Steel Insights, September 2018 by mjunction services ltd

Contents 23 Jindal Stainless aims to ride Railways’ wagon requirements 26 Scrap demand push coming from secondary steel mills 27 Pig iron prices to remain strong in September 29 Sponge iron July production up marginally 30 India’s July crude output rises 6.4% y-o-y 31 National Recycling Policy may be unveiled shortly 33 Pellet offers jump to record high, exporters gain 34 Most auto cos see sales rise in August 36 Coking coal offers gain in August on China demand 37 Healthy global demand likely for Indian steel in FY19 39 Miners raise iron ore prices 40 Met coke demand set to rise on expanding steel capacity 42 Tata Steel Q1 profit more than doubles 43 NMDC net profit inches up 1% in Q1 44 JSPL clocks profit of `110 crore in Q1 45 Coking coal price rise caused by shrinking domestic supply 47 SteelMin opposes inclusion of finished steel in FTAs 48 Global crude steel output up 2% in July m-o-m 49 Traffic handled by major ports up 4% in April-July 50 Indian Railways’ July iron ore handling down 3% y-o-y 51 Price data 52 Ferro alloy data 53 Production data 57 Consumption data 58 Import data 60 Export data

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6 | COVER STORY

Indian steel: waiting for Industry 4.0 The Indian steel industry must innovate and continue to do so if it has to survive in a regime of diminishing returns to scale

17 | COVER INTERVIEW

‘Incentives may motivate cos to set up CRGO units in India’ There is no facility here for producing CRGO because global cos are reluctant to transfer the know-how

20 | COVER INTERVIEW

Steel must enter high-end segments as import substitution

22 | SPECIAL FOCUS

India is lagging behind in developing appropriate steel-making technologies due to very low expenditure on R&D activities

ISSDA hopeful of duty removal on ferro nickel Stainless body expects govt to remove the 2.5% basic customs duty on imports of ferro nickel and stainless steel scrap

25 | EXPERT SPEAK

Aluminothermy is better for making medium, low carbon & noble alloys This process has advantages like low capital cost and no power cost or pollution hazards among others

Cover Story

Indian steel: waiting for Industry 4.0 Madhumita Mookerji

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Cover Story

he modern steel industry, like any other under a capitalist production regime, needless to say, is heavily dependent on technology and innovation as a major driver, especially at this day and age when the turnaround time is faster than ever before. As per the foundational thesis of Joseph Alois Schumpeter, an Austrian-born American economist and political scientist (1183-1950), whenever there is a rise in the technological innovation graph, then industry flourishes, with increasing returns to scale. Thereafter, comes an inevitable period of technological stagnation, a timeband in which industry keeps on producing the same products which end-users consume at a certain level of income. Concomitantly, there is no remarkable spurt in demand, unless that income rises very fast. This leads to a satiation in terms of consumption of the same old product. Ironically, once the steel manufacturers inevitably start accessing and implementing that high level of technology, in a vicious cycle, the knowledge barrier automatically gets broken, allowing the entry of many players into the field, resulting in production glut. Then there is again a need to raise the bar. Unless and until there is a sudden boost in technology, the industry index will not jump up again in a cyclical reflex. Dr Susmita Dasgupta, Joint Chief Economist, Economic Research Unit, Joint Plant Committee, tells Steel Insights: “The problem with the technology of steel making is the fact that the growth in its progress has plateaued out and we encounter a fair amount of standardisation in the steel making knowhow across the world. Clearly then, the incremental returns to scale have plateaued out as well and industries like film-making, television and ethical hacking seem to be earning better margins for the same level of investments!” She continues: “However, the reason why steel continues to get investments is because

the above-mentioned sectors are too slender as yet to be able to absorb the whole lot of money which is available in the economies as investible surpluses. There is the problem of excess funds because the sectors with the highest profits seem to be tied down into narrow bases. We see the drop in the rates of interests and even negative rate of interest in case of Japan.” And thus she warns: “We may well say that the largest steelmaking countries of the world are at risks of stagnating GDPs.” So, have we reached that point of satiation in the Indian steel industry that Schumpeter warns us about? Are we waiting for a technological Godot, hoping that “something will turn up”, as Wilkins Micawber would have said in Charles Dickens’ David Copperfield, that can deliver us from the evil of technological satiation? Industry 4.0

Yet, says Dasgupta. “Steel is an invention of modern civilisation and it is a material which made modern uses possible. The evolution of modern civilisation will indeed call for newer types of products. Deep sea rigs, mazes of flyovers, bullet trains, deep under-sea trenches and tunnels, foldable homes, heatresistant cookware and so on may constitute niche and specialised products of steel,” she informs. Many in the Indian steel industry feel that the sector needs to migrate to Industry 4.0. As per Wikipedia, Industry 4.0 is a term given to the current trend of automation and data exchange in manufacturing technologies. It includes cyber-physical systems, the Internet of Things (IoT), cloud computing and cognitive computing. Industry 4.0 is commonly referred to as the fourth industrial revolution. This developmental phase in technology fosters what has been called a “smart factory”. “Within modular structured smart factories, cyber-physical systems monitor physical processes, create a

So, have we reached that point of satiation in the Indian steel industry that Schumpeter warns us about? Are we waiting for a technological Godot, hoping that “something will turn up”, as Wilkins Micawber would have said in Charles Dickens’ `David Copperfield’, that can deliver us from the evil of technological satiation?

virtual copy of the physical world and make decentralised decisions. Over the Internet of Things, cyber-physical systems communicate and co-operate with each other and with humans in real-time, both internally and across organisational services offered and used by participants in the value chain,” as per Wikipedia. In India, interestingly, we have the large integrated steel mills that do employ some of the latest technologies to manufacture their products on the one hand while, on the other, there are the foundries, sponge iron, electric arc furnace and induction furnace units in the unorganised sector that still employ dated methods of steel production, causing immense pollution hazards in the process. Indeed, many feel the Indian iron and steel industry needs to migrate to Industry 4.0 for higher productivity, smart management of systems and processes and optimum utilisation of manpower. Industry 4.0 originated in Germany for complete automation of its manufacturing sector. Experts say that since India plans to increase steel production in a big way, it should gear up fully to shift focus to Industry 4.0. They say such a focus will not just lead to huge investments in the sector, but also lead to usage of several processes and increase employment. However, intensive training would be required to sensitise the employers at every level for technological advancements. Industry 4.0 envisages converting industrial units into smart factories. Computerisation and automation will automatically lead to smarter utilisation of technologies, a reduction in wasteful expenditure, leading to proper utilisation of processes and manpower. Industry 4.0, being a highly automated environment, can also lead to a reduction in workplace accidents, which is again a key indicator of how advanced an economy is. Dasgupta stresses that we may soon encounter specialised smaller producers who may not even use 50 percent of their capacities, producing only for very special uses. The map of steel is then likely to change from large conglomerates to smaller isolated producers. She adds: “The smaller isolated producers may need aggregation of inventories, or production volumes and may need to communicate more about their specialities.

Steel Insights, September 2018

SPECIAL FOCUS

ISSDA hopeful of duty removal on ferro nickel Ritwik Sinha

he Indian Stainless Steel Development Association (ISSDA) is expecting the government to look into the demands of local players to remove the 2.5 percent basic customs duty on imports of ferro nickel and stainless steel scrap. It is a long-standing demand of domestic stainless steel producers that the duty on imports of ferro nickel and stainless steel scrap — key raw materials used in producing stainless steel — should be removed or made zero. “The two raw materials are not available in the country and the industry is importing these. The steel Secretary has assured us that the duty will be removed and her ministry is already in touch with the finance ministry in this regard,” ISSDA President K K Pahuja informed. The government had removed customs duty on pure nickel in the last Budget, but the move did not help the industry much since most of the nickel used by stainless steel makers is in the form of ferro nickel, Pahuja said. The same relief should be extended to ferro nickel and along with it the duty should be removed on stainless steel scrap also, he added. On hike in tariffs by the US, Pahuja said it has diverted the attention of global players towards India.

“Global players are already trying to push its finished steel products into India. They are even routing products like pipes, tubes and coils through countries like Vietnam and Malaysia into India,” he added. ISSDA is the apex body representing over 145 companies of the stainless steel industry in India. It was founded in 1989 with the objective of diversifying the applications of stainless steel usage in India. ‘Stainless steel management’

best

for

water

ISSDA, the apex body of the stainless steel industry, is actively working with the ministries of drinking water & sanitation, water resources, health and housing & urban affairs to promote the use of stainless steel to ensure sustainable water management practices. It organised a national seminar on ‘Sustainable Stainless Steel Solutions for Water Management’ in Delhi under the aegis of the Ministry of Steel. The seminar deliberated on sustainable infrastructural solutions for the growing issue of safe water management with original equipment manufacturers (OEMs) and policymakers. Opening the event, Abhyuday Jindal, Managing Director, Jindal Stainless, said, “The Delhi Jal Board loses 48 percent of treated water. A significant reason for that is attributed to leaky pipelines, which in turn also contaminates the water through

The Delhi Jal Board loses 48 percent of treated water. A significant reason for that is attributed to leaky pipelines, which in turn also contaminates the water through harmful pathogens entering the water supply. A Wateraid report estimates that more than 500 children under the age of five die each day from diarrhoea in India alone. To stop this loss of life and finances, it is pertinent that we switch to stainless steel for integrated water management – for treatment, storage, transmission and waste water management

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harmful pathogens entering the water supply. A Wateraid report estimates that more than 500 children under the age of five die each day from diarrhoea in India alone. To stop this loss of life and finances, it is pertinent that we switch to stainless steel for integrated water management – for treatment, storage, transmission and waste water management. Since the metal is inherently corrosion-resistant and requires minimal maintenance, it’s an optimum choice for water management.” Addressing the gathering, Secretary (Steel) Dr Aruna Sharma, said, “As the second-largest stainless steel producer in the world, India is at a point in time when it becomes mandatory to use stainless steel in water management.” In a panel discussion during the event, U P Singh, Secretary, Union Ministry of Water Resources, said: “The health costs of impure water are too high and it, therefore, merits that we have an inter-departmental discussion among related Secretaries to deliberate over this.” With improved awareness, there are growing instances of adoption of stainless steel in water management. While the Delhi Jal Board is adopting stainless steel tankers to transport water to ensure hygiene, stainless steel water ATMs are also being installed in many cities to maintain safe supply of water to all. “ISSDA has been working tirelessly to promote stainless steel because it has proven to be the ideal material to ensure safety and purity of water across the world,” Pahuja said. Water pipes made of plastic and poor quality steel tend to leak or rust, leading to the contamination of treated water. A Wateraid report has said about 37.3 million lives are affected annually in India due to water borne-diseases. An integrated waste water treatment plant can lead to reclamation, recycling and re-treating of water. World over, stainless steel is used for water management. Globally, there are growing examples of cities like Tokyo and Taipei which managed to save nearly 37.5 billion gallons and 38.6 billion gallons of water respectively after the adoption of stainless steel in their water management system. Singapore too has also dealt with water crisis by adopting stainless steel water treatment plants.

EXPERT SPEAK

Aluminothermy is better for making medium, low carbon & noble alloys Tarun Kanti Bhattacherjee

h e mammoth hike in steel metallurgy has perhaps been the greatest factor in contributing towards the rapid strides our civilisation has

taken in the last century. It has now been widely accepted by the steel industry and the Government of India that ferro alloys are and will continue to play a key and definitive role in scaling up steel production to 300 mtpa by 2030 and, therefore, play a key role in the infrastructural development of the country on a broader front. Besides deoxidising and cleaning, ferro alloys are crucial ingredients for the production of steel, imparting certain necessary and desirable physical properties to it. The quantum of consumption varies widely based on the steel-making process and the grade of steel. The alloying elements are indeed integral constituents of steel. We at Astha Ferrotech Private Limited manufacture low carbon and medium carbon ferro manganese in addition to ferro titanium and ferro molybdenum through the aluminothermic process of reduction. Aluminium, when subjected to exothermic reaction, has the ability to displace the metal less electro positive than it from the oxides of the metal. Aluminothermic techniques have led to notable developments in the field of high purity special steels. The objective of this process is to utilise the exothermic heat of the reaction for smelting purposes. The reduction reaction can be represented as: Metal oxide + Al g Metal + Al2O3.

As compared to the process of manufacturing through submerged electrical furnaces, aluminothermy is better for producing medium, low carbon and noble alloys owing to the following reasons: yy Low capital cost. yy Low inventory. yy No power cost and not being power dependent. yy Can easily switch over to produce various grades. yy Bulk production of a particular variety is not required. yy Less area is required. yy No pollution hazards. yy No hazard in solid waste management. yy Less manpower required. yy Benefit of being an SSI unit. And, above all, carbon acts as a reducing agent in the production of ferro alloys in submerged arc furnace. This definitely leaves a carbon footprint. In addition to the carbon generated, energy is supplied through electricity (thermally produced) thereby, leaving an additional carbon footprint. On the contrary, the production of ferro alloys in our industry is through aluminothermic route, where energy is generated during reduction. The latter process, hence does not leave any carbon footprint and is quite environment friendly. Astha Ferrotech Pvt. Ltd. is a professionally managed organization that has quality products and has been recognized as a leading manufacturer of Low Carbon and Medium Carbon Ferro Alloys including Noble Alloys. The project was initiated on January 1, 2003 to set up a small-scale industry at

Adityapur Industrial Area, Jamshedpur for manufacturing wide range of ferro alloys through aluminothermic route to cater to the needs of steel plants in general. The company has been manufacturing low carbon ferro manganese, medium carbon ferro manganese, ferro titanium and ferro molybdenum. During its 15-year journey, the company catered to impressive clientele like Tata Steel Ltd, Jindal Steel & Power Ltd, SAIL’s Bhilai Steel Plant, SAIL’s Bokaro Steel Plant, SAIL’s Alloy Steel Plant, Sunflag Iron & Steel Ltd, Electrosteel Steels Ltd, Aarti Steels Ltd, Adhunik Metaliks Ltd, Hindalco Industries Ltd and Bhushan Steels Ltd. The quality products have helped the company to withstand the test of competition. With a set of satisfied clients in India, the company is encouraged to expand its vision to consolidate its position in the international market. The author is Managing Director, Astha Ferrotech Private Limited. Note: The views expressed here are those of the author and not of Steel Insights. The publication does not take any responsibility for the article in part or in full.

Steel Insights, September 2018

INTERNATIONAL

Coking coal price rise caused by shrinking domestic supply Madhumita Mookerji

surging Asian market will push up prices for both thermal and coking coal and the trend is likely to continue, according to analysts. The increase in demand has been attributed to infrastructure building programmes throughout Asia, along with increased industrialisation and urbanisation A study commissioned by the Minerals Council of Australia predicts a 400 million ton increase in annual demand by 2030 â&#x20AC;&#x201C; double Australiaâ&#x20AC;&#x2122;s total thermal coal export levels in 2017. As per experts, the Asian economic expansion story, which is happening from Pakistan through to Vietnam, is the real trigger for booming demand for Australian coal. Apart from a steady demand from Korea, China and Japan, new demand is coming from countries such as Malaysia, Vietnam and Thailand. Actually, after the Australian coal industry saw bloodbath of coal prices in 2016, when Newcastle coal hit $40 (per ton) and Queensland coking coal was at about $80 per ton, this surge in demand was phenomenal. The industry has been amazed that prices of coking coal are around $200 per ton coming out of ports in Queensland and Newcastle, going all the way to Japan. Thermal coal was trading at $120 per ton there, the highest since the post-Fukushima accident in 2011.

Along with surging demand, the port horizon is getting dotted with a high number of ships waiting to load at Australian ports, a scene which has not been witnessed for many a year. While Newcastle Port has had queues of about 22 ships, waiting to get coal delivered down to the port, Queensland, Dalrymple Bay Terminal, Gladstone Port too have has double digit ships in queues. How long the good day will last?

The surge in coal prices has impacted other

sectors of the economy as well. According to some experts, while a price spike should be a boon for coal miners in the short term, the industry is instead turning it into a potential financial shipwreck, rushing to lock in more port capacity for coking coal. Some traders have plans to restart old mines and cash in on the latest trading craze. According to a recent Chinese coal industry think tank study, this recent price spike cannot sustain. As per the study, the high prices of both coking and thermal

Steel Insights, September 2018

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Tear along the dotted line