Contents 2 4 Steel firms expect to report strong Q4 27 Iron ore stocks climb on falling exports, low demand 28 Coking coal offers ease in April 30 Autoville’s FY19 starts with sales headed north 32 Vehicles’ end-of-life policy needs a sustainable model’ 34 Global crude steel output up 12.55% in Mar m-o-m 35 Traffic handled by major ports up 5% in FY18 36 Indian Railways’ March iron-ore handling down 8.6% y-o-y 37 Kalinganagar boosts Tata Steel FY18 output to 12.48 mt 38 JSPL records 0.45 mt of steel production in March 39 Tata Metaliks Q4 PAT up 35% to `54.65 cr 40 Vedanta’s Goa iron ore output falls 58% in Q4 41 JSW Steel-Aion emerges successful bidder for Monnet Ispat 42 Corporate Update 43 Primetals Technologies receives PAC from ArcelorMittal Poland 44 Non-availability of steel hits bridge rehab work 46 Can Washington avoid casualties of a trade war? 45 Vale’s iron ore output at 82 mt in Q1 50 Price data 51 Ferro alloy data 52 Production data 56 Consumption data
4 Steel Insights, May 2018
6 | COVER STORY Better get ‘moving’
Setting up efficient logistics infrastructure, not just locational advantage, will offer steel mills competitive edge.
20 | COVER STORY
Roads to play important role in secondary movement of steel It is essential for railway freight to become reasonable in order to reduce logistics cost of steel manufacturers, says Sushim Banerjee.
22 | COVER STORY
TMILL eyes investments in private freight terminals As the industry expands, the company may also look at investing in warehousing.
25 | feature
Global steel demand sustains broad recovery: WSA Demand expected to touch 1,616.1 mt in 2018, an increase of 1.8% over 2017.
48 | INTERVIEW
Danieli eyeing biz worth #400m in India by 2021 Italian metals engineering major Danieli sees new opportunities emerging in rail transport, says Francesco Esposito.
Cover Story
Better get ‘moving’ Setting up efficient logistics infrastructure, not just locational advantage, will offer steel mills competitive edge Madhumita Mookerji
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Cover Story
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ndia’s steel mills have been set a considerably steep target of 300 million tons (mt) of crude steel production by 2030. But producing this quantum is not an end in itself and may defeat the very purpose of the policy if there is not enough infrastructure in place to wheel in the raw materials for producing that amount of crude steel. And, once the finished goods are ready, it is equally important to ensure that these are transported to their end-destinations to create the basis for a healthy steel economy. Steel sector transportation includes not only finished steel distribution from steel plants directly to consumers at their nearest public booking points or to their booking space, if allotted, but also to the warehouses (at booking points either inside or outside the yard), to ports for exports or to locations near the ports for onward coastal shipping. The National Steel Policy, 2017 has laid down a crude steel production capacity of 300 mt by 2030-31 from the current level of 102 mt, at a CAGR of 8.7 percent. It has also been stated in the Policy that 300 mt of crude steel would require iron ore of 437 mt, coking coal volumes of 161 mt and non-coking coals of 136 mt (for PCI and for DRI). Requirement of other raw materials (manganese ore, chromites ore, limestone and dolomite) would amount to 102 mt. Ferro alloys required would amount to 4 mt, refractories of 3 mt and scrap (imported melting scrap and domestic scrap) of 16 mt. These estimates are based on a predetermined blast furnace (BF)-basic oxygen furnace (BOF) and electric arc furnace (EAF)/ induction furnace (IF) ratio, charge mix and requirement of raw materials per ton of hot metal and actual production of 300 mt of crude steel. It is, therefore, apparent that the envisaged production of crude steel would require movement of more than 800 mt of
raw materials and nearly 250 mt of finished steel, Sushim Banerjee, Director General, Institute for Steel Development & Growth (INSDAG), tells Steel Insights. These numbers automatically entail an enquiry into how these materials would be moved to the steel mills, a question that begs an answer because the steel sector, along with bulk material industries like coal, cement and other minerals, for long, has been famously hamstrung by port congestion and a paucity in the availability of railway rakes for transportation of the same, along with poorly maintained road conditions. Just as with the hospitality sector, location is key to the steel sector too. But, unlike the hospitality sector, location is not enough! Setting up mills close to the mine-heads is not enough! The availability of efficient logistics infrastructure is what gives that competitive edge! Also, plants should aim at optimal utilisation of logistics infrastructure. In India, the Bokaro-Rourkela combine is an example. Rakes bring iron ore from mines located in Rourkela (Odisha) to Bokaro (Jharkhand) and return with coal from the coalfields located in the latter. This is an instance of optimal utilisation of logistics infrastructure since the wagons do not return empty. Or if a plant is located near the coast. Vizag Steel-owned Rashtriya Ispat Nigam Limited, located in Visakhapatnam, is an example. Such formulae distinctly help in the development of the iron and steel industry. Or take the case of POSCO. “As our infrastructure improves, we will become more competitive. We can also develop slurry pipelines. Take for instance, POSCO’s plant in Pohang, which is said to be one of the world’s best steel plants, if not the best. It produces steel without owning coking coal or iron ore mines. But what it has at Pohang is amazing logistics supply by virtue of which all the raw material comes in. POSCO makes
Just as with the hospitality sector, location is key to the steel sector too. But, unlike the hospitality sector, location is not enough! Setting up mills close to the mineheads is not enough! The availability of efficient logistics infrastructure is what gives that competitive edge!
the steel and sends it out through that same logistics network to all corners of the world,” Abhijit Sarkar, Vice- President, Dastur Business & Technology Consulting (a division of M N Dastur), tells Steel Insights. Unfortunately, India’s cost of moving steel is 2.3 times more compared to China’s or that of any other developed nation. As per industry data, India’s cost of logistics as a percentage of the GDP is 14 percent against 10 percent in the US and Japan, 11 percent in the European Union while China’s is higher at 17 percent. Indian Railways transports nearly 75-80 percent of the steel produced in the country. Since the movement of iron ore and steel depends on the quantity of the commodity and the distance covered, it varies from company to company, an expert says. Steel companies like the government-owned Steel Authority of India (SAIL) has had a longlasting relationship with Indian Railways, being both a freight customer and supplier for them. “We expect to benefit as and when the guidelines are implemented. SAIL is currently moving 50-60 mt of steel, iron ore and coal through railways. As we ramp up our production from the current level of 15 mt to 20 mt in the coming years, we expect to add more traffic to the rail network of the country,” an insider tells Steel Insights. RINL, the flagship plant of Vizag Steel, plans to move 200,000 tons via coastal shipping route in FY19. Around 80 percent of JSW Steel’s inbound and outbound logistics is by rail. The logistics initiatives the company undertook in FY2016-17, as per its 201617 annual report, included optimisation of the mode of transportation, achieving reduction in overall freight, benefit from the withdrawal of port congestion charges, short lead concession on freight and reduced inward and outward idle freight. The company also implemented multiple cost optimisation initiatives under ‘Project Deep Drive’ at various business critical departments that included logistics, agglomeration and iron making, power and others, leading to substantial cost savings. JSW’s integrated steel plant (with a capacity of 5 mtpa) at Dolvi in Maharashtra came into the JSW Steel fold in 2010. Located on the west coast of India, the plant has a jetty with a capacity of 10 mt per annum. This provides the unit with logistical
Steel Insights, May 2018
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Cover Story
Roads to play important role in secondary movement of steel
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ndian Railways transports 75-80 percent of steel products in the country, at present, with the road sector contributing 22-23 percent and the balance by shipping. The SME sector relies primarily on road movement to neighbouring areas as wagons/rakes supplies require more volume. However, poor road conditions and narrow lanes in the congested routes enhance the cost of transportation through delays and other associated costs. And, it is essential that railway freight becomes reasonable in order to reduce the logistics cost of steel manufacturers, Sushim Banerjee, Director General, Institute for Steel Development & Growth (INSDAG), tells Tamajit Pain and Madhumita Mookerji. Excerpts from an interview:
How much has steel sector transportation grown in general over the last 3 years? Steel sector transportation includes finished steel distribution from steel plants directly to consumers at their nearest public booking points or to their booking space, if allotted, or to the warehouses (at booking points either inside or outside the yard), to the ports for exports or to locations near the port for onward coastal shipping. Steel sector transportation, therefore, includes rail despatches, road despatches, shipment through ports for exports and imports as well as for coastal shipping. The volume of steel transportation depends directly on steel production, exports and imports. Crude steel production in 2014-15 was 89 mt which has grown to 102.3 mt in 2017-18, signifying an average growth
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of 4.8 percent in the last 3 years. There has thus been a corresponding increase in steel sector transportation through higher movement of raw materials (iron ore, coking coal and fluxes), movement of finished steel, imported coking coal from ports to individual plants and transportation of finished steel from plants to the ports for export purposes. What is the overall scenario like with steel sector logistics at present? What percentage of the total freight comprises products and materials related to the steel sector? Please give the break-up within the steel space. How much of it is transported by road, rail and shipping? The National Steel Policy 2017 has laid down a crude steel production capacity of
300 mt by 2030-31 from the current level of 102 mt, at a CAGR of 8.7 percent. It has also been stated in the National Steel Policy that 300 mt of crude steel would require iron ore of 437 mt, coking coal of 161 mt, non-coking coal of 136 mt (for PCI and for DRI). Requirement of other raw materials (manganese ore, chromites ore, limestone and dolomite) would be 102 mt 4 mt of ferro alloys, 3 mt of refractories and 16 mt of scrap (imported melting scrap and domestic scrap). These estimates are based on a predetermined BF-BOF and EAF/IF ratio, charge mix and requirement of raw materials per ton of hot metal and actual production of 300 mt of crude steel. It is, therefore, apparent that the envisaged production of crude steel would require movement of more than 800 mt of
Cover Story
TMILL eyes investments in private freight terminals
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How much has steel sector transportation grown for TM International Logistics (TMILL) and in the logistics industry in general over the last 3 years? TMILL is primarily a captive supplier to Tata Steel in the steel space and for handling of raw materials at ports, it has grown with Tata Steel. With our recent foray into rail transportation, TMILL entered into transportation of finished steel in financial year (FY ) 2017-18. On an overall basis, the logistics industry has struggled to match the growth rates of the steel industry due to infrastructure constraints in eastern India. To what extent has the logistics industry been hit because of the steel sector slowdown? Also, please give an overview of the steel logistics sector in India. The steel logistics sector is one of the largest after agriculture and coal for power plants. If we consider only railways, it contributes close to 21 percent of Indian Railways’ freight. More than the slowdown in the steel sector, which is cyclical in nature, the steel
22 Steel Insights, May 2018
ogistics is the spine for any industry and steel is no exception since it connects the seller to the buyer. But, there are many roadblocks to an efficient evacuation system. Thus, today, logistics is a key determinant in the competitiveness of steel plants and, in the future, one can expect to see large investments by companies towards reducing this expense. TM International Logistics (TMILL), which is a captive supplier to Tata Steel in terms of steel and handling of raw materials at ports, is looking to invest in rail logistics, both for raw materials and finished goods as well as ports on the east coast of India. As the industry expands, the company may also look at investing in warehousing, Ashish Gupta, Managing Director, tells Madhumita Mookerji. Excerpts from an interview.
logistics sector is impacted by infrastructural constraints and imbalance in the flow of freight within India. Which companies and mines and ports do you connect with? How much do you transport via road and rail? Almost 100 percent of TMILL’s freight is related to the steel sector. We don’t operate from mines, but we connect all ports to the steel plants in Jamshedpur and Kalinganagar. Within the steel space, almost all raw materials for integrated plants are transported by Railways. However, finished steel movement by railways will be in the region of 50-60 percent only, the balance being mainly through road transportation. What are TMILL’s future plans and
investments where steel logistics is concerned? We plan to invest in rail logistics, both for raw materials and finished goods. We are also planning to invest in ports on the east coast of India. As the industry expands, we may look at investing in private freight terminals and warehousing as well. What critical role does logistics play in determining the operational efficiency and cost structure of steel mills? How much do logistics comprise in terms of costs for steel mills? Logistics is one of the biggest cost components for a steel plant. If we include in-plant logistics and logistics for byproducts, integrated steel plants spend close to 12-15 percent of their costs on logistics. However, only for finished steel, the global
Interview
Danieli eyeing biz worth #400m in India by 2021
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talian metals engineering major Danieli is optimistic about its growth prospects in India, with the ongoing consolidation in the steel sector and new opportunities emerging in rail transport. Danieli India Ltd CEO Francesco Esposito tells Tamajit Pain that in India, Danieli supplies machinery and technology to steel and aluminium producers in India. Danieli set up a machinery equipment and spare parts making plant at Sri City, Andhra Pradesh in 2014-15, producing about #20-25 million worth of goods a year. Excerpts from an interview:
What products do you offer for the Indian steel market? We are present in all the verticals, including long and flat products. We are also into supplies of project equipment, automation projects and engineering software projects for steel plants. We are not only involved in supplying of technology for new plants but also into improving old plants and
48 Steel Insights, May 2018
machinery, electrical optimisation of furnaces, fuel extraction convertors and provide technology packages for galvanizing lines. We provide various technology packages for optimisation of cost for big steel mills of JSPL, JSW and Tata Steel. We also have capabilities for providing our expertise for making of modern day rails and wagons.
Which segment contributes most of the revenues for Danieli in India? Steel contributes to 85-90 percent of the revenues in India. We started our plant in Sri City in 2014 and have seen the worst years in the steel industry in 2015 and 2016. About 60 percent of the revenues then came from domestic projects and rest came from foreign projects. Spare parts refurbishment process helped us tide over the period when projects were slowing during the worst years of the steel industry. Now we are offering complete end-toend solution for our clients, including new
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Tear along the dotted line
Tear along the dotted line