India

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It’s been great going for India’s state-owned National Aluminium Company (NALCO). Its revenues in sale of alumina are up by 30% year-over-year and it has reported a 94% jump in net profit.

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The company has now lined up some new projects.

According to reports, NALCO is said to be contemplating a high-end aluminum products plant by availing technology from foreign suppliers. The project is intended to provide for future applications of aluminum in bullet trains, aerospace and electric vehicles, all three of which are coming to India.

T.K. Chand, NALCO’s chairman and managing director, was quoted as saying that the technology for high end aluminum products plants was not available in India, so Nalco was in talks with potential suppliers in the U.S. and Russia to avail their technologies. The company had already floated an Expression of Interest (EoI) to select the technology supplier.

If successful, the proposed plant is likely to come up within the aluminum park at Angul in Odisha province.

Earlier this month, the aluminum major inaugurated three major projects at a total cost of about U.S. $94 million (Rs 660 crore). One was a bauxite mine, the second a 18.5 MW power unit at alumina refinery, Damanjodi and a nanotechnology-based defluoridation plant at Angul.

The aluminum park that Chand referred to was being developed jointly by NALCO and state-owned Odisha Industrial Infrastructure Development Corporation.

NALCO has signed a memorandum of understanding (MOU) with the Indian Defense Ministry Public Sector Unit Mishra Dhatu Nigam Ltd for the manufacture of high-end aluminum alloys.

Aluminum is not only in the weapons and aerospace sector but also in vehicles (especially electric vehicles).

In an interview with The Economic Times recently, Nalco’s CMD spoke of his plans to make the company a  1-million-ton aluminum player by 2020. He said NALCO’s capacity today was at 4.6 lakh ton, of which, this year, it would be producing around 4.2 lakh (420,000) tons. In 2018-2019, the company planned to ramp up production to 4.6 lakh (460,000) tons. The addition of a new smelter would take it to over 1 million tons for aluminum.

When asked for the reason behind NALCO’s alumina sales volume jumping by 30% year on year, Chand replied that the increase in revenue, particularly in alumina, came because of change in NALCO’s strategy. Earlier, the company would sign a long-term agreement for sale of alumina in the international markets, but it did not give much benefit in case of a rising market. Thereafter, with the market price going up, it had switched strategy of spot tenders. This was what led to the prices increasing from U.S. $280 to as high as $527.

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Growth in volume was also achieved since NALCO was able to achieve a 100% capacity utilization of aluminum refinery.

The Renewable Monthly Metals Index (MMI) picked up a point for our January reading, rising from 78 to 79 (a 1.3% jump).

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Several of the heavier hitters in this basket of metals posted price increases this past month.

U.S. steel plate rose 4.0% and U.S. grain-oriented electrical steel (GOES) coil rose 3.8%. Korean steel plate also increased, rising by a whopping 8.9% for the recent monthly window.

Chinese silicon and cobalt cathodes also posted notable price jumps. Meanwhile, Chinese steel plate fell slightly, while Japanese steel plate posted a small price jump.

Continuation of Steel Plate Tariffs on the Table

U.S. Rep. Pete Visclosky (D-Merrillville, Indiana) testified before the International Trade Commission recently on the subject of extending 18-year-old duties on cut-to-length carbon-quality steel plate from India, Indonesia and South Korea, the Northwest Indiana Times reported.

Northwest Indiana, where Merrillville sits, is home to significant domestic steel industry activity, including by ArcelorMittal, which produces steel plate at its Burns Harbor Plate Mill — located in Gary, Indiana — the paper reported.

“As a representative and resident of Northwest Indiana, I am acutely aware of the challenges facing the American steel industry due to the onslaught of illegal steel imports,” the Times quoted Visclosky as saying during testimony at a hearing in Washington, D.C. “The ArcelorMittal facility at Burns Harbor in Northwest Indiana makes cut-to-length carbon-quality steel plate, and every one of those dedicated workers deserve to be able to continue to fairly compete and make the best steel to the best of their ability in our global economy.”

Of course, the issue is one of many metals-related trade issues before U.S. trade bodies (the most headline-grabbing being the Section 232 probes into steel and aluminum imports, for which a ruling is expected this month).

Like the Section 232 probes, which seek to determine whether those imports negatively impact the country’s national security, Visclosky also cited national security concerns vis-a-vis steel plate imports.

“It is essential for both our national defense and our national economy, and we cannot afford to threaten our production capabilities,” the paper quoted Visnosky as saying.

GOES Gets a Boost

As reported by our Lisa Reisman yesterday, grain-oriented electrical steel (GOES) got a boost this past month.

GOES prices, as Reisman noted, usually don’t move in tandem with other forms of steel — but it didn’t play out that way in December.

Import levels, however, are something to monitor going forward.

“In addition to prices moving in a similar direction, import levels also followed similar patterns, although GOES imports showed a dramatically higher increase whereas finished steel imports grew by 14.5% on an annualized basis according to the American Iron and Steel Institute (AISI),” Reisman added.

While China is often the subject of much discussion regarding a flood of imports into the U.S., when it comes to GOES, Japan is actually the leader in exports to the U.S.

Source: International Trade Administration and MetalMiner analysis

Japan owns about two-thirds of the U.S. GOES import market share, rising significantly despite a drop in overall finished steel sent to the U.S.

The explanation for that disparity?

“Increased domestic efficiency standards have led to the development of higher performance electrical steels (HB), which have taken share away from the more conventional grades produced by the sole U.S. producer,” Reisman wrote. “With no U.S. producer of these grades, the market has become more reliant on exports from Japan.”

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Tata Steel has a couple of things going for it in the new year — but before we get into that, 2017 was a bit kinder to it than the preceding two years.

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And we are not saying that, but the CEO and MD of Tata Steel, T.V. Narendran himself, told a gathering of employees and some reporters here recently that 2017 was somewhat better than the previous two years for the company.

Looking Back: A Recovery in Steel Demand, Prices

In 2014, Tata Steel dealt with some of the challenges relating to the closure of its mines because of changes in regulations. The next year, it dealt with the challenge posed by neighboring China, which had increased its export volumes globally (including to India). Tata Steel continued to perform and grow in these two years, Narendran said.

According to him, 2017 saw “a recovery in global steel demand, prices and trade,” leading to better-than-expected performance by India’s steel sector. The year, he added, not only saw India becoming the third-largest steel producer in the world, it managed to successfully reverse the trend of increasing imports, as it became a net exporter.

Narendran was also positive on India’s National Steel Policy 2017, which draws up a long-term road map for steel.

Another point which went in favor of the steel sector, Narendran pointed out, was the rollout of the Goods and Services Tax (GST), which had positive implications across the company’s value chain in India.

The Year Ahead

Tata Steel has big plans for 2018.

Its board recently approved an expansion from 3 million tons (MT) per annum of its Kalinganagar plant in Odisha province to 8 MT. The plant’s expansion will be completed in four years and is expected to meet demand in automotive, general engineering and other valued-added segments. The project will be funded through a mix of both debt and equity, according to the board.

Meanwhile, Tata Steel Ltd has initiated the process of raising U.S. $2.15 billion in six-year syndicated loans as part of its $5.1 billion loan program to refinance its existing debt. It has already appointed a domestic investment bank to manage the issue. The Indian steelmaker is seeking $2.15 billion in six-year syndicated facility to refinance loans in the books of TS Global Holdings Pte and NatSteel Asia Pte on an immediate basis.

Analysts, too, seem positive regarding Tata Steel’s performance in the coming years. Credit Suisse, for example, has maintained an “Outperform” rating for the company.

Free Download: The December 2017 MMI Report

Citigroup has said Tata Steel Ltd notes that management had indicated plans to double capacity in five years. Tata Steel’s plans to double capacity in five years providing growth visibility, while attractive M&A and the Tata-Thyssen joint venture could take the stock higher. Strong spreads, captive India iron ore, improving leverage and reasonable valuations should benefit the company, said its analysts.

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This morning in metals news, U.S. raw steel production for the final week of 2017 hit 1.63 million net tons, some Indian steel companies are upset about a hike in iron ore prices and zinc hits a 10-year high.

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Raw Steel Production to Close ’17 Falls From Previous Week

According to weekly data from the American Iron and Steel Institute (AISI), U.S. raw steel production for the week ending Dec. 30, 2017, hit 1,637,000 net tons (NT), which was up 1.9% from the same week in 2016 but down 4.7% from the previous week.

Adjusted year-to-date production through Dec. 30, 2017, was 90,106,000 NT, which was up 4.3% from the 86,379,000 NT during the same period in 2016.

Iron Ore Prices Up, Steel Companies Frown

According to a report from the Economic Times, a hike in iron ore prices has some Indian steel companies unhappy.

According to the report, Indian steel companies are worried that the rise in iron ore prices, among other materials, could force them to raise their prices.

Zinc Soars on Deficit Concerns

Zinc reached a 10-year high on expectations of a supply deficit, according to a Reuters report.

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Benchmark zinc rose 0.9% to $3,349/ton, its highest price since August 2007, according to the report.

India’s solar energy plans seem to have run into a spot of a bother.

The Indian government’s target is to boost installed solar power capacity more than five-fold to 100 gigawatt (GW) by 2022.

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The problem, though, is India meets about 85% of its solar cell demand through imports from China, and photovoltaic modules account for over half the costs of a solar project.

Now, the Indian government is left contemplating whether the domestic industry of solar cells and modules manufacturers should be “protected” from cheap imports. In that vein, the government is actively thinking of imposing an anti-dumping duty.

In a related development over last week, the Ministry of New and Renewable Energy has come out with a “concept note” for offering “direct financial support” of approximately U.S. $1.7 billion (Rs 11,000 crore), as well as a tech upgrade fund for solar manufacture. At the same time, it has said cell and module manufacturing capacity in the country is “obsolete.”

The concept note pointed India had installed capacity for producing 3.1 GW of cells and 8.8 GW of modules, but even this capacity was not being fully exploited because of obsolete technology. The Ministry of New and Renewable Energy believes only 1.5 GW of cell manufacture and 3 GW of module manufacture is being used.

Now, as per the concept note, the Indian government aims to provide a 30% subsidy for setting up new plants, while also expanding existing ones. Heavy equipment required to set up projects shall also be exempt from customs duty, according to the scheme to be operated by the Indian Renewable Energy Development Agency.

According to a news report, the Ministry’s note targets creation of solar cell manufacturing capacity of 10 GW over five years and includes interest subvention of 3% to manufacturers, setting up new capacity for loans taken through state-managed banks.

Cheap imports from China have brought down solar power tariffs to record lows, according to the Indian Solar Manufacturers Association. The latter has now petitioned the government to impose an anti-dumping duty on inbound shipments from China.

The concessions that the concept note speaks of are expected to bring down reliance on imports from China.

Already, there is a slowdown in fresh investments in this sector.

In November, tenders for new projects declined by 25% to 300 mega watt (MW) and auction of new offerings dropping by 98% to just 5 MW from levels of activity seen in October. According to the latest solar market update for the third quarter published by renewable energy market tracker Mercom Capital, a total of 1,456 MW of solar power projects was tendered and 1,232 MW auctioned in the period. The figures represented a marked reduction from the activity seen in the second quarter that saw 3,408 MW of solar projects tendered and 2,505 MW auctioned.

Meanwhile, the Directorate General of Safeguards and Anti-Dumping held the first oral hearing last Tuesday to investigate allegations of dumping imported solar cells and modules.

The domestic solar panel manufacturing industry, in a petition, had submitted that around 80% of the market had been taken away by imports. The domestic industry has taken the position that as imports harm the indigenous sector, a retrospective duty should be imposed on the importers. But this was challenged by some solar power project developers, who used the argument that silicon wafers required to make solar cells were also being imported, mainly from China, hence the domestic sector had no choice but to be dependent on imports.

The prices of panels have crashed to $0.32 per kWh from $0.50 per kWh in three years, owing to global over-capacity and “dumping” by China. The tariff for solar power projects has fallen by 80% in six years.

Free Download: The December 2017 MMI Report

All of the above could be music to the ears of the consumers … but not to the domestic manufacturers.

India represents one of the biggest automobile markets in the world, with about 3 million petrol and diesel vehicles having been sold last fiscal year.

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That pie is just too lucrative for the world to ignore.

The Players

It’s not only “regulars” such as Honda, Suzuki and Hyundai are planning launches and tie-ups for the Indian market; domestic players like Mahindra and Tata Motors are also around. With the Indian government having announced earlier that the country would move to an all-electric fleet of passenger vehicles by 2030, the timeline is more or less clear.

The most unlikeliest of the pack is Chinese smartphone brand Xiaomi. Indian media reports Xiaomi has “adopted an expansion roadmap revolving largely around plans to sell electric vehicles (EVs) in the country.”

While there was no immediate confirmation from the company itself, The Economic Times report pointed to a recent regulatory filing made with the Registrar of Companies that talked of Xiaomi potentially selling “all types of vehicles for transport, conveyance and other transport equipment, whether based on electricity or any other motive or mechanical power, including the components, spare parts.”

Next on this list is Swedish company Volvo. It announced plans to only sell hybrid, electric and battery-powered cars in India after 2019. Volvo is aiming to sell over 1 million electric vehicles worldwide by 2025, with India being a major target market.

Read more

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This morning in metals news, ArcelorMittal and the state-run Steel Authority of India Ltd. (SAIL) are reportedly close to a joint-venture deal, officials in a northwest Indian town are threatening to sue U.S. Steel after a recent Lake Michigan toxic chemical spill, and despite the start of the winter season, Chinese steel mill profits have gone up.

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ArcelorMittal, SAIL Close to Deal

ArcelorMittal and India’s state-run SAIL have been in talks regarding a potential joint venture; according to Bloomberg, the two are expected to ink a deal soon.

According to Bloomberg, the two have agreed to terms on the deal, which features a $60 billion automotive plant.

Portage Officials Threaten to Sue U.S. Steel

After a second incident of dumping toxic chromium into Lake Michigan, U.S. Steel is facing lawsuit threats from a northwest Indiana town, not long after the City of Chicago said it would file suit.

Officials from Portage, Indiana, recently threatened to sue the company after the second spill, which occurred in October.

According to the Northwest Indiana Times, the Portage City Council approved a resolution Tuesday night demanding the steelmaker report any environmental spill or discharge to the city as it would to the Environmental Protection Agency or Indiana Department of Environmental Management.

Chinese Mills’ Profits Up

Profits by Chinese mills continue to rise after a warm start to the winter season, Reuters reported.

Warmer weather has allowed steel operations to continue when they would ordinarily be shut down by the colder winter weather.

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According to the report, physical spot prices for steel rebar for immediate delivery rose to 5,210 yuan ($787.72) a ton on Tuesday — its highest since August 2008.

Besides bringing back some cheer to the sector, the latest report by industry monitoring body World Steel Association (WSA) on crude steel production reveals an interesting story.

World crude steel production soared in October, thanks to higher output in China, the U.S., India and Japan.

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While production in the U.S. zoomed by 12% year-over-year in October, China manufactured 72.4 million tons (MT) in the same month, a 6.1% year-over-year increase and 10 times more than the U.S. did that month.

India, on the other hand, produced 8.6 MT of crude steel in October, up by 5.3% to 8.6 MT.

Clearly, the October cheer is positive news, in the sense that the steel sector is making a comeback. The WSA tracks steelmakers in 66 countries globally, representing about 85% of total steel production, and has said in this report that world steel production increased 5.9% year-over-year to 145.3 MT in October.

The China steel story, incidentally, produced nearly half of the world’s steel in October, which indicates a revival of sorts in the growth story there, too.

According to Moneycontrol.com, the downside was reported from Japan, the world’s second largest crude steel producing country. It registered a 1% contraction in output at 8.971 MT in October 2017, compared to 9.060 MT during the same month last year.

During the first 10 months of 2017, Japan’s steel output dropped from 87.442 MT to 87.239 MT, a 0.2% dip compared to the same period last year.

There’s a keen tussle on between the four steel giants (the U.S., China, Japan and India), with the latter already the world leader in stainless steel production and the third largest crude steel producer.

For example, India had overtaken Japan to become the second-largest steel producer in the world after China in 2016, according to the International Stainless Steel Forum. The country’s stainless steel production had gone up to 3.32 MT for 2016, approximately 9% more than the 3.0 MT achieved in 2015. Read more

We have written before about the principal of unintended consequences. Governments, companies and people do things often for the best reasons, but do not foresee occasionally tragic — but more often unfortunate — consequences.

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Well, India’s recent amendments to the Insolvency and Bankruptcy Code (IBC) have not only practically debarred promoters from reacquiring their own assets – the intended action, but have also put the world’s largest steelmaker ArcelorMittal’s prospective bid for stressed steel assets (namely Bhushan Steel, Bhushan Power & Steel, and Essar Steel), in jeopardy, the Indian Business Standard reports last week.

Firstly, the act — as the paper explains, a new Section 29A of the IBC rules that a person and therefore company in which they are involved shall not be eligible to submit a bid for a distressed company if they are an undischarged insolvent. This prohibits promoters or sister concerns of companies with non-performing assets (NPAs) of more than a year from bidding for these companies. This quite rightly stops the practice of putting an asset into insolvency to lose its debts only to pick it up for a song from the administrators and start again without the debt.

The problem for ArcelorMittal is that in 2009 the firm picked up a stake in Uttam Galva Steels. The idea was to pave the way for the global major’s entry into India. The glitch is that last September, according to the report, Uttam Galva Steels was classified as an NPA, which means that it’s been more than a year since the account became an NPA and bars ArcelorMittal from participation in the auction.

Of the 12 companies that the Reserve Bank of India mandated India’s commercial banks to refer to bankruptcy courts the first batch include Essar Steel, Monnet Ispat, Bhushan Power & Steel, Bhushan Steel, Electrosteel Steels, Alok Industries, Amtek Auto, Jaypee Infratech, Lanco Infratech, Jyoti Structures, ABG Shipyard, and Era Infra, the Economic Times reports.

Steelmakers are likely only interested in the three steel producers: Bhushan Steel, Bhushan Power & Steel, and Essar Steel.

With steel demand rising rapidly, Indian assets should have potential, and with ArcelorMittal’s experience, deep pockets and technology, the firm makes a natural buyer, significantly better to have a trade buyer than private equity or a conglomerate – of which India has many – without the deep subject matter experience in turning around steel plants.

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The authorities no doubt realize this and will be working behind the scenes to find a solution.

One option suggested is that a resolution is found to the bankrupt firm Uttam Galva Steels that is the cause of the firm’s debarring.

Ironically, Uttam Galva Steels is on the list for the second round of forced auction. However, some are asking if Arcelor couldn’t, or wouldn’t, turn around Uttam Galva Steels, then why should they be given the chance to bid to do the same for this new batch of assets?

A fair question, indeed.

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This morning in metals news, the Indian government says the country’s steel firms can meet the railway industry’s needs, copper hits a one-month high and the Japan Iron and Steel Federation says it doesn’t expect a decline in automobile steel sheet demand.

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Domestic Firms Can Meet Railway Demand, Indian Government Says

According to an Indian government panel, domestic steel companies like Jindal Steel and Power Limited can meet the railways’ demand if given an opportunity, Reuters reported.

According to Reuters, the state-run Steel Authority of India Ltd (SAIL) has struggled to supply the steel as India looks to expand its rail network, the fourth-largest rail network in the world.

Copper Hits One-Month High

Copper rose to a one-month high on Monday, Reuters reported, topping $7,000 in the process.
The jump comes “amid signs of resilience in China’s industrial sector,” Reuters reported.

Demand for Automotive Steel: Japan Iron and Steel Federation

Despite news that Nissan and Subaru did not comply with inspection procedures for decades, the top official of the Japan Iron and Steel Federation said they do not expect a decline in demand for automobile steel sheets.

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