Author Archives: Sohrab Darabshaw

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Much hope was pinned on the latest round of trade talks between the United States and India.

In the end, however, the talks that concluded late last week were inconclusive.

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The Indian government said the countries agreed to continue their discussions for “addressing mutual trade concerns,” Reuters reported.

This round of meetings was supposed to chart the course ahead on trade between the two countries, particularly in the wake of the exchange of tariffs and counter-tariffs.

Yet, many of the questions on agricultural commodities, e-commerce, and steel and aluminum have been put off, according to the report.

Talks will now resume when India’s Commerce and Industry Minister Piyush Goyal goes to Washington next month for talks with United States Trade Representative Robert Lighthizer, Reuters reported.

“The meeting was cordial and aimed at providing a new impetus to bilateral trade and commercial ties, in line with the mandate given by Prime Minister Narendra Modi and the US President Donald Trump during their meeting at Osaka, Japan on June 28, 2019,” Goyal said, according to The Asian Age. “Both sides discussed the broad contours of bilateral trade and commercial ties and agreed to continue their discussions for achieving mutually beneficial outcomes aimed at further growing the economic relationship and addressing mutual trade concerns.”

The U.S. delegation, led by Assistant United States Trade Representative (AUSTR) Christopher Wilson, aimed to explore potential for enhanced bilateral trade and economic engagement with India under the new government, The Asian Age reported. The Indian delegation was led by Sanjay Chadha, additional secretary in India’s ministry of commerce and industry, and also included senior officials from other Indian government ministries.

After delaying the imposition of tariffs on U.S. goods, the Indian government recently opted to levy tariffs on 28 U.S. goods in response to the U.S.’s decision to rescind India’s preferential status under the Generalized System of Preferences (GSP). President Donald Trump announced his intention to remove India’s preferential status in March.

The GSP affords duty-free tariff treatment “to certain U.S. imports from eligible developing countries to support their economic development.” According to the Congressional Research Service (CRS), U.S. imports from India covered by GSP accounted for 11% of U.S. imports from India, checking in at a value of $6.3 billion.

The U.S. was India’s second-largest export market — behind only the E.U. — in 2017, according to the CRS.

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The U.S. goods targeted for tariffs by India included almonds, apples, chemicals, flat-rolled stainless steel products, other alloy steel, tube, pipe fittings, screws, bolts and rivets.

In a July 9 tweet, Trump said “India has long had a field day putting Tariffs on American products,” adding the situation was “no longer acceptable.”

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Reactions from Indian steel industry leaders to some of the provisions of the annual budget that was just passed have been a mixed bag.

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Overall, industry players were in agreement that the annual budget exercise would push big-ticket infrastructure projects. Stress on infrastructure means more consumption of steel.

India’s first woman finance minister, Nirmala Sitharaman, announced fresh projects, including augmenting as much as 125,000 kilometers of rural roads, setting up more industrial corridors, & extending railway infrastructure, according to

Steel company CEOs, like Chairman of Steel Authority of India Ltd (SAIL) Anil Kumar Chaudhary, told the Press Trust of India (PTI) that these were “welcome steps.” Billions of dollars have been earmarked to be spent every year on developing and reinforcing infrastructure.

The SAIL chairman’s rival, Tata Steel CEO and Managing Director T.V. Narendran, saw good news in the budgetary provisions. He said the provisions would boost the domestic steel market, which has otherwise been in a state of decline.

N.A. Ansari, joint managing director of Jindal Steel and Power Ltd., told reporters that improving railways through the public-private partnership model was an “opportunity” for India’s steel industry.

One day before the budget, as is the norm, the Economic Survey report was released, which reflects the health of the Indian company. That report has estimated the country’s steel output to hit 128.6 million tons (MT) by 2021 and consumption to reach 140 MT by 2023 on the back of investments in infrastructure, construction and automobile sectors.

On a macro level, the steel majors have welcomed the union budget; on the ground, smaller players have raised some red flags.

Integrated steel players in stainless and carbon steel did not join the cheering.

The budget proposal to hike customs duties on stainless steel items from 5% to 7.5% will rein in imports of semi-finished products by the unorganized sector of domestic producers. As K.K. Pahuja, president of the Indian Stainless Steel Development Association (ISSDA) was quoted in the Economic Times as saying, “This will barely change the scenario as there is little import of these semi-finished stainless-steel products in the country.”

Where imports do make a large dent in India is in stainless steel flat products, where its share is about 20%. This sector does need government protection, but a call to hike tariff rates was met with no success.

Large integrated steel producers face the threat of cheap steel being diverted to India after the U.S.’s decision to impose tariffs on Chinese and Vietnamese steel products. Because of it, the Indian Steel Association has been asking for an increase in the customs duty.

The finance minister did propose to cut customs duties on certain inputs for making cold-rolled grain-oriented sheets or electrical steels — used in critical power equipment — from 5% to 2.5%, according to the Economic Times. This has been welcomed, as it would encourage domestic production of such steel products in the country.

And Now, Over to the U.S. President…

A few days from now, representatives from the U.S. and India will meet to try and break the trade impasse between the two countries, on the heels of India’s new tariffs on U.S. goods.

On Tuesday, though, Trump tweeted, “India has long had a field day putting Tariffs on American products. No longer acceptable!”

The tweet was enough to raise eyebrows in India.

India had finally imposed retaliatory tariffs on 28 U.S. products, including steel products, from June 5 after over a year’s delay.

The move was aimed at countering the increase in steel and aluminum tariffs by the U.S. and its withdrawal of duty-free benefits to Indian exporters. India also raised customs duties on a host of products, including alloy steel and auto parts, in the budget presented July 5.

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The fresh tweet by the president is being read in India as a pressure tactic before the new round of negotiations begin.

India’s solar energy production plan seems to be growing stronger, so much so it has even received global recognition.

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The International Renewable Energy Agency (IRENA) said in a recent report that India was producing the cheapest solar power in the world, the India Times reported.

In 2018, India recorded a 27% decrease in solar prices in 2018, plus a drop of as much as 80% in the setup costs between 2010 and 2018, which, according to IRENA, was the most of any country. Canada, on the other hand, had the highest production cost for this form of energy.

Late last month, a delegation from the European Union visited India and, along with the latter’s Ministry of New and Renewable Energy, launched standard operation procedures and monitoring tools for Indian solar parks.

India is banking on such solar parks to achieve its target of 100 GW from solar energy by 2022, according to the Press Trust of India. The E.U. and India have been collaborating to develop climate-friendly energy sources, which includes solar energy.

The standard operating procedures were developed under the E.U. program and have been prepared for development, implementation, construction, operation and maintenance of solar parks (including an operation and maintenance manual and a health and safety manual for solar parks), per the Press Trust of India.

In its onward march on the solar energy front, at least 20 global power and renewable energy companies have shown interest in a 7.5 GW solar power park planned in the Indian province of Jammu and Kashmir. Interested companies include: Siemens, ABB, Power Grid, Adani Transmission, BHEL, and L&T Construction, as well as project developers like Hero Future Energies, Mahindra Susten, and Tata Power Solar.

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India’s consistent investments in renewable energy over the last few years have been geared toward meeting its Paris climate agreement commitment to bring 175 GW of renewable energy online by 2022.

India’s retaliatory tariff on 28 U.S. goods, including some finished metal products, has been dubbed the “fruit and nut tax” in trade circles. The facetious label, though, does not take away from the seriousness of the developing situation.

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In India and the U.S., exporters, importers, trade and industry are apprehensive about the turn this fresh step by India will take in the coming days, especially in light of the current U.S.-China trade war.

Will the move by India escalate into a similarly full-blown trade war? Or will it be used as a bargaining chip by the Indian side during the visit by U.S. Secretary of State Mike Pompeo to India later this month?

Last weekend, the Hindu Business Line reported the Indian government slapped tariffs on 28 U.S. products, including: almonds, apples, chemicals, flat-rolled stainless steel products, other alloy steel, tube, pipe fittings, screws bolts and rivets.

India’s Ministry of Finance said the decision was in the “public interest.”

Technically, it comes in retaliation to America’s imposition of a 25% tariff on steel and a 10% import duty on aluminum products in March 2018. That it took a year or so for India to go ahead with this counter was that despite announcing the counter-tariffs on June 21, 2018, the country had decided to go slow on implementing them for various reasons, one of them being general elections held earlier this year.

So why now?

The answer to that lies in U.S. President Donald Trump’s removing India from the list of nations with preferential trade treatment, just one day after a new government was sworn in in India.

Questions are already been asked in India – will the country lose more than it will benefit because of this new move?

The U.S. is India’s largest trade partner, and India sells much more to the U.S. than it buys. Last year, India imported U.S. goods worth U.S. $33 billion and exported goods worth $54 billion. Last year, trade equivalent to $54 billion was conducted between the two nations. The equation is slightly in favor of India only in the IT sector because of the outsourcing of services to Infosys and other firms.

All of this means the U.S., if chooses to do so, could hit back at India with fresh tariffs, which in turn would escalate the trade battle and, in turn, deliver a body blow to India’s already-suffering economy.

An editorial in Indian newspaper The Hindu said the Indian government has sent “a strong message that Indian is not going to be compelled to negotiate under duress.”

“To be sure, India has much at stake in ensuring that economic ties with its largest trading partner do not end up foundering on the rocky shoals of the current U.S. administration’s approach to trade and tariffs, one that China has referred to as ‘naked economic terrorism,” the editorial continues.

“The counter-tariffs have now lent the Indian side a bargaining chip that the US Secretary of State, Mike Pompeo, will have to grapple with during his visit later this month.”

To be fair, unlike countries like Canada and Mexico, India had extended the deadline for imposition of these duties eight times in the hope that some solution would emerge during a negotiation between the two nations. Earlier, India dragged the U.S. to the World Trade Organization’s dispute settlement mechanism over the imposition of import duties on steel and aluminum. India exports steel and aluminum products worth about USD $1.5 billion to the U.S. annually.

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All attention is focused on Pompeo’s India visit, even as backchannel dialogue continues in the hopes of reaching a solution in the interest of both nations.

Among many other things, India is a land of auto rickshaws (or “tuk-tuks,” as they are called in Thailand).

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These three-wheeler “traffic dodgers” are a common sight on Indian roads. They also form part of India’s exports to other nations in Southeast Asia and Africa.

Just a couple of days ago, the tuk-tuk debuted in Omaha, Nebraska, too.

Perhaps keeping in mind its ever-increasing popularity around the globe, Indian steel company Jindal Stainless has announced it would soon be manufacturing stainless steel e-rickshaws, the Business Standard reported.

The steel major showed off a prototype at the 9th Electric Vehicles Expo, which drew enthusiastic crowds. About 600,000 e-rickshaws are being sold every year in India, and Jindal Stainless feels it could easily corner 25% of that multimillion-dollar market with its new product. Furthermore, the market is estimated to grow at 16% CAGR over the next five years, the Business Standard reported.

Jindal officials said there was demand from India’s first- and second-tier cities. One of them was Lucknow, the capital of India’s largest province, Uttar Pradesh. They expect an annual demand of 13,000 tons of steel from the sector by 2021.

Jindal claims to have manufactured India’s first-ever stainless steel e-rickshaw, claiming it was far superior in chassis performance as compared to carbon steel e-rickshaws.

The lifespan of the carbon steel vehicles is low as compared to the stainless steel counterpart. Safety, too, is better in the latter because of its high strength-to-weight ratio, improved crash resistance and corrosion prevention. Stainless steel components lead to 14-15% reduction in overall body weight, according to the Business Standard, resulting in higher battery efficiency. Not only that, a stainless steel “auto” will fetch a higher value when scrapped, as compared to the carbon steel counterpart.

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Jindal has already received advance orders of 100 stainless steel e-rickshaws. More are expected since India’s electric vehicle market is expected to grow exponentially in the coming decade.

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A new government in India has steel companies and iron miners rushing to it with urgent pleas on iron ore mine auction.

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One appeal is for the government to auction iron ore mining licenses held by private miners when they expire in March 2020.

If that happens, it will come as a relief for India’s steel companies, as they will no longer have to rely on costly imports.

Mining leases of at least 59 iron ore mines with a total capacity of 85 MTY are set to expire March 31, 2020. These have a combined production capacity of around 60 MTY, but none of them has been put up for new auctions.

A few days ago, the Indian Chamber of Commerce (ICC), Associated Chambers of Commerce and Industry of India (Assocham) and the Chattisgarh Sponge Iron Manufacturers’ Association (CSIMA) sent off letters to NITI Aayog, India’s planning commission, and the mines ministry, making a case for mine auctions, Livemint reported.

Experts say production at non-integrated steel companies, which do not have access to captive iron ore resources, will be disturbed if the auctions were delayed any more, affecting even major steel companies like Rashtriya Ispat Nigam Ltd, Essar Steel and JSW Steel.

The letter to NITI Aayog by the ICC said accepting merchant miners’ request to extend their license till 2030 would mean a huge revenue loss by way of auction premium for the exchequer. It takes about two years for operations to restart once regulatory clearances are received.

For India’s iron ore miners, there’s new hope, however, given that international prices are over $100 a ton, the highest in five years, which means a restart in export of lower grades of ore from India.

The Indian province of Odisha has in excess of 100 million tons of inferior grade iron ore accumulated at mine heads, which nobody wants in India. Similar inventory is to be found in the province of Jharkhand. Both provinces account for over 80% of India’s accumulated iron ore stockpile, the Business Standard reported.

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In the recent past, export of iron ore failed to pick up, despite incentives. Miners are hopeful a supply disruption in Brazil and Australia will make global steelmakers look to source more iron ore from India.

One of India’s largest miners, Hindustan Copper Ltd., is looking to grow in ore production by 25% to 5.15 million tons in fiscal year 2019-2020. The company has set a revenue from operations target of approximately U.S. $286 million, with a capital expenditures of about U.S. $86 million, mostly for mine expansions.

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Besides mining of copper, Hindustan Copper’s other principal activities include concentration of copper ore into copper concentrate through a beneficiation process, in addition to smelting, refining and extruding of the copper concentrate into refined copper.

The state-owned company announced it had signed a memorandum of understanding with the Indian Ministry of Mines to raise copper ore production from 4.12 million tons in 2018-19 to 5.15 million tons, reported.

Like steel and iron ore, India’s copper consumption has been steadily going up.

A recent report by the International Copper Study Group for February said while the global mine production had declined by about 1.8% in the first two months of the year, refined usage remained more or less unchanged in the same period. In China and India, demand grew by 4%, but declined in Japan and the United States.

Like in steel, copper in India is under stress from imports.

The latter now account for 38% of the country’s consumption. India has a capacity of 1 million tons in copper, according to the Business Standard, and major players like Vedanta Ltd are about to set up new smelting units.

Likely Fallout of RCEP

India is on the verge of formally signing what’s called the Regional Comprehensive Economic Partnership (RCEP).

Domestic copper producers have raised concerns to the Indian government regarding the potential fallout from signing this agreement.

RCEP is an economic gathering of 16 nations, which includes China. India’s trade with RCEP countries is amounts to approximately $100 billion, according to the Business Standard.

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When RCEP is signed, the Indian government is likely to keep 10% of the items under exempt list while opening up the rest of the goods. The Indian Primary Copper Producers Association has asked the government to keep key metals like copper and aluminum on RCEP’s exempt list.

The tariff war between the United States and China is being watched with trepidation in India.

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There’s no unanimous view yet on the fallout of the tariffs with respect India. Most in India are in a wait-and-see mode as things unfold.

Overall, some analysts have said the situation could be good for India, as the U.S. would now start sourcing more and more goods from other Asian countries, including India. That belief is underlined by a recent report by the Coalition for GSP, a group of U.S. companies and trade associations.

Based on official trade figures, the Generalized System of Preference (GSP) had saved U.S. companies U.S. $105 million this March, marking an increase of 36% from March 2018 and the second-highest level on record, The Asian Age reported.

But U.S. President Donald Trump’s March warning regarding removing India from the GSP list has not gone down well in Indian trade circles; the 60-day notice period ended May 3.

The report noted that Chinese imports, subject to new tariffs, were down significantly, and had risen significantly from countries like India.

For India, 97% of increased 2019 GSP imports are on the China Section 301 lists, so it is only logical that what is China’s loss is India’s gain.

But with Trump’s announcement, nobody knows what’s going to happen on this front yet.

That is specifically true on the metals front. Indian steel companies are already apprehensive that it will lead to an increase in the dumping of cheap steel into the Indian market.

The Indian steel industry has already appealed to the Indian government to impose safeguard duties of 25% to protect it from growing imports.

News agency Reuters quoted an unnamed source as saying that China’s excess steel capacity was “a concern” for India, as the former could reroute it through other countries like Vietnam and Cambodia.

The new agreement signed a few days ago between the U.S. and Canada to prevent cheap imports of both products from entering North America will only compound the problem for India.

The world’s second-largest steel producer, India turned net importer this year on March 31, 2019, according to official statistics. Along with China, other countries that export steel to India are Japan and Korea, who, incidentally, are also major exporters of steel to the U.S. and Europe.

Fearing the dumping of additional steel, a group of Indian steel companies recently met with Indian government officials asking for more safeguards. For now, with the national election just having been completed, there may not be much movement as everyone awaits the next government to get into the saddle.

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According to a World Steel Association report, India is expected to finish as the second-largest user of steel in 2020. The usage of finished steel products in India is forecast at 102.8 million tons in 2019, rising to 110.2 million tons (mt) in 2020. The country’s steel use in 2018 reached 96 million tons.

After the collapse of its deal in Europe with Thyssenkrupp AG, Tata Steel is reportedly considering several options, including a new partner for a joint venture (JV), according to Bloomberg Quint.

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A report in the Business Standard quoted Tata Steel CEO and Managing Director T.V. Narendran as saying the steel major had a Plan B. The CEO also pointed out that Tata Steel was now a more “structurally sound company.”

In a conference call May 10 after the announcement of the JV not coming through, Narendran reiterated that Tata Steel was exploring a few options, though he did not clarify further. The CEO also forecast that the firm’s U.K. operations should improve upon their performance this year. At the same time, he underlined that the units in Europe need to be cash positive.

Executive Director and CFO Koushik Chatterjee said that volumes in Europe should increase by 5% this year, although the demand outlook in the continent is dim.

Analysts here say the collapse of Tata Steel’s JV with Thyssenkrupp AG had once again turned on the spotlight on Tata’s $13 billion debt. The deal would have transferred some of the debt to the joint venture.

At March-end, the Indian group’s debt stood at $13.15 billion, which is said to be the highest among Indian steelmakers. Of this, about $2.5 billion is from its European operations. Tata was looking at the Thyssenkrupp JV to create a sustainable portfolio in Europe. The management had hoped to bring in a level of stability to the units under the JV, which would have also taken over about 15% of Tata Steel debt.

Since 2016, Tata Steel has been trying to resolve its European business to get it on the right path. It had first purchased Corus Group Plc for about U.S. $13 billion in 2017. Since then, it has been involved in a series of closing and selling of plants in the U.K.

Meanwhile, a report in said there was unease at the U.K. units of Tata Steel with unions seeking an assurance that the company’s operations not be split and sold off after the JV fell through.

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Tata Steel’s European operations include units in the U.K. and the Netherlands, employing about 20,000 people. The Netherlands-based unit is said to be among the most profitable ones in Europe. However, the U.K. operations have been constrained under high energy costs in the country and legacy issues.

Faced with the prospect of perhaps not being able to meet the target of installing 175 GW of renewable energy by 2022, the Indian government has decided to adopt a new tack.

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Media reports in India say the government is mulling a tender calling for the manufacturing of solar power equipment that doesn’t come with the usual clause requiring electricity generation. The aim is to invoke investor interest and meet the demands of this market.

There’s little doubt in anyone’s mind that to meet the 2022 target, things need to, well, be speeded up.

Of the 175 GW of renewable energy capacity, 100 GW will be from solar, the Business Standard reported. Of this, the government expects at least 40 GW to come from installation of rooftop solar projects.

While the interest in solar power as an alternate has been growing in India, interest from solar equipment makers has been poor, which is now coming in the way of Prime Minister Narendra Modi’s ambitious plans on this front.

According to a report by news agency Bloomberg, India has been “struggling” to push its budding domestic solar equipment manufacturing industry. By one government reckoning, as of now, it can meet about 15% of India’s annual needs; India has already imposed a safeguard duty on cheap Chinese import options.

The same Bloomberg report pointed out that a May 2018 tender was “downsized” and also delayed many times before being scrapped due to poor investor interest. It was replaced by a smaller version in January, for which the bidding deadline has been extended three times — more likely than not, the latest deadline of May 14 will be extended again.

But in a case of the opposite, at least one province in India has decided to halt all new solar projects.

A few weeks ago, the southern Indian state of Karnataka has halted the construction of new solar energy projects, Livemint reported. The Karnataka Electricity Regulatory Commission, a regulatory body, stated there would be no further bidding to procure solar energy from large-scale projects until further orders.

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The Karnataka Electricity Regulatory Commission wrote to the state electricity body that because of Karnataka’s power-positive situation, it would have to restrict procurement from high-cost sources. The state’s distribution companies have already contracted to procure adequate power from solar energy sources, enabling them to meet their renewable purchase obligations (RPOs), not just for Fiscal Year 2020, but for another couple of years, as well.