Sohrab Darabshaw

While India leads the world in Direct-Reduced Iron production, the domestic industry has been facing an uphill production battle for the last four years.

Why Manufacturers Need to Ditch Purchase Price Variance

India’s DRI sector is hoping for help from the government and clarity in the overall steel policy to see it through, what many have dubbed, its most critical phase ever.

Demand DRIs Up

What is worrisome is that the falling demand for steel, especially construction steel globally, could further, negatively impact the sector. Some are quick to note that India’s DRI units need not worry much on this front as the market in India has remained insulated from global trends owing to steadily increasing domestic steel consumption.

Two other risks facing the sector are imported scrap being used by steel companies in India, DRI is an excellent substitute for scrap in electric arc furnaces, and the reliance by medium-sized DRI producers on inferior technology. That means technological limitations stop the producers from exploiting inferior grades of iron ore and coal.

Further, the limited availability of coking coal only motivates steel production in the country through a combination of DRI and blast furnace. What has added to the misery is the recent round of coal auctions held by the federal government.

Unable to Bid in Coal Auction

DRI companies were unable to participate in the auction, and a hitherto discounted source of fuel was lost, pushing the cost of DRI production by an estimated 40%, some have said. The DRI segment has brought this to the government’s attention.

While many steel companies prefer to use DRI instead of scrap, the slowdown in the global steel industry has seen some amount of the steel melting scrap being imported into India because of lower import duties. What makes steel plants happy in such cases, besides the cheap duty, is the fact that the imported scrap percentage works out to be higher, which eventually negates the cost of imported scrap.

To many analysts, the DRI sector in India is poised on the cusp of a turnaround, but only if there is adequate government backing as well as support from domestic steel companies. Even then, it could easily take four years for the industry to come back to an even keel and ramp up production.

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Why Manufacturers Need to Ditch Purchase Price Variance

High costs and lower demand are just two of the problems plaguing India’s DRI sector. DRI is used by the steel industry in flat as well as long steel product segments, and is also used in infrastructure projects.

Low Steel Demand Hits DRI Producers, Too

According to figures put out by the World Steel Association, in the first quarter of 2015, India, with over 4,500 tons of DRI, headed the list of 14 nations that accounted for 87 % of the world’s total DRI production. The Sponge Iron Manufacturers Association has estimated India to have an installed capacity of 37 million metric tons, although it’s difficult to arrive at an accurate figure due to a general lack of proper research.

EAF and Induction Resources

India’s DRI industry has nurtured secondary steel producers who largely use electric arc or induction furnaces to make their steel, for which DRI comes as handy substitute for scrap.

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Yesterday’s post explained how the Short Range Outlook (SRO) report released by the World Steel Association for 2015-2016 predicted steel demand would grow by just about 0.5% to 1.544 million metric tons in 2015.

Pool 4 Tool’s Automotive SRM Summit

The world’s steel sector looks on with hope to India to see it through this downturn. The country’s per capita consumption was still low, at about 60 kg as against the world average of 220 kg. With the government’s Make In India (manufacturing) plan slowly grinding into motion, it is hoped that this will lead to an increase in steel consumption.

The End of Annual Growth for Chinese Steel

So, the China steel story is over, at least for the short-term. The economic deceleration there, following low investment growth since 2008, is expected to adversely impact any steel growth there, and it has so far this year.

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According to the latest Short Range Outlook (SRO) report released by the World Steel Association for 2015-2016, steel demand was forecast to grow by just about 0.5% to 1.544 million metric tons in 2015. The next year could be better with a forecast of 1.4% to reach 1,565 mmt. Last year, incidentally, steel use grew by 0.6% in 2014.

Pool 4 Tool’s Automotive SRM Summit

The economic slowdown in China is leading to lesser uptake of steel and that was was one of the major reasons for the sluggish growth. This was expected to be partly only partially offset by a measure of growth in developing economies such as India, Indonesia and Vietnam.

The Dragon Gives Way to the Tiger

Clearly, in the next two years, so far as steel is concerned, one emerging superpower will give way to another neighboring one. India’s steel consumption growth was on its way to register a new high this year as well as the next, at 6.2% and 7.3%, respectively, while other high-consuming nations besides China, including the US and Japan, are expected to see a decline.

India, as per WSA data, was the world’s third-largest steel producer with a production of 14.6 mmt in the first quarter of 2015. In this period, India’s production grew by 9.4% compared with the first three months last year. As reported by MetalMiner, it was in February this year that India had passed the US to become the world’s third-largest steel producer, after China and Japan.

Can India Offset the Losses?

The world’s steel sector hopes India can power it through this downturn. The country’s per capita consumption is still low, at about 60 kg opposed to the world average of 220 kg. With the government’s Make In India (manufacturing) plan slowly grinding into motion, it is now hoped that this would lead to an increase in steel consumption.

So, is the China steel story over? It’s affirmative, at least for the short-term. The economic deceleration there, following low investment growth since 2008, was expected to adversely impact its steel growth, and it has.

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The price estimate of discarded metals; including gold, silver, iron and copper, according to the UN’s Global E-Waste Monitor 2014 report is $52 billion in 2014, alone.

Free Webinar: MetalMiner’s Q2 and Q3 2015 Forecasts

The gold itself was valued at about $11.2 billion. Some researchers, according to the report felt that in many cases, it made sense to recover the metals.

More Scrap Recycling Needed

Not much was diverted for recycling. Only about one-sixth of last year’s e-waste was moved from landfills for reuse, according to the report.

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The United Nations (UN) recently put out a listing of countries and regions dubiously leading in the generation of electronic or e-waste.

Free Webinar: MetalMiner’s Q2 and Q3 2015 Forecasts

E-waste, for this discussion, includes electronic and electrical equipment. Everything from printers and computers to discarded cell phones, calculators and other personal electronics was counted by the UN. Even vacuum cleaners, toasters, electric shavers, video cameras were included in the total as all were dependent on being plugged into a wall.

US, China, Dubiously Top E-Waste List

India found itself in the 5th spot, having discarded 1.7 million metric tons of electronic and electrical equipment in 2014. The US (7.1 million mt) followed by China (6 million mt) topped the “Global E-Waste Monitor 2014,” report compiled by the United Nations University (UNU). Together, these two were responsible for about 32% of the total e-waste.

Regionally, most e-waste in the world last year was generated in Asia at 16 million mt. The top three Asian nations with the highest e-waste generation in absolute quantities were China with 6 million mt, Japan with 2.2 million mt and India with 1.7 million mt.

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It is one of those delicious ironies of life that India, the world’s largest consumer of gold, has very little to show when it comes to actually mining the yellow metal.

Free Webinar: MetalMiner’s Q2 and Q3 2015 Forecasts

That’s poor form because India sits on very large resources of gold, revealed by several geological studies in the past. One such study pegged India’s primary gold resources at about 491 metric tons. Despite its 6,000-year mining history, the country mines just around a pitiful 25 mt of gold annually.

Imports Flourishing

India is one of the biggest importers of gold, despite a punitive 10% import tax. In the financial year ended March 31, gold imports had touched 900 mt, up 36% from a year ago.

Perhaps keeping all this in mind, and the fact that gold mining could mean earning some big bucks, Western Australia recently expressed interest in developing gold mines in India, as part of the bilateral cooperation in minerals and energy sectors between the two nations.

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India’s dependence on thermal coke from abroad is beginning to raise concern in international circles, though some exporting countries are happy to have the business.

Free Webinar: MetalMiner’s Q2 and Q3 2015 Forecasts

India sits on mountains of thermal coke, yet mainly due to bureaucracy, it has to depend on imports.

The day, it seems, is not far off when India will topple China as the World’s number one importer, if analysts were to be believed.

Coal, Coal, Everywhere But Nary a Chunk to Mine

The situation is, indeed, grim. It has made Indian Power Minister Piyush Goyal remark at a public platform that it (importing thermal coke) is shameful. The minister told an audience after inaugurating a power project recently near Nagpur in central India that the government plans to almost double the government coal production by 2019-20. He added that importing coking coal, used for making steel, may be a necessity but thermal coal is at a surplus in the country, yet India is still being forced to import it. A Ministry of Coal report estimated coal reserves at about 300 billion metric tons, of which 125 billion mt were in the “proved” category.

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Speaking at the agreement signing ceremony featuring India’s seven steel majors in the creation of the new Steel Research and Technology Mission (SRTMI), Indian Steel Minister Narendra Singh Tomar said the joint initiative of steel industry and the government would also help the steel industry to play a major role in creating employment.

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This new industry-led initiative to promote collaborative research programs in India’s steel sector aims to increase investment in research and development in the steel sector from its present level of 0.2-0.3% of turnover progressively towards the international benchmark of 1-2% of turnover.

Public-Private Partnership

The initial approximately $32 million (about Rs 200 crore) investment for SRTMI will come in equal contribution from the Steel Development Fund of the ministry and the participating companies: Steel Authority of India Ltd. (SAIL), Tata Steel, JSW Steel, Jindal Steel and Power Ltd., Rashtriya Ispat Nigam Ltd., the National Mine Development Corporation and MECON Ltd.

SRTMI, as conceptualized by a high-level government task force, will carry out research and development in priority areas of Indian national importance covering best usage of available raw materials and conservation of natural resources, optimum energy conservation coupled with minimum emissions, innovation and in-house development of design, engineering and manufacturing facilities of key steel plant equipment.

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While India’s recent growth has helped propel sales and exports of steel, the federal government here wants to maximize returns by creating a favorable atmosphere for research and development.

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As many as seven steel majors joined hands with the Ministry of Steel on Wednesday to set up a Steel Research and Technology Mission (SRTMI) in the Indian capital of New Delhi. The Steel Authority of India Ltd. (SAIL), Tata Steel, JSW Steel, Jindal Steel and Power Ltd., Rashtriya Ispat Nigam Ltd., the National Mine Development Corporation and MECON Ltd. are the first to join the project that many analysts say marks the start of a new chapter in steel research and development in India.

New Legislation

The government is considering introducing a bill in Parliament in the next session for the creation of an educational institute under the Ministry of Steel, on the pattern of India’s famous Indian Institutes of Technology, where students are able to formally learn and undertake research programs on steel.

The institute may offer graduate, post-graduate, doctoral and research programs. This is line with the recommendations of a ministerial committee instituted in 2014 that recommended such an institute to ensure a stream of knowledge workers for the domestic steel industry.

The planned outcome of these efforts goes beyond the quality of finished steel, too. The initiative is being taken, also, to find innovative uses for steel and create entire new fields of employment for India’s youth.

Investment in Research

Speaking at the signing ceremony involving the seven steel majors in SRTMI, Steel Minister Narendra Singh Tomar said the joint initiative of the steel industry and the government would also help it play a major role in new employment.

This industry-led initiative will promote collaborative research programs in the steel sector and aims to increase investment in research and development in the steel sector from the present level of 0.2-0.3% of turnover, progressively toward the international benchmark of 1-2% turnover.

The initial approximately $32 million (about Rs 200 crore) for the creation of the SRTMI will come in equal contribution from the Steel Development Fund of the Ministry and the participating companies.

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