Author Archives: Sohrab Darabshaw

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In a late December report, the Indian government said it forecast the Indian automotive sector to attract between U.S. $8 billion and $10 billion in local and foreign investment by 2023.

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The Year End Review 2018 by the Ministry of Heavy Industries & Public Enterprises pointed out the sector had attracted $16.5 billion in foreign direct investment (FDI) between April 2000 and December 2016.

But the 2023 target may not be met if the government does not resolve the contentious issue of steel import rules soon.

Last August, the Indian Steel Ministry announced import rules for high-grade steel products, stipulating that foreign steelmakers must get Indian certification for high-grade steel products being used by Indian manufacturers. The Feb. 17 is fast approaching, but automakers have already registered their protests, saying they will not comply as they needed more time to do so.

The auto industry has dubbed the import rules as stringent, and though it is for specific high-grade steel products coming in from Japan and South Korea, they are used for vital auto components.

A Reuters report said India’s Heavy Industries Minister had written a letter in early January to his Steel Ministry counterpart, pointing out that the shipments of the auto component industry had started getting impacted. He voiced concerns in the letter that this “posed a significant risk of production stoppage of the whole automobile industry in the immediate future.”

Another issue which the minister pointed out was that if the government were adamant about imposing the new tax, auto manufacturers would simply stop importing steel and import the entire component itself, which would be detrimental to the “Make In India” plans of the government.

At a meeting mid-January between automakers’ representatives and government officials, the former pointed out that the new steel import norms were “a unrealistic protectionist measure” aimed at encouraging local steelmakers that could slow down manufacturing. Indian steelmakers did not manufacture special-grade steel, which is why Indian auto companies looked to other countries to fulfill this need.

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Indian automakers are seeking a year’s extension to comply with the new norms; now the ball is in the government’s court.

The new year for India started on a positive note where trade with the United States is concerned.

On Jan. 7, U.S. President Donald Trump called up his Indian counterpart, Prime Minister Narendra Modi to discuss, among other things, reducing the trade shortfall — a move that seems to have gone down well in Indian circles.

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The White House later issued a statement that said the two leaders had decided to strengthen the Indo-U.S. strategic partnership in 2019, and “exchanged perspectives on how to reduce the US trade deficit with India.”

Trade between the two nations hit a sour note in March 2018 after Trump imposed tariffs on imported steel and aluminum, seen as part of the U.S. president’s move to reduce the U.S. trade deficit and boost American manufacturing jobs.

Since then, a miffed India has threatened to retaliate, but has put off retaliatory tariffs four times, the most recent postponement now pushing the date to the end of January 2019.

Indian Steel Secretary Binoy Kumar told reporters in late December that India was in talks with the U.S. regarding exemptions to the steel tariffs. Similar relief would also be sought from Canada soon, he also revealed. His remarks came on the heels of demands made by India’s domestic steel industry.

India wants to meet the target of producing 300 million tons of steel by 2030-31, which means an increase in the per-capita demand of steel from the present 69 kg to about 167 kg.

But the Indian Steel and Commerce Ministries do not seem to be seeing eye-to-eye on trade tariffs.

A recent report in the Hindu Businessline said the steel ministry refused to accept any quantitative restrictions on exports of steel and aluminum to the U.S., which made it tough for the Commerce Ministry to ask the U.S. to remove the duties imposed in 2018.

The news report quoted an unnamed government official as saying the U.S. was unwilling to look at options other than the quantitative restrictions on imports at levels it suggested. But since the Indian Steel Ministry was not willing to accept any such restrictions, there could be no forward movement.

One source of apprehension stemming from a tit-for-tat penalty imposition was the potential fallout in diplomatic relations between the two nations.

Government calculations have shown India’s steel exports to the U.S. were down, but not so much with respect to its aluminum exports.

Besides India, the U.S. had imposed the tariffs on Japan, China, South Korea, Mexico and the E.U. members, among others.

India has to also now face a counter levy of import quotas from the European Union, further impacting its exports.

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According to a new U.S. Congressional report, if India were to go on with its retaliatory tariffs against U.S. agricultural products, it would adversely impact American exports to the tune of U.S. $900 million.

Many countries had imposed tariffs on American agricultural products to retaliate against Trump’s metals tariffs.

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In a ruling that caught many by surprise, an environment court in India set aside a provincial government order to shut down Vedanta’s copper smelter plant permanently.

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This is the same plant over which the local population in the southern Indian state of Tamil Nadu have been protesting primarily because of pollutants from the smelter.

It was this plant in Tuticorin that was ordered shut down by the government after hundreds of angry local residents had, in May this year, spilled out on the road to protest against the plant’s environmental impact. As we noted earlier this year, the protests turned bloody, as police fired on the protesters, killing 13 people.

With this new legal order, Vedanta has high hopes of restarting this vital smelter, but the Tamil Nadu government says it will not budge, and would file an appeal in the country’s highest court.

A report on moneycontrol.com said the National Green Tribunal’s (NGT) ruling had raised hopes of a revival, especially because the shutdown of Vedanta’s copper smelter had “dealt a blow to its valuations.”

The tribunal directed the Tamil Nadu state pollution regulator to pass a new order of renewal of consent for the smelter within three weeks. It also directed Vedanta to spend about U.S. $14 million (about 1 billion rupees) in three years for the local people’s welfare.

But the Tamil Nadu Environment Minister told reporters after the ruling that his government will fight this order, since it does not want the smelter to reopen.

Vedanta Ltd is part of the oil-to-metals conglomerate Vedanta Resources, run by Indian businessman Anil Agarwal. The Tuticorin smelter is one of the two largest in India, and Vedanta desperately wants it to resume operations as the group braces for rising raw material costs.

At the time of the closure in May, Sterlite Copper Vedanta Ltd CEO P. Ramnath said the closure of the plant would push India’s annual import bill by an estimated $2 billion.

The Tuticorin facilities include a custom smelter, a refinery, a phosphoric acid plant, sulphuric acid plants and a copper rod plant.

News of the tribunal order was welcomed by the Indian share market.

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On Dec. 17, Vedanta’s shares rose by 6.5% in early trading following news of the ruling. Towards the end of the day, it cooled off a little after the Tamil Nadu government made it clear that it planned to challenge the order at the Supreme Court of India.

India is all set to get a new aluminum alloy unit, claimed to be the biggest so far.

A Memorandum of Understanding (MoU) was signed recently between the Andhra Pradesh Economic Development Board (APEDB), a body of the Andhra Pradesh Government in southern India, and Japan’s Daiki Aluminium Industry, under which Daiki will invest up to $30 million in Andhra Pradesh province to build the aluminum alloy unit. The plant will have a capacity of 84,000 tons per year.

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According to the Hindu BusinessLine report, the raw material for this unit will  initially be from the U.S. and major European markets. The end product, largely for the automobile industry, will be exported mainly to ASEAN markets & Japan. While the foundation ceremony will be sometime in February next year, the company is awaiting clearances on the detailed project report it has submitted.

According to CEO of APEDB Krishna Kishore it was decided to go for setting up such an aluminum recycling unit because the latter was becoming more and more important “as an economically valuable secondary raw material across the world.”

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Indian-born British businessman Sanjeev Gupta’s global conglomerate GFG Alliance has signed a binding agreement to purchase all of the outstanding stock in Keystone Consolidated Industries, Inc. (KCI) from Contran Corporation.

Under terms of the deal, Liberty Steel USA, a company under the GFG umbrella, will acquire KCI, including all its subsidiaries, for U.S. $320 million in cash (less certain assumed liabilities), according to a GFG release.

The purchase is expected to close on or before Dec. 31, 2018, subject to regulatory issues.

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In October, GFG Alliance purchased steel plants in the Czech Republic, Romania, Macedonia and Italy from top global steelmaker ArcelorMittal, in the process doubling its worldwide steel-rolling capacity to 15 million tons per annum (mtpa). Incidentally, it also owns a U.S.-based steelworks in Georgetown, South Carolina.

Gupta, the executive chairman of Liberty Steel and GFG Alliance, said in a written statement that the Keystone acquisition was “a core part of GFG’s GREENSTEEL vision to become a leading U.S. producer of high quality, cleanly produced steel.”

Grant Quasha, chief investment officer for GFG North American, said in a statement that combined with Liberty Steel Georgetown, the Dallas-headquartered KCI will increase its downstream capabilities and create critical synergies.

Liberty Steel USA will have up to 1.8 mtpa of electric-arc furnace (EAF) melting capacity, 2 mtpa of wire rod rolling capacity, significant value-added downstream businesses and over 1,300 employees.

The combined company will have operations in Illinois, Ohio, South Carolina, New Mexico, Texas and Georgia.

Being in the business for over 100 years, Keystone Steel and Wire, a division of KCI, had recently posted its strongest results in its long history. It added a wire rod facility with a 1.1 mt capacity EAF, the market-leading agricultural fence products of RedBrand, industrial wire, an MBQ/SBQ bar mill, three welded wire reinforcement mesh facilities and a PC strand facility.

The acquisition will make Liberty one of the leading producers of wire rod in the U.S.

Of late, some analysts have been raising the red flag with respect to GFG’s rapid worldwide growth.

According to The Sunday Times report, some suppliers complained of being owed large sums by the conglomerate.

It was in 2017 that the GFG Alliance had acquired Liberty Steel Georgetown. The Georgetown facility was then restarted in June this year, and has been pushing up production to the current, 400 kt run rate by the first quarter of 2019.

Together, KCI and Liberty Steel Georgetown will now be at the core of GFG’s North American business, which the company is looking to grow further with additional acquisitions in the coming months.

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Contran Corporation, a holding company, operates through its wholly owned and majority-owned subsidiaries, including: Valhi, Inc., NL Industries, Inc., Kronos Worldwide, Inc. and CompX International Inc. Contran is a leading global producer and marketer of value-added titanium dioxide pigments, which are used to impart whiteness, brightness and opacity to a wide variety of products, including paints, plastics, paper, fibers and ceramics.

It may be in an extremely preliminary stage, but South Korean steelmaker Hyundai seems keen on setting up a steel plant in India.

A team from the Hyundai group visited Visakhapatnam in South India, where the steel plant of Rashtriya Ispat Nigam Ltd (RINL) is located, and spoke of looking at the possibility of setting up a steel plant in partnership with the public sector company, according to a Business Standard report.

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The Telegraph quoted P.K. Rath, chairman and managing director of RINL, acknowledging the visit in October, saying the South Korean major was indeed interested in a joint venture (JV).

Rath told The Telegraph that Hyundai was contemplating setting up a flat steel plant, especially since RINL was already producing long products. Though too early in the day, the plant could have an annual capacity of 3 million tons. Flat steel products like sheets are used in automobiles and consumer durables.

In addition to Hyundai Steel, the Hyundai-Kia Motor Group has steel companies, like the Hyundai Special Steel and BNG Steel Co., Ltd. Specifically, in India, Hyundai has a steel service center under Hyundai Steel India Private Limited (HSIPL), which caters to the steel requirements of Hyundai Motors India Limited.

The delegation of Hyundai company representatives, including the South Korean ambassador, visited the Visakhapatnam Steel Plant. Sources say government-to-government talks for setting up such a project were already on. The delegation will now give its report to the government.

Steel analysts here said Hyundai setting up a JV plant in India would be a good business decision for the South Korean group, as Hyundai not only sells automobiles in India — for which steel is required — but two other Korean brands, Samsung and LG, have a huge presence in the country, with both requiring flat steel products.

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RINL itself is on the way to ramping up, aiming for a capacity of 7.3 million tons next year.

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A move to hammer out a new trade agreement between the Association of Southeast Asian Nations (ASEAN) and other associated free trade agreement (FTA) countries has left India’s steel, manufacturing and other industries somewhat jittery.

The country’s steel sector has been working overtime trying to make the Narendra Modi-led government understand its concerns, pointing to the loopholes in existing FTAs with Korea and Japan, as a case in point.

This lobby feels that although these FTAs were meant to promote bilateral trade, they were heavily skewed in favor of the other country. That’s exactly what this lobby feels will happen under the Regional Comprehensive Economic Partnership (RCEP).

For now, the signing of the RCEP has been deferred until early 2019. The new trade agreement, once signed, will cater to almost half of the world’s population, and will impact steel, pharmaceuticals, e-commerce, food processing, agriculture, and food security, just to name a few things.

Signatories will include the 10 ASEAN member countries, plus China, Japan, South Korea, India, Australia and New Zealand. Needless to say, the RCEP is being closely monitored by the U.S. and other global trade lobbies.

At the end of the first round of meetings, a joint statement issued said negotiations on goods and services market access, and on investment reservation lists had “advanced significantly” with all RCEP participating countries (RPCs) engaged in a series of bilateral and plurilateral negotiations throughout the year.

“There has been a genuine effort by RPCs to progress market access negotiations while recognizing that different RPCs have different sensitivities toward each other,” the statement reads.

It added the participating countries were within reach of concluding market access negotiations to meet the goals in the Guiding Principles and Objectives for Negotiating the RCEP, but some work was needed to close the remaining gaps.

Steel giants such as Jindal Stainless have already made their apprehensions known. Abhyuday Jindal, managing director of Jindal Stainless, is nervous that India could agree to zero tariffs on steel import. And who will benefit from it? China, of course, he says, once again flooding Indian markets with cheap steel.

“Inclusion of stainless steel products in RCEP will result in a huge surge in imports from China,” Jindal said in a company release on the RCEP developments. “This will make operations for domestic producers non-viable, thereby resulting in long-term losses. This may result in immediate shut down of small scale units and will simultaneously cascade into the organised sector. Significant investments made by domestic industry in capacity building worth Rs 35,000 crore would stand in jeopardy. Once operational, RCEP will turn India into a nation of traders alone, defeating the visionary ‘Make in India’ concept.”

Hectic consultations were on for some time between the various trade bodies, and then inter-ministerial talks between the Indian Commerce Ministry, and the Heavy Industry, Textiles and Steel Ministries. The latter are trying to have the Commerce Ministry exclude certain products from the tariff elimination list under the RCEP.

The deferment may have given Modi some space, especially going into an election year as it is. The RCEP, if it happens, is being seen in Indian trade and media circles in direct contrast to Modi’s “Make In India” program.

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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.

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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.

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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.

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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.

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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.

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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.

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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.”

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