steel insights

Steel Insights, November 2012 3

Dear Readers,

The Indian steel industry is set for a bumpy ride. World Steel Association in its short range outlook recently said that 2012 steel

consumption growth would be 5.5% at 73.6 million tons (mt), down from earlier estimates of 6.9%. In 2013, the demand would grow 5% at 77.3 mt. The downtrend was because of the ongoing un-favorable conditions across manufacturing and housing sector. The two sectors consume around 55% of India’s steel production.The Association forecasted global apparent steel use to increase 2.1% in 2012 and 3.2% in 2013, which is considerably lower than the 6.2% growth achieved in 2011. Hans Jürgen Kerkhoff, Chairman of Worldsteel Economics Committee, said earlier the economic situation deteriorated during the second quarter of this year due to continued uncertainty arising from the debt crisis in euro zone and a sharper than expected slowdown in China. These factors have weighed heavily on business confidence and manufacturing activities around the world. As a result momentum in both the developed and emerging part of the world weakened considerably. However, the situation is expected to gradually improve in 2013 on the basis that the euro zone crisis can be contained, the US successfully deals with the fiscal tightening due in 2013 and the economic stimuli measures secure a soft landing in China. Adding to the woes of the industry, Odisha has stopped giving permits to iron ore mining companies other than for captive mining. This would lead to a plunge in exports to about 25 mt this fiscal from 60 mt in the last. The move is also likely to hit the domestic iron and steel sector as it could lead to greater imports of more expensive iron ore by steel mills, boosting end-product prices during a period of weak demand.Odisha’s move follows a mining ban in Goa, while Karnataka has only just begun to ease the mining ban. The three states together account for the bulk of iron ore output in India, the world’s No. 3 exporter.The eastern state is also demanding penalties from 103 companies for excessive mining. Experts feel the iron ore production is expected to fall to 100 mt this year from 160 mt last year. Meanwhile, overall steel demand from auto, construction and capital goods sectors is still dull. Even after the input cost fall in the last quarter, the Indian steel industry has witnessed a subdued demand growth of 2.8% during July to September as against 7.7% in the previous quarter.Only companies having raw material inventory will have some cushion but that too only for one or two months but times are very trying. At this juncture, we at Steel Insights examined the requirement for beneficiation of low grade Indian iron ore, which would reach 206 mt by 2016-17 from 116 mt in 2011-12. Steel Insights also met Sanat Bhaumik, the senior vice president (flat products) of Danieli India to know about Thin Slab Casting and Rolling process and Danieli’s innovations in this technology.Happy reading!

(Rakesh Dubey)

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Editorial BoardDr Abhirup Sirkar, Professor Economics, Indian Statistial Institute (ISI)Dr Amit Chatterjee, Consultant and former Advisor to MD, Tata Steel LtdJayant Acharya, Director (Commercial & Marketing), JSW Steel LtdK Ranganath, former CMD, KIOCLVikram Amin, ED (Strategy and Business Development), Essar Steel LtdRana Som, Former CMD, NMDC Ltd

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4 Steel Insights, November 2012

COnTEnTs

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37 | FEATUREIndia’s steel demand to grow 5.5% in 2012: WorldsteelSlowdown in demand because of unfavorable domestic and external economic conditions

34 | FEATUREAlloy makers expect demand to rise in March quarter Demand to pick up as European mills will return to market with depleted inventories

26 | FEATURE Odisha plans to channelise ore tradeThe state plans to appoint a designated state agency to bring transparency and generate more revenue

20 | INTERVIEWThin slab casting tech for HR coil productionThin slab casting achieves energy and cost savings over conventional hot strip mills

6 | COVER STORyIron ore beneficiation need of the dayBeneficiation will conserve limited high grade lumpy ore and optimize mine utilization

30 Spot coking coal prices firm up in October

32 Ferro alloys remain stable in October35 Auto sector downtrend continues, sales

dip in September36 India’s steel imports up 38% y-o-y in H138 JSW Steel Q2 net profit soars40 Nippon-Sumitomo merger to put

pressure on Indian firms41 ArcelorMittal profitability dips42 SAIL production up 7% y-o-y in Q243 Tata Steel launches new hot rolled

products brand ‘Tata Astrum’43 Posco to get additional land in 2 months44 Verma stresses on RINL marketing

strategies45 Iron ore, new steel projects are of prime

interest46 Iron ore handling by major ports down

43% in H147 Railways commodity freight revenue

down in September m-o-m 48 Macroeconomic indicators of India50 Global crude steel production remains

unchanged52 Domestic flat & long markets56 Price data57 Production data58 Ferro alloy price trend59 Iron ore data60 Summerised ferro alloys import data61 Summerised ferro alloys export data


COvER sTORy

Tamajit Pain

A recent report of the working group on steel pegged India’s steel capacity to reach 149 million tons (mt) by

2016-17 from the present 90 mt. It forecast production to reach 115 mt by that time.

If there is one thing that needs immediate attention if these projections are to be achieved, it is enhancement of iron making capacity in all three routes of BF, DRI and

liquid iron process routes followed by BOF, EAF and IF for steel making.

The steel policy assumes that around 60 percent of the new steel capacity would come up through the blast furnace and BOF route, 33 percent through sponge iron and EAF/IF route and about 7 percent through other routes.

Therefore, blast furnace route of iron

making would continue to dominate the iron production in India followed by the sponge iron (DRI) route. Lumpy iron ore (-30+10mm) and agglomerates like sinter and pellets form the feed for the production of pig iron in blast furnace, whereas, steel scrap, lumpy iron ore (-18+6mm) or pellets are the feed for sponge iron production.

There is a consensus in industry circles

Iron ore beneficiation ...

... the need of the day


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that in order to achieve growth in steel making there is a need for increased raw material security and requirement for removal of the bottlenecks pertaining to new projects and expansion of old projects.

Iron ore is the basic raw material for steel production. Haematite and magnetite are the most prominent of the iron ores found in India. Of these, haematite is considered to be the most suitable for iron making because of its high grade quality and lumpy nature. Almost 98 percent of the domestic consumption is haematite iron ore. The main consumers include sponge and pig iron makers.

India is bestowed with large resources of iron ore, which occur in different geological formations. However, major economic deposits of iron ore are found associated with volcano – sedimentary banded iron formation of Precambrian Age. Geographically, the Precambrian banded iron ore formations are distributed in five broad zones, wherefrom haematite is mined.

Reserves

Most of the iron ore deposits in India were explored during 1950s and 1960s with the advent of integrated steel plants in the public and private sectors. Exploration agencies laid emphasis on establishing source of iron ore whose grade was 60-63 percent Fe keeping in view the availability of haematite ore and technical knowhow of steel making at that time.

Consequently zones of lower grade ores were overlooked. However, exceptions were made where low grade ore deposits were found associated with high grade types. Almost all the five major zones were explored for high grade ores and exclusive low grade ore deposits were ignored then.

As per United Nations Framework Classification (UNFC) of mineral resources, total resources of iron ore in the country

is around 28.52 billion tons. Haematite is estimated to be around 17.88 billion tons – has about 8.09 billion tons under “reserve” category and 9.79 billion tons under “remaining resource” category. Total resources of magnetite is estimated at 10.64 billion tons – has under reserves category a mere 0.02 billion tons while 10.62 billion tons is placed under remaining resources category. A closer look at the grade-wise share of haematite reserves in the country shows that the cut-off grade of +60 percent Fe has only been taken for exploration programme as against present threshold of 45 percent Fe and hence reserve estimates are significantly on the lower side.

Almost all the present day production of steel products comes from haematite reserves. Magnetite reserves are not exploited for domestic consumption as these are mostly in eco-fragile areas of Western Ghats. Existing resources of haematite merely account for around 28 percent of the total iron ore resource of the country.

In India, haematite reserves and resources are mostly confined to the states of Odisha (42 percent and 34 percent), Jharkhand (29 percent and 26 percent), Chhattisgarh (11 percent and 19 percent), Karnataka (11

percent and 12 percent) and Goa (6 percent and 5 percent). The balance (1 percent reserves and 4 percent resources) are spread across Maharashtra, Andhra Pradesh, Uttar Pradesh and Rajasthan, according to the recent Vision statement by Indian Bureau of Mines.

About 2.5 tons of r.o.m. iron ore or 1.7 to 2 tons of processed iron ore is required for per ton of steel production. To meet the projected steel production of 115 mt per annum by 2016-17, the r.o.m requirement would be around 206 mt per annum.

Iron ore supply

India is completely self-sufficient with regard to iron ore but the projected growth in steel production may adversely impact iron ore supply going forward. The existing reserves of haematite (averaging around 63 percent) are the only source of iron ore and these reserves may not last beyond 15-20 years maximum at the present rate of steel production. Hence to meet future and projected targets, additional domestic resources have to be created.

With high grade iron ore reserves under the threat of depletion despite revision of threshold value of iron ore to 45 percent Fe and 35 percent Fe (from haematite ore and siliceous haematite ore respectively), it is obligatory on the part of the mining industry to consider exploitation and utilisation of low grade iron ore, which were till now sidelined as waste, for effective utilisation. A fresh exploration strategy will have to be formulated with cut off/threshold grade ores as target, the Indian Bureau of Mines Vision document said.

Majority of the hematite ore reserves (over 85 percent) in India are of medium to

Prominent iron ore zones

Zone A Singhbhum (Jharkhand), Cuttack (Odisha)

Zone B Dantewara & Durg (Chhattisgarh), Chandrapur & Gadchiroli (Maharashtra)

Zone C Bellary-Hospet Belt (Karnataka)

Zone D Goa, Ratnagiri (North Karnataka)

Zone E Metamorphosed BIF along the West Coast in Karnataka/Kerala

Source: Indian Bureau of Mines

Odisha, 34%

Jharkhand, 26%

Chhattisgarh, 19%

Karnataka, 12%Goa, 5% Others, 4%

Statewise distribution of hematite iron ore resources in India

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high grade. Selective mining coupled with processing of entire r.o.m. iron ore makes their use possible directly in blast furnace or coal based DRI plants in the form of quality calibrated lumps. This resulted in usage of higher percentages of lumpy iron ore i.e. around 45 percent in iron making in India as against 15-20 percent lumps used globally.

Only processed iron ores are used in iron industry. Iron ore processing in India is restricted to meet the physical standards as it is inherently medium/high grade.

Therefore, all the integrated steel plants deploy multi-stage crushing, washing and sizing of r.o.m. ore to produce lumps (-30+10mm) and sinter feed size (-10+0.15 mm) material. Non-captive sector supplying lumps to coal based DRI plants resorts to multi-stage crushing and screening to meet the size requirement. This practice generates large amount of fines (-10/-6 mm) and slimes (-100 mesh/0.15 mm) which get unused at the mine site.

Indian iron ores are fragile in nature and mining and processing generates substantial amount of fines. The proportion of lumps and fines in general is around 2:3.

These stacked fines, slimes and the category of available low grade resources falling in between threshold value and saleable grade constitute the potential source for producing usable grade iron concentrate after beneficiation.

This will not only utilise existing discard material for recovery of value but also conserve limited high grade lumpy hematite reserves of the country.

Extensive R&D work was carried at various laboratories in India at IBM’s ore dressing laboratory on low grade iron ore, iron ore fines (-10mm) and classiflier/tailing pond slimes (-100 mesh). The flow sheet developed on almost all types of ore showed the possibility of producing concentrate suitable for sinter and pellet making. By taking advantage of the process route to beneficiation the existing operators must look towards beneficiation as a means to overcome the crisis of supply of high grade ores.

The capital cost of 250 tph beneficiation plant works out to be around `100 crore. The cost of beneficiation in respect of fine for sinter feed will be around `200 per ton whereas for pellet feed it would be in range of `250-350 per ton.

Current status of ore mining

The mining industry is currently run in fragmented leaseholds and operated by captive and non-captive units producing iron ore in the ratio of 25:75. Since creation of a beneficiation unit is capital intensive, it may not be possible for a small and medium sized unit in the non-captive sector to invest in such a venture. However, a large number of small mines located nearby can form a consortium to have their beneficiation facility.

According to the Indian Bureau of Mines, a custom mill for beneficiation needs to be introduced, whereby the fines from small mines in the vicinity of the facility could be received, blended, processed, in a centralised processing unit and the concentrate thus produced could be pelletised or sold to appropriate market. Such a consortium would need to work on certain defined objectives:

♦ Consistent supply of raw material for which they must sign an MoU amongst themselves;

♦ Seek government intervention for land, power, fuel, and water management so that they could be made available at subsidised rate;

♦ Seek relief by way of import duty waive off on imported technology and equipment for setting up such beneficiation facilities as a measure of incentive.

The potential areas for such activities are Odisha and Jharkhand and Bellary Hospet sector in Karnataka. The beneficiated fines need to be agglomerated before its use. Beneficiation and agglomeration of these materials for iron making is the call of the day and India should take the right direction to meet its growth targets, according to the mines ministry.

Iron ore production, consumption and export

Year Production(in million tons)

Domestic Consumption (in million tons)

Export

Quantity(in million tons)

Value(in `crore)

2009-10 218.55 90.62 117.37 41794.85

2010-11 208.00 111.40 97.66 41295.86

2011-12 (provisional) 169.66 116.30 61.80 Not Available

Source: For finished steel - Joint Plant Committee; Ministry of Steel, For production and consumption of iron ore – IBM, Ministry of Mines; For export of iron ore – MMTC, Department of Commerce

Essar’s slurry tank in Paradip


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The primary use of incorporating agglomerates in the blast furnace is to utilise the fines generated during various stages of mining and processing as blast furnace being a counter gas current reactor, these fines cannot be directly used as they hamper gas flow.

The present facility in the country for processing and utilisation of beneficiated fines through agglomeration is highly inadequate particularly in the non-captive sector, according to industry experts. This has led to large amount of fines (around 70-75 percent of the total fines production) getting exported.

Sintering and pelletisation

The government’s current National Steel Policy suggests encouragement of sintering and pelletisation so as to utilise these iron ore fines which make up 90 percent of the present exports.

Agglomeration of iron ore fines involves two methods – sintering and pelletisation. Sintering is the agglomeration of technique of iron ore fines in the size range of -10+0.15 mm to produce clusters by incipient fusion at high temperature.

Sinters are porous and brittle and that is why sintering process of agglomeration is restricted to integrated steel plants using blast furnace route and mini blast furnace of non-captive sector only.

Almost all the integrated steel plants have their own sintering plants (except IISCO) to cater to its own needs and consume the entire generated fines for sinter making. The non-captive producers deploying mini blast furnace for hot metal production use limited amount of fines for sintering after beneficiation.

However, huge quantities of fines are left unused at present at various mine sites even after their export.

The total installed sintering capacity in India is 39 mt. However, the production was 31 mt as of 2009-10.

Pelletisation is another mode of agglomeration applicable for fines below 325 mesh size. Pellets are hard and compact and therefore they can be transported over a long distance as they can withstand the rigours of handling i.e., repeated loading, unloading etc.

Pellets are viable and therefore can be produced and sold everywhere. Pellets therefore will pay a very important role in iron making in both blast furnace as well as coal based DRI units.

In India, pellets are selectively used in gas based DRI units whereas the integrated steel plants consider them unviable. This notion is however fading away now. Many integrated steel plants have moved proposals to incorporate a portion of pellets in the blast furnace burden to replace the calibrated lumps because of their superior chemistry, quality and strength in addition to enhancement of productivity. Therefore, pelletisation is likely to come up in a big way in India.

At present, practically none of the integrated steel plants have pelletisation facility. The present level of pellet making facility in the non-captive mine however is too little and needs augmentation of its capacities besides initiating creation of new facilities both in the captive and non-captive sectors.

Integrated steel plants can commence beneficiation followed by pelletisation in the immediate future as it had readily available huge stocks of slimes impounded in the tailing ponds.

This will not only recover the loss of valuables from slimes but also help in controlling environmental degradation on account of its perpetual stacking.

Of late the leading players in the mining and steel industry have realised the importance of pellet making and have begun to incorporate pelletisation facilities.

Pelletisation plants in general involve huge capital investments and consume enormous amounts of energy and fuel for grinding and pellet making.

Therefore, the capital involved and operating cost of pelletisation plants is very high. The breakeven and economic size of the pelletisation plant is around 1 mt. This involves huge capital investment (approx. `250 crore).

Hence, only big players like captive plants can set up pellet plants. However, technology needs to be tailor made for deposit specific iron ore as economic and readily available commercialised technology may not be suitable and would need testing before its implementation.

A close look at the market price of high grade lumps versus production cost of quality pellets from mine and processing rejects and slimes after beneficiation would be comparable.

Many integrated steel plants have moved proposals to incorporate a portion of pellets in the blast furnace burden to replace the calibrated lumps

Future scope of exploration of low grade iron ore in Indiaas identified by CGPB Committee

Odisha Bonai-Keonjhar belt, Tomka-Daitari, Umerkote belt

Jharkhand All major high grade ore deposits contain low grade lateritic ores

Karnataka Bhagalkot, Tumkur, Chitradurga

Maharashtra Sindhudurg, Gadchiroli, Gondia

Chhattisgarh Siliceous Hematitic ore (55-60 percent Fe), lateritic hematite ore (45-55 percent Fe) in all 14 desposits of Bailadila range

Andhra Pradesh Cuddapah, Kurnool, Karimnagar, Adilabad, Guntur

Source: Indian Bureau of Mines

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Thus the process of beneficiation followed by agglomeration will not only conserve the limited high grade lumpy ore but also lead to optimum utilisation of the available valuables from mine and process rejects.

This would reduce burden of stacking of tails/rejects that are kept for disposal and will be an effective measure to control environmental degradation.

Blast furnace productivity did show a turnaround over the years consequent to utilisation of higher proportions of quality agglomerates in the burden.

Observations revealed that 1 percent replacement of calibrated lumps by agglomerated products like sinter or pellet reduces the coke rate by 1.5 kg/ton of hot metal produced.

Depending upon the quality of ore and the physical and chemical properties of sinter, it is generally agreed that on an average 20-70 percent sinter could be used successfully in the blast furnace.

Use of pellets in iron making is advantageous due to improved permeability in comparison to lumpy or sinter. This leads to better solid gas contact resulting in higher productivity and lower coke rate.

At present, 15-20 percent of pellets are used in many furnaces along with sinters and lump ore.

SAIL intends to incorporate pellets in their blast furnace burden and proposes burden comprising 15 percent lumps, 15 percent pellets and 70 percent sinters in near future. This strategy could open up the opportunity for utilisation of low grade iron ores, fines and slimes which after beneficiation and transformation into pellets could fine larger scope for application.

To meet the future target in steel production, integrated steel plants and DRI units whose share in the country’s iron production is likely to be 60 percent and 33 percent respectively would have to

depend largely on pellets to enhance their production.

Assuming that integrated steel plants on the whole make use of a minimum of 15 percent pellets (optimum) in their blast furnace burden and taking into consideration the projected target steel production to be achieved, the minimum requirement of pellets would be around 25 mtpa.

Further assuming that all coal based DRI units use 50 percent pellets in replacement of high grade lumps, there too, the demand for pellets would be around 25 mtpa. Thus around 50 mtpa pellets would be required in near future.

This dependence on pellets would not only conserve the high grade hematite lumps but would also enable effective utilisation of fines and slimes.

The surplus production of pellets if any could be supplied to the indigenous coal based sponge iron plants and the remaining could be exported. The recent waiving of export duty by the government of India could make pellet making ventures a viable option.

According to the Indian Bureau of Mines, small mine owners must be encouraged to venture into the pelletisation business considering its future demand. The industry has been of the opinion that to improve participation in pelletisation business

End use grade specification for hematite

Lumps, fines & blue dust

Chemical constituents

Fe (t) SiO2 Al2O3 P

High grade 65 percent & above 2 percent max 2 percent max 0

Medium grade 62-65 percent 3 percent max 3 percent max 0.1 percent max

Low grade 60-62 percent 4.5 percent max 4 percent max 0.1 percent max

Aerial view of Essar’s Odisha pellet plant


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incentivising pellet making industries in the country is essential.

The government will need to consider offering some additional incentives in power and water tariff, reducing the royalty on pellet making industry and waiving off import duty so that technology and equipment for setting up beneficiation and pelletisation facilities could be easily imported.

Small mine owners will need to be encouraged to establish beneficiation and pelletisation plants as joint ventures so that

there is no dearth of sufficient feed material and availability of capital investment.

The sponge iron industry will have to play a key role for development of steel sector. Therefore, thrust should be given to make pellet making which would in turn replace use of high grade lumpy iron ore in the coal based DRI units in the country.

Thus steel making necessitated the whole gamut of activities right from mining of r.o.m. iron ore at the threshold value of 45 percent Fe (35 percent Fe for siliceous hematite ore)

to value addition/beneficiation of iron ore, sintering and pelletisation followed by iron and steel making through blast furnace cum BOF/LD or DRI cum EAF/IF processes.

Moreover, steel is a long term business and the raw material resources are to be planned at least for a period of 50 years. As India looks into its strength regarding availability of iron ore, the present level of reserves is not encouraging for the projected demand of the ore by 2016-17.

We have to ensure that the requirement of input is comprehensively met in quality as well as quantity. This brings to the fore the issue of conservation and beneficiation followed by agglomeration of beneficiated fines.

Short term measures

The short term measures include the following:

♦ Preparation of feasibility of mining of several small/low grade deposits already identified and proved earlier and the

The government will need to consider offering some additional incentives in power and water tariff, reducing the royalty on pellet making industry and waiving off import duty so that technology and equipment for setting up beneficiation and pelletisation facilities could be easily imported.

An iron ore beneficiation plant in operation

0525

75

95

100


enhanced requirement and deployment of appropriate beneficiation technology would have to be ascertained.

♦ Immediate processing of sinter fines being used for sinter making by integrated steel plants for making of quality sinter grade material production (reduction of alumina) after deployment of appropriate beneficiation technology.

♦ Immediate utilisation of available stacked fines (-10 mm) in non-captive sectors and slimes (-100 mesh) impounded in the tailing ponds of iron ore washing plants and stacked sub-grade/marginal grade ore through deployment of appropriate beneficiation technology.

♦ Improving the processing capacity of existing beneficiation facilities to produce quality product.

♦ Introducing the concept of total beneficiation of r.o.m. ore at 45 percent Fe cut off (for quality lumps, sinter & pellet fines) for optimum utilisation of available reserves.

♦ Developing new mines with total beneficiation facility.

♦ Exploration of low grade iron ore associated with high grade types within the existing mine/lease area.

♦ Augmenting sintering plant capacity by integrated steel plants.

♦ Contemplating pelletisation facility by integrated steel plants and non-captive sectors to accommodate additional concentrate generated from beneficiation of low grade ores, fines and slimes.

♦ Augmenting existing pelletisation plant capacity in non-captive sector.

♦ Encouragement for use of pellets in DRI units (coal based) and thereby discourage liberal use of high grade lumps.

Long term measures

♦ Convert the existing hematite resources into reserve by detailed exploration followed by feasibility study.

♦ Exploring the possibility of persistence of iron ore (hematite) at depth (beyond 50 meters or from existing pit bottoms of large working mines of hematite).

♦ Exploration in freehold area within known iron ore belts must be taken up. Most of the freehold areas within the known iron ore belts have not been explored so far due to lack of iron ore exposure. Besides, ideal lease/relinquished areas may have to be thoroughly assessed by drilling to ascertain the availability of iron ore.

♦ Exploration of low grade ores (hematite and magnetite) in the country, other than the mining area already in operation needs to be put in the fast track.

♦ Evolving suitable mining technology to exploit magnetite ores that are mostly found to occur in environmentally and ecologically sensitive areas of the Western Ghat region.

♦ Exploring beneficiation potential of hematite resource namely banded iron formation which is basically banded hematite quartzite (BHQ) or banded hematite jasper (BHJ) forming the base rock of the enriched iron ore deposits. This base rocks contain around 25-35 percent Fe.

♦ Evolving suitable technology for utilisation of goethite-rich iron ore in iron making. Beneficiation of low grade iron ore would generate substantial goethite rich iron reject (Fe 50-55 percent) which may cause huge environmental problem on account of stacking.

♦ Finally, statutory regulations need to be brought to ensure that full utilisation of the mined ore which automatically would lead to adoption of latest efficient technologies of beneficiation and agglomeration.

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Estimated conversion cost per ton of pellet produced from

beneficiated concentrate

Particulars Cost (Rs)

Power consumption: 65 units/ton@ Rs 5.5/unit

357.50

Fuel consumption: 18 kg of furnace oil @ Rs 30/kg (price-modvat)

540.00

Additives 10 kg of pulverised coal@ Rs 4000/ton

40.00

Bentonite 10 kg @ Rs 2000/ton 20.00

Labour & maintenance 1000.00

Miscellenous 100.00

Total 1157.50

The process of beneficiation followed by agglomeration will not only conserve the limited high grade lumpy ore but also lead to optimum utilisation of the available valuables from mine and process rejects.

Major players in pelletisation

Owner Source of raw material

Total capacity (in mt)

Essar Odisha, A.P. 14

JSPL Odisha 10

JSW Karnataka 9.2

Tata SteelNoamundi, Jharkhand

6

SAILGua, Taladih, Kalta mines

6

KIOCL Karnataka 4

BRPL (Stemcor) Odisha 4

Bhushan steel & Power

Odisha 4

NMDC Karnataka 3.2

Mandovi Pellets Goa 2.5

Bharat Mines Odisha 1.2


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Thin slab casting, rolling tech for HR coil production

Tamajit Pain

The direct rolling process for hot strip production, where the thin slab caster is connected

directly to rolling mill, has gained large market share rapidly because of its remarkable advantages in term of energy savings and investment cost over the conventional hot strip mills. However, the unquestionable advantages of the first-generation applications of such TSCR plant concepts also entail significant limitations both in terms of productivity and steel grades that can be produced.

Since its first pioneering applications in this area, Danieli considered strategic development of new technical solutions specifically conceived to overcome these

limitations with the goal of increasing plant production volumes and enlarging steel grades in product mix, in order to cover the gap between “Conventional Mill” and “Thin Slab Casting and Rolling” (TSCR) process routes.

Steel Insights met Sanat Bhaumik, the senior vice president (flat products) of Danieli India to know about TSCR process and Danieli’s innovations in this technology.

Why are steel producers opting for the “Thin Slab Casting & Rolling process” for HRC production?We all know combining processes will always reduce investment and transformation costs of a plant. So, it is not a surprise that production of hot rolled coils through TSCR route is always going to be cheaper than conventional HSM route. When we produce HRC directly from liquid steel in a single plant we are able to avoid

intermediate storage and reheating of slabs thereby eliminating a few equipment which saves capital cost and ensure no cooling or reheating of slabs saving energy or transformation costs.

But we cannot produce all steel grades in TSCR plants and such plants have productivity limitations also.Yes, it is true and only for this reason, since its first pioneering pilot plant in 1985, DANIELI have always tried to implement solutions which combines the best of both thin slab casting & rolling as well as conventional H S M techno log i e s . Danieli’s fTSR plants overcome the quality and p r o d u c t i v i t y l i m i t a t i o n s but retain the capex and opex Sanat Bhaumik, Sr. VP

(flat products), Danieli India


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advantages of thin slab casting and rolling technology.

In what ways are Danieli plants different from others?The differences are mainly in the Caster Design and Configuration of the Hot Strip Mill.

What is special about Danieli’s thin slab caster?In the thin slab caster (TSC) area the main special feature is the design of the caster itself. Danieli provides the TSC with Vertical Curved design with its parented Dynamic Soft Reduction (DSR) process. This feature will allow adapting a dedicated roll diagram to cope up with both internal cleanliness and proper ferrostatic pressure during the casing process.

In addition, Danieli patented long funnel H2 mould ensures reduction of the stress on the slab during the solidification phase, which is the key factor to cast crack sensitive grades like real peritectic grades. Application

of Dynamic Soft Reduction (DSR) is a key factor in ensuring optimal internal quality, under all casting conditions, and not only in a limited range of operative conditions.

The Air Mist secondary cooling which allows to fine tune the thermal profile of the slab during solidification in a dynamic way of the casting conditions (such as casting speed, superheat, etc.) with the maximum control range. Danieli thin slab caster also incorporates the unique feature of Independent machine closed circuit cooling for all sensitive elements of the caster (bearings, supports, etc) to monitor and control the temperature of all maintenance sensitive components of the caster regardless the casting speed and reduces the maintenance issues.

How do these features contribute to the end product which is HRC?Danieli vertical curved TSC has the following major advantages:• No limitation on metallurgical length (9

– 20 meters).

• Higher casting speeds achievable (up to 8.0mpm). Casting speed is the key point for productivity, safety and quality.

• Allows casting of thicker slabs which is beneficial for quality and productivity

• Casting at lower speed for some crack sensitive grades and also to avoid risk of breakouts (safer operation)

• Lower overall height (< 7.5 meter head)

• Flexible speed of operation (2.5mpm to 8.0mpm) with no limitation of thickness

• Each segment can be removed individually without disturbing other segments in the line

• Dynamic Soft Reduction reduces centre line segregation and helps in refining grain size.

You have also mentioned about hot strip mill configuration. How is it different from other TSCR plants?

Starting from its first applications of TSR (Thin Slab Rolling) plants, where


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all rolling stands are arranged in a single Finishing Mill train operating in tandem, Danieli implemented several mill stands arrangements with separation between Roughing Stands and Finishing stands, in order to apply advanced rolling practices, such as ferritic rolling and thermo mechanical rolling, typically adopted in conventional Hot Strip Mills. These are fTSR (flexible Thin Slab Rolling), QSP (Quality Strip Production) and ETR (Extra Thin Rolling) plant configurations.

Where are such plants installed?The only TSR plant is installed in Esfahan Steel (Iran) and the ETR in POSCO (Korea). Danieli has a number fTSR installations in Dong Bu (Korea), Tong Hua, Benxi & Bao Steel (China), MMK Atakas (Turkey), Severstal Lucchini (Italy) and NMDC (the first fTSR plant in India under implementation). The QSP installations are in Essar Algoma (Canada), North Star BHP (USA), Ezz Steel (Egypt) and OMK (Russia).

How will such HSM configurations benefit the plant?Separation between the RM and FM trains allows installation of some strategic equipment like intermediate cooling, crop shear and an onboard descaler before the finishing mill. The intermediate cooling section will allow thermo-mechanical rolling or finish rolling of transfer bar with lower temperature.

The crop shear can be used to cut the

head end of the transfer bar for smooth threading through the finishing mill which reduces the cobble rate particularly during production of thinner gauges. Furthermore, the distance between R2 and F1 ensures higher strip internal quality because adequate recrystalization time is available between R2 and F1 passes. This is a must for rolling API grades.

Tell us about some landmarks achieved by Danieli’s thin slab casting and rolling plants.

There are many such land marks, out of which I would like to specially mention about some plants. Essar Algoma DSPC, Canada was the first plant in the world to cast real peritectic grades since 1997 in a

thin slab casting facility. Tangshan Iron and Steel, China is the first plant in the world overcoming the 3.0 million tons of productivity in 2005 (with 2 strands in operation). Benxi Iron and Steel in China pioneered the production of high Silicon grades since 2008. Posco CEM Plant in Korea is the first ultra high speed thin slab caster (>7.5mpm) in operation since 2009.

Do you think TSCR plants will be able produce replace conventional HSM to produce all grades and quality of hot rolled coils?My reply to this question will be a big “Yes”. In fact all research activities in DANIELI for TSCR technology are targeted to achieve this goal. Lot of progress has been made over the years after the first TSR plant installed at Esfahan Steel, Iran in 1989 with production capacity of only 0.8 million tons per annum (mtpa) for single strand casting line. Today the ETR in POSCO, CEM plant can produce 2.0 mtpa for a single strand casting line.

Similarly, TSR in 1989 produced only commercial quality hot rolled coils and gradually more grades were produced in Danieli’s subsequent plants – peritectic in 1997, HSLA in 2000, API grades in 2005, Silicon steel (up to 3.2% Si) in 2009, Arctic API in 2010 and AHSS in 2011. Continuous efforts by a dedicated technology team are trying to reach the ultimate target mentioned by you but it will take time.


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steel makers based in south India have also started sourcing the raw material from the state after Goa recently banned mining following a probe panel recommendation. In Karnataka, even though the Supreme Court has lifted the ban on mining after 13 months, production is yet to resume in full scale.

According to current practices, manufacturers procure raw material from miners at a negotiated price, while others depend on mines run by OMC, which announces its rates every quarter. The introduction of the tender process is expected to push iron ore rates, traders said.

After initiating the e-auction process for chrome ore raised in its own mines, OMC is in the process of introducing the same system for iron ore raised from its own mines.

Currently, central government PSU National Mineral Development Corporation (NMDC) conducts e-auction of iron ore in Karnataka following the Supreme Court direction.

The government of Odisha has been taking pro-active measures to curb iron ore exports in order to ensure raw material supply for over 45 companies, including steel majors Posco and ArcelorMittal, with whom it has signed agreements to set up steel plants. In a recent notification,

Odisha plans to channelise iron ore trade

Steel Insights Bureau

Odisha, the largest producer of iron ore in the country, is mulling channelisation of iron ore trade by

appointing a designated state agency in order to bring in transparency and generate more revenue, industry sources told Steel Insights.

The single-point trading process is likely to push iron ore rates and impact margins of steel makers across the country who depend on the state for the raw material supply, as many other major producers, such as Karnataka and Goa, have restricted output.

The state government plans to create a trading platform by authorising a state run agency, which will float sales tenders on behalf of 150-odd iron ore miners. The process is expected to check under-reporting of mineral prices by some miners and thus bring in more revenue to the state exchequer in the form of royalty, sources said.

Sources informed that state-run miner Odisha Mining Corporation (OMC) and state-run MSTC has been called in by the Odisha government for discussions on the issue. An inter-ministerial panel has been formed to take a final decision on this issue in the next two to three months.

MSTC has been conducting e-auctions in Karnataka after the Central Empowered Committee appointed them following the illegal mining probe in Karnataka.

Odisha is the highest producer of high quality sized iron ore and fines, with annual output surpassing 75 million tons (mt). In the current fiscal, it is expected that the state will produce less than 45 mt ore due to production cap imposed at key mining sites.

Many sponge iron makers and other secondary steel producers of Odisha, Chhattishgarh and West Bengal depend on state-based miners to run their units. Some


it has announced not to renew mining leases for those who do not have any mineral development industry under their ownership and said industries having mining areas beyond their captive use must return the surplus land to OMC.

India emerging as unknown factor in Asia

India is emerging as the unknown factor for Asia’s iron ore market in 2013, which otherwise looks to be in a fair balance between supply and demand.

Analysts expect iron ore prices next year at $120 per ton and for Chinese import demand to gain 6 percent to 774 million tons (mt) from an estimated 730 mt this year.

Analysts expect that China will account for the bulk of growth in seaborne iron ore demand, with recession-plagued Europe expected to be steady and modest growth likely from the rest of the world. An increase of 44 mt from China should also be well within the capacity of the main global miners to supply, given what is known of their expansion plans and targets.

Brazil’s Vale is expected to produce about 320 mt in 2013, only marginally up from current output levels, which amounted to 317.4 mt in the 12 months to September.

The company expects its expansion projects to start coming on line around the end of next year, but for the most part increases in seaborne iron ore supply will have to come from Australia in 2013.

The bulk of Australia’s increased output will come from Rio Tinto which is expecting to raise production by 33 mt to 283 mt. BHP

Billiton said it expects a 5 percent increase in output in the year to end-June 2013 over the same period a year earlier, which if extended over the calendar year could mean about an extra 8 mt.

Fortescue Metals Group has recently scaled back its rapid expansion plans in the face of slower demand growth from China and market unease over its debt-funded model, but even so it may produce an additional 20 mt in 2013.

Taking the three Australians miners together, output may rise in the region of 61 mt, more than enough to meet the forecast growth in China of 44 mt, industry sources said. In fact, it’s enough to suggest that the iron ore market will be in a small surfeit, which in turn suggests limited upside to prices.

Of course, forecasts tend to assume that other things remain equal, and for iron ore in 2013 this may not be the case, especially where India is concerned.

India used to be the world’s third-largest exporter of the steel-making ingredient, but the industry has been roiled in recent years as the authorities try to crack down on illegal mining and exports and reserve more production for the domestic steel industry.

India’s exports fell more than 40 percent in the April-to-June quarter to 12.1 mt from a year earlier, according to official data. Since then, however, a series of court rulings have called into question whether any ore will be shipped out in the next few months and into 2013.

The Supreme Court suspended iron ore transport on October 5 in Goa, which usually produces about 50 mt a year and exports almost all of it.

This followed a limited resumption of mining in neighbouring Karnataka state, but it’s reasonable to assume that much of this output will be used domestically. The risk is that Indian ore exports, which head mainly to China, will continue to slump as the authorities continue efforts to regulate and organise the industry.

Industry feels that a loss of about half, or about 30 mt, would probably be enough to turn the Asian iron ore market into a small deficit, which the major miners might struggle to immediately meet.

Joda order to restrict ore supplyThe recent order of the Joda mining circle office to 10 miners, who are waiting for renewal of their mining leases to restrict iron ore output only to the extent of their captive plant need until the completion of the lease renewal process is likely to result in 27 million tons (mt) production loss per year.

According to industry sources, notices served to 10 miners in Joda will affect more than 60 percent of total 55 mt iron ore output in Odisha as most of them are large mines. Around 100 steel units would be affected because of the loss of supply.

The major impact would come from three miners, who do not have any value addition industry attached to their mines and hence will have to stop production as per the new resolution brought in by the state government earlier this month. The three mines are Essel Mining, Kalinga Mining Corporation, Bhanja Minerals. They contribute around 15 mt output with Aditya Birla group owned Essel leading the pack with a capacity to produce 12 mt annually.

Besides, the companies who have to slash production as per their captive need are TATA Steel, MISL, KJS Ahluwalia, Steel Authority of India, KayPee Enterprises, RP Sao and KN Ram. These seven mines produce around another 18 mt of iron ore.

The order follows a recent state government resolution that mines having value addition industry attached to it will be given priority at the time of renewal of mining leases. Currently, 28 iron ore and manganese mines are waiting for their second or subsequent renewal. The dispatch of production restriction notices to 10 mines in Joda is expected to be followed with similar missives to 18 mines in Koida, Baripada and Keonjhar mining circle soon.

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Spot coking coal prices firmed up in October after a flurry of trades took supply out of the market, giving

producers a chance to raise their offers.Premium low-vol HCCs traded at around

$149 per ton fob on October 29, up from $142 per ton fob Australia at the beginning of the month. Low vol PCI prices recovered to $115 per ton on October 29 compared to $103 per ton at the beginning of the month. The semi soft variety was quoted at $100 per ton on October 29 compared to $94 per ton in the beginning of the month.

Several transactions were heard done into China between $145-149 per ton fob, sources said.

Appetite in China was strong, suppliers said. This coincided with higher indicative bids for the whole spectrum of metallurgical coals. Producers pointed to a clear improvement compared to the lows seen in September, when prices were $5-10 per ton lower. But some Chinese traders were concerned that the large number of spot

Spot coking coal prices firm up in October

cargoes sold to China in September and October could pressure prices in November. Industry sources said in excess of 40 spot cargoes were sold into China in September and October.

Firm buying interest was evident in India. Buy-side interest was said to be at $145-150 per ton fob, for premium variety. India imports 30-35 million tons per year of coking coal currently.

Meanwhile, SAIL and RINL concluded negotiations for the purchase of coking coal with Australian miners, industry sources said.

While SAIL had contracted for October and November delivery contracts with BHP

Billiton-Mitsubishi Alliance or BMA, RINL has contracted for October-December contract with both BMA and Anglo American, sources claimed.

Sources claimed that SAIL has agreed to pay $155 per ton fob Australia for October despatches and $143 per ton for November despatches.

RINL on the other hand is believed to have contracted with BMA to procure prime coking coal at around $170 per ton during the fourth quarter of 2012, the sources said, adding, the steel maker has also contracted with Anglo American at $164 per ton fob Australia.


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India plans to invest about $1 trillion in the infrastructure sector during the 12th Plan period running from April 2012-March 2017. Sources have earlier estimated this would generate some 200-250 mt of steel demand in the period.

Met coke prices

Metallurgical coke prices moved in a narrow range in October even as higher offers for CIS material hinted at higher tradable values for 62% CSR material. 62% CSR, 12.5% ash blast furnace coke is quoted at $316 per ton cfr India on October 29 compared to $317 per ton cfr India on October 1.

Two new offers for CIS coke were heard in the Indian market. Both were around $310-315 per ton cfr India by different traders, and were said to be approximately 61% CSR. However, end users in need for November cargoes were only willing to consider $300 per ton cfr India for such coke.

There was buying interest for 62% CSR and 12.5% ash at `17,500 per ton ex-works east India, while sellers are offering material at `19,500 per ton ex-works east India.

Coking coal CFR India ($/ton)

Date HCC Peak Down Region

Premium Low Vol

HCC 64 Mid Vol

Low Vol PCI

Low Vol 12 Ash PCI Semi Soft Met Coke

4-Sep 171.50 172.00 147.50 125.00 106.50 112.50 331.00 10-Sep 161.50 161.50 145.00 120.50 108.00 112.00 329.00 11-Sep 161.00 161.00 145.00 119.00 108.00 112.00 325.00 12-Sep 159.00 159.00 144.00 118.50 107.50 111.50 325.00 13-Sep 157.50 157.50 142.00 117.50 107.00 111.50 325.00 14-Sep 155.50 155.50 139.50 118.50 108.00 112.50 325.00 20-Sep 155.50 155.50 139.50 118.00 109.00 109.50 324.00 21-Sep 154.50 154.50 138.50 117.50 109.00 109.50 324.00 24-Sep 154.50 154.50 138.50 117.50 109.00 109.50 317.00 25-Sep 155.00 155.00 139.50 116.50 109.00 108.50 317.00 26-Sep 156.00 156.00 141.50 116.50 109.00 108.50 317.00 28-Sep 156.00 156.00 142.00 118.00 111.00 108.50 317.00 1-Oct 157.00 157.00 142.00 118.00 111.50 108.50 317.00 2-Oct 157.00 157.00 142.00 118.50 111.50 108.50 317.00 3-Oct 157.50 157.50 142.50 119.50 112.00 108.00 316.00 4-Oct 157.00 157.00 142.00 120.00 111.50 107.50 316.00 10-Oct 159.50 159.50 144.00 127.50 114.50 112.50 319.00 11-Oct 164.00 164.00 146.50 128.50 116.00 113.50 323.00 12-Oct 164.50 164.50 147.50 129.50 118.00 116.50 323.00 16-Oct 164.00 164.00 147.00 129.50 117.00 115.00 318.00 19-Oct 164.50 164.50 145.00 130.50 117.00 115.50 317.00 25-Oct 164.25 164.50 144.50 132.50 117.00 116.00 316.00 29-Oct 166.25 166.50 147.50 132.50 119.50 118.00 316.00


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Ferro alloys remain stable in October


The ferro alloy segment in October remained largely lukewarm and stable on soft demand.

Ferro-manganese

Both producers and traders of high-carbon ferro manganese are reporting a stable market but at low activity level as mainstream prices remain in the range of `51,000-52,000 per ton ex works.

Producers disclosed they are still supplying material to both traders at different rates but still within the price range; but conceded the volume of deals is low. Traders were looking for quotations from multiple producers and none were ready to accept counter offer at `51,700 per ton ex works.

However, the current trend is unlikely to change for the next week or two until after the Diwali festival. For the export market,

offers remain nominal in the range of $1000-1020 per ton fob Indian ports with no deals reported whilst some others have stopped production.

Ferro-silicon

Ferrosilicon producers are expected to raise prices by `1,000 per ton to `71,000 per ton ex works, and although there is no severe shortage of material in the domestic market yet, output reduction from Meghalaya area is enough signal to traders to anticipate higher quotations. According to industry sources, some steel plants have been informed that shipments will be booked at `71,000 per ton ex works and traders with low inventory are hoping to cash in on this as more enquiries are being reported.

Spot demand is not great but market participants are anticipating price increase immediately after the Diwali festival. Companies are currently fulfilling their

Chinese Mn ore market turns active

on fresh buying

Putting an end to the dull trend, the manganese alloy market in China turned active in the

first week of November on rebound in purchases from steel mills, an industry source claimed.

However, despite the trend, the import price of manganese ore for December as well as spot prices remained largely unchanged.

Meanwhile, it is assumed that some producers in the Guangzi region may consider shutting down plants due to a large increase in electricity cost which was adjusted up to RMB 0.66 to 0.67 kWh in November.

The overall silico manganese market was relatively stable with purchase prices from steel mills at around RMB 7100-7150 for 65/17 material. However, the material was offered in South China at RMB 6600 to 6800, including tax.

The spot price of SiMn (65/17) was quoted at RMB 6700-6800 per ton, including tax, in South China, at RMB 6900-7100 in the Northern region and at RMB 7000-7200 per ton in Northeast region.

On the other hand, prices of 60/14 material in Guizhou rose to RMB 5850-5950 per ton, while in the Hunan and Guangxi regions to RMB 5900-6000 per ton levels.

Meanwhile, China produced a total of 853,000 tons of silico manganese (SiMn) in September, up 13% compared with 754,000 tons produced in August, a media report said quoting China’s National Statistics Bureau.

The production during the first nine months of 2012 (January-September) stood at 7.53 million tons, down nearly 6 percent compared with 7.99 mt produced during the same period of 2011, the report said.


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orders at around `70000 per ton ex works but added there are signs demand will pick up just as any price increase, to compensate for the weak Rupee against the unexpectedly strong Dollar.

Ferro-molybdenum

Although mainstream ferromolybdenum quotations stand around `960/kg, more dealers are reporting smaller-tonnage deals at `940/kg but big end-user enquiries appear distant away from spot business. Trading companies have confirmed concluding smaller-tonnage deals at around `940/kg but added they rejected bids at `920/kg even with advance payment as it was doing back-to-back business.

Molyoxide quotations were at $11.2/lb CIF Indian ports and traders continued to take unspecified quantity of material in monthly delivery from Western regions. Insiders also reasoned that prospective buyers are likely to wait for any big purchases given the volatility in the exchange rate market and,

although few Western suppliers of molyoxide are reported to be offering material, evidence of few enquiries indicate that converters are operating with material contracted on long-term basis with no need to ask for spot offers.

Silico-manganese

Silico-manganese traders are reporting that despite a sudden `1,000 per ton drop in quotations to `50,000-51,000 per ton ex works, continuing low level demand from end-users makes prompt purchases for positioning unrealistic.

The market is completely stagnant and except for traders making scheduled delivery there are almost zero new spot enquiries at the moment. Producers insisted silico-manganese quotations are unchanged at `51,000 per ton ex works and argued it would not be possible to consider any lower bids except to run into losses.

Producers also informed that the export market remains in the range of $980-1000 per ton fob India and have cited volatility in the exchange rate market as making it difficult to accept lower bids. Higher-grade s i l i co-manganese material remains being quoted in the export market in the range of $1080-1090 per ton fob India, but due to weak demand, more producers are shifting focus on domestic market.

Ferro chrome

Demand for ferro chrome exports have failed to pick up after the holidays, as domestic prices were still higher than overseas prices. Companies like IMFA (Indian Metals & Ferro Alloys) have seen a huge drop in ferro-chrome production since last quarter.

However, though

exports were low, yet a weaker Rupee ensured healthy profits were posted for all deals concluded. But traders lament as the tonnage of these profitable deals were very low and demand was far worse than expected. Other producers have stopped production and are doing maintenance work amidst a lack of demand.

Offers for high carbon ferrochrome exported to China were indicated at 85-87 cents/lb CFR this week, unchanged since end September. Traders added that the ferrochrome market saw limited spot activity this month as demand from stainless steel producers in the country did not improve even after the long drawn festivities.

Ferrochrome exports have dropped in the last few quarters with the introduction of export duties, but statistics indicate domestic players have boosted production from 634,000 tons to over 1 million tons per annum, 26 percent of which is exported to China at a much better price than selling chrome ore. Current prices of high carbon (60%) ferro-chrome is hovering at `67,500/- ex-works.

Power crisis hits producers

Acute shortage of power in most south Indian states is severely affecting ferro alloy producers

in the region, according to industry sources.

“We are operating with only one of the two furnaces because of power related issues. There has been no improvement in power scenario since July,” sources said.

The situation is quite dismal and ferro alloys makers alleged that they are getting power for only five days of the week and during peak hours they receive lighting load just enough to heat the furnace.

Incidentally, this has resulted in capacity utilisation at 50 percent of the installed capacity.

A large number of ferro alloy plants, including those of Abhijeet Group (22 MVA x 8) and Maithan Group (34 MVA), operate in southern India.


2.1 percent from October 10, 2012 from 3 percent earlier.

However, with the rise in demand from European steel mills, export levels are expected to increase in the next quarter.

Meanwhile, manganese ore October prices were down by $0.50 and it is expected to fall by $0.30 in November, the ferro alloy makers said. “November prices will be decided during the current week and it will depend on Chinese demand,” ferro alloy sources said.

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Indian ferro alloy makers expect prices and demand to pick up from the last quarter (January 2012-March 2013) of

2012-13 as most European steelmakers will return to the market after Christmas holidays with depleted inventories.

Apart from steel makers in the Europe, who are operating at 70 percent capacity utilisation levels, traders will also be left with low inventory levels resulting in rise in demand and prices to the extent of around $200 per ton in the March quarter.

The shutting of a silico manganese plant by diversified miner BHP Billiton and others like Transalloys, Ore & Metal and Privat will lead to a supply glut and fall in the inventory levels of the steel makers in Europe, Indian ferro alloy makers said.

“This will lead to a rise in demand from the European steel makers in the March quarter,” officials in ferro alloy companies said.

They said the appreciation of rupee to `51-52 levels against the dollar from earlier levels of `55 will not lead to a substantial rise in exports of silico manganese immediately because the DEPB benefit will be slashed to

Indicative prices

Name of Alloy Price as onOctober 9, 2012

Price as onAugust 17, 2012

Price as onJuly 2, 2012

Price as onApril 19, 2012

Silico Manganese (60-14)

$960 $950 $1,100 $1,150

Silico Manganese (65)

$1,060 $1,050 $1,200 $1,250

Ferro Manganese (70)

$980 $925 $1,020 $1,100

Ferro Manganese (75)

$1,030 $1,000 $1,080 $1,150

Ferro Chrome (60)$0.92 (European Grade) and $0.85 (Chinese grade)

$0.93 (European Grade) and $0.89 (Chinese Grade)

$0.95 $1.05

Alloy makers expect demand to improve in March quarter

Medium, small makers shut shop

Faced with a situation of high raw material, power and labour cost, many medium and small ferro

alloy makers in India have shut shop, according to information available with Steel Insights.

The ferro alloys industry in India is in very bad shape and they are passing through a period of cut throat competition. All the manufacturers are making losses, banks are squeezing their limits, raw material cost is not coming down, power rates are going up, labour costs are going up and in this situation, companies are under pressure to shut down their plants, sources said. A lot of producers have already cut down their production by around 50 percent due to low demand and sharp fall in prices in September quarter.

“If the situation continues for long then a couple of big players will also be impacted and forced to take hard decisions,” a ferro alloy source said. The overall ferro alloys market is currently very weak because of low demand from Europe and China. Europeans are expected to be back in the market by the January-March quarter.

Industry officials in India expect that after the European officials are back from their holidays they will start picking up the material because they will have to stock for the fourth quarter. There is no stock of material with most of the steel makers in Europe and they will have no option but to buy.


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Indian Automobile Manufacturers (SIAM), the overall growth in domestic sales during April-September 2012 was 3.62 percent over the same period last year. However, in September 2012 overall sales declined by 9.43 percent over September 2011.

The passenger vehicles segment grew at 6.96 percent during April-September 2012 over the same period last year. Passenger cars declined by 0.27 percent, utility vehicles grew by 55.83 percent and vans sales dropped by 5.05 percent during April-September 2012 as compared to the same period last year. However, in September 2012 passenger car sales dropped by 5.36 percent over September 2011. Total passenger vehicles sales grew around 5 percent in September 2012 over the same month last year.

The overall commercial vehicles segment registered growth of 3.71 percent in April-September 2012 as compared to the same period last year. While Medium & Heavy Commercial Vehicles (M&HCVs) registered negative growth of 12.49 percent, Light Commercial Vehicles grew at 16.04 percent.

Three wheelers sales recorded marginal growth at 0.59 percent in April-September 2012. Passenger carriers grew by 4.29 percent during April-September 2012 and goods carriers registered de-growth of 13.21 percent during this period.

Two wheelers registered a growth of only 3.12 percent during April-September 2012. Scooters and mopeds grew by 20.46 percent and 0.80 percent respectively. During April-September 2012, motorcycles declined by 0.79 percent over the same period last year. However, in September 2012 motorcycle and mopeds registered negative growth of 18.85 and 10.36 percent respectively over the same month last year.

Exports

During April-September 2012, overall automobile exports registered negative growth of 5.96 percent. While passenger vehicles grew by 2.77 percent and commercial vehicles grew only by 1.91 percent, two & three wheelers declined by 3.75 and 30.91 percent respectively in April–September 2012 compared to the same period last year. In September 2012, car exports grew by 10 percent compared to last year September and two wheelers exports declined by over 11 percent during the same period.

Auto sector downtrend continues, sales dip in Sept


There is no escaping the economic slowdown, not for the Indian automobile sector. In line with

the lukewarm sales in the recent past, the industry showed continued downtrend in September 2012, producing 6 percent less than what it did the same month last fiscal. The numbers showed total production of 1,672,797 vehicles in September 2012 as against 1,773,154 in September 2011. The cumulative production data for April-September 2012 also showed a production growth of only 2.44 percent over the same period last year.

A significant development during the month has been the launch of Maruti’s new model – Alto 800 – which was received well by the market. "So far this festive season, there has been 15 per cent increase in overall

bookings compared to last year. The growth is coming from across our models but the new Alto 800 has also received a very good response," Maruti Suzuki India Chief Operating Officer (Marketing & Sales) Mayank Pareek said. He said since its launch on October 16, the Alto 800 has received a total of 21,200 bookings.

Also, Mahindra & Mahindra (M&M) reported record monthly sales in September. Overall, however, the market was marked by lack of demand and this in turn affected steel offtake at the mills leading to increased inventory, industry sources said.

Going forward, the industry expects demand to remain subdued during the coming winter months but may pick up slightly during the festive weeks at the end of December.

Domestic sales

According to data released by the Society of


India’s steel imports up38% y-o-y in H1


Steel imports by India was up 38 percent year-on-year in the first six months (April-September) of 2012-

13, with China remaining the top sourcing destination followed by Korea and Japan. The other major exporters to India during the period were Russia and Ukraine.

According to the latest (provisional) data available from the steel ministry, total imports by India during the first half of 2012-13 stood at 4.304 million tons (mt), about 38 percent up from 3.117 mt recorded for the same period last year. China’s share in total imports was a high 21 percent at 891,000 tons, while that of Korea and Japan were 18 percent and 14 percent, respectively.

Country wise imports inApril-Sept, 2012

(in ‘000 tons)

Country Apr-Sep 12 Apr-Sep 11 Growth %

China 891.04 587.35 52

Japan 622.7 397.86 57

Korea 766.9 604.28 27

Russia 359.78 154.7 133

Ukraine 214.13 238.18 -10

Others 1450.24 1134.71 28

Total 4304.79 3117.08 38

HR coil imports

HR coil/strips made up bulk of the flat (non-alloy) steel imports into India during the April-September period of 2012-13, the provisional data showed. The volume of HR coil/strips was 813,000 tons during the period, which was 27 percent higher than 640,800 tons recorded for the same period last year.

Total flat (non-alloy) steel import during April-September 2012 was 2.678 mt, around 30 percent higher than 2.055 mt imported

during the same period last year. Other than HR coil/strips, CR coil/sheets comprised a significant part of flat (non-alloy) steel imports by the country. Total volume of CR coil/sheets was 775,800 tons, about 8.3 percent higher than 716,200 mt recorded for the same period last year.

However, imports of plates showed highest growth of 72% followed by imports of elect sheets, the data showed.

Production, consumption down

Meanwhile, India’s finished steel production fell by 3.4 percent month-on-month in September 2012 when compared with August, the (revised) provisional steel ministry data shows. The steel ministry releases the revised provisional data at the month end after the release of the preliminary provisional data at the beginning of the month.

The data shows that production by SAIL, RINL, Tata Steel, JSW and Essar declined month-on-month. However, production by JSPL recorded impressive growth in September as compared to August.

Also, India’s steel consumption fell by 1.3 percent month-on-month in September 2012 when compared with August.

The data showed that on year-on-year

basis consumption rose 4.3 percent. Imports rose 22.2 percent month-on-month in September when compared with August and on year-on-year basis imports rose 19.7 percent. Exports rose 2.1 percent month-on-month in September when compared with August and on year-on-year basis exports rose 38.3 percent.

fEATuRE

Steel production, import, export, consumption for Sept v/s August(in ‘000 tons)

Sl no Item 12 Sep 12 Aug % Variation 11 Sep % Variation

1 Steel Production 6106 6324 -3.4 5986 2

2 Import 578 473 22.2 483 19.7

3 Export 448 439 2.1 324 38.3

Availability (1+2-3) 6236 6358 -1.9 6145 1.5

Variation in stock 306 310 127

4 Apparent consumption 6542 6668 -1.9 6272 4.3

Double Counting -456 -502 437

5 Real consumption 6086 6166 -1.3 5835 4.3

Source: Ministry of Steel

Flat (non-alloy) steel importduring H1

(in ‘000 tons)

Category Apr-Sep2012

Apr-Sep2011

Variation %

Plates 408.6 237.5 72

HR Sheets 60.6 26.2

HR Coil/STRIPS

813 640.8 26.9

CR Coil/Sheets

775.8 716.2 8.3

GP/GC Sheets/coils

224.6 156.2 43.8

Elect Sheets 198 120.9 63.8

TMBP 0.6 0.7

Tin Plates 72.4 54.9 31.9

Tin Plates w/w

16.6 13.4 24.5

Tin Free Steel 34.1 24.3 40

Pipes 73.8 64.6 14.2

Total 2678.1 2055.8 30.3

Source: Ministry of Steel


With the debt crisis in the euro zone weighing heavily on the economic activities of the countries in the region, apparent steel use in EU 27 is expected to decline by -5.6 percent in 2012. In particular, apparent steel use in Spain and Italy in 2012 is expected to fall by -11.9 percent and -12.6 percent, respectively. The most resilient country Germany will also experience a decline of -4.7 percent in 2012. In 2013, the situation is expected to improve and steel demand in EU 27 will recover by 2.4 percent. Steel demand in Europe, however, remains at a depressed level and economic growth between countries continues to be uneven.

Japan’s apparent steel use is projected to increase by 2.2 percent to 65.5 mt in 2012 aided by the reconstruction activities and government stimulus measures. However, the manufacturing sector is struggling with the strong yen and falling exports and in 2013 steel demand in Japan will decline by -2.9 percent to 63.6 mt.

In the CIS, apparent steel use is forecast to rise by 0.8 percent in 2012 and by 3.9 percent in 2013, much slower than the 13.8 percent achieved in 2011. Steel demand in 2012 will be 55.2 mt and 57.4 mt in 2013.

The developing and emerging world overall will see their steel demand growing by 3.0 percent and 3.7 percent in 2012 and 2013 respectively, whereas in the developed world steel demand will contract by -0.3 percent in 2012 and then grow by 1.9 percent growth in 2013.

fEATuRE

India’s steel demand to grow 5.5% in 2012: Worldsteel


Amid unfavourable domestic and external economic conditions, India’s steel demand growth is

projected to slow down to 5.5 percent in 2012 and 5 percent in 2013, according to the World Steel Association (Worldsteel) 2012 Short Range Outlook (SRO) for 2012 and 2013, the half year revision from its April 2012 statement.

India’s apparent steel use will reach 73.6 million tons (mt) in 2012 and 77.3 mt in 2013, Worldsteel said. It forecasted that global apparent steel use will increase by 2.1 percent in 2012, which is considerably lower than the 6.2 percent growth achieved in 2011. In 2013 world steel demand will grow by 3.2 percent and reach a record high of 1,455 mt.

Hans Jürgen Kerkhoff, chairman of the Worldsteel Economics Committee said, “Earlier this year we were seeing some signs of recovery from the slowdown of the last quarter of 2011 and we expected a better second half performance in 2012. However,

the economic situation deteriorated during the second quarter of this year due to continued uncertainty arising from the debt crisis in euro zone and a sharper than expected slowdown in China. These factors have weighed heavily on business confidence and manufacturing activities around the world. As a result momentum in both the developed and emerging part of the world weakened considerably.

However, we expect the situation to gradually improve in 2013 on the basis that the euro zone crisis can be contained, the US successfully deals with the fiscal tightening due in 2013 and the economic stimuli measures secure a soft landing in China.

Since the 2008 economic crisis, uncertainty and volatility has become the norm for the steel industry but it is worth noting that world steel demand has maintained positive growth despite all the headwinds and lingering difficulties”, he concluded.

Steel demand in China is expected to increase by 2.5 percent to 639.5 mt in 2012 after 6.2 percent growth in 2011. In 2013, government stimulus measures are likely to moderately improve the economic situation. This follows sluggish exports resulting from the global economic slowdown. Thus China’s apparent steel use is expected to rise by 3.1 percent and will reach 659.2 mt in 2013.

Apparent steel use in NAFTA is expected to grow by a healthy 7.5 percent in 2012 to 130.4 Mt, due to improvements in construction activities and a strong performance from the automotive industry but in 2013 steel demand growth will slow to 3.6 percent. Apparent steel use will reach 135.1 mt in 2013.

Most countries in Central and South America are also facing headwinds from the poor external economic environment as well as domestic tightening. Apparent steel use in the region is forecast to rise by 3.8 percent in 2012, but in 2013 it is projected to grow by 6.3 percent and reach 50.4 mt.

Apparent steel use (ASU) in regions

RegionASU, mt

2011 2012 (f) 2013 (f)

European Union 153.1 144.5 148.1

Other Europe 33.2 34.4 36.0

CIS 54.8 55.2 57.4

NAFTA 121.3 130.4 135.1

Central & South America

45.7 47.4 50.4

Africa 23.9 25.3 27.3

Middle East 48.2 49.9 52.8

Asia & Oceania 900.6 922.2 947.9

World 1,380.9 1,409.4 1,454.9

Source: Worldsteel

JSW Steel Q2 net profit soars

CORpORATE


JSW Steel, one of the leading steelmakers of the country has witnessed a positive growth in its second quarter (July-

September) standalone net profit which jumped by nearly 547 percent to `822.26 crore from `127.12 crore on higher volumes and rupee appreciation impact.

The company has gained around `422.38 crore due to 6.4 percent appreciation in the value of the rupee against US Dollar during the second quarter and this has been treated as exceptional in nature, a senior official of JSW told Steel Insights.

“Due to 6.4 percent appreciation in the value of the rupee against US Dollar during the second quarter of 2012-13, the gain of `422 crore on re-statement of foreign currency monetary items at close of the quarter credited to profit and loss account has been considered by the company as exceptional in nature,” the company said in a release.

Net sales for the quarter stood at `8833.73 crore, up nearly 16 percent from `7625.06 crore in the corresponding quarter of 2011-12 whereas expenses rose by 16.13 percent to `7826.92 crore from `6739.90 crore, it said.

The finance cost rose by nearly 60 percent to `420.75 crore during the quarter from a low of `263.54 crore in the corresponding quarter of previous year, the release added.

In fact, the company’s consolidated net sales during the quarter increased by 16 percent to `9475.24 crore as compared to `8133.93 crore in the corresponding quarter of 2011-12 whereas net profit increased by 584 percent to `617.29 crore from `90.20 crore.

Production scenario

JSW Steel Ltd’s crude steel production on standalone basis during the second quarter (July-September) of 2012-13 rose by 25 percent to 2.17 million tons (mt) taking the production during the first six months of

Punita Kumar joins JSW Steel as additional

directorJSW Steel Ltd has appointed Punita Kumar Sinha as an additional director with effect from October 28, 2012.

Punita, who is the founder and managing partner of an independent advisory & management firm called Pacific Paradigm Advisors, has over 20 years’ experience in fund management and emerging markets.

Prior to setting up Pacific Paradigm in 2012, she was heading Blackstone Asia Advisors LLC and was its chief investment officer. She was also a senior managing director of the Blackstone Group LP. She had also worked with Asia Tigers Fund and Asia Opportunities Fund LP.

With the induction of Punita Kumar Sinha, the company currently has a total of 14 directors, out of which eight are independent directors.

Steel Insights, November 201238


CORpORATE

financial year to 4.32 mt showing a growth of 26 percent. The production was up despite constraints in iron ore supplies which forced the company to operate at about 80 percent capacity utilisation during the quarter, the company said in a release.

JSW said that its total saleable steel during the quarter stood at 2.17 mt, up by 15 percent and at 4.28 mt during the first half of the year, up by 19 percent. Of the total saleable steel during the quarter, semis accounted for 0.11 mt showing a growth of 39 percent over the corresponding quarter of previous financial year whereas Flat (rolled) sales stood at 1.66 mt, up 13 percent and Long (rolled) sales rose by 19 percent to 0.40 mt, the release said.

The sales of semis during the first half fell by 26 percent to 0.16 mt while that of Flat (rolled) and Long (rolled) increased by 21 percent and 25 percent to 3.33 mt and 0.79 mt respectively, the release added.

However, HR coils production at JSW Ispat Limited during the quarter stood at 0.64 mt with capacity utilisation of 78 percent.

Operating EBITDA stood at `205 crore and net profit at `122 crore after considering

exception items credit of `235 crore which includes Forex gain of `158 crore and write back of provision of `105 crore.

Operations abroad

However, the company said that capacity utilisation at its plate and pipe mills in the US was 31 percent and 21 percent during the quarter resulting in a production of 0.08 mt and 0.03 mt, respectively.

On the other hand, during the quarter, the iron ore mining company at Chile made two shipments aggregating 0.15 mt and the coal mining company of the US made shipments of 0.02 mt.

JSW refutes allegations

JSW Steel Ltd, which has been caught-up in the illegal mining scandal, has refuted allegations that the company indulged in any “criminal conspiracy”.

In a statement the company said that, the charge that the company caused losses amounting to `890 crore to the publicly-owned Mysore Minerals Limited (MML) were “misleading”.

It alleged that the adverse media coverage, based on the press release of the Central Bureau of Investigation, has caused “irreversible loss/harm” to JSW Steel.

“The company and its officials are yet to be served with a copy of the charge sheet,” it said.

The company claimed that neither the Lokayukta Court nor any other authority in the State has ever made the charge that JSW Steel has caused losses to MML, despite the two companies operating a joint venture for over a decade. The company had filed case against MML for `216 crore, which was “illegally recovered” from the joint venture, it said.

JSW Steel alleged that the governments in the State had failed to abide by an order issued in October 1994 to make available power, water, captive mines and other infrastructure for the company’s operations in Bellary district.

The state government’s failure “to place the fact before the public/authorities” has “maligned” the image of the company, it said. Though the company is aggrieved, yet its image is being maligned, it said.

Input crisis to hit Indian steel

sector: JSWIndia’s largest steel maker, JSW Steel Ltd, expects that domestic steel demand will remain study but rising imports and availability of mineral resources will be major deterrents for Indian steel industry.

“Rising imports and availability of mineral resources will be major deterrents depriving Indian steel industry a level playing field compared with their global peers,” JSW said in a release after announcing second quarter (April-September) financial results.

Indian steel industry has witnessed a subdued demand growth of 2.8 percent during the period July-September 2012 compared with a 7.7 percent growth witnessed during the same quarter of 2011, it said.

JSW said import of steel to India from FTA countries is a major concern to steel makers even as the Indian economy is expected to get back in growth mode post recent economic reform announcements.

According to the company, global economic situation continues to remain challenging with increasing uncertainties, impacting the prospect of economic growth across geographies.

In this context, JSW pointed that continuing recessionary trends in Europe and slowing Chinese economy are expected to hold world steel production at previous year’s level of 1518 million tons.

The world’s crude steel production for the first nine months of 2012 at 1149 million tons recorded a marginal growth of 0.6 percent even as some countries like US (5.3 percent), Russia (4.3 percent) and Korea (3.0 percent) have recorded a reasonably good growth in steel production during the first nine months of 2012, it said.


CORpORATE

Nippon-Sumitomo merger to put pressure on Indian firms


The recent merger of Japan’s two leading steelmakers, Nippon Steel and Sumitomo Metal, is expected to

put pressure on Indian steel manufacturers, going forward. The two steel majors, which announced their merger on October 1, have already pronounced that China and India would be their target markets. Market analysts believe that it might result in increased competition for the local manufacturers which would be compelled to maintain prices despite slack market conditions.

Interestingly, the development comes barely a month after some Indian manufacturers expressed worries over the increased imports of cheap steel from Japan and South Korea. They also demanded that steel be removed from the purview of India’s free trade agreement (FTA) with the two Asian economic powers.

“India has an FTA with Japan and South Korea. The economies of these two are not doing well, especially Japan. So, they are sort of exporting a lot of steel into India at a very low price, taking advantage of such FTAs,” JSW Steel’s chairman and managing director Sajjan Jindal told reporters on the sidelines of an Assocham steel summit.

In view of the above concerns, the analysts said, the mega merger which created the world’s second largest steelmaker after Luxembourg-based ArcelorMittal, would add to the pressure on the Indian industry. “For some time now, the Indian manufacturers

are facing slack market condition. Increased competition from abroad may worsen the price and margin pressures,” they said.

A mega merger

As per the arrangement, the new firm, Nippon Steel & Sumitomo Metal Corp (NSSMC), will be a wholly owned by Nippon Steel and Sumitomo Metal Corporation. The merger is aimed at reducing cost of operations and leveraging synergies. “The new company aims to realise integration synergies quickly and become an efficient, profitable and competitive logistics company,” the two companies had said.

Earlier, the two companies formed an alliance in 2002, and said they aim to streamline operations to improve their competitiveness amid a shake-up of the global steel industry. Nippon Steel is Japan’s largest steel company (world’s sixth largest), while Sumitomo Metal Industries is the third largest (27th-ranked in the world) in that country.

The two Japanese firms produced a combined 46.1 million tons (mt) of crude

steel in 2011, according to the World Steel Association (WSA), topped only by ArcelorMittal on 97.2 mt. The new firm would replace Hebei Group, which has a production of 44.4 mt, to emerge as the second largest steelmaker in the world.

Following the announcements of the merger, the new firm said it aims to boost its annual output to as much as 70 mt tons within the next five to 10 years. Meanwhile, Nippon Steel reported a net 87.5 billion yen ($1.1 billion) loss in the April-July quarter, which it mostly attributed to losses on investments in securities due to weakness in stock prices.

According to reports, it is the first takeover in Japan’s steel industry since NKK and Kawasaki Steel joined forces in 2002 to create Japan’s second largest steel maker, JFE Holdings Inc.

Impact on market

Although a distant second to ArcelorMittal, the merged entity would have significant impact on the global market. Global competition in the steel industry has intensified in recent years even as demand has been spurred by emerging economies such as China and India. These target markets are undertaking massive construction, infrastructure and manufacturing projects and therefore comprise the bulk of demand globally.

In 2011, global steel production stood at 1,527 mt. The supply side is dominated by China, the largest producer, followed by Japan which has a production of around 107.6 mt.

Industry sources said the new firm will try to export more to India, where the demand for steel is growing as compared to other consuming pockets. Japanese steel mills have, in the recent past, stepped up exports to the Indian market cashing on the FTA signed between the two countries. This new development may exert further pressure on the Indian steel makers to maintain prices.

The newly formed entity, Nippon Steel & Sumitomo Metal Corp., has also said that it aims to expand its global operations, especially in China, India and other emerging countries, where demand is expected to grow, while consolidating operations in the shrinking Japanese market.

Nippon Steel President Shoji Muneoka and Sumitomo Metal President Hiroshi Tomono announcing the merger


CORpORATE


ArcelorMittal, the world’s leading integrated steel and mining company with a presence in more than 60

countries, has witnessed a drop of 50.2 percent in the company’s EBITDA to $236 million as compared to $474 million in 2Q 2012.

In the third quarter of 2012, lower profitability was primarily driven by North American operations due to lower selling prices and one time labor cost ($72 million impact related to one-time signing bonus and post-retirement benefit costs following entry into the new US labor contract) combined with lower steel shipment volume, the company said in a statement.

According to company sources, ArcelorMittal’s net income for the nine month period ended September 30, 2012 stood at $0.3 billion, or $0.17 per share, as compared to net income for 9M 2011 of $3.3 billion, or $2.11 per share.

Total steel shipments for the nine month period 2012 were lower at 63.8 million tons (mt) as compared with 65.2 mt for corresponding period of 2011. However, sales during this period decreased by 9.3 percent to $64.9 billion as compared with $71.5 billion for corresponding period of 2011 primarily due to lower average steel selling prices (-8.1 percent) and lower steel shipments (-2.2 percent).

Impairment charges during the first nine months of 2012 totaled $199 million, primarily related to the intention to launch a project to permanently close the liquid phase at the Florange site in France ($130 million) and the extended idling of the electric arc furnace and continuous caster at the Schifflange site in Luxembourg. Impairment expenses for 9M 2011 were $103 million relating to a rolling facility in the Long Carbon Americas segment as well as costs associated with the decision to close two blast furnaces, sinter plant, steel shop and continuous casters at Liege, Belgium.

Net debt of the company increased by $1.2

billion during the third quarter of 2012 to $23.2 billion, driven by negative operating cash flow (including a $0.3 billion investment in working capital) and negative foreign exchange impacts partially offset by proceeds from asset disposal and an issuance of perpetual securities, the statement said.

Management gains plan completed with $4.8 billion savings achieved ahead of schedule while steel shipments of 19.9 million tons (mt) took place in 3Q of 2012, a decrease of 8.3 percent as compared to 2Q 2012 and 5.7 percent below 3Q 2011. On the other hand, 14.3 mt of iron ore produced in 3Q 2012, up by 1.3 percent YoY while 7.1 mt was shipped and reported at market price which was up by 6.7 percent YoY.

Challenges

The Q3 2012 fall in the iron ore price and the weaker global economic backdrop adversely impacted steel prices and steel volumes as well as the profitability of the company’s mining operations affecting ArcelorMittal’s expectations for group profitability in the second half of 2012.

According to company sources, excluding any proceeds from future asset sales, net debt is expected to be approximately $22 billion by year end since deleveraging is a priority as the company continues to target an investment grade credit rating.

According Lakshmi N. Mittal, chairman & CEO of ArcelorMittal, “The already fragile global economy was further impacted in the third quarter of 2012 by the slowdown in China. This resulted in very challenging operating conditions for ArcelorMittal, which are expected to continue in the fourth quarter.”

“Against this backdrop, the company is focused on delivering its plan of asset optimisation, net debt reduction and productivity and efficiency improvements,” he added.

ArcelorMittal profitability dips

Europe segment reports €303-m

Q3 lossArcelorMittal’s Flat Carbon Europe segment for the third quarter of 2012 recorded an operating loss of €303 million which includes restructuring costs but excludes interest and tax costs. The total operating loss now for the first nine months of 2012 stood at €643 million reflecting the continued difficult operating environment in Europe where further weakening of demand has combined with a seasonal slowdown.

Compared to Q2 of 2012, the segment’s crude steel production fell 5.9 percent to 6.7 million tons (mt) in Q3 of 2012. Steel shipments for Q3 2012 fell to 5.8 mt, a decrease of 13.8 percent as compared to 6.8 mt for Q2 of 2012 and a decrease of 8.6 percent as compared to 6.4 mt for Q3 of 2011.

Sales stood at €4.9 billion for Q3 of 2012, a decrease of 12.5 percent as compared to €5,6 billion for Q2 of 2012. Sales decreased primarily due to lower steel shipment volumes and lower average steel selling prices.

Europe has seen declining GDP since the 3rd quarter of 2011 due to continuing decline in investment and consumption, as austerity and record unemployment weigh on demand. No sustained pick-up in Europe is expected before 2014 and the eurozone as a whole is likely to at best stagnate in 2013. PMI remains below 50 for a fifteenth month indicating manufacturing contraction. Apparent steel demand in the European Union in the first three quarters of 2012 is estimated to have declined around 9.5 percent year on year and we expect it to decline by close to 8 percent for the year as a whole. EU demand is now at least 28 percent below 2007 levels.

Lakshmi N. Mittal, Chairman & CEO, ArcelorMittal


CORpORATE


Steel Authority of India Limited (SAIL), the public sector steel behemoth, has recorded a growth of 7 percent in hot

metal production in the July-September quarter of 2012-13 over corresponding period last year, with a production of 3.6 million tons (mt), according to information available with Steel Insights.

Growth in crude steel and saleable steel production was 5 percent and 4 percent, with production of 3.39 mt and 3.17 mt in the second quarter respectively. There was 6 percent growth in hot metal production and 4 percent growth in production of crude steel as well as saleable steel in September 2012, over the same month last year. Blast furnace productivity showed substantial increase of 8 percent year-on-year in Q2.

On the other hand, in the April-September period of 2012-13 also, 3 percent year-on-year growth was registered in production of both hot metal and crude steel. Improved techno-economic parameters in H-1 of current fiscal supported the growth trend with BF productivity, specific energy consumption and coke rate registering improvements of 4 percent, 3 percent and 2 percent respectively, the statement said.

Bhilai production

Bhilai Steel Plant of SAIL produced 2.68 million tons (mt) of hot metal, 2.59 mt of crude steel and 2.21 mt of saleable steel, recording growth of 5.7 percent, 8.1 percent and 6.1 percent, respectively over that recorded in the first half of previous fiscal year, a company source informed Steel Insights.

Production of 1.35 mt of cast steel at SMS-2 has been the best ever for any H1 period, surpassing the previous best figure of 1.32 mt recorded in H1 of 2010-11. Production of rails and structurals which stood at 473,700 tons has been the best ever

for any H1 period surpassing the previous best figure of 468,300 tons recorded in H1 of 2008-09.

Loading of UTS 90 rails at 385,300 tons has also been the best ever for the period surpassing the previous best figure of 379,700 tons recorded in H1 of 2009-10. Loading of long rails at 70,600 tons has also been the best ever surpassing the previous best of 66,500 tons in H1 of 2011-12.

The plant continued to maintain its high proportion of special steel grades in total saleable steel production in the first half period (April to September) of current fiscal year.

The plant’s wire rod mill recorded a total production of 3.16 lakh tons of special steel grades out of the mill’s total production of 3.20 lakh tons in H1 period. The mill’s special steel production included 1.72 lakh tons of TMT wire rods, 88,360 tons of electrode quality wire rods and 55,770 tons of SWR-10/SAE special grade wire rods.

SAIL production up 7% y-o-y in Q2

The special steel component in merchant mill’s total production of 3.13 lakh tons in H1 period was 2.19 lakh tons, including 2.14 lakh tons of the earthquake resistant and high corrosion resistant grades of TMT bars.

The plant’s plate mill produced 2.42 lakh tons of special steel grades in H1 period including boiler quality, high tensile and copper bearing grades, normalised plates, ship building quality and thicker plates. It is worth mentioning that out of the total exports of 86,361 tons in April to September period, the export of plates have been 72,695 tons.

Capacity expansion

SAIL’s capacity expansion of its unit, Rourkela Steel Plant (RSP), is expected to be completed by the end of this year.

As part of the ongoing expansion and modernisation, a new state-of-the-art blast furnace is being constructed at RSP, sources said. This new blast furnace will enable the steel plant to raise its capacity to 4.5 million tons per annum (mtpa) from the existing 2 mtpa, according to sources.

Work on SAIL-Kobe JV to begin

in a yearSteel Authority of India Ltd (SAIL) expects to begin construction work within a year on a 50:50 iron making joint venture in India with Japan’s Kobe Steel, industry sources said.

The JV – named SAIL-Kobe Iron India – envisages a 500,000 tons per year iron nuggets plant incorporating Kobe’s ITmk3 technology and built in SAIL’s alloy steelworks at Durgapur.

The necessary approvals for environmental clearances are under progress and in less than one year the company should be in a position to start the project, sources said.

The timing is in line with Kobe’s earlier expectations of beginning construction work in 2013 and commercial operations in 2015.



Acquisition of an additional 700 acres of land for the Posco mega steel project which was stalled

temporarily due to the company’s lack of commitment on periphery development work is set to be completed in two months, industry sources said.

While the state government had acquired 2,000 acres of land, the South Korean steel major needed an additional 700 acres for setting up an 8-million-ton (mt) plant in the first phase. The

company, which needed 4,004 acres in all, would later scale up capacity to 12 mt after receipt of the balance land.

Though the state government had acquired 2,000 acres of land for the Posco project, only 548 acres was transferred to the company.

Despite being the biggest foreign direct investment (FDI) of the country, the Posco’s steel project near Paradip in Jagatsinghpur district has not taken off for several reasons, including delay in land acquisition due to strong local resistance. Significantly, though the memorandum of

CORpORATE

Posco to get additional land in 2 months


Tata Steel, one of the leading steelmakers of the country, has unveiled ‘Tata Astrum’, a new

brand of its Hot Rolled products range, the company said in a statement.

With this the Company has made a foray into branding of HR products in the SME segment for the first time and this initiative is aimed at de-commoditising steel and offering the best-in-quality product to customers, the statement said.

Tata Astrum follows the success in the market of other Tata Steel brands, such as

Tata Tiscon (rebars), Tata Shaktee (roofing sheets), Tata Steelium (cold rolled sheets), Tata Galvano (galvanized sheets), Tata Structura (hollow sections), Tata Bearings (bearings), Tata Agrico (agricultural implements), etc.

Tata Astrum HR coils and Sheets will be produced from two of Tata Steel’s mills at Jamshedpur and will be available in 1.6 mm to 16 mm thickness range. Customers will be served through Tata Steel’s authorised distributors.

A total of 42 such distributors have been appointed across the country each of whom will have a tie-up with service centres that will be certified by Tata Steel for quality

products. The material will be supplied to customers in processed form out of the service centres.

“Tata Steel is constantly endeavouring to enhance customer satisfaction. With the launch of Tata Astrum, Tata Steel is offering convenience to its customers through consistent availability of ready-to-use quality HR products,” said T. V. Narendran, Vice President, Safety and Flat Products of Tata Steel.

The Astrum product range will be used in the Automotive, Earth Moving Equipment, Railways, Fabrication, Construction and Industrial Machinery segments.

The size of the domestic market for hot rolled products in the SME segment is pegged at 6 mtpa. Tata Astrum hopes to garner a market share of 17-18 per cent in this segment in FY’14. This is expected to generate revenue of approximately Rs 4,000 crore for the Company, the statement further added.

Tata Steel launches new hot rolled products brand ‘Tata Astrum’

understanding (MoU) signed between the State Government and Posco for setting up a 12- mt capacity steel plant expired on June 21, 2010, it still remains yet to be renewed. In the recently held meeting between the Posco India’s Chairman-cum-Managing Director (CMD) Yong Won Yoon and Odisha’s Chief Minister Naveen Patnaik, Yoon told mediapersons after the meeting that Posco had already submitted the documents for the renewal of the MoU to the State Government.

Though the company had initially proposed to set up a 12-mtpa mega steel plant at an investment of `52,000 crore, it revised its plan and reduced capacity of its proposed project to 8 mtpa in view of difficulty in land acquisition.

On cost escalation of the project because of the delay, Yoon said it will be assessed after the work starts. He also refused to comment on the closure of the VAL at Lanjigarh.


CORpORATE

Govt against foreign majority

stake in JVsThe Indian steel ministry said that Posco and Severstal cannot have majority stakes in their proposed JVs with state-run SAIL and NMDC respectively, media reports said.

Steel minister Beni Prasad Verma told the media that talks are going on and there are problems with regard to the shareholding. “We cannot give them land and all facilities, and still have minority shareholdings in the ventures,” he said.

He declined to give a timeline on when the deals are likely to be sealed. He said that “These can be finalised only when Posco and Severstal agree to give our companies 51 percent stakes in both the JVs.”

SAIL had signed a memorandum of understanding with South Korea’s Posco to form a JV company at Bokaro in Jharkhand for setting up a 3-mtpa steel making unit in 2011 at an investment of `16,000 crore.

NMDC had inked an MoU with Russia’s second largest steel maker Severstal in late 2010 for a 3-mtpa plant initially in Karnataka involving around `20,000 crore investment.

Differences on shareholding issues continue to come in the way of formation of the two steel making ventures, as both the foreign firms are insisting on owning majority stakes in them.

Verma stresses on RINL marketing strategies


Steel minister Beni Prasad Verma called upon RINL to evolve innovative marketing strategies to perform better

and intensify its marketing efforts in rural areas, according to information available with Steel Insights. Verma was reviewing the company’s first half performance.

RINL posted growth in hot metal, liquid steel and value added steel production, captive power generation, operating profit and profit after tax during H1 of 2012-13. A marginal shortfall in the Saleable Steel production was registered due of acute power crisis in the Andhra Pradesh as well as heavy rainfall.

The weakening demand of long products marginally impacted the sale of long products in the country. RINL took steps like correction in prices to improve sales.

During H1, RINL improved its rural marketing network by 69 percent and growth in sales increased to 88 percent. Significant growth was achieved in converter lining life, specific water consumption and labour productivity.

RINL paid `1414.51 crore to the government in H1 towards dividend and redemption of preferential capital.

On the expansion front, new Blast Furnace, Oxygen Plant, Turbo Blower, Power and Utility Systems were commissioned and are currently in operation. Order for new Pressure Reducing Station has been placed and is expected to be commissioned by March-April 2013. The balance units viz., sinter plant and wire rod mill would be commissioned by end of 2012.

The company signed a Memorandum of Understanding (MoU) with NMDC for transportation of iron ore through slurry pipeline from Bailadilla to Visakhapatnam and setting up of pelletisation plant at Visakhapatnam. RINL also signed a MoU with Power Grid Corporation of India for manufacturing of transmission line towers and another MoU for manufacturing CRGO and CRNO steel.

The company’s expenditure on CSR activities grew by 10 percent during the review period.

According to industry sources, RINL is also planning to diversify into flat steel production. In fact, the company has ramped up capacity to 6.3 million tons per annum (mtpa) from 3.3 mtpa. Output from these units would consist entirely of long steel products.

Further expansion of crude steelmaking capacity to 11.5-12 mtpa would be for flat steel production of 4-4.5 mtpa. This would include production of hot rolled coil of up to API X100 grade as well as coils to feed a planned silicon steel mill that would produce cold rolled grain-oriented and non-grain oriented steel.

Gujarat NRE Coke Ltd more than doubled its profit after tax for the July-September quarter of 2012-13 to `16.72 crore as against `8.04 crore in the same period last year.

The total income for the second quarter also registered a rise of around 23 percent which stood at `331.83 crore as against ̀ 270.04 crore in the corresponding quarter last year.

Gujarat NRE’s Australian coking coal mining subsidiary has been continuously

increasing its coking coal production for last few quarters. Gujarat NRE Coking Coal Ltd (GNCCL) has registered a 60 percent rise in the total H1 2012 coking coal production, up to 906,000 tons from 568,000 tons in the corresponding half yearly production in H1 2011. GNCCL also registered the highest quarterly production in a quarter in Q2 2012 which stood at 544,000 tons, while sales increased by 34 percent in Q2 2012 (486,000 tons) over Q2 2011 (363,000 tons).

Gujarat NRE Coke Q2 PAT doubles


Posco waits on

There is something about Posco India other than steel. Seven years on, the steel major continues to hold patience and remain o p t i m i s t i c .

Recent reports say the company is expecting acquisition of 2,700 acres of land for setting up its 8 million tons per annum (mtpa) steel plant near Paradip within 60 days.

“The state government has indicated that it will hand over 2,700 acres of land required by us to set up an 8-mtpa capacity steel plant within two months,” Posco-India CMD Yong Won Yoon told reporters after meeting Chief Minister Naveen Patnaik last month.

He further said that the company would start physical construction of the project as

sOCIAL buzz


As the Indian steel industry wades through a slack market scenario, the community on ISMW identifies

issues related to iron ore and new steel projects as of prime interest. News about domestic ore makers facing competitive import offers caught attention of the members who agreed with the reports. There is a unanimous view in the industry about the need for large scale pelletisation in the country and the ISMW could be no different.

Yet another major concern is about the long stuck-up steel projects of Posco and ArcelorMittal. However, nobody seems to hold an answer to the land acquisition hurdles, which is likely to take immense proportions going forward. Recently, an industry bigwig said it was becoming difficult to get land in Odisha even at a whopping offer of `12 lakh per acre. One only hopes the government has some solution in mind.

Iron ore, new steel projects are of prime interest

soon as it got the required land. If not for anything else, industry sources said, the company deserves a fair treatment for its patience and optimism.

Meanwhile, there was little news about the other steel major ArcelorMittal. But a merger between two Japanese steelmakers created ripples in the global steel market.

N i p p o n , Sumitomo merger

The big news in recent past was the merger of

Japan’s Nippon Steel and rival Sumitomo Metal Industries, which together created the world’s second largest steelmaker amid intensifying global competition.

As of 2011, the two Japanese firms produced a combined 46.1 mt of crude steel, about half of ArcelorMittal’s production of 97.2 mt. Although still a distant second, the new combined entity is sure to be in a position to influence global prices.

Industry sources termed the development as a very pragmatic step in view of the intensified competition and cost pressures facing the leading steelmakers in the global market. In fact, cost was the primary concern of the two companies which decided to go for the merger late last year.

Met coke demand

In line with the domestic steel market, the metallurgical coke prices remained depressed in recent

weeks. This was mainly due to the lack of firm interest in India, a coke maker told ISMW.

However, he hoped some buying interest would return soon as historically steel demand rises post-October with construction project work starting off after monsoons.

Commenting on the issue, Robert S, experienced corporate finance executive from Australia said, the scenario was about the same in the US. “It appears that there is oversupply in Eastern USA….Cannot see demand increasing until early 2013.”

Steel Insights has started a group on LinkedIn called India Steel Market Watch (ISMW). The readers are welcome to join the group and participate in daily conversations and surveys conducted by ISMW on the online forum. Steel Insights may, at its discretion, publish the results of such surveys and discussions for the benefit of a larger audience.


LOgIsTICs

37.54 percent lower than the iron ore traffic moved through the port in the same period last year.

The 12 ports handled 270.56 mt of traffic during the period, 3.28 percent lower than 279.72 mt recorded during the same period last year.

According to data released by the Indian Ports Association (IPA), the country’s major ports handled a total of 15.27 mt of coking coal in April-September period, up 2.93 percent as compared with 14.83 mt handled in the same period last year.

Movement of coking coal through Paradip, Kolkata, Visakhapatnam, Chennai, Cochin and Mormugao ports declined during the period when compared to the corresponding period last year.

Movement of container traffic in terms of tonnage and TEUs showed an increase in the April-September period. The major ports handled 60.90 mt of tonnage and 3.93 million TEUs in April-September period compared to 59.33 mt of tonnage and 3.89 mt of TEU in the same period last year.

Seven major ports showed positive growth in traffic handling during the April-September period of the current fiscal, while the remaining five showed negative growth on a year-on-year basis.

In terms of growth, Ennore port topped the list with a 22.52 percent increase in cargo throughput. JNPT’s growth was lowest at about 0.94 percent during the period. In terms of traffic volume, Kandla port clinched the top rank with a cargo volume of 44.68 mt recorded for the period.

The Mormugao port registered the highest decline of 22.86 percent in traffic handling during the period due to fall in iron ore export.


Movement of iron ore through the 12 major Indian ports dropped 43 percent in the in the first

half (April-September) of 2012-13 due to restrictions imposed on mining and a hike in export duty on iron ore. The major ports together handled 18 million tons (mt) of iron ore in the April-September period compared to 31.64 mt handled in the same period last year.

Mormugao port handled the highest volume of 7.42 mt of iron ore in April-September. This volume, however, was about

Traffic handled at major ports(During April to September, 2012* vis-a-vis

April to September, 2011)(*) Tentative (in ‘000 tons)

PortsApril to September traffic % Variation against

prev. year traffic2012* 2011

KOLKATA

Kolkata Dock System 5754 6203 -7.24

Haldia Dock Complex 14054 17005 -17.35

TOTAL: KOLKATA 19808 23208 -14.65

PARADIP 25629 27996 -8.45

VISAKHAPATNAM 30309 36097 -16.03

ENNORE 7997 6527 22.52

CHENNAI 27128 29269 -7.31

V.O. CHIDAMBARANAR 14037 13852 1.34

COCHIN 10134 9754 3.90

NEW MANGALORE 16736 16042 4.33

MORMUGAO 12656 16406 -22.86

MUMBAI 28789 26662 7.98

JNPT 32653 32348 0.94

KANDLA 44686 41568 7.50

TOTAL: 270562 279729 -3.28

Iron ore handling by major ports down 43% in H1


LOgIsTICs

Railways commodity freight revenue down in September m-o-m

The Indian Railways’ revenue earnings from commodity-wise freight traffic fell month-on-month in September

due to lower transportation of coal and iron ore.

Revenue earnings from commodity-wise freight traffic during September 2012 stood at `6,040.96 crore, down 4.54 percent

Commodity-wise revenue

CommodityQuantity (in mt) Earning (`cr)

Sept 2011 Sept 2012 Sept 2011 Sept 2012

Coal

i) for steel plants 3.78 3.87 151.52 206.65

ii) for washeries 0.15 0.09 2.17 1.02

iii) for thermal power houses 20.13 22.05 1299.43 1695.28

iv) for public use 7.09 10.09 391.6 606.06

v) Total 31.15 36.1 1844.72 2509.01

Raw material for steel plants except iron ore 1.24 1.22 91.25 95.39

Pig iron and finished steel

i) from steel plants 2.15 2.16 239.42 317.79

ii) from other points 0.59 0.57 38.21 49.79

iii) Total 2.74 2.73 277.63 367.58

Iron ore

i) for export 1.03 0.47 265.08 105.93

ii) for steel plants 3.69 5.04 127.59 205.79

iii) for other domestic users 2.58 2.69 181.71 206.35

iv) Total 7.3 8.2 574.38 518.07

Cement 7.66 8.01 438.54 575.41

Foodgrains 3.76 3.57 334.77 488.2

Fertilizers 4.35 4.77 314.53 479.86

Mineral Oil (POL) 3.06 3.2 247.21 328.04

Container Service

i) Domestic containers 0.77 0.74 71.91 75.55

ii) EXIM containers 2.43 2.49 204.48 216.29

iii) Total 3.2 3.23 276.39 291.84

Balance other goods 5.71 4.9 377.94 387.56

Total revenue earning traffic 70.17 75.93 4777.36 6040.96


compared with `6,328.28 crore earned in August, according to information available with Steel Insights.

The Railway’s revenue from transportation of coal fell to `2,509.01 crore in September from 2,537.7 crore in August. The Railways transported 36.1 million tons (mt) of coal in September compared with 36.69 mt transported a month ago.

Revenue from transportation of iron ore for exports, steel plants and for other domestic user in September fell to `518.07 crore, down 16.55 percent from `620.84 crore in August. The quantity of iron ore transported fell to 8.2 mt in September from 9.21 mt in the previous month.

Revenue from transportation of cement in September stood at `575.41 crore (8.01

mt) as compared to `551.57crore (7.52 mt) in August, while that from foodgrains transportation fell to `488.2 crore (3.57 mt) in September from `597.09 crore (4.22 mt) in August.

The Railways revenue from transportation of fertilisers in September rose sharply to `479.86 crore (4.77 mt) from `427.08 crore (4.29 mt) in August.

Revenue from transportation of petroleum oil and lubricant (POL) in September stood at `328.04 crore (3.2 mt), while the same from pig iron and finished steel from steel plants and other points was `367.58 crore (2.73 mt). Revenue from container services was `291.84 crore (3.23 mt) and from transportation of other goods was `387.56 crore (4.9 mt).


mACRO OuTLOOk

Source: rBI

69

74

79

84

89

43454749515355575961636567697173

INR vs G

BP

INR

vs U

SD, Y

en

USD YEN GBP

INR movement against select major currencies

India’s rupee is falling as investors question the government’s ability to implement policies to boost growth, which the RBI predicts will be the least in a decade. INR fell 1.8 percent to 53.8150 per USD last month after rising 5.1 percent in September, when it was the region’s best performer. The INR is expected to fall further in the coming months as foreign investors might not invest in the economy.

105

125

145

165

185

205

Aug-11

Sep-11Oct-11 Nov-11

Dec-11 Jan-12 Feb-12 Mar-12

Apr-12 May-12

Jun-12 Jul-12 Aug-12

Mining & Quarrying ManufacturingElectricity General Index

Source : Govt. of India, MoSPI

India’s industrial output rose modestly by 2.7 percent in August with the growth driven by consumer goods though not enough to end a long slump in Asia’s third-largest economy. In the April-August period, industrial production expanded an annual 0.4 percent. Manufacturing grew an annual 2.9 percent from a year earlier, statistics office said.

Index of Industrial Production

110120130140150160170180190200210220230

All Commodities Primary ArticlesManufactured Products Fuel & PowerBasic Metals Alloys & Metal Products Steel

Source : OEA, GoI, Ministry of Commerce & Industry

Wholesale price index (Selected categories)

India’s wholesale price index (WPI) (Base 2004-05=100) rose to168.4 in September as compared to 166.6 recorded in the previous month. Also WPI for July this year was revised to 165.8 this month. The index for primary articles group increased by 8.77 percent to 220.7 from 202.9 in September the previous year. The index for manufactured products group also rose by 6.26 percent to 147.7 from 139 in September 2011. Fuel and power index rose 11.88 percent to 188.3 from last year while index for basic metals and metal alloys rose by 7.46 percent to 167.2 on rising prices of the product globally. Steel index however remained unchanged.

10.00%

9.87% 9.46%

7.74%

7.23%7.56%

7.69%

7.23%

7.55% 7.25%

6.87%7.55%

7.81%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

Source : OEA, GoI, Ministry of Commerce & Industry

Inflation rate in India

India’s wholesale price inflation accelerated to 7.81 percent in September from 7.55 percent in August as prices of fuel, potato, pulses, wheat and sugar soared. Food articles inflation increased 7.86 percent, while non-food article inflation was up 10 percent. Fuel & power index soared 11.88 percent, while manufactured products inflation was up 6.26 percent. The annual reading for July was revised up to 7.52 percent from 6.87 percent earlier. High inflation rate is likely to pressurise RBI to lower interest rates as its anti-inflationary stance has hurt growth. The central bank expects inflation to remain at around 7.7 percent. India’s annual consumer price inflation fell in September to 9.73 percent from 10.03 percent in August, driven by a marginal fall in fuel and food prices.

1400000

1450000

1500000

1550000

1600000

1650000

1700000

280000

282000

284000

286000

288000

290000

292000

294000

296000

298000

in Rs crore

in m

illio

n $

in Million $ in Rupees crore

Source: rBI

Foreign Exchange Assets

India’s forex reserves went up by a mere $55.6 million to $295.29 billion for the week ended October 26, as overseas investors withdrew more money from the local markets. Forex reserves may dwindle in the coming week as higher outflows may continue as New York remains virtually closed due to devastation caused by superstorm Sandy.

Macroeconomic indicators of India



mARkET REpORT

Global crude steel production remains unchanged

Chandrika Mitra

World crude steel production for the 62 countries reporting to the World Steel Association (Worldsteel) was

123.637 million tons (mt) in September 2012 similar to that reported in August 2012 at 123.642 mt. However crude steel production for September 2012 was higher by just 0.57 percent compared to September 2011.

In September 2012, Asia produced 80.285 mt of crude steel, an increase of 1.91 percent over September 2011. The EU produced 14.105 mt of crude steel in September 2012, down by 3.82 percent compared to the same month of 2011. North America’s crude steel production in September 2012 was 9.68 mt, 2.32 percent lower than the corresponding month of 2011.

China, the single largest producer, produced 57.95 mt of crude steel in September this year, an increase of 2.2 percent as compared to the corresponding

period in 2011, when production stood at 56.7 mt. Again, m-o-m production saw a fall of 1.28 percent as compared to August’s produce of 58.703 mt

Elsewhere in Asia, Japan produced 8.798 mt of crude steel in September 2012, a decrease of 1.01 percent compared to the same month last year. India’s production for September 2012 stood at 6.155 mt, up 3.45 percent compared to S e p t e m b e r 2011. South K o r e a produced 5.602 mt during the same period, a 1.8 percent increase on the same month 2011.

World crude steel production (in ‘000 tons)

World Crude Steel Production Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12

European Union (27) 14,962 15,404 14,727 14,240 12,073 14,105

Other Europe 3,081 3,282 3,146 3,261 3,188 3,197

C.I.S. (6) 9,570 9,615 9,243 9,172 9,250 9,597

North America 10,684 10,772 9,768 10,014 10,380 9,680

South America 4,075 3,972 3,835 3,934 3,829 3,600

Africa 1,223 1,260 1,209 1,207 1,199 1,161

Middle East 1,736 1,705 1,674 1,404 1,572 1,500

Africa/Middle East 2,959 2,965 2,883 2,610 2,772 2,661

China 60,575 61,234 60,213 61,693 58,703 57,950

India 6,360 6,593 6,375 6,359 6,360 6,155

Japan 9,077 9,224 9,198 9,251 9,207 8,798

South Korea 5,915 6,032 5,764 5,908 5,632 5,602

Taiwan, China 1,783 1,804 1,781 1,761 1,730 1,780

Asia 83,710 84,887 83,330 84,972 81,631 80,285

Oceania 485 477 485 494 519 511

Rest of the world except China 68,951 70,140 67,204 67,004 64,939 65,687

World 129,526 131,374 127,417 128,697 123,642 123,637

In the EU, Germany produced 3.6 mt of crude steel in September 2012, a decrease of 2.2 percent on September 2011. Italy’s crude steel production for September 2012 was 2.4 mt, down by 7.8 percent compared to September 2011. France’s crude steel production for September 2012 was 1.3 mt, a decrease of 3.0 percent on September 2011. In September 2012, Spain produced 1.2 mt of crude steel, 10.3 percent lower than September 2011

In September 2012, Russia produced 6.2 mt of crude steel, an increase of 15.1 percent compared to the same month last year. Ukraine’s crude steel production for September 2012 was 2.7 mt, 8.3 percent less than September 2011.

Turkey’s crude steel production for September 2012 was 3.0 mt, an increase of 1.9 percent compared to September 2011. The US produced 7.0 mt of crude steel in September 2012, down by -3.0 percent on September 2011. Brazil’s crude steel production for September 2012 was 2.8 mt, down by -0.4 percent compared to September 2011.

The crude steel capacity utilisation ratio for the 62 countries in September 2012 rose to 77.7 percent from 75.5 percent in August 2012. Compared to September 2011, it is 2.5 percentage points lower

It is to be noted that the March to September 2012 data covers 62 countries against 64 in March to September 2011. In January and February 2012, only 59 countries are covered as three African countries, Algeria, Libya & Morocco while two Middle East countries Iran and Qatar did not provide monthly production statistics.

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

July1

0/09

Aug10/09

Sep10/09

Oct10/09

Nov10/09

Dec10/09

Jan11/10

Feb11/10

Mar11/10

Apr11/10

May11/10

June11/10

July1

1/10

Aug11/10

Sep11/10

Oct11/10

Nov11/10

Dec11/10

Jan12/11

Feb12/11

Mar12/11

Apr12/11

May12/11

June12/11

July1

2/11

Aug12/11

Sept12/11

China Rest of the world except China World

Crude steel production growth rate (Y-o-Y)


mARkET REpORT

Domestic flat & long markets

Low demand keeps markets subdued


The domestic flat steel market remained largely sluggish in October on the account of a

number of factors. The main attribute to the quietness of the market was that due to the festivity both the buyers as well as the producers were out of the market for most part of the month.

Further the sluggishness in demand sustained which coupled with cheaper imports added pressure on the domestic hot rolled coil producers. The market failed to see any movement. The buyers were hesitant to buy. The end user sector also failed to see any revival coupled with the fact that the steel mills are running in almost full capacity. All these factors resulted in building of inventory in the market creating a surplus. Currently

the market for HR Coil of size 2.5MM is at Rs 35800 Ex-Delhi, whereas on the other

hand HR Plates of size 8-20MM is at Rs 37500 Ex-Kutch.

The rise in inventory level in the market is alarming at the moment, with a number of factors like cheap imports from China, Korea and Japan, weak off take due to slow demand. The domestic demand from the end users sector is also weak, despite the fact that the market expected some move pre festive season especially from the auto sector. Meanwhile the new capacity additions have led to an increase in the inflow of material in the market. Growing imports from Korea and Japan have also added to higher steel supplies resulting in market surplus.

Outlook

Consistent weakness in demand, capacity addition and increased imports has resulted in rise in market surplus. Amidst the week of festivities and low off take kept the market slow. There is hardly any sign of optimism in the market and the market players are likely to surface it through provided the rupee further appreciates and the imports see an increase. In the interim, the market experts feel some movement in November; however in view of the past few months, the market seems uncertain.

Scrap market remains unchanged

As per the market sources, the domestic ferrous scrap witnessed subdued buying interest on the back of low trade in semi-finished goods and finished goods. The

26000

28000

30000

32000

34000

Wtd

. Avg

. Prc

ie (R

s./M

T)

Defective HR Plate-Rourkela Semi Rolled Plate Defective PlateCobble Plate Defective HR Plate-Bokaro HR SheeDef. Chequered Plat

HR products price trend

Price in `/t is basic


mARkET REpORT

trading activities in the eastern markets remained dull due to festivities in the past few days. The offers for HMS are currently going around at Rs 24,500/MT (basic) in the eastern region.

Semi-finished market exhibits a slow movement

The market for the semi-finished steel items continued to remain slow and slackened. Overall demand of the steel products has been poor for the last few months. The construction sector is yet to come out of the hibernation mode. Billet market is impacted by limited funds invested in projects for infrastructure development as market is not much hopeful of good profit margins. The sales in the first two quarters was not good due to monsoons and weak buying of finished products -TMT, wire rods, etc.

Finished long steel market slow but stable

The demand situation in the finished steel

market continued to remain feeble with construction & infrastructure sector still remaining weak. The sales of the materials continue to remain low.

The long steel market depicted a stable yet a sluggish movement in October. Long product prices exhibited a slightly stable trend over the last few days showing signals of turnaround post festivities.

Festive fervor of Durga puja especially in the eastern part of the country kept the transaction activities low for the most of the month of October which is expected to slowly ease out. The demand conditions are yet to pick up and the market is expecting some movements once the Diwali is over. The buyers at the moment have lost their confidence on the market and are skeptic about each move they make.

The market for cast and pig iron too remained sluggish and the producers are holding considerable high stocks with them. All the manufacturing entities in the steel value chain are suffering from excess supply and this is not only affecting the pig iron producers but also integrated prime producers of steel.

Outlook

The long steel market is expected to remain more or less stable in the coming days with not much movement is expected to be seen right now. Once the festivals are over, the market might see some positive movement around the middle of the month of November. Price in `/t is basic


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37000

Wtd

.Avg

.Pric

e(Rs

./M

T)

CR Coil End from SPM - I Defective CR Coil UACE from HDGL Defective CRNO Sheet CR Sheet Cutting

CR products price trend

25000

27000

29000

31000

33000

35000

Wtd

. Avg

. Pric

e(Rs

./M

T)

Defective Billet MM end Cutting Rejected Bloom Plate Cutting

Long products price trend

22000

26000

30000

34000

38000

Wtd

.Avg

.Pric

e(Rs

./M

T)

CR Coil End Side-End Shearings CR Gas Cut WRM Material Turning & Boring Coil End Cutting

Scrap products price trend



pRICE DATA

Indicative market price for September 2012Steel Insights Bureau

Sl. No. ITEM Kolkata Delhi Mumbai Chennai

1 PIG IRON 32450 35800 29600 35180

2 BILLETS 100 MM 41180 41340 42840 42050

3 BLOOMS 150X150 MM 39980 40260 41680 40360

4 PENCIL INGOTS 35570 32000 35300 38330

5 WIRE RODS 6 MM 47410 48180 50270 49280

6 WIRE RODS 8 MM 47010 47720 49630 48820

7 ROUNDS 12 MM 46810 46810 47730 48330

8 ROUNDS 16 MM 46870 47230 47710 48140

9 ROUNDS 25 MM 46510 47410 47510 47970

10 TOR STEEL 10 MM 48970 49580 50190 50190

11 TOR STEEL 12 MM 47910 47850 49340 49630

12 TOR STEEL 25 MM 47750 48060 49220 49450

13 ANGLES 50X50X6 MM 47110 46980 48790 49290

14 ANGLES 75X75X6 MM 46240 46680 47840 47690

15 JOISTS 125X70 MM 46950 47160 49030 48830

16 JOISTS 200X100 MM 46970 47400 48970 48830

17 CHANNELS 75X40 MM 47970 48830 49790 49770

18 CHANNELS 150X75 MM 47320 48460 49080 48500

19 PLATES 6 MM 47750 49590 49640 50210

20 PLATES 10 MM 47750 49590 49660 50210

21 PLATES 12 MM 48350 50120 50140 50790

22 PLATES 25 MM 48900 50640 50610 51370

23 H. R. COILS 2.00 MM 46800 48800 49780 49350

24 H. R. COILS 2.50 MM 45680 47710 48700 48390

25 H. R. COILS 3.15 MM 45640 47710 48710 48390

26 C. R. COILS 0.63 MM 52100 52380 53560 54260

27 C. R. COILS 1.00 MM 51130 51800 52830 53340

28 G. P. SHEETS 0.40 MM 55880 57030 58730 60310

29 G. P. SHEETS 0.63 MM 54020 53380 57270 59510

30 G. C. SHEETS 0.40 MM 54990 56300 57630 60660

31 G. C. SHEETS 0.63 MM 54010 54680 57370 60230

32 MELTING SCRAP H M S - I 31830 27700 NA 25730

33 MELTING SCRAP H M S - II 28000 27700 NA 24680

34 SPONGE IRON (COAL BASED) 27000 26000 28500 21530

NOTE: 1) All prices are in rs./Tonne and has been compiled on the basis of average of Main & Others producers’ price. (2) Prices are inclusive of Excise Duty & Sales / Vat Tax (3) All prices are as on 01 day of every month (4) Prices are indicative.

(Rs. Per tons)


pRODuCTIOn DATA

Source: Steel Ministry

Production, Imports, Exports, Availability & Apparent Consumption (provisional) April - August 2012


PRODUCERS

FINISHED STEEL

Non-Alloy Steel (Carbon) Alloy Steel Total

2012 - 13 (Prov.)

2011 - 12 (Prov.) % Variation 2012 - 13

(Prov.)2011 - 12 (Prov.) % Variation 2012 - 13

(Prov.)2011 - 12 (Prov.) % Variation

SAIL 4865 4584 6.1 136 133 2.3 5001 4717 6.0

RINL 1242 1323 -6.1 1242 1323 -6.1

TSL 2869 2719 5.5 2869 2719 5.5

a) Prod. of Main Producers 8976 8626 4.1 136 133 2.3 9112 8759 4.0

ESSAR 2877 3277 -12.2 2877 3277 -12.2

JSW ISPAT 1708 1546 10.5 1708 1546 10.5

JSWL 5140 4091 25.6 482 479 0.6 5622 4570 23.0

JSPL 608 593 2.5 608 593 2.5

b) Prod. of Major Producers $ 10333 9507 8.7 482 479 0.6 10815 9986 8.3

Others 20257 20683 -2.1 1849 1775 4.2 22106 22458 -1.6

Less : IPT/Own Consumption 4430 4635 256 156 4686 4791

c) Total Production for Sale 35136 34181 2.8 2211 2231 -0.9 37347 36412 2.6

d) Imports $ 3023 2259 33.8 912 623 46.4 3935 2882 36.5

e) Exports $ 2118 2006 5.6 249 253 -1.6 2367 2259 4.8

e) Availability (c+d-e) 36041 34434 4.7 2874 2601 10.5 38915 37035 5.1

f) Variation in Stock -659 -505 4 0 -655 -505

g) Apparent Consumption (e-f) 36700 34939 5.0 2870 2601 10.3 39570 37540 5.4

Less : Double Counting 2508 2174 430 515 2938 2689

Real Consumption 34192 32765 4.4 2440 2086 17.0 36632 34851 5.1

(in ‘000 tons)


pRICE TREnD

Ferro alloys & metals price trendsSteel Insights Bureau

Ferro alloys & Metals October 2012 September 2012 August 2012

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

70,250 70,250 70,000

HC Ferro Chrome (Cr - 60%)Ex-works Rs/ ton

68,500 68,500 69,000

HC Ferro Manganese (Mn - 70%)Ex-works Rs/ ton

53,500 54,000 53,500

Silico Manganese (Mn - 60%, Si - 14%)Ex-works Rs/ ton

54,500 55,000 58,650

MC Ferro Manganese ( Mn - 70%, C -1.5)Ex-works Rs/ ton

75,500 74,500 77,000

LC Ferro Manganese (Mn - 70%, C - 0.1)Ex-works Rs/ ton

1,19,000 1,19,000 1,12,000

Ferro VanadiumEx-works Rs/ kg

725 735 790

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

1,005 1,055 1,015

Ferro Titanium (Ti - 30%)Ex-works Rs/ ton

1,52,500 1,57,500 1,52,500


Import DataPort Date Country Of Origin Item Description Unit Price (in Rs.) Unit Price (in $) Quantity (in tons)

KANDLA

5 Sep 12 AUSTRALIA IRON ORE PELLETS 9,909 177.11 5,000

11 Sep 12 UKRAINE IRON ORE UNFLUXED PELLETS 9,830 174.91 9,948





24 Sep 12 MALI IRON ORE LUPMS (FE 63.50%) 7,362 134.46 1,970



Kandla Total 44,685

MUNDRA 15 Sep 12 SENEGAL IRON ORE LUMPS (NON SIZED) 6,148 109.39 406

Mundra Total 406

VIZAG10 Sep 12 ALBANIA IRON NI ORE (FE 51.90%) 6,594 117.33 529

17 Sep 12 ALBANIA IRON NI ORE (FE 51.90%) 6,629 117.96 28

Vizag Total 557

GRAND TOTAL 45,647

IROn ORE DATA

Iron ore data for September 2012Steel Insights Bureau

Export DataPort Destination country Date Product category Fe content Unit price (in Rs/ton) Quantity (in tons)

GANGAVARAM CHINA

1 Sep 12 FINES 63.5 6,472 552

3 Sep 12 FINES 58 4,070 12,670

5 Sep 12 FINES 58 4,070 576

Gangavaram Total 13,798

KOLKATA CHINA 26 Sep 12 FINES 63.5/63 5,255 24,000

Kolkata Total 24,000

PARADIP CHINA24 Aug 12 FINES 3,985 400

31 Aug 12 FINES 3,960 53,185

Paradip Total 53,585

VIZAG

CHINA 12 Sep 12 FINES 63.5 4,633 48,972

JAPAN 15 Sep 12FINES 65 7,674 40,308

LUMPS 65 8,337 30,713

Vizag Total 119,992

GRAND TOTAL 211,375


Product category Port

July 2012 August 2012 September 2012 Product and portwise

quantity total (In tons)

Quantity (in tons)

Average unit Price (Rs./ton)

Quantity(in tons)


Quantity(in tons)


Aluminothermic Chromium Chennai 5 704,202 5

Ferro Chrome

Chennai 150 195,118 442 130,222 177 142,771 769

Kolkata 66 255,684 222 202,846 288

Mundra 41 181,891 41

Vizag 77 208,956 77

Ferro ManganeseChennai 2,092 89,037 158 94,678 2,250

Kolkata 1,007 83,236 522 87,980 1,528

Ferro Manganeso Chennai 34 99,493 34

Ferro NickelKolkata 21 983,597 75 1,011,501 472 483,228 568

Vizag 647 477,880 1,845 211,925 999 247,247 3,491

Ferro NiobiumChennai 39 2,428,113 39

Kolkata 44 2,240,688 44

Ferro Phosphorus

Chennai 54 24,664 52 23,778 106

Kolkata 25 24,820 108 25,543 133

Vizag 27 25,896 27

Ferro Silicon

Chennai 1,909 92,178 507 121,633 262 110,878 2,679

Kolkata 1,020 84,200 827 110,301 138 108,890 1,985

Mundra 79 137,190 79 130,637 59 137,394 218

Vizag 600 76,475 150 77,764 750

Ferro Silicon BariumChennai 200 93,016 200

Vizag 24 97,196 24

Ferro Silicon Magnesium Kolkata 48 94,263 48

Ferro Silicon Manganese Chennai 4 137,848 4

Ferro Silicon Zirconium Kolkata 10 257,838 10

Ferro Titanium

Chennai 20 303,751 20 264,344 40

Kolkata 22 444,196 43 465,730 56 446,768 121

Vizag 20 308,915 20

Ferro Vanadium Chennai 16 1,384,483 16

Monthwise Quantity Total (in tons) 7,381 4,942 3,193 15,516

Summarised ferro alloys import data July - September 2012

fERRO ALLOy DATA


Product Category Port

July’12 August’12 September’12 Product and Portwise

Quantity Total (in Tons)

Quantity (in tons)

Average Unit Price (Rs./ton)

Quantity (in tons)


Quantity (in tons)


Ferro Chrome

Kolkata 12,507 70,416 12,001 69,500 9,444 69,752 33,953

Paradip 14,421 63,978 12,059 65,419 2,051 54,687 28,531

Vizag 19,054 64,714 18,125 64,404 13,135 63,087 50,315

Ferro Manganese

Kolkata 7,660 56,087 5,524 55,927 7,755 55,196 20,938

Vizag 1,365 60,512 1,941 56,483 1,511 53,043 4,817

Ferro Molybdenum

Vizag 40 1,010,480 40

Ferro Silicon

Kolkata 112 75,407 47 86,369 24 79,067 183

Vizag 386 73,960 313 69,993 795 65,837 1,494

Ferro Silicon Magnesium

Kolkata 22 108,207 1 115,975 23

Ferro Silicon Manganese

Cochin 754 83,595 686 80,523 704 81,184 2,144

Kolkata 19,004 58,036 22,937 56,005 16,073 53,289 58,014

Vizag 9,052 56,200 7,999 58,039 7,057 60,219 24,108

Ferro Vanadium

Kolkata 2 1,047,850 2

Vizag 10 1,242,340 20 1,079,661 30

Silicon Manganese

Cochin 175 74,830 175

Kolkata 36,117 58,033 32,166 58,046 36,546 55,915 104,829

Mormugao 100 76,383 140 81,535 240

Vizag 2,245 55,576 1,408 53,246 1,705 52,737 5,358

Month-wise Total 122,687 115,389 97,118 335,193

Summarised ferro alloys export data July - September 2012

fERRO ALLOy DATA

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