Domestic

Miners and steelmakers lock horns over mines ministry's proposal to amend MMDR Act

The mines ministry has proposed changes in the law to allow auction of around 500 iron ore mining leases currently stuck in legacy issues among its recommendations under the Atmanirbhar Bharat scheme. While steel companies have welcomed the move, merchant miners have opposed it saying it will put to risk significant investments made by existing concession holders and deny them a level-playing field. The ministry has proposed amending Sections 10A(2)(b) and 10A(2)(c) of the Mines and Minerals (Development and Regulation) Act, 1957 to pave way for auctioning of a large number of potential leases currently blocked in legacy cases. “The cases coming under Section 10A(2)(c) of the Act, which stood extinguished on January 12, 2017 as per law, but are still litigated or pursued unnecessarily at various levels, need to be brought to a closure to end the policy stalemate," the ministry said in a notice dated August 24. Cases under Section 10A(2)(b) are still disputed in the absence of a specific sunset clause in the act, and they have not reached closure yet, it said.

Mines ministry comes out with reform proposals

“Proposal is there to remove the provision of earmark any mine for captive purpose during auction, henceforth, all the blocks will be auctioned without any end use restriction,” it said. The mines ministry has come out with a slew of

reforms proposals, including amending the contentious provisions of 10A(2)(b) and 10A (2)(C) of the Mines and Minerals (Development and Regulation) Act, to pave the way for auctioning of around 500 potential leases stuck in legacy issues now. Section 10A(2)(b) deals with leases where reconnaissance permit or prospecting licence were granted; while 10A(2)(c) relates to grant of mining leases (ML). The mines ministry has sought comments from the stakeholders on these proposals till September 3. The cases coming under Section 10A (2)(b) of the Act are still disputed in the absence of a specific sun set clause in the Act, and they have not reached closure till date. Section 7 of the MMDR Act provides for maximum period of five years for completing the prospecting operations. These amendments came in effect on January 12, 2015, and the maximum period of five year for prospecting has also lapsed on January 12, 2020.

. Commercial mining: UN secretary general expresses concern over ongoing coal auctions

After the government recently launched the maiden auction for 40 coal blocks for commercial mining, Antonio Guterres, secretary general of the United Nations, said on Friday that such a “strategy will only lead to further economic contraction and damaging health consequences”. While delivering the 19th Darbari Seth Memorial Lecture organised by Teri, Guterres said, “In India, 50% of coal capacities will be uncompetitive in 2022, reaching 85% by 2025.” He added that “the coal business is going up in smoke”. Expressing his concerns about the “continued support for fossil fuels in so many places around the world”, Guterres said that “we have seen countries doubling down on domestic coal and opening up coal auctions”. The government has recently amended several rules to make the coal mines more attractive for private players in the upcoming auctions, and has offered some blocks falling in areas which had been earlier designated as ‘no-go zones’. This would also be the first set of coal assets to be auctioned off for selling the fuel in the open market. The government estimates that the country will need 892 million tonne of the fuel in FY30 — around 40% higher than current levels — for power generation. More than 75% electricity is currently generated by thermal power plants, though the share of such power generation capacity is only around 60%. The intermittent and limited hours of power supply from renewable energy render it unattractive for state-owned discoms, which have to spend more on making backup arrangements. The nameplate tariffs of some solar/ wind based projects are currently cheaper than coal, but only when the sun shines and the wind blows.

India plans deep cut in thermal coal imports in coming years

India plans to significantly reduce its thermal coal imports in “the next few years” to save foreign exchange and create jobs through the development of existing and new coal blocks, a senior official in the federal coal ministry said. Coal is among the top five commodities imported by India, the world’s largest consumer, importer and producer of the fuel after China. India spent 1.58 trillion rupees ($21.28 billion) on importing 247 million tonnes of coal, including 197 million tonnes of thermal grade, in the fiscal year to March 2020, M. Nagaraju, a joint secretary in the coal ministry, told a seminar. “As per our assessment, we can actually substitute between 110-120 million tonnes of coal. We will not be able to do this year, but certainly we will do in the next few years,” Nagaraju said, without giving more detail on the timeframe.

He said increasing local coal production would help to improve the economies of states in central India, where most coal mines are located. To boost local output, India in June launched an auction of 41 coal blocks with an annual production capacity of nearly one third of total national output..

. State Bank of India plans coalloan policy before key auctions, could put 41 mines in private hands

State Bank of India is creating a policy to lend to coal miners before landmark auctions that would end decades of state monopoly on the fuel, according to a person with knowledge of the matter. Long-term offtake contracts assuring demand will be central to any lending decision, the person said, sking not to be identified before terms are finalized. The nation’s biggest bank would prefer a loan tenor closer to five years, the person added. The planned policy suggests SBI is open to providing some of the financing required to put 41 coal mines with a combined annual production capacity of 225 million tons into private hands. The giant bank has flagged concerns about the sector, and Indian banks are reining in loans to corporate borrowers as the coronavirus pandemic pressures asset quality. Lenders are also wary about sustained demand for coal, which is seen globally as a dirty fuel but is still the biggest source for electricity generation in India. In Japan and Europe, several banks have announced plans to cut down lending to coal projects. India’s coal-fired power plants, the biggest users of the fuel, operated at an average 46.2% of their capacity during the three months ended June, compared with 63.2% a year earlier. State-run MSTC Ltd will hold the final online auctions from Oct. 19 to Nov. 9, allowing private companies to mine and sell coal for the first time in nearly five decades. A representative for SBI didn’t immediately reply to an email seeking comment.

Domestic coal demand may be subdued in Q2 on lower demand: Report

Demand for domestic coal is likely to be subdued in the second quarter of the current financial year, due to lower demand from end-user industries amid the COVID-19 pandemic along with high inventory at power stations, according to a report by India Ratings. The rating agency said domestic coal production remained subdued for the third consecutive month in June 2020 year-on-year as well as month-on-month due to low power demand and higher inventory at power stations. "Despite gradual relaxation in lockdown norms, demand over the second quarter of FY21 shall be further dampened by the onset of the monsoon season. Overall, domestic coal imports are also likely to be lower in Q2 FY21 year-onyear," it said. According to IndRa, domestic coal imports are likely to have been lower in July 2020 due to the low domestic demand from end-user industries amid the COVID-19 outbreak. "The share of imports in the total domestic consumption reduced to 22 per cent in June 2020 from 28 per cent in FY20. While the non-coking coal imports reduced 34 per cent y-o-y, coking coal imports declined 41 per cent y-o-y," it said.

In talks with Environment Ministry to bring down time taken for Forest Clearances: Coal Secretary

The Ministry of Coal is in talks with the Ministry of Environment, Forest and Climate Change (MoEFCC) to bring down the time taken for getting Forest Clearances to coal mining projects. Speaking at a virtual conference titled Stakeholders Consultation on Addressing Financing Perspective for Auction of Coal Mines for Commercial Mining, Coal Secretary Anil Kumar Jain said: “Earlier in the mining plan, the project developer also had to submit the environmental plan too. We realised that the MoEFCC will anyway be looking at the environment plan, so why repeat it. So now the mining plan has become much more manageable.” “Forest Clearance still takes much time. In this case, we are constantly applying our mind and talking to the Ministry of Forest. We are hopeful that in the next 6 to 12 months, the time taken to get Forest Clearance will also come down,” Jain added. This facilitation is essential to help India grow and plug outflow of foreign exchange. A coal ministry official also said that the Centre considering acquiring land under the Coal Bearing Areas Act, 1957 for speedier commercial coal mining. This would result in the Centre acquiring land and then leasing it out to the companies for commercial coal mining. Till now, this Act was used to acquire land only for Public Sector Undertaking companies.

STEEL

Steel firms set to raise prices from Sept on higher costs, global prices

Steel companies are set to increase prices from September due to rising costs and higher international prices, Jayant Acharya, director – marketing, commercial & corporate strategy at JSW Steel, said, the difference between domestic and international prices currently is about 8 per cent. “An increase in prices from September is on the cards. The amount will be decided, he added. Acharya explained that iron ore prices were at a 6-year high. “International steel prices in August, too, have increased," he said. The average FoB China for hot rolled coil (HRC) in April 2019 was $532 a tonne. At the beginning of August 2020, it was at $495 a tonne and currently is at Rs $515, indicating an increase of nearly $20 a tonne. However, the current price is yet to breach last year's April-level. The increase from September could be in the range of Rs 2,000-3,000 a tonne. While a major primary steel producer said that an increase of Rs 3,000 a tonne in steel prices was being contemplated, a secondary steel producer said that the increase could be Rs 2,000 a tonne. In the second quarter, so far, steel prices have increased by about Rs 3,000 a tonne. JSW Steel said that it had started the roll-out of JSW Radiance, a steel colour-coated produce range in high-gloss feature with multiple variants. It was suitable for applications ranging from warehousing, appliances, cold storage, hospitals etc.

India's crude steel output falls over 24 pc in July, global production shrinks 2.5 pc: worldsteel

India's crude steel output fell 24.6 per cent to 7.150 million tonnes (MT) during July 2020, according to global body worldsteel. The country had produced 9.485 MT crude steel during the same month in 2019, World Steel Association (worldsteel) said in its latest report. Global steel production also registered a fall during the month under review, the data showed. "World crude steel production for the 64 countries reporting to the worldsteel was 152.694

MT in July 2020, a 2.5 per cent decrease compared to 156.679 MT in July 2019. "Due to the ongoing difficulties presented by the COVID-19 pandemic, many of this month's figures are estimates that may be revised with next month's production update," it said. According to worldsteel data, China registered a 9.1 per cent year-on-year growth in its steel output at 93.359 MT during July 2020. The United States produced 5.241 MT of crude steel in July 2020, registering a fall of 29.4 per cent compared to 7.419 MT output in July 2019. Japan produced 6.049 MT of crude steel in July 2020, down 27.9 per cent from 8.387 MT in July 2019. South Korea's steel production for the month stood at 5.526 MT, down 8.3 per cent compared to 6.026 MT in July 2019. MSMEs Engineering Export Promotion Council (EEPC) India, the apex body of engineering exporters, has sought an immediate intervention of Prime Minister Narendra Modi to rein in a sharp spike in steel prices and help the micro, small and medium enterprises (MSMEs) manufacturing exporters. In a statement on Thursday, EEPC India said the Indian steel makers have raised the prices across different product categories in the backdrop of the restrictions that the government imposed on the imports from China, Vietnam and South Korea. The government imposed duty on imports is in the range of $ 13.07 per tonne to $ 173.1 per tonne on imports of flat rolled products of steel, plated or coated with alloy of Aluminium and Zinc from China, Vietnam and South Korea. According to the apex body, the government should intervene to ensure that the benefits of ‘Aatma Nirbhar Bharat’ were shared widely with the MSME manufacturing exporters and not grabbed by large steel makers. EEPC India said the sharp spike in prices by the steel makers made the raw material costs for user industries shot up that left the engineering exporters non-competitive in the international markets. The protection against imports that the government initiated was largely accruing to the steel makers at the cost of engineering industries, particularly in the MSMEs, said EEPC India chairman Mahesh Desai.

EEPC urges PM Modi to rein in sharp spike in steel prices to help

CEMENT

Cement demand to surge on the back of strong recovery from the rural segment, say analysts

Higher agricultural income, a better-than-expected monsoon and pick up in the affordable housing segment will lead to a surge in India’s cement demand in the rural segment, analysts said. Rural demand is likely to help contain the onyear drop in cement sales volume to 12-14% this fiscal as against an average annual growth of 6% during the last three fiscals, said analysts from rating agency Crisil in a sector research report. “Demand recovery, however, has not been uniform across regions and bears a likeness to the intensity of the pandemic – East and Central regions are more resilient, while West and South are more impacted,”said Crisil Research’s Director Isha Chaudhary. Data shows a V-shaped recovery in the cement sector from a sharp contraction of 85% seen

in April to an estimated 7-10% growth by the fourth quarter. Rural demand will also ride on a sharp rise in spending under the Mahatma Gandhi National Rural Employment Guarantee Act to engage migrant workers who have returned home following the Covid-19 pandemic. Cement demand is expected to de-grow by 12% in FY21 and is likely to rebound by 11.4% FY22, he added. Lower cement volume will result in a 50-100 basis points (bps) moderation in earnings before interest, taxes, depreciation and amortisation (Ebitda), or the operating profit margin, to around 19% this fiscal. Despite the volume contraction and lower cash accrual, credit profiles of cement makers won’t be impacted.

. For cement players, the benign input costs party is about to end

Cement companies did relatively better than expectations in the June quarter, owing to cost savings. However, certain costs have increased recently, which does not bode well for cement manufacturers. The price of key input material petroleum coke (pet coke) has recently started to rise. In August, international pet coke prices surged 31% on a month-on-month (m-o-m) basis to $83/tonne, as per a Kotak Institutional Equities report. Domestic pet coke prices too increased by 8% mo-m in August to ₹7,275/tonne. Also, the price of imported coal has started to inch up; it was up around 1% in August at 55/tonne, the report said. Analysts say pet coke prices are unlikely to see a runaway rally to their previous high levels of beyond $100/tonne. However, the landed cost may continue to head northwards due to increased ocean freight cost. Analysts also caution about increased input cost pressures to start reflecting from the second half of the fiscal year. Pet coke inventory is procured at lower prices and a lag in exhaustion of that inventory could help temporarily. As for other input costs, diesel prices remain high compared to the year-ago period. This will weigh on freight costs. That said improvement in realizations can compensate for these increasing cost pressures. Currently, demand and pricing scenarios are bleak as September is a seasonally weak quarter for the sector.