Author Archives: Sohrab Darabshaw

So, will aluminum receive a similar tariff shield as steel has enjoyed in India? The shield refers to a minimum import price (MIP) that is generally imposed on cheap commodities entering India, just like cheap steel from China.

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In the case of aluminum, too, the main “culprit” seems to be China. Yet, the stance of the Indian government vis-à-vis an MIP is still not clear, as various ministries concerned with the development have given divergent opinions. Read more

India will complete the second phase of its mining auctions later this month, after the first round last year received a lukewarm response. Going under the hammer will be gold, diamond and iron ore mines.

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Mines in five provinces — Karnataka, Andhra Pradesh, Madhya Pradesh, Rajasthan and Jharkhand — will be auctioned. This time, there are 14 iron ore mines, 12 blocks of limestone and one block each of gold, diamond and copper. While some analysts have predicted a better response than last time to the iron ore mining auction, the limestone blocks may not see much action because of the cement market slump.

Round One

In the first round of the auction, the states offered 47 mines bearing minerals such as gold, iron ore, bauxite and limestone.

They were able to auction seven mines in that phase, earning the government billions of dollars over the next 50 years. However, 17 blocks were not sold due to an insufficient number of initial bids on account of factors such as quantity and grade of ore and low quality of the mineralization studies, among other reasons.

The first round also came under scrutiny when the comptroller and auditor general of India (CAG), a body that audits all government expenditures, passed certain adverse observations. It said in a report tabled in the Indian Parliament that competition may have been restricted in the auction of 11 coal blocks on account of multiple bids by corporate groups made through joint ventures or subsidiaries.

What Does This Mean For India’s Steel Exports?

The iron ore auction comes at a time when the Indian government is contemplating a relaxation of export duties on iron ore. This has led to protests from the domestic steel industry.

In a representation to the steel ministry, the Indian Steel Association asked the government to continue with a 30% export duty on all grades of ore, to preserve natural resources for domestic use.

The government already cut the export duty on low-grade fines to 10% earlier this year but continued with a 30% levy on lumps.

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India’s ore production is lagging its growth of steel production. Production, according to steel ministry data, fell at a compound annual growth rate (CAGR) of 6.5% in the past five years.

She’s been described as the “green lady,” and The Guardian once called her the “woman who loves garbage.”

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Veena Sahajwalla, a native of Mumbai, is the director of the Centre for Sustainable Materials Research and Technology at the University of New South Wales in Australia

Last weekend, Sahajwalla was on one of her many visits to India, where she addressed a high profile seminar at the Scrap Recycling Conference: Emerging Markets. There, she told delegates about her pioneering effort in making “green steel” from, guess what? End-of-life rubber tires.

Polymer Injection Technology (PIT), a technology that Sahajwalla invented, can be used to recycle tires to replace coal and coke in the making of steel. While the two-day conference saw almost 300 delegates from the scrap and steel industry confab on issues ranging from the world business of recycling to automobile recycling in India, Veena’s presentation seemed to have created the most buzz.

The Indo-Australian scientist insists that her technology could be the answer to the growing global problem of disposal of waste tires globally. The United States, for example, was the largest producer of waste tires at about 290 million a year, but now China and India are giving the U.S. a run for its money because of increasing sales of new vehicles.

Automobile tires are made from a mix of natural and synthetic rubber, and various structural reinforcing elements including metal wires and chemical additives. The PIT introduces a modification into the conventional manufacturing process for steel. The technology precisely controls the injection of granulated waste tire material in conventional electric arc furnace (EAF) steelmaking, partially replacing non-renewable coke. Tire rubber, like coke, is a good source of hydrocarbons, which means they can be transformed in EAF steelmaking.

New South Wales University researched the replacement technology for years and, today, millions of waste tires are being transformed into high quality steel in Australia.

Recently, the same university also showcased a pilot micro-factory that safely transforms toxic e-waste into high-value metal alloys, offering a low-cost solution to what to do with the millions of phones, computers and other e-waste products plaguing India. Sahajwalla was involved in this project, too.

She told the Asian Scientist Magazine recently that a ton of mobile phones (about 6,000 handsets) contained about 130 kilograms of copper, 3.5 kg of silver, 340 grams of gold and 140 grams of palladium, worth tens of thousands of dollars. Sahajwalla explained that she used precisely controlled high-temperature reactions to produce copper and tin-based alloys from tossed out printed circuit boards (PCBs) while simultaneously destroying toxins.

All this is sweet music to the ears of Indian recycling industry. The country is the world’s second-largest mobile phone market, and the fifth-largest producer of e-waste, discarding roughly 1.9 million metric tons of such waste every year. Veena is confident that the PIT can solve India’s waste tyres problem.

India’s Recycled Metal Market

While the global recycled metal market is estimated to touch $476.2 billion by 2024, India’s scrap recycling industry is set to register an annual growth of 11.4% until the year 2020, according to a recent report by Frost & Sullivan. India’s annual scrap consumption was 20.40 mmt; it imports 6.48 mmt of scrap, and is the world’s third-largest importer.

But India’s traditional metals, ferrous and non-ferrous, recycling rate is about 20%, less than the world average. For some years now, the unorganized sector has been demanding that the Indian government accord it “industry” status and implement a metal recycling policy with a view to ensuring fast-track growth.

India has the potential to become one of largest car recycling regions, and the demand for policy was something that was even discussed at the two-day conference here. The Indian government recently proposed offering consumers an incentive of about $375 (almost 25,133 Indian Rupees) for a passenger car handed in to be scrapped in the hopes of boosting recycling rates.

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A few months ago, the state-run scrap metal trading firm MSTC Ltd. signed an agreement with the Mumbai-based Mahindra Intertrade, a part of the Mahindra Group, to set up an auto shredding and recycling plant in India. The joint venture will help meet India’s annual ferrous scrap usage requirement of about 6 mmt.

The onward march of an “aggressive” China, the world’s biggest supplier and consumer of steel, has virtually come to a halt in recent times due to a variety of reasons, but India’s steel sector has picked up speed, both in steel output and demand.

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A fresh report by Moody’s Investors Services said demand in India is set to outstrip the region’s average. It said the need for steel in India would outpace the regional average as the country’s GDP growth of around 7.5% in 2016 and 2017 was the highest in Asia.

As reported by MetalMiner, China’s steel production was predicted to contract this year and shrink even further in 2017. Li Xinchuang, Vice-chairman at the China Iron & Steel Association explained that was due to a drop in local demand.

So when the red dragon’s huffing and puffing, what’s added speed to the elephant?

Here’s why:

  • India’s reform and policy support for infrastructure and manufacturing, as well as increasing urbanization is driving steel consumption.
  • The Indian government’s protectionist measures over the last two years like anti-dumping tax are bearing fruit.
  • Recent commissioning of capacities by big producers such as Steel Authority of India Limited, JSW Steel and Tata Steel.

Moody’s said the profitability of Indian steel companies such as Tata would outperform that of regional peers owing to increasing domestic demand and measures like minimum import prices. Read more

The month of August has seen the Indian government slap anti-dumping duties on the import of a variety of steel products from six countries including China, South Korea, Brazil and Indonesia.

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In the first week, the import duty was imposed on hot-rolled steel products, while a few days ago, the duty was enforced on certain cold-rolled flat steel products from different countries to protect the domestic industry from cheap imports.

In the first case, anti-dumping duties $474-557 per metric ton were imposed on hot-rolled flat products of alloy or non-alloy steel from China, Japan, South Korea, Russia, Brazil and Indonesia, according to a government notification.

Coiledsteel_585

Imports of coiled steel will be heavily tariffed in India, too. Source: iStock.

The duty will be in force for six months until February 7.

Hot-Rolled Duties

An anti-dumping duty of $474 per ton was imposed on import of hot-rolled flat products of alloy or non-alloy steel of a width up to 2,100 millimeter with a width up to 25 mm from Korea and Japan.

According to an Indian Express report Korean firms affected by this were Hyundai Steel Co. and POSCO. Three Japanese companies — JFE Steel Corp., Nippon Steel and Sumitomo Metal Corp. are also on the list. A similar anti-dumping duty was slapped on imports of similar products from China. Exporters Angang Steel Company Ltd. and Zhangjiagang were among the hardest hit. Imports of the same from Indonesia, Russia and Brazil attracted the $474 per mt duty. Read more

A new space has opened up for India’s scrap metal recycling business. The government has given its go-ahead to a “state-of-the-art” auto shredding and recycling plant, which has been in the pipeline for about a year.

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The automotive scrap shredder/recycler is the result of an agreement signed with the state-run metal scrap trading firm MSTC (formerly Metal Scrap Trade Corporation) and Mahindra Intertrade, a part of the diversified $17.8 billion Mahindra Group. Mahindra, incidentally, is a well-known auto major in India, too.

Potentially Huge Market

India’s scrap market is estimated to be in the range of about $1.8 billion, and most of the scrap required by the country, about 5-6 million metric tons, is imported.

Scrap Recycling Yard

India will soon receive its first state-of-the-art automotive recycling yard. Source: Adobe Stock/Robert Hainer.

In a thriving auto market, such as India’s, there’s no formal disposal method for end of life vehicles right now, thus the new joint venture has a ready-made market. The JV will start off with a single unit, but will soon expand across India. The idea is to save India precious foreign exchange rupees, in addition to creating jobs. Every ton of new steel manufactured from scrap will help save iron ore, coal, electricity and limestone from being produced. Read more

The decision to set up a modern, state-of-the-art auto shredding/recycling plant in India could not have come at a more opportune time. Many Indian provinces, led by New Delhi, are starting to come around to the view that older vehicles, especially those running on diesel, need to be banned.

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Older cars pollute more than the ones that adhere to the India’s latest “Bharat Stage” (pollution control) norms. The Mahindra/MSTC joint-venture is also planned to be able to scrap ships and machines.

India’s National Green Tribunal (NGT) recently asked the New Delhi local government to deregister diesel cars 10 years or older. That’s a large chunk of the approx. 8.5 million cars registered in New Delhi, which would end up being either sold outside New Delhi or totally scrapped.

The number of cars sold in India was expected to grow from 2.2 million vehicles back in 2010 to 10.6 million units by 2020. At present, about 28 million vehicles are said to be over 15 years old and ready for the scrap heap.

India’s Cash for Clunkers

The Indian Government was actively contemplating better policies in the organized and mandatory vehicle recycling business when this project came along. India had the potential to become one of largest car recycling regions, according to SteelMint Events, and the rise of recycling-friendly legislation was one of the topics to be discussed at the Scrap Recycling – Emerging Markets conference to be held in September in New Delhi.

The vehicle scrapping policy is formalized in legislation as the Voluntary Vehicle Fleet Modernization Plan (V-VMP). The bill is currently in its draft stage but, when passed, it would apply to all vehicles, regardless of engine type, bought on or before March 31, 2005. The Ministry of Road Transport and Highways (MoRTH) submitted the draft policy to the Ministry of Finance for approval. The government also recently proposed offering consumers an incentive of $375 for any passenger car handed in for scrapping to boost recycling rates.

When the policy is implemented, analysts predict about 28 million older, polluting vehicles will be taken off the roads. So, while automakers moan the NGT’s order on diesel cars in the short term, in the long-term, companies such as Maruti Suzuki India Ltd. are very happy that the policy means sales of more cars.

Maruti Suzuki India Ltd. is India’s largest car maker. It believes the local car market will reach 5 million units in annual sales by 2020, making the country the fourth-largest market in the world, if the V-VMP is passed.

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The automaker’s forecast is in line with the central government’s Auto Mission Plan II that forecasts the passenger vehicle (PV) market to more than triple to 9.4 million units by 2026 from 2.8 million now if the economy grows at an average rate of 5.8% a year. If the economy grows at an average yearly pace of 7.5%, the size of the passenger vehicle market is forecast to rise to 13.4 million units, making it the world’s second-largest after China.

While India’s Tata Steel’s effort to sell its U.K. assets enters its second round of bids, there’s some good news for the company from the other side of the Atlantic.

The provisional government of Quebec in Canada has decided to invest $133 million (C $175 million)  in Tata Steel’s iron ore project in the region between Quebec and Labrador.

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According to an announcement made by Tata Steel Minerals Canada (TSMC), the company’s Canadian subsidiary, it had been awarded the financial contribution to support the development of its Direct Shipping Ore (DSO) Project. The contribution included an equity stake of $95.72 million (C $125 million) through the Capital Mining Hydrocarbons Fund which supported mining activities in the northern region of Québec and a loan of $38.29 million (C $50 million) through Investment Québec.

Canada Supports Iron Ore

Analysts said the equity/loan assistance was aimed at fueling growth in the mining sector in the region and would also create jobs. TSMC, a joint venture, is developing the iron ore project in Quebec. Tata Steel holds a 94% stake in the JV while the remainder is held by the Toronto-listed New Millennium Corporation.

The DSO project involves mining, crushing, washing, screening and drying the run-of-mine ore, and is expected to produce 4.2 million tons of sinter fines and pellet feed a year.

The finished product will be transported to Sept-Îles, Québec, from where it will be shipped to Tata Steel Europe’s steelmaking facilities.

With the Canadian government’s equity infusion in TSMC, Tata Steel’s stake will come down though it’s not yet clear how much. The Quebec Government’s financial package is in line with a similar financial package proposal by the U.K. Government for Tata Steel’s Port Talbot operations, aimed at rescuing the British steel industry.

Port Talbot Still on the Block

Last week, CNBC TV 18 reported that Tata may keep the Port Talbot unit. Quoting unnamed sources, the report claimed Tata Steel is likely to sell off downstream units in Rostherham, Hartlepool and Stocksbridge, instead. Each of these operations have a 100-million-metric-ton production capacity and together employ about 3,000 workers. Management buyout firm Excalibur and Indian-origin businessman Sanjeev Gupta’s Liberty House are said to be in the fray for the assets of the other operations.

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Tata had written down the value of its U.K. steel assets to almost zero and was also exploring a merger of its European business — including its profitable assets in the Netherlands — with German peer ThyssenKrupp.

There’s a quiet battle being fought outside the limelight between India and other steel producing nations over the world’s largest democracy’s protectionist measure, the Minimum Import Price (MIP), introduced in February.

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The MIP, essentially a tariff on imports targeted mainly at neighboring China, is set to expire August 5. While large steelmakers in India are pushing for the continuation of MIP by the government, some member-nations of the World Trade Organization have started to apply pressure to remove the MIP. The MIP on 173 steel items for six months was introduced as a way to curb cheap imports and firm up steel prices in the home market. The MIP ranged from $341 a metric ton to $752/mt depending on which product.

Other Nations Protest the MIP

In a recent meeting of the goods council at the WTO, nine members, including the U.S., the European Union and China, asked India to justify its continued restrictions on imported steel.

There are some who say that if India continues with the MIP after the deadline it could be dragged into dispute proceedings at the WTO by any of the complaining members, although India has consistently maintained it’s done no wrong and the MIP is a general agreement on tariffs and trade-compliant instrument to regulate imports. Almost all steel producing major countries have imposed one form or the other of tariffs or other protectionist measures to curb steel imports. There are also reports here that India could prune the list of 173 steel products and still keep the MIP in effect for most products.

MIP Effect: Imports Fall

In the first quarter of FY17 (India’s fiscal year begins in on April 1) total steel production in India grew by 3.8% year-on-year, while overall steel consumption grew by only 0.3%. In the same period, imports fell by 30.7% year-on-year, according to a new report by rating agency India Rating and Research (Ind-Ra).

According to the agency, the increase in Indian steel production was supported by the MIP policy but was unlikely to continue beyond August after it expires. Since the imposition of the MIP, domestic producers benefited by way of import substitution. Ind-Ra felt the continuation of the industry protection measure beyond August is required to “safeguard the interest of the domestic steel industry, which has shown signs of a recovery in the current fiscal on the back of MIP.”

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Ind-Ra opined that profitability for most steel producers is likely to remain under pressure due to the newly added capacity. The interest cost and depreciation from these new capacities has now started to impact the income statements and increased both operations and financial leverage for India’s steel industry. For India’s steel companies to see healthy profit generation, capacity utilization levels need to increase significantly.

In the coming years, India will be scouting around for strategic partnerships with multinational mining exploration companies to secure the supply of critical minerals for its defense and manufacturing programs.

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In the opinion of analysts, if the Indian government wants its much-vaunted “Make in India” campaign to be a real success, it has no choice but to do this. Over the coming years, India will need to strategically develop joint partnerships with existing global players to secure assured supply of critical minerals. Read more