Author Archives: Sohrab Darabshaw

Almost everyone, by now, has heard of the deadly Zika virus which has prompted the World Health Organization to declare a global public health emergency. But this virus has felled another unlikely victim: a car in faraway India. You heard right.

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India’s leading automobile manufacturer Tata Motors never saw this one coming. Its newest hatchback, the Zica, is about to be officially launched, yet, the name, which matches with that of the virus if you ignore the spelling, sent the company into a public relations tizzy.

Tim Leverton and Mayank Pareek at the official unveiling of the new Tata Zica at an auto show in Goa last December. Source: Tata Motors

Tata Executives Tim Leverton and Mayank Pareek at the official unveiling of the new Tata Zica at an auto show in Goa last December. Source: Tata Motors

For months, the marketing division spent thousands of dollars on Zica’s promotional activities until the virus Zika came along. Now, Tata Motors has announced a name change, though at press-time, the new name is not officially out yet.

Zika vs. Zica: Bad Timing

Auto analysts are now wondering whether the change has come too little, too late since the hatchback is to be launched at the Auto Expo in New Delhi on Wednesday. Zica, by the way, stood for “zippy car.”

Sadly, what also turned out to be “zippy” was the rapid spread of the Zika virus.

Zica’s marketing campaign included advertisements featuring football legend Lionel Messi. In another messy coincidence, Zica’s brand ambassador, too, hails from Argentina where the first case of a Zika-infected person, who reportedly contracted the disease after being bit by a mosquito, was from.

New Name But Not Yet

In a statement announcing the rebranding, Tata said: “Empathizing with the hardships being caused by the recent Zika virus outbreak across many countries, Tata Motors, as a socially responsible company, has decided to rebrand the car.”

Tata has said for the time being, though, the compact car will still carry the Zica label. At least until the auto show ends. The new name will be announced in a few weeks.

For auto lovers, the Zica was Tata Motors’ first hatchback offering after the globally famous Nano, billed as the cheapest car in the world. And for those of you out there who love to get your hands greasy with vehicular details, Zica is said to have a 1.2-liter petrol (gasoline) engine or a 1.05-liter diesel engine, both with three-cylinders. The petrol engine will be a new all-aluminum one. Both the engines are paired to a five-speed manual transmission.

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Along with the Zica, Tata Motors will be showing off a slew of new models including two forthcoming SUVs. Over 80 vehicle launches are expected at the Auto Expo 2016, with Fiat-Chrysler-owned Jeep making its India debut.


One of the largest tractor manufacturers in the world and one India’s top automakers, Mahindra & Mahindra Ltd. is reportedly building an SUV for the American market.

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A recent report in The Wall Street Journal said the company has cobbled together an engineering team to set up a unit near Detroit, home of much of the US auto industry. Mahindra’s new staff has been carefully poached from US giants such as Ford Motor Co. and Tesla Motors Inc.


Mahindra’s new Genze 2.0 is a scooter designed for the North American market. Source: Mahindra.

The same report claims Mahindra was already testing the large SUV, said to be comparable to the BMW X5, on the streets of metropolitan Detroit. The SUV will have to meet stiff US safety and fuel economy regulations, and cater to the whims of American buyers if it wants to be successful.

Mahindra’s US Ambitions

This isn’t Mahindra’s first attempt to crack the US automotive market. About a decade ago, the $16.9 billion conglomerate, which controls about 40% of the SUV market in India announced partnerships with US dealers, with the promise of delivering vehicles by 2009. But Mahindra claimed it had trouble meeting US vehicle regulations and canceled its plans in 2010, and the entire episode ended up in US courts as at least 5 automobile dealers from the US filed a lawsuit accusing M&M accusing it of fraud, misrepresentation and conspiracy.

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Aluminum producers in India are looking to the US and other export markets with hope in the new year, after the double whammy of cheap Chinese imports and low prices for the silver-white metal for almost all of 2015.

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As in other countries, the overall global commodity free fall was the main cause of the mayhem for Indian producers. Aluminum prices dropped from a monthly average of $2,455 a metric ton in 2011 to the recent $1,468 per mt. A large number of Indian aluminum majors are now staring down capacity shutdowns and operational losses. Companies such as Vedanta have been negatively affected.

What Can Save Indian Aluminum?

There are three factors aluminum producers are banking on: more and newer innovative uses of aluminum, especially by US companies, India’s economy improving and producing at full throttle and, finally, support from the Indian government via additional taxes and tariffs to stop the influx of cheap imports.

Indian smelters are counting on automotive and other sectors to eliminate their surplus.

Indian smelters are counting on automotive and other sectors to eliminate their surplus. Source: Adobe Stock/Arsel.

New uses of the metal are key to producers overcoming their recent losses. Indian aluminum companies have put their faith in a large increase in the use of aluminum in the automotive, aircraft manufacturing and construction sectors in the US and in European countries. Expansion by Indian producers into these markets needs to happen to justify their optimism.

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So what country will be the one bright spot in the global steel market this year?

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It’s no secret that for the last four years the global steel sector has been floundering and it’s been tough for producers to find any silver lining. Now, with 2016 upon us, the one question that’s been asked by everybody, even as prices plunge and the Chinese economy shows no signs of a recovery, is, what now? The unanimous response from around the globe is India.

Can Indian steel demand buoy the sector this year? Source: Adobe Stock/Jovanning.

Can Indian steel demand buoy the sector this year? Source: Adobe Stock/Jovanning.

There’s a lot riding on India, both domestically as well as internationally. Ironic, since both China and India are the world’s top two emerging economies, and with the collapse of China, the world turns to its neighbor India, in these times of stress.

India to the Rescue?

Edwin Basson, Director-general of the World Steel Association (WSA) echoes these voices in this article in The Gulf News where he was quoted as saying that there was really only one location that had the long-term potential to pull the global steel market out of its current slump, and that was India.

The over $100 billion Indian steel industry is placing bets on rising domestic demand in 2016, even as local players try to combat cheap imports. Last year saw a deflation of global commodity prices, including steel and other industrial metals. This affected the Indian market, like all of the others, leading to severe pressure on the operating margins of steel plants.

Ravi Uppal, Managing Director and Group CEO, JSPL, believes that the Indian steel industry would be able to recover and show growth in 2016. He told the Economic Times that even if the industry could grow at 6% to 7%, that would translate into additional demand of 4 to 5 million metric tons of steel, which is good news for Indian steel. However, this will only be possible if adequate precautions are taken against reckless dumping by the foreign producers.

Can Indian Steel Demand Deliver?

Spoiler alert! Even if there’s unanimity on India being in the sweet spot this year, one big question remains: When will the world’s largest democracy deliver? Yes, it has a huge unfilled demand and an even bigger economy, but when will the benefits start accruing? We have long heard of the potential of mass industrialization in India.

In 2015, India became the third-largest steel producer globally, bypassing the US, with demand between April and November going up by 5.3%, and production by 2.4% in the same period. India is now positioned just after China and Japan as a steel producer.

Yet, prices of some steel products in India hit a 10-year low in 2015, no thanks to the cheap exports from China, Japan and South Korea.

Financial Pressure Via Dumping

This has also jeopardized billions of dollars in loans raised by domestic steel producers for capacity expansion. Already, the steel sector is a leading contributor to the bad loan woes of Indian banks, and some sector experts fear that this would come in the way of capacity addition.

Global ratings agency Moody’s expects profitability of Indian steel firms to be lower this year as compared to the previous years, but the country would be better placed than its peers in Asia.

The government still seems confident that India will, indeed, overcome many of these hurdles. Recently, Steel Minister Narendra Singh Tomar told news agency Press Trust of India that the steel industry was “tense” not just in India, but in the world over. In his opinion, India is better placed this year compared to other countries since both production and demand are likely to go up.

Increased Production… and Increased Tariffs

India’s top three steel producers — state-run Steel Authority of India Ltd. (SAIL), and private players Tata Steel and JSW Steel — are expected to ramp up production capacity in the next two years to capture domestic demand growth propelled by demand in the automotive, consumer durable goods and construction sectors.

Of late, the Indian government has taken steps to protect the domestic steel industry, including raising import duties on long and flat products.

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If it’s as clear that 2016 will the year of India vis-à-vis steel, as some predict, will the country live up to global expectations and deliver or will it be a case of wasted opportunity?

The Indian government recently imposed import duties, for a term of five years, on stainless steel from China, the US and the European Union. The move has evoked mixed reactions from industry and analysts.

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The anti-dumping duties are an attempt to protect local companies from “unfair competition.”

Anti-dumping duties, on cold-rolled flat stainless steel products, ranged from 4.6 to as high as 57.4%. Along with the above-named countries, imports from South Korea, South Africa, Taiwan and Thailand will also be taxed.

Will the idling of Midland by ATI take a bite out of stainless supply? Only time will tell. Source: Adobe Stock/Jovanning.

India has taken steps to protect its domestic stainless industry from cheap imports.  Source: Adobe Stock/Jovanning.

While a large section of India’s domestic steel industry welcomed the move, some experts opined that the duty did not make much sense, except, of course, for protecting local steelmakers.

In an interview with the Economic Times, N.C. Mathur, director of corporate affairs at JSL Steel and the president of the Indian Stainless Steel Development Association, said that the anti-dumping duties on cold-rolled stainless steel products were “not likely to help the domestic industry in any way.”

That was because they were imposed after the review of an earlier, similar, notification, and all the conditions remained the same in the new tariff structure.

Do These New Dumping Duties Even Matter?

According to Mathur, the duties are restricted in terms of cold-rolled width — from 600 mm to 1250 mm. The same terms and conditions were already in place under the earlier anti-dumping law, yet, importers had been easily circumventing it over the last five years.

How? They would simply import products measuring above 1,250 mm.

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Both the USA and India’s steel mills are running at less than capacity thanks to the worldwide steel surplus. US steel mills continue to be buffeted by cheap, mostly Chinese imports and lukewarm demand and no one is willing to bet on when, or if, they will ever come back to full production.

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On the other hand, the future of India’s steel industry is tied to the percentage of expenditures on infrastructure that the government is expected to provide. The difference between the two is that India’s economy is merely in revival mode, while the US economy is growing at a rapid pace.

Rating Agencies Weigh In

A recently released report by Fitch Ratings titled, “2016 Outlook: Indian Steel Sector,” says that increased spending on infrastructure projects, such as housing and smart cities is the key to the revival of India’s steel industry.

Welded carbon steel pipe

Indian and US steelmakers both face a glut of imports and low prices in their struggles to get back into the black. Adobe Stock/Sasint

Indian steelmakers, however, have to face the onslaught of cheap imports just as their counterparts in the US do, especially imports from China. The difference is, the imports work, to an extent, in Indian producers’ favor, as opposed to how badly they harm US steelmakers.

In India, abundant steel only increases domestic demand in India as low prices and more supply are likely to spur government action as costly infrastructure investments are more likely to be seen as relative bargains.

“Spending by the Indian government on infrastructure will be the catalyst for any meaningful improvement in domestic steel demand. The agency expects India’s steel consumption to improve modestly by 7-8% in 2016,” according to the Fitch report.

No doubt, high imports and soft steel prices globally in 2016 might bring up sales in India, but that will still eventually result in far lower prices, meaning less profit for Indian steel producers despite more sales. Steel companies’ margins are likely to be lower in 2016 but could improve, incrementally, in 2017, supported by “(an) improving domestic demand and the imposition of safeguard duty on imports on certain steel products for 200 days,” according to the Fitch report.

The Effect of Tariffs and Duties

As with steelmakers worldwide, the prices of Indian steel dropped almost a quarter year-on-year as of the end of September. The imposition of a 20% duty on certain steel product imports, effective September 14, has saved the day for some Indian steel companies.

In a similar vein, another global ratings agency, Moody’s Investors Service, cautioned that failure to implement reforms in India could hamper investment amid weak global growth.

According to Vikas Halan, a Moody’s vice president and senior credit officer, a healthy 7.5% GDP growth for India for the fiscal year that will end in March 2017 (FY2017) and a pick-up in manufacturing activity will broadly support business growth.

The ratings agency expects upstream oil and gas companies to benefit from lower fuel subsidy burdens, although low crude and domestic natural gas prices will continue to hurt profitability.

Another Negative Outlook

The agency’s negative outlook for the steel industry reflects elevated leverage and an extended period of low prices due to continuing low steel import prices, while the negative outlook for metals and mining companies reflected bleak global commodity prices.

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While India’s steelmakers are banking on growth to see them through these difficult times, one of the biggest challenges that the US industry faces is the growth of steel imports. Its best bet is to reduce  imports and pray that the domestic market will swing back to buying for US mills.

Earlier this year, steel companies including AK Steel, Nucor and U.S. Steel filed trade cases to stem the flow of steel products entering the US. The only silver lining was that steel imports into the US have started to come down on a year-over-year basis for the last five months.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.


A quiet revolution is going on in India’s defense sector.

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It is set to give an impetus to steel, aluminum and composite materials demand in the country. Recently, US aircraft manufacturer Boeing Co. and India’s Tata Advanced Systems Ltd. (TASL) announced a joint venture to manufacture aerostructures for aircraft beginning with the reputed AH-64 Apache fighter helicopter.

AH-64 Apache

Make in India, in this case, means making Apache helicopters there thanks to a joint venture with Boeing. Source: Adobe Stock / VanderWolf Images

The joint venture, according to media reports, would also then compete for additional manufacturing work packages across Boeing platforms, both commercial and defense.

Burgeoning Private Defense Industry

Currently, as many as 14 Tata companies are providing support to India’s defense and aerospace sector. In addition to TASL. The list also includes Tata Advanced Materials, a company that has delivered composite panels for cabinets and auxiliary power unit door fairings for the P-8I long-range maritime surveillance and anti-submarine warfare aircraft.

Another company, TAL Manufacturing Solutions, has manufactured floor beams out of composite materials for the Boeing 787-9, and provided ground support equipment for the C-17 Globemaster III strategic airlifter. Read more

Except for the well-connected in India’s iron ore and steel circles, very few know, or care, about the going-ons around Essar Steel’s proposed US iron-ore-pellet production facility in Minnesota. But in the US, it continues to hit the headlines regularly.

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At its center are two competitors — Essar and Cliffs Natural Resources. There have been over a decade of delays (accompanied with a series of controversies), but now, the Essar Steel Minnesota project, insists the company, is headed toward completion. The plant is expected to start making iron ore pellets sometime late 2016.

Minnesota Iron Ore Ship Loader

One of the many iron ore ship loaders in Minnesota. Could Essar Steel’s production facility revive the iron range? Source: Johnsroad7/Adobe Stock.

Essar plans to produce 7 million tons of processed taconite pellets a year. This may ultimately go to ArcelorMittal’s Indiana steel mill near Chicago, as well as Essar’s own steel mill in Algoma, Ont., Canada.

State Help

Essar received about $70 million in state grants and state loans after taking up the project in 2007 to build one of Minnesota’s only integrated taconite and steel mills. Read more

Last week, two major developments took place in India which are likely to impact global ore production and maybe even prices.

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Vedanta announced it has begun to export iron ore from the Indian province of Goa for the first time since mining was halted there about two years ago. Shipments started to China, one of the biggest buyers of Goa ore. India’s overall ore mining had ground to a halt over three years ago after a Supreme Court imposed ban that was subsequently lifted in phases.

Iron ore has averaged about $60 per metric ton this year. Depressed iron ore prices stabilized recently at about $55 per mt, after a long period of volatility. But Vedanta leadership is of the opinion that iron ore prices were in “freefall.”

Export Duty Falls

For some Indian miners, at least, restarting ore mining may become profitable again following India’s reduction of its export duty from 30 to 10% earlier this year on lower-grade exports of the commodity.

The other, more important development, though, is that India’s Tata Steel is reportedly reaching an agreement with New Millennium Iron Corp., its Canadian iron ore joint venture partner, to hike its stake in the JV to 94% from its current 80%.

Canadian Investments

New Millennium declined to make further investments in the JV’s projects at this time, something that Tata Steel accepted. Tata Steel will invest $401.39 million ($524.5 million Canadian) to continue as the lead investor in the JV, Tata Steel Minerals Canada Ltd.’s (TSMC). After the deal, New Millennium will end up holding only a 6% stake.

TSMC is pursuing a direct shipping ore project (export of iron ore fines) in Canada’s sub-arctic region. Shipments from the DSO project began supplying Tata Steel’s European facilities in 2013. The project has yet to be fully commissioned, but its capital cost has already increased beyond the $428 million ($560-million Canadian) announced in October 2012. Tata Steel entered into an entire off-take agreement with TSML at the project’s outset. The initial production for the DSO project was aimed at 1 million tons.

The DSO project license area contains 64.1 million metric ton of proven and probable mineral reserves at an average grade of 58.8% iron (Fe).

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Tata Steel is also reviewing its future commitment on developing New Millennium’s two other inferior grade (taconite) projects – Lab Mag and Key Mag – in Canada.

The World Steel Association (WSA) recently said that India is the silver lining in an otherwise gloomy global steel market where most of the steelmakers have come under intense pressure from the Chinese economic slowdown.

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The Association, in its Short Range Outlook (SRO) forecast issued a few days ago, forecast the demand for steel in India to go up by 110 basis points (bps) in 2015 to 7.3% and by another 30 bps in 2016. Compare this to another top producer of steel, the US, where demand continued to remain a “challenge.”

US, Chinese Consumption Falters

Crude steel production, for example, dropped 9.7% year-over-year to 7 million tons in the US in August this year, marking it the seventh straight month of decline in 2015. The WSA saw no major change in this position through the rest of the year, at least as a stronger greenback and a listless energy sector continued to weigh down the domestic steel industry. The WSA predicted steel usage in the US to drop 3% in 2015, before clawing back to a 1.3% gain next year.

Where China is concerned, the WSA said in its report that steel exports from there had risen 28% to almost 44 million metric tons in the first 6 months of 2015, despite output declining by 2%. No surprise there since China produces over half of the world’s steel, but finds domestic uptake slowing, forcing its steel companies to dump there products in foreign markets. Low local demand has started to affect steel production, so much so that in July steel production fell 3.8%.

Overall, the WSA has predicted a 1.7% drop in global finished steel demand to 1,513 mmt in 2015. Demand may increase slightly next year by just 0.7% to 1,523 mmt, as it hopes the Chinese economy stabilizes.. This iss slightly different from its April SRO forecast which said steel demand was set to grow by 0.5% in 2015 and then recover to 1.4% in 2016.

India, South Korea Buck Falling Trend

Only India and, to a certain extent, South Korea somehow managed to buck the global trend. India, in the top 5 producers of steel, had produced 91.46 mmt in the last year. According to the Brussels-based WSA, world steel production fell by 3% in August, its biggest fall this year. But India still managed to beat this trend to post a 2.8% growth in steel output as compared to the same month last year. Despite the threat of imports, India produced 7.66 mmt in August compared to 7.45 mmt in August 2014.

At 5.9 mmt, South Korea, too, posted a 4.9% growth in steel output in August as compared to the same month a year ago. In July, the country posted a 1.7% growth in steel production to 6 mmt in the month.

South Korea today has a high-per-capita steel consumption of steel, over 1,000 kg of finished steel per person. By comparison, China’s is half as much per capita. To a large extent, by virtue of it being 1 of the world’s largest automobile maker,s South Korea consumes a lot of auto grade steel. Shipbuilding remains another major source of South Korean steel demand.

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The WSA report is based on data collected from 65 countries, representing about 98% of the global steel production.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.