Steel Insights, October 2022

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need for digitalisation in

value chain

leaders talk on importance of

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touch

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on scrap as quality ore turns

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support needed to turn steel

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Growing need for digitalisation in steel value chain

Sumit Maitra

Thereis an urgent need for the adoption of big data analytics for better decision making for ways to raise steel consumption and also for identifying what kind of steel to produce, steel industry leaders said at the two-day 9th Indian Steel Markets Conference recently organised by mjunction services limited.

“Industry 4.0 is generation and utilisation of data. Huge data will come to us from sensors and smart devices,” Sanjay Singh, Secretary, Ministry of Steel, said while delivering the keynote address at the inaugural session.

With the entry of computers and sensors in the manufacturing processes, hundreds of zettabytes of data are being generated.

“To reach a capacity of 300 mt, we need to grow consumption. How do we know where we can create demand for steel? Such decisions have to be more data-driven than it is now,” Soma Mondal, Chairman, Steel Authority of India (SAIL) said.

The industry also needs digital intervention to know where scraps are being generated which will help the sector reduce emission through more scrap collection and usage, she said.

“There’s this huge pool of data that is available now but only a fraction of that is being used,” she said.

The steel industry in India is aiming to be globally competitive through innovative solutions in the sale, buy and logistics functions, industry leaders said at the conference held in New Delhi during September 15-16.

Vijay Sharma, Director, Jindal Stainless Ltd talked of how data analytics will play a key role in realising the vision of the government for 2047.

“Today in our organisation, the customers are using platforms where ordering, tracking, validations, payment gateways, complaint management, pricing, auction, leads and visits are all happening on a digital platform. Supplier onboarding, quotation, contract and settlements, everything is there,” Sharma said.

Delivering the welcome address, mjunction MD, Vinaya Varma said, “India

is now the second largest steelmaker, and in digitisation and automation India has been a pioneer. Today, all major steel producers have digital platforms helping them to connect with their customers seamlessly.”

Data-driven demand and production planning

Identifying the nature of future demand for steel is an important challenge for the sector which can be addressed using digital solutions, Mondal said.

“Industry will invest when they foresee a demand over the next 3-5 years. So that would be the first challenge for you to find out which way the consumption is going to grow and what is that the future consumers would require. Our production capabilities have to be aligned to that,” she said.

The construction sector consumes around 65 percent of the total steel availability and the national infrastructure development pipeline is around `1.11 lakh crores. So, while there is potential in the construction sector, the sector also has to look at the capital goods sector as a lot of capital goods industry will shift to India with the adoption of China-plus strategy.

“This is what you need to find out digitally. The decision should be a datadriven decision, not just an approximation,” Mondal told the steelmakers.

While steelmakers had to produce according to existing demand, the sector now has to create the demand for steel as well.

Analytics to drive down costs

“When production is analytics and automation driven, then your cost of production also goes down,” Mondal said.

Citing the specific example of coal consumption, Mondal said every steel plant has huge amount of data of coal consumption and digital analytical tools can be utilised to decide upon the right kind of blends so that costs are optimised.

The next phase of growth for the steel sector would be technology driven which, Singh said, is deflationary in nature.

This is in contrast to the debt-driven growth which was inflationary.

Industry 4.0 and rising importance of data analytics

“Industry 4.0 is going to be about utilisation of data. It broadly means huge connectivity which will going to be in place once the 5G comes. So, there will be integration of the entire chain from operational units of product designing, processes and production to consumers and distributors,” Singh said.

To utilise that huge amount of data, we need application of Artificial Intelligence (AI), he said.

The steel sector should start learning the ways of utilising the opportunity that is being thrown up by exponential growth of data generation, processing capabilities and connectivity.

“We need to utilise data in all aspects of our operations, whether it is designing the products, managing production processes and making them very efficient or even to understand the psyche of the consumers,” Singh said.

“In all these areas, we need to develop expertise as we don’t have much of it and we

“To reach a capacity of 300 mt, we need to grow consumption. How do we know where we can create demand for steel? Such decisions have to be more data-driven than it is now,” Soma Mondal, Chairman, Steel Authority of India

Steel sector calls for strategy to rein in coking coal costs, dictate prices

Steel Insights Bureau

country needs to reduce cost of coking coal and reduce dependency on imports and studying the Chinese model would be a good lesson, A K Saxena, Director (Operations), Rashtriya Ispat Nigam Ltd said while chairing a session on the way forward for efficient procurement of raw materials at the 9th Indian Steel Markets Conference organised by mjunction services ltd.

The

Stressing on the importance of coking coal in steel making, Saxena said: “Coking coal is the most critical and cost intensive raw material in steelmaking with 1 million tons of steel requiring 0.9 million tons of coking coal which constitute 65 percent of the cost of inputs.”

“Of the total requirement of coking coal, 82-85 percent is imported, which, on an average is transported over 10,000 kilometer taking 25 days to reach, as a consequence, a lot money is locked in it,” he said at the event organised at India Habitat Centre at New Delhi over September 15-16.

Learning from the China model

Dependence on coal beneficiation and coal washeries, China has cut down on imports, he said.

Over the last 5 years, China increased crude steel production by 21 percent but reduced its coking coal imports by more than 29 percent in the same period.

“China, through better coal beneficiation, has reduced coking coal imports over 201722 despite rise in steel production. India

can take a leaf out of it and can reduce its imports,” Saxena said.

“A key area of R&D should be how to raise beneficiation and blending of domestic coking coal”

Compared to imported coal, India coal has high ash content (18 percent - 49 percent), low coking properties, high inerts and low washability potential.

In addition, there is limited availability and logistics (rake availability for inland transport) is also a constrain.

As there is no perfect coal for perfect

“If we resolve that now onwards, all expansion and new projects would only have stamp-charged coke ovens then need for utilisation of domestic washed coking coal would rise by an additional amount of 28 mt by FY31 considering 35 percent usage in coal blend,” A K Saxena, Director (Operations), Rashtriya Ispat Nigam Ltd

China coking coal import and crude steel production

Focus on scrap availability as iron ore quality turns scarce

Steel Insights Bureau

Fallingquality of domestic iron ore availability and fast depletion of reserves have triggered the need for a strategy to augment scrap availability for the steel sector, Sanjay Singh, Secretary, Ministry of Steel, said while delivering the keynote address at the inaugural session of the 9th Indian Steel Markets Conference.

“As we have set a target to achieve Net Zero by 2070, we have to become carbon neutral, so greening of the steel sector is important. This could be achieved by using maximum scrap. We need to focus on raw materials availability as iron ore is not going to remain forever as we have limited reserves and quality of iron ore is falling,” Singh said while highlighting key challenges before the steel sector.

According to Singh, data shows that low-grade ore mining has increased at a very rapid pace over the past 3-4 years, and in the previous year share of low-grade iron ore went up from 17 percent to 21 percent.

Replacing iron ore with scrap is a major challenge as scrap is generated from high consumption of steel but consumption of steel in India mostly happens in the construction sector to the extent of 60 percent where the steel is locked up for a very long period.

In her address, Soma Mondal, Chairman, Steel Authority of India (SAIL) said, “We need digital intervention to know where scraps are being generated which will help us to reduce emission through more scrap collection and usage,”

Importance of scrap can’t be overemphasised with growing concern for climate change and urgent steps needed to start moving towards Net Zero target.

Every ton of scrap used for steel production avoids the emission of 1.5 tons of carbon dioxide, and the consumption of 1.4 tons of iron ore, 740 kg of coal and 120 kg of limestone.

Share of recycled steel to grow

“Metals will remain the vital cog in India’s economic wheel of growth, hence the scrap

Top ferrous scrap importing nations 2021 (mt)

generation is expected to follow suit, Bidyut Chakraborty, Partner, Mining and Metals Advisory Business Consulting, KPMG Advisory Services said.

Globally, in 2050, Steel industry is expected to use 2x recycled steel against 2020 levels while steel production rises to only 1.1.

It is estimated that the global steel industry use about 2 billion tons (bt) of iron ore, 1 bt of metallurgical coal and 600 mt of steel scrap to produce about 1.8 bt of crude steel.

Currently 70 percent of crude steel is produced via primary routes using mostly iron ore along with some scrap. The remainder is produced via recycled scrap.

“With a global emphasis on green steel production for arriving at decarbonisation goals, countries are restricting exports of ferrous scrap. European Commission imposed a blanket ban late last year, while Russia also slapped a 5% export duty,” Bidyut Chakraborty, Partner, Mining and Metals Advisory Business Consulting, KPMG Advisory Services

Strategies to touch 500 mt by 2047

Steel Insights Bureau

Propelled by the strong workforce and development-oriented policy scenario, India’s economic growth is likely to remain strong, and by the end of the current decade, India’s nominal GDP is projected around $8.4 trillion by 2030.

The Indian economy is expected to be the third largest in the world after US and China.

A decade ago, India was at the eleventh position and by end of this decade, it is expected to be at the third position.

“In line with becoming the third largest economy, the steel consumption in India by 2030 is likely to grow approximately to around 200 million tons (mt) from the current level of 106 mt. The growth drivers of steel consumption in India will be construction and infrastructure primarily with a share of almost 63 percent for engineering and fabrication with a share of around 17 percent, automotive with the share

of 7 percent followed by energy at 5 percent,”

V S Chakravarthy, Director (Commercial), SAIL said while addressing the 9th Indian Steel Markets Conference.

To achieve a capacity of 300 million tons (mt) by 2030-31, and then to 500 mt by around 2047, Mondal said the sector needs to focus on three key areas: “One is we need to increase capacity. If we increase consumption, we should have sustainable development through efficiency improvement. But in all these, digital solutions and innovations are required. That is where we can be globally competitive.”

Capacity to touch 220 mt by FY31

As per the current capacity expansion plans of large steelmakers and expected growth of the secondary players, country’s steel capacity is likely to reach 220 mt by 2030-31 considering 64 mt of fresh capacity against estimated demand of 181 mt, according to Chakravarthy.

“Likely capacity addition based on

expansion plans announced so far by large steel makers is around 49 mt to 52 mt. The secondary producers, one can very conservatively estimate, will also be growing, increasing their capacity by 2030,” he said.

Raising steel consumption

To achieve 300 mt production capacity by 2030-31, consumption would be around 2030 mt considering capacity utilisation of 85 percent.

That takes per capita consumption to 158 kg per person by 2030.

“To reach 300 mt, we need to have this demand of 158 kg per person by then and the steel industry should increase capabilities to meet the projected demand and supply the

“Today the biggest capital investor in India is the steel industry with almost `2,00,000 crores being spent by the steel industry in the capacity expansion announcements they have made and these announcements are not on paper, but they are under execution,” Rajeev Singhal, VP (M&S) Flat products, Tata Steel

Policy support needed to turn steel green and competitive

Steel Insights Bureau

♦ High logistics costs and bottlenecks

The

government has been providing a multi-pronged support system to the steel sector through several policy initiatives and major capex programme, speakers at the 9th Indian Steel Markets Conference.

“The government has been providing support to the steel industry through various policies. Eventually, all of this will lead to Atmanirbhar India. It’s important for a country to produce the steel it wants, because steel is the backbone of the economy. So as an economy, we need to produce all the kind of steels that we need, whether it is automotive steels, energy-oriented skills, consumer durable steel. We would be producing all of those,” Akshaya Gujral, Chief of Sales, Steering and Distribution, AM/NS India said at the conference.

“This year is a very important milestone as for the first time the government capex will reach the run rate that has been envisaged in the National steel policy which is around `15 lakh crore per year. Getting it there for the first time is very heartening,” Ritabrata Ghosh, Vice President & Sector Head, Corporate Ratings, ICRA said.

However, there are certain procedural and systemic concerns which need to be addressed for the betterment and sustained competitiveness of the industry and to reach the target of 300 million tons by 2031 and further expand to 500 million tons by 2047, said Gajendra Singh, Senior Vice President & Group Head, (Corporate & Regulatory Affairs), JSW Steel Ltd.

According to him, the key areas of concern are:

♦ Land acquisition delays

Raw material availability and its appropriate pricing

taxation and finance cost

Sustainability

“Many infrastructure projects, major and minor industrial units, highways and road construction have been stopped or indefinitely delayed in recent years due to protests, agitation by locals and political reasons,” Singh said.

According to the JSW Steel official, the government should provide certain land parcels with all embedded clearances built in.

Even if certain clearances are required then they may be taken in a composite manner or in a single application so that the project proponent doesn’t have to go to multiple authorities or places for seeking clearances.

Required policy enablers

Singh suggested the following policy interventions for the various aspects of the sector.

Raw material availability and pricing

♦

♦

Countr y should export only value-added products like steel and semi-finished steel instead of raw materials

Operationalisation of Jharia coking coal reserves which has 1.8 billion ton of coking coal

♦ Coking coal washeries with raw feed and linkages has to be set up

♦ Uninterrupted supply of iron ore has to be ensured by expeditiously auctioning cancelled and expired mines by 2030

♦ Long-term mineral security can be achieved by locating strategic mines in

friendly countries and invest to harness long term benefits

Advance benefication and mining technologies adoption

Royalty on Royalty: Mechanism for calculation of Average Sale Price

Logistics

Steel sector suffers from several logistical bottlecks and hurdles. There is high haulage charges due to cross subsidy and variable densities of raw material. Railway infrastructure is inadequate due to indequate supply of rakes, single line access on various routes and last mile connectivity issue.

There is absence of a dedicated freight corridor on major freight routes like Chennai to Goa.

“India’s internal logistics cost (per ton) is around $40-50, which is more than 2-times

“Many infrastructure projects, major and minor industrial units, highways and road construction have been stopped or indefinitely delayed in recent years due to protests, agitation by locals and political reasons,” Gajendra Singh, Senior VP & Group Head, (Corporate & Regulatory Affairs), JSW Steel Ltd

Tata Steel arms merger with co to drive efficiency, sharper focus

Theproposed amalgamation of six subsidiaries into Tata Steel Ltd is aimed at driving synergies, simplifying the group holding and management structure, and consolidating and strategically growing downstream operations and engineering capabilities, Tata Steel has told its investors.

The process will enhance management efficiency, drive sharper strategic focus and improve agility across businesses based on

the strong parental support from Tata Steel leadership, the company management has said in its intimation to stock exchanges.

The board of directors of Tata Steel at its meeting held on September 22 approved schemes for the proposed amalgamation of six subsidiaries all majority owned by Tata Steel and include Tata Steel Long Products Ltd (74.91 percent equity holding), The Tinplate Company of India Ltd (74.96 percent equity holding), Tata Metaliks Ltd (60.03 percent equity holding), The Indian Steel & Wire Products Ltd (95.01 percent

equity holding), Tata Steel Mining Ltd and S & T Mining Company Ltd (both wholly owned subsidiaries).

The Board also approved the amalgamation of TRF Limited (34.11 percent equity holding) into Tata Steel Ltd.

Based on the reports of the independent valuers, the board approved the following swap ratios:

♦

For every 10 shares of Tata Steel Long Products Ltd, 67 shares of Tata Steel Ltd

Steel Insights Bureau