Contents 16 ‘Flat steel demand may grow in excess of 10% in 3-5 years’ 18 NMDC re-works production target 19 Domestic iron ore miners’ increase offers 22 Coking coal continues to surge in August 23 Merchant exporters of ferro alloys seek level playing field 24 ‘NPA resolution to help resume steel sector lending’ 25 An august month for Motown! 26 Iran well on its way to 2025 goal 28 Global crude steel output up 2% in July m-o-m 29 Traffic handled by major ports up 4% in April-July 30 Indian Railways’ July iron ore handling up 13% y-o-y 31 Value-addition to substitute steel imports: Minister 32 Traffic handled by 12 major ports up 19% in 5 years 38 SAIL to require 27 mt of coking coal by 2025 42 JSPL narrows consolidated loss to `420 cr in Q1 44 SAIL to emphasise on product differentiation: Chairman 45 LTTC agreement signed between SAIL, Railways 48 Tata Steel reports higher consolidated Q1 PAT 49 Corporate Update 50 Price Data 51 Ferro alloy data 55 Consumption data 56 Import data 58 Import export data
4 Steel Insights, September 2017
6 | COVER STORY
Is the flat steel graph headed northward? Flat steel demand for the next quarters of FY17-18 may vary between 8-10 percent.
20 | Feature
Steel & petroleum ministries in talks over GAIL gas sale to steel mills Move to protect steel industry against volatility in the coking coal market, says Syedain Abbasi, Jt. Secy., steel ministry.
33 | Interview
Big opportunity for Indian steel is competitiveness & profit growth
43 | Corporate
Focus should be on brownfield not greenfield expansion, says Abhijit Sarkar, Vice President & Head of Advisory, M N Dastur.
RINL aims to cash break even in FY18 The company is still EBITDA-negative on a cumulative basis, but expects to turn EBITDA-positive during the fiscal.
47 | Corporate
Tata Steel plans to expand Kalinganagar capacity to 8 mtpa Steel major to take the Kalinganagar plant’s capacity to 8 mtpa from the current 3 mtpa.
Cover Story
Is the flat steel graph headed northward?
Flat steel demand for the next quarters of FY17-18 is unlikely to match the figure of 16.3 percent as observed in the first quarter but it may vary between 8-10 percent Madhumita Mookerji
6 Steel Insights, September 2017
Cover Story
E
ven if they haven’t exactly gone flat out, flat products consumption as well as prices within the steel industry have been slowly inching up over the last few months, giving the beleaguered industry, wallowing in the troughs of slow growth, something to cheer about. As per an industry report, during 2015, flat steel products dominated the Indian steel industry and accounted for around 56 percent of the total market revenues. Much of this segment’s growth comes from the construction, infrastructure, and automotive segments with Tata Steel, SAIL, JSW Steel, Essar Steel, Jindal Stainless, Bhushan Steel and Uttam Galva being the key vendors in the organized Indian flat steel market, in terms of production. Hot-rolled sheets, coils, and plates are the largest product segment and accounted for around 60 percent of the flat steel products market. At Tata Steel, for instance, 65 percent of its portfolio comprises of flat products. Flat steel is commonly used in construction, white goods, consumer durables, automotive industry and electrical transformers. Flat steel comprises of hot rolled coils, cold rolled coils, hot rolled plates, galvanized and colour-coated steel coils. Long steel products, on the other hand, are mainly bars and rods, structures, rails, etc which are commonly consumed by the construction/infrastructure sectors and can play a vital role in the development of an emerging economy like India. Over the years, the flat products-tolong products share in India had been hovering around 55:45 for a long time. But, because of the very high emphasis put by the government on infrastructure development in the country, this ratio is getting slightly skewered, touching almost 53:47 at present,
say some sources. Some even say, this ratio is now at 45:55. “The classic composition of flats to long is 55:45 as a country develops. But, we in India are in reverse! We are 45 percent in flats and 55 percent in long! Whenever this 300 mt happen, whether in 2030 or later, it would have around 160 mt of long and 140 mt of flat products. This is because India still needs to develop as a country before we can see the change-over ,” Peeyush Gupta, VicePresident, Tata Steel, informs Steel Insights. “I think when we reach 300 million tons per annum (mtpa) production level, this flats-to-long products ratio may not change very much. But it is not possible to definitely predict such market share which keeps on changing from time to time,” Sanat Bhaumik, Director, Sales Marketing, Steel Plantech India, says. Steel Plantech is a leading supplier of steel plant equipment for producing high-end flat steel for automotive application and electrical steel. Exports
In an interesting twist, India’s non-alloy flat steel exports rose a sharp 42.95 percent in April-July, 2017-18 on higher shipments by end-users, as per provisional steel ministry data available to Steel Insights. Non-alloy flat steel exports were at 1.92 million tons in April-July, 2017-18, as against 1.34 million tons in April-July, 2016-17, the data showed. Exports of HR coils rose a whopping 89.39 percent to 663,980 tons during the period, while exports of plates rose 29.44 percent to 120,910 tons during April-July, 2017-18. GP/GC sheet exports, however, fell 17.75 percent to 410,330 tons, while CR coils/sheet exports rose 46.29 percent to 446,980 tons during the period.
The classic composition of flats to long is 55:45 as a country develops. But, we in India are in reverse! We are 45 percent in flats and 55 percent in long! Whenever this 300 mt happen, whether in 2030 or later, it would have around 160 mt of long and 140 mt of flat products. This is because India still needs to develop as a country before we can see the change-over
Flat product exports (in ‘000 tons) Product
April-July 2017-18
April-July 2016-17
Growth
Non-alloy
Non-alloy
%
Plates
120.91
93.41
29.44
HR Sheets
17.85
22.67
-21.26
HR Coil/strip
663.98
350.59
89.39
CR Coil/sheets
446.98
305.54
46.29
GP/GC sheets/ coil
410.33
498.86
-17.75
Elect sheets
23.46
7.89
197.34
Tin plates
11.71
9.13
28.26
Tin free steel
0.73
0.64
14.06
Pipes
228.93
57.82
295.94
Total
1,924.88
1346.55
42.95
Source: Steel ministry
Interestingly, flat products exports had shown an upward trend in 2016-17 as well, rising a whopping 93 percent to 5.34 mt against 2.77 mt in the previous fiscal despite the fact that global steel demand was muted during most part of 2016-17. “The rise in exports from India was driven by sluggish domestic demand and enough available capacity with most of the major steel producers in India,” reasons Sharad Mahendra, Director, Sales & Marketing & Board Member, APL Apollo Tubes Ltd. Peeyush Gupta of Tata Steel, dwelling on why flat products exports have been on an upswing, tells Steel Insights: “India is now a net exporter as a country. We used to be a net importer till 2015. Last year, India became just about a positive net exporter. Internationally, China has got anti-dumping measures against it in most countries. We have extra capacity which got commissioned. Capacity comes into play in short bursts. Suddenly, there is a spurt in capacity which can be run. Geographically, India is very well located to serve the Middle East and South East Asia. We have very friendly relations with the countries in these regions where we are not seen as a “dumping” country. Wherever China had to be closed, India got a very good option to go there. So, we have moved very fast as an exporting country.” Corroborating China’s stand, Mahendra too adds, “Trade barriers against China in most of the western economies also enabled India towards achieving increased export levels.”
Steel Insights, September 2017
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Cover Story
‘Flat steel demand may grow in excess of 10% in 3-5 years’
T
he steps taken in the National Steel Policy (NSP), 2017 are definitely going to drive steel demand in India (despite the challenges), which will result in a significant increase in per capita steel consumption in the country. Demand for the industry in the second half (H2) of financial year 2017-18 (FY18) is expected to show a significant growth year-on-year. Also, demand is expected to be better when compared to the actual growth in H1FY18, which will lead to a significantly higher flat steel consumption, Sharad Mahendra, Director - Sales & Marketing & Board Member, APL Apollo Tubes Ltd, tells Madhumita Mookerji. The company is the largest producer of electric resistance welded (ERW) steel pipes and sections in India, with a capacity to produce more than 1.3 million tons per annum. Excerpts from an interview:
The Union Government has approved the National Steel Policy (NSP) 2017, as it seeks to create a globally competitive steel industry in India. NSP 2017 targets 300 million tons (mt) of steel-making capacity and 160 kg per capita steel consumption by 2030. What will be the share of flat steel in both? NSP 2017 has been an excellent initiative taken by the Union Government. This has been pending for quite some time. The
16 Steel Insights, September 2017
steps taken in the NSP are definitely going to drive steel consumption in India which will result in significant increase in per capita steel consumption in India. From a per capita steel consumption of `63 in calendar year (CY ) 2016, reaching a level of `160 is a very reasonable target, keeping in mind growth in the construction and infrastructure sectors along with the pace of urbanisation. In my opinion, this number of per capita consumption may be achieved even earlier than 2030 .
Our research reveals that total flat products consumption grew 16.3% in the first quarter of FY18 at 8.73 mt tons against 7.51 mt tons in the same period in the previous fiscal. What factors do you attribute this growth to? Because, in April-March, 201617, these grew a mere 3% over the previous fiscal, as per our research… Overall, demand improved in the first quarter (Q1) of financial year 2017-18 (FY18) with increased demand coming from the construction and infrastructure
FEATURE
Steel & petroleum ministries in talks over GAIL gas sale to steel mills
willing to give a guarantee of 4-6 years whereby it will continue to provide gas at a certain price, which will be negotiated at $5-7 per MMSCMD, to the steel sector if the latter gives a take-or-pay commitment to GAIL. “Ï think this is a very good proposal for the steel industry because it acts as a buffer against the volatility in the coking coal market and this will result in quality improvements because of the steady supply of gas. Where the logistics of coal versus gas are concerned, there will be a steady supply of gas and once the steel plants have a steady pipeline supply, then this fuel becomes so much more superior to coal. Thus, the advantages would be huge. I know for a fact where a blast furnace chilled because of a lack of coking coal,” Abbasi said. Abbasi further said discussions have already been held regarding the proposal at the minister-level both in the steel ministry and Ministry of Petroleum and Natural Gas as well as at the Secretary-level. “The Minister of Steel has already had discussions at the Minister of Petroleum & Natural Gas level, as well as at the secretary level and we will be preparing a paper on this and shortly inviting the industry to discuss with GAIL on how to take this forward,” Abbasi further informed. Nagarnar plant completion in 8 months?
Madhumita Mookerji
A
n old army maxim, which is gaining currency in management courses as well is that, people continue to do what they know. Rarely do people know, at any given point in time, what needs to be done! It is the latter category of activity that can bring about gainful disruptions. And, perhaps, the prospective use of gas in the steel industry as a substitute to coking coal could bring about positive disruptions. The Ministry of Steel (MoS) and the Ministry of Petroleum and Natural Gas are in talks to explore opportunities for selling surplus gas offered by the Gas Authority of India (GAIL) to the steel industry, Syedain Abbasi, Joint Secretary, Ministry of Steel, told Steel Insights.
20 Steel Insights, September 2017
Abbasi, speaking on the sidelines of an international seminar organised by Steel Tech in Kolkata recently, said the MoS is in discussion with GAIL, which is looking to provide an additional 20-30 million cubic metres (mcm) of gas for which it does not have buyers. “GAIL thus wants to attract the steel companies,” Abbasi revealed. Several of the existing gas plants in India had been shut for a long time because gas prices were at $16-17 per million metric standard cubic meter per day (MMSCMD). Now, with gas prices having fallen, these units are producing at 70 percent capacity. But, at the same time, coking coal prices went up to $300 per ton, which is making gas prices competitive. Now GAIL has a surfeit of gas, Abbasi said and the PSU gas major has said it is
Even as the State-owned miner NMDC’s 3 million tons per annum (mtpa) steel plant in Nagarnar, Chhattisgarh has not yet found a suitor, construction of the plant is close to the finishing line, which would be completed in another 6-8 months, a well-placed source in the steel ministry informed Steel Insights, while speaking on the sidelines of a seminar organised by Steel Tech. The topic of the seminar was “Advancement in Technology for Production & processing of Steels: Application of 4.0”. Commissioning of the plant would, however, take another year, the source added. “Commissioning usually takes another year. It takes a year for a plant to stabilise before the commissioning can happen, the source said. The board has also taken a decision to continue implementing the project “as if we are going to run it”, revealed the source, adding that, meanwhile, the stock investments etc can happen “and if and
INTERVIEW
Big opportunity for Indian steel is competitiveness & profit growth, not volumes
F
or a robust Indian manufacturing sector, the steel base has to be strengthened. But how? First, Indian steel mills need to cut down on their cost of production and logistics. Secondly, they need to ensure optimal consumption of raw materials. Thirdly, they need to explore ways to resolve the high number of uncommissioned mills. Importantly, the government has taken a step in the right direction with the National Company Law Tribunal (NCLT) admitting the insolvency cases against the debtburdened steel companies. This creates an opportunity for the larger players and new investors to acquire these stressed assets and make their existing capacities more productive instead of waiting for greenfield expansion, Abhijit Sarkar, Vice President & Head of Advisory, M N Dastur, tells Tamajit Pain & Madhumita Mookerji. Excerpts from a free-wheeling interview:
Do you feel steel companies should, at present, concentrate on the existing capacities rather than going in for greenfield expansion? The big picture needs to be considered first, before we dive into the specifics. First, as we pursue a dream of Makein-India, steel sits at the base of this manufacturing pyramid. It will power
Steel Insights, September 2017
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62 Steel Insights, September 2017
Tear along the dotted line
Tear along the dotted line