February 23, 2012: Electrosteel Castings (ECL) has received forest stage-I clearance for its iron ore mines located at Kodolibad, West Singhbhum, Jharkhand, from the Ministry of Forests and Environment (MoEF). ECL expects to receive stage-II clearance in the coming two to three months and then sign mining lease with the state government. After signing the mining lease, ECL can develop the mine and resume production. The mine has reserves of 91 million tons with 64% Fe content. ECL expects to commence production from this mine in FY2013. With upcoming production from coking coal and iron ore, ECL will turn into a fully integrated steelmaker. Although there is lack of clarity on the timelines for commencement of meaningful production from its coking coal and iron ore mines, ECL's margins are expected to be significantly higher than its peers once it reaches optimum production capacity at its mines, according to analyst reports. Moreover, ECL's associate, Electrosteel Steels (34.8% stake) with 2.2 million tons of steel capacity is expected to benefit the most, as ECL will supply coking coal and iron ore from its mines to Electrosteel Steels at subsidized rates (cost + 20%). Source: ISMW

February 23, 2012: The Bhilai Steel Plant (BSP) of Steel Authority of India Ltd (SAIL) on February 22 said its plate mill has rolled out a fresh order of 54 tons of Ultra High Strength Special Steel Plates of 9.2 mm thickness that will be used for the main body of India's indigenous space launch vehicles such as Polar Satellite Launch Vehicle (PSLV) and Geosynchronous Satellite Launch Vehicle (GSLV) that are manufactured by India Space Research Organisation (ISRO). The plates were rolled in Plate Mill from slabs supplied by Mishra Dhatu Nigam Ltd (MIDHANI), the company said in a release. Steel is widely used in construction of space shuttles along with metals like aluminium, titanium and other high grade materials. Such special grades of steel are made out of special alloys and are capable of withstanding metal fatigue which occurs due to tremendous changes in heart and atmospheric pressure on the spacecraft when it returns to orbit. Special care was taken in Bhilai's Plate Mill for proper heating and soaking this grade as the steel requires eight hours of retention time inside the furnace. BSP had earlier rolled this special grade of plates for space application in 2009. The officials witnessing the production in plate mill have expressed confidence in Bhilai's capabilities for rolling out more such grade of plates for space applications in future. Bhilai's plate mill that has been rolling the required grades for use in defence and space sector, has become a kind of one-stop shop for wide and thicker customised and special grade plates for meeting a variety of end usages in the power and energy sector, super-construction projects, ship building and manufacture of boiler and pressure vessels, heavy engineering machinery and equipment, pipelines for water, crude and gas transportation etc. The product range of Bhilai's plate mill is wide and includes plates of 8 to 120 mm thickness, 1500 to 3200mm wide and in lengths up to 15 meters. Close to 50% of the total production from the plate mill is of the special steel variety. The mill has advanced facilities for ensuring high product quality i.e., Hydraulic Automatic Gauge Control, Plan View Rolling, On-line Ultra-Sonic Testing Machine, Normalizing Furnaces. Among such new and advanced facilities recently added are Heavy Duty Shear and an Edge marking with bar coding and decoding facility that is under commissioning. Bhilai has collaborated with the Indian Navy to develop and supply DMR-249A (ABA) grade steel plates meant for use in constructing hull of the aircraft carrier warships of frigates. The collaboration with the Navy is expanding and BSP is also making steel (DMR 249B) for manufacture of submarines. These grades are specially toughened, warship-grade steel from Bhilai for use in constructing hull of the aircraft carrier warships or frigates and submarines. Several projects of national importance are sourcing their requirement of special steel plates with the right properties and strength from Bhilai's Plate Mill. To meet the requirement of M/s BHEL, Bhilai produced for the first time 120 mm thick normalized ASTM A36 grade plates with ultrasonic testing for supply to M/s BHEL, Ranipet for construction of auxiliary structure of high capacity boilers. Another grade developed for M/s BHEL, Haridwar is the thicker gauge Boiler Quality plates in IS 2002 Gr.II in 120mm thickness for use in the Turbine pedestal of 500MW Thermal Power Plant. Suzlon's windmills are being made with the required grade of plates from Bhilai. Indian Railways that gets all its rails in lengths of 13 metre, 26 metre and 130 and 260 metre from Bhilai also sources plates in SAILMA 300 HI grade of thickness up to 80 mm for its Diesel Locomotive Workshop from Bhilai. Big industrial houses like Thermax sources boiler quality plates for providing sustainable energy solutions. The Bangalore Water Supply Board has sourced huge quantities of plates from Bhilai for its 69 km pipeline to get Cauvery's water to the city. It is worth mentioning that most of the new grades of special steel successfully developed and rolled by Bhilai in the last several years as part of its 'one new grade every month' product development programme have been plates. Out of the 12 new grades of special steel successfully developed and rolled by Bhilai steel plant in 2010-11, as many as nine were new grades of special steel plates rolled in the Plant's Plate Mill. Among the new grades developed recently is one special grade for M/s BEML that is manufacturing coaches for the Delhi Metro. M/s IOTL is sourcing pressure vessel plates with superior impact toughness for horton spheres of ethylene storage vessel for a petrochemical project in Assam. In the current fiscal year, Bhilai has successfully developed and rolled out several new special grades of steel. These include corrosion-resistant grade of plate to be used in the manufacture of bogey frames for rail coaches, a new ASTM grade of plate for use in the manufacture of pressure vessel for a petrochemical project. M/s Siemens Transport Systems too is getting special steel plates with low temperature impact toughness to be used for manufacturing railway passenger bogies from Bhilai. Several other special steel grades of plates are in advanced stages of development. These include a dual-grade Boiler Quality plate for M/s GR Engineering for intermediate and low temperature application by boiler and pressure vessel manufacturers. While Bhilai has 22.2% share in the market for plates in the country, the plant also exports boiler quality, ship building grades, thicker plates as well as mild steel grades and low carbon plates for earthmoving equipment to several European countries. The plant has supplied dual certification plates for export to Thyssen, Germany for use in different shipyards. An export grade plate has been developed and supplied for M/s Titagarh Wagon Ltd for manufacturing of high-speed light oil tank wagons for the French National Railways. Source: ISMW

February 23, 2012: The commissioning of the new plate mill of Rourkela Steel Plant (RSP) of Steel Authority of India Ltd (SAIL) is likely to be delayed "slightly" due to delay in civil construction work, a company source told ISMW. "The new plate mill with expanded capacity to process 4 meter wide plates has been slightly delayed because of civil construction work. The construction work got delayed as foundation work took more than expected time because of rocks below the surface. The mill has currently a capacity to process plates of up to 2 metres," the source said. The wider plates are in good demand in the market, but transportation is a challenge. It is used in ship building and infrastructure and the main buyers are defense industry, structural and railways (for wagon making) among others. Besides the plate mill, RSP is working on making some more grades of special steel, the source said. "We are already making Silicon Steel at SMS1, but with the installion of RHOV at SMS2 not only our capacity will increase, but we will be able to make clean and good steel such as extra deep drawing (EDD) steel," the source, said, adding, "EDD has been delayed a bit and will now be commissioned in March 2013." Source: ISMW

February 23, 2012: After remaining subdued during the last quarter (October-December) of 2011 on account of low demand from Indian steel makers, metallurgical coke prices are likely to firm up slightly from next month, an official of a merchant coke maker said on February 22. Coke prices were quoted at around Rs 20,000/ton in the last quarter of 2011 and some deals were struck even at about Rs 18,000/ton as demand from steel makers had come down while some coke makers were facing liquidity crunch, the official said. "Some steel makers were forced to suspend their production due to non-availability of iron ore, while others were operating at much below their rated capacity. Thus there was very limited demand for coke leading to build-up of inventories as a result of which prices turned weak during the quarter," he said. "Things are looking up from beginning of February 2012 as iron ore supplies have eased a bit and that has led to increased steel production. Because of the overall better situation in steel industry, there has been slightly better demand for coke and inventories have fallen," he added. The official feels that there is no further scope for fall in coke price even as coking coal prices are down sharply to contracted level of $235 a ton fob for January-March, while spot price is further down to around $210 a ton. "The current price is anywhere between Rs 20,000 to Rs 20,500/ton, but things are looking better for coke makers and it should firm up in the coming days," the official said. Source: ISMW

February 23, 2012: World production of crude steel recorded a slight upturn in January over December, reaching 117 million tons (mt), but remained almost 8% below output in January 2011. The industry's capacity-utilisation rate edged higher to 71.3% last month, a World Steel Association (WSA) statement said. The WSA said that China's January 2012 production of 52.1 mt was 13% less than the 59.9 mt recorded for the same month last year. Other Asian countries also reported year-on-year declines with Japan down 10% and South Korea down 9%. India's crude steel production in January 2012 was 6.1 mt. Compared with January last year, there were also falls in production in many other countries. The European Union's output of 13.9 mt declined 5.6% - falls in Germany, Spain, the UK and Belgium were only partially outweighed by increases in Italy, France and Poland. Output in the CIS declined by 1.4% compared with January 2011. But production in Turkey rose by more than 14% in the same comparison. The Americas also produced more steel than in January 2011. There were gains of 5.7% in the USA, 3.7% in Mexico, 0.9% in Brazil and nearly 10% in Argentina. The sharpest fall was registered in Australia, where January production of 380,000 tons was 42% below the 657,000 tons made in the same month last year. Source: ISMW

February 23, 2012: JFE Holdings Inc's decision to increase its stake in India's JSW Steel Ltd is expected to boost the Japanese steelmaker's pretax profit by nearly 5 billion yen ($62.7 million) next fiscal year, the Nikkei said. Last week, JFE increased its stake in JSW Steel from 14.99% to 15%. The 15% share works out to about 4.8 billion yen, the business daily reported. JFE has a part-time director on JSW Steel's board and has taken other steps to deepen their relationship, the Nikkei said. Income from the Indian steelmaker will add to JFE's consolidated earnings from January onwards though the impact on this fiscal year's results will be small, the daily said. For the fiscal year ending March 2013, JSW Steel is expected to see a 19.5 billion rupee ($396.1 million) net profit, the Nikkei said. Source: The Economic Times

February 23, 2012: The impending restructuring of Vedanta Group will be confined only to its operations in India and won't include the African business, whose valuation was reportedly the main reason for a similar attempt in 2008 that failed. "Anil Agarwal is unlikely to bring his African business in the restructuring purview this time. The exercise will largely be confined to the company's operations in India," a source in the know said. The London-based mining group is looking at simplifying its corporate structure in the planned rejig and may bring Sesa Goa in the fold of its flagship Sterlite Industries. Source: The Economic Times

February 23, 2012: In the absence of any doemstic production, India has accorded approval to Japanese steel maker Nippon Steel Corporation for supplying value-added CRGO steel, used mainly in manufacturing of power transformers, to an estimated $2-billion domestic market. "Nippon Steel Corporation had earlier applied to supply CRGO steel in India. A licence has been granted in-principle in respect of its Hirohata Steel Works. Once it send the fees, licence will be promptly despatched to them," a senior steel ministry official has said. Nippon Steel's domestic peer JFE is the only other firm that has been supplying CRGO into India for quite some time now. CRGO is a value-added steel and a critical input for the making of distribution transformers used in the power sector. "With this, two foreign manufacturers - JFE, Japan and Nippon Steel Corp, Japan will now be able to supply CRGO to India," the official added. India's CRGO market is currently pegged at around $2billion and the future growth of the product is linked with the spurt in the power sector. Source: The Economic Times

February 22, 2012: Indian sponge (DRI) producers have raised their offers by Rs 200-300/ton on improved demand and rising steel prices. Indian steel prices have recovered a bit after primary steel producers like TATA and SAIL hiked their steel prices. In the same line steel prices have gained momentum in physical and futures market. Current prices RAIPUR - Rs 24,000/ton RAIGARH - Rs 22,800/ton DURGAPUR - Rs 23,600/ton Source: ISMW

February 22, 2012: Indian imports of containerized shredded and other scrap types are quoted at $470/ton cfr Nhava Sheva for EU-origin material. But imports may become a little slow owing to the budget announcement due next month, sources said. However, while the national budget may cause a pause in Indian imports, buyers need to book scrap in this buy-in window for arrivals for use in May production before the monsoon season curtails construction activity in the country. Source: ISMW

February 22, 2012: The Vedanta Resources group may merge iron ore firm Sesa Goa with copper and aluminium maker Sterlite Industries as it tries to simplify a complex corporate structure and deal with challenges to its main businesses. The exercise, which is still on the drawing board, will create agiant metals and mining firm with the third-biggest profit in the private sector after ONGC and Reliance Industries. It will have a combined market cap ofRs 66,000 crore, or about $14 billion, more than double that of Sterlite's nearest rival Hindalco Industries. The merged entity would straddle across all major resources, including oil, iron ore, aluminium, copper, zinc and lead, and will make Sterlite's parent, Vedanta Resources, owner of the entire shareholding of recently-acquired Cairn India. "Vedanta's stated strategy is to simplify and consolidate its corporate structure. The management reviews options to deliver this strategy on an ongoing basis and will update the market as appropriate," a Vedanta spokesperson said. A Delhi-based law firm has been asked to work on legal requirements for the merger. Source: The Economic Times

February 22, 2012: A surge in production of gold and coal resulted in an increase in the value of India's mineral output in December, 2011, to Rs 17,286 crore from Rs 15,692 crore a month earlier. "The total value of mineral production (excluding atomic and minor minerals) in the country during November, 2011, was Rs 17,286 crore," according to data released by the Ministry of Mines. However, there was a negative growth of 3.77% in December, 2011 as compared to that of the corresponding month of 2010, it added. Contribution of crude oil was the highest at Rs 5,725 crore in the total mineral production value in December from Rs 5,567 crore in the previous month. Besides, contribution of coal and iron ore increased significantly in December at Rs 5,292 crore and Rs 3,227 crore, respectively to the total value of mineral production. Both the minerals had contributed Rs 4,628 crore and Rs 2,788 crore, respectively in November, 2011. Production of coal improved to 536 lakh tons during the month from 481 lakh tons a month ago, up 11.45%. Iron ore output was also up by 8.97%, at 136 lakh tons, as against 121 lakh tons in the previous month. India produces around 87 minerals. This includes four fuels, 10 metallic, 47 non-metallic, three atomic and 23 minor minerals. Source: The Economic Times

February 22, 2012: JSW Steel plans to raise up to $275 million through overseas borrowings mainly to buy back its outstanding foreign currency convertible bonds. The fund raising plan has been approved by the Finance Committee, a duly authorised sub-committee of the company board, at its meeting held yesterday, JSW said in a filing to the BSE, adding that it will be done through external commercial borrowing (ECB) route. "The company has entered into an indicative, non-binding term sheet with an arranger for the ECB. The term of the ECB is 5 years plus 1 day from the date of drawdown," JSW further said, without giving the details. The fund raising exercise of up to $275 million includes a green-shoe option of USD 75 million, the company said. This means that JSW will be borrowing $200 million through ECB and can increase it further by $75 million, if the response is higher than expected. The raised money will be utilised for buyback of outstanding foreign currency convertible bonds (FCCBs), on redemption of outstanding FCCBs and capital expenditure, the company said. Source: The Economic Times

February 21, 2012: Indian sponge prices continue to trade high on better demand from ingot manufacturers, market sources told ISMW. Manufacturers raised their offers by Rs 100-200/ton. Lots of steel mills based in UP are buying sponge from Raigarh and Rourkela on low availability of scrap due to elections, sources said. Current prices Raipur - Rs 23,800/ton Rourkela - Rs 22500/ton Durgapur - Rs 23,500/ton Source: ISMW

February 21, 2012: Indian sponge prices continue to trade high on better demand from ingot manufacturers, market sources told ISMW. Manufacturers raised their offers by Rs 100-200/ton. Lots of steel mills based in UP are buying sponge from Raigarh and Rourkela on low availability of scrap due to elections, sources said. Current prices Raipur - Rs 23,800/ton Rourkela - Rs 22500/ton Durgapur - Rs 23,500/ton Source: ISMW

February 21, 2012: The Indian ferro-manganese market has not seen many variations with price for the high carbon ferro-manganese 70% is hovering around at Rs 49-50 per kg ex works. Market players anticipate that the market will stay stable in the next few weeks until the steel market picks up. Source: ISMW

February 21, 2012: The erection activity of the new blast furnace 8 for Steel Authority of India Ltd's (SAIL's) Bhilai Steel Plant has begun. The new blast furnace being installed by SAIL in Bhilai as part of the Plant's 7 million tons (mt) modernisation and expansion programme will be the biggest blast furnace in Bhilai Steel Plant having useful volume of 4060 m3 and capacity of producing 8030 tons of hot metal per day and 2.8 million tons per annum, the company said in a statement. BF 8 has such modern design and state-of-the-art environment-friendly and energy-efficient technology as Top Recovery Turbine, Waste Heat Recovery system and other energy-efficient and pollution control equipment. The contract for installation of BF 8 had been awarded to a consortium of M/s. Paul Wurth, Italia (PWIT), M/s. Paul Wurth, India (PWIN) & M/s L&T. The furnace shell will be of 45 metre height and shall consist of 23 special steel rings (made of Material Grade Q 345) of thickness varying from 40 to 120 mm. Material for the Shell up to 5th ring has been supplied by M/s. Paul Wurth, Italia. Internal diameter of ring is 16.65 metres and total weight of the shell will be around 700 tons. The BF shell erection will be followed by erection of coolers and refractories to make it ready for the production of hot metal. A Demag Crane of 600 tons capacity has been deployed at site for the work of shell erection. Source: ISMW

February 21, 2012: The installation of two roller hearth furnaces at Tata Steel's thin slab casting and rolling plant at its integrated works in Jamshedpur (India) is set to be completed by the end of the first quarter of 2012. The installation of a second roller furnace is at an advanced stage, according to industry sources. The second furnace could be completed before the end of the first quarter of 2012, according to sources. Both the furnaces have a reheating capacity of up to 280 tons per hour of slab. The slabs produced are later re-rolled into coils at the Jamshedpur plant. Source: ISMW

February 21, 2012: The global steel demand is expected to register a 5.4% growth in the current year to around 1,500 million tons on higher consumption from developing nations, World Steel Association (WSA) has said. WSA's Director General Edwin Basson in a presentation said the steel consumption will grow from 1,397 million tons last year as consumption in developing regions is higher. WSA members represent around 85% of the world steel production. Basson said the demand for steel is expected to grow by 2.5% in the European Union to 159 million tons over the last year. The demand of steel may grow by 5.7% and 4.9% in Commonwealth of Independent States and countries signatory to North American Free Trade Agreement to 60 million tons and 121 million tons, respectively, he said. Countries in Central & North America and Africa are expected to register 9.8% and 11% growth in steel demand in the current year to 52.4 million tons and 23.8 million tons, respectively, over the last year. "The exceptionally high growth rate for Africa is partly the result of weak steel consumption at the start of 2011, owing to the political uncertainty in the region for a large part of 2011," Basson said. The growth in steel demand would be 7.9% and 5.4% in the Middle East and Asia & Oceania in 2012 to 15 million tons and 963.1 million tons, respectively. India's steel consumption was around 68 million tons in 2011, the third-highest steel consuming country in the world after China and the US. Basson said the demand for steel in China is likely to be its lowest level over the last three years to 6% in the current year to 682 million tons. However, he added: "This does not mean that China is becoming less important as a steel consumer. It only means that China is growing larger at a slower pace". Source: The Economic Times

February 21, 2012: The steel sector was hit badly due to slowdown in infra projects, high interest rates and falling capex. Domestic steel prices were stable due to fall in supply from Karnataka region which accounts for over 20% of Indian steel production. However, rupee depreciation inflated coking coal cost and offset the benefit of higher realisation. The operating margins of all steel makers declined sharply by around 500 bps due to 320 bps rise in cost of raw materials compared to the year ago period. For JSW Steel, the margin dip was sharper at around 700 bps, largely on account of inadequate iron ore and lower volume. Tata Steel's margins fell by over 500 bps led by weak prices in Europe and high cost of raw materials. SAIL witnessed a 580 bps fall in margins led by high power, fuel and other operational costs. The result: Net loss for many players. Tata Steel, Jindal Stainless and JSW Ispat reported net losses. SAIL reported a significant decline - 43% - in net profit. SAIL's net worth, however, grew by Rs 2,503 crore to Rs 38,618 crore as on December 31, 2011, and the company's board approved an interim dividend of 12% of the paid-up capital. Bhushan Steel, however, bucked the trend by maintaining profits on a year-on-year basis. Tata Steel went into red again after two years, reported consolidated after tax loss of Rs 687 crore. The company said the rise in input costs for the European operations and weaning demand for the metal was the major cause. Tata Steel Europe posted an operating loss of Rs 781 crore in the quarter, as compared to profits of Rs 392 crore. Source: Business Standard

February 21, 2012: FICCI in its pre-budget memorandum has given the following recommendations for steel and other ferrous metals: The Government may consider reviewing the duty structure on following items: > Customs duty on Vanadium Pentoxide (Chapter Heading 2825 30) and Vanadium sludge/ Ammonium Metavanadate (Chapter Heading 2841.90) may be reduced suitably from the present level of 7.5%. > Government may consider listing Ferro Manganese Slag under Free Items instead of Restricted Items under chapter heading 2621 9000. > Customs duty on Ferro alloys under heading 7202 to 7.5% except Ferro Nickel (7202 6000) may be suitably increased. > Customs Duty on the Ores viz. Manganese Ore, Chrome Ore, Molybdenum Ore/moly Oxide, Tungsten Ore, Wolframite Ore, Scheelite Ore, Nickel Oxide, Vanadium Ore etc., falling under Chapter 26, are basic raw materials and duty may be suitably reduced as these are not available in the country except the first two. Source: The Economic Times

February 20, 2012: The country's biggest iron ore miner NMDC Ltd expects production to be around 27 million tons (mt) in the current fiscal year, lower than its target of 30 mt, according to reports. There was disruption in power supply to the pipeline and the company has scaled down its production, reports said. The company, however, aims to produce 30 mt of iron ore in the next fiscal year starting on April 1, reports added. Source: ISMW

February 20, 2012: Indian ferro silicon prices have firmed up marginally and are hovering around Rs 67-68 per kg from Rs 66-67 per kg earlier, market sources told ISMW. The demand has been slow because of the slow demand from the construction industry, sources said. Inventory with buyers were also high and therefore stopping prices from rising much, sources added. Source: ISMW

February 20, 2012: Spot iron ore prices dropped further as buyers held purchases in anticipation of further drop in prices, market sources told ISMW. Quotes for Indian fines Fe 63.5/63 dropped to $143/ton i.e. down by $1-2/ton. Sources said if physical demand for steel comes back then buyers will start buying iron ore. Meanwhile, there are reports that the Chinese government has raised a resource tax on iron ore in a move aimed at conserving resources and curbing pollution. The tax rate for iron ore has been raised to 80% from the previous rate of 60%. Higher resource taxes on iron ore will add an average of around 10 yuan/ton to the cost of domestic concentrate, industry sources said. The increased cost of domestic iron ore may encourage steel mills in China to go for more imports and this may turn out to be slightly positive for the iron ore import market which has been lull since the re-opening of market post Chinese New Year. Meanwhile, NMDC Ltd had cut its price of iron-ore fines for the January-March period by 23% from the past quarter to Rs 2,590/ton and that for lumps by 3% on to Rs 4,960/ton. Source: ISMW

February 20, 2012: The domestic hot rolled coil market is seen cooling off as real demand continued to be moderate in February, market sources told ISMW. Some Indian HRC producers had attempted to lift their domestic base prices for February by Rs 500-1,000/ton over the previous month's levels. But these attempts were largely futile. Transaction prices of A/B structural HRC, 3mm thick and above, presently average Rs 35,500-36,000/ton compared to Rs 34,500-36,000/ton in January. Coil prices in Mumbai's retail market have fallen by Rs 1,700-2,000/ton since mid-January, after having surged some Rs 3,000/ton earlier. Import buying interest has also not improved as was earlier anticipated. The Indian currency, which had recently begun to strengthen against the US dollar, has remained largely stable at Rs 49-49.5 levels over the past fortnight. Offers from Chinese mills continue to average $670/ton cfr India for 3mm thick and above commercial grade HRC. Buying interest is scant even at $650/ton cfr price levels. Source: ISMW

February 20, 2012: The domestic steel sector that supports the growth of economy's key manufacturing and infrastructure sectors is going through an unprecedented slowdown. Worse, the union government sees no silver lining in the horizon. In fact, the ministry of steel has painted a bleak picture of the sector in the next Five Year Plan period (2012017) beginning this April. It has predicted a demand growth that would be lower than even that during the tenth Plan, while pegging production only a notch higher. Also, both the growth indicators would just be marginally up from the current Plan achievements. Steel is one of the eight core infrastructure industries that have a combined weight of 38% in the index of industrial production. A host of issues, including a historic low demand, supply constraints at the back of a lull in commissioning of green-field projects coupled with a severe raw material crunch from the ongoing crisis in coal and iron ore sectors, has brought down the sector's growth to an all-time low. Such bottlenecks, added to a depleting production efficiency of the integrated steel majors like SAIL and RINL, have left the government worried. "The prospects of domestic demand appear grim and gloomy on the eve of launching the 12th Plan," according to the government's working group for the twelfth Plan, chaired by the then steel secretary P K Misra. "Also, all the macro-economic indicators point out the onset of overall economic slowdown of the Indian economy which will have a profound impact on investment," the body states in its recent report. Both production and consumption of steel during the current Plan period -- at 5.8% and 8.8% respectively - were significantly lower than the 9.4% and 10.4% during the 10th Plan period. Even for the 12th FYP, the steel sector is unlikely to achieve a double-digit growth -- a goal that was initially set for the current Plan period. The government expects a modest 9.1% growth in consumption through 2017, even assuming a high gross domestic product (GDP) growth rate of over 8%, against 8.8% over the past five years. Steel demand grew by 8.8% during the past four years of the current Plan period, compared to 10.4% in the tenth Plan. This financial year, consumption -- a measure of demand -- has grown by a meager 4.7% so far, against a 6.2% growth registered during the same period last year. Asia's third-largest economy consumed 56.8 million tons (mt) of steel between April and January 2011-12, as compared to 54.2 mt consumed last year. One reason for the reduced demand is the lower share of commodity sectors (primary and secondary sectors) in the GDP growth. The demand from automobile sector, a major consumer, has been identified as a dampener. The automobile sector projected a meagre 1.6% growth in steel consumption this fiscal, against an over 7% growth registered last year. Despite the slump in demand, India is going to remain a net importer of steel during the 12th Plan. Another major hurdle for the steel sector is land availability for green-field steel plants. "Posco and Arcelor Mittal have been engaged with setting up green-field plants for quite some time," pointed out Misra. "However, the progress on this front is long drawn and time consuming. Land availability for mega green-field projects will continue to be a concern." To add to the problem, the domestic steel industry has been losing ground on its traditional area of strength - availability of low cost and high quality iron ore - at the back of a severe clampdown on mining activities down south and large scale exports of iron ore. A senior official from the ministry said prices have remained high hurting steel companies' bottomline despite the slowdown in iron ore exports over the past some months. "This is a major concern," he told Business Standard. The concern regarding the raw material for the 12th Plan is compounded by the current large-scale exports of iron ore and a huge shift towards steel-making through the BF (blast furnace) route which uses coking coal as an input. Indian steel-makers meet 70% of their annual coking coal demand through imports. The ministry holds state-owned miner Coal India Ltd (CIL) responsible for its ills. "The required drive for developing the coking coal assets has been missing in the growth strategy of CIL," according to the working group report. The government wants steel production to grow from the current 62 MT annually to 108 MT by 2017. This would require an additional 91 MT iron ore and 47 MT coking coal. Overall, the long-term economic sustainability of the steel sector could be threatened by the inefficient use of resources, rising land and labor cost, rising interest rates, illegal mining coupled with iron ore exports and over-dependence on imported coking coal. Source: Business Standard

February 20, 2012: NMDC, the country's largest iron ore producer, has cut prices of fines (Fe grade) and lumps by 20% and 3% respectively in the light of fall in international prices of ore. NMDC sources said that the price of iron ore fines and lumps now would be around Rs 2,600 and Rs 5,000 a ton. Currently, NMDC is selling fines at Rs 3,380 a ton and lumps at Rs 5,100. The price of lumps in the international market is round Rs 7,000 a ton. Though NMDC said a price drop was being examined, the reduction seems to be higher than expectations. The company sources had earlier indicated that the price drop would be 'marginal'. "The price cut by NMDC is higher than our expectations given the shortage of iron ore in the domestic markets (especially iron lumps) on the back of mining ban in the Karnataka region and government's stricter stance on illegal mining in other regions such as Goa and Orissa," online share trading portal, Angel Broking, stated. So far, the domestic prices have remained steady despite a decline in international prices due to shortage of ore. On the export front, the fall in prices will not have any impact on NMDC as it is not exporting any ore this year. NMDC accounts for 25% of iron consumption in the country. In 2010-11, the public sector undertaking had sold 23.75 million tons of ore, while the total requirement of domestic industries was 100 million tons. Source: Business Standard