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| JUNE 2004 | |
| From the CEO's Desk | |
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“By 2020, India is sure to reach a level of 100 MT production annually.” No, this is not government’s official projection, nor it is published by any international consulting company. These are the words of a very senior executive in one of the prestigious steel company in India. Well, the names are not important but the point remains that whether this level of steel production is possible to achieve by 2020 ? To reach the 100 MT mark by 2020, Indian steel industry has to grow at around 10 % on an annual basis. This seems to be difficult if not impossible. Further, down the line industries like infrastructure, white goods, auto etc. have to register similar growth rates year after year. For last few years, ‘China Factor’ has created lot of positive impulses in Indian industry for many reasons. Firstly, our finished steel can find a growing market there. Secondly, we can explore and expand other trade avenues like iron ore, met coke, coking coal etc. The third and most important reason is that China has created a strong benchmark and is perceived as a near perfect model for growth of iron & steel sector. As many may be aware, the things have changed in last few weeks or so. The iron ore export to China has gone down and the restrictions for coking coal / met coke exports from China continue. Many of mega projects in China are being reviewed and their funding has been put on hold. This has naturally affected finished steel exports from India. Will this down trend continue ? What effect this will have on short term and long term prospects of Indian industry ? Should steel companies, instead their dependence on exports, try to develop domestic markets which can give assured steady business ? Is the newly developed Indian model based on mini sponge iron plant sustainable ? These are the issues to be discussed and debated. The ‘Iron & Steel Summit’ being organized at Goa will discuss these key issues facing the industry and can hopefully give some direction to the above thoughts. D.A.Chandekar
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| Headlines | |
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India retains leadership of sponge iron production With a record production of 7.7 million tons, India has once again emerged as the largest producer of sponge iron in the world for the calendar year 2003. Thus, the country registered a significant production growth of 17.5 per cent. The country has thus established a clear lead of 0.8 million tons over Venezuela which is the second largest producer at 6.9 million tons and Maxico at third position with 5.6 million tons production. World production of sponge Iron has risen from 45.10 million tons in 2002 to 49.45 million tons in 2003 (growth 9.64 per cent). The pressure on steel prices partly eased during April, 2004 primarily with regard to flat products where globally also, there has been a decline in price of HR Coils. However, prices of long products have registered a general increase in all markets primarily because of the boom in the construction sector. |
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OMC slows iron ore supply to NINL Orissa Mining Corporation (OMC) has slowed down its iron ore supply to Nilanchal Ispat Nigam Ltd. and created a difference like situation with the latter. The situation does not look to be resolved soon. The uncertainty over signing deals still prevails. The differences between the two may result into closure of the company, if the supply is not restored soon. A source closed to the situation said that OMC was supplying 30,000 ton of ores though the plant requires about 85,000 ton per month in order to put pressure on NINL to come down to their terms. The OMC and NINL have entered into an agreement that the former would supply iron ore to the latter’s steel plant at Dubri in Orissa from the Daitari iron ore mines for five years with a price revision every year. However, even though two months have passed of the current fiscal, the supply agreement is yet to be signed because of dispute over the quantity and prices of iron ore. While NINL is looking for 10 lakh ton of fines besides four lakh ton of CLO (calibrated lumpy ore), OMC is willing to supply six lakh ton of fines and four lakh ton of CLO. With the sinter plant commissioned, the steel plant requires more ore from this year. |
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Ispat targets European, West Asian markets Ispat Industries is turning to Europe and Middle East, which are witnessing northwards movement of demand and prices. While Chinese prices, which were ruling at about $100 less than global prices, may improve July onwards, Ispat is exploring alternative markets for exports. Italy and Spain were witnessing good demand with prices ruling at about $580 per ton. Ispat is also making substantial exports to Dubai and Iran which also posed good demand. It is not exporting much to US because of the 43 per cent anti-dumping duty on steel imports in that country. The company, which is in expansion mode, is enhancing its hot-rolled coils capacity to 3.6 MT from 2.4 mt and has tied all finances for it involving an expenditure of Rs.10 billion. The additional capacity at the company would be available by first quarter of 2005. Ispat has acquired a coke plant in Bosnia and reached long-term contracts with Chinese companies for supply of coke, to meet its raw material requirements. |
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Iisco posts Rs 27 crore net profit The Indian Iron & Steel Co (Iisco) has reported a net profit almost after three decades, partly owing to interest waiver from financial institutions, sources said. The Burnpur-based company has registered a net profit of Rs.270 million for 2003-04 fiscal on a turnover of Rs.10.51 billion. The last time it made a net profit was in 1974-75. The figure was Rs.10.5 million then. Since then the company has been making huge losses. At one point of time it was on the verge of closure since the government could not find a suitable buyer and funds for its revival. |
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Essar Steel Ltd is planning to expand its existing facility in order to increase hot rolled coil production from 2.4 mt to 3.6 mt, at an estimated investment of Rs.6-7 billion for which the company has already initiated talks with financial institutions. The company has already undertaken Rs.1.50 billion expansion plan to raise the capacity of sponge iron production to 3.6 mt from 2.4 mt. Since the capex requirement is met through internal resources, nod from FIs was not required. In fact, the company will start producing the expanded quantity of sponge iron from July. Essar Steel has also applied for taking five iron ore mines in Chhattisgarh and one in Orissa on lease with the combined capacity of 1,000 mt. |
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| Bhilai Steel reports
highest ever net profit
Bhilai Steel Plant, the flagship unit of Steel Authority of India Ltd (Sail), has earned the highest ever net profit of Rs.19.32 bn in 2003-04, a growth of over 163 per cent over the previous fiscal’s Rs.7.35 bn, to become the highest profit-making steel plant in the country, reports said. The plant located in Chhattisgarh was able to increase its turnover by 36 per cent to Rs.88.50 bn and exports by 65 per cent from Rs.5.25 bn to Rs.8.64 bn thanks mainly to 25-30 per cent higher production than the rated capacity, better product-mix and higher sales realisation. Bhilai Steel’s net profit in second quarter of the fiscal grew by 46 per cent over the first quarter, 20 per cent in third quarter over the second and 27 per cent in fourth quarter over the third. The plant’s first quarter net profit in 2003-04 grew by 204 per cent to Rs.2.99 bn, while the second, third and fourth quarter net profits grew by 253 per cent to Rs.4.38 bn, by 283 per cent to Rs.5.26 bn and by 78 per cent to Rs. 6.69 bn over the respective quarters of previous fiscal. ‘We made very close monitoring of production planning, reviewed product-mix with an aim to maximise contribution from such value-added products that were in demand and could fetch good net sales realisations,’ Bhilai Steel managing director RP Singh said. The successful implementation of several big projects in-house also raised confidence levels and boosted the morale of employees to a new high. |
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Apr-Jan ’03-04 exports jumps 31% Riding high on Chinese demand, exports of iron and steel rose by 31.53 per cent to $1,847.80 million in April-January 2003-04 as against $1,404.80 million in the corresponding period of the previous year. Iron and steel bar rods saw a rise of 24.32 per cent to $239.04 million in April -January 2003-04 as against $192.27 million in the same period in 2002-03. Following a similar trend, primary and semi-finished iron and steel exports increased by 32.68 per cent to $1,608.77 million in April-January 2003-04 as against $1,212.53 million in the same period of the previous fiscal. Ferro alloys registered a rise of 12.75 per cent to $49.29 million during the same period from $43.72 million in 2002-03. Even as exports witnessed a growth, imports of iron and steel rose by 52.50 per cent to $1,194.71 million in April-January, 2003-04 from $783.40 million during the same period in 2002-03. Metaliferous ores and metal scrap grew sharply to $1005.27 million in 2003-04 as against $783.40 million in the corresponding period of 2002-03. |
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| Steel policy must
be compatible with WTO: Assocham
The Associated Chambers of Commerce and Industry of India (Assocham) has suggested that the policy directions on steel be taken in a manner that is compatible with the World Trade Organisation. In a note submitted to the government, the chamber said, the national policy should balance the need for making available adequate amounts of steel, which is a basic raw-material for infrastructure development to the end-users, and also address the concerns of profitability and competitive pricing of steel manufacturers. Under the present circumstances where the international prices are rising on the fears of excess demand from some countries and supply inadequacy at home and even regionally, the chamber said the Organisation for Economic Co-operation and Development’s proposal of voluntary capacity-creation-restraints should be resisted at a national level, keeping in mind the domestic economic (infrastructure) requirements and strategic needs. According to Assocham, from the consumer’s viewpoint, price stabilisation is the most critical requirement, especially for the small units. Despite the Government’s directive, the effectively applied prices have not come down. Also, the price fluctuations are creating problems for small producers and end-users, whose budgets and competitive pricing leave them with very little room to absorb the fluctuations. |
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| Kobe Steel strive
to offset raw material costs
Kobe Steel Ltd., Japan’s fourth largest steelmaker, will continue to make efforts to offset the negative effects of rising raw material prices, partly through seeking longer term supply contracts, sources said. Strong steel demand in China has tightened global supplies of raw materials such as iron ore and coal, leaving steel makers with higher procurement costs. The company will negotiate with iron ore and other raw materials suppliers to have purchase contracts cover a period of 10-years or less. Contracts now generally last five years or less. The steelmaker may consider buying a minority stake in a possible raw materials-related joint ventures overseas, to help smooth the supply of raw materials from Australia and other countries. Nothing specific has yet been decided on the idea. As independent efforts are unlikely to be enough to fully control the effects of higher raw materials costs, Kobe Steel will also enter into talks with such customers as automakers to further hike steel product prices later this year. |
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| US imports more steel
Six months after the White House scrapped tariffs on foreign-made steel, imports to the US are again peaking up, raising concerns among domestic producers that want to protect their shaky industry. US companies are heartened by the growing global demand for steel. But, the US industry fears that imported steel again could flood the US market, so steelmakers are pressing the Bush administration to set up a permanent system for monitoring imports. “This is a cyclical business,” Terrence Straub, vice president of Pittsburgh-based US Steel (X), said. The White House imposed steep tariffs on steel imports in March 2002 to ease foreign competition and give the beleaguered U.S. industry breathing room to consolidate and restructure. But in an about-face in December, President George W. Bush eliminated the tariffs midway through their three-year program to avoid a threatened trade war with the 15-nation European Union. At the same time, the White House held in place a monitoring system for imports that is set to expire in March 2005. Domestic producers are lobbying to make the system permanent, as well as expand its coverage beyond the estimated dozen steel products now covered. Surprisingly, forty-one steel companies in the US have declared bankruptcy since 1997. |
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Cold-finish bar prices go up in July Some cold-finished bar products’ prices are set for move up in July mainly due to the basics of strong demand and limited supply. Nucor Corp.’s Darlington, S.C., mini-mill would raise prices on 1-inch round, grade 12L14 bars by $3.50 per hundredweight, effective July 5. Base prices for that product currently are around $42 per cwt, and slightly higher in some cases. The product also is carrying a raw materials surcharge of $4.60 per cwt, taking current transaction prices to about $46.60. Similar action by Ispat Inland Bar Co. and Ispat North America, which would increase prices on all bloom cast products-including all leaded, bismuth and tellurium-treated products-by $50 a ton ($2.50 per cwt.) effective July 1. At the same time, Ispat Inland incorporated a previously announced $3-per-cwt scrap surcharge into the base price. Ispat Inland Bar Products and Ispat Sidbec Inc., Contrecoeur, Quebec, also plan to increase the price of billet cast 1215 bars by $30 a ton, effective July 1. The most recent moves by Ispat North America are reflective of the rapidly rising prices in the bar markets. On May 10, Ispat Inland Bar Products and Ispat Sidbec announced that base prices of all special bar quality CMS (billet cast) carbon and alloy products would be increased by $1.50 per cwt effective June 6. |
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| Chinese slump hits
rebar prices
According to traders and industry players, the knock-on effects of reduced Chinese purchasing and falling billet prices in Turkey have sharply cut international rebar prices in the past couple of weeks. Turkish rebar imports have been coming into Italy at approximately €410 per ton cif, down by as much as €20-30 in the past two weeks. Italian rebar shipments in the past couple of weeks to Spain have also fallen back to approximately €380 fob. It is believed that Spanish rebar producers will seek to lower prices of rebar for new deliveries to the UK by approximately 13 per cent to £275-280 per ton, from £315 over the past month. Lower priced rebar is also coming into the UK from other destinations like Russia and Turkey is around £300 per ton delivered, down 10-12 per cent in the past two weeks. |
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Zaporizhstal takes breath with normal coke supply Zaporizhstal, the Ukrainian steelmaker, has seen production stabilise after several months of disruption caused by shortages of coke. The company spokesman said that in recent days coke supplies to the mill have been stabilised after the government moved to regulate the country’s raw material supply. “When the government made a threat of introducing export duties on coke and the licensing of all coke exports late last month, domestic coke producers began to supply a larger part of their output to the domestic market, exporting less,” he said. The Ukrainian government has been trying to persuade domestic coke, iron ore and steel scrap suppliers since early March to increase deliveries to Ukrainian mills and not to raise prices. Zaporizhstal and Ilyich Iron and Steel Works were among the mills hit most severely by the coke shortages. At Zaporizhstal, the problem became especially acute in late May when the mill was forced to temporarily stop production at some of its blast furnaces several times. Currently, Zaporizhstal’s main coke supplier, Zaporozhkoks, is sending coke to the steelmaker in previously agreed quantities of 5,000 tpd, which is sufficient for the steelmaker’s normal operation. |
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| ELBE Stahlwerke FERALPI
GmbH commissions section mill
The bar and wire rod mill at ELBE-Stahlwerke FERALPI GmbH in Riesa, modernized by SMS Meer GmbH, Mönchengladbach (both Germany), has successfully gone back into production after a plant standstill of only four weeks. An output of 1600 tonnes per day was achieved even in the first week of production after the plant standstill. The primary aims of the modernization of the mill that was originally erected in 1995 were greater flexibility and an increase in the rolling speed to max. 105 m/s. The SMS Meer scope of supply essentially comprised the delivery of two cantilever roll stands, a four-stand wire rod block and a six-stand wire rod block, as well as a water cooling section, pinch-roll units and loop laying head upline of the existing loop cooling conveyor, training and supervision of the erection and commissioning of the mill. The mill is to produce rebar up to 32 mm and wire rod sizes upward of 5.5 mm. SMS Meer GmbH forms part of the Tube, Long Product and Forging Technology Business Area of the SMS group. |
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| French plan wants
steel to cut emissions by 2.7%
French steel producers must cut their carbon dioxide emissions by 2.7 per cent to an annual 28.7 million tonnes during the first phase of the European Union’s emissions trading scheme running from January 2005 to end-2007, studies said. Arcelor is co-operating with France’s other steel industry participants to evaluate the installation-specific national allocation plan (NAP), and formulate how best to proceed, said a group spokesman in Luxembourg. The largest allocation was granted to the group’s Sollac Atlantique plant, which will receive just short of 11.4 million tpy of carbon dioxide allowances, down 2.7 percent on its recent average carbon dioxide generation of 11.71 million tpy. Sollac’s Fos-sur-Mer plant faces an 8.89 million tpy allocation, compared with average carbon dioxide generation of 9.13 million tonnes, while for Florange, the company is to receive 4.99 million tonnes, compared with 5.12 million recently emitted. The French steel industry has voluntarily cut its carbon dioxide emissions by 7 percent between 1990 and 2000, despite an increase in crude steel production during the period from 17.75 million to 19 million tonnes, Arcelor’s spokesman said, quoting French steel federation data. This translates as a 13 percent carbon dioxide reduction per tonne of steel produced during the ten years. |
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| NSC starts operation
ahead of schedule
Ispat Industries’s latest international acquisition — the National Steel Corporation (NSC) of Philippines, which is a 3 million ton per annum (mtpa) rolling mill has begun operations before the time frame stipulated by the Philippine National Bank (PNB), the main creditor to the company. The NSC, after take-over by the Mittals, has been rechristened Global Steel Works International. The plant was transferred to the Pramod Mittal-promoted Global Infrastructure holdings (GIHL) and had to be operationalised by early June. Industry sources said that GSWI began production in mid-May by importing slabs from nearby countries like China and Indonesia. The rolling mill currently does not produce its own steel. The plant has a total rolling capacity of about 3 mtpa, which comprises a 1.2 mtpa hot strip mill, one mtpa cold rolling mill, a 7 lakh tonne cold rolling mill and a 1.5 lakh tonne pickling line. The company would initially roll slabs and over the next few years, produce its own steel to match its rolling capacity. The firm was bought from the consortium of creditors led by PNB for 13.25 bn Pesos or around $250m. As per the deal, the full amount has to be paid over a period of eight years. The main task ahead for Ispat is to shell out 1bn pesos or around $18m by July 31. |
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Nakornthai Strip Mill Public Co. to receive hot-dip galvanizing and push-pull pickling line Nakornthai Strip Mill Public Co. Ltd. (NSM), Thailand, has awarded to SMS Demag AG, Germany, an order for the construction of a hot-dip galvanizing line and a push-pull pickling line, with the pertaining acid treatment plant. The facility will produce strips of maximum width 1600 mm at a process speed of up to 200 m/min. This will enable NSM to expand its range of services on the flat-rolled products market. The push-pull pickling line includes equipment for joining the strips and for stretch-leveling as well as a process section with SMS Demag turbulence pickling line technology. The process speed can be a maximum of 180 m min and the acid throughput up to 4300 l/h. The reactor is designed for optimum flow and thermodynamic conditions,with great importance being placed on minimized environmental impact due to waste-water and exhaust-air flows. Commissioning will take place in mid-2005. SMS Demag AG forms part of the Metallurgical Plant and Rolling Mill Technology Business Area of the SMS group. |
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