Coal Demand In India.pdf

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Dear reader, The wider economic slowdown is not likely to spare the domestic steel industry, with credit rating agencies raising the alarm on falling profitability at steel mills. Profit margins for steel companies are expected to get further squeezed between weakening domestic steel consumption and a weak outlook for global growth amid escalating trade war tensions. Over the last four quarters, operating profit margins of the domestic steel industry have been on slippery ground, declining steadily from 22.6 percent in Q1 FY19 to 18.2 percent in Q1 FY20. This downward trend in profitability is expected to continue in Q2 FY20 as well. The Indian economy grew at only 5 percent in Q1 FY20, the slowest in the last six years. With steel demand growth being dependent on growth of gross domestic product (GDP), domestic steel consumption growth slowed down to 5.7 percent in April-July of FY20, against 7.5 percent and 7.9 percent in FY19 and FY18, respectively. Given the slow pace of infrastructure and construction activity in the ongoing monsoon season, and with auto sales continuing to contract in July and August, 2019, early lead indicators for a steel demand uptick in Q2 FY20 remain weak. Statistics indicate that domestic steel consumption growth weakened from 6.4 percent in June 2019 to 3.5 percent in July 2019. This weakness is expected to continue for the remainder of Q2. Steel prices have been retreating southwards across most steelconsuming hubs globally, be it the US, the European Union or Asia. Steel spreads have witnessed a significant contraction in FY20 thus far compared to FY19. This leads to believe that in the current fiscal, unless steelmakers are able to supplement weaker margins with higher sale volumes, a decline in industry earnings over the FY19 highs remains likely. Recently, some rating agencies revised its outlook on the steel sector to stable-to-negative from stable for the remainder of FY20. The agencies credited the downward revision to sluggish steel demand growth expectations and a mix of structural and cyclical concerns in end-user sectors, primarily auto and real estate construction. They slashed growth expectations for the sector to 4 percent for FY20, from the earlier 7 percent forecast. FY19 growth had been 8 percent. It also pointed to increased import risks, especially from free trade agreement countries such as Japan and South Korea, with domestic consumers substituting local products with cheaper imports. Raw material availability and price risks may escalate in Q4 FY20 if uncertainty over iron ore mine auctions persist. While the bulk of steel producers are likely to see moderation in cash flows, large integrated players will continue to have adequate liquidity and are likely to fare better under a stressed operating environment. Meanwhile, in the current edition of Steel Insights, we try to estimate the demand for coking coal, the major input material for steel making, as India targets 300 million tons steel capacity by 2030. With scarce domestic availability of coking coal likely to persist in the near term, India will be dependent on imports and look at multiple sources to cope up with volatility in prices.

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Steel Insights, September 2019

3

Contents 20 Imported scrap offers quiet, domestic prices volatile

6  |  COVER STORY

21 Pig iron production up 2.5% in April-July

Met coke demand

22 July sponge iron production up 4.9% on year, down 1.7% on month

As steel plants expands, coking coal demand to rise to 70 million tons by 2021

23 Crude steel production up 1.7% in July 27 Increasing share of institutional investments in Indian real estate: study 28 Demand woes continues in August for carmakers 30 Seaborne coking coal offers slide in August 31 Iron ore prices plunge to hurt exports from India

24  |  COVER

Coal India eyes coking coal mines in Russia Company officials visit properties in Yakutia

25  |  FEATURE

32 Global crude steel output down 1.43% in July 33 Traffic handled by major ports up 2% till July

Rating agencies predict bearish steel trends

34 Indian Railway’s iron ore handling in July up 15.43% 37 Tata Steel cuts capex plans for FY20 39 Aichi of Japan to invest in Vardhman Group for auto grade steel 40 Corporate Update 43 ArcelorMittal plans asset sale, production cuts 45 Aussie firms see profit soar on iron ore prices surge in FY19 48 Nippon Steel cuts capex spending, forecast as US-China trade war hurts 50 Ferro alloy data 52 Price data 53 Production data

4 Steel Insights, September 2019

Weaker demand, possible to iron ore disruptions to pose challenge

35  |  FEATURE

SAIL extends disinvestment EoI deadline for better response No debt to be transferred, large tracts of land on offer

46  |  FEATURE

Steel makers’ profitability to decline on slowing demand: Moody’s Rising costs, narrowing spreads to weigh on profits of Indian companies

Cover Story

Met coke demand set to rise on expanding steel capacity Steel Insights Bureau

6 Steel Insights, September 2019

Cover Story

D

emand for low ash metallurgical (LAM) coke, an important input material for steel-making, is set to rise as steel mills in India plan to enhance capacity to meet demand in the near to long term, according to industry sources. The country’s overall metallurgical coke production capacity is estimated to be 4550 million tons (mt) per annum annually. Out of the total production, integrated large steel mills like Steel Authority of India Ltd (SAIL), Tata Steel, Rashtriya Ispat Nigam Ltd (RINL) and JSW Steel have a combined captive capacity of around 35 mt per annum annually, according to industry sources. Medium mills like Adhunik, Jayaswal Neco, Uttam Galva and secondary steel mills have an estimated capacity of 5-6 mt per annum. The merchant mills make up around 10 mt of LAM coke production in the country, sources said. However, plant utilisation of merchant producers has declined to 40 percent levels due to imports available at lower cost. There have been unrestricted imports from China at prices well below the cost of production in the originating country. The increasing price volatility of imported coking coal and poor domestic supply of good quality coking coal has further affected the merchant coke producers. India imported around 2.01 mt of met coke in 2018-19, up from 1.61 mt in 201011. With expected production of at least 250 million tons of crude steel in India by 2030-31, the metallurgical coke production capacity has to be suitably built up. Coke rate in blast furnaces is targeted to be reduced to 300-350 Kg/tHM. At these rates, for a conservative estimate of 250 mt of crude steel demand by 2030-31, around 100 mt of met coke is required for consumption of the steel industry alone. The steel industry alone has to build up another 70-75 mtpa of coke production capacity by 2030-31, industry sources said.

What is met coke?

Coke is made by destructive distillation of a blend of selected bituminous coals (called coking coal or metallurgical coal) in special high temperature ovens in the absence of oxygen until a greater part of the volatile matter is driven off. The resulting product, coke, consists principally of carbon.

Traditionally, chemistry, size and strength (both cold and hot) have been considered the most important properties for use in blast furnaces. The quality of the constituent coals determines the characteristics of the resultant coke. Coke is primarily used to smelt iron ore and other bearing materials in blast furnaces, acting both as a source of heat and as a chemical reducing agent to produce pig iron or hot metal. Coke, iron ore and limestone are fed into blast furnaces, which runs continuously. Hot air blown into the furnace burns the coke, which serves as a source of heat and as an oxygen reducing agent to produce metallic iron. Limestone acts as a flux and also combines with impurities to form slag. Coke also serves as a structural material to support the deep bed of coke/iron oxide/ limestone that makes up much of the furnace volume. It is in this last role that its properties are crucial. It is important that it does not degrade (ie, break up into small particles) during its descent through the oxidising hot gases passing through the stock region of the furnace. To produce high quality blast furnace coke, high quality coal must be used. High quality coals are those coals which, when coked together, produce the highest stability and CSR (coke strength after reactivity) to support the blast furnace burden and allow maximum production. Low ash metallurgical (LAM) coke is required for metallurgical and chemical industries and is used as the primary fuel where high temperature and uniform heating is required. The industrial consumers of LAMC include integrated steel plants, industries/foundries producing ferro alloys, pig iron, engineering goods, chemicals, soda ash and zinc etc. Quality

Coke quality has always been a subject of prime importance for a stable, efficient and consistent blast furnace operation. The allcoke operation at huge furnaces operating at higher top pressure (>2kg/cm2) has put stringent requirements on the quality of coke. Apart from having low ash content and good room temperature strength indices like M10 and M40, coke should exhibit superior high temperature properties like CSR and CRI (coke reactivity index).

Production of high CSR coke needs high quality coking coals which are not available in India. Due to inferior coking properties, Indian coking coal solely cannot be used to produce coke as required by blast furnaces and it is well understood that we have no alternate but to depend on heavy imports. Imports of coal are associated with several risks such as volatile price trends, inconsistent supply, natural calamities, change in quality due to geological reason etc. Hence, we are always at the mercy of the supplier. Mitigation of above difficulties needs strong policy initiatives and commitment from all concerned on the following: ♦♦ Large-scale beneficiation of indigenous coking coal ♦♦ Assessment of maximum achievable improvement in coking property after beneficiation, so as to calculate the exact amount of import substitution in coke making ♦♦ Joint task group needs to be set up with the Ministry of Steel and Coal India Ltd to conduct R&D and training activities on beneficiation and coking technology ♦♦ Use of optimisation model to reduce cost and increase import substitution Estimated low ash metallurgical coke production in India (in million tons) Producers

Total Capacity

Captive producer (large mills) SAIL Tata Steel

40

RINL JSW Steel Captive Producer (medium mills) Adhunik Jayaswal Neco

6

Uttam Galva Merchant producer Gujarat NRE Coke

1.5

Saurashtra Fuel

1.3

Bengal Energy

0.6

Visa Sun Coke

0.4

Others (including plants in Dhanbad, Gujarat, & southern India)

6.2

Total

50

Source: Gujarat NRE, Saurashtra Fuels, traders

Steel Insights, September 2019

7

Cover Story Imported met coke price trend in last one year

production especially of value-added steel in order to meet the growing demand, while adding there is a need for investment in capacity addition and infusion of modern technology for production. Raw material requirement

Source: Insights Research

♦♦ Formulation of cost-effective indigenised (higher use of indigenous coking and non-coking coal) blends by pilot and commercial study and research works. With several years of coke-making experience behind them, some steel mills have coined the idea of introducing straight coal, ie, coal from a single source/mine head into its blend. The basic reasons for such an option are: ♦♦ To have cushioning on cost and logistics ♦♦ More flexibility in blending ♦♦ Obtain accuracy in target blend property ♦♦ Tailoring coke quality to different requirements ♦♦ Flexibility of supplier base. Steel production

India produced 106.56 million tons of crude steel in 2018-19, making it the second largest steel producer in the world and has already overtaken Japan to become the second largest steel producer last year. Only China among the major producing countries has seen a greater output growth of 6.6 percent to reach 923 million tons in 2018. Japan’s steel production has been fairly stagnant for almost a decade and was down 0.3 percent to 104.3 million tons in 2018. India is on track to produce over 110 million tons of crude steel in 2019-20 if we consider the current growth rate of 3.5 percent year-on-year.

8 Steel Insights, September 2019

India has a very long way still to run – both in economic and steelmaking terms. Under India’s National Steel Policy, the Indian government has set a target of reaching 300 million tons per annum of crude steel capacity by 2030, driven by per capita steel consumption rising to 158 kg from around 69 kg currently. New Delhi wants Indian steel to cater to the ‘Make in India’ program and plans to lift manufacturing’s share of GDP to 25 percent by 2022. Budget, Economic Survey 2019

The government has estimated the country’s steel output to hit 128.6 million ton by 2021 and consumption of the same to reach 140 million tons by 2023, on the back of investments in infrastructure, construction and automobile sectors, according to the Economic Survey 2018-19. Currently, India’s per-capita consumption stands at only 69 kg, compared with the global average of 214 kg, it said. “With huge investments in infrastructure, construction and automobile sector, steel demand and corresponding consumption is growing at an average of 7.4 per cent. This will lead steel production to go up to 255 million tons by 2030 and per capita steel consumption to 160 kg,” it said. The Survey said the policy gives broad policy directives to the industry for encouraging long-term growth for Indian steel on both supply and demand fronts. It said the policy envisages focus on domestic

It is estimated that 1.4 ton of iron ore, 0.70.8 ton of coking coal and around 0.2-0.3 ton of fluxes can be saved from recycling of one ton of steel scrap and thus indirectly will reduce the production which saves around 16-17 per cent of energy. The Survey further said the domestic steel sector faced a number of issues in 201819, such as dependence on imported coking coal and import of high-grade steel. “Some of the key challenges faced by the Indian steel industry are capacity expansion as the demand for steel is bound to rise with economic growth. High grade and valueadded steel are used in power, defence and automobile which is currently imported. “Difficulties in acquiring mining lease and high dependency on import of coking coal add to cost of steel production. High logistics costs also act as a major constraint,” it said. The industry’s capacity utilisation level is expected to remain at a healthy 82-83 percent between FY2019 and FY2021, supported by a favourable domestic demand and low greenfield capacities coming up in the medium term. India’s metallurgical coal demand

India’s met coal demand is estimated to increase to meet the needs of a fast-growing steel sector. Recent consolidation in India’s steel sector, and greater international participation, should help ensure the industry is on a surer footing going into its next growth phase. It is estimated that India’s crude steel production will trend towards 128.6 million tons by 2021 from 106.56 million tons from 2018-19 level of production. Hot metal output could increase to 82-83 million tons, from 72.63 million tons reported for 201819. Based on the “rule of thumb” for India that 1 million tons of hot metal requires 0.8 million tons of coking coal, it is estimated that coking coal demand will be at 66-70 million tons by 2021. This would mark a 21 percent increase in coking coal demand from 2018-19 levels of around 58 million tons.

Cover Story Monthly coking coal demand is therefore forecast to trend higher towards 5-6 million tons per month at the end of 2020-21. India to overtake China as largest importer of coking coal

India will overtake China as the largest importer of coking coal by 2025, Fitch Solutions Macro Research said recently. “We forecast India’s coking coal consumption to grow at an annual average rate of 5.4 percent between 2019 and 2028, driven by an equally robust expansion in steel production in the country,” it said in a report. “As a result, we expect India to overtake China as the largest importer of global coking coal by 2025, despite the country only importing half as much as China in 2017,” it added. “The coal reserve of coking coal variety used in steel making is still in scarcity in both quality and quantity. We have no alternative but to import as far as metallurgical coal is concerned. We are importing around 51-52 mt of coking coal and this import will touch around 140 mt or maybe slightly more. So, Coal India has decided that we would acquire some coking coal mine abroad and in this context, we have decided that there couldn’t be a better place than this region,” Coal India chairman Anil Kumar Jha recently said at the Eastern Economic Forum in Russia. While China will remain dominant in terms of overall market share, India will

become increasingly important in terms of seaborne demand, the Fitch report said. High frequency indicators show that while the largest importer of Australian coking coal, India, saw a 25.8 percent yearon-year increase in coking coal imports from Australia in the second quarter of 2019, China, the second largest importer of Australian coking coal, decreased imports by 8.8 per cent year on year in the same period. In global terms, as China will continue to account for roughly two-thirds of global coking coal production and consumption over the coming years, trends in the country’s mining and steel sectors will continue to exert a dominant influence on seaborne prices. “Although taking a longer time than previously expected to play out, due to the ongoing risks to the economy and government efforts to stimulate domestic industries, our view remains that steel production in China will stutter in the medium term with the slowing of the economy and construction sectors, dragging coking coal consumption lower,” it added. One of the key market implications could be the mining majors potentially benefiting from India’s growing appetite for metallurgical coal. Since the start of 2017, major Indian steelmakers have been seeking to secure long-term contracts with miners, ensuring reliable supply. This comes at a time when large steelmakers are looking to boost efficiencies and lift capacity utilization rates

after acquiring distressed steel assets that were operating well below capacity. Indian steelmakers typically favor importing high fluidity and high vitrinite type coking coals. Fluidity is measured by the difference between melting and solidifying temperatures of coal. High fluidity gives higher “bendability” of coals and optimizes the coke input into a blast furnace. Vitrinite indicates the heat tolerance of each coal, reflecting better performance in the blast furnace when higher. With the estimated ramp-up of India’s met coal demand by 5-6 million tons per month through 2020-21, implied demand for the preferred likes of Premium Mid-Vol such as BHP-Mitsubishi Alliance’s (BMA) Goonyella, Peak Downs North and semihard coals like Kestrel, in eastern Australia’s Queensland, will grow for the foreseeable future. Different sources of coal

Besides relying on Australian coals, steelmakers in India were understood to be diversifying their coal blending by opting for other origin coals, including US material. They have also sought cheaper alternatives such as pulverized coal injection (PCI) and semi-soft. This was particularly the case when hard coking coal prices rose to $300 per ton FOB Australia in recent years due to supply constraints in China and Australia. Indian mills are particularly susceptible to price spikes and in certain cases were forced to mothball some blast furnace operations until steel margins improved. India has also been keen to develop Mozambique coking coal, with both Tata Steel and the state-owned consortium International Coal Ventures Limited (ICVL) investing in the east African country. However, Mozambique supply has not come to fruition as expected, with only Vale’s Moatize mine producing sizable volumes of met coal at around 7-8 million tons per year. As a result, it is Australian-based exporters that are best placed to benefit from India’s steel capacity expansion. Structure of Indian steel mills

The Indian steel industry is structured in between three broad categories based on route wise production viz. BF-BOF, EAF and IF. BF-BOF route producers have large integrated steel making facilities which utilize

10 Steel Insights, September 2019

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FEATURES

Cover Story iron ore and coking coal for production of steel. The Indian steel industry is also characterized by the presence of a large number of small steel producers who utilize sponge iron, melting scrap and non-coking coal (EAF/IF route) for steelmaking. However, the Indian steel sector is disadvantaged due to limited availability of essential raw material such as high grade Manganese ore & Chromite, coking coal, steel grade limestone, refractory raw material, Nickel, Ferrous Scrap etc. Due to shortage of domestic coking coal, both in terms of quantity and quality, pig iron producers/ BF operators in India have to significantly depend on import of coking coal. Domestic availability

India has the fifth largest coal reserves in the world. As on 31 March 2018, India had 319.04 billion metric tons (351.68 billion short tons) of the resource. The known reserves of coal rose 1.23 percent over the previous year, with the discovery of an estimated 3.88 billion metric tons (4.28 billion short tons). The estimated total reserves of lignite coal as on 31 March 2018 was 45.66 billion metric tons (50.33 billion short tons), a decrease of 0.96 percent from the previous year. Coal deposits are primarily found in eastern and south-central India. Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Telangana and Maharashtra accounted for 98.26 percent of the total known coal reserves in India. As on 31 March 2018, Jharkhand and Odisha had the largest coal deposits of 26.06 percent and 24.86 percent respectively. The energy derived from coal in India is about twice that of the energy derived from oil, whereas worldwide, energy derived from coal is about 30 percent less than energy derived from oil. India has less proven reserves of coking coal which accounts for just 13 percent (19 billion tons) of the country’s total proven coal reserves of 148.8 billion tons (bt). Of the total proven coking coal reserves, only 4.6 billion tons can be considered as prime grade variety. Indian coking coals predominantly fall into the medium category. Since the available coking coal is of inferior grade, it is often blended with imported coal. If we go back in time, we realise that the country was rather relaxed and liberal

12 Steel Insights, September 2019

in its use of coals in the past. We may recall that in the initial days of coal mining, the best quality thermal coals were available in the Raniganj coalfields and superior grade coking coals in Jharia. Unfortunately, there was indiscriminate use of coals in those days and whatever was mined was used up as fuel. According to an industry source, “As such, there is a dearth of coking coal in India. And whatever we have are of high ash content. And that ash is also so intimately mixed with the coal matrix that it is difficult to separate it and free the carbon from the coal. So what do we need to do to make it suitable for steel-making or for any other metallurgical purpose?” The Jharia coalfields have a sequence of 41 coal mines. Some are consistent while others are not. But there were 18 mines that were very consistent, whose seams were numbered from 1 to 18, with the latter being the top-most and the former being the bottom-most. The seams from 9 and above comprised prime coking coal. Coal in the seams from 8 to below are medium coking coals because they do not meet those standards which are required for making coke for use in the blast furnaces. These need to be blended with some prime coking coal for coke-making. Coking coals in India are categorized into three types: ♦♦ Prime grade: which can form coke for metallurgical purposes without being blended with other coals ♦♦ Medium grade: which requires to be blended with prime coking coal for cokemaking ♦♦ Semi-coking coal: which are weak in coking properties but can be blended in small ratios with prime coking coal for coke-making. As mentioned, prime coking coals are available in India only in the upper seams of the Jharia coalfields which have been already exploited in the past and the remnants are now available in the surface-constrained areas like surface fires, rivers, townships, human settlements and road and rail infrastructure. The medium variety is available in various coalfields in Jharkhand (lower seams of the Jharia coalfield, East Bokaro, West Bokaro, Ramgarh, North Karanpura,

South Karanpura); West Bengal (Raniganj coalfield); and Madhya Pradesh (Pench, Kanha and Dohagpur). The semi variety is available in limited areas of West Bengal (Raniganj coalfield), Jharkhand (Ramgarh coalfield) and Chhattisgarh (Sonhat coalfield). Though India is fortunate to have the fifth-largest share of coal resources, the quantity of coking coal is limited. Further, since coal seams in India are of “drift origin”, where the woody material was transported across longer distances, carrying along with it external impurities, such coals tend to contain high levels of inert material or mineral matter, commonly known as “ash content”. These mineral matters are finely disseminated within the coal matrix which makes Indian coals more difficult to wash or beneficiate – for reducing their ash content. Production by Coal India

An analysis of domestic availability of coking coal will remain incomplete if we do not account for Coal India’s production of this scarce commodity. Coal India (CIL), the largest coal miner in the world, produced 607 mt of raw coal in 2018-19, of which coking coal comprised less than 6 percent, at around 34 mt. Earlier, CIL suffered a 39 percent decline in its coking coal production to 33.28 mt in 2017-18, compared to 54.65 mt produced a year ago. In absolute terms, coking coal production was down by almost 21 mt during that year. Consequently, the share of coking coal in CIL’s total production kitty was also down at 5.9 percent in 2017-18 from 9.9 percent in 2016-17. CIL’s coking coal output in 201718 was the lowest in at least 7 years. The dramatic decline was attributed to various factors like depletion of reserves in opencast projects, closure of unviable mines and regradation of blocks, according to sources. Bharat Coking Coal (BCCL), a CIL subsidiary which produces the major volume of coking coal in India, also reported a sharp decline in its yearly output for 2017-18 at 23.30 mt from 32.39 mt achieved in the previous year. In 2018-19, however, coking coal production improved marginally, by around 2 mt. With new washeries coming up at BCCL, supply of coking coal is expected to

Cover Story improve in coming years, company sources said. Going forward, CIL plans to enhance its coking coal production significantly from the current levels. CIL is eying prospects in Russia, Canada and Africa to augment production. Sources indicated that looking at mines in Canada is fine but not without its inherent problems. Most often, Canadian mines are located far from the ports which makes the FOB cost for the coal high. A similarity perhaps can be drawn here with the acquisition of the Benga mine from Rio Tinto by ICVL a few years back. “The coking coal quality is excellent at Benga. But there are logistic problems which make many analysts feel that this acquisition can become commercially viable sometime in the near future only when prices start moving up,” said the source. Local and global supply

From the domestic standpoint, only 4-5 mtpa of coking coal, produced by CIL subsidiaries BCCL and Central Coalfields (CCL) are supplied to public sector steel players and the remaining is sold to power companies because of washing constraints. Although BCCL has come up with two new washeries in 2018-19, production from the same is yet to start to any significant extent. As already mentioned, 85 percent of the Indian demand is taken care of by imports which have risen to around 48 mt in 2018-19 from around 33 mt five years back (2013). The globally traded coking coal volume was around 195 mt in 2017 but it is estimated that there will hardly be 1 percent growth in this figure in 2018 because of the overall slow turnaround in the global steel industry.

The largest contributor in this globally traded corpus of coking coal is Australia. The next player is the United States of America. Most of the countries that produce coking coal use up the material for their own needs. Only those which produce in excess, like Australia and the US, the latest entrant being Mozambique, export. As already mentioned, Australia accounts for around 60 percent of the world’s exports of coking coal at 183 mt and is expected to retain its share in the same range over the next 5 years. As per the Resources and Energy Quarterly, December 2017, around 90 percent of Australia’s met coal production is exported and in 2016 India imported 43.5 mt from Down Under alone. India is Australia’s second-largest consumer of met coal, with 10 percent share after China’s whopping 61 percent. China produces 2.83 mt of steel every day. So just imagine the requirement of coking coal by the dragon country! It, alone, after all accounts for almost 50 percent of the world’s steel production! An industry source indicated that Australia is the most reliable supplier of coking coal for the Indian steel mills because of factors like the continent’s proximity to the sub-continent, established business relations and the quality of its coal etc. “Mozambique is coming up but there are quality issues that Indian mills will have to work upon,” the source said, adding that Indonesian imports will increase a bit, by about a million tons or so by the end of this calendar but not more. Because Indonesian coking coals are softer and not of premium grade, they can be used only 5-10 percent in the blend, making them overall quite unsuitable for Indian use.

Australian Minster’s visit

Australia’s Minister for Resources and Northern Australia Matthew Canavan has called for increased investments by Indian companies as a means to further cement bilateral relationship. “Last year, we released an economic strategy document about wide ranging opportunities between India and Australia and I am here principally to help progress that in its next steps,” Canavan, who is on a four-day visit to India, told media persons. He said India is the largest coking coal market for Australia and it will continue to grow. Canavan also said he is looking forward for Indian companies to invest in Australia to secure affordable and long-term supply of coking coal and other minerals to meet their energy demands. The minister said he recently met Gautam Adani, the Chairman of the Adani Group, and the discussion focused on the developments in Adani’s Carmichael coal mining project in Australia. “All the major legal and procedural hurdles regarding this project have been resolved,” he said. Commenting on whether renewables will replace coal in the global energy basket, the minister said: “It has never happened in the modern times that an economy has relied on one fuel source for meeting all of the energy needs. There has always been a combination of energy sources to meet the required demand.” Canavan also added that coal sector investments, demand for the fuel and its value continue to be significantly high, particularly in the Indo-Pacific region. The minister emphasized that, given India’s large domestic production of coal, Australia can only supplement and

Coal & coke import data from major Indian ports - quantity (in ton) Coal type Coking coal Met coke Coal type Coking coal Met coke

Jan 2018

Feb 2018

Mar 2018

Apr 2018

May 2018

Jun 2018

Jul 2018

Aug 2018

Total

4,265,052

3,504,592

4,124,996

3,982,563

4,707,291

4,272,882

4,291,647

4,832,729

26,212,109

399,603

284,194

417,901

211,077

572,911

330,320

407,232

490,405

2,429,847

Jan 2019

Feb 2019

Mar 2019

Apr 2019

May 2019

Jun 2019

Jul 2019

Aug 2019 (Provisional)

Jan-Aug 2019 (Provisional)

3,322,578

4,170,595

3,694,561

4,584,631

4,189,914

4,133,544

4,820,404

4,380,160

25,803,214

340,963

325,146

224,102

387,614

244,895

216,871

319,183

223,738

1,616,403

Source: Insights Research

14 Steel Insights, September 2019

Cover Story Coking coal and met coke imports from FY'11-FY'19

Government auction

5,00,00,000

4,00,00,000

3,00,00,000

2,00,00,000

1,00,00,000

COKING COAL

2018 - 19

2017 - 18

2016 - 17

2015 - 16

2014 - 15

2013 - 14

2012 - 13

2011 - 12

2010 - 11

-

MET COKE

Source: Insights Research

compliment the country’s efforts to meet energy needs and also help in skill and technology transfer to improve productivity and efficiency. Washing/beneficiation

CIL is currently operating 15 coal washeries with a total capacity of 36.8 million tons per year. Of these, 11 are coking and the rest are non-coking projects with a capacity of 20.58 and 16.22 million tons per year, respectively. The total washed coal production from the existing washeries stood at 12.45 million tons last financial year. Most of these washeries were set up 4 to 5 decades ago. Feed ash is generally in excess of 35 percent. Clean coal ash is at 18-19 percent. CIL will be setting up 18 new coking coal washeries. Two of these washeries have already been inaugurated in Bharat Coal Coalfields and the rest are going to come up in a phased manner till December 2020. This will add a capacity of around 28.1 million tons for coking coal. One new coking coal washery with a throughput capacity of 3.5 mtpa is planned to be set up at the Tasra project of SAIL. Indian coking coal has very poor washability characteristics. The most economic ash in clean coal is 18-19 percent. New washeries being planned are expected to wash at 18-19 percent ash content.

16 Steel Insights, September 2019

The total installed capacity of the new and existing coking coal washeries would be about 59.4 mtpa, which at an average yield of about 45-50 percent can provide clean coals to the extent of 27-30 mtpa at 18 percent ash. Though most of the existing washeries would be replaced with the new ones, there would still remain a gap between the estimated demand of coking coal from indigenous sources and its likely availability. It also needs to be examined whether all the domestic coal with 18-19 percent ash can be blended with imported coal at the steel plants from the point of view of blast furnace productivity and related economics. Limited availability of domestic coking coal and its spiraling high prices in the international market requires a serious look at the demand management side. Current consumption rate of coke in Indian steel plants vis-à-vis global best practices is very high. The National Steel Policy, 2017 endeavours to bring the coking coal consumption at par with global best practices by resorting to auxiliary fuel injection technologies like PCI/ CDI or natural gas/ syngas injection along with PCI/ CDI. At present, because of inadequate washing capacity, most of CIL’s coking coal is being supplied to the power sector, and industry circles say this scenario will continue, at a great loss to the integrated steel manufacturers, till the washery construction program of CIL gains momentum.

The government recently said it has begun the process of auction of 27 coal mines and allotment of 15 blocks to public sector undertakings. “The Ministry of Coal has started the process of auction of 27 coal mines and allotment of 15 coal mines to central PSU and state PSUs (public sector undertakings),” the coal ministry said in a statement. According to the objective of auctioning of coal blocks, the government said it is auctioning 21 coal mines for end-use nonregulated sectors and six coking coal mines for end-use iron and steel sector, the ministry said. In case of allotment of blocks for PSUs, five coal mines are for power sector, nine for sale of coal and one for iron and steel, it said. “At peak rated capacity (PRC), these 42 coal mines will produce approximately 70 mtpa,” it said. Notice inviting tender and notice inviting application have been published in the newspaper.The electronic bidding will be conducted on Metal Scrap Trading Corporation (MSTC) platform,” it said. The last date of registration of bidder and sale of tender document is September 13 and the bid’s due date is September 19. The electronic bidding will be conducted on MSTC platform from October 10, 2019 to November 8, 2019,” it said. Current procurement scenario of Indian mills

India is expected to become the largest coking coal importer through sea route by 2022 as the country pushes for more steel production. The country currently imports about 85 percent of its coking coal demand through imports and, by 2022, the demand of coking coal is projected to grow to 67-70 million ton from about 58 million ton now. China is the largest importer of Australian coking coal but it is reducing gradually due to various factors. Therefore, India will remain heavily dependent on imported coking coal. The national steel policy forecasts coking coal demand of 161 mtpa by 2030-31, 31 mtpa of non-coking coal for PCI, 105 mtpa of non-coking coal requirement for DRI route. Thirty five per cent of total requirement of 161 mtpa coking coal by 2030-31 is about 56.35 mtpa. This is a challenge to coal and steel producers. India has to heavily depend

Cover Story on imported coking coal for its plan to produce 300 mt of crude steel by 2030-31. Input price hike hurting steel sector

Credit ratings agency Moody’s has revised its outlook for the Indian steel sector to negative, as rising input costs put pressure on the profitability of Asian steel producers. “We expect steel producers’ profitability, as measured by EBITDA per ton, will decline by around 15 percent in the 12 months to June 2020,” according to the report. The prices of iron ore and coking coal, two key steelmaking inputs, have surged by more than 60 percent and 20 percent, respectively, in the year to June 2019, and will likely stay high for some time. At the same time, weak demand in end markets was limiting the ability of producers to pass on these price increases to customers, resulting in narrowing product spreads, the note said. Narrowing product spreads between steel and input prices reflect producers’ limited ability to pass on price increases to buyers when end market demand is soft. “India’s steel demand will remain the strongest in Asia but result in slow-to mid-single digit growth, as weak auto and manufacturing demand offset demand growth in the infrastructure and construction industries,” according to Kaustubh Chaubal, vice-president and senior credit officer, Moody’s, and co-author of the report. Indian steelmakers’ profitability will decline mainly because of slowing demand growth, in particular from the auto sector, the note said. Meanwhile, limited new capacity additions across the Asia region will curb a sharp decline in steel prices, with production rising only in India, where demand is still growing, and flat in China, Korea and Japan. Finally, Moody’s expects the increase in US tariffs on steel imports will have a limited direct impact on Asian steel companies because of their modest US sales. Another rating agency, India Ratings and Research (Ind-Ra) has also revised its outlook on the steel sector to ‘stable-to-negative’ from ‘stable’ for the remainder of FY20 given sluggish steel demand growth expectations owing to mix of structural and cyclical concerns in end-user sectors, primarily auto and real estate construction. It has revised downwards its FY20 steel demand growth expectations to around 4 percent from the previous forecast of 7 percent against FY19 level of 8 percent. Furthermore, raw material availability and price risks may escalate in 4QFY20 if the uncertainty over iron ore mine auctions prolongs. Ind-Ra expects overall steel sales volumes and margins to weaken further in 2QFY20 after industry witnessed margin correction in 4QFY19 and 1QFY20. However, the agency expects steel demand to recover in 2HFY20, supported by pickup in government investments, fiscal stimulus measures, improvement in market sentiment and 2HFY19’s lower base. Steel mills buys unlikely to support coking coal prices

Indian buyers are unlikely to provide substantial support to the coking coal spot market later this year, as smaller steel mills scale back production and the main mills remain well supplied by contracts.

Steel Insights, September 2019

17

Cover Story China has restricted the import of coal including coking coal throughout the year to support the domestic industry and maintain quality controls to reduce pollution. With the goal of keeping 2019 import volumes at or below 2018 levels despite a year-to-date increase, tighter limits are expected for October-December and quotas issued to Chinese steel mills are already dwindling. India was expected by some market participants to overtake China in coking coal imports this year. But India imported just 33.27 million tons during January-August period of FY20 compared with 33.95 million tons recorded in the same period FY19. “Indian demand has to pick up eventually. A lot of projects have been put on hold until after the monsoon, which was really bad this year,” a coking coal producer said. “People in India even wait to buy autos until after the monsoon is finished.” General elections earlier this year delayed any rolling out of major infrastructure, but the current government has yet to implement spending for new projects despite winning a stronger mandate. A steel producer in India is so overstocked with coking coal contract volumes that it is looking to sell some on the spot market wherever possible, sources said. “We only expect very isolated spot demand from India. Some of the mediumsized steel mills will prefer to scale back production rather than procure more feedstocks until steel demand picks up,” the trader said. If more Chinese mills back further away

from the spot market as the government imposes tighter fourth-quarter import restrictions, spot prices will come under even greater downwards pressure unless coking coal producers also scale back production, the trader said. Many large-scale Indian mills will keep production rates high and continue to stockpile steel with the expectation that sales will get a seasonal lift later this year and early next year, an Indian steel producer said. “We like to remain optimistic that steel demand will improve later this year as it usually does. But the steel sector is being impacted by the trade war and it is hard to know how that will play out,” said a source. Most recent enquiries from Indian coking coal buyers have been for semi-hard coking coal or semi-premium Peak Downs North that have recently been offered at significant discounts from premium brands, another Indian trader said. “The largest Indian steel producers will wait until the end of the year before reassessing steel demand and production rates. But they cannot make up for the absence of Chinese coking coal buyers in the meantime,” the trader said.

support from the government to the slowing Chinese economy rises. On the supply side, Fitch expects production misses from Australia to keep the market tight in the coming quarters as large diversified miners lose their appetite for mining coal. Although Fitch analysts are more positive on coking coal prices in the coming quarters than they were one year ago, they maintain the view that prices will ease in the longterm as the Chinese steel sector resumes its slowdown and the demand for Australian coking coal softens. With the re-escalation of the trade war between China and the US, the Chinese government will most likely be prone to providing further economic support to domestic industries, especially the infrastructure sector, which would buoy steel production and ultimately coking coal demand, Fitch predicts. Indicators show that, while the largest importer of Australian coking coal, India, saw a y-o-y decline in coking coal imports from Australia, while China, the second largest importer of Australian coking coal, increased imports y-o-y in the same period.

Coking coal price to remain elevated in 2019

Long-term outlook

In its latest industry trend analysis, Fitch Solutions sets the coking coal price forecast for 2019 at $195 per ton. The analysts predict prices will remain elevated, with strong demand from China’s steel sector as US-China relations deteriorate and the probability of further economic

Imported coking coal price trend for last 1 year

Beyond 2020, Fitch expects Australian coking coal prices to continue on a multi-year downtrend, driven largely by a resumption in the slowdown of the Chinese steel sector and environmental concerns limiting coal imports. Production outlook

Fitch forecasts that China will maintain its dominance in the producers’ market for coking coal, with absolute coking coal production increasing from 536 million tons in 2019 to 551 million tons by 2028, with production in 2028 being triple that of the second-largest producer, Australia (184mnt). In 2026, analysts predict that Russia will surpass Indonesia as the third largest coking coal producer in the world, and that over the years, China, Australia and Indonesia will slowly lose the global market share of coking coal production to Russia, India and Mongolia. Conclusion

Access to competitively priced raw material is vital to building new capacity. There are a

18 Steel Insights, September 2019

Cover Story

number of strategies to ensure access to raw material as well as manage the volatility.

traditional suppliers from Australia and Brazil

♦♦ Investment in infrastructure to facilitate imports: Several major steel-producing countries are not backed by sufficient quantities of domestic raw material sources. Japan and South Korea, for example, have been reliant on imports to feed their domestic steel industries. To facilitate large quantities of raw material imports, both countries have invested in large deep water ports to facilitate the movement of large ships to attain cost efficiency

♦♦ Development of a derivatives market for steel and raw materials: This has been used to secure future suppliers and to reduce volatility in prices. The steel sector should get better access to thermal and coking coal mines at competitive cost levels.

♦♦ Joint ventures with miners: Steelmakers have also invested in joint ventures with miners by taking a stake in the mining operation and sometimes an offtake agreement. For example, Chinese steelmaker Ansteel increased its stake in Australian iron ore miner Gindalbie Metals to 52 percent in March 2014. SAIL and Tata Steel’s S&T Mining had announced that they were looking to invest in coking coal assets ♦♦ Vertical integration: Miners have acquired mines or invested in offtake arrangements to secure their raw material supplies. ArcelorMittal, for example, has a significant iron ore portfolio that not only feeds its steel-making business in various parts of the world but also earns revenue on third-party sale ♦♦ Diversifying sources of raw materials: China, in particular, has adopted this method to reduce its reliance on

♦♦ Procurement of imported coking coal is done as per requirements as laid down in policy through long term agreements (LTA) and global tenders. Quantities under LTA are settled annually by Empowered Joint Committee (EJC) comprising representatives of companies. EJC while negotiating quantities and prices with long term suppliers takes the FOB prices settled by Japanese steel mills as per the benchmarked index price. The annual requirement is tied up at the beginning of the year and the same is confirmed and received quarter-wise throughout the year ♦♦ Steel producers’ joint negotiation with foreign suppliers. Acquisition of coking coal mines will improve the situation. According to Jha, with the limited availability of domestic coking coal in terms of the required quality and the high spiraling prices in international markets, it is necessary to look at the demand management side. It is even more important when we look at the current consumption rate of coke in Indian steel plants. In fact, as per NSP, 2017, the

current coke rate is 400-600 kg/thm against the international best practices of 275-230 kg/thm. The NSP, however, has set a target of 300-350 kg/thm by 2030-31. Moreover, the coking coal available in India has properties that are not suitable for metallurgical purposes. There are a host of other quality parameters which decide how coking coal can be blended to make coke and whether the coke formed from that blend is of the quality that can sustain the intense pressure and hardness of a blast furnace environment. Coal is a natural resource which cannot be regenerated and particularly coking coal which is scarce. Thus, we may have mammoth plans for generation of steel but we also need to look at whether we should only follow the blast furnace route which essentially needs coke for steel-making. Or do we need to stress more on other methods of making steel that include the induction arc furnace and electric arc furnace routes. Currently, more than 50 percent of the steel is produced from the BF and BOF route and where the coke rate is high, almost double compared to the best practices worldwide. We have to not only look at the volumes that are required for our mammoth steel production plan but also at the demand side management: how can we reduce the requirement of coking coal so that more volumes of steel can be produced from the same amount of coke? In spite of all the measures, experts feel the Indian steel industry will have to depend heavily on the internationally traded coking coal, whose import volumes and prices are likely to keep on rising year after year, essentially due to quality degradation and reserves depletion. Moreover, mine owners are milking assets for cash and not reinvesting in assets, which will keep supply tight, going forward, said sources.therefore, a reduction in coking coal consumption via technology is necessary. There is a need for direct negotiation with miners for arriving at better costs and diversifying of resources. There should also be a mix of long-term and spot buying. Companies should also invest in captive and overseas blocks. As said a source, “From the perspective of buyers, de-risking by looking at a diversified sourcing of coals should be key part of procurement strategies, along with technological innovation to enjoy greater operational flexibility.” 

Steel Insights, September 2019

19

Metals Roundup

Imported scrap offers quiet, domestic prices volatile Steel Insights Bureau

T

he market for imported scrap continued to remain silent with only scarce deals of limited quantity being reported, even as offers continued to drop, sources said. Low sales of finished steel due to floods and heavy monsoon has resulted in production cuts and maintenance for many furnaces. As a result steelmakers are not requiring any major restocking of inventories, while currency depreciation also remains a worrying concern. Containerized Shredded from Europe, UK and USA stood at $290 per ton cfr Nhava Sheva. However no major fresh trades were witnessed, while some global suppliers withheld their offers amid uncertainty in prices. HMS scrap saw very few deals being concluded as HMS 1&2 from Dubai being traded at around $260 per ton cfr, while few HMS 1 offers from South Africa were heard at around $270 per ton. Indian melting scrap prices fluctuated slightly in specified regions and price range move moved up by `300-1000 per ton in major scrap consuming regions like western, northern and eastern regions of India, sources said. Domestic melting scrap price might remain supported or remain range bound considering limited supply in western region, which is known as major scrap consumer like Gujarat as well as Maharashtra. However, prices dropped `300-600 per ton in Kolkata region and in Alang region. Owing to limited supply and demand in domestic market, scrap prices are less likely to see a major change in near term. According to industry sources, domestic prices were volatile because of the weakness in the steel market, cash crunch and low movement of material. India’s overall ferrous scrap usage is estimated to be around 25-30 million tons. In FY19, India imported around 6.55

20 Steel Insights, September 2019

million tons of scrap, up 38 percent over 4.74 million tons imported in FY18. In FY19, India imported around 417,000 tons of rerollable scrap, down 2 percent over 424,000 tons imported in FY18. In the April-July period of FY20, scrap imports stood at 2.63 mt and re-rollable scrap imports stood at 115,000 tons. India imposed a 2.5 percent duty on imported ferrous scrap. The government decided not to eliminate this tariff in the budget for the current financial year. The National Steel Plan for India, released by the country’s Ministry of Steel, states ambitions to increase steelmaking capacity to 300 million tons per year by the 2030-31 financial year. This shall increase requirement of steel scrap from present level of around 25 million tons to more than 50 million tons by 2030. The basic-oxygen furnace (BOF) method will see the biggest rise, so scrap consumption will be boosted primarily by the higher intake at Indian integrated mills. Notably, the plan suggests that demand will rise for both scrap and metallics, despite announced plans to depart from iron-based steelmaking in favor of more environmentally friendly scrap-based processes.

While the Indian steel industry offers ample potential for growth, there are significant downside risks arising from its limited access to raw materials, including a tight gas supply, and the lack of investorfriendly downstream projects. Requirements for direct-reduced iron (DRI), also known as sponge iron in India, will be close to 52.50 million tons per year by 2030, which exceeds the country’s current capacity of 46 million tons per year. As long as capacity expansion plans are achieved, demand for both metallics and scrap will benefit from the rising steel output. And this means that import scrap volumes are also likely to increase, at least over the next five years, despite the launch of local shredding capacities. Over the longer term, India’s potential to become self-sufficient in shredded scrap depends on ELV stock availability, as well as on car-scrappage legislation and investment in shredding operations. Domestic steel scrap shortage

The supply shortage of domestic steel scrap in India is set to expand and this may lead to more imports of the commodity. India’s shortage of domestic scrap supply in FY19 was at 6.55 million tons, which will increase to 9.11 million tons in 2021-22, India’s steel ministry told parliament. Major scrap suppliers to India are the UAE, the US, UK and South Africa. Total scrap demand in FY2020 is expected at 2931 million tons, while domestic supply is expected to reach 27-28 million tons. 

Scrap imports to India (in ‘000 tons) Product Re-rollable scrap Scrap

Non-alloy (prime + defective) April - July FY20 115 2630

Non-alloy (prime + defective) April - July FY19 149 2099

Growth % -23 25

Source: JPC

Prices of scrap in various markets during the past six months (Rs/ton) (Prices are basic, exclusive of taxes) Name of the market Mandi Gobindgarh Kolkata Alang Scrap Yard Mumbai Durgapur

Price Rs./Ton as on 6 Sep 2019 20,000 22,100 21,200 21,300 21,600

Price Rs./Ton as on 5 Sep 2019 20,100 22,100 20,900 21,300 21,600

Price Rs./Ton as on 29 Aug 2019 20,500 22,400 22,000 21,700 21,900

Source: Compilation from various sources & ISMW data

Price Rs./Ton as on 8 Aug 2019 18,500 21,400 21,400 20,600 20,900

Price Rs./Ton as on 8 Mar 2019 25,300 27,100 25,500 25,100 26,600

Metals Roundup

India pig iron production up 2.5% in April-July Steel Insights Bureau

I

ndia’s pig iron production stood at 2.151 million tons up by 2.5 percent year on year, provisional steel ministry data showed. SAIL, RINL, TSL, Essar, JSWL & JSPL together produced 0.44 mt (21 percent share) up by 44 percent. The rest (1.707 mt) came from the other producers, down by 5 percent. With an 87 percent share, the private sector (1.878 mt, down by 0.8 percent) led pig iron production, compared to the 13 percent contribution of the PSUs. TATA Metaliks Limited (TML) - the largest Foundry grade pig iron manufacturer in eastern India, has reportedly further reduced foundry pig iron offers by `800 per ton. The latest offers for Foundry pig iron is reported at `29,600 per ton. It was earlier trading at `30,400 per ton, ex-plant, Kharagpur, eastern India. Prior to this, the producer had cut foundry pig iron offer on July 30, 2019 by `600 per ton. Meanwhile, the offers for low silicon pig iron offers also dropped and are currently

reported at `26,000 per ton, ex-plant, Kharagpur, eastern India. Constant fall in steel prices amid curtailed production is forcing producer to drop offers, sources said. Foundries and EA or Induction furnaces in north-east regions have reduced production by 20-30 percent since the prices started to fall owing weak demand globally. Thus pig iron consumption and demand fell and in turn led to fall in price range in Indian market. Meanwhile, steel-grade pig iron offers were reduced by `200 per ton and reported at `23,500-23,800 per ton ex-plant, Raigarh, Central India. Offers in Jajpur, Odisha were reduced by `200-300 per ton. In Durgapur, prices were slashed by `200 per ton to `24,300 per ton ex-plant. However, there are no major inquiries. In Bokaro, Jharkhand few deals were near `23,500 per ton ex-plant. Steel grade offers through the stockiest were learned at `23,800-23,900 per ton FoR Raipur & `26,500-27,000 per ton FoR Ludhiana, excluding GST.

Prices of pig iron in various markets during the past six months (Rs/ton) (Prices are basic, exclusive of taxes) Name of the market Durgapur Kharagpur Ludhiana

Price Rs./Ton as on 5 Sep 2019 28,700 29,400 29,900

Price Rs./Ton as on 4 Sep 2019 28,700 29,400 29,900

Price Rs./Ton as on 28 Aug 2019 28,700 29,400 28,900

Price Rs./Ton as on 7 Aug 2019 29,100 30,200 29,200

Price Rs./Ton as on 7 Mar 2019 32,100 32,800 34,400

Source: Compilation from various sources & ISMW data

Pig iron production data (in ‘000 tons) Production SAIL RINL JSPL JSWL Others Gross production Source: JPC

July 2019 2019-20 2018-19 Variation (prov) (prov) % 51 31 64.5 4 18 -79 11 5 108.6 37 18 101.7 425 481 -11.5 527

553

-4.9

July 2019 vis-à-vis June 2019 April – July July 2019 June 2019 Variation 2019-20 2018-19 Variation (prov) (prov) % (prov) (prov) % 51 68 -25 243 144 68.8 4 7 -44.4 30 60 -50.3 11 18 -40.1 51 37 38.9 37 37 0.8 121 68 77 425 459 -7.4 1707 1790 -4.6 527

588

-10.3

2151

2098

2.5

Tata Metaliks plans to double ductile iron pipe production Aligned to its strategy of value-led growth, Tata Metaliks Ltd, a subsidiary of Tata Steel, is looking to double the production of ductile iron (DI) pipe to 4 lakh tons per annum from the current 2 lakh tons. The company is also installing a new 15-MW power plant. The estimated investment on the project is `620 crore. According to Koushik Chatterjee, Chairman, Tata Metaliks, the brownfield expansion at its existing plant at Kharagpur is expected to be complete in the next 18-24 months. The company had received shareholders’ approval to fund the expansion by way of issuance of equity shares and convertible warrants to the promoter – Tata Steel – on a preferential basis. “The share of DI pipes to our total turnover is around 55 per cent while that of pig iron is around 45 per cent. Once this expansion is complete, we expect the share of DI pipes to go up,” Chatterjee told newspersons after the company’s annual general meeting here on Tuesday. The share of DI pipes to Tata Metalik’s total turnover could increase to 70 percent from the current 55 percent gradually once the expansion is complete and capacities are ramped up in the coming years. NINL floats fresh circular

Neelachal Ispat Nigam Ltd (NINL) – the largest and state owned steel grade pig iron manufacturer and exporter has floated fresh price circular for both steel and foundry grade. Prior to this, the last offers floated by company on July 5, 2019, after that no fresh offers were quoted. The latest offers for steel (N1) grade by NINL floated at `22,500 per ton as against last offers during July at `25,400 per ton. Similarly the fresh offers for Foundry grade pig iron were reduced and current offers are at `23,000 per ton (prices are basic, ex-Cuttack, East India). 

Steel Insights, September 2019

21

Metals Roundup sponge iron production of Essar, JSPL and others rose, while JSW’s production fell in April-July period of FY20.

India July sponge iron production up 4.9% y-o-y, down 1.7% m-o-m Steel Insights Bureau

A

t 3.033 million tons in July 2019, India’s sponge iron production grew by 4.9 percent over same period of last year and down 1.7 percent over June 2019, provisional steel ministry data showed. The growth was led by the coal-based route with 84 percent share, the remaining being the share of the gas-based route. While production by Essar rose 5.3 percent, production by JSPL rose 31.1 percent

Sponge iron offers remain volatile

and JSW fell by 13.2 percent. Production by others rose 7.4 percent in July 2019. On a month-on-month basis, Essar’s production fell 7.7 percent, JSPL’s production rose 6 percent, JSW’s production fell 4.6 percent and others production fell 0.7 percent. Overall the gross sponge iron production fell 1.7 percent month-on-month. At 12.445 million tons in April-July 2019, India’s cumulative sponge iron production grew by 7.7 percent over same period of last year. On a cumulative basis,

Sponge iron production data (in ‘000 tons) July 2019

July 2019 vis-à-vis June 2019

201920 (prov)

201819 (prov)

Variation %

July 2019 (prov)

June 2019 (prov)

Variation %

2019-20 (prov)

2018-19 (prov)

Variation %

ESSAR

410

433

-5 3

410

445

-7 7

1712

1635

4.7

JSPL

142

109

31.1

142

134

6

565

446

26.8

JSW

182

210

-13.2

182

191

-4.6

795

828

-4

O hers

2298

2140

7.4

2,298

2314

-0 7

9373

8649

8.4

Gross production

3033

2892

49

3033

3084

-1 7

12445

11557

7.7

Production

April - July

Source: JPC

Prices of sponge iron in various markets during the past six months (`/ton) (Prices are basic, exclusive of taxes) Name of the market Mandi Govindgarh

Price Rs./Ton as on

Price Rs./Ton as on

Price Rs./Ton as on

Price Rs./Ton as on

Price Rs./Ton as on

2-Sep-19

30-Aug-19

23-Aug-19

2-Aug-19

4-Mar-19

-

-

-

-

-

17,700

17,800

16,500

17,200

20,200

-

-

-

-

-

Raigarh

16,200

16,200

15,700

16,300

20,300

Raipur

18,200

18,200

17,700

18,100

22,300

Rourkela

16,200

16,300

15,800

16,400

20,300

Durgapur Jaipur

Source: Compilation from various sources & ISMW data

22 Steel Insights, September 2019

Sponge iron offers remained volatile in September 2019 on slow restocking of material by end users. Prices were up `100500 per ton in Durgapur and Raipur. However, prices were down `100-200 per ton in Raigarh and Rourkela. There has been drop in furnace productions. This has helped in recovery in prices in some regions. However, low demand resulted in constant drop in prices some regions. Domestic sponge iron prices have continued the declining trend in the last 2 months. Market sources said restocking material by end users remained slow even though their inventory levels depleted. However, the inventory position remained high in central and south eastern Indian markets, keeping the prices under pressure. The recent easing of raw material cost i.e., coking coal and iron ore cost are expected to support sponge iron makers positively. Sporadic monsoons in some regions of India negatively impacted offtake in the region. Some market participants expect that offtake may increase following the monsoons. Internationally iron ore prices have also declined to $85 per ton supporting the fall in domestic iron ore prices. Sponge iron prices in domestic market are likely to be volatile taking into consideration the fluctuating demand conditions in the domestic market. Sponge iron export market resume

Sponge iron export activities resumed for Bangladesh which remained silent due to Eid festival in that country. According to sources, fresh deals for sponge iron exports to Bangladesh concluded at near to $255-258 per ton CPT Benapole (dry port of India & Bangladesh). This is equivalent to $275 per ton cfr Chittagong. Further couple of deals for sponge exports were confirmed from India to Nepal, sources said. The price range is reportedly around $220-224 per ton ex-works eastern India. The freight cost to Nepal stood around $2530 per ton. Bangladesh is the main buyer of Indian sponge iron, which account more than 51 percent of total sponge iron exports from India. 

feature

India crude steel production up 1.7% in July Steel Insights Bureau

I

ndia’s crude steel production stood at 9.215 million tons (mt) in July 2019, up by 1.7 percent over July 2018 and was down by 1.3 percent over June 2019, provisional steel ministry data showed. During April - July 2019-20, crude steel production was 37.133 mt, a growth of 3.5 percent over same period of last year. Overall PSU production reported a marginal growth of 1.6 percent but any further dampening at an overall level was arrested by a modest performance by the private sector players including the other producers (production up by 3.9 percent). Hot metal production stood at 6.309 mt in July 2019, up by 4.5 percent over July 2018 and was down by 0.5 percent over June 2019. During April - July 2019-20, hot metal production was 25.089 mt, a growth of 3.7 percent over same period of last year. Finished steel production stood at 8.345 mt in July 2019, up by 2.2 percent over July 2018 and was down by 2.9 percent over June 2019. Contribution of the non-alloy steel segment stood at 32.898 mt (95 percent share), while the rest was the contribution of the alloy steel segment (including stainless steel). In the non-alloy, non-flat segment,

in volume terms, major contributor to production of total finished steel was Bars & Rods (14.20 mt, up by 15 percent) while growth in the non-alloy, flat segment was led by HRC (14.13 mt, up by 2 percent) during this period. Exports stood at 0.460 mt in July 2019, down by 13.2 percent over July 2018 and was up by 54 percent over June 2019. At 1.474 mt, export of total finished steel was down by 23.5 percent in April - July 2019 over same period of last year. Volume-wise, non-alloy HRC (0.62 mt) was the most exported item (48 percent share in total) while Bars & Rods (0.12 mt , down by 10 percent) led exports in the non-alloy, non-flat category. Nepal led exports of total finished steel – not only overall (0.33 mt, 22 percent share) but also had the highest share in case of Bars and Rods (66 percent), and Structurals (49 percent).

Steel production data (in '000 tons) Production Crude steel Hot metal Finished steel Consumption Import Export Pig iron (Gross) Sponge iron (Gross) Source: JPC

July 2019 2019-20 2018-19 Variation (prov) (Final) % 9215 9059 1.7 6309 6036 4.5

July 2019 vis-à-vis June 2019 April-July July 2019 June 2019 Variation 2019-20 2018-19 Variation (prov) (prov) % (prov) (final) % 9215 9337 -1.3 37133 35884 3.5 6309 6338 -0.5 25089 24196 3.7

8345

8162

2.2

8345

8595

-2.9

34490

32692

5.5

9055 772 460

7805 759 530

16 1.7 -13.2

9055 772 460

8318 603 299

8.9 27.9 54

33706 2496 1474

31607 2655 1926

6.6 -6 -23.5

527

553

-4.7

527

588

-10.3

2151

2098

2.5

3033

2892

4.9

3033

3084

-1.7

12445

11557

7.7

Imports stood at 0.772 mt in July 2019, up by 1.7 percent over July 2018 and was up by 27.9 percent over June 2019. Import of total finished steel was at 2.496 mt in Apr - July 2019 and decreased by 6 percent over same period of last year. India was a net importer of total finished steel in April - July 2019. Volume-wise, non-alloy HRC (0.66 mt) was the item most imported item (35 percent share in total), led by imports from Korea (58 percent share of total). Bars & Rods (0.14 mt, up by 9.7 percent) led imports in the non-alloy, non-flat category, led by imports from Singapore (40 percent share of total import of Bars & Rods). The share of China in total finished steel import declined from 19 percent in April-July 2018 to 16 percent in April-July 2019, with volumes slipping by 20 percent in during this period. Consumption stood at 9.055 mt in July 2019, up by 16 percent over July 2018 and was up by 8.9 percent over June 2019. India’s consumption of total finished steel saw a growth of 6.6 percent in April - July 201920 (33.706 mt) over same period of last year. Contribution of the non-alloy steel segment stood at 31.534 mt (94 percent share), while the rest was the contribution of the alloy steel segment (including stainless steel). In the non-alloy, non-flat segment, in volume terms, major contributor to consumption of total finished steel was Bars & Rods (13.216 mt, up by 13.3 percent), while growth in the non-alloy, flat segment was led by HRC (14.055 mt, up by 5.2 percent) during this period. 

Steel Insights, September 2019

23

FEATURE

Coal India eyes coking coal mines in Russia Company officials visit blocks in Yakutia Sumit Maitra

C

oal India has started seriously looking at coking coal assets in the eastern region of Russia and has already visited several such mines in the Yakutia region also known as Republic of Sakha. The deep interest of the state-owned miner has recently culminated in the signing of a memorandum of understanding (MoU) was between Coal India and Far East Investment and Export Agency during the Eastern Economic Forum recently held at Vladivostok in Russia to cooperate in coking coal mining projects implementation in the Russian Far Eastern region. Before the event, officials of Coal India went to the coal mines of Yakutia region to visit sites of Russian coal companies like Kolmar, Dolguchan and Mechel, Leonid Petukhov, General Director of Far East Investment and Export Agency said during the event attended by Prime Minister Narendra Modi along with industry delegation. “Coal India has decided to acquire some coking coal mine abroad and in this context, we have decided that there couldn’t be a better place than this region. We are very serious about acquiring properties in this place from where coking coal can be taken to India. My team has visited in August to this place, they have scouted certain properties also and we are very much in favour of acquring either a minority stake or or acquiring a mine so that coal produced from this region can be taken to India for our use in steel industry,” Jha said while addressing panelist at the India-Russia Business Dialogue at the sidelines of the forum at Vladivostok. Kolmar LLC, a 8 million-ton coking coal exporting company of Russia having three mining projects in the Far East, said the company is set to start exporting coking coal to India in the first quarter of 2020. “Coal India representatives have visited our

24 Steel Insights, September 2019

facilities in South Yakutia. We are hopeful of creating ties with Indian metallurgical industry. We are ready to provide support in developing new deposits and share our expertise in working in tough (sub zero) temperatures,” an official of Kolmar said at the session. “India is keen to bring coking coal from Russia to reduce dependency on Australia and US,” the official said. Russian natural resources minister said: “While the far eastern region of Russia has traditional business relations with China, Japan and Korea, in terms of expansion of our cooperation with India, there’s work being done to stimulate geological exploration to mineral resources in Russia.” Legislations are also being tweaked to allow single bidder in some case for resources and for exploitation of sub-soil resources usage creating enabling conditions for licensing in the Artic zone of Russia, he said. Kolmar is now exporting coal in Asian countries like India though the prospects for exporting coking coal is underdeveloped. “Logistically, it’s feasible with supplies possible in 7 days with just 2-3 days in ships,” she said. CIL very serious about coking coal mine buy in far East

“Coal mining history of India dates back to more than 200 years when first mine was started in 1774. After that to take care of the welfare of the workforce, Government of India nationalised coal industry in 1971 and 1973. And Coal India was formed in 1975. India is the second largest producer of coal with last year’s production of 730 million tons and also the second largest consumer of coal with 965 million tons of coal in FY19. So, there is a gap of about 235 mt which we are importing worth over $60 billion. We are trying to bridge the gap between demand and supply to a minimum possible level by increasing our own production. As far as non-coking coal is concerned,

we have huge resource and we would be meeting the gap between demand and supply in a span of 3-4 years. In case of India, known resources of petroleum and natural gas is very limited. But coal is here in abundance and the know resources of coal as of day is about 319 billion tons. But unfortunately, the coal reserve of coking coal variety used in steel making is still in scarcity in both quality and quantity. We have no alternative but to import as far as metallurgical coal is concerned. Government’s policy is to take steelmaking capacity to 250 mt from present level of 100 mt. We are presently importing around 51 mt of coking coal and by 2030, this import will touch around 140 mt or maybe slightly more. So, Coal India has decided to acquire some coking coal mine abroad and in this context, we have decided that there couldn’t be a better place than this region. We are very serious about acquiring properties in this place from where coking coal can be taken to India. My team has visited in August to this place, they have scouted certain properties also and we are very much in favour of acquiring either a minority stake or acquiring a mine so that coal produced from this region can be taken to India for our use in steel industry. Funding is not a problem as we have a huge cash reserve. But, as is known, in case of Russia, we have limitations of language and remoteness of this place. Also, weather conditions are not very conducive. But we are very serious and would see to it that demand supply of coking coal should be met with the help of Fast Eastern region. Both countries share excellent relations and the friendship between the two countries dates back to a long time. And I am very sure that all necessary help and facility would be extended by the government of Russia to India so that our venture will fructify and we will see that we should acquire some stakes. This would only be a small step as by 2030, requirement of coking coal may be more than 150 mt. We are hopeful that the types of properties that are available in Fast East would be pragmatic as far as acquisition is concerned.”  Edited transcipt of CIL Chairman A.K. Jha’s comments at the Forum.

FEATURE

Rating agencies predict bearish steel trends

Steel Insights Bureau

W

eaker demand and possible disruptions to iron ore supplies is likely to turn the current fiscal a challenging year for the country’s steel industry, Indian ratings has said. The fundamentals of the steel sector are likely to weaken in the current 2019-20 fiscal year ending March 31, with the risk of softening of prices, elevated raw material prices and weak demand, India Ratings and Research said. The rating agency has revised its outlook on the steel sector to ‘stable-to-negative’ from ‘stable’ for the remainder of FY20 given sluggish steel demand growth expectations

owing to mix of structural and cyclical concerns in end-user sectors, primarily auto and real estate construction. “The outlook also factors in increased import risks especially from Free Trade Agreement (FTA) countries such as Japan and South Korea due to adverse domino impact of the slowing global growth and continuing trade frictions. Furthermore, raw material availability and price risks may escalate in 4QFY20 if the uncertainty over iron ore mine auctions prolongs,” India Ratings has said. India’s total steel demand growth rose at a slower pace of 5.7 percent to 33.3 million tons in April-July compared with growth of 9.2 percent in April-July 2018.

A slowdown in automotive industry and a marginal growth in the consumer durables segment affected steel demand, Care said. Reduced construction activity is also expected to reduce steel consumption. These factors combined to reduce finished steel production growth to 1.4 percent to 18.1 million tons in April-May from a year earlier. Crude steel production increased by 2.7 percent to 36.9 million tons in April-July compared with a 10.6 percent increase a year earlier. Care also reduced its 2019-20 fiscal year steel production growth forecast to 3-4 percent from an earlier 6-8 percent. India’s total steel output during April-July increased by 2.7 percent to 36.85 million tons from a year earlier.

Steel Insights, September 2019

25

FEATURE A key area to watch out for is the auction of local mines by March 2020, India Ratings said. Any delay in the process could lead to disruption in domestic steel production in 2020-21. India Ratings expects supplies of coking coal to be tight in the coming months, with large-scale Australian producers reducing output. UK-Australian resources firm BHP has said its coking coal output will fall. But India, the largest coking coal buyer from Australia, has been maintaining its monthly import levels. Both agencies expect consumption to pick up in the short term following the end of the monsoon season in September and its restart of infrastructure and construction activity, although not enough to send steel prices higher. Care expects prices of flat products to fell by 4-5 percent, with long products to fall at a slower pace of 2-3 percent during 2019-20. Steel producers are likely to see moderation in cash flows from operations as strong margins moderate over FY20 from the highs of FY19, India Ratings said. “Large integrated players should continue to have adequate liquidity supported by their sound market access and high financial flexibility, despite moderating profitability pressures, ongoing challenges in market liquidity and increased risk perception among investors,” it said. India steel consumption growth likely to face slowdown

India Ratings has revised downwards its FY20 steel demand growth expectations to around 4 percent from the previous forecast of 7 percent against FY19’s 8 percent. Care Ratings lowered its forecasts for India’s steel consumption growth to 5-6 percent from the previous year, down from its previous projection of 5-7.5 percent published in February. India’s steel consumption growth is likely to slow down for its financial year-ending March 31, 2020, as its domestic downstream industries faced weaker demand for their end-products. Steel consumption for April-July amounted to 33.706 million tons, about 6.6 percent higher than the 31.607 million tons recorded a year ago, data from Joint Plant Committee showed. The 6.6 percent rise was less than

26 Steel Insights, September 2019

the year-ago growth. April-July 2018’s consumption was 9.7 percent higher from the 28.820 million ton seen in the corresponding months of 2017. By tonnage, the April-July 2019 increase against 2018 was 2.099 million tons while the corresponding rise in 2018 from 2017 was 2.787 million tons. Another indicator of the weaker demand was that both imports and exports fell during the four months. The former was down 6 percent to 2.496 million tons on the year while the latter fell 23.5 percent to 1.474 million tons, a report from the Ministry of Steel showed. The lower usage comes as demand from the automotive industry has slumped. The country’s vehicle production from April to July amounted to 9.72 million units, down 10.65 percent on the year, amid a cash crunch that has affected the availability of credit, and market concerns around slower economic growth. The automotive industry contributes about 49 percent to India’s manufacturing GDP, Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers said in August. Early August, the Reserve Bank of India revised lower its GDP growth forecast for 2019-20 to 6.9 percent from 7 percent in June. Also, the RBI has cut interest rates four times in 2019 so far to support the economy. The last cut was on August 7, when the rate was reduced 35 basis points to 5.4 percent, the lowest since April 2010. As of August,

the RBI has cut its repo rate by 110 basis points in 2019. In addition to a slowdown in the automotive sector, RBI said, “Construction activity indicators slackened, with contraction in cement production and slower growth in finished steel consumption in June.” “Two key indicators of construction activity, viz., cement production and steel consumption, also contracted/slowed down,” Shaktikanta Das, governor of the RBI, said. As a result, India is not expected to hit 7 percent GDP growth for fiscal 2019-20. In 2018-19, its GDP growth slowed to 6.8 percent, the lowest since 2014-2015. Over January-March 2019, GDP growth reached a five-year low of 5.8 percent. The AprilJune GDP result is expected end of August. Other financial reports point to lower economic growth. For instance, in midAugust, the Australia and New Zealand Banking Group cut its forecast for India’s economic growth to 6.2 percent from 6.5 percent previously. Although India’s steel production has turned it into the second largest global producer after China, its apparent finished steel consumption per capita has lagged far behind other leading countries. For instance, India’s per capita steel use stood at 66.2 kg in 2017, while leading producer China was at 549.0 kg and South Korea was in the lead with 1,104.6 kg, data from the World Steel Association showed. China was the sixth-largest user while India was in 85th place. 

FEATURE

Increasing share of institutional investments in Indian real estate: CII-JLL study

Steel Insights Bureau

I

nstitutional investments increased in the last ten years and have improved investor confidence, risk appetite and transparency. Enhanced use of technology across asset classes have changed the outlook of investors towards Indian real estate. As a result, investments have more than tripled to `1,400 billion during 2014-18 as compared to `465 billion during 2009-13, latest CIIJLL report showed. The report on ‘Innovation Led Opportunities - Changing India’s Real Estate Landscape’, was released at the 11th Edition of CII Realty & Infrastructure Conclave. Traditional real estate segments such as residential and commercial have been using modern technology across construction, planning and development for over a decade now. Policy reforms in the sector, the concept of shared economy giving rise to new asset classes such as co-living and co-working spaces and technology driven businesses resulting in the increased interest in data centers have together made times exciting,

both for occupiers and investors. Additionally, introduction of Real Estate Investment Trusts (REITs) have opened new doors for retail investments in commercial real estate. “India has gradually transformed into an investment destination of international repute post the global financial crisis and real estate and infrastructure have played a vital role. Within the space, adoption of technology coupled with policy reforms is one of the key factors for investors to consider greater participation,” said Ramesh Nair, Chairman, CII Realty and Infrastructure Conclave and CEO & Country Head, JLL India. “While metros like NCR-Delhi, Mumbai and Bengaluru accounted for 74 percent of the total institutional investments during 2009-18, we expect tier II and III cities to draw more funds in the coming years. Government’s focus on the growth of smaller cities is leading the change,” Nair added. The report also highlighted that the commercial office segment witnessed the maximum share of institutional investments in the past ten years. Rise in the development of environmentally sustainable buildings and subsequent demand from occupiers have added strength to this trend. From 2009 to 2013, opportunistic funds returned to Indian markets and picked up

marquee assets in select offices (commercial and IT parks/SEZs). India’s improving reforms scenario added value to the overall scenario. Notification of REIT regulations in 2014 led to a deluge of investments in high yielding assets with attractive valuations. This was especially in the non-IT office space as most quality IT/ITeS assets were acquired by funds. Investors took note of the innovation introduced at all levels. With a superior sustainability quotient, Grade-A offices with single ownership and limited supply have pushed global investors to close large deals. But lower availability of quality assets has led to large investors chasing entity level deals leading to extended investment cycles. As a result, the share of investments in the office segment declined during the first six months of the year as compared to the corresponding period the last year. Commenting on the investors’ preference, Samantak Das, Chief Economist and Head of Research & REIS, JLL India said, “Investment strategies have shifted to long-term partnerships from being merely opportunistic. There has been a rise in investments in the past decade. Institutional investments in real estate in H1, 2019 stood at `195 billion, reflecting continued momentum of capital infusion. The investment climate, however, in the first half of 2019 was uncertain. Initially, this was due to the NBFC default crisis and later due to general elections.” 

Steel Insights, September 2019

27

FEATURE

Demand woes continues in August for carmakers Ritwik Sinha

E

conomic slowdown has now effected the auto‑ sector for almost 10 months in a row, with sales moving downwards every month. The country’s autoville is now facing the heat as all major car makers have all posted double digit decline in its August sales figure. Country’s top six dispatched a total of 171,193 vehicles to dealerships in August 2019, registering a 34 percent drop in volumes, compared to the 259,925 vehicles that were dispatched in August 2018. The country’s largest passenger car manufacturer, Maruti Suzuki India (MSI) reported a 32.7 percent decline in sales at 1,06,413 units in August. The company had sold 1,58,189 units in August last year, Maruti Suzuki India (MSI) said in a statement. Domestic sales declined by 34.3 percent at 97,061 units last month as against 1,47,700 units in August 2018, it added. Sales of mini cars comprising Alto and WagonR stood at 10,123 units as compared to 35,895 units in the same month last year, down 71.8 percent. Sales of compact segment, including models such as Swift, Celerio, Ignis, Baleno and Dzire, fell 23.9 percent at 54,274 units as against 71,364 cars in August last year. Mid-sized sedan Ciaz had seen sales fall by 77.2 percent. Sales is reported at 1,596 units, down from 7,002 units sold in August of 2018. MSIL sells the Super Carry LCV in the CV market. Sales has contracted by 13.9 percent. August 2019 sales for Carry stand at 1,555 units, down from 1,805 units sold a year earlier. However, sales of utility vehicles, including Vitara Brezza, S-Cross and Ertiga, rose 3.1 percent at 18,522 units as compared to 17,971 in the year-ago month. Sales of vans segment was down 36.6 percent to 8,658 units in August 2019, down from 13,663 units sold in August 2018. Exports in August were down by 10.8

28 Steel Insights, September 2019

percent at 9,352 units as against 10,489 units in the corresponding month last year, the company said. The second-largest carmaker, Hyundai Motor India’s (HMIL) has witnessed a drop of 16.58 percent in sales selling 38,205 units as compared to 45,801 units which were sold in the same month last year. The decline turns out to be even most deterrent for the Korean carmaker which managed with just 3.8 percent drop last month (July 2019) riding on the success of its latest compact SUV- the Hyundai Venue. Hyundai also had to cut production in August in a bid to keep a check on the inventory. Sounding optimistic about the future, Vikas Jain, National Sales Head - Hyundai Motor India Limited said, “In August, HMIL has continued to be market leader in Utility Vehicle Segment while maintaining its market share in Passenger Vehicles segment with strong performance of Grand i10 Nios, Venue, Creta and i20. We expect the coming festive season will be a turnaround period in the market with positive customer sentiments.” Festive season is typically the period when buyer sentiments turn positive and many plan their purchases around this time. Automakers who have been under pressure for a year now are expecting sales to pick-up around this time. Home-grown auto major Tata Motors registered a drop of 58 percent in domestic passenger vehicle sales for August 2019 with 7,316 units as opposed to 18,420 units sold in August last year. The company’s total sales (domestic + exports) for last month stood at 32,343 units, a decline of 48 percent in volumes over 62,688 units sold during the same month last year. Tata Motors reported one of its lowest sales in nearly two decades. Speaking on the PV sales report for August 2019, Mayank Pareek, President, Passenger Vehicles Business Unit, Tata Motors said, “Under the challenging

market situation, we continued to focus on improving retail sales. Our retail sales were 42 percent more than offtake and as a result the network stock came down by over 3000 vehicles. This prepares dealers well for the festival season. Our prime focus remains on the working capital rotation of the channel. Our aim is to improve the retail capability, till August 2019, 72 new sales outlets were added and more than 3500 sales executives were recruited. “Marking the onset of the festive season, we will drive positive sentiments with special offers and several special editions. We have kick-started this by further increasing the style quotient of the Harrier with the Harrier Dark Edition. We are hopeful that the recently announced financial package by finance minister will help in improving the liquidity of market and to reduce the ownership cost. This will certainly help the industry to revive and drive the growth,” he added further. In the commercial vehicle segment, Tata Motors registered a negative growth across all categories. The medium & heavy vehicles segment saw the company sell 5,340 units in August 2019, a drop of 58 percent over 12,715 units sold during the same month last year. The industrial and light commercial vehicle segment too registered a 40 percent dip in volumes with 3152 units sold last month, as against 5,260 units sold in August 2018. Sales in the SCV and pick-up categories stood at 11,082 units, down by 36 percent, as against 17,426 units sold during the same period last year. Lastly, the passenger carriers from Tata Motors saw a 50 percent reduction in volumes with 2250 units sold in August 2019, over 4458 units sold in August last year. Cumulatively, Tata’s CV sales stood at 21,824 units last month, declining by 45 percent over 39,859 units sold a year ago. Speaking on the CV sales report, Girish Wagh, President, Commercial Vehicles Business Unit, Tata Motors said, “Subdued demand sentiment due to poor freight availability, lower freight rates and general slowdown in economy continued to hamper the commercial vehicle demand. System stock reduction through retail focus and aligning production, will continue to be our approach, while cautiously monitoring the market, in these challenging times. As a

FEATURE result, retail sales are estimated to be ahead of wholesale by over 25 percent in August. We are looking forward to a positive impact of the recently announced stimulus package by the Government.” Automakers including Tata Motors are now counting on a positive festive season and a stimulus package from the government to act as catalysts for the auto sector. The consumer buying sentiment is expected to finally pick up with the advent of the festive season, while OEMs are requesting the government to grant a temporary reduction in GST rates, as a short in the arm for the auto sector. The Finance Minister recently announced a number of measures for the auto industry in a bid to revive sales in the sector. The Indian subsidiary of Japanese carmaker Toyota Kirloskar Motor (TKM) total sales (domestic + export) for the previous month stood at 11,544 units, witnessing a drop of 20.8 percent, against 14,581 units over the same period last year. TKM registered a sale of 10,701 units in August 2019, witnessing a decline of 24 percent in domestic volumes, as opposed to 14,100 units sold in August 2019. The automaker continues to register the dip in volumes amidst the overall slowdown in the Indian auto sector that has affected both car and two-wheeler makers. The company’s exports, however, nearly doubled last month with the company shipping 843 units, as against 481 units in August 2018. Commenting on the sales performance, N. Raja, Deputy Managing Director, Toyota Kirloskar Motor said, “The consumer sentiment continues to be muted in the month of August, with customers deferring

their purchase of vehicles. Severe floods across states has also hurt the demand in the industry. Unfavorable exchange rate is not helping our cost. We are happy that despite the current slowdown in the industry which has resulted in slump in domestic sales, Glanza sales have shown a positive momentum. We have been successful in reaching out to our target buyers ‘First Time Toyota Buyers’, we have seen higher footfalls from them.” Adding further, he said, “The Union Finance Minister announcing measures recently to boost the auto sector with cheaper car loans, improving liquidity through credit expansion to public sector banks, deferring of one-time registration fees, higher depreciation for all vehicles and lifting ban on purchase of new vehicles in government departments is likely to spur some demand which is a much needed relief. The latest FDI reforms which will boost local manufacturing, also comes as a positive move to propel growth in the industry in the long run. We hope that the festive cheer ushers in positive sentiments with better retail sales in the upcoming months.” Homegrown utility vehicle specialist Mahindra & Mahindra (M&M) overall sales (domestic + exports) stood at 36,085 vehicles in August 2019, compared to 48,324 vehicles during August 2018. The company’s domestic sales stood at 33,564 units, a drop of 26 percent over 45,373 units sold in August last year. The automaker continues to be affected by the overall slowdown in the auto sector and the Indian economy. The company’s passenger vehicle (UV + cars) sales for August 2019 stood at 13,507 units, declining by 32

Top 6 auto makers of the country and their car sales during August 2019 and August 2018 August 2019 (in units)

August 2018 (in units)

Growth (%)

Maruti Suzuki India

106,413

158,189

(-) 32.7

Hyundai Motor India

38,205

45,801

(-) 16.58

Tata Motors

32,343

62,688

(-) 48

Toyota Kirloskar Motor

11,544

14,581

(-) 20.8

Mahindra & Mahindra

36,085

48,324

(-) 25 32

Honda Cars India

8,518

17,621

(-) 51.6

Company

percent, when compared to the 19,578 units that were sold during the same month in 2018. UV sales dropped by 27 percent with 13,037 units sold, as against 17,892 units sold August 2018. In the cars+vans segment that includes electric cars from Mahindra, the company registered a 75 percent decline in volumes with 470 units sold as opposed to 1866 units in August last year. Commenting on the sales performance, Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M said, “The auto industry continues to be subdued in the month of August due to several external factors. We are optimistic and hopeful of a good festive season going ahead”. Mahindra’s commercial vehicle segments too continued to report a drop in numbers. The manufacturer sold a total of 14,684 units in August 2019, a decline of 28 percent over 20,326 units in August 2018. In the Medium and Heavy Commercial Vehicles segment, the automaker sold 354 vehicles in the last month, a drop of 69 percent as against 1148 units sold in August last year. The threewheeler segment though recorded a two percent growth in August with 5,373 units sold, as against 5,289 units sold during the same period last year. M&M shipped 2,521 units in August this year, a drop of 15 percent over 2951 units sold in August last year. The Indian arm of Japanese automaker Honda Cars India (HCIL) Cars India has reported a 51.3 per cent decline in monthly domestic sales to 8,291 units in August 2019. In comparison, the company had sold 17,020 units in the same month last year. The carmaker also exported 227 units in August 2019. The figure is 62.2 per cent lower than 601 units exported by Honda Cars India in August 2018. “The auto sector continues to witness high de-growth due to poor consumer sentiment. This is despite the high discounts prevailing in the market which makes it the best time to buy cars,” Honda Cars India Senior Vice President and Sales and Marketing Director Rajesh Goel said. “We hope the recent measures taken by the government will help in improving consumer sentiment and demand creation as we move forward. With the impending festive season, the sales are likely to pick-up in coming months,” he added. 

Steel Insights, September 2019

29

FEATURE

Seaborne coking coal offers slide in August

Arindam Bandyopadhyay

S

eaborne coking coal offers staged a decline in August 2019 amid subdued demand from China and India and overall sluggishness in the steel market worldwide, industry sources said. According to information available with Steel Insights, the premium variety was quoted at $155 per ton FOB Australia on August 30, 2019 as against $171 per ton FOB Australia on July 31, 2019. Peak Down prices were quoted at $156 per ton FOB Australia on August 30, 2019 as compared to $172 per ton FOB Australia on July 31, 2019. Seaborne prices plunged in the first week of August before stabilising towards the close of the month, amid speculation that the prices might have bottomed out. Trading was muted in the seaborne market. Prices might not fall further after the recent spate of decreases, trading sources said. At the current level, prices got some support with some Chinese buying activity keeping prices largely at prevailing levels. Buyers were taking a wait and watch posture. Meanwhile, steel mill sources in India highlighted the bleak downstream market

30 Steel Insights, September 2019

conditions in the South Asian country, citing a liquidity crunch and poor performance of its automotive sector as reasons for subdued demand for steel products, which, in turn, saps Indian steelmakers’ appetite for buying the key raw material for making steel. Earlier, during July 2019, crude steel production in India was 9.21 million tons (mt), a decline of 1.3 percent over the production figure of June 2019, which was at 9.33 mt. In July 2019, hot metal production was at 6.30 mt, decline of 0.5 percent over the June 2019 production of 6.33 mt. Coking coal imports into India during July, 2019-20 are estimated at around 4.16 mt, marginally up from 4.13 mt in the same period last year, according to Steel Insights estimates. Steel consumption levels rose 8.9 percent to 9.05 mt in July 2019 as against 8.31 mt in June 2019. India’s demand growth of coking coal imports remained slow as buyers evaluated the falling seaborne prices before taking any decision to purchase, said sources. Marginal decline in hot metal production at around 6.30 million tons suggested that imported coal booking was slow as mills utilisation levels were slow. Slight spike in

consumption levels in July may raise coking coal bookings in August, sources said. The steady fall in coking coal prices in the last one month may encourage mills to book material again fearing that prices may find support as demand for steel rises after monsoon. Meanwhile, steel demand in India is expected to accelerate after the completion of monsoon season as construction activities will see a pickup in pace. The consumption is expected to grow by five to six percent on the back of government’s expenditure towards infrastructure and construction. With the same government coming to power, the focus will continue to remain on infrastructure development in the country, CARE Ratings said in a report. “An uptick in construction activities postmonsoon season will result in higher steel demand which in turn is expected to bring some relief to long steel products’ prices on a month-on-month basis. Also, likely recovery in automotive industry during the second half of FY20 is expected to provide some support to the flat steel products’ prices sequentially,” said the report. However, the finished steel production growth is likely to decelerate to three to four percent. This is because no major capacity is expected to come up from large steel players while the small steel players are estimated to increase their output at a rate similar to last year. The price increase going forward however is expected to be moderate. Therefore, the prices of flat products are expected to decline by four to five percent and that of long products are likely to fall at a slower pace of two to three percent during FY20 on a yearly basis. Met coke offers up

Metallurgical coke import offers staged a modest increase in August 2019 on demand from China, according to information available with Steel Insights. Imported met coke prices moved up to $321 per ton CFR India on August 29, 2019 as against $317 per ton on July 31, 2019. There was a sudden rebound in demand for higher grade material in the Chinese domestic market which led to the increase in prices, the sources said. According to sources, domestic met coke prices in India stood at around `25,000 per ton (ex-plant) on the east coast and around `25,500 per ton (ex-plant) on the west coast. 

FEATURE

Iron ore prices plunge to hurt exports from India

Steel Insight Bureau

W

ith global iron ore prices entering the bearish zone, Indian exports may be impacted. After rocketing to a five-year high of $121 per ton in July, spot iron ore prices plummeting to $90, causing panic among the country’s iron ore exporters. With forecasts of a further slump, exports will anything but gain. Exports of iron ore had gained traction since the tailing dam burst at Vale’s key mine in Brazil earlier in January spooked supplies, triggering a sharp escalation in prices. Shipments of lower grade material from India surged as China’s steel mills showed greater appetite for sourcing iron ore of Indian origin. International iron ore prices may tank up to $70 by the end of this calendar (2019). This price point will make iron ore unviable and dissuade exports, sources said. After the crisis at Vale’s mine, iron ore exports from India spiked. The country closed 2018-19 with exports of 16.2 million tons (mt), overshooting iron ore imports of 12.6 mt. The 30 percent export duty on 58 percent Fe and higher grade iron ore make it less competitive in the seaborne market. If international prices for 62 per cent Fe fines

slide to $ 70-80 levels, as was the case preJanuary 2019 before the Vale dam disaster, then iron ore exports by domestic miners are expected to decline going forward, sources said. Stabilizing supplies have helped exert downward pressure on iron ore prices. Backed by the resumption of Vale’s Brucatu iron ore mines in June, iron ore exports from Brazil have risen 17 percent sequentially in July. The Brucatu mines have capacity to unearth 30 million tons each year. Moreover, supplies from Australia are also building on after a tropical cyclone had disrupted operations of some mines in March. That apart, downside risks to international iron ore prices also prevail because of anticipation of weaker Chinese steel production growth in second half (H2) of calendar 2019 following an escalation of US-China trade-tensions, a sharp depreciation of the Yuan (China’s currency) and a corresponding decline in mill purchasing power. Steel firms see ground for cut in iron ore prices

Domestic steel makers see scope for a downward revision in iron ore prices by 3035 per cent. International prices of benchmark 62

Fe fines falling 23 per cent over the past couple of weeks and finished steel product prices tumbling by 10-25 percent between January and August back the case for ore price correction in the Indian market, they reasoned. Continuing high prices of iron ore is putting further pressure on steel industry and many manufacturers have already started throttling their production. The market is apprehending further deterioration in the situation and many plants may shut down unless immediate attention is given by the government to ensure higher demand in steel and lowering of iron ore prices, sources said. Since January 2019, sponge iron ore prices have shed 21-25 percent, from `21,200 a ton to `15,800-16,700. TMT bars (12 mm) too have seen a price fall of 14-19 percent in the comparable period to `28,500-32,600, from `35,400-37,900. The slide has also been noticed in steel billets, with prices correcting by 20-21 percent from `31,600-31,950 per ton to `25,300-25,400. International iron ore prices, after hitting a five-year high of $121 have mellowed to $90 as supplies from Brazil have stabilised sooner than expected. Spot prices are faced with a downside with easing of supply turmoil, lacklustre steel demand outlook and Chinese steel mills loath to book additional shipments. But domestic iron ore has not seen the desired correction even as global prices go into a downward spiral with forecast of further easing. For instance, in Odisha, the largest iron ore producer, prices (exmine) of 62 percent Fe fines have hovered around `2,500 a ton with sporadic marginal cuts. Both merchant miners of Odisha and NMDC have retained status quo on prices despite a glut in domestic market and steel producers disquieted by continuous fall in product prices since January. Some steel mills have urged Odisha Mining Corporation (OMC) to cut prices by 30-35 percent and accord priority to statebased integrated steel makers and other enduse industries. OMC is requested to declare all material that is available so that the supply side remains firm, and realistic rates are realised. These prices will have a cascading impact on other merchant miners who would then be forced to reduce prices for supporting the end use industry in Odisha, sources said. 

Steel Insights, September 2019

31

market report

Global crude steel output down 1.43% in Jul m-o-m July 2019, down 17.21 percent over the same month last year. Africa and the Middle East produced 1.05 mt and 3.1 mt of crude steel in July 2019, down by 12.42 percent and up by 3.79 percent respectively compared to the same month in 2018. China, the single-largest producer, manufactured 85.22 mt of crude steel in July this year, an increase of 4.9 percent over the corresponding period in 2018, when production stood at 81.24 mt and month-onmonth production decreased by 2.64 percent compared to the June 2019 figure of 87.53 mt. Elsewhere in Asia, Japan produced 8.39 mt of crude steel in July 2019, decrease of 0.39 percent compared to the same month last year. India’s production for July 2019 stood at 9.22 mt, an increase of 2.39 percent compared to July 2018. South Korea

Sanjoy Bag

W

orld crude steel production for the 64 countries reporting to the World Steel Association (Worldsteel) decreased by 1.43 percent to 156.7 million tons (mt) in July 2019 compared to 158.98 mt reported in June 2019. Crude steel production for July 2019 went up by 1.37 percent compared to 154.58 mt in July 2018. In July 2019, Asia produced 113.25 mt of crude steel, an increase of 3.92 percent over the same month in 2018. The European Union (EU) produced 13.64 mt of crude steel in July 2019, down by 6.13 percent compared to the same month in 2018. North America’s crude steel production in July 2019 was at 10.12 mt, down by 0.06 percent over the corresponding month of 2018. South America produced 3.22 mt in

produced 6.04 mt during the same period, down 2.21 percent over the same month in 2018. Thailand produced 0.42 mt during July 2019, remain flat over the same month last year. Pakistan produced 0.31 mt of crude steel in July 2019, down by 16.22 percent compared to the same month in 2018. In the EU, Germany produced 3.36 mt of crude steel in July 2019, which is 1 percent lower compared to the same month in 2018. Italy produced 2.13 mt of crude steel in July 2019, down 1.2 percent compared to that in July 2018. Spain’s crude steel production was 1.1 mt in July 2019, up 15.7 percent compared to that in July 2018. France produced 1.33 mt of crude steel in July 2019, down 0.6 percent compared to the figure in July 2018. In July 2019, Russia produced 6.2 mt of crude steel, down by 1.5 percent compared to the same month in 2018. Ukraine’s production was 1.78 mt in July 2019, down 1.7 percent over the same month in 2018. In July 2019, the US produced 7.51 mt of crude steel, 1.8 percent higher compared to July 2018 and Turkey’s crude steel production for July 2019 was 2.93 mt, decrease of 10.6 percent compared to July 2018. 

World crude steel production

(in ‘000 tons)

Jul 2018

Aug 2018

Sep 2018

Oct 2018

Nov 2018

Dec 2018

Jan 2019

Feb 2019

Mar 2019

Apr 2019

May 2019

Jun 2019

Jul 2019

Jul 2019 / Jul 2018 (% change)

European Union (28)

14,532

12,593

13,945

14,750

14,140

13,176

13,802

12,984

14,994

14,064

14,453

13,790

13,641

-6.13%

Other Europe

3,564

3,318

3,112

3,531

3,476

3,184

2,900

2,918

3,317

3,371

3,408

3,026

3,166

-11.17%

C.I.S. (6)

8,720

8,691

8,387

8,518

8,033

8,465

8,320

7,534

8,438

8,203

8,492

8,229

8,664

-0.64%

North America

10,130

10,286

10,026

10,476

10,105

10,323

10,512

9,421

10,742

10,196

10,521

9,874

10,124

-0.06%

South America

3,887

3,827

3,814

3,956

3,681

3,356

3,647

3,288

3,518

3,638

3,537

3,563

3,218

-17.21%

Africa

1,200

1,159

1,176

1,286

1,281

1,143

1,220

1,263

1,296

1,359

1,320

1,234

1,051

-12.42%

Middle East

2,982

2,954

2,929

3,059

2,944

3,222

3,226

2,927

3,176

3,105

3,181

3,108

3,095

3.79%

Africa/Middle East

4,182

4,113

4,105

4,345

4,225

4,365

4,446

4,190

4,472

4,464

4,501

4,342

4,146

-0.86%

China

81,241

80,326

80,845

82,552

77,621

76,121

75,013

70,988

80,326

85,032

89,091

87,533

85,223

4.90%

India

9,000

8,839

8,520

8,770

8,490

9,010

9,180

8,738

9,412

8,785

9,196

9,336

9,215

2.39%

Japan

8,420

8,805

8,418

8,564

8,658

8,467

8,141

7,743

9,084

8,647

8,676

8,789

8,387

-0.39%

Sou h Korea

6,177

6,097

5,853

6,185

5,928

6,162

6,211

5,471

6,266

5,978

6,371

5,958

6,041

-2.21%

Pakistan

370

435

420

435

310

325

280

255

290

265

275

280

310

-16.22%

2,040

2,040

1,925

1,965

1,880

2,020

2,010

1,815

2,030

1,930

2,040

1,960

1,890

-7.35%

Thailand

415

395

400

370

300

310

300

230

250

215

240

415

415

0.00%

Vietnam

1,321

1,402

1,460

1,675

1,295

1,292

1,420

1,260

1,395

1,350

1,395

1,350

1,773

34 25%

Taiwan, China

Asia Oceania World Rest of the world except China

1,08,984 1,08,339 1,07,841 1,10,516 1,04,482 1,03,707 1,02,554 577

574

481

491

474

507

523

96,500 439

1,09,054 1,12,201 1,17,283 1,15,622 1,13,254 474

533

550

534

484

1,54,576 1,51,740 1,51,711 1,56,583 1,48,617 1,47,084 1,46,705 1,37,274 1,55,009 1,56,671 1,62,746 1,58,978 1,56,697 73,335

71,414

Source: WSA

32 Steel Insights, September 2019

70,866

74,031

70,996

70,963

71,692

66,286

74,683

71,639

73,655

71,445

71,474

3.92% -16.18% 1 37% -2.54%

Logistics

Traffic handled by major ports up 2% till July Steel Insights Bureau

T

he 12 major Indian ports handled 236.18 million tons (mt) of total traffic during April-July 2019, about 2 percent higher than 231.54 mt recorded for April- July, 2018, according to data released by the Indian Ports Association (IPA). Movement of iron ore through the major ports showed an increase of 22.15 percent during April-July 2019. The major ports together handled 17.448 mt of iron ore during April-July 2019, compared to 14.284 mt handled in the same period of previous fiscal. Paradip Port handled the highest volume of iron ore, at 6.633 mt, during April-July 2019, against 3.748 mt handled during April-July 2018. Thermal coal handling by the major ports was down 10.1 percent during AprilJuly 2019. Movement of thermal coal

through these ports decreased to 33.04 mt during April-July 2019, compared to 36.76 mt achieved in April-July 2018. Among the major ports, Paradip had the distinction of handling the highest volume

Traffic handled at major ports (during April to July, 2019* vis-a-vis April to July, 2018)



(in ‘000 tons)

Ports

April to July Traffic 2019*

2018

% variation against prev. year traffic

KOLKATA Kolkata Dock System

6134

6023

1.84

Haldia Dock Complex

15753

14176

11.12

TOTAL: KOLKATA

21887

20199

8.36

PARADIP

38091

35676

6.77

VISAKHAPATNAM

23704

21524

10.13

KAMARAJAR (ENNORE)

10876

11527

-5.65

CHENNAI

16432

17889

-8.14

V.O. CHIDAMBARANAR

11716

11497

1.90

COCHIN

11549

10536

9.61

NEW MANGALORE

12118

14316

-15.35

MORMUGAO

5609

6750

-16.90

MUMBAI

19773

19623

0.76

JNPT

23435

23251

0.79

DEENDAYAL

40990

38760

5.75

TOTAL:

236180

231548

2.00

(*) Tentative

of thermal coal, at 10.246 mt, during AprilJuly 2019. The port had handled 11.327 mt during April-July 2018. The major ports handled a total of 20.202 mt of coking coal during April-July 2019, up 16.18 percent as compared to 17.388 mt handled during the same period of previous year. Among the major ports, Kolkata had the distinction of handling the highest volume of coking coal, at around 6.817 mt, during April-July 2019. The port had handled 5.634 mt of coking coal during April-July 2018. Movement of container traffic in terms of tonnage increased by 5.36 percent to 50.879 mt during April-July 2019, compared to 48.291 mt during the corresponding month of the April-July 2018. Altogether, 8 major ports showed positive growth in traffic handling during April-July 2019, while the remaining 4 showed negative growth on a year-on-year basis. Vishakhapatnam Port topped the list with 10.13 percent increase in cargo throughput, while Marmagoa saw the sharpest decline of 16.9 percent, during April-July, 2019. In terms of traffic volumes, Deendayal Port clinched the top rank with POL volumes of 21.514 mt recorded during April-July, 2018. 

Steel Insights, September 2019

33

Logistics

IR’s iron ore handling in July up 15.43% y-o-y Steel Insights Bureau

I

ndian Railways in July 2019 transported 12.94 mt of iron ore for exports, steel plants and for other domestic use in July 2019, up 15.43 percent from 11.21 mt in July 2018, as per provisional information available with Steel Insights. Further, revenue earnings from transportation of iron ore for exports, steel plants and for other domestic use were up 31 percent to `841.97 crore in July 2019, compared to `642.67 crore in the corresponding month of last year. During April-July, 2019, transportation of iron ore for exports, steel plants and for other domestic use stood at 49.39 mt, up 15.37 percent from 42.81 mt in April-July, 2018. Revenue earnings from transportation of

iron ore for exports, steel plants and for other domestic use during April-July, 2019 stood at `3,526.13 crore, up 25.7 percent as compared to `2,805.18 crore earned in April-July, 2018. Meanwhile, during July 2019, transportation of various commodities stood at 99.74 mt, up 1.6 percent as compared to 98.15 mt clocked during July 2018. Revenue earnings during July 2019 stood at `10,030.12 crore, up 3.98 percent compared to `9,510.66 crore in July 2018. During April-July, 2019, transportation of various commodities stood at 407.19 mt, up 2.42 percent as compared to 397.54 mt clocked during April-July, 2018. Revenue earnings of various commodities during April-July, 2019 stood at `42,433.35 crore, up 7 percent compared to `39,650.54 crore in April-July, 2018.

Commodity-wise revenue earnings of Railways (July 2019) Commodity

Tonnage (in million) 2018-19 2019-20

Coal Total for steel plants Coal for washeries Total for power houses Total for public use Total Pig iron and finished steel i) from steel plants ii) from other points Total Iron ore i) for export ii) for steel plants iii) for other domestic users Total Cement Foodgrains Fertilizers Mineral Oil (POL) Container Service i) Domestic containers ii) EXIM containers iii) Total Balance o her goods Total revenue earning traffic

34 Steel Insights, September 2019

Earnings (in cr.) 2018-19 2019-20

4 88 0.01 19.62 22 81 47 32

5.00 0.02 19.47 22.82 47.31

423.43 0 27 1,993.10 2,358.21 4775.01

461.54 0.55 2,151.71 2,481.29 5,095.09

2.65 1 87 4.52

2.86 1.65 4.51

446.62 174.01 620.63

442.70 142.66 585.36

0.15 7.64 3.42 11.21 9.50 3.15 4.38 3.69

1.63 7.27 4.04 12.94 8.81 3.23 4.46 3.84

8.36 410.10 224.21 642.67 736.72 567.36 472.15 435.39

146.35 377.60 318.02 841.97 654.01 552.17 535.74 470.24

0.94 4.21 5.15 7.22 98.15

1.08 4.29 5.37 6.91 99.74 1

118.48 376.18 494.66 589.7 9,510.66

113.91 419.52 540.30 575.69 10,030.12

Apart from iron-ore, Railways transported 47.31 million tons (mt) of coal, flat from 47.32 mt handled in July 2018. Revenue earnings from transportation of coal were up by 6.7 percent to `5,095.09 crore in July 2019, compared to `4,775.01 crore in July 2018. During April-July, 2019 Railways transported 204.35 mt of coal, up 2.9 percent from 198.57 mt handled in April-July, 2018. Revenue earnings from transportation of coal were up by 9.9 percent to `21,457.16 crore in April-July, 2019, compared to `19,517.96 crore in April-July, 2018. Cement transported through railways stood at 8.81 mt in July 2019, down by 7.2 percent from 9.50 mt in July 2018. Revenue earnings from transportation of cement were down 11.22 percent to `654.01 crore in July 2019 from `736.72 crore in July 2018. During April-July, 2019, cement transported through railways stood at 35.88 mt up by 11.39 percent from 39.97 mt in April-July, 2018. Revenue earnings from transportation of cement were also up 11.72 percent to `3,408.65 crore in April-July, 2019 from `3,050.91 crore in the corresponding period of the last year. 

Commodity-wise revenue earnings of Railways (April to July 2019) Commodity Coal Total for steel plants Coal for washeries Total for power houses Total for public use Total Pig iron and finished steel i) from steel plants ii) from other points Total Iron ore i) for export ii) for steel plants iii) for other domestic users Total Cement Foodgrains Fertilizers Mineral Oil (POL) Container Service i) Domestic containers ii) EX M containers Total Balance other goods Total revenue earning traffic

Tonnage (in million) 2018-19 2019-20

Earnings (in cr.) 2018-19 2019-20

18.86 0.04 83.49 96.18 198.57

19 88 0.06 87.67 96 74 204 35

1,632.27 0.86 8,293.49 9,591.34 19,517.96

1,841 94 1.48 9,439 36 10,174 38 21,457.16

10.37 7.12 17.49

10 91 6.66 17.57

1,940.53 699.04 2,639.57

1,975 26 653.19 2,628.45

0.81 28.64 13.36 42.81 39.97 11.91 16.15 14.46

5 93 28.55 14 91 49 39 35 88 12.02 16.12 15.19

53.16 1,739.99 1,012.03 2805.18 3,408.65 2,299.99 1,946.82 1,871.72

589.52 1,664.52 1,272.09 3526.13 3,050 91 2,354 33 2,135 83 1,958.22

3.81 15.87 19.68 28.78 397.54

3 71 16 96 20.67 27 38 407.19

468.84 1,425.32 1,894.16 2,554.69 39,650.54

458.13 1,571.42 2,054.41 2,524.83 42,433.35

Corporate

SAIL extends disinvestment EoI deadline for better response

Plant-wise financial performance (PBT in Cr) Plant/Unit

2018-19

2017-18

Bhilai Steel Plant

509.37

645.88

Durgapur Steel Plant

278.62

-270.85

Rourkela Steel Plant

1472.21

-180.24

Bokaro Steel Plant

1916.49

526.16

IISCO Steel Plant

-402.05

-988.55

Alloy Steels Plant

-40.64

-47.46

Salem Steel Plant

-259.00

-211.07

Visvesvaraya Iron

75.72

-108.90

SAIL operates and owns five integrated steel plants at Bhilai, Durgapur, Bokaro, Rourkela and Burnpur and three special steel plants at Salem, Durgapur and Bhadravati. Another Unit, Chandrapur Ferro-Alloy Plant (CFP) produces Ferroalloys. It also has SAIL Refractory Unit (SRU) at Bokaro, with four refractory manufacturing units in Jharkhand and Chhattishgarh. Changes in Bid documents

Steel Insights Bureau

T

he deadline for submission of initial bids for stake sale of SAIL’s three plants Visvesvaraya Iron and Steel Plant (VISP), Alloy Steels Plant (ASP) and Salem Steel Plant (SSP) has been extended further to September 10 to improve chances of their disinvestments. In October, 2016, the government accorded ‘in-principle’ approval for strategic disinvestment of these three units. The entire process of strategic disinvestment is being overseen by an InterMinisterial Group (IMG) constituted by the Ministry of Steel and chaired by the Secretary, Steel.

SAIL board, after giving ‘in-principle’ approval for the disinvestment, appointed SBI Capital to assist in the process. Upon receipt of approval of the government for issue of Preliminary Information Memorandum (PIM) and Expression of Interest request (EoI) in February, 2018 from the ministry, public notice for inviting EoI for ASP, Durgapur was issued. “Since, the EoIs received in response to the above were not meeting the specified eligibility criteria, the process has been annulled. Fresh process in this regard has been initiated and revised PIM/EoI requests of ASP, VISP and SSP have been issued,” SAIL has disclosed in its annual report.

SAIL has subsequently brought in some following modifications in the bid documents for Salem Steel Plant. The consortium members are now permitted to change the shareholding ratio among the consortium members in the consortium, subject to the lead member continuing to hold at least 26 percent equity shareholding and other consortium members continuing to hold at least 20 percent equity shareholding in the Consortium SPV for a minimum period of five years from the date of closing under the definitive agreements. Earlier The EoI document required that there would no change in composition of the Consortium SPV or dilution of shareholding or change in inter se shareholding ratio of the consortium members in the SPV, without the prior approval of the government for a period of five years. Key attractions

♦♦ No debt is proposed to be transferred to the Saleem Plant. Also, after consummation of the transaction, no interest cost on debt will be allocated to the unit

Steel Insights, September 2019

35

Corporate ♦♦ SAIL is divesting land measuring 1708.10 acres on perpetual lease basis. Hospitals/ guest house/ telephone exchange/ residential quarters are on the land which is retained by the SAIL ♦♦ Central Industrial Security Force barrack may be freed up. “The services of CISF will be subject to the requirement of the successful Bidder. The usage of the office and barracks by CISF will also be based on the same,” SAIL told prospective bidders who asked would the CISF office & barracks be vacated after consummation of transaction Land includes office complex covering area of 246.90 acres comprising of Admin building, HRD center, C&IT, Admin canteen, DC CISF’s office, CISF barracks, old construction lab (which is currently used by CMO for storing converted articles) ♦♦ SAIL has expanded capacity of Salem at an expenditure of `2,384.42 crore as on March 2019. The capex incurred for the expansion project has been funded by internal accruals of about `1355.40 crore and term debt of `1029.02 crore SAIL contributed to every important project in FY19

Addressing the shareholders of SAIL on company’s 47th Annual General Meeting recently, Anil Kumar Chaudhary, Chairman, SAIL said FY19 has been a turnaround year for the company. “The change in fortune has been a result of determined efforts and strategic initiatives taken by the company which helped to improve the EBITDA in FY19 to `10,283 crore, almost double of the performance of `5,184 crore in FY18,” he said. The company’s improvement in financial performance was based upon the improvement in operational areas, he said. ♦♦ Increase in Saleable Steel production by 7 percent ♦♦ Growth in sales turnover at `66,267 crore, 16 percent over the previous year ♦♦ Improvement in operational efficiencies resulting from higher production through concast route which grew by 8 percent over FY18

36 Steel Insights, September 2019

Item

Q1 FY 2019-20

Q1 FY 18-19

Hot Metal Production

4 323 MT

4.266 MT

Crude Steel Production

3 930 MT

3.945 MT

Saleable Steel Production

3.653 MT

3.613 MT

Sales Turnover (in Cr)

14,645.19

15,743.21

EBITDA (in Cr)

1766 33

2685.46

PBT (in Cr)

103.93

827.84

PAT (in Cr)

68.84

540.43

♦♦ Improved product-mix

Q1 impacted by subdued demand

♦♦ Reduction in Coke Rate (which improved 3 percent in H2 over H1 of FY19)

Announcing the Q1 performance for Q1 of FY20, SAIL declared profit before tax (PBT) of `103.93 crore and profit after tax of `68.84 crore. The volatile market conditions, which have led to subdued demand as well as realisations, have impacted the performance of the entire steel industry including SAIL. Accordingly, SAIL witnessed a reduction in its top-line as well as bottom-line despite having consistent physical performance, the company said in a statement. Meanwhile, SAIL is maintaining the tempo of improved its physical performance and has registered its best ever Hot Metal and Saleable Steel performance for Q1 at 4.323 million tons (mt) and 3.653 (mt) respectively. Despite the challenging market conditions, SAIL achieved Saleable Steel sales volume of 3.249 mt during the first quarter of FY20 which was almost equal to the performance during corresponding period last year. “The domestic steel industry has witnessed lower NSR and subdued demand during the first quarter of the financial year compared to same period last year. However, with the government announcing planned investments in steel intensive sectors including infrastructure and construction, a positive impact can be expected for the industry for the rest of the financial year. Coupled with this, the Company’s strategic priorities to ramp up volumes especially from the modernized units, improving productmix and improving operational efficiencies lend a positive outlook to the Company’s future. Inspite of market challenges, the Company has continued its profit streak over past seven quarters,” Chaudhary said. 

♦♦ New grades of steel were introduced like Quenched & Tempered Plates (SAIL WR 400, ASTM 517 F, S690 QL), High Tensile Parallel Flanged Beams, Medium Carbon Wire Rods (HC 52B,SAE 15B21) SAIL, especially during H2 FY’19, took various initiatives which led to increase in production of hot metal, crude steel and saleable steel. During this period, production of UTS90 Rails grew by 35 percent with Long Rails production increasing by 28 percent over first half. “SAIL has associated itself with every major national infrastructure project of the country in the areas of defence, railways, infrastructure, space, power, manufacturing. The company supplied steel to projects including Statue of Unity (tallest statue in the World), Bogibeel Bridge (longest railcum-road bridge in India), Kishanganga and Tuirial Hydro Projects, Eastern and Western Peripheral Expressways in FY’19 giving a fillip to India’s growth story under the ambit of National Steel Policy 2017 as well as ‘Make in India’ movement,” the chairman said. New grades were supplied for the first time to meet various requirements in the construction and infrastructure sector. SAIL also supplied steel for various defence projects including indigenously built Anti-Submarine Warfare (ASW), Stealth Corvette INSKiltan and the first indigenous artillery gun ‘Dhanush’ of the Indian Army.

Corporate

Tata Steel cuts capex plans for FY20

Steel Insights Bureau

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ata Steel plans to recalibrate its capex plans for FY20 owing to the severe demand slowdown in both domestic and international markets, T V Narendran, MD & CEO, Tata Steel said. The steel maker plans to slash capex to `8000 crore from `12000 crore planned earlier for FY20. Between Europe and India the aim is to keep Europe operations cash positive and in India there may be phasing out or delaying some projects, Narendran said while relaunching its steel retail store “steeljunction” in a different avatar in a new location. Now approximately `8000 crore of capex would likely be planned for India and around `4000 crore for Europe, Narendran said

adding the exact figure is still being worked out. Major part of the capex for India will be spent for expansion of Kalinganagar project by prioritizing some projects like cold rolling mill and pellet plant project and delaying some projects. However, the Tata Steel management is confident of completing expansion of the Kalinganagar project by FY22. Closes non-core European facilities

Tata Steel has recently signed a sales and purchase agreement for Cogent Power Inc (CPI), with Japanese steel giant JFE Shoji Trade Corporation. CPI manufactures cores for electrical distribution transformers and employs nearly 300 people.

Furthermore Tata Steel has decided to retain Surahammars Bruks AB, which makes advanced steels for electric vehicles and employs around 100 people. However, despite exploring all options, Tata Steel has been unable to find a way forward for Orb Electrical Steels and so proposes to close the site, with the potential loss of up to 380 jobs. “We have been able to secure the future for almost 400 colleagues in CPI and Surahammars Bruks. However, today’s proposal will be sad news for colleagues at Orb in South Wales. This is necessary, enabling us to focus our resources, including investment, on our core business and markets, helping us build a long-term sustainable future in Europe,” Henrik Adam, CEO of Tata Steel’s European operations, said. The Orb Electrical Steels business has been loss-making for several years as it struggled to compete in the fast-moving market to supply steels used in electricity transformers in which customer requirements have out-stripped the site’s capability. Converting the site to create steels for future electric vehicle production would cost in excess of £50 million in a highly competitive market where Tata Steel faces higher-volume competitors both in Europe and globally. “Continuing to fund substantial losses at Orb Electrical Steels is not sustainable at a time when the European steel industry is facing considerable challenges. We saw no prospects of returning the Orb business to profitability in the coming years. I recognise how difficult this news will be for all those affected and we will work very hard to support them,” Henrik added. In addition, Tata Steel has been unable to find a buyer for Wolverhampton Engineering Steels Service Centre, in the UK, and proposes to close it, potentially affecting up to 26 jobs, including a sales office in Bolton. Every effort will be made by Tata Steel to mitigate the impact on affected employees including offering alternative employment opportunities where possible at other Tata Steel sites. Consultations with affected employees and trade unions at both Orb and Wolverhampton will commence shortly. This process will include assessing ways to minimise the need for compulsory redundancies. Tata Steel is the largest steelmaker in

Steel Insights, September 2019

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Corporate the UK employing more than 8,000 people, manufacturing advanced products for the likes of the automotive, construction and engineering industries. It has has invested around £2 billion in its UK business since acquiring Corus in 2007, including more than £100 million in the last year to support advanced steel manufacturing at a number of UK sites including an essential life extension project at one of the company’s two UK blast furnaces. Group reorganisation

Speaking about the re-organization of subsidiaries, Narendran said there were a lot of subsidiaries in Europe and currently a reorganization is being undertaken. “There are around 200-300 subsidiaries in Europe, which will be reduced by 100-120 going forward,” he said. For the subsidiaries operating in India, the strategy would be to bring them under certain broad categories for synergy of operations. For example, Tata Sponge, which had been a vehicle for acquisition of Usha Martin, would focus on long products and would be renamed as Tata Steel Long Products Ltd. Similarly, there will be a holding company for downstream units, a holding company for infrastructure assets, a holding company for mining assets that will focus on commercial mining and a holding company for utility services, Narendran said. Tata Steel is also looking at growth options in multiple levels and focusing on B2B parts of automotive and downstream units. Of late the company had been focusing on the consumer facing B2C part and services and solutions divisions. “We plan to increase the share of B2C part of revenue from current level of 15 percent to 30 percent in the near future. The company makes 5 year plans for its different businesses,” he said. Talking about demand outlook of the steel industry, he said the industry is expected to perform better in the second of the fiscal. “The government is taking steps and listening to the industry. The RBI has taken a lot of measures to improve liquidity in the system. With the beginning of festival season in India, demand is expected to pick up. Automotive demand is expected to pick up before the implementation of higher emission norms from next fiscal,” he added.

38 Steel Insights, September 2019

Steeljunction initiative

A 6,000 square feet “steeljunction” outlet was inaugurated in Kolkata recently which will provide a one stop destination for consumers intending to go for steel shopping. The store will showcase steel products catering to four segments – home décor and gifting, home building, home making and tools and implements. Tata Steel continues to invest in stronger customer relationships, distribution networks and brands that focus on value-added segments such as retail, and help to strengthen the revenue profile. steeljunction will feature premium branded products of Tata Steel including Tata Tiscon, Tata Pravesh, Tata Wiron, Tata Colour, Tata Agrico and Durashine. Apart from showcasing its own branded products, Tata Steel has also collaborated with its vendor partners to feature their premium branded products in the home making space at this store. While the steeljunction store will promote the look and feel of products, customer can easily book these products online through the Company’s E-selling platform ‘Aashiyana’, that clocked a business of over `100 crore within one year of its launch. ‘Aashiyana’ is the online retail platform of Tata Steel that empowers home builders with relevant information, inspirational ideas and reliable contacts at their fingertips. In order to achieve the Company’s objective and constant endeavour to create superior customer experience, the Company has adopted best-in-class manufacturing practices, invested in creating brands, developed products keeping customers at the centre, and focussed on environment and safety. Furthermore, the Company is steadily venturing into a new gamut of solutions and ready to use products for further value creation. Tata Steel has a large retail business that leverages an extensive network of over 200 distributors and 12,000+ dealers and a strong portfolio of brands to sell branded steel across the country. This segment is relatively insulated from the international cycles and provides strong cash flows. It merits mention that steeljunction has the distinction of being India’s first organised steel retail store that was set up way back in 2005. Products on offer in the store showcased the versatility of steel, from the aspects of functionality to aesthetics. Over the last few years, the ‘Company-owned,

Company-operated’ store has clocked an average turnover of Rs 40 cr per annum, besides providing retail customers with a unique steel shopping experience. If pioneering steel-making in India was a pathbreaking step by Tata Steel then decommoditising steel is a quantum leap. Tata Steel has been a pioneer in introducing brands like Tata Steelium - the world’s first branded Cold Rolled Steel, Tata Shaktee, Tata Tiscon, and many others years ago. Branding is only one of the many initiatives taken by Tata Steel towards unlocking customer value and product optimisation. Tata Steel also made changes in its distribution system and introduced the hub and spoke model to reduce expenditure on logistics. Tata Steel’s branded products, retails and solutions business grew by 30 percent yearon-year during the last fiscal. The Company achieved 3.9 million tons annual sales of branded products; brands like Tata Tiscon and Tata Astrum achieved higher sales of 1.43 million tons and 1.52 million tons, respectively. Tata Steel has further strengthened its position in Service & Solutions space by providing better consumer connect and experience. Since inception, 100,000 units of Tata Pravesh have been installed and over 10,000 consumers have been served. Last fiscal, the turnover from Tata Pravesh Doors and Windows have increased by ~80 percent as compared to previous year. Further, another premium Services & Solutions brand - ‘NestIn’ has doubled its business during financial year 2018-19 compared to previous year. The steel industry is cyclical in nature. In order to insulate itself from this cyclicality, the Company is focusing on strengthening the branded consumer business and downstream product portfolio. Tata Steel has embarked on Services & Solutions (‘S&S’) business to reduce the impact of steel cyclicality. Pravesh and Nest In are examples of our offering in S&S. These businesses are seeing significant growth. Leveraging our deep knowledge of customer needs and ability to execute insight-driven innovation, the Company believes that this portfolio will provide it with significant competitive advantage in future. Tata Steel plans for strong growth in S&S and these businesses can contribute 20 percent of its revenue going forward. 

Corporate

Aichi to invest in Vardhman Group for auto grade steel Suchita Oswal Jain, Vice Chairman and MD Vardhman group signs the deal with Aichi Steel official.

Steel Insights Bureau

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ichi Steel Corp of Japan an affiliate of Japan’s Toyota Motor Corporation has decided to guy approximately 11.4 percent stake in Vardhman Special Steels and provide technical assistance aiming to establish a world class special steel company in India. The company will be capable of supplying steel for critical and special applications for today and tomorrows automotive industry. Aichi Steel will be posting three personnel in India while additional critical support from the headquarters will be provided constantly. “In addition to investing approximately 11 percent of issued shares after capital increase, we agreed to provide technical assistance to Vardhman. The demand for special steel in India is expected to expand further due to the growth of the automobile industry. Based on this capital investment and technical support, the foundation of the special steel business will be strengthened by improving global quality and cost competitiveness,” Aichi said in a release.

“First of all, we will have Japanese staff stationed in Vardhman from our company to provide strong technical support, and we will consider further strengthening relationships and expanding business while monitoring market trends,” it added. In the future, Aichi and Vardhman will work to realize a timely supply of steel materials to Aichi's forging business bases in the ASEAN region, thereby building an optimal global production system and contributing to customer. “One of our key objectives of this partnership is to develop special steel grades for automotive companies in India so as to help fill the gap of providing substitution of steel that is currently being imported. We plan to later export this special grade of Steel to South Asia and Europe as well,” said Sachit Jain, Vice-chairman and MD Vardhman Special Steels. The two companies signed an agreement on the deal worth $7 million in a ceremony held recently in Aichi Prefecture, where the Japanese firm is located.

"This partnership will help Aichi Steel strengthen the foundation of its special steel business by improving quality and cost competitiveness on a global basis. Vardhman Special Steels team is a friend who we will be supporting to develop technology based solutions in coming years,” added Aichi President Takahiro Fujioka. This initiative of Vardhman Steel has been executed post deep consultations with the Steel Ministry as part of “Make in India” initiative. Vardhman Special Steels, set up in 1973, focuses on making special and critical steel grades for automotive application. Customer base spreads from passenger cars, commercial vehicles, and two wheelers to engineering and off highway industry both in India and outside India. Aichi Steel Corporation is the only material maker of the Toyota Group. Aichi Steel having turnover of $2.4 billion caters to a wide range of industries centered on the automotive industry. Headquartered in Tokai city, Aichi Prefecture, Japan they came into existence in 1934 and changed name to Aichi Steel Corporation in 1945. They now have steel and forging operations across the globe. The development comes at a time when Indian auto companies in August delivered a highly subdued volume performance across segments. While Passenger Vehicles and 2 Wheelers segment recorded higher doubledigit volume decline, M&HCVs and LCVs also recorded a sharp decline on YoY and MoM basis. Tractor segment also continued negative trend due to falling volume in the Northern region in addition to ongoing slowdown in Western and Southern regions. Despite marginal de-stocking, overall inventory level remained higher. The automobile industry has been facing challenges since past 3 quarters in terms of additional burden of new insurance policy, constraints on loan disbursement from financial institutions and higher axle load norm impacting CV sales. As most auto makers have decided to cut the inventory gradually in 2QFY20, wholesale dispatches were lower than retail during the month for most companies, which also impacted Y-o-Y and M-o-M performance to some extent. We believe that the industry would see sequential improvement in 2HFY20, though on YoY basis its performance would remain muted in FY20. 

Steel Insights, September 2019

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Corporate

RAIL - SAIL Collaboration: Moving the Nation Steel Insights Bureau

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hen two large organisations collaborate, it makes a far reaching and resounding impact. The case in point is the collaboration between the Indian Railways and Steel Authority of India Limited (SAIL) for more than six decades. While the Railways is the heart of transport infrastructure of our Country, SAIL is the most trusted and longstanding supplier of rails and forged wheels to the Indian Railways. Both the behemoths have created strong synergy and have all along played vital roles in the development and progress of the country. SAIL’s Bhilai Steel Plant (BSP) produces world class rails that crisscross the country while Durgapur Steel Plant (DSP) is the only forged wheel producer in India for passenger coaches, wagons and locomotives. To cater to the changing requirements of the Indian Railways, SAIL has continuously developed its products to meet and in some cases even go beyond the exacting standards.

In rails, it has steadily rolled out the required volume, quality and length of rails (which has gradually increased from 13 meter to 260 meter), year after year. In wheels, SAIL has supplied more than 1.8 million numbers of wheels of various dimensions ranging from 720 mm to 1100 mm of diameter to the Indian Railways in last six decades. The finding of the Research & Development Centre for Iron & Steel (RDCIS), Asia’s largest iron and steel related research centre at Ranchi, shows that SAILBSP has the capability to produce rails, which can safely support 25 Tonne Axle Load while also allowing passenger trains at 160 kmph. Currently, SAIL is the only producer of the longest single piece rails measuring 130 meters. The report of Transportation Technology Centre Inc. (TTCI), USA – a world-class transportation research and testing organization and a wholly owned subsidiary Association American Railroads (AAR) shows that wheels produced at SAILDSP conforms to international standards and provide for excellent serviceability in train operations. SAIL is committed to be a partner in the Indian Railways’ endeavour to increase average traffic speed economically without any compromise on safety. It is pertinent to mention here that the quality of rails produced by SAIL-BSP is in tandem with the quality of rails used in the European Union.

In fact, The European Union uses the same quality of rails, which is equivalent to UTS-90 rails produced by SAIL, for speed up to 150 km/hr. The wheels produced at SAIL-DSP have exhibited proven performance in diverse terrains and climate of the Country and have been in use for speed up to 160 Km/hr. SAIL is working on improving further the quality of its rails, which included reducing the hydrogen content in rail steel to less than 1.6 ppm, which is the world benchmark, successfully developing 110 UTS rails, thick web asymmetrical rails, Vanadium rails and Nickel-Copper-Chromium (NCC) rails. The NCC corrosion resistant rails that SAIL-BSP developed and supplied for coastal areas have successfully undergone field trials. For wheels, to maintain superior quality, it is produced through state-of-theart manufacturing process including heat treatment and is passed through rigorous process and quality control measures. Each wheel is subjected to Ultrasonic Testing and Magnetic Particle Inspection to ensure that it is free from sub-surface flaws. Wheel selected from each batch of heat treatment is subjected to all the destructive tests to ensure the quality. Recently, SAIL has developed with inhouse resources the Linke-Hofmann-Busch (LHB) wheels, the first consignment of which has already been despatched. Earlier, responding to urgent requirement, SAIL-DSP developed, produced and supplied narrow gauge wheels for KalkaShimla narrow gauge route and played a key role to keep this popular route alive. SAIL has also developed and supplied wheels for Kolkata Metro, which used to be imported earlier. The design of these wheels is different and critical due to its complex web profile.

BSE inks MoU with Steel Users Federation for trade in steel futures

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teel Users Federation of India (SUFI) has signed a Memorandum of Understanding (MoU) with the Bombay Stock Exchange (0BSE), to enable trade in steel futures on the trading platform. This MoU allows co

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Corporate

JSPL reports Q1 net loss

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-operation between two giants in order to launch steel futures on the Sensex. SUFI has achieved success in a short span of time to bring various stakeholders of the steel industry on a common platform and is marching to achieve its objective - to achieve higher per capita consumption of steel and promoting growth and excellence in the industry, said Ashish Kumar Chauhan, MD & CEO, BSE. “We always take the participants along and only when they’re onboard are new contracts launched. The synergy between BSE and industry participants will help launch even newer products, adding more value that will extend the ecosystem. I look forward to a lasting and fruitful relationship between Steel Users Federation of India and BSE. The tie-up is a key step for moving forward, opening new avenues and opportunities for the growth of steel markets in India.” Chauhan further added. BSE and SUFI will work towards enlisting steel futures in both long and flat segments. This will bring stability, risk aversion and level playing field to one and all players. Nikunj Turakhia, President of SUFI, hoped that the ensuing investment would enable the industry to scale greater heights. “This move brings equal chances for everyone to invest in steel futures. This much-needed public participation will enable the sector to offer increased employment opportunities as well.”

Underlining equal opportunities to everyone in the steel trade, Turakhia and Chauhan inked the MoU at the International Convention Hall, PJ Towers, Dalal Street. They were joined at the event by luminaries from both the sensex body, SUFI, various trade bodies such as Steel Chamber of India, DISMA, CAMIT, CORSIA and steel mills such as Essar Steel, Tata Steel, Arcelor Mittal, etc.

JSW Steel’s crude steel production down in July

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SW Steel Ltd’s crude steel production fell 4 percent to 13.17 lakh tons, representing a fall of 4 percent year on year. Production of flat products fell 8 percent, while production of long products rose 3 percent. JSW production break-up (in lakh tons) Particulars

Jul-19

Jul-18

Growth

Crude steel

13.17

13 87

-4%

Rolled products : Flat

9.08

9.86

-8%

Rolled products: Long

3.16

3.06

3%

indal Steel and Power (JSPL) reported a consolidated net loss of `87.40 crore during the first quarter ended June 30, 2019. The steel and energy company had reported net profit of `109.89 crore during the corresponding quarter last year. During the quarter under review, JSPL saw its consolidated revenue grow less than 3 percent to `9,945.58 crore from `9,665.35 crore in the year-ago period. During Q1 FY20, the company registered an increase of 12 percent in sales of steel and related products at 1.92 million tons. JSPL sold 1.84 million tons of crude steel during the June quarter of current fiscal, up 14 percent from 1.61 million tons during same quarter in the previous fiscal. In operating terms, JSPL reported Earnings before Interest Tax Depreciation and Amortisation (EBITDA) of `2,173 crore during the June quarter, 5 percent lower than `2,277 crore reported during the yearago period. EBITDA margin declined to 22 percent from 24 percent posted during the first quarter of previous fiscal. The deferred tax during the June quarter of FY20 was `97.86 crore, as compared to `153.6 crore during the previous fiscal. The board of JSPL also approved the appointment of VR Sharma as an additional director of the company with immediate effect up to the ensuing AGM of the company. He has also been appointed as Managing Director of JSPL for a period of three year, effective from August 14, 2019. The board also discussed issuance of further securities for an amount not exceeding `5,000 crore. The proposal is subject to shareholders’ approval. The company will hold its 40th Annual General Meeting (AGM) on September 27.

Tata Structura wins India’s Most Trusted Brand Award

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ata Structura, the structural tube brand from Tata Steel, has been conferred

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Corporate Praveen Shrivastava, Chief of Marketing & Sales, Tubes SBU, Tata Steel, said: “Over the years, Tata Structura has won the trust and hearts of millions of consumers for its quality, affordability, and ability to render superior finish in a wide range of applications. Its high structural durability makes it the preferred brand for architects and structural engineers for airports, metro and railway stations, malls, IT, industrial complexes, etc.”

Jindal Saw enters alliance with Hunting Energy Services

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India’s Most Trusted Brand Award 2019 by International Brand Consulting Corporation (IBCC). This is the second time Tata Structura has won this award since 2016. The award was conferred on Tata Structura based on a survey of over 1 lakh consumers across 50 cities in India followed by votes from the panel of jury members and the editorial team of IBCC. In the preliminary stage, over 1000 brands from across India were identified for the potential recognition of which 200 were shortlisted based on research parameters including Brand Image, Brand Leadership, Brand Value, Brand Impact, Brand Innovation, Brand Trust and Brand Equity. Praveen Shrivastava, Chief of Marketing & Sales, Tubes SBU, Tata Steel, Abhishek Gulati, Regional Sales Manager-North, Tubes SBU, Tata Steel and Saumya Chhokar, Sr. Manager Marketing, Tubes SBU, Tata Steel, received the award on behalf of the Company at an event organized by IBCC in New Delhi on August 11, 2019. Tata Structura is positioned in the market as a premium, trusted brand of hollow steel tubes manufactured by Tata Steel. The product offering is available in various shapes like square, rectangular and circular with a wide size range. The steel tubes are made up of high quality steel raw material and are capable of taking very high loads.

42 Steel Insights, September 2019

ipe maker Jindal Saw has entered into a strategic alliance with global upstream equipment maker Hunting Energy Services to bring in seamless casing and tubing technology to the country that could partly help substitute imports worth $200 million a year. Under the partnership, Hunting will share its patented premium connection technology with Jindal Saw, who would in turn use the technology to manufacture the seamless casing and tubing, used mainly in drilling activity in the oil and gas sector. Exploration and production activity has expanded in recent years in India, creating demand for more rigs, oilfield services and equipment, triggering big interest from foreign suppliers.

“India’s demand for seamless pipe with premium connections has till now been covered through imports. Now with this partnership for manufacturing top quality seamless pipes in India, the nation can look at reduction in their imports,” said Jim Johnson, CEO, Hunting PLC. India currently imports seamless casing and tubing worth $200 million a year, according to Jindal Saw group CEO Neeraj Kumar. “There is a huge demand of premium connections in the domestic market and with this strategic partnership, we hope to get a substantial portion of the market share,” Kumar said.

KK Ghosh assumes charge as Director (Projects) of RINL

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anak Kumar Ghosh has assumed charge as the new Director (Projects) of RINL. Prior to this assignment, Ghosh worked as Executive Director (Mills & Logistics) in RINL. Ghosh, a 1983 batch Management Trainee, has vast experience in steel industry. He worked in various capacities like HOD of Wire Rod Mill, General Manager (Rolling Mills) during his long journey in RINL-VSP. Ghosh is known for high levels of discipline and administrative capabilities. 

international

ArcelorMittal plans asset sale, production cuts to tide over crisis

EBITDA for first half drops 42.6% Steel Insights Bureau

debt at the end of June was the lowest level achieved since the ArcelorMittal merger

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4. Cash needs of the business for 2019 have been reduced by $1 billion to $5.4 billion, due to lower expected capex and tax

Strategic actions

5. To complement the expected deleveraging through FCF generation, the company has identified opportunities to unlock up to $2 billion of value from its asset portfolio over the next two years

roduction cut of approximately 4.2 million tons in response to market demand in the second half of 2019 and unlocking up to $2 billion from asset sale over the next two years are some of the steps being taken by ArcelorMittal to tide over the current crisis in the global steel sector.

The following steps are being contemplated as highlighted post the earnings release by the Luxembourg-based entity on August 1: 1. Given weak demand and high import levels in Europe, the company has taken steps to align its European production levels to the current market demand. As a result of previously announced European production curtailments, approximately 4.2 million tons of annualised production curtailment is scheduled for second half of 2019 2. Further temporary cost initiatives undertaken to navigate the current weak market backdrop 3. Deleveraging remains a priority. Net

“After a strong 2018, market conditions in the first half of 2019 have been very tough, with the profitability of our steel segments suffering due to lower steel prices combined with higher raw material costs. This has been only partially offset by improved profitability from our mining segment,” Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said. Global overcapacity remains a clear challenge for the industry forcing ArcelorMittal to cut capacity in Europe in response to the current weak demand environment, which has also impacted the turnaround of the ex-Ilva facilities in Italy. “Further action needs to be taken to

address the increasing level of imports entering the continent due to ineffective safeguard measures and we continue to engage with the European Commission to create a level playing field for the sector,” Mittal said. Further actions to adapt and strengthen the company are being taken to ensure reduction in debt and increase returns to shareholders. “Despite the current challenges, the Company is well positioned to benefit from any improvement in market conditions and the current very low spread environment,” he assured. Outlook

ArcelorMittal expects global steel demand in 2019 to grow by 0.5-1.5 percent while excluding China the global steel major sees growth tapering off to 0.5-1 percent. “Against this backdrop and considering scope changes (ArcelorMittal Italia acquisition, remedy asset sales and European production curtailments) steel shipments are still expected to increase YoY, which should provide support for the Group's Action 2020 program,” the release said.

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international ♦♦ US: Demand remains positive driven by robust non-residential construction offset by ongoing weakness in automotive demand and a slowdown in machinery demand ♦♦ Europe: Demand decline largely due to weakening automotive ♦♦ China: Positive demand growth due to better than expected real estate demand ♦♦ Brazil: Demand moderated to reflect delay in infrastructure spending until pension reform is passed and impact from Argentina recession China factor

♦♦ 2019 CISA (China Iron and Steel Association) mill steel inventory lowest level in last 5 years and current 2019 levels down 9 percent YoY ♦♦ June finished steel exports of 5.3 million tons down 7 percent M-o-M while half year exports were down 3 percent from 2018 levels ♦♦ Chinese government committed to tackle overcapacity and environmental issues ♦♦ Permanent and illegal capacity targets in 2018 met though overcapacity still exists ♦♦ Steel replacement policy in favour of EAF (Electric Arc Furnace) over BF (Blast Furnace) ♦♦ No new capacity to be built ♦♦ Stronger domestic fundamentals plus global trade restrictions led to reduced incentive to export ♦♦ 3-year Blue Sky Campaign led to stringent emissions standards ♦♦ Winter capacity constraints supporting fundamentals through seasonally weaker demand period; delayed start in 2018 “The Group's steel shipments are expected to increase in 2019 versus 2018 due to these demand expectations, the positive scope effect of the ArcelorMittal Italia and Votorantim acquisition (net of the remedy assets sales for the ArcelorMittal Italia acquisition now complete), the expectation that 2018 operational disruptions (both controllable and uncontrollable) will not recur, offset in part by European production curtailments,” Mittal said. “The company expects certain cash

44 Steel Insights, September 2019

needs of the business (including capex, interest, cash taxes, pensions and certain other cash costs but excluding working capital movements) to be approximately $5.4 billion in 2019 versus $6.4 billion previous guidance. Whilst no significant delays to growth investments are expected, the company has reduced overall expected capex across all segments in 2019 by $0.5 billion and now expects 2019 capex to be $3.8 billion (versus previous guidance of $4.3 billion). Interest expense in 2019 is expected to be $0.65 billion (no change) while cash taxes, pensions and other cash costs are now expected to be $1.0 billion (versus previous guidance of $1.5 billion),” the release said. ArcelorMittal would continue to prioritize deleveraging and has set $7 billion as an appropriate net debt target that will sustain investment grade metrics even at the low point of the cycle.

The impairment includes $0.3 billion related to the remedy asset sales for the ArcelorMittal Italia acquisition and $0.6 billion impairment of the fixed assets of ArcelorMittal USA following a sharp decline in steel prices and high raw material costs, the company said in a release. EBITDA for the first half dropped 42.6 percent to $3.2 billion “reflecting a negative price-cost effect”. Steel shipments of 22.8 million tons in 2Q 2019 was up 4.3 percent on quarter and 4.8 percent on year. For the first half, shipments were at 44.6 million tons, up 3.5 percent YoY largely reflecting the impact of the ArcelorMittal Italia acquisition. Second quarter iron ore shipments of 15.5 million tons was up 6.1 percent of which 9.9 million tons were shipped at market prices which dropped 1 percent on year.

Current price scenario

Essar Steel acquisition likely by December

♦♦ ArcelorMittal has seen sharp declines in steel prices in Europe and the US ♦♦ This contrasts with the more stable price environment in China and the rising raw material basket ♦♦ Structural improvements in the steel industry over the past 3 years is demonstrated by the relative resilience of steel prices in China reflecting higher capacity utilisation rates ♦♦ In Europe demand has declined due to macro headwinds, including the declines in auto production. Despite this, more supply is available in the market through escalating imports due to ineffective safeguard measures ♦♦ In US, the demand environment has weakened, but impact on prices has been exacerbated by additional domestic supply and customer destocking ♦♦ Industry has been facing rising raw material prices, particularly iron ore, due to supply-side developments in Brazil resulting in profitability compresssion due to this negative price cost effect Financial performance

The second quarter of calendar 2019 has been difficult for ArcelorMittal suffering operating loss of $0.2 billion in including $0.9 billion of impairments.

“Legal process nearing completion with transaction closing expected in 3Q’19,” ArcelorMittal told analysts after the earnings. The Supreme Court on July 22 put on hold sale of Essar Steel to ArcelorMittal and agreed to hear the appeal filed by lenders against the NCLAT order of July 4 which approved ArcelorMittal's `42,000 crore bid for acquiring the debt-laden firm. “Pleasingly, Essar is performing well and posted record results for the June quarter with annualised crude steel production of 7.6 million tons and EBITDA of $0.2 billion. At the same time we have seen domestic natural gas prices have declined to reach 3 year lows. This makes the gas based steel production capacity at Essar - which we had expected to require partial replacement - profitable and, if sustained, more viable long term,” the presentation made to analysts said. ArcelorMittal said since bankruptcy process was initiated, Essar’s performance has improved with record quarterly results ending June. Crude steel output at 1.9 million tons was up 9.5 percent on year with EBITDA of $0.2bn. Existing gas based production has turned more viable given the fall in gas prices, the company said. 

international

Aussie firms see profit soar on iron ore prices surge in FY19 Steel Insights Bureau

M

ajor Australian iron ore miners have all reported significant jump in profits and margins during the year to June driven by supply disruptions in Brazil, Chinese demand surge and a shift to higher-grade ore. Even as higher revenues and profits soared, the miners continued their sustained efforts to cut down on costs. Fortescue Metals Group

One of the largest in the world, Fortescue Metals Group, saw its profit after tax jumping 263 percent to $3.2 billion. Its average realisation soared $65 a ton up from $44 a ton a year ago. “(We are) achieving our strategy to deliver majority of product over 60 percent Fe increasing Fortescue’s average grade,” the group said in a presentation to investors. Shipping around 167.7 million ton (mt) of iron ore in China and elsewher, Fortescue, predominately sells to China where it claims to be the lowest cost provider of seaborne iron ore. “A new China based sales entity was established to support customers through direct supply from regional Chinese ports, providing them with an option to purchase smaller volumes, in Renminbi. Initial sales commenced towards the end of FY19 with volumes,” the company said about its China policy in its just released annual report. The factors which have influenced Fortescue’s realised price include: ♦♦ Successful integrated operations and marketing strategy increasing the volume of higher margin products shipped including West Pilbara Fines ♦♦ Increasing demand for Fortescue’s products following moderation of steel mill margins in China

♦♦ Continued strength in Chinese steel production, growing by 9.9 per cent in the first half of calendar 2019 compared to the prior year ♦♦ Sustained strength in the benchmark iron ore price following supply disruptions in Brazil and Australia, leading to significant drawdowns in iron ore inventories at Chinese ports Strong demand continues in FY20

Despite recent correction in iron ore prices by almost a third to $83 per ton in August, Fortescue sees continuing demand with China’s iron ore port stockpiles drawn down to 118mt as on August 6 from a peak stockpiles of 163mt in March 2018. The group expects to move 170-175 mt of iron ore in FY20 and sees its costs per wet metric ton to $13.25-13.75 range up from $13.11. Strategic moves

During FY19, Fortescue claims committed long term contract offtake strategy is on target which will allow Fortescue to capitalise on prevailing market opportunities. The Iron Bridge project was approved in April and engineering and early works on site have commenced. Western Hub drilling has also produced strong results and early site works for Eliwana commenced and the project remains on schedule. Considerable progress has been made toward Fortescue’s diversification strategy including commencement of drilling in Ecuador in April and reconnaissance exploration work ongoing in Colombia. Exploration activities have defined drill targets in the San Juan province in Argentina with drilling to commence in FY20. Copper and lithium projects in Argentina continue to be identified and analysed. New

opportunities in Chile and Peru are under evaluation, the company said. BHP

BHP’s Western Australia Iron Ore generated EBITDA of $11 billion at a margin of 65 percent, its highest since 2012 when prices were double 2019 levels. “Though an 18 percent increase in prices clearly helped, this outstanding result can be attributed to our team’s ongoing effort to realise cost and volume efficiencies. We finished the year with record volumes at Jimblebar and an exit run-rate above 290 million tons per annum. Despite the train derailment and cyclone, we continued our multi-year track record of reducing unit costs. For the full year, we delivered sector leading C1 costs of below $13. We will not only sustain but build on this strong performance in future years,” BHP said. Over the past five years at Western Australia Iron Ore, BHP achieved above design capacity of 240 mt a year. By reducing costs by 50 percent, BHP claims to be the lowest cost iron ore producer and have plans to go lower, as it works towards 290 mtpa on a sustainable basis. Outlook

“Growth profile (global steel production) has become unbalanced recently, with robust expansion in China and the US offsetting weakness in Europe and Japan. As anticipated, steel mill margins have begun to normalise. We expect iron ore quality differentiation to remain a durable element in price formation for steel making raw materials,” BHP said in a presentation. The Platts 62 percent Fe Iron Ore Fines price index has been elevated since the Brumadinho tailings dam tragedy in Brazil first disrupted the market in late January 2019. The lump premium has also been strong. “In addition to the decline in Brazilian exports, prices have responded to stronger than expected Chinese pig iron production and cyclone disruptions to Australian supply. We expect supply conditions will return to a more normal path on a one to three year timeframe, and prices are likely to be volatile as that adjustment plays out. In the longer term, the marginal price setting ton will be provided by a higher-cost, lower value-in-use exporter from Australia or Brazil,” the miner said. 

Steel Insights, September 2019

45

international

Indian steel-makers' profitability to decline on slowing demand growth: Moody’s Sumit Maitra

G

lobal rating major Moody’s has changed the outlook for Asian steel industry to negative from stable on following expectations for deterioration in fundamental business conditions over the next 12 months. “Rated Asian steel producers' profitability, as measured by EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) per ton, will decline further by around 15 percent in the 12 months to June 2020,” Moody’s says in a report accessed by Steel Insights. The outlook had been stable since August 2017, when Moody’s changed it from negative. Operating profits had fallen 8 percent for the 12 months to June 2019 because of rising input costs and producers' inability to pass on higher costs to customers. EBITDA per ton for the 12 months ended June 2019 averaged $142 – 8 percent lower than $154 in 2018 – and Moody’s expect EBITDA per ton to decline a further 15 percent to around $120 over the next 12 months. “This level of decline meets our trigger for a negative outlook for the Asian steel industry,” Moody’s says. The decline in Asian steel producers' profitability comes after strong improvements in 2017 and 2018. EBITDA per ton rose around 35 percent to $133 in 2017 from $98 in 2016, and then increased a further 16% to a five-year high of $154 in 2018. However, profitability has since come under pressure because of rising input costs and producers' inability to pass on the higher costs entirely to their customers. Although weaker profitability drives the negative industry outlook, expected levels of EBITDA per ton until June 2020 will still be $10-15 higher compared with the trough in 2015 and 2016.

46 Steel Insights, September 2019

As a result, Asian steel producers are better placed to weather weakening profitability this time than in the previous downturn. Also, in the last industry downturn from 2015 to mid-2017, steel producers faced a supply glut amid weak demand whereas this time Asian steel supply and demand will be largely flat over the 12-month outlook period. Below is some of the key findings of the report. Rising costs and narrowing product spreads will weigh on profitability

Prices of key steelmaking inputs, iron ore and coking coal, will stay high after rising more than 60 percent and 20 percent respectively in June 2019 from a year earlier. Narrowing product spreads between steel and input prices reflect producers' limited ability to pass on price increases to buyers when endmarket demand is soft. Prices of iron ore and metallurgical coal, which collectively account for around 80 percent of production costs, will stay high. In addition, given producers' limited ability to pass on price increases to buyers at a time when end-market demand is soft, product spreads between steel and input prices will remain narrow, pressuring steelmakers' profitability. Backward-integrated producers would be better insulated from rising raw material costs. Rising iron ore prices amid soft steel demand in China will reduce China Baowu Steel Group Corp Ltd's (A3 stable) EBITDA per ton by 23 percent to around $120 in the 12 months to June 2020. Nevertheless, EBITDA per ton of around $120 will still be 25 percent higher than in the last downturn in 2016. Steady sales will also support Baowu’s operating cash flow. India outlook

Indian steel-makers' profitability will decline mainly because of slowing demand growth,

in particular from the auto sector. EBITDA per ton of Tata Steel Limited's (Ba2 stable) Indian operations will likely decrease by a mid-single-digit percentage over the 12 months to June 2020. But at more than $200 per ton, its profitability will continue to be the highest among rated Asian steel producers. JSW Steel Ltd's (Ba2 positive) EBITDA per ton will decline by around 13 percent and remain lower than Tata Steel's Indian operations, largely because of elevated raw material prices and the company's relatively limited backward integration. Nonetheless, the two Indian steel companies will benefit from rising steel production on the back of continued demand growth. In India (Baa2 stable), licenses to 59 iron ore mines currently under operation will expire by March 2020. “While our baseline scenario is that most of these licenses will be renewed, if they are not, a resulting shortage in iron ore supply would lead to an increase in prices,” Moody’s says. Tata Steel's Indian operations are insulated from such iron ore supply disruptions because of its backward integration into iron ore production. However, JSW's captive sourcing will account for only 20-25 percent of its iron ore requirements by December 2019 and therefore the company is more exposed to a rise in iron ore price. India's steel demand growth will remain the strongest in Asia, predicts Moody’s. Demand growth, however, will soften to 5 percent per annum over the next two years, from 7 percent in the 12 months to June 2019. Steel demand growth will be supported by India's GDP growth of around 6.2 percent and 6.7 percent in 2019 and 2020 respectively, and government infrastructure spending of $140 billion on railways, roads and metro lines to improve connectivity across the country. In addition, under the “House for all by 2022” mission the government aims to build 19.5 million houses over the next two years, which will support steel demand. The government's “Har Ghar Jal Mission” (translated as water for every home) by 2024 will also boost demand for steel pipe manufacturers. While auto sales will remain soft through 2019, pre-buying ahead of the country's transition to the equivalent of Euro VI emission norms in April 2020 will somewhat fuel steel demand.

international Steel demand will vary across Asia

Despite an uptick in demand from the infrastructure sector, soft demand from the property and manufacturing industries will limit China's (A1 stable) apparent steel demand growth to a low single-digit in the 12 months to June 2020. “We expect real estate investments in China to stay soft over the next 12 months, as contracted sales volumes will be flat or decline by up to 5 percent in the same period. This view takes into account the recent tightening of financing conditions, weaker demand in some lower-tier cities and an expectation that the government will continue to tweak regulatory measures to prevent sharp property price increases,” Moody’s says in the report. In 2018, the contracted value of Chinese residential real estate sales increased 14.7 percent because of a sharp increase in real estate prices, but total volumes increased by only 2.2 percent. The same trend was seen in the first half of 2019, as contracted sales increased 8.4 percent but volumes declined 1 percent from a year earlier, indicating weaker construction demand growth from the real estate sector. Weak Chinese auto sales is expected to dampen demand prospects for steel products, especially auto sheets. After plummeting 12 percent in the first half of 2019 from a year earlier, auto sales will improve somewhat in the second half, but full year 2019 auto sales will still decline 6.5 percent from 2018. Faster growth of infrastructure investments will support steel demand in China. We expect the pace of infrastructure investments – which increased 4.1 percent year over year in H1 2019 – to pick up for the rest of the year, underpinned by the central government's spending to spur economic growth. Since late 2018, the Chinese government has articulated policies supporting faster growth of key infrastructure investments, such as railway and toll-road infrastructure projects. The government also recently allowed local governments to use special purpose bonds as equity capital for infrastructure projects, effectively expanding the available funding sources for infrastructure projects and thus providing a much-needed boost to China's steel sector. Steel demand in Korea (Aa2 stable) will remain flat with a better performing

shipbuilding sector compensating for sluggish demand from the auto and construction industries. Stable construction demand in Japan (A1 stable) will drive the country's flat steel demand. India's (Baa2 stable) steel demand will slow to midsingle digit growth due to weak auto and manufacturing demand. Limited new capacity additions in the region will curb a sharp decline in steel prices

Steel supply in Asia is likely to be broadly stable, supporting steel prices. Most Asian steel companies have no plans to launch major new capacities in the coming 1218 months. India will remain the world's second-largest steel producer behind China after having overtaken Japan in 2018. New capacity additions in India will be limited over the next 12 months but domestic production will increase to meet demand growth. Consolidation in the Indian steel sector that began in 2018 will continue in 2019, with five stressed steel companies accounting for 20 percent of the country's steel-producing capacity operating under new ownership. As a result, India's capacity utilization will improve to 85 percent over the next two years from less than 78 percent in the 12 months to June 2019. Slowing but still healthy domestic demand and limited capacity additions will help keep steel prices largely stable over the next 12-18 months. China will retain its tight capacity controls and environmental protection measures. China's supply-side reform initiated in 2016-17 has materially improved supply and demand dynamics in the country, supporting steel prices at relatively high levels compared with 2015 and 2016. The government had reduced steel capacity by 150 million tons during 201618, ahead of original schedule. The reduced capacity accounted for around 20 percent of total steel capacity of around 1.13 billion tons as of year-end 2015. At the same time, the government has forced steel mills that used illegal induction furnaces to shut down, removing capacity of around 230 million tons. Production in Korea and Japan will remain flat, and companies in both countries have no plans for significant capacity additions.

Trade tensions will have a limited impact on sales

The US government's rising protectionism in the form of trade tariffs on steel imports will have a limited direct impact on Asian steel companies because of their modest US sales. However, if trade disputes are prolonged, or if they escalate, the spillover effect through weaker economic growth in Asia would be greater on Asian steel producers. Japan's decision on 2 August to remove Korea from a white-list of countries that receive preferential access to Japanese goods will not have a material effect on steel demand in both countries or Korean steel-makers' operations, even if the situation escalates to a Japanese ban on exports to Korea. While Korean companies import scrap metals and intermediate products such as hot-rolled coil from Japan, they should be able to source the materials from outside Japan with little disruption or cost increases, when necessary. We do not expect US tariffs to lead to a substantial increase in Asian steel companies' exports to India that would hurt the pricing power of domestic steel-makers. This is because India's import taxes and anti-dumping duties will protect the domestic incumbents. Imports from countries such as Japan and Korea which have free trade agreements with India will attract nominal taxes, but the imports will still be subject to anti-dumping duties. Moreover, the import-parity-pricing mechanism in India sets a floor for steel prices. What could change the outlook

Moody’s will likely change the outlook back to stable if it expects year-on-year growth in EBITDA per ton of our Asian steel producers to stabilize over the next 12 months. “We will likely change the outlook back to stable if the decline in EBITDA per ton for our Asian steel producers is arrested, and if we expect the metric to stabilize over the next 12 months,” Moody’s says. Since outlooks represent our forwardlooking view on business conditions that factor into our ratings, a negative (positive) outlook suggests that negative (positive) rating actions are more likely on average. However, the industry outlook does not represent a sum of upgrades, downgrades or ratings under review, or an average of the rating outlooks of issuers in the industry, but rather our assessment of the main direction of business fundamentals within the overall industry. 

Steel Insights, September 2019

47

international

Nippon Steel cuts capex spending, forecast as US-China trade war hurts demand

Steel Insights Bureau

N

ippon Steel Corp has downsized its planned capex for the period between 2019-2021 to the extent of 10-20 percent following weak steel demand in the backdrop of continued China-US trade war which has impacted profits. Japan’s top steelmaker has reported a 33 percent decline in profit for June quarter and predicted a 56 percent plunge in profit for FY20. The company sees a gloomy scenario has highlighted in its presentations and interaction with investors. “While promoting further recovery of manufacturing capability, we intend to make

48 Steel Insights, September 2019

a shift to “profitability oriented production” that put more emphasis on economic rationality in production volume in line with order intake, in accordance with demand slowdown in some of domestic industrial sectors & margin deterioration in exports for spot markets,” the company said. “Margin Shrink brought by high raw material prices and low steel product prices,” “Iron ore prices remained at high level due to growing pig iron production in China. The impacts from Vale’s accident & RioTinto’s underproduction will be subdued and speculative transactions will recede, but in terms of the current low level of inventory, iron ore prices remain high for now,” Robust infrastructure investments have boosted demand in long steel products and resulted in the record-high crude steel production. The EAF’s production volume has grew as it substitutes the removed illegal induction furnaces production. Due to the poor scrap supply chain in China, the demand of pig iron for the EAFs has increased and pig iron production also reached the record-high level. Iron ore inventory remains low. The long products’ SD situation stays firm, while flat products market bear a weak tone. The

polarization between long & flat prices is anticipated to expand as infrastructure investments gain more momentum. Strategy to fights slowdown

Build lean & optimal production framework Promote concentrated investment in competitive production lines and improve their operation rates coupled with productivity improvement through implementation of advanced IT. Overcome drawbacks Evaluate each product and area of business to define direction. Plans to be announced one by one as they put into concrete shape. As the first step, UO pipe mill in Kashima Works will be closed, Its production will be transferred to Kimitsu Works Restructure overseas businesses, close loss making arms In terms of increasing overseas businesses profit and re-distribution of management resources, thoroughly examine measures, including withdrawal from businesses that cannot move into the black, businesses that have completed their roles, or businesses that are losing synergies. Interaction with investors ♦♦ Katsuhiro Miyamoto, Director Executive Vice President ♦♦ Takahiko Finance

Iwai,

Executive

and

Officer,

How you incorporated your assumptions on raw material prices? We have incorporated the assumption that fine iron ore will remain at the current level

international of US$100 per ton over the second half of the fiscal year ending March 31, 2020 (FY2019). We also assume that the market price of hard coking coal, while it is currently declining, is likely to be higher in the second half compared to the first half, due to weather factors, etc. and given the past pattern. Explain how the expected cost increase has been incorporated in your product prices of FY2019 forecasts With regard to prices for products with long-term contracts, we anticipate that we will be able to reflect the increased cost caused by higher raw material prices in some sectors, with some time lag, and that we will have to negotiate with customers for other sectors. Ultimately, the increased cost resulting from higher raw material prices will be reflected in sales prices but in the case of our forecasts for FY2019, we are incorporating only the price rises which we believe will be reflected within FY2019 as of this moment. Concerning spot products for distributors, our current assumption is based on the current spot market. If you attempt to raise sales prices while prices are declining in the international market, more imported steel and more electric furnace steel will flow into the market, which may lead to the risk of a decline in your market share. What do you think about this? Electric furnace steelmakers tend to be engaged in different markets and we do not think we will greatly compete with them. We are resolutely determined to explain to our contracted customers the value we provide, including delivery, quality, solution proposals, and a strong response overseas, and ask them for a fair appraisal. Raw material market prices are projected to decrease business profit by ¥190 billion, or roughly ¥5,000 per ton, while steel prices and the product mix are set to increase the profit by only ¥35 billion, or roughly ¥1,000 per ton. Is it therefore correct to assume that your margin will deteriorate by ¥4,000 per ton? In FY2019, domestic shipment is expected to decrease because of decline in indirect export demand, which we plan to offset by

increasing shipments of spot sales for exports. This is likely to cause deterioration in the product mix. In fact, steel product prices alone, excluding the impact of the product mix, are expected to improve by more than ¥1,000 per ton on a net basis Price of hot rolled coils (HRC) has been around the level of $500 per ton in East Asia. Are you expecting this price level to continue in the second half? Given the rise in raw material prices, the HRC market may slightly rise in the future but we are factoring in the assumption that the current level will continue in the overseas steel market for FY2019. How have cost increases in alloys, commodities and transportation increases been incorporated in your forecasts on this occasion? Costs for commodities and other items, excluding raw material prices, have increased by about ¥5,000 per ton in the past two years. We have strived to reflect this in sales prices in the past two years, but have not fully done so. Moreover, the cost of freight and other items is also increasing. We are asking our customers with contracted business to understand our value proposition and allow us to reflect cost increases in commodities, transportation, freight, and other factors. However, we have not fully incorporated the potential cost increase that we think is necessary to be reflected in our forecasts for FY2019. The level of steel shipments was at a low level in the first quarter. Is there any delay into the second quarter? Mainly due to the weather, shipments of about 280,000 tons have been delayed into the second quarter.

declined again in the first quarter of FY2019 and are expected to decline more in the second quarter. Toward the second half of FY2019, we intend to continue raising sales prices for domestic contracted products. As for exports, the overseas spot markets are expected to be soft, mainly for flat steel products, and we have incorporated flattish markets. At the same time, we are assuming a significant deterioration in the margin stemming from an increase in raw material prices. Why are you expecting a business profit decline of ¥8 billion from group companies in steelmaking in your forecast for FY2019 vs. FY2018? Your interest in the iron ore mine must be contributing to profit. Our interest in the iron ore mine is contributing to an increase in profit, and so are Sanyo Special Steel Co., Ltd. and Ovako AB, which became our subsidiaries. Despite their positive impact, we forecast a profit decline of ¥8 billion from overall group companies due to a significant profit decline in the stainless steel business and at Nippon Steel Nisshin, mainly owing to a decrease in volume. Moreover, domestic rerollers are being affected by the changing business environment. The amount of decline in profit is not that significant for each company but significant in aggregate. Domestic demand for stainless steel is expected to decline for kitchen, and gas and oil equipment, due to a decline in housing starts, and for semiconductor-related industrial machinery. The supply-demand balance for exports of stainless products is projected to weaken because of continued excess capacity and excess supply, and the worsening trade protectionism. While the margin is not deteriorating much, the impact of production cuts will be significant.

Explain the trend in sales prices by sectors, spanning the first quarter and the second quarter to the second half.

Steelworks in Japan have posted significant impairment losses in the past. Given your forecast of a ¥65 billion ordinary loss (nonconsolidated), is there a risk of generating impairment losses?

Sales prices for domestic long-term contracted products rose from the first half of FY2018 to the second half and are projected to rise from the first quarter of FY2019 to the second quarter. Sales prices for exports were at a high level in the first half of FY2018 and remained firm in the second half of FY2018 but plummeted at the end of FY2018. They then

Because operating profit (non-consolidated) excluding inventory evaluation loss has been in the red for three consecutive years since fiscal 2017, there is a possibility that some segments may indicate warning signs of impairment losses but we intend to make an assessment with due consideration to future profit assumptions. 

Steel Insights, September 2019

49

Ferro Alloy Data

Ferro alloys & metals price trends Steel Insights Bureau Ferro Alloys

August 2019

July 2019

June 2019

Ex-works Rs/ ton Ferro Silicon (Si - 70%)

66,000

67,500

68,500

HC Ferro Chrome (Cr - 60%)

64,500

62,000

64,000

HC Ferro Manganese (Mn - 70%)

66,000

70,500

70,500

Silico Manganese (Mn - 60%, Si - 14%)

62,500

65,500

65,000

1,18,500

1,28,500

1,35,000

1,145

1,255

1,33,500

1,29,500

Ferro Titanium (Ti - 30%)

Ex-works Rs/ kg Ferro Molybdenum (Mo - 60% min)

1,265 Ex-works RMB/ MT

Ferro Vanadium (V - 50%)

1,36,500

Base metals price trends Steel Insights Bureau Non Ferrous Metals

August 2019

July 2019

June 2019

1,38,350

1,40,600

4,48,700

4,14,150

Ex-works Rs/ ton Aluminium

1,36,750 Ex-works/Ex-Godown Rs/ ton

Copper

44,100 USD/Ton

Lead

1,54,200

1,53,800

1,55,500

Zinc

1,80,250

1,89,850

1,96,400

Tin

16,050

17,830

18,805

1,15,700

98,400

90,350

Nickel

50 Steel Insights, September 2019

PRICE DATA

Prices of steel products in various markets Steel Insights Bureau

per ton

PRODUCT

NAME OF THE MARKET / SPECIFICATION

Price Rs./Ton as on

Price Rs./Ton as on

Price Rs./Ton as on

Price Rs./Ton as on

Price Rs./Ton as on

4 Sep 2019

3 Sep 2019

27 Aug 2019

6 Aug 2019

6 Mar 2019

Monthly changes

INGOT

MANDI GOVINDGARH

28,800

29,000

28,800

27,700

35,100

▲

INGOT

RAIGARH

25,600

25,800

25,400

24,800

31,900

▲

INGOT

MUMBAI

27,200

27,600

27,700

26,800

35,200

▲

SCRAP

MANDI GOBINDGARH

19,600

19,900

19,500

18,900

25,900

▲

SCRAP

ALANG SCRAP YARD

20,900

21,000

21,700

21,800

26,000

▼

SCRAP

MUMBAI

21,300

21,500

21,400

21,000

25,300

▲

BILLET

MANDI GOBINDGARH

29,100

29,200

28,900

27,800

35,600

▲

BILLET

DURGAPUR

26,600

26,900

26,100

25,600

32,500

▲

SPONGE IRON

DURGAPUR

17,700

18,000

17,100

16,200

19,900

▲

SPONGE IRON

RAIGARH

16,200

16,300

16,000

16,000

20,000

▲

PIG IRON

DURGAPUR

28,700

28,700

28,700

29,100

32,100

▼

PIG IRON

LUDHIANA

29,900

29,400

28,900

29,200

34,400

▲

TMT 12 mm

CHENNAI

32,000

32,100

32,200

33,100

38,900

▼

TMT 12 mm

MUMBAI

30,600

30,800

30,600

30,000

38,500

▲

TMT 12 mm

DURGAPUR

30,700

31,000

30,300

29,700

37,400

▲

TMT 12 mm

DELHI-PRIME

34,900

34,900

35,900

36,300

41,900

▼

HR COILS

DELHI

36,600

36,600

36,600

37,100

42,900

▼

HR COILS

KOLKATA

36,100

36,100

36,100

36,400

42,900

▼

CR COILS

MUMBAI

40,900

40,900

41,400

42,600

46,900

▼

CR COILS

LUDHIANA

41,600

41,600

41,600

41,600

47,900

IRON ORE, NMDC

6-20mm / 65

2,900

2,900

2,900

3,100

3,000

⇔

IRON ORE, NMDC

10-150mm / 64

2,710

2,710

2,710

2,890

2,790

▼

IRON ORE, NMDC

FINES / 64

2,660

2,660

2,660

2,860

2,760

▼

IRON ORE, BELLARY

5mm-18mm

6,100

6,100

6,100

6,100

7,200

IRON ORE, TATANAGAR

5mm-18mm

5,000

5,000

5,100

5,600

5,900

⇔

IRON ORE, BARBIL

5-20mm

6,000

6,000

6,000

6,500

5,800

▼

CHANNEL

GHAZIABAD

33,600

33,800

33,600

33,500

40,200

▲

CHANNEL

RAIPUR

33,300

33,400

32,800

33,000

39,900

▲

WIRE ROD

DURGAPUR

30,300

30,400

29,900

29,600

37,600

▲

WIRE ROD

RAIPUR

29,900

30,500

29,800

29,700

39,900

▲

▼

▼

Note: Prices are basic, exclusive of taxes Iron ore prices are FOR, excluding Royalty, DMF, NMET, Cess, Forest Permit Fee etc. HR Coil & CR Coil prices are exclusive of ED & taxes

Steel Insights, September 2019

51

PRODUCTION DATA

Production, imports, exports, availability & consumption (provisional) April 2019 - July 2019 Steel Insights Bureau

(in ‘000 tons)

Finished Steel Non-Alloy Steel

Producers 2019 - 20 (Prov.)

2018 - 19 (Final)

Alloy & Stainless Steel

% Variation

2019 - 20 (Prov.)

2018 - 19 (Final)

Total

% Variation

2019 - 20 (Prov.)

2018 - 19 (Final)

% Variation

a) Production SAIL

4097

4068

0.7

14

26

-44.3

4112

4094

0.4

TSL

4492

4206

6.8

4492

4206

6.8

1069

1025

4.3

RINL

1358

1351

0.6

1358

1351

0.6

ESSAR

2414

2232

8.2

2414

2232

8.2

7.7

JSPL

1385

1142

21.3

31

36

-13.3

1416

1177

20.3

JSWL

4976

4881

1.9

193

208

-7.2

5169

5090

1.6

OTHERS

14175

12696

11.7

1354

1847

-26.7

15529

14542

6.8

Total Production

32898

30576

7.6

1592

2116

-24.7

34490

32692

5.5

b) Imports

1899

2059

-7.8

597

596

0.2

2496

2655

-6.0

c) Exports

1278

1763

-27.5

195

163

19.9

1474

1926

-23.5

33518

30872

8.6

1994

2549

-21.8

35512

33421

6.3

1985

1808

-178

6

1806

1814

34.6

31534

29064

2172

2543

33706

31607

6.6

d) Availability (a + b - c) e) Variation in Stock f) ASU (Consumption)

8.5

-14.6

Note:

1. The Gross Production of Semis is equal to the Crude Steel Production.



2. The Gross Produdtion of SAIL and TSL is calculated based on the Net Production provided by them.



3. With reference to the Meeting on 28.05.2018, the Conversion factor is 5% for HR to CR and 2% for CR to GP / GC /Coated. Source: Steel Ministry

52 Steel Insights, September 2019

PRODUCTION DATA

India’s crude steel production for July 2019 Steel Insights Bureau (in ‘000 tons)

July

July vis-a-vis June

April - July

Producers 2019-20 (Prov.)

2018-19 (Final)

% Variation

July 2019 (Prov.)

June 2019 (Prov.)

% Variation

2019-20 (Prov.)

2018-19 (Final)

% Variation

A) SAIL

1398

1258

11.1

1398

1353

3.3

5330

5203

2.4

B) TSL

1151

1125

2.3

1151

1103

4.4

4404

4304

2.3

C) RINL (VSP)

422

441

-4.4

422

430

-1.9

1723

1739

-0.9

D) ESSAR

606

554

9.5

606

622

-2.4

2457

2243

9.6

E) JSPL

472

452

4.4

472

458

3.0

1931

1676

15.2

F) JSWL

1321

1381

-4.4

1321

1400

-5.6

5576

5510

1.2

G) OTHERS

3845

3848

-0.1

3845

3972

-3.2

15711

15209

3.3

TOTAL PRODUCTION

9215

9059

1.7

9215

9337

-1.3

37133

35884

3.5

Total PSU Production

1820

1699

7.1

1820

1783

2.1

7053

6942

1.6

% Share of PSU

19.7

18.8

19.7

19.1

19.0

19.3

18.8

19.5

% Share of Oxygen Route Production

45

45

45

45

44

45

% Share of EAF Route Production

24

26

24

26

26

26

% Share of IF Route Production

31

29

31

30

31

29

Note : Ispat has a compact mill, hence it does not report the production of crude steel.The production of Crude steel has been estimated on the basis of actual finished steel production.

Steel Insights, September 2019

53

Consumption DATA

Production, Import, Export & Consumption of Steel April 2019 - July 2019 (2019 - 20) (Prov.) Steel Insights Bureau Quantity ‘000 tons

Stock Category

SEMIS

Production

37134

Import

Export

180

Availability

631

36683

As on 01-Apr2019 420

As on 31 July 2019

Consumption Variation in Stock

Current Year

Previous Year

Consumption Variation over last year (%)

511

91

36593

35378

3.4

FINISHED STEEL (Non-Alloy) Bars & Rods

14197

140

123

14214

6940

7938

998

13216

11664

13.3

2516

16

65

2467

197

494

298

2170

2143

1.3

530

10

0

540

182

230

48

491

455

8.1

17243

167

189

17221

7319

8662

1343

15878

14261

11.3

1520

133

69

1584

579

562

-17

1601

1443

11.0

H.R. Coils/Strips

14134

1599

1020

14713

4488

5146

658

14055

13360

5.2

TOTAL (FLAT)

15655

1732

1090

16297

5067

5708

641

15656

14803

5.8

TOTAL (Non-Alloy)

32898

1899

1278

33518

12386

14370

1985

31534

29064

8.5

Structurals Rly. Materials TOTAL (NON-FLAT) PM Plates

FINISHED STEEL (Alloy) Non-Flat

990

108

24

1074

192

100

-92

1166

1302

-10.4

77

276

55

298

227

155

-72

371

286

29.7

1068

383

79

1372

420

255

-165

1537

1587

-3.2

Flat TOTAL (Alloy)

FINISHED STEEL (Stainless) Non-Flat

188

15

49

154

0

1

1

152

287

-46.9

Flat

337

199

68

469

18

3

-15

484

669

-27.7

TOTAL (Stainless)

525

214

117

622

18

4

-14

636

956

-33.4

FINISHED STEEL (Non-Alloy + Alloy + Stainless) Non-Flat

18421

289

262

18448

7511

8764

1252

17196

15849

8.5

Flat

16069

2207

1212

17064

5312

5866

554

16511

15758

4.8

TOTAL Finished Steel

34490

2496

1474

35512

12824

14630

1806

33706

31607

6.6

Note : For Import, Export, Availability, Stock Variation & Consumption, all items across the value chain have been taken Source: Steel Ministry

54 Steel Insights, September 2019

ImPORT DATA

Summary of Import of Iron & Steel April 2019 - July 2019 (Prov.) Steel Insights Bureau Quantity ‘000 tons

Category I

Non-Alloy (Prime + Defective) April - July 2019 (P)

Non-Alloy (Prime + Defective) April - July 2018

Growth %

Steel A. SEMIS Billets, Slabs, etc.

30

150

-80

Re-rollable Scrap

115

149

-23

B. Finished Steel 1. Non- Flat Products 140

128

10

Structurals

Bars & Rods

16

21

-24

Rly. Materials

10

19

-45

167

168

-1

133

158

-16

5

0

3018 -7

TOTAL (1) Non-Flat Products 2. Flat Products Plates HR Sheets HR Coil/Strip

657

710

CR Coil/Sheets

161

150

7

GP/GC Sheets/Coil

387

422

-8

Elect. Sheets

207

232

-11

0

2

-100

Tin Plates

66

70

-5

Tin Free Steel

29

30

-3

Pipes

87

118

-26

1732

1892

-8

TMBP

TOTAL (2) Flat Products TOTAL Finished Steel (1+2) (NON-ALLOY)

1899

2059

-8

TOTAL Steel = (A+B) (NON-ALLOY)

2044

2358

-13

597

596

0 -56

Alloy/Stainless Finished Steel Semis

35

80

632

676

-6

TOTAL FINISHED STEEL (ALLOY + NON-ALLOY)

2496

2655

-6

TOTAL STEEL (ALLOY + NON-ALLOY)

2676

3034

-12

TOTAL STEEL (ALLOY)

II

Other Steel Items Fittings MISC. Steel Items Scrap

III

69

-15

580

-82

2630

2099

25

Iron Pig Iron

IV

59 104

5

4

16

Sponge Iron

16

20

-20

Ferro-Alloys

257

253

2

5747

6059

-5

GRAND TOTAL Source: Steel Ministry

Steel Insights, September 2019

55

EXPORT DATA

Summary of Export of Iron & Steel April 2019 - July 2019 (Prov.) Steel Insights Bureau Quantity ‘000 tons

Non-Alloy (Prime + Defective) April - July 2019 (P)

Non-Alloy (Prime + Defective) April - July 2018

Growth %

628

648

-3

Bars & Rods

123

137

-10

Structurals

65

39

65

Category I

Steel A.SEMIS Billets, Slabs, etc. B. Finished Steel 1. Non- Flat Products

Rly. Materials

0

1

-76

189

177

6

Plates

69

140

-50

HR Sheets

1

0

63

TOTAL (1) Non-Flat Products 2. Flat Products

HR Coil/Strip

618

721

-14

CR Coil/Sheets

160

233

-31

GP/GC Sheets/Coil

215

296

-27 -61

Elect. Sheets

10

26

TMBP

0

0

NA

Tin Plates

3

8

-60

Tin Free Steel

1

1

25

Pipes

13

161

-92

TOTAL (2) Flat Products

1090

1586

-31

TOTAL Finished Steel (1+2) (NON-ALLOY)

1279

1763

-27

TOTAL Steel = (A+B) (NON-ALLOY)

1907

2411

-21

195

163

20

3

20

-84

Alloy/Stainless Finished Steel Semis

II

TOTAL STEEL (ALLOY)

199

183

8

TOTAL FINISHED STEEL (ALLOY + NON-ALLOY)

1475

1926

-23

TOTAL STEEL (ALLOY + NON-ALLOY)

2106

2594

-19

Fittings

95

57

66

MISC. Steel Items

303

1594

-81

2

2

0

Other Steel Items

Scrap III

IV

Iron Pig Iron

90

85

7

Sponge Iron

309

167

85

Ferro-Alloys

917

522

76

GRAND TOTAL

3823

5021

-24

Source: Steel Ministry

56 Steel Insights, September 2019

58 Steel Insights, September 2019

Tear along the dotted line

Tear along the dotted line