Author Archives: Sohrab Darabshaw

Alexander Chudaev/Adobe Stock

A financing deal was recently struck between steel tycoon Sanjeev Gupta’s GFG Alliance with international banks for the purchase of Rio Tinto’s Dunkerque aluminum smelter in France, one of Europe’s largest smelters. The Liberty House Group is a part of the GFG Alliance.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

The term loan secured on standard financial terms provides five-year committed funds, Liberty said in a press release. Analysts say the development clears the way for the deal to be formally completed before the end of November.

Gupta, the executive chairman of the GFG Alliance, was quoted as saying, “This transaction allows us to press ahead with our plans to develop Dunkerque, to expand production and create added-value downstream operations. This agreement underlines the support of the banking community for GFG’s vision for economic and environmental sustainability.”

The agreement comes after a series of talks which also involved getting the French government’s approval, plus garnering long-term power price contracts.

According to GFG Alliance, there will now be more investments in the property after the plant is eventually acquired. Previously, Liberty House acquired an aluminum wheels facility in Chateauroux. With these purchases the firm will position itself as a major integrated manufacturing business, producing metals and components for the automotive and other growing industries in France.

The Dunkerque smelter boasts an annual capacity of 270,000 tons. The smelter was commissioned in 1991 and later purchased by Alcan, which was then purchased by Rio Tinto about a decade ago.

Liberty is part of the GFG Alliance, a global group of energy, mining, metals, engineering, logistics and financial services businesses, headquartered in London. GFG has additional hubs in Dubai, Hong Kong, Singapore, Sydney, Paris and New York, and a presence in around 30 countries worldwide. The GFG Alliance has a turnover exceeding U.S. $15 billion, and features integrated industrials and metals businesses under the Liberty banner.

For more efficient carbon steel buying strategies, take a free trial of MetalMiner’s Monthly Outlook!

Recently, Liberty Steel announced an agreement to deal with ArcelorMittal to acquire three European steel plants, signaling another major expansion by the British-owned Liberty Steel.

Much is happening at Tata Steel.

To begin with, the Indian steel conglomerate announced it was looking at increasing its installed capacity from the present 18.5 million tons (MT) per annum to 30 MT by 2025.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

In the near term, Tata wants to have a common branding strategy for all its acquired companies so that end-consumers are not confused, according to the Hindu Business Line.

Recently, Tata Steel picked up steel plants of Bhushan Steel and the steel business of Usha Martin, and is said to be looking around to pick up some more stressed steel units.

The Press Trust of India (PTI) in its report quoted Tata Steel (India) President Anand Sen as saying bringing together of all Tata Steel’s assets under one brand would take place only after they are upgraded to meet Tata’s high standards. The Tata Steel India president was speaking on the eve of the announcement of the 56th Metallurgists’ Day and 72nd Annual Technical Meeting — organized by the Indian Institute of Metals along with Tata Steel — scheduled for Nov. 14-16.

In both acquisition cases, there are several areas which will require an upgrade in order to bring the two plants on par with the standards of Tata Steel. Bhushan Steel and Usha Martin have a combined capacity of 7 million tons.

This would be factored in Tata Steel’s aim of going up to 30 MT capacity. In addition, the projected capacity of the Kalinganagar plant is to reach 8 MT after its second phase of expansion, as well as the 13.5 MT from the Jamshedpur plant.

The Kalinganagar second phase is expected to increase the capacity from the present 3 MT to 8 MT, and will be completed by early 2022.

All this is music to the ears of the domestic steel industry.

India’s steel demand is growing at about 7%. Domestic steel consumption grew at 9.2% year over year in the first quarter of fiscal year 2019 compared with 7.9% in FY ’18.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

In the meantime, Tata Steel said it would continue talks with the European Commission, the Economic Times reported, as the Commission has raised concerns over a plan by Tata to set up a steel joint venture with Thyssenkrupp in Europe.

The European Commission had initiated a deeper investigation into the proposed joint venture following fears being expressed that it could result in higher prices.

Zerophoto/Adobe Stock

It was the first edition of its kind, but it attracted quite an audience.

The International Steel Conclave, organized by the Indian Steel Association and Messe Frankfurt India, was held in the Indian capital of New Delhi on Oct. 25.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

Using the occasion to highlight the Indian government’s rapid strides in the steel sector, Minister Birender Singh said India is poised to achieve its stipulated target of 300 million tons of capacity by 2030. About 150 delegates and speakers, from national and international steel companies — including JSW Group, Tata Steel, JSPL, Steel Authority of India Ltd — were in attendance.

The minister lamented that though India does have good engineers and scientists, the country is not leading vis-à-vis innovation in steel technology. According to Singh, advancements would help reduce the country’s import bill.

Sounding positive on the forward movement of steel in India, Singh noted crude steel production capacity had gone up to 52 million tons, up by 6% from last year. He dubbed 2018 as a “year of new beginnings for the industry.”

Read more

misunseo/Adobe Stock

Festival season in India normally means one thing: a rush to buy gold.

Outside of China, India sees the most amount of gold buying when Indians are, well, happy or enjoying a moment — be it a party, a wedding or a festival.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

But this festive season, starting from around the beginning of October, gold buying has not picked up at the pace one it used to.

Reports are coming in that Indians are not flocking to jewelry stores as they normally would for a couple of reasons – an increase in the price of domestic gold and the increasing value of the U.S. dollar versus the Indian rupee.

At the first marker of this season, that is Dusshera, when buying the yellow metal is considered auspicious, demand was down between 20-40% in some places, as compared to the same period last year, according to a Reuters report.

Of course, demand was better compared to some of the previous months, but it has not been as high as it was last year, according to Nitin Khandelwal, chairman of the All Indian Gems & Jewellery Domestic Council, as quoted by Reuters.

Much of the demand for “festival” gold comes from rural India. This year, that sector is lagging, partly because of failure of the monsoon in many parts. A good monsoon means a bumper crop, which translates into better buying of the bullion during the festival time. Even discounts of about U.S. $8 an ounce failed to pull in the crowds.

The next milestone is the Indian festival of lights, Diwali.

While some retail jewelers are optimistic of an increase in pickup, others are keeping their fingers crossed. The price of gold continues to soar, touching Rs 32, 350 (about U.S. $442) per 10 grams as of Oct. 23.

Gold plays a major role in the Indian economy. Previous studies have pegged India’s gold stock at around 24,000 tons, mostly held by the average Indian. Its value, at today’s rates, reaches about U.S. $800 billion.

The last quarter of the year is the season of peak demand, with Indians buying almost 240 metric tons on average in the past four years, according to the World Gold Council.

This year, Dhanteras — one of the most auspicious days for Indians to buy gold — falls on Nov. 5 and will be followed by Diwali.

Both retailers and bullion analysts say that if things on the ground do no improve by then, the trend seen during Dusshera will follow into Diwali.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Gold futures at India’s Multi Commodity Exchange of India Ltd. are up by over 10% this year, the highest since July 2016.

The rupee, on the other hand, is at its lowest standing versus the dollar in 16 years. Ask any bullion dealer or retailer and the market rule of thumb is that rising prices always bring down sales.

Going by the way things are on the ground at the moment, chances of things changing dramatically for the better by the first fortnight of November seems like a far-off dream.

This story of India’s coal shortage refuses to die down.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

For some years now, many parts of the country have been facing power cuts. Why? Because of a shortage of coal, which becomes even more acute in the monsoon season (which is just about ending in most parts of India).

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

Northern provinces, including the country’s capital, New Delhi, and those in the central part are susceptible to coal-linked power interruptions, forcing industries to halt temporarily and wreaking havoc on the lives of ordinary people.

India’s single-largest supplier of coal for thermal plants, the state-run Coal India, finds itself at the receiving end because of supply issues, which it, in turn, says is due to unavailability of rail wagons. The firm accounts for about 80% of coal production.

Not only are power plants complaining of the coal shortage — other industries are now protesting loudly, too.

The Aluminium Association of India (AAI), for example, dashed off a letter to the federal government asking it to halt prioritizing coal supply to power plants.

A report in the Indian newspaper The Hindu said excluding other important industries from the coal supply chain was having a detrimental and cascading effect. The reaction comes after the government asked coal companies to send off supply to thermal plants first.

As expected, in these troubled days of import-export between the U.S. and the rest of the world, India’s coal imports shot up by 35% to 21.1 million tons (MT) in September this year, compared to 15.61 million tons in same period last fiscal, according to the Economic Times. Imports were largely of non-coking coal.

Government officials had hoped that this monsoon season it would be a different story compared to some of the previous years. The federal government had assured all that this time there was enough dry coal supply for power plants. At the end of the rainy season, the government’s claim was shown to be untrue.

Incidentally, Coal India registered 15.2% growth in coal production during the first quarter ended June 2018, amounting to 136.87 MT.

One can even claim that an indirect victim of the ongoing U.S.-China trade tariff war is India’s aluminum sector.

Because of the tussle, both countries are sending their aluminum scrap to India. In the AAI’s letter, it pointed out that aluminum smelting needs uninterrupted electricity. An outage of over 2 hours directly affected the functioning of the smelters for a temporary period, affecting bottom lines and yielding lower output.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Coal India had sent 84% of its coal to power plants up till Oct. 12, sending 1.34 MT of coal per day to power plants in October.

The Indian province of Goa, known world over for tourism, was once also a well-known destination on India’s mining map.

But legal, environmental and political issues ensured the stoppage of mining operations there in 2012.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

Though operations did resume to a degree in 2015, things have not picked back up speed to pre-2012 levels.

All that has now led Manohar Parrikar, Goa’s chief minister, to write to the Government of India (GoI), asking it to fast-track the complete resumption of mining in Goa.

The chief minister, in his letter to Indian Minister for Mines Narendra Singh Tomar, has said Goa’s mining sector needed an immediate “legislative cure,” according to a report in The Statesman.

What he has sought is an amendment of the Mines and Minerals (Development and Regulation) Act. This will mean that current lease holders can continue mining. It would also allow the postponement of auction of the iron ore leases.

The Indian government is perturbed by the slowing down of the overall mining sector in India.

For example, a recent report by the Centre for Monitoring Indian Economy (CMIE) pointed out that foreign direct investment (FDI) inflows had slowed down significantly, from U.S. $659 million in 2014-15 to about $36 million at the end of 2017-18. Mining’s overall contribution to FDI had declined from 2.06% to 0.08% in the same period.

For Goa, specifically, there were hopes expressed earlier that mining would resume full-scale by Oct. 1 this year, especially because even the province’s local government had unanimously passed a resolution a few months ago seeking the intervention of the Indian federal government. This resolution asked the government to suitably amend the local laws to allow mining leases to be operational till 2037, and also amend the central laws.

In 2015-16, for example, only 7 million tons of iron ore were exported, while the following year it rose to 20 MTA, the ceiling set by the Supreme Court of India.

But the local government’s decision to fast track the renewal of leases without following basic laid down rules led to mining coming to a complete halt from March 2018.

One of the affected mining companies is the Anil Agarwal-owned Vedanta Group. To express support for the chief minister’s demand, Agarwal recently tweeted “concern” over the imports of natural resources, and suggested that iron ore mining in Goa be restarted.

In his tweet, the executive chairman said iron ore exports worth billions from Goa had stopped, all of which had contributed to the value erosion of the Indian rupee versus the U.S. dollar.

For more efficient carbon steel buying strategies, take a free trial of MetalMiner’s Monthly Outlook!

In a tweet, which tagged Prime Minister Narendra Modi, Agarwal added there was an urgent need to resume mining in Goa.

By now, much has been written on U.S. trade tariffs, the latest being the 10% tariff on Chinese imports amounting to a value of $200 billion. While almost all the countries against whom the U.S. has imposed tariffs have chosen to retaliate and go in for a tit-for-tat policy, India, curiously, has decided to be cautious.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

MetalMiner has followed this story over the last few months. As late as August, we reported that for the second time, India deferred imposing a tit-for-tat duty on the import of over two dozen products from India, including certain flat-rolled stainless steel products. It was supposed to come into effect Aug. 8, but now the new date is Sept. 18.

Sept 18’s come & gone, and it is now being reported that the Indian government has postponed its decision yet again.

A report by Live Mint said India would not be imposing a “revenge tax” against 29 American products worth U.S. $235 million to oppose the move by the U.S. to raise import duties on Indian steel and aluminum.

The Live Mint report quoted a “person with knowledge of the development” as saying the two nations were engaged in arriving at a negotiated solution on the issue.

So when’s the next date? Nov. 3.

It was on June 20 that India had said it would raise tariffs on the U.S. products, including fruits worth $10.6 billion imports in retaliation.

So why is India dithering?

Political observers cite many reasons for India’s reluctance. One is that India is headed for a general election soon and the government does not want Indo-U.S. ties to deteriorate because it could then become a poll issue, giving the opposition a handy weapon.

The other could be that both countries were engaged in what’s known as the “2+2”  negotiations on many fronts, such as defense, so neither wants to ratchet up the heat. Also, U.S. President Donald Trump’s friendly relationship with his Indian Prime Minister Narendra Modi is well-known.

India has been demanding a waiver on tariff hikes similar to the ones the U.S. granted to Argentina, Brazil and South Korea. There were some unconfirmed reports here that the Trump administration had hinted that it was willing to waive off the tariff hikes on steel and aluminum if India were to cap the exports at 70% of its total exports to the U.S. last year. India, though, does not seem to be keen on doing this, though there’s no official word on it.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

India’s exports of steel items to the U.S. went down by 42% in the quarter ending June, mostly because of the sanctions.

Zerophoto/Adobe Stock

Moody’s Investors Service has said India will be the brightest spot for the steel sector over the next 12-18 months, according to a report by the Hindu Business Line.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

Moody’s pointed out that India’s steel consumption was rising at least 5.5%-6% every year, tracking strong GDP growth of 7.3%-7.5%.

It said rated Indian steel producers had only marginal exposure to the U.S. Moody’s has estimated that their indirect exposure may also be limited, given most of their sales were to domestic automotive and manufacturing companies.

In fact, on Tuesday the Indian Steel Ministry, perhaps buoyed by sentiments such as those expressed by Moody’s, issued a statement saying it was hopeful of occupying the second slot in global steel output (after China), while the government has also taken steps to encourage secondary steel producers to boost performance.

According to Moody’s, with minimal new steel capacity expected to be commissioned until 2021 in India, robust steel demand — especially from the construction, infrastructure and automotive sectors — would keep end-product prices high, even as rising costs for key inputs, like coking coal and iron ore, put pressure on profitability.

Moody’s also noted the outlook for the Asian steel industry was stable, reflecting the consideration that the profitability of rated producers will increase moderately over the next 12 months against the backdrop of overall steady regional demand.

The robust steel demand, especially from the domestic construction, infrastructure and automotive sectors would keep end-product prices high, even as rising costs for key inputs, coking coal and iron ore pressure profitability.

The Indian Government believes that, in conjunction with the primary steel sector, the secondary steel sector holds enormous potential for growth and opportunities.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

“Strong performance of the secondary steel sector has added muscle to India’s steel production. Encouraged by the overall potential, the Government of India has taken various initiatives to improve the performance of this sector. Based on the present growth pattern, it is expected that India will rise to the second position after China,” the statement said.

Zerophoto/Adobe Stock

Rare earth exporters in India have lodged protests after the government snatched their rights to send these precious elements abroad.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Rare-earth metals are a group of 17 elements, which are found in geological deposits. Some of the most abundant metals in the world are neodymium, cerium, and lanthanum.

All rare earths are classified into two groups: light rare earths (LREs), and heavy rare earths (HREs).

Just 20 years earlier, the Government of India (GoI) allowed the private sector into beach sand mining. Now, it issued a notification, wherein the right to export these rare-earth metals have been taken away.

Instead, the GoI has introduced a canalization system.

The primary aim of canalization of exports through Indian Rare Earths (IRE), according to the Financial Express, is to curtail direct private sector export of beach sand minerals and derivatives like ilmenite, rutile and zircon.

Canalizing means putting quantitative restrictions on exports.

But the move has obviously not gone down well with rare earths miners. Miners have said these checks would curtail beach sand mining activities and deprive India of a developing sector.

According to a new research report by Global Market Insights, Inc, the rare earths market size will exceed U.S. $20 billion by 2024. It’s well known that the majority of the global rare earth production capacity is in China. However, China has not shown much inclination of sharing those resources with other nations.

Thus, the focus is on countries like India and Japan — specifically India, which has a sizable reserve.

Driving this sector is the demand for magnets in automobiles, and requirements in defense and energy generation. Electric cars, for example, rely on some of rare-earth metals.

Beach sand minerals and their derivatives find diverse applications in paints and other decorative materials, papers and plastics, and high-tech applications. At present, much of India’s share of domestic production, as well as exports, are done by private sector firms.

The GoI notification said export of beach sand minerals had been brought under the STE and shall be canalized through IRE. Beach sand minerals, permitted anywhere in the export policy, will now be regulated in terms of the new policy. One of the other sources of angst for private firms in the business is that they have already made huge capital investments by way of technology and production facilities.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

According to the Financial Express report, beach sand minerals mining activity commenced in India in 1908. In addition, until 1998, other minerals were restricted only to public sector companies (except for garnet), but just after that the GoI embarked on a path of liberalization that allowed participation by the private sector.

The Anil Agarwal-led Vedanta Ltd. may have faced a blow when one of its operations in India was shut down earlier this year, but that is not stopping it from investing more money in the country.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Navin Agarwal, chairman of the company, has said they are planning invest as much as about $8 billion (Rs 56,000 crore) to expand its oil and energy businesses in India.

“As India’s largest private sector oil producer, Vedanta Limited contributes 27% to the domestic production and aspires to take it up to 50%,” he was quoted as saying.

About U.S. $4 billion will come in within the next two to three years in various growth projects. The remaining will be in zinc, lead, silver and aluminum businesses.

Of these earmarked funds, Vedanta said it will be investing $2.3 billion towards capex on its oil and gas activities in the “near term” to increase the reserve base by around 375 million barrels. According to its latest annual report, Vedanta aims to increase production from the current 200,000 barrels per day (bpd) to 300,000 bpd over the next few years.

“Our rich project portfolio is comprised of enhanced oil recovery projects, tight oil and gas projects and exploration prospects. As well as boosting production, this investment will generate sustainable employment opportunities, directly and indirectly and bring cutting edge solutions to community needs,” Vedanta stated.

For FY 2019, Vedanta expects to achieve growth in production, with total volumes in the range of 220-250 bpd, through execution of growth projects with operating expenditure of sub-$7/boe (barrel of equivalent).

This year, Vedanta has posted record zinc and lead production. In May, Vedanta had said it had received an order from the Tamil Nadu provincial government to close the company’s 4 lakh ton per annum copper smelter plant in Tuticorin with immediate effect. At least 13 people were killed after local police opened fire on people protesting against the plant’s operations.

Vedanta has always supported its Tuticorin operations, emphasizing the copper smelter complied with all environmental norms and is amongst the best, globally.

Vedanta has often advocated for policy change on the mineral mining front in India. The chairman reiterated this, saying encouragement to explore and produce natural resources in India would lead to greater self-reliance and save billions of dollars in imports.

But in what is seen as a further blow to the company’s operations in India, the Goa Directorate of Mines and Geology (DMG) has issued an approximately U.S. $13 million (Rs 97.48-crore) demand notice to Vedanta towards non-payment of royalty for FY 2011-2013.

The company is alleged to have illegally mined iron ore to the tune of 20,76,746 tons during this period, according to the DMG, a charge hotly denied by Vedanta.

For more efficient carbon steel buying strategies, take a free trial of MetalMiner’s Monthly Outlook!

The principal royalty amount is about U.S. $7.6 million (Rs 54.48 crore), while the interest of about U.S. $6 million (Rs 43.03 crore) has to be paid up in the next seven days.