Steel Insights, May 2022

CONTENTS 12 Imported scrap prices soften on low bookings 13 India pig iron production down y-o-y in March 14 India’s March sponge iron production down 4% y-o-y 15 March crude steel production up 4.4% y-o-y 16 Zero-emission steel needs recycling, material efficiency: IPCC 18 Green hydrogen key to steel decarbonisation: IRENA 24 Iron ore market remains volatile in line with steel market movements 26 Seaborne coking coal offers remain volatile in April 27 FY23 starts off as mixed bag for autoville 29 Iron ore handled by major ports down 28% in FY22 30 Indian Railways’ iron ore handling up 6% in FY22 31 Global crude steel output up 12.8% in March 32 ArcelorMittal bullish on Indian investment 36 Warrior restarts Blue Creek met coal project to cash in on high prices 38 NMDC posts flat ore output, sales growth in April 39 Jindal Stainless doubles export sales share 41 JSPL sets up country’s first 50-mm rebar mill in Angul 43 Tata Steel reports 37% rise in Q4 profit 46 Gainwell to start production at Panagarh by January 2023 47 Corporate Update 49 Govt Update 51 Import Export data 55 Price trends 56 Ferro Alloy data 57 Production data 59 Consumption data 60 Import data 61 Export data

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6 | COVER STORY Navigating volatility

Can cost inflation sustain steel prices?

20 | FEATURE

Indian Railways turns ‘hungry for cargo’ Incremental loading growth best ever in absolute and percentage terms.

22 | FEATURE

Reopening of 20 closed mines to boost coking coal supply Mines offer 380 mt reserve of high GCV coal

34 | INTERNATIONAL

Lockdown shrinks Chinese steel output by 10% in Q1 Covid resurgence slows down construction activities.

44 | CORPORATE

AMNS to touch 8.8 mt by 2023 via debottlenecking Hazira expansion engineering, design work to start soon

COVER STORY

Navigating volatility Can cost inflation sustain steel prices?

Sumit Maitra and Tamajit Pain

6 Steel Insights, May 2022

COVER STORY

S

teel prices would stay at elevated levels reflecting cost factors and tightening markets despite weakness in demand, say leading global steel makers.

Indian steel prices to remain resilient supported by strong international prices and input costs which remain elevated, Tata Steel management has told analysts.

Asian steel prices are expected to be range bound as Covid related restrictions weigh on China domestic demand as well as output while European prices are expected to be volatile driven by supply demand imbalances, the company believes.

“Commodities in general, and steel market in particular, has been very volatile over the last quarter and the ongoing RussiaUkraine crisis coupled with the Covid wave in China have added complexities to the supply chain. It has kept the demand-supply balance, in some sense, bit volatile,” T V Narendran, CEO and Managing Director,

Tata Steel said during a conference call with analysts.

Some moderation in prices are being seen as reallocated quotas partially offset constrained supply from Russia and Ukraine.

In the first quarter of 2022, steelmakers globally, and in India, could significantly improve their profitability primarily due to a positive price-cost effect with higher contract pricing more than offsetting higher raw material costs.

“Steel prices in western markets rose steeply in the January–March period on tight supply and recovering demand. China steel prices were relatively more stable as Covid restrictions dampened demand. Coking coal prices witnessed renewed volatility, with a steep rise being followed by a sharp decline.

Overall, this has led to divergent steel spot spreads. Western spot spreads are up while Chinese steel spreads have softened,” Tata Steel management told investors.

Global seaborne met coal demand growth by country

“We are confident that cost increase in the first quarter can be covered by the price increases that we got or will get in this quarter, both in Europe and in India.

We expect realisation in the first quarter to be `8,000-`8,500 a ton over the last quarter.”

T V Narendran, CEO & MD, Tata Steel However, according to ArcelorMittal, pace of demand recovery has started moderating.

And this put to question how long would the market keep supporting the prices despite the cost inflation and supply bottlenecks keep playing out.

“Real demand continues to recover, albeit at a slower pace given the moderation in economic activity, notably in Europe, and the ongoing supply-chain challenges facing the automotive industry. Nevertheless, supply/ demand conditions have tightened since the outbreak of the Russia-Ukraine conflict.

This has led to a sharp re-set of pricing, particularly in regions that have become reliant on imports, either of finished steel or semi-finished/intermediate products,” ArcelorMittal said.

On top of it, there are several uncertainties and risks to the earlier positive outlook.

The Russia-Ukraine conflict continues and no end is in sight forcing several developed economies to scramble for energy security in the midst of rising inflation.

Steel Insights, May 2022

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FEATURE

Zero-emission steel needs recycling, material efficiency: IPCC Steel Insights Bureau

W

hile several technological options exist for very low to zero emissions steel, their uptake will require integrated material efficiency, recycling, and production decarbonisation policies, according to the Intergovernmental Panel on Climate Change (IPCC) report prepared by the Working Group 3.

Material efficiency can potentially reduce steel demand by up to 40 percent based on design for less steel use, long life, reuse, constructability, and low contamination recycling. Secondary production through high quality recycling must be maximised, the report says.

Production decarbonisation will also be required, starting with the retrofitting of existing facilities for partial fuel switching, Carbon Capture Utilisation and Storage (CCUS), followed by very low and zero emissions production based on high-capture CCS or direct hydrogen, or electrolytic iron ore reduction followed by an electric arc furnace.

The use of steel, cement, plastics, and other materials is increasing globally in most regions.

“There are many sustainable options for demand management, materials efficiency, and circular material flows that can contribute to reduced emissions, but how these can be applied will vary across regions and different materials. These options have a potential for being more used in industrial practice and would need more attention from industrial policy,” it says.

Net Zero CO2 emissions from the industrial sector are challenging but possible, believes IPCC.

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“Reducing industry emissions will entail coordinated action throughout value chains to promote all mitigation options, including demand management, energy and materials efficiency, circular material flows, as well as abatement technologies and transformational changes in production processes. Progressing towards Net Zero GHG emissions from industry will be enabled by the adoption of new production processes using low and zero GHG electricity, hydrogen, fuels, and carbon management,” IPCC said.

Hydrogen in steelmaking achieving ‘near commercial’ stage

Hydrogen direct reduction for primary steelmaking is near-commercial in some regions, the report says.

In fact, for almost all basic materials – primary metals, building materials and chemicals – many low-to zero-GHG intensity production processes are at the pilot to near-commercial and in some cases commercial stage but not yet established industrial practice.

Introducing new sustainable basic materials production processes could increase production costs but, given the small fraction of consumer cost based on materials, are expected to translate into minimal cost increases for final consumers, the report says.

Future demand for hydrogen as reduction agent in steel production also offers electricity demand flexibility for electrolysis through hydrogen storage and flexible production cycles.

“The main use of hydrogen and hydrogen carriers in industry is expected to be as feedstock rather than for energy as industrial electrification increases,” the report says.

“Production decarbonisation will also be required, starting with the retrofitting of existing facilities for partial fuel switching, Carbon Capture Utilisation and Storage followed by very low and zero emissions production based on high-capture CCS or direct hydrogen, or electrolytic iron ore reduction followed by an electric arc furnace.”

FEATURE

Indian Railways turns ‘hungry for cargo’ Steel Insights Bureau

I

ndian Railways with highest ever incremental freight loading in FY22, recorded itself amongst one of the highest surface freight carriers in the world.

Indian Railways break several records in freight loading during the previous year.

It breached 1,400 million tons (mt) freight loading mark for 1st time in FY22, achieved incremental growth of 15 percent with increase in freight loading from 1233.2 mt in FY21 to 1418.1 mt in FY22.

The incremental loading of 185 mt has been led primarily by coal with 111 mt growth, followed by cement at 17.2 mt and balance other goods at 15 mt.

The incremental loading is the best ever growth in both absolute and percentage terms.

The previous best incremental growth in percentage terms was achieved in 1981-82 with 12.9 percent growth. The previous best

incremental loading in absolute terms was 66.1 mt achieved more than a decade ago in 2005-06.

A year of records, FY22 has seen the best ever figures in many indices including freight loading and revenue.

“Following the call of “Hungry For Cargo”, Indian Railways has made sustained efforts to improve the ease of doing business as well as improve the service delivery at competitive prices which has resulted in new traffic coming to railways from both conventional and non-conventional commodity streams. The customer centric approach and work of business development units backed up by agile policy making helped Railways towards this landmark achievement,” Indian Railways said.

Indian Railways achieved incremental loading in all commodities except fertilisers where the demand was subdued due to high international prices.

During FY22, Indian Railways achieved

FY22 freight loading and revenue figures Indices

Previous Best

Freight loading

Date/Period

New Best*

Date/Period

1233.3

FY 20-21

1418.09

FY-21-22

Gross freight revenue

`1,27,430

FY 18-19

`1,43,732**

FY-21-22

Incremental loading

66.1 MT

FY 07-08

185 MT

FY 21-22

Average wagons per day

54,469

FY 20-21

62,885

FY -21-22

Highest loading in a single day

1,03,737 wagons (7.8 MT)

31.03.2021

1,06,227 wagons (8.14 MT)

31.03.2022

Highest loading in a month

130.48 MT

March 2021

139.25 MT

March 2022

Revenue NTKM

702 billion

FY 18-19

820 billion

FY-21-22

* The Figures are provisional and might change slightly upon finalisation of Statistics. ** Gross Revenue figures before apportionment

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milestones in various categories including freight loading, electrification, new line/ doubling/gauge conversion, loco production and also the integration of technology for ensuring safety.

Highlights of the year

♦ Freight Loading: Highest ever monthly loadings in consecutive respective 19 months from September 2020 to March 2022. ♦ Record electrification of 6,366 RKMs. Previous highest electrification was 6,015 RKM during 2020-21. As on March 31, out of 65,141 RKM of BG network, 52,247 BG RKM has been electrified, which is 80.20 percent of the total BG network. ♦ In new line/ doubling/ gauge conversion, 2,904 km was achieved against target of 2400 Km, and 2361 km of FY21. It is 23 percent more than last year. It is also the highest ever commissioning (excluding DFC) ♦ Highest ever electric loco production and induction of 1,110 locos (965 by the Railways, 35 from BHEL and 110 Madhepura unit) in FY22 ♦ Highest ever scrap sale achieved `5,316.1 crore as compared to `4571.4 crore in FY21,a 16.2percent growth. Target for the year was `4,100 crore ♦ Total panel/electronic interlocking of stations achieved 444 and Kavach commissioned at 850 Rkm

FEATURE

Reopening of 20 closed mines to boost coking coal supply

be reimbursed the mining expenses plus a margin and coal would be handed over to Coal India.

A revenue share model was then developed and circulated among stakeholders to which prospective mine developers responded positively, Agrawal said at the investors meet.

“With marketing and pricing freedom, these mines have turned economical,” Jain said.

“Coal India is currently undertaking duediligence for other mines which would be offered subsequently,” Nagaraju said.

Coal Minister Pralhad Joshi said around 110 more such abandoned and closed coal mines will be put forth by the state-run miner.

“PSUs face several constraints in terms of the way they operate, which is not the case with the private sector. Which is why it has been decided that along with commercial mining, Coal India will put up its own abandoned/discontinued coal mines on offer for the private sector to ramp up India’s coal production,” he said.

Subsidiary-wise distribution of mines Subsidiary

Steel Insights Bureau

C

oal India expects 20-25 million tons (mt) of high grade coal production from 20 closed or abandoned mines that are shortly to be auctioned, Chairman Pramod Agrawal said at an investors meet.

Taken together, these mines have 380 mt of extractable reserve.

These mines have reserve of high GCV coal comparable to imports from South Africa at a high price, Dr Anil Jain, Coal Secretary said during the launch of the auction.

“All the mines are of coking coal grade or high thermal coal grade,” Manoj Kumar, CMD, CMPDIL said.

These coals can be sold at market determined prices though a transparent

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mechanism and not (at any privately negotiated prices) to related parties, M Nagaraju, Additional Coal Secretary said.

Adani group showed keen interest with Gautam Adani’s son, Jeet Adani being present at the event.

Vedanta and Essel Mining are some of the other companies who had sent their senior officials to the event.

Coal India, over the years, have closed down 200 mines for various factors including such mines turning uneconomical at the time of the closure.

Subsequently, Coal India tried to reopen such mines through the Mine Developer and Operator (MDO) mode.

The effort didn’t find such response as the MDOs were offered a cost plus model where the operator of the mines would

Number of mines

ECL

4

BCCL

5

CCL

2

WCL

5

SECL

4

India needs to increase domestic coal production in order to fulfil the evergrowing demand for fuel and reduce import dependency, Joshi said.

“The need for coal is going to be double by 2040 with the rise in electric vehicles and the increased demand for electricity. Therefore, we need to ramp up our coal production to meet this growing energy requirement,” Joshi said at an investors’ meet here.

He said the target of the coal ministry is to minimise the import of thermal coal and

INTERNATIONAL

Lockdown shrinks Chinese steel output by 10% in Q1

China Iron and Steel Association holding a press conference to announce Q1 sectoral figures.

Steel Insights Bureau

C

hina’s steel production has dropped by 10 percent while steel consumption shrunk by 5 percent year-on-year (y-o-y) during the JanuaryMarch quarter of 2022.

“China’s economic operation has remained stable on the whole, but due to various factors, steel production decreased by 10.5 percent y-o-y, and downstream steel consumption is still recovering. The basic balance between market supply and demand has been maintained generally,” He Wenbo, executive chairman of China Iron and Steel Association (CISA) said recently.

Wenbo was speaking to officials of Rio Tinto to whom he introduced the operation of China’s economy and steel industry in the first quarter. Both sides also exchanged views on how to improve the pricing mechanism, jointly promote the development of large overseas mines and strengthen low-carbon technology cooperation.

Alfredo Barrios, chief commercial officer of Rio Tinto, representatives of Rio Tinto

34 Steel Insights, May 2022

China, Luo Tiejun, vice Chairman of CISA, Wang Yingsheng, chief economist, Jim Su, deputy secretary general, attended the meeting.

2022 Q1 steel consumption drops 5%

China’s steel consumption fell 5 percent y-o-y during the first quarter partly due to waning demand as the resurgence of domestic Covid-19 cases slowed down the construction of many projects.

From January to March, steel consumption of the building industry dropped 7 percent from a year ago, while that of the manufacturing sector dipped 2 percent, said Qu Xiuli, vice chairperson of the CISA. The global uncertainties also caused a decline in steel exports and imports, she said.

2022 consumption to stay flat

However, China’s 2022 whole-year steel consumption will likely remain flat from that of 2021 with the implementation of measures to stabilise growth, said Shi Hongwei, deputy secretary-general of the association.

“China’s economic operation has remained stable on the whole, but due to various factors, steel production decreased by 10.5 percent y-o-y, and downstream steel consumption is still recovering. The basic balance between market supply and demand has been maintained generally.”

He Wenbo, executive chairman, China Iron and Steel Association “The previously pent-up steel consumption will not disappear. It will only be delayed,” Shi said.

CISA held a press conference for the first quarter of 2022 in Beijing to introduce the operation of the industry.

Qu Xiuli, vice Chairwoman and Secretary General of the Association, attended the press conference and focused on the steel industry performance, the features of the industry, difficulties and status quo faced up by the industry in the first quarter, as well as the key work to be carried out in the next stage.

CISA’s deputy secretary general Wang Dechun presided over the press conference, deputy secretaries Shi Hongwei, Huang

CORPORATE

AMNS to touch 8.8 mt by 2023 via debottlenecking Steel Insights Bureau

A

MNS India plans to debottleneck existing operations to achieve 8.8 million tons (mt) capacity by end of 2023 and the process is currently under way, ArcelorMittal has said.

ArcelorMittal is the 60 percent owner of AMNS, its joint venture with Nippon Steel.

Hazira facility expansion to at least 14.4 mt is at an advance stage as discussions with vendors are taking place while engineering and design work will start soon, the JV partner said adding that final environmental clearance for the project is awaited.

AMNS India reported a 16.62 percent year-on-year (y-o-y) growth in EBIDTA at $470 million in first quarter of 2022 backed by sale of pellets from the newly commissioned pellet plant.

AMNS India saw solid EBITDA performance in the March quarter supported by contribution from sale of pellets from newly commissioned pellet plant offset in part by a negative price cost impact, ArcelorMittal said.

Crude steel production in Q1 of 2022 decreased by 6.3 percent to 1.7 mt as compared to 1.8 mt in Q4 of 2021 primarily due to planned maintenance.

Steel shipments were stable as compared to Q4 of 2021 and Q1 of 2021, the company said.

RE to power decarbonisation

New Renewable Energy (RE) project in India will drive decarbonisation efforts at AMNS. The $0.6 billion investment to develop renewable energy capacity and expansion of production capacity are the two key strategic initiatives that ArcelorMittal is making in India, according to the group’s presentation to invstors.

Like metallics, securing renewable energy sources on competitive terms will be a differentiator of success in low carbon emissions steel making, the JV partner said.

ArcelorMittal announced in March 2022 that it had established a strategic partnership with Greenko Group wherein

ArcelorMittal will invest $0.6 billion in solar and wind power capacity which, supported

by Greenko’s hydro pumped storage project, will provide for 250 MW of uninterrupted renewable power to be supplied annually to AMNS India under a 25-year off-take agreement.

“The project offers dual benefits – it provides an attractive return on investment for ArcelorMittal (expected to add $70 million to Group EBITDA upon completion) and AMNS India will benefit from over 20 percent of the Hazira plant’s electricity requirement coming from renewable sources, reducing costs and lowering carbon emissions by approximately 1.5 mt per year,” ArcelorMittal said.

Greenko will design, construct and operate the renewable energy facilities in Andhra Pradesh.

ArcelorMittal is studying the option to develop a second phase at a later date which would double the installed capacity.

“Renewable energy (is) a key resource” for decarbonised steel making,” ArcelorMittal said.

The RE capacity supported by Greenko’s hydro pumped storage project overcomes the intermittent nature of wind and solar power generation to supply ‘round the clock’ power to AMNS India.

Over 20 percent of Hazira plant’s electricity requirement would be sourced reducing carbon emissions.

“Project commissioning is expected by mid-2024. ArcelorMittal is studying the option to develop a second phase which would double the installed capacity,” the company said.

AMNS launches new product range

Introducing Tufmax, steel that belongs to the hot-rolled family and is distinguished by excellent formability.

Tufmax is a super tough steel with reduced deadweight, increased payload and longer useful life. It is available in coil, slit coil and sheet/platform.

Kalash is a range of premium style prepainted galvanised steel available in an array of vibrant colours, the company said.

Steel Insights, May 2022

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