Steel Insights, September 2021

CONTENTS

6 | COVER STORY

13 Imported scrap offers fall 14 India pig iron production up in August

“Infra & government projects to boost steel demand”

15 India July sponge iron production remained flat 16 July crude steel production up 13.3% y-o-y

Interview of JSPL’s Managing Director, V R Sharma.

25 Steel cos see rising cost pressure 26 Steel demand momentum to continue: Rating agencies 29 High speed rail project on top gear 30 Coal India floats tender for solar PV wafer cell plant 31 Government set to announce PLI scheme for auto sector

17 | FEATURE

Monetisation creates opportunities in Rail, Power May provide 5-6 percent of NIP outlay.

33 Seaborne coking coal offers surge in August

22 | FEATURE

34 Car sales in August takes a hit due to semiconductor shortage 36 Iron-ore handled by major ports down marginally

Govt eyes `10,000 crore from scrappage policy

37 Indian Railways’ iron-ore handling up 44% till July

Incentives to promote scrapping old vehicles.

38 Global crude steel output down 4% in July 39 Structural shifts in HR practices in core sector an immediate need

41 | INTERVIEW

46 State funding for thyssenkrupp consortium project

“JSL increasing near-shore raw material sourcing”

47 Tata Steel eyes leadership in low-carbon steel

Rajeev Garg, Sales Heads, Jindal Stainless, talks about company strategy.

49 SAIL eyeing distribution reach expansion 51 Coal India on path of higher profitability 55 RINL August sales up 50%, production touches 5-lakh ton mark 57 NMDC eyes 44 mt output in FY22 59 Corporate update 61 Government update

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44 | INTERNATIONAL

Chinese steel sector slowdown likely to continue Moderation in construction activities seen.

COVER STORY

“Infra & government projects to boost steel demand”

6 Steel Insights, September 2021

COVER STORY

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indal Steel and Power Ltd (JSPL) has taken an ambitious target to be the most vibrant company in terms of financial ratios with strong EBIDTA, lower debt and `50,000-crore turnover in FY22.

It is aiming at 15 mt steel production by 2025. In a freewheeling interview to Steel Insights, JSPL’s Managing Director V R Sharma said steel consumption depends on government’s willingness to spend on infra projects.

How do you see Indian steel demand-supply scenario in near and long term?

The Indian steel industry is doing pretty well. We are going to produce around 110 million tons (mt) this fiscal despite first two months affected by pandemic. The demand is good. The country is exporting more than 35 percent of the total produce and around 60-65 percent is going to be consumed domestically.

The MSMEs are back and demand has picked up. I think 5 mt will be imports. So, around 115 mt will be the overall rotation of steel, including exports. Infrastructure projects are coming in a bigger way. We are in a position to meet our demand. We are optimistic.

What is the impact of pandemic on steel producers, intermediaries and consumers?

The first 2 months of this year were very bad because of the second wave. Whenever a pandemic arises, most of the construction sites close down, sometimes by the government and sometimes workers and technicians go back to their homes.

This is the reason why Prime Minister Narendra Modi has decided that citizens of 18 plus years of age need to be vaccinated.

They go back to their homes and finally the work suffers. I think by December most of the people who are frequent travellers or people who work outside or outside their states, will be vaccinated and they will not leave their workplace.

If any other wave hits the country, the steel industry will come back by exporting

products to the rest of the world in the spot market. Put together, JSPL has exported more than 42 percent of the produce in the last one quarter.

What are the structural shifts that have evolved during the pandemic? How is the industry adopting them?

Majority of the steel consumption is going into infrastructure projects, especially roads, bridges, rails and areas like water pipelines.

The other major market is shipbuilding. All these segments are great consumers of steel plates.

The export market has opened up and international spot market is very positive.

Industry’s overall profitability is good because of higher prices in international spot market. However, there are some constraints in terms of arranging vessels and shipments. Most of the ports are fully congested and international shipping cost has gone up. That is an adverse effect of this pandemic.

What do you think policy makers and industry should do to augment steel sales in India?

Policy makers have already done much. Now we have to increase production. India wants to reach 300 mt per year steel production by 2030 and at least we should aim for 250 mt per year. To make it happen, the brownfield and new projects should be supported by the government. Clearances should be given faster.

Government must address the iron ore availability issue. Iron ore and coal are in short supply today. Government should have a friendly iron ore mining policy. India should try to set up more pellet plants so that low grade iron ore material can be converted into pellets.

Has the game of selling steel changed in the new normal?

Steel industry is regularly improvising to

Steel Insights, September 2021

7

FEATURE

Monetisation creates investment opportunities in Railways, Power

The monetisation process includes selection of de-risked and brownfield assets with stable revenue generation profile with the overall transaction structured around revenue rights.

The primary ownership of the assets under these structures would continue to be with the Government with the framework envisaging hand back of assets to the public authority at the end of transaction life.

Sectors covered

♦ ♦ ♦ ♦ ♦

Mining – `0.29 lakh crore Railways – `1.52 lakh crore Stadium – `0.11 lakh crore Roads – `1.6 lakh crore Power generation and transmission – `0.85 lakh crore

♦ Oil and gas and pipelines – `0.47 lakh crore ♦ Aviation – `0.21 lakh crore ♦ Ports – `0.13 lakh crore ♦ Telecom – `35,100 crore ♦ Urban real estate – `0.15 lakh crore ♦ Warehousing – `0.29 lakh crore Finance Minister Nirmala Sitharaman along with officials of Niti Aayog launching the National Monetisation Plan.

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he Union Finance Ministry along with Niti Aayog has announced the National Monetisation Plan that aims to monetise `6 lakh crore of assets in the next 4 years involving gainful deployment by the private sector of underutilised brownfield infrastructure assets of the government under 12 ministries including the coal and mines ministries.

The projects constitute 14 percent of the National infrastructure pipeline. Currently, only assets of central government line ministries and Central PSUs in infrastructure sectors have been included. Process of coordination and collation of asset pipeline from states is currently ongoing and the same is envisaged to be included in due course.

The monetisation process includes selection of de-risked and brownfield assets

with stable revenue generation profile with the overall transaction structured around revenue rights. The primary ownership of the assets under these structures would continue to be with the Government with the framework envisaging hand back of assets to the public authority at the end of transaction life.

The Australian experience

The government has taken a leaf out of the Australian Asset Recycling model, says Care Ratings in a report.

Under the model, the Australia government established an AUD $5 billion incentive program in 2013 to provide state governments with an additional 15 percent of the capital raised from recycled assets.

This is likely to pave the way for a sizable

Steel Insights, September 2021

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FEATURE

Govt eyes `10,000 crore investment from scrappage policy

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he vehicle scrappage policy is expected to bring in fresh investment of more than `10,000 crore and will create thousands of jobs, the government has said.

The scheme was launched by Prime Minister Narendra Modi during an Investor Summit in Gujarat for setting up vehicle scrapping infrastructure.

Vehicle scrapping will help phase out unfit and polluting vehicles in an environment friendly manner.

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“Our aim is to create a viable circular economy and bring value for all stakeholders while being environmentally responsible,” said the Prime Minister.

While launching the automobile scrappage policy, the Prime Minister said that this policy is going to give a new identity to the auto sector and to the mobility of New India.

The Prime Minister said the new scrapping policy is an important link in the circular economy and in the waste to wealth campaign.

This policy by following the principle

There are 4.5 million Medium and Heavy Commercial Vehicles in the end of life vehicle (ELV) phase and 7.5 milin light vehicles (excluding 2-wheelers) in the ELV phase.

FEATURE

High speed rail project on top gear

Steel Insights Bureau

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ational High Speed Rail Corp Ltd (NHSRC) in late August opened technical bids for design, supply and construction of track and track related works for the Vapi and Vadodara (Package T2).

Total 4 bids were received and all were from Indian or India led JV companies.

Tender for design, supply and construction of track and track related works for Package T3 between Vadodara and Sabarmati depot in Gujarat was also issued at the same time.

NHSRC is a joint venture of Government of India and participating state governments.

Meanwhile, construction work of Surat station is progressing for the MumbaiAhmedabad High Speed Rail corridor.

Apart from these developments, the full span launching equipment - straddle carriers and girder transporters - for the rail corridor has been constructed and was recently flagged off.

“To encourage Aatma Nirbhar Bharat Abhiyan initiative, full span launching equipment of 1,100 ton capacity is indigenously designed and Indian manufacturer at Kanchipuram, Chennai.

This will expedite construction of high speed Railway,” India Railways said.

Created by construction major L&T, 55 micro and small enterprises were involved in the project, Indian Railways said.

Ashwini Vaishnaw, Minister for Railways, Communications and Electronics & IT, recently flagged off the L&T-built full span launching equipment at the company’s manufacturing facilities in Kanchipuram, some 50 km from Chennai.

“Considering the enormous scale of construction involved in constructing the 508-km long, Mumbai-Ahmedabad High Speed Rail Corridor project, of which L&T’s share is 63 percent, there is a need to adopt innovative, state-of-the-art construction techniques and methodologies to hasten the

The 40-m long girders will be the heaviest PSC box girders to be precast and erected in India. pace of execution,” L&T said in a release. The full span launch equipment will transport and erect full span girders as a single piece for the double track.

The 40-m long girders weighing 975 tons will be the heaviest PSC box girders to be precast and erected in India’s construction industry.

“Both these equipment have been entirely designed and developed in-house and, most pertinently, customized to the specific requirements of the High Speed Rail project that is by far the largest EPC project ever to be awarded in India. There are several challenges to build at such speed and scale, but we are committed to take on this mammoth challenge to deliver India’s first high speed rail project in time and to quality,” S N Subrahmanyan, Chief Executive Officer & Managing Director, L&T, said.

“Although such equipment is readily available in several global markets, we felt it would be strategically more beneficial for us to build it indigenously in partnership with MSMEs, and an important step towards making India self-reliant,” said S V Desai, Whole Time Director & Senior Executive Vice President (Civil Infrastructure), L&T. The equipment has been designed using state-of-the-art finite element analysis software by developing full-scale models inhouse following stringent international codes maintaining world class design standard “The machines are equipped with highly mechanized and proven world class and most reliable components and can operate in automatic mode using in-built program logic.

There is a provision for remote monitoring through IoT,” L&T said.

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INTERNATIONAL

Chinese steel sector slowdown likely to continue Steel Insights Bureau

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hinese steel sector growth has been showing weakness in terms of both production and pricing and the second half of 2021 is expected to be weaker, analysts said.

The deceleration in China’s economic activities in August extends the widespread deceleration observed in July with manufacturing sector activities contracting in August.

There are signs of cooling off in steel prices in China and global export prices.

But commodities prices are still considerably elevated, implying further scope for a decline in the months ahead, says JM Financial in its investment strategy report.

While steel products price recovered in the last week of August, firm demand recovery is not being seen even though raw material prices kept soaring, said Chinese research house Mysteel.

While the impact of the Delta variant spread and floods explain the steep plunge in services and non-manufacturing PMI in August, the decline has been noticeable since the March peak.

There have been moderations in

industrial production, new orders, export orders, raw material and inventory levels.

The slowdown is now reflecting in softening commodity prices and cost inflation but these still remain elevated.

China pulling down global steel output

There has been a global slowdown in the sector with crude steel production falling to 161.7 million tons (mt) in July down from 167.9 mt in June.

Lower month-on-month (m-o-m) crude steel production can mainly be attributed to China, which recorded a steel output at 86.8 mt in July, down 7.6 percent m-o-m and 7 percent year-on-year.

“Fall in Chinese production in July can be attributed to the production curbs and the export rebate cuts in May to reduce export allocations,” India Ratings said.

The rating agency expects Chinese crude steel output to be weak in the second half of 2021 compared to the first half on account of the strict measures to curb production.

As an additional measure, the Chinese government is considering an introduction of export duties on steel products, although an official announcement is awaited.

China steel prices falling since May

44 Steel Insights, September 2021

A host of indicators such as sales of excavators, cranes, bulldozers and related machineries have seen a marked decline since 1Q peaks indicating moderation in construction activities.

Weakening demand scenario

Recent data suggests emerging slack in global growth momentum as seen in widespread decline in China’s Purchasing Managers’ Index.

China’s official manufacturing PMI for August fell further to 50.1 from 50.4 in July, indicating that the sector is barely expanding.

A separate Caixin manufacturing PMI declined even sharper into contraction to 49.2 in August from 50.3 in July.

Non-manufacturing PMI including services and construction activities plunged to 47.5 in August from 53.3 in the previous month while services PMI also plunged to 45.2 from 52.5.

The slowdown was seen across

China steel output (’000 tons) in downward trend

CORPORATE

Tata Steel eyes leadership in low-carbon steel Steel Insights Bureau

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ata Steel is eyeing leadership in sustainable businesses and low carbon steel at scale using Electric Arc Furnace route.

Its future investments would be focused on sector-leading returns in downstream portfolio in India including cold rolled products, ductile iron pipes, tinplate, tubes and wires, company management said in a presentation made to investors.

In new and allied business, the private sector steel major is eyeing composites and new materials business like Graphene, medical materials and also commercial mining.

It plans to be one of the lowest cost producers globally with a strong focus on free cash flow to create shareholder value.

Tata Steel’s domestic operations are well-integrated with captive power and mining operations, which meet 100 percent of its iron ore requirements and around 29 percent of its metallurgical coal requirements (excluding Tata Steel Bhushan Ltd and Tata Steel Long Products Ltd).

“Therefore, Tata Steel’s India operation is among the most low-cost steel producers.

Its Indian operations continue to be the highest EBITDA generators among peers,” Brickwork Ratings said in a recent report.

Leadership in select technology areas

Tata Steel aspires for leadership position in identified areas like: ♦ Low-cost inputs: Use of low-quality iron ore, coal and ferro alloy minerals

♦ Hydrogen: Technologies for generation/ usage of green/blue H2 in steel value chain ♦ Water: Technologies for Water neutrality through Reduce, Reuse & Recycle ♦ Digital: Use of AI to drive process excellence and ‘first time right’ in steel value chain ♦ Carbon Capture and Utilisation: Technologies for CO2 Capture, Storage and Utilisation ♦ Mobility: Material leadership in mobility domain ♦ Coatings: Breakthrough coating solutions serving needs better than competition Capex plans

Tata Steel has set a capex target of `10,00012,000 crores in the current financial year.

The company spent `2,011 crores on capex during Q1 of FY22; work on the pellet plant, the cold roll mill complex and the 5 mtpa expansion at Kalinganagar is ongoing.

Total capex required for expansion of Kalinganagar plant is around `23,000 crores of which around `6,000 crores has been incurred till March 2021, Brickwork Ratings said. The project is expected to be completed

by FY24.

Sustainability goals

TSI – Tata Steel India (Tata Steel standalone, TSBSL and TSLPL); TSJ: Tata Steel Jamshedpur TSE – Tata Steel Europe; tcs – tons of crude steel; material efficiency is defined as percentage of crude steel and co-products (by-products) material out of total output material

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