Steel Insights, October 2021

CONTENTS 1 9 India pig iron production up y-o-y in August 20 August sponge iron production up y-o-y, m-o-m 21 August crude steel production up 8.2% y-o-y, 0.8% m-o-m 24 Infra capex frontloading driving steel demand 25 Coal Min launches second attempt for 11 coal mines 27 Steel Min calls for coal gasification ecosystem 28 More coking coal mines to be offered in auction 30 Odisha gets 123 bids for 11 blocks 31 Spot coking coal offers volatile in seaborne market 32 Car sales on a bumpy ride ahead of festivities 34 Iron ore offers stay soft, offtake to pick up in H2 35 Iron-ore handled by major ports down 8% till August 38 Indian Railways’ iron ore handling up 36% till August 39 Global crude steel output down 3% in August 43 Danieli sees rising demand for green steel plants 44 China’s secondary steel to replace primary sector in a Net Zero scenario: report 48 Global steel makers for greener shipments 49 Tata Steel India Q2 deliveries grow 12% q-o-q 53 OMDC gets mining approval in Bagiaburu 54 Shyam Steel to expand its retail presence pan India 55 Corporate update 57 Government update

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6 | COVER STORY Recycling: The route to decarbonisation

Need for green steel to drive scrap usage.

22 | FEATURE

Steel Min focuses on raising consumption, cost cutting Real time demand assessment propose.

40 | INTERNATIONAL ArcelorMittal bets big on decarbonisation

Invests in Bill Gates-backed Breakthrough Energy.

50 | CORPORATE

Steel demand likely to see growth in coming months: SAIL Chairman Bullish on construction, infra, auto, consumer goods.

51 | CORPORATE

NMDC raises FY22 output target to 47 mt To start coal mining in two blocks by Q4.

COVER STORY

Recycling: The route to decarbonisation Sumit Maitra & Tamajit Pain

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COVER STORY

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ndia, the second largest steelmaker in the world, is also the second largest importer of steel scrap. Surely India fares poorly in terms of scrap generation and consumption despite steel being the most recyclable metal in the world.

Not only can steel products be reused and remanufactured, steel is also a permanent material, which can be recycled over and over again without losing its properties.

Domestic scrap demand is estimated at around 25-28 million ton (mt) with import being 5.57 mt.

In contrast, with steel output touching 1 billion tons, consumption of scrap by China’s steelmakers has increased from 90 mt in 2016 to 230 mt in 2020, with an average annual growth rate of 9.8 percent.

Growing domestic steel making capacities and phasing out unfit and polluting vehicles will generate more scrap.

Usage of scrap in steel making is gaining importance with the necessity to reduce usage of fossil fuel, mainly coking coal, in steel production.

Also, conventional steel making process is giving way to Green Steel using inputs like hydrogen, bio-waste or steel scraps.

Recycling 1 ton of scrap saves 1.1 ton of iron ore, 06-0.7 ton of coking coal and around 0.2-0.3 ton of fluxes.

Besides, specific energy consumption is also reduced drastically as the requirement of energy for production of steel through primary and secondary routes is 14 Mega Joules/Kg and 11.7 MJ/ Kg respectively.

It leads to savings in energy by 16-17 percent. It also reduces water consumption and GHG emission by 40 percent and 58 percent respectively.

Decarbonisation initiatives

The industry needs to cope with the pressure to reduce its carbon footprint from both environmental and economic perspectives.

Currently the steel industry is among the three biggest emitters of carbon dioxide, making steel plants good candidates for decarbonisation.

While the industry must adapt to these new circumstances, it can also use them as a chance to safeguard its license to continue operating in the long term.

In various industries including the auto industry, manufacturers have the ambitious aim of eliminating carbon emissions completely from their entire value chains (including their suppliers) and taking on a full life cycle perspective.

The Institutional Investors Group on Climate Change, a global network with 250-plus investors and over trillions of

Major importing markets of steel scrap in 2020 (in 1,000 metric tons)

25,000

22,435

20,000 15,000 10,000 5,000 0

5,383 4,512 4,398 3,616 2,866 2,126 1,420 1,031

dollars in assets under management, has raised expectations for the steel industry to safeguard its future in the face of climate change.

At the same time, global investment firm BlackRock has confirmed its commitment to environmentally responsible business development and sustainable investing.

Technology landscape for decarbonisation in steel production

Going forward, steel producers need to assess, evaluate, and decide on a technologically and economically viable way to decrease their carbon footprint.

Steel can be produced via two main processes: either using integrated blast furnace (BF)/basic oxygen furnace (BOF) or electric arc furnace (EAF).

While integrated players produce steel from iron ore and need coal as a reductant, EAF producers use steel scrap or direct reduced iron (DRI) as their main raw material.

Although BF/BOF efficiency programs and biomass reductants can be evaluated, but such programs are not fully comprehensive.

Effective measures: Carbon capture and storage/higher share of scrapbased EAFs

This process maximises secondary flows and recycling by melting more scrap in EAFs. EAF producers are more environmentally friendly and flexible to the ups and downs of demand.

However, shifting to EAF-based steel production requires the future supply of renewable electricity to be commercially available, as well as a sufficient supply of high-quality steel scrap.

High quality scrap is necessary for the production of high-quality products, which are nowadays mainly produced through the integrated route. If high-quality scrap is not available, lower-quality scrap can be mixed with DRI to ensure a high quality EAF input.

Increasing the share of EAF-based steel production will play a key role in decarbonising the steel industry. However,

Steel Insights, October 2021

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FEATURE

Steel Ministry focuses on raising consumption, cost cutting measures

The minister urged the PSUs to focus on the important cost cutting measures such as reduction in the coke rate, increase PCI injection and increase use of pellets to reduce the consumption of coking coal and minimise the cost of production. dealers/distributors, agents, customers, etc. and work towards expanding their reach to the common man in small towns and villages.

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he steel ministry, in a recent series of meetings with officials of major state-owned and private steel makers, asked the industry to raise steel consumption across several sectors of the economy and also take steps to bring down costs of production.

The Union Steel Minister, Ram Chandra Prasad Singh, chaired a meeting with CMDs of public sector steel companies on September 21 to review their marketing strategies and future plans.

The Minister reviewed the marketing and sales strategies adopted by the companies including its roadmap in the context of future expansion and diversification plans.

The Minister of State for Steel and Rural Development, Faggan Singh Kulaste and Steel Secretary, Pradip Kumar Tripathi were also present in the meeting.

The Steel Minister was apprised by the respective PSUs about the marketing strategies in place for the domestic as well

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as for the export market for their various products.

The Minister directed the steel PSUs to have a system in place for real-time assessment of the changes in the demand, supply, pricing trends, degree of competition, etc. for their various products for arriving at the best suited marketing strategies.

He suggested for aggressive marketing of their products.

The Steel Minister also stressed the need for the companies to wholeheartedly contribute to the ongoing and future infrastructure projects of national importance and other important projects viz. Bharatmala, Sagarmala, roads projects, Railways dedicated freight corridors, dams construction and projects in the energy sector.

The Minister further advised the PSUs to lay more emphasis on branding of the products and utilize all available advertising opportunities to popularise their products.

The Minister directed the companies to involve themselves constantly with the

Cost reduction efforts

A meeting with officials of the PSUs from the steel sector to review status of cost reduction in production of PSUs and action plan for the future was also held under the Chairmanship of the minister.

The Minister emphasised on the need to carry out macro and micro analysis of the parameters affecting the cost of production and leave no stone unturned to convert the adverse conditions into opportunities.

Singh directed that a road map for cost reduction through improvement in the parameters in the next six months, be prepared and necessary action be taken.

It was informed that coking coal, which is mostly imported, is the biggest cost element.

The minister urged the PSUs to focus on the important cost cutting measures such as reduction in the coke rate, increase PCI injection and increase use of pellets to reduce the consumption of coking coal and minimise the cost of production.

FEATURE

Iron ore offers stay soft, offtake to pick up in H2 Steel Insights Bureau

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he Indian iron ore market maintained soft in line with low offtake by buyers in the auctions because of the sluggish steel market during monsoon season.

However, offtake levels are expected to rise with the end of monsoons in Q3 and the rise in international demand for pellets due to shortage in China.

Domestic iron ore fines offers for Fe 62 percent stood at `5,100-5,200/ton (inclusive royalty, DMF and NMET), while that of Fe 63 percent stood at `5,900-6,000/ton in Odisha.

NMDC has cut lumps prices by `200/ ton and fines prices by `400/ton for October deliveries.

NMDC has cut its iron ore prices for the fourth consecutive month on sliding international iron ore prices.

The producer lowered its monthly domestic prices to `5,950/ton for lump with 65.5 percent ferrous (Fe) content and to `4,760/ton for 10 mm fines with 64 percent Fe. Iron ore export offers for Fe 57 percent remained stable at $60/ton CFR China on some buying interest.

Seaborne iron ore offers remained stable amid improving supplies from Brazil. Iron ore trading liquidity was still limited mainly due to China’s Golden Week holiday, but improving supplies from Brazil were helping to stabilise prices.

Offers for 62 percent Fe fines stood at $117/ton CFR Qingdao.

Offers for 62 percent Fe low alumina fines stood at $119/ton CFR Qingdao. Offers for 58 percent Fe fines high grade premium stood at $91/ton CFR Qingdao.

Offers for 65 percent Fe Brazil origin fines stood at $138/ton CFR Qingdao.

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Top producer China’s measures to reduce steel output and keep its 2021 production levels flat at 2020 level has pulled down international iron ore prices from record highs earlier this year.

NMDC produced and sold less iron ore in September as the monsoon reduced steel demand, but output and sales rose from a year earlier.

The producer aims to achieve output of 47 million tons (mt) for the current fiscal year ending in March 2022, up from the 35 mt it produced in 2020-21.

Steel minister RCP Singh last month reviewed a meeting on the status of NMDC’s iron ore fines sales and directed it to prepare a roadmap for production and expanding its customer base.

Meanwhile, OMC scheduled iron ore lumps and fines e-auction recently saw bids for the entire quantity of lumps with increase in bid price.

Hike in domestic pellet offers supported the market sentiment. The recent buoyant sentiments in the sponge iron and semifinished steel market because of surge in coal prices have enabled producers to raise offers. Sponge iron prices were up on coal price rally.

Pellet export offers rise

Pellet export offers increased on lower availability of pellets in China as pellet plants in the neighbouring country faced power shortages thereby reducing output levels.

Current offers for pellet Fe 64 percent stood at $132/ton FOB east coast as against $121/ton FOB east coast a week ago.

Pellet prices are expected to remain supported on tight pellet supply in China.

The power cuts there have led to reduced output from Chinese pellet plants, impacting domestic pellet production.

With the end of Chinese Golden Week holidays approaching, demand has witnessed a slight uptick. Rising global spot iron ore prices have pushed pellet export offers.

India’s pellet Fe 63 percent offers have increased tracking the global markets and stood at `12,900/ton ex-Raipur.

GST rates

Meanwhile, the GST Council chaired by Finance Minister Nirmala Sitharaman gave its nod for increasing the GST on iron ore and manganese ore. It also approved raising GST on nickel, copper and zinc. The council gave its consent to increase GST on metals from 5 percent to 18 percent.

India has raised the GST for iron ore to amend the inverted duty structure in the industry, but the government has not finalised a date on the implementation.

The country’s GST council in its 45th meeting increased the GST on ores and concentrates of metals such as iron, copper, aluminum, zinc and few others to 18 percent from 5 percent.

An inverted duty structure occurs when tax on inputs exceeds that of the output. Iron ore miners pay 18 percent GST for supply of services, while the GST on processed iron ore sale is 5 percent. The GST on steel products is 18 percent.

The GST hike will increase steel companies’ working capital requirement initially, sources said,adding that steel mills will have to pay an 18 percent GST upfront to buy the ore, from the current 5 percent.

There will be a gap in the realisation given the time difference when procuring the ore and when the sale was made.

Market experts said the tax increase will not lift steel prices and is a welcome move as this will streamline the process.

Out of the 19 auctioned blocks in Odisha last year, 14 have commenced production in phases through 2020. While three of the blocks have been put up for re-auction this time. Companies expressing intent to surrender mines, and recurring shortfall in dispatches from high-yielding mines, are a pointer to the fact that high premiums are discouraging production and dispatches.

INTERNATIONAL

ArcelorMittal bets big on decarbonisation

Steel Insights Bureau

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rcelorMittal is betting big on decarbonisation of the steel put in investments across several innovative projects spread across continents.

The Lakshmi Mittal-owned global steel maker has recently signed a letter of intent with the governments of Belgium and the regional government of Flanders, for a €1.1 billion investment in decarbonisation technologies at its flagship plant at Ghent located there.

“To tackle the climate crisis, we need ambitious action. European countries are leading the way, with clear targets to reduce greenhouse gas emissions by 55 percent by 2030 and climate neutrality by 2050. It is good to see that sectors with a large footprint are also joining the race by investing in innovation that reduces emissions and, in the long term, achieves carbon neutrality,” Alexander De Croo, Prime Minister of Belgium, said.

“This ambitious project shows that

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industry is a crucial partner to achieve a climate neutral society by 2050. It will be one of the largest climate investments in Belgium that will anchor ArcelorMittal in the Ghent region, that guarantee employment and that will provide low carbon and ultimately carbon neutral steel. Green steel is needed in the switch to 100 percent renewable energy.

What is good for the climate is good for the economy and for everyone,” Tinne Van der Straeten, Belgian Minister of Energy, said.

Reducing emission with smart DRI technology

The project involves reduction of CO2 emissions by 3.9 million tons per year by 2030, by building a 2.5 million-ton direct reduced iron (DRI) plant and two electric furnaces, which will operate alongside its state-of-the-art blast furnace that can take waste wood and plastics as a substitute for fossil carbon.

A DRI plant uses natural gas, and potentially hydrogen, instead of coal to reduce iron ore, resulting in a large reduction

The Ghent project involves reduction of CO2 emissions by 3.9 mtpa by 2030, by building a 2.5 millionton DRI plant and two electric furnaces, which will operate alongside its state-of-the-art blast furnace that can take waste wood and plastics as a substitute for fossil carbon.

CORPORATE

Steel demand likely to see growth in coming months: SAIL Chairman Steel Insights Bureau

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teel demand will continue to grow in coming months despite recent softening, Chairman Soma Mondal said in the 49th annual general meeting (AGM) of the company.

“Through there has been slight correction after the sharp rise in H2 of FY21 yet the overall scenario remains positive. With the receding monsoon, control in Covid cases and approaching festive season, the construction, infrastructure, auto and consumer goods sectors are likely to see the growth in coming months,” she said.

SAIL is set to enter the next phase of expansion, Soma Mondal, chairperson, announced in its 49th annual general meeting (AGM). SAIL has been taking regular initiatives to increase its presence in different areas by targeting defined market segments. The company is ready to expand the Tier-2 and Tier-1 distribution network across the country to strengthen its retail presence, she said.

Taking proactive actions, the company reworked its plans and strategies to sustain all round activities. Outlining some of those, she said, SAIL made optimal utilization of the operational facilities instead of operating greater a number of facilities at sub-optimal level.

During FY21, SAIL supplies to projects like Katra to Banihal Tunnel project, BRTF Leh-Ladakh project, Leh Airport, Eastern Dedicated Freight Corridor Corp, Lower Subansiri Hydel project in Assam, Agartala – Akhura Rail link project in Tripura among others.

In FY21, SAIL posted highest-ever EBITDA of `13,740 crore, higher by 23

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percent over the corresponding period last year, she said.

The profit before tax (PBT) of the company stood the highest in the last ten years. The company’s borrowings came down to `35,350 crore, a reduction of more than `16,000 crore.

The factors which helped improve profitability included higher sales of secondary products, sale of iron ore fines, lower usage of other raw materials, improvement in technoeconomic parameters, benefit in stores and spares expenses, decreased purchased power rates, reduction in interest charges, higher dividend income and forex exchange gain among others.

Along with reduction in cost by reducing consumption level for various inputs, the capital repairs were implemented upfront wherever feasible, Mondal informed.

The company maximised sales volumes through potential channels like exports, dispatch to Railways while it reduced cash outflows by reviewing commitments and renegotiating contracts among others, she added.

The Chairman outlined the outlook along with performance of the company, initiatives taken in fight against Covid-19, Supply of steel in the development of the nation, marketing measures being undertaken by the company, contributing to Atmanirbhar Bharat’ initiative by developing and producing import substitute steel products.

The company maximized sales volumes through potential channels like exports, dispatch to Railways while it reduced cash outflows by reviewing commitments and renegotiating contracts among others, Soma Mondal said.

“Through there has been slight correction after the sharp rise in H2 of FY21 yet the overall scenario remains positive. With the receding monsoon, control in Covid cases and approaching festive season, the construction, infrastructure, auto and consumer goods sectors are likely to see the growth in coming months.”

Citing the various challenges faced by the Company due to the ongoing Covid-19 pandemic, the shareholders were informed about the measures taken by the company to counter the impact of this pandemic.

Begins forging of LHB axles

Forging of LHB Axles in the new (DSPASP-VISL-DSP) route commenced from September 25 at Visvesvaraya Iron and Steel Plant.

The 790 mm R16 grade ingots (5.85 T) made at ASP using DSP hot metal are being sent to VISL as input for forgings.

In addition to the 790 ingots, ASP has also supplied 270 dia forged rounds to VISL to supplement the feed material required for axle making.

CORPORATE

NMDC raises FY22 output target to 47 mt

NMDC held its 63rd Annual General Meeting on September 30. At the AGM, Sumit Deb, CMD, NMDC (2nd from right) addressed company’s shareholders on synergising efforts to enhance efficiency and prioritise digital transformation in the current fiscal.

Steel Insights Bureau

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n the current fiscal, NMDC Ltd expects to achieve production of 47 million tons and will also begin mining coal from the two blocks it has been allotted by Q4 of FY22, CMD Sumit Deb said.

The state-run iron ore miner had earlier told analysts that it is targeting at least 44 mt production in FY22, up from 35 mt last year with contribution of about 7 mt from restarting Donimalai mine while 2-3 mt would be incremental output from other mines. The company has a capital expenditure of `3,720 crores planned for FY22, he said.

The first quarter of FY22 was an extremely rewarding one, NMDC achieved production of 8.91 mt and sales of 9.45 mt respectively - its best Q1 since inception.

Total revenue from operations stood at `6,512 crore and PAT at `3,193 crore in Q1, also the best ever.

Sharing the progress of the company’s projects - additional screening plant, doubling of railway line and upgradation of conveyor pipeline and slurry pipelines, Deb also stresses on the digital transformation of the company.

“NMDC has made IT and digitalisation a strategic priority, synergising its efforts to significantly enhance competitive advantage and efficiency. We expect technology, automation and data analytics will reinvent all aspects of our business – from mineral exploration to mining, the processing of ore to the sales and distribution of the product,” he said.

“The iron & steel industry will see exciting

“NMDC has made IT and digitalisation a strategic priority, synergising its efforts to significantly enhance competitive advantage and efficiency. We expect technology, automation and data analytics will reinvent all aspects of our business – from mineral exploration to mining, processing of ore to the sales and distribution of the product.”

Sumit Deb, CMD, NMDC opportunities from rapid developments through digitalisation and automation, infrastructure initiatives, reorganisation of urban centres and energy transformation. At NMDC we have the required operational agility to absorb the cyclical volatilities in the iron ore and steel sector and stay ahead on a growth trajectory,” Deb told shareholders.

NMDC is the first PSU to implement, despite Covid-19 challenges, the Enterprise Resource Planning (ERP) solution on SAP S/4 HANA in 21 months with minimal to near zero disruption to business activity, he said.

The digital transformation at NMDC

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