Author Archives: Sohrab Darabshaw

One of India’s premier industrial representative bodies, the nonprofit Federation of Indian Chambers of Commerce & Industry (FICCI) has expressed concern over the drop in mining concessions being awarded every year.

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In a presentation to Niti Aayog, a policy think tank of the Government of India (GoI), the Chamber called for the government to “expedite” auctions of mineral blocks, moneycontrol.com reported. The FICCI pointed out that the average of such sales had come down to 15 mines annually today, compared with the 300-400 mineral concessions given prior to 2015.

As part of reforms and in the interest of mining sector transparency, the Indian Parliament passed the Mines and Minerals Development and Regulation Amendment Bill in 2015. The Indian government claimed this had removed the arbitrariness seen earlier in such auctions.

FICCI said although the 2015 act does grant the winner of the mineral block with sub-surface mineral rights, the company had to face a lot of red tape to seek the surface rights and obtain necessary statutory clearances. This was a hindrance in converting successful auctions into production on the ground.

Citing unnamed sources, moneycontrol.com reported officials from Rio Tinto, Tata Steel, Vedanta and the Federation of Indian Mineral Industries (FIMI) also were part of the presentation.

The mining sector of India had already been demanding further reforms, including the implementation of a “One Tax Regime” in mineral production along the lines of GST, with the effective taxation rate (ETR) capped at 40%, the Hellenic Shipping News reported.

A few days ago, Niti Aayog itself set up a high level committee to look at ways and means of boosting mining in the country, according to CNBC-TV18 reported.

Mining contributes about 2% to India’s GDP, but some in India claim it could go up to as much as 10%.

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In FY 2018, for example, India’s import bill hit U.S. $465 billion, of which $126 billion, or 27%, consisted of metals and minerals alone.

Already labeled a protectionist regime, the Indian government recently issued notice to the World Trade Organization (WTO) of its intent to bring more stainless steel items under quality control, The Hindu Business Line reported.

The move has Indian importers of stainless steel worried.

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According to the draft “Steel and Steel Products (Quality Control) Order 2019” issued recently by the Indian Steel Ministry, compulsory testing of steel items is necessary from the Bureau of Indian Standards (BIS). For now, this is applicable to two categories of products.

Stampings/laminations/cores of transformers (with or without winding) have to be made from BIS standard marked steel sheet and strip, conforming to certain Indian Standard (IS) specifications, government’s draft order said.

India has around 50 carbon steel and three stainless steel products, including pipes and tubes, under such quality control. Now, it has notified the WTO of bringing 13 more steel items under the same regime.

The reason given for this new move is to ensure safety of infrastructure and the health of the Indian people.

The new move is bound to raise the hackles of some of India’s important trading partners, including the European Union. India’s explanation is that it cannot go merely by the international safety guidelines for production of steel, since many non-Indian producers do not have BIS certification.

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India is seeing a glut of imported steel flooding its market. In March this year, imports had gone up as much as 46% to meet India’s increasing steel demand. Now, steel experts are worried that if more items are brought under the BIS quality control, it would lead to an increase in the domestic prices of steel.

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Amidst the trade tension that exists between the United States and India, now comes a report that India’s steel exports to the U.S. last year fell by a whopping 49%.

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On the other hand, exports of Indian aluminum went up by 58%.

The report by the independent Congressional Research Service (CRS), which said the value of Indian steel exports to U.S. was down to U.S. $372 million but aluminum was up to $221 million.

The U.S. had imported steel and aluminum products totaling $29.5 billion and $17.6 billion, respectively, in 2018.

Quoting from the CRS report, the Hindu Business Line said the countries to see the largest declines in the value of their steel exports to the U.S. were:

  • South Korea (-$430 million, -15%)
  • Turkey (-$413 million, -35%)
  • India (-$372 million, -49%)

There were major increases in imports from the European Union (+$567 million, +22%), Mexico (+$508 million, +20%) and Canada (+$404 million, +19%).

According to the CSR, the countries seeing the largest declines in their export totals to the U.S. were:

  • China (-$729 million, -40%)
  • Russia (-$676 million, -42%)
  • Canada (-$294 million, – 4%)

Major increases were from:

  • the E.U. (+$ 395 million,+9%)
  • India (+$ 221 million,+58%)
  • Oman (+$186 million, +200%).

Last year, U.S. President Donald Trump decided to impose blanket tariffs on steel and aluminum imports, which applied to India, as well as other countries (such as China). India then proposed retaliatory tariffs against U.S. agricultural products, including apples and lentils, which experts believed would have had an adverse impact on American exports worth nearly U.S. $900 million.

However, India has continued to defer with respect to this option.

The U.S. president had given temporary exemption to several countries from the tariffs pending negotiations. Later, permanent tariff exemptions in exchange for quantitative limitations on U.S. imports were announced covering steel for Brazil and South Korea, and both steel and aluminum for Argentina.

The latest CRS report pointed out that one of the U.S.’s major concerns was overcapacity in steel and aluminum production led by China.

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The U.S. had imposed extensive anti-dumping and countervailing duties on Chinese steel imports to counter the latter’s unfair trade practices, but experts believe the size of Chinese production continues to depress prices globally, according to the CRS report.

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The Indian government has initiated an inquiry into an allegation of dumping of aluminum and zinc-coated flat steel products from China, the Republic of Korea and Vietnam.

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The probe will cover the October 2017-September 2018 period, but data from 2015 will also be looked at by India’s Directorate General of Trade Remedies (DGTR), which falls under the Commerce Ministry.

A report by the Press Trust of India said the investigation had been launched following a complaint by domestic producer JSW Steel Coated Products.

India, one of the fastest-growing economies in the world, has one of the highest trade tariffs in the world; for decades, its highly protectionist trade policy received flak.

Some experts have argued there was a risk that this protectionism could backfire somewhere down the line.

In the latest anti-dumping probe, it must be remembered that aluminum and zinc-coated steel are used largely in solar power projects, roofing and appliances (to name a few). India is currently very bullish on solar power projects; naturally, local producers are worried these projects have started using cheaper products from foreign shores.

If the allegation is eventually found to be true, the DGTR will then recommend imposition of the anti-dumping duty on the imports. The investigation has been initiated because there was some prima facie evidence found of dumping by the three countries.

The probe into the alleged dumping will help determine the existence, degree and effect of alleged dumping, and to recommend the amount of anti-dumping duty, which if levied, would be adequate to remove the injury to the domestic industry, according to the DGTR.

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Dumping of commodities negatively impacts the price of the same products in domestic markets.

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India’s continued emphasis on coal-based power plants has drawn flak from Greenpeace India and other agencies.

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A report released jointly by Global Energy Monitor, Greenpeace India and the Sierra Club  said the Indian government continued to support thermal power plants when they were being cut down elsewhere in the world.

Little love is lost between the present dispensation in India and Greenpeace.

Since the 2014 election of current Prime Minister Narendra Modi Government was elected din 2014, it has come down against Greenpeace’s climate campaign that concentrated on coal mining and thermal power generation. In fact, the internationally-known NGO was also labeled “anti-national” for opposing coal mining in Central India forests. In addition, its accounts were frozen twice and its license to operate was revoked.

The report, titled “Boom and Bust 2019: Tracking the Global Coal Plant Pipeline” said there was a 20% drop in newly completed coal plants, a 39% fall in new construction and a 24% cut in plants in pre-construction activity, year on year.

Yet, despite such “unfavorable market conditions for coal power,” the Indian government persisted with investments in new coal-fired plants, The Business Standard report quoted Pujarini Sen of Greenpeace India as saying.

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As if cheap steel imports from the Association of Southeast Asian Nations (ASEAN) was not enough of a problem to handle, India’s steelmakers are now fretting over heavily discounted steel imports coming in from Iran, a country that is under economic sanctions imposed by the United States.

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The first consignments from Iran’s Bandar Imam Khomeini port via was expected to land in Indian ports soon.

The U.S. sanctions dissuade allies from having a direct trading relationship with Iran. So, to avoid import restrictions, the paperwork of these imports is done through a third country.

According to some media reports, since December 2018 imports of flat steel were being routed through the U.A.E. — otherwise a net importer — which has seen a hike of almost five times to 65,000 tons.

The Economic Times reported that the Indian Steel Association (ISA), a representative body, had written a letter to the Indian Steel Ministry, asking it to ban imports of Iranian steel.

The Indian steelmakers’ allegation was that the spike in steel imports — for which the country of origin is usually listed as U.A.E. — is the result of steel that was actually manufactured in Iran.

The ISA has said there was a five-fold increase in steel shipments to India that could be traced back to Iran. The ISA is now worried that if India continues to accept Iranian steel, it could face some retaliatory action from the U.S. for sanction violations.

Iran’s steel exports have fallen significantly since sanctions were imposed last year. Surprisingly, however, Iran’s output is up 8% in the 11 months to February 2019.

As noted by the Economic Times, the members of ISA — which include Tata Steel, JSW, and Jindal Steel and Power Ltd. — have said Iran’s surplus capacity had reached 36%, or 12.2 million tons (MT), though per capita consumption was down by 14%. About 30% of Iran’s steel is exported to ASEAN nations, according to the report.

The ISA has said that imports from U.A.E. had increased 390%, calling the increase “alarming.”

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Iranian steelmakers, most of which are state-owned, produced 42.3 MT of finished and semi-finished steel products during the 11 months to Feb. 19, according to the Mehr News Agency, marking a 10.94% increase compared with the previous year’s corresponding period.

Steel tycoon Lakshmi Mittal’s dream of re-entering the Indian steel market is about to come true.

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After almost a year of legal tussles, the National Company Law Tribunal (NCLT), Ahmedabad bench, gave the green light to ArcelorMittal’s resolution plan for the debt-laden Essar Steel Ltd. The latter was put on the block after lenders asked the court to recover about U.S. $7 billion in dues.

The approximately U.S. $5.9 billion acquisition of the distressed plant, though, has run into one more road block.

Essar Steel Ltd’s ex-promoter Prashant Ruia and two other directors of the erstwhile board of the steelmaker have approached the National Company Law Appellate Tribunal (NCLAT) to thwart the move.

Standard Chartered Bank, a dissenting bank among the Committee of Creditors (CoC) of Essar Steel, has challenged the NCLT’s order.

The bank’s contention was the resolution plan approved by the CoC of Essar Steel favored the secured creditors.

In late January, the same Tribunal had rejected a full debt settlement proposal by shareholders of Essar Steel, ruling that the offer violated Section 12A of the Insolvency and Bankruptcy Code (IBC), which says the promoters can reclaim a company from bankruptcy by paying full settlement, but not after others have submitted their expressions of interest.

This is one more hurdle that Mittal will now have to overcome to take over the mill, which boasts an annual capacity of 10 million metric tons.

A joint venture between Japan’s Nippon Steel & Sumitomo Metal Corp. with ArcelorMittal has offered an upfront cash settlement of about U.S. $ 1 billion and a multimillion-dollar capital infusion as part of the acquisition process.

ArcelorMittal SA is the world’s largest steel company by volume but doesn’t have a steel plant yet in India. Once the formal acquisition is done, Essar Steel’s capacity will immediately make ArcelorMittal the fourth-biggest player in India. The Essar plant is operating at much lower capacity; experts say will need a large influx of funds to run at capacity.

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ArcelorMittal has a presence in 60 countries and an industrial footprint in 18 countries. Mittal has made several attempts in the past to get into the Indian market, but none bore fruit.

In 2010, the company signed an agreement with the Karnataka provincial government to set up a 6 million ton per annum capacity plant, but the land acquisition process itself has taken about eight years.

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In what’s been dubbed as a rather unique agreement for an Indian steel company, JSW Steel this week signed a payment and supply deal with Duferco International Trading Holding (DITH) for U.S. $700 million.

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According to reports, the five-year agreement provides DITH with supplies of various steel products over the agreement term. For JSW, on the other hand, it confirms a steady flow of funds for its growth plans.

JSW Steel, one of India’s largest steelmakers, recently received a letter of intent in the auction of the insolvent Bhushan Power & Steel Ltd., taking it one step closer to acquisition of Bhushan. Also, late last year JSW Steel announced a multimillion-dollar plan to strengthen its downstream manufacturing capacity.

The new arrangement with DITH entails a financing structure that will provide JSW long-term funding to complement its plans for future growth, secured by committed exports of steel products to DITH, the company said in a statement.

This is not the first time that JSW and DITH have entered into a deal; there have been smaller agreements in the past 15 years. The deal, according to reports, was “the largest trade finance facility” to have been arranged in the Indian steel sector.

According to the company, the deal has been arranged and financed by a number of global banks:  BNP Paribas, Citibank, Credit Suisse, ING, Mashreqbank, Natixis, Societe Generale, with Standard Chartered Bank acting as mandated lead arrangers and bookrunners.

JSW Steel is the flagship company of the U.S. $13 billion JSW Group. The company has about 50,000 customers in 108 countries, and a recorded turnover of U.S. $7 billion, with sales of 12 million tons per annum.

Going by JSW’s plans, Moody’s Investors Service recently revised the outlook on JSW Steel to positive from stable, citing an improved credit situation.

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Moody’s also affirmed JSW Steel’s Ba2 corporate family rating (CFR) and the Ba2 rating on the company’s senior unsecured notes.

The railways sector is one of the high-growth areas in India, so far as infrastructure is concerned.

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Much of it still runs on a setup that its former colonial ruler, the British Empire, left behind, and then some.

In a bid for modernization, which includes a bullet train, India wants steel for new and replacement rail tracks, wagon wheels and so on.

There are billions of dollars worth of contracts to be given out, but there’s a problem.

There are barely two domestic companies who can provide what the Indian Railways (IR) wants.

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Last week, MetalMiner reported on the challenges India’s steel companies face in the form of cheaper imports, and their desire for the Indian government to impose an import tax.

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The woes of India’s aluminum producers, too, are similar.

Primary and secondary producers have started grumbling about cheaper imports eating into their aluminum business.

The ongoing trade war between the U.S. and China has seen the dumping of aluminum finished products in India, not only from China but also from nations with whom India has a free trade agreement, including Vietnam, Malaysia and Japan.

Anil Agarwal, of the Aluminium Secondary Manufacturers Association, was quoted by the Business Standard newspaper recently as saying that the import of finished aluminum products into India had eroded the margins of medium and small players by as much as 7%.

According to estimates, such imports have gone up by over 50% year on year, which has put the small and medium-sized enterprises (SMEs) businesses in peril. Total aluminum imports have grown 21% year over year.

Between April and October 2018, aluminum imports into India increased 24% year over year. In addition, low prices and rising production costs have also made life difficult for the domestic aluminum industry. Production costs, for example, have gone up as much as 30% over the past approximately four years.

Primary and secondary aluminum producers, like their steel counterparts, have been asking the Indian government to hike the import duty on primary aluminum to 10% from the current 7.5%, according to the Business Standard.

India’s domestic aluminum industry has about 3,500 MSME players, the Business Standard notes, while there are three large primary producers —Hindalco Industries, Vedanta and the state-owned National Aluminium Company (Nalco).

Scrap aluminum imports, too, have gone up dramatically.

But imports of aluminum scrap carry a 2.5% import duty, even though imports have gone up by about 27%, by the industry’s reckoning.

Indian producers lament they cannot compete with countries like China. The latter is able to produce aluminum at a cheaper rate because it follows the Shanghai Metal Exchange for price, which is U.S. $250-300 per ton lower than that on the London Metal Exchange.

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Incidentally, India has set a target of producing 10 million tons of aluminum by 2030, up from the present-day 3.4 million tons.