Steel Insights, November 2016

Contents

6 | COVER STORY

20 Provisional anti-dumping duty imposed on certain steel products 22 ASSOCHAM seeks regulatory authority to fix road freight for steel sector

Infrastructure: The key pillar on which steel can grow

23 JSW wins three iron ore mines 26 Manganese ore prices on upward spiral 27 Real estate unlikely to record high sales in festive season: survey 29 Coking coal offers swell in October 30 Niti Aayog favours independent regulators for steel, mining 31 October car sales shows fireworks 32 JSW Q2 profits rise 13-fold 33 Tata Steel in mining partnership with Quebec govt

21 | FEATURE

Dumping duty mooted on imports of colour-coated steel DGAD has mooted duty on imports of colour-coated steel originating and exported from China and EU.

34 Corporate update 36 Concast (India) to supply continuous billet caster to Orissa Metaliks in India

39 Iron ore H1 handling by major ports catapults y-o-y

41 Global crude steel output slightly down m-o-m in Sep 42 MIP lays ground for price increases in steel sector 46 Kandla to cross 150 mt of cargo by 2025 50 A new KISS of life 52 Price data 53 Ferro alloy data 54 Production data

25 | FEATURE

Ferro alloy units re-open on rise in demand

38 Sponge iron, pellet makers allowed to bid for iron ore mines

40 Indian Railways’ H1 iron ore, steel transportation up 12% y-o-y

Indian steel-makers are banking on infrastructure investments announced by New Delhi to hike demand.

28 | FEATURE

Ferro alloys units are gaining momentum on low inventory levels and demand for the material.

Steel mills feel pinch of high coking coal prices Steel production is likely to be impacted by coking coal price surge in the third and fourth quarters.

43 | INTERVIEW

56 Consumption data

EU infra push to be mainly in logistics

57 Import data

And this approach will particularly boost the tourism sector, which contributes significantly to EU coffers.

58 Import-export data 60 Export data

4 Steel Insights, November 2016

Cover Story

Infrastructure: The key pillar on which steel can grow Tamajit Pain

6 Steel Insights, November 2016

Cover Story

T

he steel industry in India is still in the doldrums with consumption growing by a mere 3.6 percent yearon -year to 40.97 million tons in AprilSeptember, 2016-17 and debt servicing levels remaining weak despite the minimum import price and anti-dumping measures lending a meagre fillip to profit margins in the medium term.

The marginal increase in operating margins, owing to decline in imports, has been offset by a rise in coking coal prices to $262 per ton from $90 per ton since January.

Adding to this, iron ore prices have increased 21 percent over the last few months.

The country is yet to witness real growth in steel consumption so Indian mills’ efforts to raise prices and fill the gap vacated by foreign steel have proven largely unsuccessful.

Unluckily for Indian steel-makers, many are in the process of either commissioning newly-installed facilities or ramping them up. These had been under construction for

The initiative is likely to translate into meaningful steel demand after a gap of around 2 years.

While the growth trajectory for India’s economy and its steel sector is unarguably a positive one, patience will be required. India has routinely missed its targets and despite the efforts of the government, limited access to land, approval delays and a lack of funding remain.

Yet the potential upside is enormous with new investments in roads, power and railways over the next five years accounting for almost 60 percent of the total investment.

The government wants to construct 10,000 km of highways in the current financial year.

One positive sign is low level of resistance to reforms taken by the government in the last 32 months.

Steel-makers are already benefiting from higher road construction activity with consumption of rebars and wire rods increasing by 4.8 percent year-on-year to

years and delaying start-up until demand improves is apparently not an option.

Indian steel-makers are counting on numerous infrastructure investments announced by New Delhi, translating to steel demand by the end of 2017.

Latest steel ministry data shows that consumption of non-alloy long steel products has risen 4.7 percent year-on-year to 20.93 million tons in April-September, 2016-17, while non-alloy flat product consumption has risen 4.4 percent to 16.23 million tons during the same period.

Steel mills hope for infrastructure projects to materialise

Steel mills are setting their eyes on Prime Minister Narendra Modi’s ‘Make in India’ programme, which has earmarked $87 billion worth of investment in new infrastructure and manufacturing projects over the next five years. This they hope would benefit the country’s steel and mining companies.

Non-alloy finished steel - April - September 2016 (Provisional) (in ’000 tons)

Cataegory

1. Bars & Rods 2. Structurals 3. Rly. Materials Total Non Flat (1 to 3) 4. Plates 5. H.R. Coils \ Skelp 6. H.R. Sheets 7. C.R. Sheets \ Coils 8. GP \ GC Sheets 9. Elec.

Sheets 10. Tinplate (incl. ww) 11. TMBP 12. Pipes (Large Dia.) 13. Tin free steel Total Flat (4 to 13) TOTAL (Non - Alloy)

Apparent Stock Double count Consumption consumption Total Consumption production Imports Exports Availability As on As on Variation Current Last year Current Last year Current Last year variation over for sale last year (%) 1 Apr 30 Sep in year (2015 year (2015 year (2015 2016 2016 stock (2016-17) 16) (2016-17) 16) (2016-17) 16) 17,061

220

298

16,983

2,612

2,985

373

16,610

15,847

16,610

15,847

4.8

3,901

17

44

3,874

286

330

44

3,830

3,740

3,830

3,740

2.4

483

21

1

503

76

81

5

498

404

498

404

23.3

21,445

258

343

21,360

2,974

3,396

422

20,938

19,991

20,938

19,991

4.7

2,127

366

127

2,366

345

348

3

2,363

2,156

2,363

2,156

9.6

11,355

949

786

11,518

1,313

1,379

66

11,452

10,696

6,734

6,025

11.8

624

30

33

621

175

173

-2

623

777

623

777

-19.8

3,978

459

538

3,899

174

243

69

3,830

3,862

1,997

1,814

10.1

3,623

270

837

3,056

504

595

91

2,965

3,172

2,965

3,172

-6.5

100

162

13

249

11

11

0

249

232

249

232

7.3

173

136

14

295

0

0

0

295

220

295

220

34.1

0

0

0

0

1

1

0

0

2

0

2

-100.0

1,021

52

77

996

25

26

1

995

1,097

995

1,097

-9.3

0

15

1

14

0

0

0

14

49

14

49

-71.4

23,001

2,439

2,426

23,014

2,548

2,776

228

22,786

22,263

6,551

6,719

16,235

15,544

4.4

44,445

2,697

2,769

44,373

5,522

6,172

650

43,723

42,254

6,551

6,719

37,172

35,535

4.6

0

4,718

1,833

0

4,671

2,048

Steel Insights, November 2016

7

FEATURE

Dumping duty mooted on imports of colour-coated steel Steel Insights Bureau

T

he Director General Anti-Dumping (DGAD) has recommended an anti-dumping duty in the form of a reference price on imports of colour-coated steel originating and exported from China and the European Union (EU) region into India.

The DGAD has suggested that the duty should be the difference between the landed value of the steel products and $849 per ton.

The recommendation has been forwarded to the Ministry of Finance for issuing corresponding custom notification. The difference in the reference price between hot rolled, cold rolled and colour coated is $375/ ton. The Minimum Import Price (MIP) for colour-coated on other origins continues to be at $752/ton.

The petition was filed in June 2016 and investigations initiated in end-June.

Essar Steel India Ltd and JSW Steel Coated Products Ltd had jointly filed the application for initiation of the anti-dumping investigations.

DGAD said its analysis overwhelmingly indicates that the domestic industry is suffering material injury due to increasing dumped imports of the product under consideration into India. There exists a strong nexus between the increase in dumped imports of the subject goods and the material injury being suffered by the domestic industry.

In its preliminary findings, the directorate general of anti-dumping and allied duties (DGAD) has recommended the duty on imports of “colour coated/pre-painted flat products of alloy or non-alloy steel.” In its findings, the DGAD concluded that the product has been exported to India at below the normal value due to which the domestic

industry has suffered material injury.

“The authority recommends imposition of provisional anti- dumping duty on the imports to remove injury to the domestic industry,” the DGAD said in a notification.

The authority is of the view that imposition of provisional anti-dumping duty is necessary to offset dumping and injury, it said.

These steel products offer resistance to corrosion along with barrier protection. It is used in many applications and sectors, including construction, roofing, walling, panelling, cladding and decking, automotive, white goods and appliances and furniture.

Imports of these steel products have drastically increased to 213,311 tons during the period of investigation (July- December, 2015) from 60,771 tons in 2012-13. India has already slapped an anti-dumping duty on certain cold-rolled flat steel products from four nations, including China and South Korea.

While the DGAD recommends the duty

be levied, the finance ministry imposes it.

Countries initiate anti-dumping probes to determine if the domestic industry has been hurt by a surge in below-cost imports. As a counter-measure, they impose duties under the multilateral World Trade Organisation (WTO) regime.

Anti-dumping measures are taken to ensure fair trade and provide a level-playing field to the domestic industry. They are not a measure to restrict imports or cause an unjustified increase in cost of products. India has initiated maximum anti-dumping cases against below-cost imports from China.

To protect the domestic steel industry, the government has also fixed the minimum import price on certain goods.

The government also imposed a provisional anti-dumping duty on 15 wire rods of alloy or non-alloy products.

40 steel grades gets exempted from quality control

As many as 40 types of stainless steel grades, which are basically used in auto and engineering sectors, are going to be excluded from the Steel Quality Control (QC) Order, 2016, as per an official statement by the steel ministry.

An order from the Bureau of Indian Standards (BIS) stipulates a mandatory registration with the state-¬run quality control body. It also prohibits manufacture, import, storage, sale and distribution of stainless steel products by trade and industry without such registration.

These steel grades are basically customer specific stainless steel flat rolled products used in the auto, industrial and engineering sectors. But those used in utensils and kitchenware applications are still covered under the QC order.

Upon receiving the views of many industry bodies, the government had extended the window for registration under the Stainless Steel Quality Control Order, 2016, by three months in September.

The development took place after many conflicts between stainless steel industry body ISSDA and industry bodies like PPMAI, MSSMA and AISSIA, which forced the steel ministry to set up a panel to look into the issue in August.

The industry bodies alleged that the QC order has been implemented without discussions with end-users.

Steel Insights, November 2016

21

FEATURE

Ferro alloy units re-open on rise in demand Steel Insights Bureau

F

erro alloys units are gaining momentum on low inventory levels and demand for the key input material for steel.

However, increase in power tariffs and delay in shipment of manganese ore – the principal raw material, has become a matter of concern for the managements.

Reports said presently out of 31 units across Andhra Pradesh, 23 have launched revival operations, including a major ferro alloys unit of Facor in Vizianagaram district.

The maintenance work is now in progress in most of the units and production is expected to start in a month or so.

Industry sources say the steep increase in the prices of manganese ore, which is sourced from South Africa and Australia, is not only giving them sleepless nights but also the delay in arrival of consignments is a cause for serious concern.

Manganese ore production in India is very low. It is also of low quality. Hence, the manufacturers blend imported ore with

domestic ore, meeting 5 - 10 percent of their requirement.

Steam coal, another raw material, which used to be imported, is now available in good quantity in India. Coke, a by-product of Rashtriya Ispat Nigam Limited, is also available in plenty. Manganese ore price in the international market has undergone a three-fold increase in the past one year or so.

Moreover, countries like Malaysia are offering power, another important requirement for ferro alloys production, at throwaway prices.

Manganese ore import prices firm

Manganese ore import prices remained unchanged with lumps of 38 percent manganese levels from South Africa priced at 7/dmtu CFR India, sources said.

Lumps of the same variety from South Africa were priced at around $4.3/dmtu CFR India around a month back, sources said.

Lumps of 44 percent manganese levels from Gabon quoted at $6.2/dmtu.

The same variety from Gabon was priced at $4.5/dmtu a month ago.

Meanwhile, in the domestic market,

Prices of ferro alloys in various markets during the past six months (Rs/ton) PRODUCT FERRO SILICON

NAME OF THE MARKET GUWAHATI

FERRO VANADIUM

Price Rs./ Ton as on

Price Rs./ Ton as on

Price Rs./ Ton as on

Price Rs./ Ton as on

Price Rs./ Ton as on

27-Oct-16

26-Oct-16

20-Oct-16

27-Sep-16

30-Apr-16

61,600

61,600

62,100

62,100

59,600

568

568

568

568

538

SILICON MANGANESE

ROURKELA

55,600

55,600

54,200

51,800

51,400

HC FERRO MANGANESE

RAIPUR

58,600

58,600

58,600

54,800

53,200

568

568

568

575

565

81,800

81,800

79,800

68,800

57,900

9,400

9,400

9,400

6,800

6,700

10,200

10,200

10,200

10,200

8,600

FERRO MOLY HC FERRO CHROME

JAJPUR

MANGANESE ORE

BALAGHAT

CHROME ORE

BARBIL

Source: Compilation from various sources & ISMW data

prices of lumps of 37.5 percent manganese content was priced at around `9,400 per ton, while 40-44 percent manganese content was priced between `9,500-11,300 per ton, sources added.

Select ferro alloys rise on low inventories

Select ferro alloys remained firm on restocking and lower inventory levels, market sources said.

Silico manganese prices moved up `1,400 per ton. Ferro chrome prices also moved up `2,000 per ton.

Ferro manganese, ferro moly and ferro vanadium prices remained unchanged.

Ferro silicon prices, however, showed some weakness and fell `500 per ton.

Chrome ore prices remained unchanged.

Manganese ore prices also remained unchanged on low inventory levels.

In the export market, silicon manganese was quoted at $870-960 per ton FOB east coast as against $830-950 per ton FOB east coast in the previous month on demand in the international market.

Indian producers reported that there were enquiries from the Middle East, South East Asia and Latin American countries but confirmed deals were few and far between.

In the export market, ferro manganese was quoted at $730-760 per ton FOB as against the same prices in the previous month on oversupply. There were stable enquiries from the international markets, sources said. 

Steel Insights, November 2016

25

Interview

Kandla to cross 150 mt of cargo by 2025

‘Present coastal berth aims to handle iron ore, steel automobiles’

K

andla Port is one of the few government-owned ports that earn a healthy profit. When it comes to handling maximum cargo, Kandla stands second only to private sector Mundra Port. Kandla was the second port after Mundra to cross the 100 million tons cargo handling mark, but beat Mundra hands down in terms of efficiency gains last year. However, the port authorities are not ready to rest on their laurels. The Kandla Port management, in fact, has chalked out a detailed roadmap for its future expansion, Ravi M Parmar, Chairman, Kandla Port, tells Kingshuk Banerjee, in an exclusive interview.

Kandla Port Trust (KPT) was the second port in India to cross the 100 million tons (mt) mark in cargo handling last year. Could you take us through the recent performance of the port and the projections for the next five years?

Kandla Port has put up an impressive growth in cargo handling in recent years.

The port handled 92.50 mt of cargo in 2014-15 and followed it up with 100.05 mt in 2015-16, registering an 8.1 percent growth year-on-year. In 2016-17, the port is expected to handle about 106 mt of cargo.

Cargo projections for the next few years stand at 120.50 mt for 2020 and 150.60 mt for 2025 (based on the base case scenario).

46 Steel Insights, November 2016

The largest component of cargo throughput is POL, followed by thermal coal (unloading), fertilizers, vegetable oil, salt, timber log, food grains, etc. While POL accounts for the largest volume, thermal coal is likely to see a faster growth in coming years. As per the cargo projections, thermal coal (unloading) is expected to nearly double at 18.2 mt in 2020 from 9.7 mt in 2014-15.

What are the expansion plans of KPT? What would be capital expenditure on such expansion?

The port has plans to improve and revamp its infrastructure. Some of these projects are

already under implementation stage, while others are to be taken up in due course.

The major projects include the construction of two new dry cargo berths – CJ – 14 & 16 – through internal resources.

The estimated cost of the project is `531 crore. We are also planning to set up liquid storage tanks farms in different plot locations at Kandla, in the port’s vicinity and outside the port, at a cost of about `538 crore. Mechanisation of fertilizers handling at Kandla is another project in the offing.

Container terminal operations are expected to start by January 2017 to handle container vessels. Also, new railway line is being planned to facilitate cargo movement from

62 Steel Insights, November 2016

Tear along the dotted line

Tear along the dotted line