As part of its energy planning — especially on the oil and gas front — India has been actively looking at its neighbors in the past few months for support and supply.

Besides Russia, the other countries India is looking to for fulfilling its energy requirements is the United Arab Emirates (U.A.E.), Saudi Arabia and Qatar.

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On a visit of the U.A.E. earlier in the week, Dharmendra Pradhan, India’s minister of petroleum and natural gas and minister of steel, met his U.A.E. counterpart,Minister of Energy and Industry Suhail Mohamed Faraj Al Mazroui, and a host of other leaders from the region for talks on energy.

Pradhan also addressed the opening session of the 8^th Asian Ministerial Energy Roundtable in Abu Dhabi on Tuesday.

Addressing the delegates at this conference, the Indian minister said he was sure that the shift in global energy consumption to Asia would be a reality soon.

Anticipating that, he said it is necessary for the change to be “rooted in energy justice,” a very important component of the energy vision of the present Indian government, the Orissa Diary reported.

He forecast that within the next two decades, Asia would be driving global economic growth, meaning developing economies would drive 80% of incremental global growth. India and China would be in the driver’s seat, accounting for more than half of that growth, he argued.

Thus, he said, it is imperative that low income, low per capita energy-consuming countries have access to technology and capital for their energy efficiency and clean tech plans. In turn, that access would provide better energy security than short-term interventions in fossil fuel supply and price, he said.

India’s energy vision, he explained, is based on four pillars: energy access, energy efficiency, energy sustainability and energy security. Energy justice was a major objective of this plan, he added, for which India had undertaken many initiatives.

India’s per capita consumption of energy is quite low compared with the global average. Pradhan said the Indian government is trying to improve the country’s energy supply to rectify the disparity.

India is the third-largest energy consumer in the world, with its share of total global primary energy demand set to double to 11% by 2040.

India has already laid down over 16,000 kilometers of gas pipeline and an additional 11,000 kilometers is under construction. The country is also aiming to produce 175 GW of renewable energy by 2022, with a solar target of 100 GW by 2022.

On his visit, Pradhan met Al Mazroui here and discussed ways of strengthening bilateral hydrocarbon engagement between the two countries.

India wants the U.A.E.’s increased participation in Phase II of India’s Strategic Petroleum Reserves Program coming up in India’s Odisha and Karnataka provinces, Sify reported (the U.A.E. is already a partner in Phase I).

According to news agency ANI, on Sept. 9, Pradhan met his Saudi counterpart Prince Abdulaziz bin Salman in Jeddah and discussed ways to boost energy ties between the countries.

Significantly, just a week prior to the minister’s Gulf visit, it was announced on a visit of Indian Prime Minister Narendra Modi to Russia that a consortium of Indian companies led by state player ONGC Videsh would acquire a 49% stake in Russia’s Vankor cluster oilfields, Oil and Gas Eurasia reported.

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Modi Russian President Vladimir Putin agreed to the deal as part of a wider range of investment agreements signed at the Eastern Economic Forum in Vladivostok. It is worth noting the agreement comes after over three years of protracted negotiations with Russia. With this agreement in place, India is set to become a strategic player in this sector in the Arctic region.

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India’s growth rate has slowed, which in turn means sluggishness in the manufacturing sector.

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All of the above means lower consumption of steel.

Riding on these developments comes the news that domestic steel producers are sitting on a “larger than usual” steel inventory.

A report in the Business Standard quoted Sushim Banerjee, director general at the Institute of Steel Development Growth, as saying steel inventories are at “alarming” levels of 35 days rather than the more typical 21 days.

The total steel inventory of all primary producers in India is at 2 million tons, up from the more typical level of 1 million tons, according to the Business Standard. Because of such high inventory, domestic prices have fallen by about 20% since April.

Ratings agency Fitch Solutions has revised its 2019 global steel price forecast downward to an average of U.S. $600 per ton from $650, citing weak investor sentiment, the ongoing U.S.-China trade war and uncertainty surrounding the U.K.’s Brexit effort, the Business Standard reported.

Nikunj Turakhia, director at the Steel Users Federation of India, was quoted as saying domestic steel prices were close to the bottom and hoped they would start rising soon.

There is more bad news for Indian steel companies.

Ratings agency India Ratings and Research has revised its outlook on the steel sector to “stable-to-negative” from “stable” for the remainder of this fiscal year. One of the reasons for the downgrade is sluggish demand. The rating agency has also revised downwards its fiscal year 2020 steel demand growth expectation to around 4% from the previous forecast of 7%.

All of this comes as global crude steel production rose by 1.7% in July, with Indian steel production increasing by the same percentage.

Tata Steel has announced a closure of some of its operations in the U.K., which could lead to a loss of about 400 jobs.

It has not been a good year for many steel companies in India; for example, Tata Steel Ltd’s first-quarter profit slumped to its lowest level in more than two years.

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India’s S&P BSE Metal Index has fallen by about 30% so far this year due to the slowdown in the economy and infrastructure.

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India is almost on the cusp of this year’s festival and wedding season, but the domestic bullion market remains subdued, contrary to historical norms.

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The reason? Gold prices in India have rallied 20% this year based on several internal and external factors, Livemint reported.

Over the past week, spot prices touched a high of U.S. $558.45 (Rs 40,000) per 10 grams. The futures market showed a similar trend, though prices later dropped. Gold futures had hit a record high of U.S. $543.44 per 10 grams (Rs 38,666).

The Livemint report said the spread between MCX and international prices narrowed on Tuesday from near $51/ounce to about $42/ounce, sparking some buying interest in the physical market. But even then, the higher domestic price and higher taxes continued to dampen demand.

Bullion experts forward many reasons for the highest-ever spurt in gold prices, including: a hike in import duty, the weaker rupee versus the U.S. dollar, the ongoing U.S.-China trade war, the U.K.’s impending Brexit and buying by global central banks.

India’s gold imports this July fell by 55% from a year ago, down to a three-year low, Yahoo Finance reported.

The gold scene in most of Asia is equally depressing.

News agency Reuters reported steep prices prompted Asian consumers to sell back physical gold for profit this week.

Some amount of buying, even at the current price range, did happen because of gold’s appeal as an instrument to hedge against risk.

In China, the biggest gold consumer in the world, premiums eased slightly to $6-$9 per ounce over the benchmark, down from $9-$10 last week.

The Reuters report quoted Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, as saying interest was mostly from the investment side.

In India, dealer discounts of up to U.S. $33 an ounce over official domestic price saw some amount of buying activity. Most dealers, however, were not in the mood to place new orders, preferring to wait and let the situation unfold, according to the Economic Times.

Almost everyone is waiting for a price correction, which is a far cry from the positive situation at the start of 2019.

Demand grew 9% from January-June this year, sparking hopes that consumption towards the latter half of the year would go up.

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But experts are of the opinion that if things do not improve soon, consumption could slump to a low of over 650 tons (comparable to the 2016 low).

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All indicators seem to show that India may end up being a net importer of steel for the second consecutive year in fiscal year 2020, according to sector experts and ratings agencies.

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The reasons underpinning this development are many.

In a desperate attempt to quell the import tide, the Indian government is said to be actively looking at imposing even more safeguard duties on steel imports. These are reported to be at an advanced stage at India’s Directorate General of Trade Remedies (DGTR), the government body in charge of recommending safeguard duties. In addition, the government is being pressured by the Indian steel lobby (which is led by the large representative body of steel companies, the Indian Steel Association).

The first signs of India continuing to be a net importer this year, too, came from figures out for the April-July period of this fiscal year.

A report by CARE Ratings showed the imports of finished steel products exceeded exports by 1 million tons, according to the Business Standard. Steel exports from India in the period under review declined by 23.4% to 1.5 million tons. Despite a 6% fall, imports of finished steel products remained high at 2.5 million tons, per the Business Standard.

According to another research agency, India Ratings and Research (IRR), the fundamentals of the domestic steel sector are likely to weaken in the current 2019-20 fiscal year (ending March 31, 2020), which includes the risk of softening of prices, elevated raw material prices and weak demand, Argus reported.

Experts say additional safeguard measures imposed on imported steel products by the European Union (E.U.) have dented Indian exports to the trading bloc. E.U. nations like Italy, Belgium and Spain accounted for 5-12% share in India’s total finished steel exports in fiscal year 2019.

In fiscal year 2019, India imported around 3.1 million tons of steel from the Republic of South Korea, followed by 1.8 million tons from China and 1.2 million tons from Japan.

One more worry for Indian steel companies is the plummeting of global iron ore prices. From a five-year high of $121 per ton in July, spot iron ore prices have fallen to $93; iron ore prices are expected to fall further.

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According to the IRR, one area to watch out for is the auction of local ore mines scheduled for March 2020. If there is any delay in the auction schedule, it would lead to a disruption of local steel production.

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India’s National Aluminium Company (NALCO) has had expansion plans on the anvil for some time now.

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Towards this goal, it has started taking the first steps.

Part of this effort is the indigenization of technology and equipment specific to the aluminum sector. It is a commonly known fact that only is India’s per capita aluminum consumption is low as compared with other countries, and much of the industry is dependent on imports and foreign technology.

A few days ago, the state-owned company signed a joint venture agreement with another public sector undertaking, the Mishra Dhatu Nigam (MIDHANI), to set up a high-end aluminum alloys plant for manufacturing of plates, sheets and more, the Business Standard reported.

MIDHANI and NALCO will, at least at the start, be equal shareholders in the joint venture company, according to the Business Standard.

NALCO has lined up a multibillion-dollar fund to increase capacity, get into new areas (like mining and tech), and step up coal production.

Under this funding plan, it is on the way to setting up an alumina refinery stream that is likely to be commissioned in 2021-2022.

But a more recent move by the company has caught the media’s attention in India.

According to The Financial Express, NALCO will soon set up a technology division.

The aim of the new division is to research and develop indigenous technologies for making equipment that will cater to the domestic aluminum industry. The board has already cleared the proposal; now the proposal is before the mines ministry.

All this is part of the government’s “Make In India” plan. Initially, it will collaborate with foreign suppliers to develop technology and expertise. Then, it will link up with domestic fabricators to manufacture equipment that will largely be India-specific.

The Financial Express reported said engineers will be studying technologies and engineering available across the world, particularly in Australia and Brazil.

A few weeks ago, NALCO, Hindustan Copper Ltd and Mineral Exploration Co Ltd (MECL) signed an agreement to set up a 40:30:30 joint venture company called Khanij Bidesh India Ltd (KABIL) to establish a supply chain for critical and strategic minerals in India.  Pralhad Joshi, minister of Coal, Mines and Parliamentary Affairs, in a statement before Parliament said while KABIL will ensure the mineral security of the nation, it will also help in realizing the objective of import substitution.

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India’s per-capita aluminum consumption at 3 kg, compared with the global average of 11 kg, is extremely low. Projections indicate consumption would go up at a compounded annual growth rate of 7.5% to reach 10 million tons per year by 2031-32, according The Financial Express.

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Since April this year, the Indian automobile sector has been seeing signs of a slowdown in sales. This has led to job cuts and expressions of concern from some major domestic steel producers.

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The slump in the sales of four- and two-wheelers has forced companies and ancillary automotive supply units to either shut down factories for specific hours (even days) or axe shifts, leading to a reduction in both temporary and permanent workers.

Auto sales for the June quarter are at their lowest in almost two decades, according to the Business Standard, only adding to the worries of domestic flat steel producers.

Many producers are now wondering what the immediate future holds for them.

There are no signs of any immediate revival in auto sales, especially after some economy experts warned of a coming recession in India.

Added to this is the Indian government’s new drive to bring in electric vehicles. Some major automobile companies, already on the path of a switch to electric, have stopped manufacturing diesel vehicles.

Yet, there are steel and automobile industry experts who are downplaying the drop in sales.

T.V. Narendran, CEO and managing director of Tata Steel, told the Business Standard recently that the platform economy (for example, Uber and Ola) is a bigger disruptor than electric vehicles. In his opinion, as more and more people took to cab-hailing apps, the need to have their own vehicles would come down, he said.

In the June quarter, the total sales of cars, sport utility vehicles and vans declined 18.4%, the largest drop since a 23.1% drop in the third quarter of 2000-01. Every segment of the auto industry reported a double-digit decline.

A recent report in India’s national daily, The Hindustan Times, said automobile ancillaries in and around Jamshedpur, where Tata Steel’s main plant exists, were facing tough times due to a series of block closures in Tata Motors in the past month because of a market slowdown. A local association leader told the paper that about 30-odd such ancillary “steel sector companies” were on the verge of closing down, even as a dozen others had already downed their shutters.

The report quoted Inder Agrawal, president of the Aditaypur Small Industries Association, as saying that recession in the auto sector is always cyclical and that he expects things to normalize after September.

According to media reports, because of the automobile sector slowdown, steel companies were diverting products towards alternative segments, such as renewables, oil and gas, and structural steel.

Flat and long steel products are two categories which find application in the auto and infrastructure sectors, respectively.

A report by news agency Reuters said India’s JSW Steel Ltd had acknowledged that a weaker steel market coupled with a drop in global demand and a local slowdown could impact the turnaround time for its newly acquired Monnet Ispat assets. The report, though, added that JSW’s chairman downplayed any substantial impact on financials.

On the sidelines of the company’s annual meeting, Sajjan Jindal, co-chair of JSW Steel Ltd, said his company had always said it could take about two years to turn around and it would try and do it within that time frame.

He called the present slowdown in the automotive sector as “temporary” and was hopeful the sector will bounce back.

Another Reuters report, as published on the Al Jazeera website, said the auto industry has sought tax cuts and easier access to financing for both dealers and consumers to revive the industry.

The report quoted Automotive Component Manufacturers Association of India (ACMA) Director-General Vinnie Mehta as saying the sector was experiencing a “recessionary phase.”

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India’s automobile sector employs over 35 million people, directly and indirectly, according to the report.

Piped water to all – a new Government of India (GoI) multimillion-dollar scheme announced recently — comes as a pleasant surprise to India’s steel industry.

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Called the “Nal se Jal” scheme (meaning “water connection to all”), this flagship project aims to provide piped water connection to every household by 2024.

Experts are of the opinion that the new scheme will increase the domestic steel demand, which means massive investments in the sector, according to the Sunday Guardian Live.

Because of its durability and greater life span, steel is ideal for water pipelines and other infrastructural requirements for the flagship scheme.

A news report in Live Mint quoted a report by Bank of America Merrill Lynch, which has estimated that India needs to put in $270 billion (about ₹18.5 trillion) over the next 5-15 years to meet its ambitions of piped water supply to all homes by 2024, cleaning the Ganges River, interlinking rivers to redirect water to water-scarce regions and irrigation projects.

Some experts, though, feel the scheme is too ambitious and may not take off.

As of now, only about 18% of rural households in India have piped water supply.

For one, how the scheme will be financed is something the GoI is still trying to figure out.

One option it is toying with is to take part of the investments from consumers in rural India by a nominal monthly fee, according to a report by The Print.

But according to Indian brokerage firm JM Financial, private sector investment will be a must if the GoI wants to go ahead.

The minister in charge has gone on record to state the government was examining the public-private partnership model for water infrastructure projects. This includes BOT (build, operate and transfer), DBOT (design, build, operate and transfer) and the hybrid annuity model (HAM).

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The JM Financial report said the scheme will likely lead to a massive jump in investments in water and sanitation. These will be made in various verticals, such as pipes, EPC, water treatment pumps, and valves and cement, the Hindu Business Line reported.

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India’s foremost private sector steel company, Tata Steel, plans to increase crude steel capacity to 30 million tons a year by 2025, from the present level of approximately 20 million tons a year.

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Toward that goal, the steelmaker said it will raise U.S. $600 million. Part of this would go to refinance its own loans and the rest will be used to fund the CAPEX of phase two expansion at its pilot plant at Kalinganagar.

According to a Live Mint report, Tata Steel was focused on increasing free cash flow to reduce its debt burden, according to CFO Koushik Chatterjee. He made this statement while addressing the media after the company’s annual shareholders meeting.

According to media reports in India, Tata Steel’s debt had started worrying shareholders. The company was staring at debt running into billions of dollars, some of it due to two recent buyouts in the last fiscal year.

According to the CFO,  the company’s target was to cut down gross debt by $1 billion in FY 2020, after Tata Steel’s proposed merger of its European operations with Thyssenkrupp AG fell apart following failure to meet Europe’s antitrust requirements.

Tata Steel is still optimistic that would eventually make its European operations self-sustainable. Much of its earnings will go to servicing its European operations.

According to Tata Steel Chairman N Chandrasekaran, the company’s first aim is to increase  capacity in India, the Economic Times reported.

During Tata Steel’s 112th Annual General Meeting (AGM) on July 19, the chairman told shareholders that last year Tata had talked of a merger of the European subsidiaries in the Netherlands and Britain with Thyssenkrupp. But the plan, he said, unfortunately, did not meet the standards of the E.U.’s competition commission.

To generate cash flows, the company will dispose of certain assets and bring down the number of subsidiaries through mergers, the chairman said during the AGM.

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The company CFO told reporters there are no plans to increase borrowing after raising the $600 million, according to the Economic Times.

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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 moneycontrol.com.

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.