India

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.

Two-Month Trial: Metal Buying Outlook

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.

Two-Month Trial: Metal Buying Outlook

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

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.

Two-Month Trial: Metal Buying Outlook

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.”

Free Download: The July 2016 MMI Report

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.

Two-Month Trial: Metal Buying Outlook

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

Rarely do a government’s stated aims and the aspirations of industry align quite so perfectly as they do in today’s India regarding steel.

Two-Month Trial: Metal Buying Outlook

Prime Minister Narendra Modi’s government has been championing a “Make in India” mantra since coming into power in 2014. It has manifested itself in various ways and most intensely with the state-run enterprises who are more open to government pressure. Even so, it has become a pervasive theme across the entire national economy, coercing companies to finds ways of buying domestically in rupees rather than directly importing materials and paying in foreign currency. Read more

In early June, the Chinese government held an auction for nine types of rare-earth metals, but bids came in below the production costs of China’s six major, consolidated suppliers.

Rare-Earths_Chart_July-2016_FNL

This year, China plans to add about 20,000 metric tons to its rare earth stockpiles. The six major suppliers are to keep 5,000 mt at government-designated warehouses and Beijing is to purchase the other 15,000 mt from those same six suppliers.

Two-Month Trial: Metal Buying Outlook

Beijing is hoping that the stockpiles will make prices rebound as, except for a few minor increases, rare earths have fallen for the entire year.

Our Rare Earths MMI fell another 6% this month and there is little reason to expect the important metals for batteries and magnets to escape the low range they’ve fluctuated in for the last two years. Dysprosium and neodymium both lost ground this month as demand has faltered for the motors and batteries both are used in. Yet, it wasn’t an entirely lost month for rare earths.

Scandium Exploration

Texas Mineral Resources signed a memorandum of understanding with an unnamed coal company in Pennsylvania to produce scandium and other rare earth byproducts from coal ash and tailings. Initial studies on the coal ash project there suggest modest capital expenditure would be required, along with profitability.

Scandium is used in fuel cells today but its future as an additive in high-strength aluminum is bright. We’ve already written about Airbus‘ experiments with it in both 3D-printing and generative design. If TMR’s scandium from coal ash experiment is successful, its plan to establish a new subsidiary titled Scandium America Corp. with the unnamed Pennsylvania Coal Company.

This won’t affect prices anytime soon. Scandium isn’t even a part of the Rare Earths MMI yet. However, it shows that manufacturing companies are demanding more and rarer metals snd companies are devoting significant resources to providing them.

India Sets Aside Rare Earth Blocs

India is also exploring more rare earths production. The nation recently issued new policy guidelines to encourage more private-sector exploration for the minerals that demarcates a total area of 1,000 square kilometers (386 square miles) where companies can search for rare earths, and introduce auctions for the right to explore for the deposits, according to Balvinder Kumar, the top bureaucrat in the nation’s Ministry of Mines.

Free Download: The June 2016 MMI Report

India has one of the world’s bigger reserves of rare earths and Prime Minister Narendra Modi wants to cut the red tape involved with setting up new mines. The region to be earmarked for exploration includes states such as Kerala and Tamil Nadu, according to Kumar, with another 400 square kilometers set aside exclusively for state-run companies to search for uranium and thorium.

For full access to this MetalMiner membership content:
Log In |

The international mining and metals sectors didn’t take a break for Independence Day. Rio Tinto Group has made its first moves under its new CEO and India is reconsidering its steel tariffs.

Jacques Shelves Rio Iron Ore Project

Rio Tinto Group has shelved its $20 billion Simandou iron ore project in Guinea because of a sustained slump in prices, the company’s new CEO Jean-Sebastien Jacques said in an interview with The Times newspaper.

Two-Month Trial: Metal Buying Outlook

The world’s second biggest miner by market capitalization had been seeking financing for Simandou, even after a $1.1 billion writedown on the project in February. Last month the Anglo-Australian company submitted a feasibility study to the Guinean government.

But global oversupply of iron ore made the project inviable at this time, Jacques told The Times.

India is Reconsidering Steel Minimum Import Prices

India may alter the list of steel items that attract a minimum import price if the country decides to continue with the measure beyond August, steel secretary Aruna Sundararajan said.

Free Download: The June 2016 MMI Report

India imposed the minimum import price on 173 steel products in February, helping cut inbound shipments last month to their lowest level in at least 14 months.

The decision by a majority of U.K. citizens to leave the European Union (E.U.) has injected a note of worry in business circles in faraway India, one of Great Britain’s former colonies and a nation that trades more than India Pale Ale with it.

Two-Month Trial: Metal Buying Outlook

Especially worried are India’s steel and automobile sectors. The anxiety stems from the fact that the U.K. was always seen as an attractive business entry point to the rest of the E.U. It’s favorable tax regime was the other positive factor that encouraged trade between the two nations.

Tata Steel’s Conundrum

But now, with the referendum over, trade bodies such as the Federation of Indian Chambers of Commerce and Industry (FICCI) feel that Brexit could create a lot of uncertainty for India, Inc. After all, Indian companies are the third-largest source of foreign direct investment in the U.K.

This steel plant at Port Talbot in South Wales, U.K., could close if Tata Steel can't find a buyer. Even as steel prices increased last week. Source: Adobe Stock/Petert2

Tata’s steel plant at Port Talbot in South Wales, U.K., could close if Tata Steel can’t find a buyer. Source: Adobe Stock/Petert2

Take Tata Steel for example, the company’s steel products enjoyed free trade with other European countries because Britain was part of the E.U. Now, depending on what type of deal is struck with its former E.U. cohorts, that status will likely be gone, leaving Tata Steel negatively impacted. Not only will it hurt the division’s exports, but it also complicates proposed sale of its U.K. plants. Read more

Huge inventory levels and increased production are not helping India’s iron ore mining sector.

Two-Month Trial: Metal Buying Outlook

According to a recent report by credit rating agency ICRA, India’s iron ore prices are not likely to recover in the near future. On the other hand, steel companies would benefit from this development in the short term. They were likely to enjoy “better profitability” due to improved steel prices in the current year, supported by imposition of minimum import price (MIP) by the government.

Production Up, Prices Down

India’s iron ore production in 2015-16 was at 155 million metric tons, registering an annual growth rate of 23%, ICRA said in a statement. Much of the incremental production in iron ore was because of stepped up mining in the Indian state of Odisha. In the current fiscal, ICRA said, India’s iron ore output could be somewhere in the range of 170-175 mmt.

The Federation of Indian Mineral Industries (FIMI), on the other hand, was of the view though that the Indian iron ore export mining industry needed tax relief to compete internationally after an absence of approximately four years when mining was largely banned in many Indian states.

Speaking at an iron ore conference in Singapore recently, R.K. Sharma, Secretary-general of FIMI said it would “challenging” to restart some of the mines after they have been shuttered for four years.

According to ICRA Corporate Sector Ratings Senior VP Jayanta Roy, because of the substantial iron ore inventory levels at existing mines and the fact that India’s iron ore production was slated to increase further, domestic iron ore prices are unlikely to recover meaningfully in the near term, which benefits local steel mills.

Post minimum-import-price, Indian hot-rolled coil (HRC) prices have seen a sharp increase of about 25% from the lows reached in February 2016, according to ICRA’s quarterly research report on the steel industry. Industry players saw additional gains due to an increase in sales volumes, as imports were likely to reduce in the current year.

Free Download: The May 2016 MMI Report

The MIP is scheduled to expire in the second quarter of the India’s fiscal year (April 1 to March 31), but according to analysts, the present level of international prices and the extension of a safeguard duty by the Indian Government to March 2018, could continue to boost prices and prospects for Indian steel producers.

“The World Silver Survey 2016,” an annual report published by The Silver Institute, said Asia’s silver mine output went up last year by 1% to 165.1 million ounces, following a 3% drop in 2014. A major part of the decrease originated from lead and zinc production sources with a lesser drop from primary silver mines. The bulk of the loss could be traced to mines in China and Kazakhstan.

Two-Month Trial: Metal Buying Outlook

For India, silver production showed a “notable rise” last year, of over two-fifths, or by 3.6 million ounces, to reach a record production total for the country of 12.0 million ounces.

Indian Silver Production

Higher ore volumes and grades from the country’s Sindesar Khurd mine in the second half of the year were behind much of the gain, amid a period of otherwise lower output as the company’s flagship Rampura Agucha moved from open pit to underground mining.

Total physical demand in 2015 saw a 3% increase in 2015, driven by higher retail investment, jewelry and silverware fabrication and solar and ethylene oxide catalyst demand.

Also, last year, silver retail investment and jewelry fabrication hit a record high. Jewelry fabrication, for example, increased for the third consecutive year and hit a fresh record high of 226.5 millions ounces. Again, strong growth in Indian and North American fabrication offset a near one-third drop in Chinese fabrication.

The silver market, according to the report, realized an annual physical deficit for the third consecutive year in 2015. The market’s deficit of 129.8 million ounces was more than 60% larger than the previous year’s deficit of 78.6 million ounces and the third largest on record, the survey recorded. Silver prices averaged $15.68/oz, down 17.8% from 2014, the fourth consecutive annual drop. Prices were pushed lower by investor expectations for an interest rate hike in the United States and a weakening Chinese economy.

Silver bullion trade in 2015 continued to be dominated by flows to India, where total imports reached an all-time high of 256.0 million ounces, rising by 16% from the 2014 level.

In India, scrap supply declined for a third consecutive year falling by 14% from 2014 to 2.5 million ounces, the lowest in more than 15 years. This decline was largely attributed to three consecutive years of falls in annual average prices, which last year had dropped by 14%.

Physical Bar Demand

Compared to the previous year, global physical bar investment rose to a record 158.2 million ounces in 2015, a 24% surge. The declining silver price drove bargain buying higher, particularly in India and the U.S., where bar consumption rose 31% and 25%, respectively, said the survey. What also gave a boost to silver bar demand was a strong demand for official coins and the corresponding shortfalls of coin supply, as investors sought an alternative to satiate investment demand.

Last year, physical bar investments in India increased by 31% to 82.5 million ounces, the highest since 2008. In India, a large part of this form of investment comes from short term hoarding to benefit from lower prices or to profit from a differential in the spot and futures market. This type of build-up of positions eventually returns to the market as disinvestment when the price rallies.

Such disinvestment during price rallies resulted in local premiums (the price at which the metal is sold by a domestic trader after buying from importing agency) falling to a low of 2 cents and at times being forced to sell at discount, as against a lower threshold of 3 cents observed in 2014.

Turnover on the Multi-Commodity Exchange of India (MCX) more than halved in 2014 as a result of the commodities transaction tax, which was introduced in July 2013. The marginal 1% year-on-year decrease in 2015, to a nominal 7,705 million ounces, might indicate that investors have gradually adjusted to the change.

Outlook

The survey said in the first quarter of 2016, although safe haven demand was the primary driver, the relatively stronger market fundamentals acted as a spring board for silver prices, given the continued higher demand for coins and concern around mine supply reduction.

Free Download: The May 2016 MMI Report

The report predicted that silver mine production would continue to suffer losses in 2016 as a consequence of supply cuts in lead and zinc production, in combination with lower forecast output from both the primary silver and gold industries.