4 Steel Insights, May 2014

COnTEnTs

36 | INTERVIEW Demand slump forces Shyam Steel to eye diversification Co may mull steel expansion if economy stabilizes and banks look at proposals favourably.

30 | COVER STORY “Industry may recover in 6-9 months”Adhunik, looking to consolidate steel biz, is targeting `4000 crore revenue from steel, pellet plants.

46 | GOVERNMENT India probes dumping in stainless steelEvidences prima facie indicate dumping from China, Korea and Malaysia.

16 | FEATuRE “Consolidation & costcompetitiveness are our gameplan” Tata Metaliks with 10% market share has strategized sale based on realization, says MD Sanjiv Paul.

14 | FEATuRETata Steel plan 8 mtpa sinter, 7 mtpa pellet capacity in 2 years Subject to management approval there is plan to invest about `100 cr in 2 years.

6 SC lifting of mining ban in Goa may not guarantee immediate relief

10 Miners wait with bated breath for court verdict for Odisha

12 Tata Steel’s BBSP#2 reaches historic milestone

20 Global steel demand to rise 3.1% in 2014

22 Indian property market banks on new govt.

24 Steel secretary calls for paradigm shift in usage of steel slag

26 Newfiscbeginsinslowmotionforautocos 28 Coking coal stages mild recovery in April

41 Tata Steel’s Q4 saleable steel production up 7%

42 BSP launches brand of customised plates for earth moving equipment sector

42 SAIL bags 2 RVNL contracts for supply of rails

43 Ramp up in output main challenge for FY15: RINL CMD

43 RINL expects to 1 mt saleable steel production

44 Drager celebrates its 125th anniversary

44 JSW inaugurates India’s most modern CRM

45 Sesa Sterlite Q4 net falls to `1,621.55 cr

45 Narendra Kothari assumes charge as CMD, NMDC

47 Iron ore handling by major ports down 13.38% in Apr-Mar

48 Railways’ iron ore handling up 15% m-o-m in March

49 Global crude steel output up 13.07% in Mar m-o-m

50 Ferro alloy market remains constant on low activities

6 Steel Insights, May 2014

sPECIAL fEATuRE

SC lifting of mining ban in Goa may not guarantee immediate relief

Steel Insights Bureau

Heeding pleas to restart mining in Goa, the Supreme Court (SC) recently lifted the complete ban on

extraction of iron ore in the state but made resumption of mining activities conditional on issuance of fresh leases.

The decision offers a ray of hope to thousands thrown out of jobs after the court shut down mining in the wake of reports of massive illegal extraction of iron ore. However, awarding of fresh leases will be time-consuming.

The SC order has implications beyond Goa as the mining sector’s woes contributed to the economic slowdown along with low growth in manufacturing. Mining has been affected in Karnataka and Odisha as well.

The mining sector has also been hurt by Coalgate and long pendency of key amendments to the Mines and Minerals (Development and Regulation) Act to allow private firms to engage in mining through competitive bidding. The Goa government and various bodies have been seeking a review of the ban, saying legal mining be allowed as thousands of livelihoods and state revenues are being severely impacted.

In its order, the SC bench limited iron ore extraction at 20 million tons (mt) a year and cancelled mining leases that had been given extensions after 2007 following the completion of 20-year renewal periods.

This is a hurdle the mining industry and the state government have to cross and the role of the new government at the Centre, expected to be in office by May, will be crucial in ensuring quick clearances.

Earlier, the green bench of justices AK Patnaik, SS Nijjar and FMI Kalifulla ordered cancellation of all mining leases given extension after 2007 even after completion of the maximum 20 years of renewal period and upheld the state as well as central government’s decisions in September 2012 in this regard. It also set out conditions like defining a one-km buffer zone around national parks and sanctuaries as no-mining areas and asked the Union ministry of environment and forests (MoEF) to issue a notification within six months demarcating eco-sensitive zones around national parks and sanctuaries.

As an interim measure, the court permitted resumption of iron and other ore mining by those granted fresh leases by the state government in accordance with “its policy decision and Mines and Minerals (Development and Regulation) Act”.

“Until the final report is submitted by the expert committee, the state government will, in the interests of sustainable development and intergenerational equity, permit a maximum annual excavation of 20 million tons from the mining leases in the state of Goa other than from dumps,” said Justice Patnaik, who authored the judgment for the bench.

16 Steel Insights, May 2014

fEATuRE

The pig iron market has remained dull and stagnant for some time now. What are the reasons for this and how do you see the market panning out in the next six months as the general elections take place and a new government takes over?The pig iron industry caters to the foundry sector – primarily, engineering product makers and automobile component manufacturers, and also to the secondary steel- making sector. In the last few months,

both the engineering and automobile markets have not done well, and they continue to not do well despite all the relief given by the finance minister in the last Budget. That is the reason why the pig iron industry remained depressed. It is felt that the elections are going to make a big difference if a single party comes to power and forms a stable government. Then the economy may pick up and go back to 8-9 percent growth rate as India had seen in the past.

If that happens, the pig iron market will also look up because the automobile and engineering markets will improve. However if that does not happen, then it might continue to remain depressed. But others have another theory – that it is not the markets or politics alone that impact sentiments. The world goes through economic cycles and at this point of time we are at a low and there will also be a high, hopefully some time sooner rather than later. So that will make a difference.

My answer to this question is one cannot really predict as to how the market will pan out going forward. Sure, elections will have a bearing on it, but I would rather bet on the inherent strengths of the company and strategise accordingly.

With a 10 percent market share and a strong brand identity, TML should look to play in niche markets where it has a reasonable presence and can hold its own, rather than spread itself thin. Other

“Consolidation & cost competitiveness are our gameplan”

Though the jury is still not out on how the market will pan out after the new government is in place, at Tata Metaliks (TML), the mandate is clear: The company is on its way to consolidation

and aims to be a low-cost producer of pig iron. Only then, TML will be sustainable and ensure that it is not the first one to go down in a falling market. In a free-wheeling interview to Tamajit Pain of Steel Insights, Sanjiv Paul, Managing Director, Tata Metaliks Limited, dwelt on the future of pig iron prices, the company’s identity post the merger with Tata Steel and the status of the joint venture with Kubota for DI pipes.

Excerpts.

COvER sTORy

In the times of slowdown, the `3,500-crore Adhunik Group did just what the doctor ordered. Instead of diverting its energies towards

external factors, it has been focusing on bolstering its internal strengths. The prescription included integrating operations, investing rationally and divesting non-crore businesses to reduce debt and generate additional cash flow, with a focus on exports, the power transmission business and technology and processes.

While the group is looking to consolidate its steel business, with an eye on improving efficiencies, it is setting up another pellet plant of 2 mtpa at Sundergarh in Odisha, which is expected to be commissioned in FY2017. It is expanding its pellets capacity as well at the Jamshedpur plant from 1.2 mtpa to 1.6 mtpa, with the enhanced capacity slated to start commercial operation early this year.

Manoj Kumar Agarwal, Managing Director of group flagship Adhunik Metaliks Ltd and who guided the group’s foray into mining and power, in conversation with Madhumita Mookerji of Steel insights, said the group is targeting revenues of around `4,000 crore from its steel and pellet plants after implementation of the proposed 2-mtpa pellet capacity. Furthermore, liquidation of the cement

plant, forgings unit and transmission line business generated `400 crore in cash which reduced

around `800-crore of debt at the group level and generated additional annual

cash flows of `100 crore in the form of reduced interest. Also, the merger

of ZSL and reverse merger of AML with OMML will lead to synergy and economies of scale.

Agarwal was also instrumental in setting up of the 0.45 mtpa integrated steel plant at Rourkela and

acquisition of OMML, a merchant mining company. Among others,

he was honoured with the “Rotary Young India Leadership award” in the

industrialist category and the “Prabhat Samman Award, 2012” under the “Entrepreneur

of the Year” classification.

30 Steel Insights, April 2014

‘Industry may recover in 6-9 months’

Steel Insights, May 2014 31

COvER sTORy

Excerpts:

Please could you elaborate on the Adhunik Group’s existing facilities – plants, mines etc.?

We have set up and are operating steel manufacturing facilities of 450,000 million tons (mt) of carbon, alloy and stainless steel billets and rolled products through the DRI-BF-EAF-LF-AOD/VD-concast-rolling mill routes, suitably supported by a coal washery, an oxygen plant, a ferro alloys plant, a coke oven and other facilities, including a railway siding – for better logistical support. The integrated facility is engaged in the production of alloy steel, special steel and stainless steel, catering to the automotive, engineering, oil and gas, telecom, defence, power, railways and construction industries.

Within a very short span of time, the company’s products have been recognised by major automobile component manufactures and auto companies like Tata Motors, Mahindra & Mahindra, Ashok Leyland, Guru Nanak Forging, Ramkrishna Forging, etc.

Adhunik Metaliks Limited (AML) has also been allotted a captive iron ore mine in the village of Deojhar, in the Keonjhar district of Odisha. The company has executed a mining lease for its captive iron ore mine and started operations from June 2012.

Our mining business is being carried out through Orissa Manganese & Minerals Ltd (OMML), which is engaged in the business of exploration, development, mining and processing of mineral assets. It has six manganese ore mines in the state of Odisha. These mines started operations in a gradual manner from January 2008 onwards and, currently, three are operational.

The company’s production rate is around 200,000 tons per annum which makes it one of the largest manganese ore producers in the country after Manganese Ore India Limited (MOIL).

OMML operates two iron ore mines at Ghatkuri and Suleipat. The Ghatkuri iron ore mine is located in the state of Jharkhand and has been operational since January 2009. In 2010, the company entered into a joint venture agreement with the owner

of the Suleipat iron ore mine for exclusive raising and selling of ore. The mine has started production from October 2012.

OMML has also set up a 1.2-million tons per annum (mtpa) pellet project, including an iron ore beneficiation facility, at Kandra Chowk Road, Saraikela, Jharkhand. The beneficiation facility started operation during FY2011 whereas the pellet plant commenced operations from December 2011, ahead of its scheduled time (as against the documented COD of April 2012).

The pellet plant set up by the company is one of the few with advanced technology, i.e., straight grate. The pellet plant is currently running at 80-85 percent capacity utilisation.

The company is also expanding the capacity of the pellet plant from 1.2 mtpa to

1.6 mtpa, which is under implementation. As informed, the trial run for enhanced capacity has started and is expected to start commercial operations from this April itself.

What are the major challenges being faced by steel manufacturers in India? What improvements can be brought about in the current steel scenario in the country?

One of the biggest challenges being faced by the steel manufacturers is finding raw material for enhancing capacities and upgrading infrastructure for production and consumption of steel in the domestic market as well as for exports.

The steel sector has reported one of its slower growth rates in recent years as both infrastructure spending and industrial growth have declined significantly.

36 Steel Insights, May 2014

Demand slump forces Shyam Steel to eye diversification

Slackening demand, coupled with short-sighted government policies, rising prices of raw materials like iron ore and coal and their scarcities, increasing debt on the books and lack of access to cutting-edge

technology are factors that have turned the Indian steel industry into a worried lot today. Kolkata-based Shyam Steel, a key player in construction steel, is no exception. Lalit Beriwala, Director, Shyam Steel, tells Madhumita Mookerji of Steel Insights that his company is eyeing a diversification into food processing and greenhouse farming to stay afloat in these lean and mean times. It has also abandoned plans for its 1-mtpa integrated steel plant at Raghunathpur in West Bengal due to lack of iron ore resources. But, steel being its bread and butter, if the new government brings stability to the economy, then it would mull expansion, provided the banks look at its proposals favourably.

What challenges are being faced by the steel industry in India? Where have our policy-makers gone wrong?The fortunes of the steel industry are closely linked to the economic growth and development of a country. India is the world’s fourth-largest steel producer, logging in a growth of 5.86 percent in production in financial year (FY) 2012-13.

The industry is facing several challenges:

Non-availability of iron ore at fair prices & desired quantitiesIron-ore, which is the basic raw material for steel-making, is available in abundant quantities in our country. But easy availability of the material to the actual consumer at a fair price and right quantity, especially to the small steel players who produce about 50 percent of the total steel in India, is far from the reality.

Due to the lack of vision on the part of the steel ministry, only 30-40 percent of mines in India are in operational condition. This has created a huge crisis of iron ore and the industry has to restrict itself to using highly priced iron-ore pellets from only a handful of big private manufacturers.

Moreover, state governments are also evolving their own policies. For instance, a few months back, the government of Odisha unveiled a policy whereby only 50 percent of the mined iron ore can be shipped out of the state.

Apart from that, 80 percent of iron ore mines are privately owned and there is no pricing mechanism or regulatory authority within the government which could put a check on the abrupt pricing tendencies by such merchant miners, which, in turn, is leading to huge losses being incurred by steel companies across the country.

The government has allotted large blocks of iron ore mines to NMDC and OMDC with the purpose of providing iron ore at fair prices to steel manufacturing companies in their nearby states. But, with time, the Government of India as well as the states may have forgotten the main principal of development of the country and the steel industry… and the above agencies, it seems, have focused on earning revenues by auctioning and exporting iron ore at exorbitant prices.

InTERvIEw

Tear along the dotted lineTear along the dotted line

58 Steel Insights, May 2014