steel insights january 2015

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NMDC: A mine of opportunities Steel Insights explores how NMDC is gearing up to meet the requirements of iron ore by enhancing production capabilities at its existing mines and opening up new ones. In a free-wheeling interview, Narendra Kothari, CMD, sounds confident of delivering the goods and achieving the targets. To put it in his own words: “I like to take challenges in a positive way…” The edition also takes a look at the Rs.6,000-crore refractory industry. Because it serves an industry whose market size is much larger, refractory-makers lose the negotiating edge, says Dr A K Chattopadhyay, Technical Advisor to Chairman, TRL Krosaki Refractories. The spotlight also turns on M&M Executive Director Pawan Goenka who divulges why the auto major lost marketshare and Amitabh S Mudgal, President, Marketing & Corporate Affairs, Monnet Ispat & Energy, who speaks about his expectations from the coal block e-auctions. Also watch out for our regular sections on coking coal prices, fer

TRANSCRIPT

Page 1: Steel Insights January 2015
Page 2: Steel Insights January 2015

4 Steel Insights, January 2015

COnTEnTs

44 | INTERVIEWGovt could consider auctioning EUPs along with coal blocksAuctioning may undo the efforts made to achieve linkage rationalisation: Mudgal.

40 | INTERVIEWReflecting on refractory With 75% exposure to steel industry, refractory makers are feeling the heat already.

47 | INTERVIEWM&M looks to regain lost ground with compact SUVs Co is betting on new launches as electric vehicle poses challenges.

34 | COVER STORYNMDC eyes organic, inorganic routes for growthCompany formulates strategy to ramp up capacity & acquisitions abroad.

10 | FEATURE Year-end review: Slow, steady steps to 2015 “Make in India” drive may create demand.

6 India’sironoreoutputmaybeflatinFY15 15 India’s steel consumption prospects to

improve: SRMA 17 WTO accepts India’s challenges to US CVD 18 Government executive order to make land

acquisition easy 19 Lack of iron ore availability posing problems 20 India’s iron ore requirement to touch 206.2 mt

in 2016-17 22 EU mulls dumping duty on Indian silico

manganese 24 FIMI seeks change in manganese ore, chrome

duty structures 25 Tata Steel gets third renewal nod for Sukinda

mines 26 Realty braces for “Achhe Din” 27 CokingcoalpricesflatinDecember 28 World’s largest coking coal mine offers Indian

steel mills double bonanza 31 Mixed fortunes for auto industry 33 Joy of new year turns sour for auto sector 39 Actual iron ore output less than 152 mt 50 Thyssenkrupp aims to use technology as lever

in India 52 Iron ore handling by major ports at 10.97 mt in

Apr-Nov 53 Railways’ Nov iron ore handling up 2.15%

m-o-m 54 Global crude steel production fell 4.54% in

November m-o-m 55 Tata Steel to commission Kalinganagar from

early 2015 56 SAIL to study feasibility of setting up plant at

Telengana 57 JSPL commissions billet caster plant at Odisha 58 EOF: An emerging steel-making technology 60 Siemens modernizes automation of hot rolling

mill at Handan

Page 3: Steel Insights January 2015

10 Steel Insights, January 2015

fEATuRE

Tamajit Pain

As we come to the end of 2014 and enter 2015, India retained its position as the 4th largest producer

of crude steel in the world as against its 8th position in 2003. The country continues to maintain its lead position as the world’s largest producer of direct reduced iron (DRI) or sponge iron. The steel sector contributes nearly 2 percent of the country’s GDP and employs over 6 lakh people. The per capita consumption of total finished steel in the country has risen from 51 kg in 2009-10 to about 60 kg in 2013-14. Capacity for crude steel production expanded from about 75 million tons per annum (mtpa) in 2009-10 to about 101.02 mtpa in 2013-14.

The Steel & Steel Products (Quality Control) Orders, 2012 have come into effect from October 1, 2014 on all 15 products having direct bearing on safety and security on

human beings and infrastructure. Expansions of two steel plants – namely IISCO, Burnpur and Rourkela Steel Plant – are ready to be dedicated to the nation, thus adding about 4.7 million tons of crude steel capacity. Active engagement with the ministries of mines, coal and environment and forests has been undertaken for simplification of procedures.

The year saw the formation of the Indian Steel Association (ISA) to articulate the needs and aspirations of the steel sector of the country. As a major step towards ensuring long-term security in the supply of coking coal, ICVL has taken over the operating coal mine and coal assets of Rio Tinto in Mozambique.

The year 2014 saw India’s steel mills scrambling to source one crucial commodity– iron ore. Even as the country’s coal sector inches towards normalcy, with the central government adopting a new policy of auctioning of coal blocks, India’s iron ore sector is still in the doldrums.

From one of the world’s biggest exporters of iron ore four years ago, India has now turned into a net importer of the mineral as it seeks to feed its steel plants.

Partly, this is a consequence of the Supreme Court’s ban on mining of iron ore from four years ago, after the apex court moved to curb illegal mining. Other factors include uneven actions by a clutch of state governments as they dither in renewing mining leases that steel-makers badly need.

The central government should have given as much importance to the iron ore sector as coal, feel industry insiders. And the result is that some of India’s largest steel companies are being forced to source ore from the international markets—some for the first time in over a century—while others are shelving expansion plans.

For India’s steel companies, it’s turned into a raw material crisis that will eventually impact balance sheets. Tata Steel, ranked the

Year-end review: Slow, steady steps to 2015

Page 4: Steel Insights January 2015

Incorporated in 1958, NMDC Ltd, under the administrative control of the Ministry of Steel,

has been the backbone of India’s iron ore production over the last five decades. With India’s steel demand set to grow substantially in coming years, the Navaratna company is gearing itself to meet the requirement for iron ore by enhancing production capabilities of its existing mines and opening up new ones. Currently India’s largest producer of iron ore, NMDC is putting all efforts to enhance its production capacity from the current level of 30 million tons per annum (mtpa) to 65 mtpa by 2018-19 and more than 100 mtpa by 2024-25 as India targets a steel production of 300 million tons (mt) by 2025-26. In

NMDC eyes organic, inorganic routes for growthTamajit Pain

34 Steel Insights, January 2015

COvER sTORy

Page 5: Steel Insights January 2015

Steel Insights, January 2015 35

COvER sTORy

How do you see India’s iron ore production and exports in the current fiscal considering the ongoing regulatory curbs put in place by the government and courts?During the year 2013-14, India produced about 152 million ton of iron ore and exported about 14.4 million ton of iron ore, domestic consumption of iron ore during the year 2013-14 was about 104 million ton.

During the current fiscal year 2014-15, it is expected that iron ore production in the country will reduce to about 140 million ton, due to various regulatory curbs. Due to falling international iron ore prices, iron ore export will also drop during the year and the same is expected to be lower than 10 million ton. Overall demand supply scenario of iron ore in the domestic market is expected to remain in balance during the year 2014-15.

How do you see your iron ore dispatches panning out in the next few months?Next 3-4 months are fair weather period for iron ore production and dispatches at our mines. Generally production and dispatches remain higher during second half of the year compared to first half. I am sure that we will be able to achieve the sales target of 32 million ton of iron ore sales during the year.

Please elaborate on the current production break up across your different mines. Can you give us NMDC’s production and sales guidance for FY15 and target in the next 2 years?

Production details of operating projects:

Projects/Particulars Production (till Nov) in Lakh Ton

Bailadila- 14/11C 57.80

Bailadila-5 + 10 & 11A 71.53

Donimalai 60.93

Total 190.26

NMDC’s proposed targets for 2015-16

y Iron Ore Production - 35 million ton y Iron Ore Sales - 36 million ton

Though we have not finalized the target for the fiscal year 2016-17, however, our aim would be to produce more than 40 million ton.

What is the contribution of Karnataka with regards to sales volume of the company?Contribution of Karnataka with regards to sales volume

Excerpts:

What is your outlook on iron ore pricing in the domestic and international market?Presently, world iron market is in over supply condition and thus there has been downward pressure on world iron ore prices. Average CFR China Iron ore prices for 62% Fe content Iron ore fines at the start of current financial year, i.e, April 2014 used to be about US$ 115 per ton, which has gradually come down to about US$ 70 per ton presently. However, we don’t foresee further downward pressure on world iron ore prices and expect that world iron ore prices will vary in the range of US$ 70 per ton to US$ 85 per ton for 62% Fine ore in near future.

As regards to domestic market, it is expected that the demand supply scenario is in balance and therefore it is expected that prices of iron ore in domestic market will not be volatile in near future.

the near term, the company has set iron ore production target of 35 mt for 2015-16 and expects to commission a 3 mtpa steel plant at Nagarnar by December 2016. It has also developed an internationalisation strategy for critical steel making, energy and fertilizer raw materials and kept an ambitious budget for acquisitions in next fiscal.

In a free-wheeling interview to Steel Insights, Narendra Kothari, who took over as chairman and managing director of NMDC at this crucial juncture, sounded confident of delivering the goods and achieving such multifaceted targets. To put it in his own words: “I like to take challenges in a positive way. I take challenges as opportunities which are there to increase your efficiency, boost your performance, make you stronger and more mature. Challenges are the real test of your hidden qualities and mature thinking is tested.”

Work in progress of units of NMDC Steel Plant at Nagarnar

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Steel Insights, January 2015 39

InTERvIEw

Excerpts:

What is the current state of affairs in iron ore mining in Odisha?Odisha has not taken any decision on the progress of the mining sector. That is the reason why the renewal applications are pending for years. However, the situation should have been different. Odisha could have been the most progressive state in the country in terms of mineral sources. The state has got a huge sea coast. It has to develop infrastructure and the mining industry.

Out of the total 56-odd mines in this state, many are yet to get mine renewals. This has led to imports of iron ore by prominent steel players like Tata Steel. The whole production process in the state has gone haywire.

What is the current production level in Odisha?

In Odisha, even the existing mines can produce 55-60 million tons of iron ore. What is lying in the state is at the mine

head and not being lifted. How long can the mine keep this stock? It has a limit. As on March 31, 2014, 29 million tons were lying at the mine head in Odisha. In our country, as a whole, 120 million tons are lying at the mine heads. Out of this, about 100 million tons are fines and 20 million tons in the form of lumps.

How do you see the iron ore production scenario in the country?The actual production figure of iron ore is much less than the official figure of 152 million tons given in 2013-14. If the demand is not more than 104 million tons then what happened to the rest of the production? Why does the industry need to import in that case? So far as steel is concerned, 45 percent of production comes from the induction furnace and electric arc furnace route, which does not use iron ore. They use only sponge iron or scrap. Any fluctuation in the demand-supply of steel is made by induction furnaces and not by the plants using the basic oxygen furnace route.

How do you see the auction mechanism for mining blocks panning out as compared to the first-come-first-serve route in mine allocations?All countries in the world do mine allocation on the basis of first-come-first-serve. Here, however, the government feels that since mineral exploration is a risky venture, excess money should not be put to risk. Private capital is mainly invested here and entrepreneurs depend on venture capital and hedge funds. Exploration has a high failure factor and in case there is discovery they can sell that material because they have got the freedom to do so commercially. So, they make money out of it and hence there is no dearth of exploration activities.

Where do you see iron ore exports headed in the current fiscal? Exports have almost stopped. In 2013-14, iron ore exports were at 16 million tons but this year, whatever production has happened has been till September. Nothing happened after that. This is because faulty policies and the high export duty have made iron ore exports uncompetitive in the world market. I think exports will be less than double digits this year.

Actual iron ore output less than 152 mt

Odisha has been tardy in terms of decision-making in the mining sector and thus lease renewals are pending today.

Otherwise, the state has the potential to be the most progressive in the country in terms of mineral resources, R K Sharma, Secretary General,

Federation of Indian Mineral Industries (FIMI), tells Sanjukta Ganguly & Tamajit Pain of Steel Insights.

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40 Steel Insights, January 2015

Reflecting on refractoryThe `6,000-crore refractory industry is plagued

by lack of naturally occurring raw materials and talent as well as usage of outdated technology.

Moreover, having an almost 75% exposure to the steel industry, whose prospects are not too bright at this juncture, refractory-makers are feeling the heat alright. Also, because it serves an industry whose market size is much larger, refractory-makers lose the negotiating edge as well. Dr A K Chattopadhyay, Technical Advisor to Chairman, TRL Krosaki Refractories, tells Sanjukta Ganguly and Tamajit Pain of Steel Insights that further consolidation is expected in this industry.

Briefly describe the current status of the refractory industry in India?

The refractory industry in India is worth `6,000 crore revenue-wise and most of the manufacturers are medium and small enterprises. Only a few, 8-10, are big players – like TRL Krosaki, the largest. The second largest is Vesuvius, third is Ace Caldery’s, which is now Caldery’s India, OCL, Dalmia Refractories (earlier used to be known as Nataraj Ceramics), Orient Refractories (taken over by RHI). RHI, in recent years, has been very aggressive in India. It has taken over one unit, called RHI Classil, in Vizag.

The capacity utilisation of the industry is to the tune of 60 percent currently and there has been no growth in projects for the last couple of years. That is why many industries dependent on projects are not doing that well.

What is your outlook on the industry in the near term?

We certainly feel that in the next 6-7 months, owing to the positive sentiments based on the recent political changes, we expect projects will move ahead and become big sources of refractory consumption. What happens is that, at the time of project installation, refractories are consumed. There is a portion which is consumable. Consumable refractory goes into the steel-making area but blast furnace, coke oven,

InTERvIEw

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