Steel Insights, May 2023

CONTENTS

14 Imported ferrous scrap offers remain slow

15 Pig iron production down 8% y-o-y in April

16 Sponge iron production up 17% in March

17 India March crude steel production up 3% y-o-y

20 Iron ore prices under pressure on low trading

21 Seaborne coking coal offers decline in April

22 FY24 starts off on a mixed note for auto sector

24 Iron ore handled by major ports down 13% in April

25 Indian Railways’ iron ore handling down 5% till FY23

26 Global crude steel output up 16% in March

33 Liberty shif ts to EAF from coal-based steelmaking at Aussie works

35 Teck Resources sees 21% drop in met coal realisation in March quarter

37 Tata Steel consolidated EBITDA at `32,698 crores for FY23

40 Tata Steel ar ms file merger scheme with NCLT post stock exchange approval

41 SAIL capacity expansion to unlock potential: report

44 BKT in Bhuj: bigger giant tires in the making

48 NMDC Nagarnar sets June date for commissioning

50 JSW USA plans major capacity upgrade investments

51 JSP to set up 1.2 mtpa rail mill at Angul

53 Jindal Stainless poised to cash in on growth opportunities 55

18

FEATURE

JSW, Tata Steel among Worldsteel Sustainability Champions

WSA recognises 10 companies for their work in 2022.

6

COVER STORY

China shadow on steel sector recovery

Realty slowdown, excess exports hurting global prices

27

EVENTS

Steel sector seeks freedom from input and tech imports

Ministry to promote green steel use in government projects.

30

INTERNATIONAL

Aramco, Baosteel venture into hydrogen-compatible green steelmaking

Facility to have plate production capacity of up to 1.5 mtpa

46

CORPORATE

AM/NS January-March EBITDA doubles sequentially

Eyes investment in Maharashtra.

China shadow on steel sector recovery

Sumit Maitra

Extra production by China in a weak economic scenario coupled with uncertainty driven by the confluence of factors ranging from geopolitics to concerns about global financial markets has put a dark cloud on steel sector recovery.

Steel prices were on a downward trend for most parts of 2022 on account of factors affecting the Chinese market. Slowdown in infrastructure and construction sector in China due to stalled projects and liquidity crunch, leading to higher inventory levels was the primary reason for reduced demand.

The prices then started to recover in 2023 increasing 26 percent from November 2022 to reach $695 per ton in March 2023.

Prices of steel, along with its critical inputs, have again started correcting in the past few weeks.

“Steel prices have reduced over the last few weeks, which has seen China exporting higher steel volumes and the competition has intensified in export markets,” analysts with Motilal Oswal said.

“A lot depends on what is happening in China,” T V Narendran, CEO and MD of Tata Steel has said when asked by analysts about his views on the recent global correction in steel and its input prices.

“While Chinese steel industry ramped up in anticipation of growing demand, they were producing at highest levels, touching 96 million tons (mt) in March and hence, exported 8 mt, which is more than what they have done for a long time. This had a impact on the global sentiment because suddenly, 2 mt hit the global market when the rest of the market was still fragile,” he said.

China produced 261.6 mt of crude steel in the first quarter, a gain of 6.1 percent from a year earlier, according to China Iron and Steel Association.

While Chinese market could absorb some 243.4 mt of crude steel in the first three months of 2023, a gain of just 1.9 percent from a year earlier, China produced 261.6 mt in the period, 6.1 percent higher than the year-ago period.

As a consequence, steel prices are falling faster than the price of raw materials and fuel, squeezing the profit margin of steel

producers, Wang Yingsheng, chief economist of the China Iron and Steel Association, said.

“Imports (from China) are elevated in Europe though they are below what they were in the Q1 of 2022,” Genuino Christino, Chief Financial Officer, ArcelorMittal told investors.

“Chinese policy can be summarised as compulsive overproduction. This is not good for China, and it is not good for the world… This is not a free market phenomenon,” commented Sridhar Vembu, noted entrepreneur and founder of Zoho.

China dominates the global crude steel consumption with a 50 percent market share in 2022. The major driving industry is the construction sector which accounts for China’s 55 percent finished steel consumption.

The EU is the world’s second largest consumer of steel, accounting for 8 percent of global consumption in 2022.

Weakness in China

In China, major steel product prices are likely to trend down due to weak demand in the real estate sector and oversupply, says Mysteel Research and Consulting.

“It is estimated that steel demand in the real estate sector decreased by 4.79 percent year-on-year during the January-March period. Demand for steel in the infrastructure sector is expected to weaken marginally indicated by a 0.2 percent decreased in infrastructure investments. In terms of supply, steel mills have begun to reduce production due to sluggish demand for steel products,” Mysteel said in a note.

China, in the long term, will have a depressing impact on the steel sector as it moves from investment-led growth to consumption-led growth.

“After China removed its restrictions in December, there was a burst of optimism and everyone thought that the Chinese economy is going to takeoff and will get reflected in steel prices and everything else including coking coal prices. While its economy is expected to grow by 5 percent, it is shifting more to consumption-led growth which need not be as steel intensive as investment-

led growth that China traditionally had,” Narendran added.

The silver lining

Steelmakers see higher domestic realisation in the current quarter on improved expectations about economic activity despite the feeling of gloom.

Tata Steel sees `1,000-1,200 per ton higher steel prices in the first quarter of FY24.

“Market is still looking at some direction. Keeping that it mind, this is what we feel,” Narendran recently told investors.

ArcelorMittal has seen a “solid start” to 2023 in the European market as it believes destocking has ended although restocking is yet to happen in any significant way.

“When we see inventory levels in Europe, US and other geographies we operate in, we actually believe inventory levels are quite low which should then support apparent steel consumption,” Genuino Christino, Group Chief Financial Officer of ArcelorMittal told analysts.

Apparent steel consumption in India was up 14 percent on year-on-year (y-o-y)

“When we see inventory levels in Europe, US and other geographies we operate in, we actually believe inventory levels are quite low which should then support apparent steel consumption,” Genuino Christino, Group Chief Financial Officer, ArcelorMittal

JSW, Tata Steel among Worldsteel Sustainability Champions

Steel Insights Bureau

JSW Steel Ltd and Tata Steel Ltd are the 2 domestic integrated steel players who have been recognised as sustainability champions of 2023 by the World Steel Association (WSA).

Others are: ArcelorMittal, HBIS Group Co, HYUNDAI Steel, JFE Steel Corp, Nippon Steel Corp, POSCO H, Tenaris and Ternium.

WSA has recognised 10 companies as Steel Sustainability Champions for their work in 2022.

Now in its sixth year, the Steel

Sustainability Champions Programme

commends those worldsteel members that are most clearly demonstrating their commitment and action to sustainable development through their involvement in worldsteel sustainability activities.

“JSW Steel has been recognised as sustainability champion of 2023 for its constant efforts and endurance towards safeguarding the environment through sustainable steel-making processes. We strive to work toward the same with utmost persistence to build a sustainable future for all,” JSW Steel said.

JSW Steel Vijayanagar Works was earlier

ArcelorMittal, HBIS Group Co, HYUNDAI Steel,

JFE Steel Corp, Nippon Steel Corp, POSCO H, Tenaris and Ternium are the foreign companies recognised as champions.

Secretary, Ministry of Steel, urged the industry to focus on innovation and research to produce new age steel. “The challenge is to grow responsibly,” she said, as the world watches India's growth with a critical eye.

Abhijeet Narendra, Joint Secretary, Steel, emphasised the need to prioritize research and development, create indigenous technology, and promote energy-efficient methods for steel production.

Sanjay Roy, Joint Secretary, Steel, emphasized the significance of meeting global goals and considering future generations when promoting greener growth.

“We have to grow greener to give better climate to our future generations,” he said.

Roy underlined the National Steel Policy, incentives through PLI schemes, and the focus on increasing efficiency of plants through process changes and new technologies as key factors in promoting sustainable growth in the steel industry.

Subhrakant Panda, President, FICCI, emphasized the importance of the steel industry in facilitating India's growth story. He highlighted the challenges faced by the sector, such as decarbonisation and dependence on the import of coking coal.

Panda stressed that supportive policies and a conducive regulatory environment will enable the steel industry to overcome challenges and leverage the opportunities arising out of the significant growth trajectory that India is embarking upon.

FICCI and Deloitte Report unveiled at India Steel 2023 presents a positive outlook for the Indian steel industry, despite looming raw material and sustainability challenges.

The report explores the industry's potential in the context of infrastructure spending and sustainability. The report highlights the importance of sustainability, with Indian steel producers facing challenges in reducing carbon emissions to remain competitive internationally. It also identifies raw material availability as a key challenge for the industry.

A.K. Agrawal, D(T), Mecon Ltd delivered lecture on Technology Solutions for Enhancing Productivity & Efficiency in Iron & Steel Plants. Senior officials of MECON participated in G2B interactions and round table on Secondary Steel Sectors.

Lookingat the structural shifts at the international level, from west to east, India has now emerged as an epicenter for the evolution and growth of the steel sector globally. Growing strength to strength in the last 9 years, our country is on the course to achieve 2 landmark figures: first, production of 125 million tons (mt), second, 11-12 percent growth in consumption levels.

In the last decade, steel production in India has steadily grown at a GAGR of 6 percent.

Global steel experts led by the World Steel Association have predicted that India is going to be the epicenter of growth of the global steel industry during this decade.

India’s steel production has increased by over 6 percent whereas globally, steel production declined by 4.2 percent in 2022.

We have already emerged as the second largest steel producer in the world and our per capita steel consumption has gone up from 57 kilos to 78 kilos during the last 9 years.

This proves our mandate to become a powerhouse of manufacturing and increase the share of steel in GDP from 2 to 5 percent.

This growth is having manifold results: the first collaborative efforts of industry and government, wherein, the government plays the role of a facilitator and the industry drives this engine of growth.

PLI schemes

A successful example of the same is that we

recently signed 57 MoUs with 27 companies for specialty steel under the Production Linked Incentive (PLI) scheme, which is expected to generate an investment of about `30,000 crores and create additional capacity of about 25 mt in specialty steel in the next five years. This will also, as a multiplier, create 60,000 plus jobs and contribute towards achieving the goal of becoming the third largest economy of the world by 2030-31.

Towards Atmanirbhar Bharat

Second, strengthening the foundation of national infrastructure building in the endeavor of creating an Atmanirbhar Bharat.

The steel Ministry is in the process of aligning, our policies with the GatiShakti master plan, which will complement the 100,00,000 crore investment plan for infrastructure development.

Over the next five years this will boost the demand of steel in various sectors thereby enhancing steel usage.

There are other government initiatives such as the Pradhan Mantri Awas Yojana, both urban and rural and the Make-inIndia program. The Pradhan Mantri Ujjwala Yojana, the Pradhan Mantri Krishi Sinchai Yojana, Smart City development, Amruth and the Clean Ganga Mission, which will also be demand drivers for our industry.

Increased indigenous defense procurement and a growing manufacturing sector through

“In future, government may ensure greater usage and promotion of green steel in government projects.”

Aramco, Baosteel venture into hydrogencompatible green steelmaking

Steel Insights Bureau

Fossil fuel energy major Aramco has joined hands with Baoshan Iron & Steel Co. Ltd (Baosteel) of China and Public Investment Fund (PIF) of Saudi Arabia to establish the first integrated gasbased steel plate manufacturing complex in Saudi Arabia, which, in near future, will be fueled by hydrogen.

“The facility is expected to have a steel plate production capacity of up to 1.5 million tons (mt) per year. It would also be equipped with a natural gas-based direct reduced iron (DRI) furnace and an electric arc furnace, which aims to reduce CO2 emissions from the steel-making process by up to 60 percent compared to a traditional blast furnace. The DRI plant would be compatible with

hydrogen without the need for major equipment modifications, potentially reducing CO2 emissions by up to 9 percent in the future,” a joint release by the partners said.

Saudi Arabia would be the project’s primary target market, with plans to export to the Gulf Cooperation Council (GCC) and broader MENA region. It is expected to create new jobs and significantly reduce reliance on imported steel, serving customers in several strategic industrial sectors including pipelines, shipbuilding, rig manufacturing, offshore platform fabrication and tank and pressure vessel manufacturing. It also would aim to serve the construction, renewables and marine sectors.

“Subject to customary regulatory approvals and closing conditions, the joint

venture complex is expected to be located in Ras al-Khair Industrial City, one of the four new Special Economic Zones recently announced,” the release added.

The complex would bring together Aramco’s energy and industrial services ecosystem, Baosteel’s advanced steel plate industry capability and PIF’s strong financial capabilities and investment expertise.

It would be the first facility of its kind in the Kingdom and the GCC region, advancing the regional steel industry ecosystem. The project aims to enhance the domestic manufacturing sector through localizing the production of heavy steel plates, transferring knowledge and creating export opportunities.

Amin H. Nasser, Aramco President & CEO, said: “The Kingdom’s first steel plate production facility is expected to enhance

AM/NS January-March EBITDA doubles sequentially

Steel Insights Bureau

AM/NS India’s Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) or operating profit has doubled during the March quarter compared to the December quarter on higher shipments and higher

selling prices, joint venture partner ArcelorMittal has said while announcing the quarterly financial results.

EBITDA has gone up 2.10 times to $341 million during January-March 2023 from $162 achieved during October-December 2022. Year-on-year, EBITDA, however, dropped, due to lower prices.

“EBITDA during Q1 2023 of $341 million was higher as compared to $162 million in 4Q 2022, due to higher steel shipments, higher average steel selling prices and lower costs (including energy costs). EBITDA during 1Q 2023 of $341 million was lower as compared to $470 million in 1Q 2022, due to lower prices offset in part by higher steel shipments,” ArcelorMittal said.

Expansion project underway

Projects are underway to expand capacity to 15 mt by 2026, ArcelorMittal said.

Growth plans in steel & mining

♦ Approved investment plan of $7.4 billion to expand capacity, increasevalue added capabilities and leverage infrastructure. This includes $0.8 billion for ongoing debottlenecking; $1 billion for downstream; $5.6 billion for upstream expansion

y Investing $1 billion in state-of-theart downstream facilities at Hazira to supply growing automotive demand; CGL4 to be commissioned in July 2023; (CRM2 complex on track for commission in July 2024)

y Upstream expansion of Hazira (phase 1A) to 15 mt by early 2026 underway

y Enhancing iron ore capabilities: setting up slurry pipelines to connect mines to beneficiation plants in Thakurani and Sagasahi and beneficiation of ore in Odisha

♦ Port, power and other logistics and infrastructure assets acquired from Essar Group (India) for $2.4 billion

♦ Capacity expansion to 20 mt at Hazira; 12 mt greenfield project in Odisha

Crude steel production in Q1 of 2023 increased by 8.6 percent to 1.8 million tons (mt) as compared to 1.6 mt in Q4 2022. Production was higher by 2 percent as compared to Q1 2022.

Steel shipments in Q1 2023 increased by 15 percent to 1.8 mt as compared 1.6 mt in Q4 2022 and 5.7 percent higher as compared to 1.7 mt in Q1 2022.

Inflation Reduction Act, ArcelorMittal said but added that the longer-term outlook for these countries to align with a Net Zero economy is very positive.

Investing in clean electricity for use in the steelmaking process In 2022, the group entered into a strategic partnership with Greenko Group, India’s leading energy transition company, to develop a round-theclock renewable energy project in India with 975MW of nominal capacity.

The $0.6 billion project will combine solar and wind generating assets, supported by Greenko’s hydro pump storage facility to overcome the intermittent nature of wind and solar generation.

AM/NS India will enter into a 25-year off-take agreement with ArcelorMittal to purchase 250MW of renewable electricity annually.

This will supply 20 percent of the Hazira plant’s electricity requirement, reducing carbon emissions by around 1.5 mtpa.

Project commissioning is expected by mid-2024, while ArcelorMittal is currently studying a second phase that would double installed capacity.

AM/NS India will soon be publishing its first climate action report in which it will set out plans to reduce its emissions intensity by 2030, the review said.

NMDC Nagarnar sets June date for commissioning

NMDC Steel Ltd (NSL), the demerged steelmaking plant of iron ore miner NMDC, is expected to get commissioned in June, implying a slight delay in the starting of the operations at the 3 million tons (mt) capacity plant at Nagarnar in Chhattishgarh.

As a runup to its commissioning, NMDC’s Nagarnar plant, meanwhile, has achieved major operational milestones.

According to NMDC officials, the steel plant is likely to get commissioned in June.

Earlier, while talking to analysts after the announcement of third quarter financial results, then CMD Sumit Deb had said the target is to commission the plant by March 31.

2nd coke oven

NSL’s second coke over battery was inaugurated on April 24.

The first coke oven battery was commissioned on October 27 and has already produced 2.25 lakh tons of coke so far, as per NMDC officials.

With the commissioning of its second COB, coke oven capacity touched 1.76 mtpa.

Steel Insights Bureau

“AM/NS India desires to make a huge investment in Maharashtra. I assured AM/NS all support from Maharashtra and looking forward to meeting again with positive developments,” Devendra Fadnavis.