Indian steel prices are set to stay firm in 2010, after sliding nearly a fifth year-on-year, sparked by a global demand recovery. However, the 2008 peak looks distant as imports gain momentum.
According to a report, key raw materials iron ore and coking coal have also increased 65-70 percent from their 2009 lows, promoting prices hikes globally while local players have said the will hike rates by 5-7 percent in January as demand grows.
Currently, Indian steel is quoting at Rs 35,290 a ton. Consumption in the world's second fastest growing major economy is set to rise over 12 percent compared with global usage of 9.2 percent.
"There are no concerns on price front," said a report, citing J. Mehra, Director, Essar Steel Ltd. "Since investments are being made in steel-intensive sectors, it is realistic to expect that demand growth can touch 12 percent." India this year extended fiscal stimulus packages to various sectors including infrastructure, real estate, auto and made credit easier to farmers to wriggle out of an economic slowdown.
While steel makers posted losses or poor profit growth in the first half of 2009 on inflating input costs, peaking interest rates and slumping demand, they turned to profit in the later half as government initiatives ensured a demand revival.
"We can see an upward bias in 2010. Domestic demand is robust. Raw material prices are going up so prices internationally are also rising," said MVS Seshagiri Rao, joint managing director, JSW Steel.
According to the report, however, analysts do not expect prices to touch the 2008 peak as input costs then were 'abnormally' higher pushing rates up and with imports seen as a major threat. Imports in April-Nov have risen about 9 percent to nearly 5 million tons, government data showed.
"Most of this import is from CIS countries...threat is from there but demand for steel is very strong in India. As of now, producers are not carrying any stocks," a senior official at Joint Plant Committee, a government panel, said. Besides, producers relying on exports will continue to suffer as they will be exposed to price competition, intensifying trade barriers and currency fluctuations, a Fitch Rating report said.
Local steelmakers are also worried buyers may turn to China, the world's top consumer and producer of the metal, which produces cheap steel and is aggressively raising output. Chinese steel output has been growing at a rapid clip and is seen around 600 million tons by the end of this year, up from 500 million tons a year ago.
The latest data from the World Steel Association show that global crude steel output rose nearly a quarter year-on-year to 107.5 million tons in November. China's output surged 37.4 percent to 47.3 million tons. "Indian prices are still at a premium to China but with higher input costs even Chinese will have to raise their rates, an analyst at Pinc Research said. “Non-integrated players may suffer if (raw material) prices go beyond control."
Non-integrated players such as Ispat Industries, Uttam Galva, JSW Steel, Bhushan Steel among others purchase iron ore and coking coal, adding to cost pressures.

India's steel consumption rose to 8 percent during April-December 2009, over the year ago period, buoyed by strong demand from automobile, consumer durable and construction sectors, said the provisional data of steel ministry. It is estimated that growth gathered pace in the three months to end-December compared with the first half of the current financial year ending September, partly due to low base effect of the previous year.
Indian steelmakers cut production by up to 40 percent in the October-December 2008 as demand dropped significantly due to economic slowdown. This led to a 0.5 percent decline in steel consumption for the full year ending March 2009.
But the economic stimulus packages announced by the government early last year have had a positive impact on demand. Higher consumption is an indication of a sharp turnaround in industrial activity since then. Steel consumption as well as production is likely to be higher for the full year ending March 2010 due to the low base effect, said a senior steel ministry official requesting anonymity.
The nine-month period of the current fiscal saw finished steel consumption rise to 41 million tons from 38 million tons in the year-ago period. Steel production, on the other hand, grew 3.5 percent to 44 million tons during April-December 2009, from 42.5 million tons a year ago, as most of the steel companies such as JSW and Essar had resumed normal production.
“The growth was expected as industrial activity has picked up in almost all the sectors. The automobile and infrastructure sectors, however, remain major drivers of steel demand,” Ernst & Young partner Navin Vohra said. He said increase in iron ore prices, a key input in steel making, is pushing steel prices upwards in the domestic market and so inflation is going to be a challenge in the future.
Recently, top steel makers including Sail, Tata Steel, Essar and JSW increased prices of steel products up to Rs 2,000 a ton for the current month citing high demand.
Steel products in the domestic market are currently selling for Rs 32,000-34,000/ton, marginally higher than the landed price of imported steel. The April-December, 2009, period also saw imports move up 16 per cent to 5.2 million ton.
Steel prices have started moving up internationally as well hinting at moderate revival in global demand. “Although demand for metal has picked up in the US and some parts of Europe, some steel companies in these countries still have huge spare capacities,” said a Delhi-based steel industry analyst. He said work on various projects in railways, aviation and telecom sector is on, which would give a further boost to steel consumption in India.

Adhunik Metaliks Ltd is planning to buy a 30 percent stake in a coking coal mine in Australia to meet supply and pricing of the raw material.
The Kolkata-based company will spend up to $ 80 million on an operating mine, said a report citing Managing Director Manoj Kumar Agarwal. The company needs about 300,000 metric tons of coking coal per year.
“We hope to source all our coking coal requirements from the Australian mine,” Agarwal said without giving a timeframe or naming targets. “There are good quality coking coal mines available in Australia.”
Contract prices for coking coal may surge by about 36 percent this year to $175 a metric ton, as global demand rebounds, Morgan Stanley said. Indian steelmakers, whose sales revived faster than their international peers, are looking for additional raw material supplies.
Indian steel consumption in the nine months to December grew 7.7 percent, boosted by demand from power projects, the construction industry and makers of car.

The private sector steel major Tata Steel will begin work on its Rs 18,700-crore, six-mtpa steel plant at Kalinga Nagar, Orissa, in two months.
The company still needs to convince another 300 families to shift to the rehabilitation colonies before commencing work on the project. Once the required land is available, the company would ensure that production starts within next 36 months, a company executive said, adding about 800 families had so far been rehabilitated. Tata Steel had already procured equipments worth Rs 6,000 crore for the project. These equipments are stored at the company's establishments at Brahmanipal and Jamshedpur now.
The company, which signed the MoU with the state in November 2004 for this plant, had so far invested Rs 1,094 crore out of its planned investment of Rs 18,700 crore, besides giving orders for machineries. It was to start its first phase production in 2008 but anti-displacement agitation and subsequent police firing delayed the project. The project is already behind the schedule by 18 months now. Meanwhile, the world's No. 8 producer of the alloy, sees a slow recovery at its European unit Corus as the western economies limp out of a recession. Meanwhile, its European subsidiary Corus, Europe's second biggest steelmaker, announced in December plans to close sites in northeast England and a further 1,700 job losses, having already cut 4,500 British jobs earlier in 2009. The pace of recovery in Western Europe and the U.S. is much slower than in China and India.
Tata Steel said sales from its Indian operations, which account for a quarter of the group's global capacity, rose 73 percent in December, and overall sales for the December quarter rose 49 percent to 1.60 million tons. By comparison, Corus has struggled as the global downturn has hit demand from key sectors such as construction and automakers and is operating at about 80 percent of its capacity in Europe.

The world's biggest steelmaker ArcelorMittal is likely to sign an initial pact with Karnataka Government to set up a six-million tons steel plant, said a report quoting Sudhir Maheshwari, a member of the group's management board.
Talking about the project, Murugesh Nirani, Minister of Large and Medium industries Karnataka State, said the steel giant is also likely to set up a 750 megawatt captive plant. The proposed plant will generate 10,000 employments. The project will spread over 4,000 acres with an investment of $6.5 billion. However, the ArcelorMittal Chairman L N Mittal had said that although he is unhappy about delays to the company's two continuing steel plant projects in India, it is not abandoning them.
"We hoped we could have made more progress than what we have achieved so far," Mittal said. However, ArcelorMittal, the world's largest steel manufacturer by output, is very interested in India.
The company plans to invest a total of $20 billion-$25 billion to build a steel plant each in the eastern states of Jharkhand and Orissa. The plants, expected to have an annual capacity of 12 million metric tons each, are due to start operations in 2014. However, ArcelorMittal has been struggling to secure the land it needs to set up the facilities because of fierce opposition from local people and slow-moving state governments.
L N Mittal said the company will continue to work on the projects and that it isn't planning to shift the sites or cut production capacity plans. The company's plans to add capacity in India isn't just about supplying steel to meet present demand, but also to cater to targets over the next 10 years, he said. "We are discussing [the possibility of] setting up steel plants with various [Indian] states," said Mittal. He said also that India will continue to have strong economic growth, which means it will need more steel.

Indian steel producer JSW Steel Ltd plans to use 9 percent more iron ore in the next financial year as demand increases from automobile and construction sectors.
Sheshagiri Rao, Chief Financial Officer, JSE Group said that ore requirement is expected to jump to 12 million metric tons in the year ending March 31,2011, from about 11 million tons this fiscal year. While the company's coking coal imports are expected to jump more than 11 percent to 5 million tons in the period, he added.
Demand for steel in India is recovering more rapidly than in overseas markets, thanks to sales of vehicles and government spending in infrastructure. The country's steel consumption in the eight months to November rose 8.1 percent from a year earlier, junior steel minister A. Sai Prathap had said.
India's third largest steel producer plans to increase production capacity by more than a third to 10 million tons at its Vijaynagar plant by 2011, said Sajjan Jindal, Director JSW Steel Ltd, in November. Under the company's expansion plans, JSW will build a mill in West Bengal with initial capacity of 3 million tons, he added. “After the new capacity at the Vijayanagar plant the iron ore and coking coal requirements will further go up,” Rao said. However, he did not give any details.
Indian steel majors, Tata steel ltd, Steel Authority of India (SAIL), Essar Steel ltd and JSW Steel, hiked steel product prices in December months in the wake of increased input cost and sales. Jayant Acharya, Director, Sale and Marketing, JSW, said India's steel demand should continue to rise at more than 9 percent in 2010 and prices should also gain at least in the January to May period.

After primary steel makers, Tata Steel, Steel Authority of India (SAIL), Essar Steel, JSW Steel, increased prices in December, India's secondary steel producers have also hiked steel product prices.
Higher input cost and demand from auto, consumer durables and construction sectors led the primary steel producers to increase prices. While for India's secondary steel producers, who buy hot- rolled coil from primary steel producer, did not any option but to hike prices. The secondary steel makers have hiked steel prices by about 10 percent. Uttam Galva hiked prices by Rs 3,000 a ton while Delhi-based Bhushan Steel rose prices by Rs 2,000 a ton.
Meanwhile, the bottomline of steel makers may not get impacted but it is certainly going to hit our pockets, as the products made by the secondary steel mills are used by white goods company, who surely will pass on the price hike to consumers.

Sensing the robust growth in India's economic and steel sector in near future, Japanese steelmakers are set to gain a foothold in India's steel manufacturing sector. JFE Steel, the world's sixth steel maker, and Sumitomo Metal Industries are negotiating with JSW Group and Bhushan Steel, respectively, for picking up equity stake of anywhere between 26 percent to 40 percent in new plants in India.
This move is distinctly different from ArcelorMittal's strategy or that of POSCO which had tried to set up projects on their own, but have made little headway, so far. Interestingly, both Japanese companies have chosen greenfield projects that are being set up JSW and Bhushan Steel. JSW Group, which had set up a steel plan at Vijaynagar in Karnataka in 1995, is now expanding capacity to 10 million tons (mt) by March 2011.When completed, it will be one of the largest single site plants in the country, apart from the Tata Steel plant at Jamshedpur. Similarly, Bhushan Steel currently has a capacity to produce one million ton a year and is set to start operations at a new plant in Orissa in January 2010. It will produce 2.5 million tons of steel in a year.
“The proposed JFE-JSW deal could prove to be a precursor for more such deals in the domestic steel industry. We are already seeing other companies take a somewhat similar approach. Look at Sumitomo and Bhushan Steel. Since these are some of the leading global steel players, it definitely adds lustre to the project profile and makes it more bankable,” Biswadip Gupta, joint MD & CEO of JSW Bengal Steel, said.
While JFE-JSW deal includes a possible equity tie-up for JSW Steel's upcoming project at Salboni in West Bengal, Sumitomo Industries, too, is keen to participate in Bhushan Steel's upcoming $4.3-billion project near Asansol in Bengal.
“The possibility of Sumitomo entering into a joint venture with Bhushan Steel for this project is being explored. Sumitomo may buy a 26-40 percent in the venture,” Bhushan's managing director Neeraj Singhal said. The new plant in Bengal is likely to have an initial capacity of 3 million ton a year when it starts production by 2014/15.
The reason for the interest in India is the country's growing domestic steel market, which is estimated to go up anywhere between 7-10 percent. “Steel demand is growing so rapidly in India. It is a very important market for Sumitomo to explore,” Hiroshi Tomono, president of Sumitomo Metal had said, when the latter had signed a production and sales pact with Bhushan Steel on December 16.
In both these cases, the Indian and Japanese companies have known each other and had business links for some time. “We have been in talks with JFE since 2003. JFE has helped our group in upgrading technology,” Sajjan Jindal, vice-chairman & MD of JSW Steel, had said at an event to mark the JFE-JSW agreement.
Similarly, Bhushan Steel's CFO Nittin Johri said, “We have an existing tie-up with Sumitomo for cold-rolled coils. We also have a marketing arrangement with them for OEM supply of hot-rolled (HR) coils from our soon-to-be-commissioned plant at Orissa. Sumitomo will sell these HR coils to its global customers under its own brand.”

Indian steel major Tata Steel and Steel Authority of India (SAIL) have hiked prices by up to Rs 2,000 per ton with immediate effect on the back in rising input cost and demand from auto and construction sector. SAIL, the country's largest state-owned steel company, said that it has decided to withdrawn discounts and rebates with immediate effect.
Tata Steel too has raised prices on long products by up to Rs 2,000 per ton. Incidentally, the development comes days after the two companies indicated they could look at revising prices upwards in January 2010.
“We have decided to withdraw discounts of Rs 700 per ton on flat steel products and Rs 1,500 on long steel items,” a SAIL spokesperson said. Tata Steel also jacked up prices of its long steel products by about Rs 2,000 a ton. “The hike is from immediate effect. We have not revised our flat steel prices,” a spokesperson of the company said.
Long steel products are mainly used by infrastructure and construction sectors while flat ones are used by consumer durables industry.

JSW Steel, India third largest steel producer, said it production rose 88 percent to 14.69 lakh tons in the third quarter of the current fiscal. The company's crude steel production during the nine-month period ended December 31, 2009 was 43.9 lakh tons, up 59 percent over the corresponding period last year. During the December quarter last fiscal, the company's crude steel production was at 7.82 lakh tons, JSW Steel said in a statement to the Bombay Stock Exchange.
Production of flat-rolled items, used by the auto and consumer durables industry, surged 51 per cent to 9.41 lakh tons in October-December quarter compared with the same period last fiscal.
Production of long-rolled steel products, primarily consumed by the construction sector, also surged by 199 percent to 2.37 lakh tons in the latest quarter compared with the same period a year ago. JSW Steel, which belongs to the JSW Group, is one the lowest cost steel producers in the world.

Indian steel ministry is planning to set up a special arm under Steel Authority of Indian Limited (SAIL) to spearhead overseas acquisitions, particularly in the mining sector. Likely to named SAIL Videsh, the move comes in the wake of the existing special purpose vehicle, International Coal Ventures (ICVL, which is a joint venture between SAIL, NMDC, RINL, NTPC and Coal India, failing to make much headway in procuring coal assets abroad during the past two years.
The proposal to create SAIL Videsh, as a subsidiary of the steel major, is being examined in the steel ministry, sources in the know said, adding a final decision is expected soon.
As per report "The ministry is examining either to wind up ICVL or revamp it and make it a 100 percent subsidiary of SAIL and ask NMDC, NTPC, RINL, CIL to leave the SPV.”
The report cited Atul Chaturvedi steel secretary as saying that "The ministry is examining options to restructure ICVL or to give a new shape to it because in the present form it has not achieved desired progress. So we are examining how we can resolve it's structural and decision making deficiencies. The bottomline is that we have to acquire raw materials resources abroad. There is and should be no compromise in achieving that objective.”
ICVL was formed to acquire thermal and coking coal properties abroad in 2008 with a corpus of Rs. 10,000 crore, with SAIL being the major contributor and steel ministry being its administrative ministry.

South Korean steel major POSCO forecast global steel demand would rise about 10 percent in 2010, recovering to 2008 levels.
The world's No.4 steelmaker also expected iron ore and coking coal prices to recover this year, Park Myung-kil, a senior vice president at POSCO, said in a document released for a parliamentary economic forum.

Indian steel major Jindal power and Steel Limited and US coking coal major Massey Energy Company plan to work together on bids to develop and operate underground coal mining projects.
According to a report, both companies focus will be on potential projects in India, Mangolia, Australia and the US.
Under the agreement announced, JSPL will identify projects in India and other countries and obtain necessary licenses, permits and approvals from governments, while Massey Energy will provide technical mining expertise and will be responsible for the development of detailed plans. Massey also will provide the technical manpower and project management.
Don Blankenship chairman & CEO of Massey Energy said “We believe there is great potential for synergies between Massey and JSPL.”

Coal India Ltd (CIL) has reported a 8.6 percent growth in sales during the April-December period compared to the year-ago period, recording 295.52 million tons raw coal production.
The production by the country's largest coal producer in the period saw an increase of 19.77 million tons during the period over the same period last year, said The Coal Ministry.
"While production (of CIL) through opencast mines was 263.81 million tons, the underground production was 31.71 million tons. Gross sales during the period was Rs 37,546.67 crore against Rs 34,580.87 crore during the same period last year," a ministry statement said.
Further, the state-owned Neyveli Lignite Corporation (NLC) also posted a production growth of 15.25 percent during the first three quarters, the ministry statement said.
"NLC exceeded its targets in all activities namely lignite production, over burden removal and power generation during April-December. The growth rate was 15.25 per cent (lignite), 11.7 per cent (overburden removal) and 15.25 percent (power generation) respectively," the statement said.
Earlier, reviewing the performance of CIL and NLC, Coal Minister Sriprakash Jaiswal directed the ministry officials and heads of these companies to achieve 100 percent production targets to support the economy.

Jharkhand Deputy Chief Minister Raghubar Das said the government was concerned about the delay in the Arcelor Mittal steel project and would help in setting up its plant in the state.
"We are concerned about the steel projects, including that of Arcelor Mittal. Government will find out ways to help Mittal steel to set up their plant in the state (in Khuti and Gumla districts)," Das said. "The present government is concerned about industrialisation and at the same we are also concerned about the villagers whose land would be acquired for mega projects."
"Jharkhand was under president's rule for nearly one year. There were successive unstable governments. After Cabinet expansion we will work out ways of setting up steel projects." LN Mittal, chief of Arcelor Mittal, had expressed concern over the delay in the projects. The company signed an MoU with Karnataka government to set up another steel plant which is construed as move to shift the project from Jharkhand. The steel major had signed an MoU with the Jharkhand government in 2005 to set up a 12 million ton greenfield steel plant with an investment of Rs 40,000 crore. Mittal steel authorities say that the Jharkhand project's estimated cost is swelling due to delay.
Arcelor Mittal has already been allocated coal blocks and iron ore mines. Now it needs land to set up the plant. It plans to set up the plant on an 11,000-acre plot in the bordering areas of Khuti and Gumla districts. The villagers are protesting the land acquisition. Due to land acquisition problem, Mittal and other major steel players are finding it difficult to set up plants.

India has lifted a curb on imports of hot rolled coils - a vital steel input for sectors like auto and consumer goods, a government statement said. Import policy will now be free on hot rolled coils, said the Directorate General of Foreign Trade in an order. With this policy, traders can import steel flat products in small quantity. Before now, only actual users were allowed to import hot rolled coils, while the new policy will allow even traders to import hot rolled coils.

The country's iron ore exports surged by 24.5 percent to 10.65 million tons in November 2009 mainly due to increased demand from the Chinese steel mills.
The exports of steelmaking raw material in November 2008 stood at 8.5 million tons, according to the provisional data from the Federation of Indian Mineral Industries (FIMI). The 24.5 percent increase in iron ore exports in November is mainly due to an increased purchase from the Chinese mills. The lower base of November 2008 also led to the percentage increase in exports. For the April-November period, exports of the raw material used in making steel increased by 23.23 percent to 64.8 million tons, as per the provisional data. The domestic industry is targeting to export about 110 million tons of iron ore in the current financial year. The country exported about 106 million tons of iron ore in the year-ago period, of which a major portion was shipped to China.
Analysts demanded iron ore contract price to increase 40 percent to 50 percent in 2010 after a surge in the cost of the steelmaking ingredient for immediate delivery on the so-called spot market, Nomura Holdings Inc. said. Contracts are unlikely to be settled at very large discounts to the spot price, otherwise ore would simply be sold into the spot market,. The bank said trade in the spot market has grown to 400 million tons a year from 100 million tons in 2003.

ArcelorMittal, the world's largest steelmaker, sought approval to search for manganese and iron ore in the east Indian state of Jharkhand. The company on December 30 sought permission to explore 1,080 hectares of land spread across two locations in the west Singhbhum district of Jharkand. ArcelorMittal announced in 2005 a plan to set up a $10 billion 12 MTPA steel mill in Jharkhand. The Luxembourg-based company said in 2006 it would build a similar-sized unit in Orissa. The projects have faced delays because of difficulties acquiring land and iron-ore mines. Meanwhile, the world's largest steel maker ArcelorMittal believes that India is not equipped to handle big-ticket investments, although the country needs over half a trillion dollars to shore up its infrastructure. Billionaire Lakshmi N Mittal, whose company's projects worth USD 22 billion have been held up for over four years for want of regulatory clearances and land, said this was so because no one quite saw the rapid growth coming. These delays are despite India making public that it needs over USD 500 billion in investments in infrastructure sector and that too steel being a key construction material.