. On the whole, Q2 dispatch for the Big 4 miners were higher. Ways to mitigate volatility in prices

Short term Rely on spread between steel prices over raw material prices: Steel makers need to be frugal manufacturers by cutting costs and improving efficiencies and maintaining profitability at lower steel prices, he said. Sustain steel demand: Marginal steelmakers would continue to survive till there is demand. If demand for steel starts slowing down, there

“Since there is little fight for market share among the Big 4 miners, the small producers at the higher end of the cost curve are helping in discovery of prices.” Somesh Biswas, Chief, Raw Material Strategy, Tata Steel 30 Steel Insights, March 2021

would be a fight for market shares for the large players which will drive down the prices. “Everyone would benefit if steel demand is sustained through high construction and infrastructure building,” he said. Procurement option: Steel makers are preferring spot buying over long term procurement tie-ups to benefit from price volatilities. Taking benefits of indexation, hedging and lower stock maintenance are some of the other steps. Long term Efficient coke making technologies such as Stamp Charge Coke Oven batteries should be used which allows usage of more indigenous coal. Leverage high reserve of indigenous thermal coal: With abundant domestic reserve of coal, coal gasification for DRI production would be opted. Having captive raw material assets: Owning captive mines is not enough, such assets need to be acquired at reasonable prices. Beneficiation strategy: While iron ore beneficiation is not a very viable proposition in India, beneficiation of domestic coking coal and thermal coal can be explored. Volatility in Asia Pacific coking coal

Trade tensions & informal ban of China on import of Australian coking coal pushed supply from other geographies with a premium as high as $100/ton. “Due to the informal ban of Australian coking coal by China, the gap between FOB Australia prices and CFR China prices widened. The deficiency, to some extent, was met by inferior Mongolian supplies as well as shipments from US and Canada,” Biswas said. This, in turn, led to wide gap between global coking coal and Chinese coke prices with the spread touching a high of $314 in January 2021 from a low of $122 in January 2020. This led to rise in coke cost for Chinese steel mills. “Chinese met coke price increase has been higher than expected. Since July, China has become a net importer of Coke with Japan stopping their Blast Furnaces and exporting their excess coke.” Situation is now changing with Japanese steel makers restarting operations.

66 Steel Insights, March 2021

Tear along the dotted line