Shortage of long products hits construction industry

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Housing and construction projects outside urban markets are staring at a slowdown for a few months with dealers and buyers reporting a shortage of long steel products, such as rods, bars and wires.

Construction steel, mostly produced by small, secondary steel mills scattered across the southern and eastern regions, has been in short supply as many micro, small and medium enterprises struggle to emerge from the effects of the pandemic on labour and capital as well as sky-high iron-ore prices. The key reason for the shortage appears to be linked to a scarcity of iron ore in the local market.

About 1.6 tonnes of iron ore are required to produce a tonne of steel. Iron ore prices are moving in tandem with the global trend, which is rising to meet China’s stimulus-driven appetite for steel. This has prompted miners across the world, including in India, to increase their steel exports. In India, construction steel producers, who are mostly medium-sized enterprises making unbranded TMT bars and rebars at plants of under 2 million tonnes per annum capacity, are unable to keep up with the rising input costs as they do not have the pricing power to pass on the increase in prices to their customers.

Analysts say the shortage is being felt acutely in non-urban markets, where large integrated steel mills do not have a marketing presence, and where building projects may be delayed. The secondary steel mills will be able to return to normalcy once iron ore prices begin to cool.

Steel companies raise prices again by upto Rs. 2,400 a tonne.

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Amid the noise around rising steel prices, the rally continued in the new year with some companies increasing prices by Rs 1,000-2,400 a tonne and indicating more hikes in the coming weeks.

A primary producer said that the prices would be raised in tranches this month and the total increase could be Rs 6,000 a tonne. “The first tranche is already effective. We have increased hot rolled coil prices by Rs 1,500 a tonne and rebar by about Rs 2,400 a tonne,” he said.

Jindal Steel & Power (JSPL) has increased prices by Rs 1,000-1,500 a tonne. The buoyancy in the market was reflected in JSPL’s production numbers released on Monday. The company recorded its highest ever production and sales in December; production increased 20 per cent year-on-year to 1.93 million tonnes in Q3 while sales increased 12 per cent (Y-o-Y) to 1.88 million tonnes in the same period.

Other major producers, too, are expected to come out with a good showing in the third quarter. Some companies, however, were waiting for NMDC’s move on prices before taking a call on the quantum of increase.

Since India entered the unlocking phase, steel prices have been on a continuous uptrend. There was a shortage of long products as secondary producers that account for about 40 per cent of the production were not able to come up to the right level of production. They are producing 30-31 per cent which is being made up for by the six major producers. The increase in prices, however, has caused much discontent among user industries.

The mystery behind rising iron ore prices

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In FY20, India’s iron exports rose 133% to 37.69 million tonnes versus FY19 levels. And over 80% of these exports went to China. In crux, India’s domestically produced iron ore was serving the needs of another market before catering to its own.

Over the past couple of months, the steel industry has witnessed constant dialogue between iron ore miners and steel producers, aimed at reaching common ground on the availability of a key commodity for manufacturing steel—iron ore. While manufacturers of the alloy have gone up to the Prime Minister’s Office (PMO) seeking a ban on exports of iron ore citing sky-high prices, miners of the key raw material—whose pellets form about 60% of the cost of production of steel—claim that steel mills have been importing iron ore to suppress prices of the commodity despite huge stockpiles lying idle. Both sides have made sure to supplement their claims with data.

Over April-July 2020, India’s exports of iron ore have risen by a massive 63%. This rise in exports is primarily fuelled by record steel production by the world’s largest steel manufacturer—China. Chinese steel output hit all-time highs in September, as state-backed investment in infrastructure projects took centre-stage amid the nation’s resurgence from the pandemic. This was further corroborated by an Edelweiss report which stated that iron ore imports in China surged 9% year-on-year in September 2020 and iron ore inventory at ports rose to 124 million tonnes from 105-110 million tonnes in July 2020. Consequently, miners including the NMDC have been exporting the iron ore owing to higher realisation for their produce.

The signs were already visible in FY20 as India’s iron exports rose 133% to 37.69 million tonnes versus FY19 levels. And over 80% of these exports went to China. In crux, India’s domestically produced iron ore was serving the needs of another market before catering to its own.
Aggravating the situation is the problem of non-operationalisation of merchant mines in India. India’s iron ore production over April-September 2020 stood at 47 million tonnes, witnessing a drop of about 50% versus last year. Also, about 50% of the mines auctioned in Odisha this year went to large steel players for captive usage while majority of the remainder, which have gone to merchant miners, are yet to start production.

India extends anti-dumping duty on steel products from China, US

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India has extended anti-dumping duty on imports of cold-rolled flat products of stainless steel of width 600-1250 mm and above 1250 mm of non-bonafide usage, from China, Korea, European Union, South Africa, Taiwan, Thailand and the US, till January 31, 2021. The extension had been announced by the Central Board of Indirect Taxes and Customs (CBIC) through a notification dated December 3.

The duty was first imposed in 2015 and was under review by the Directorate General of Trade Remedies (DGTR) since September 2020. CBIC said in the notification that the extension had been granted after request from DGTR, which had undertaken a sunset review investigation on imports of certain stainless steel products imported from China, South Korea, European Union, South Africa, Taiwan, Thailand and USA.

Jindal Stainless Limited, Jindal Stainless (Hisar) Limited and Jindal Stainless Steelway Ltd had alleged the likelihood of continuation or recurrence of dumping of the cold-rolled flat products of stainless steel and consequent injury to the domestic industry, and requested for review and continuation of the anti-dumping duty.

 

Nippon Steel and ArcelorMittal plot Indian expansion blitz.

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Nippon Steel and ArcelorMittal will more than double the steel production capacity of their Indian subsidiary to 23 million tons a year by the 2030s, looking to expand their foothold in a promising market. The expansion plan, involving fresh investments and acquisitions, far outstrips an increase to between 12 million tons and 15 million tons that the two steelmakers cited when they acquired Essar Steel India late last year. The company, since renamed AM/NS India, currently can produce about 9.6 million tons of steel products a year.

The partners envision a larger share of a national market that is catching up with China as a global driver of the industry. Nippon Steel forecasts Indian demand for steel products swelling to 230 million tons a year by the 2030s, or 2.3 times the current level, and aims to boost capacity to at least 10% of that figure. The two companies spent roughly $7 billion on the Essar acquisition, with ArcelorMittal holding a 60% stake and Nippon Steel 40%. The subsidiary ranks as India’s No. 4 steelmaker with a share seen at less than 10%, behind Tata Steel, JSW Steel and Steel Authority of India.

Though details of the investment plan have yet to be hammered out, it likely will include building and expanding blast and oxygen furnaces as well as a coke oven at the main AM/NS India steelworks in Gujarat. Boosting capacity for both crude steel production and downstream processing will increase overall output of steel products. Acquisitions are in the cards as well. AM/NS India in July purchased Odisha Slurry Pipeline Infrastructure, which manages and operates a pipeline used to transport iron ore, enabling Indian ore to be shipped efficiently to coastal areas. The company was originally under the umbrella of the former Essar but was sold amid the steelmaker’s financial difficulties.

Indian engineering exports hit by increasing raw material prices

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Steel prices have increased from Rs 35,000 per tonne to Rs 42,000 per tonne in the past six months for a product like hot rolled coil, an essential raw material for engineering industry.

Rising steel and other metal prices coupled with the second wave of Covid pandemic has crippled India’s engineering exports, EEPC India, the apex body of engineering exporters, said and sought the intervention of the commerce ministry to address the issue.

Steel prices have increased from Rs 35,000 per tonne to Rs 42,000 per tonne in the past six months for a product like hot rolled coil, an essential raw material for engineering industry.

Prices of other metals like zinc have risen from Rs 170 a kg to Rs 220 a kg, resulting into the hike in prices of end-products. Freight charges have almost doubled due to which exporters of engineering goods are facing severe headwind.

There is also a scarcity of steel in the market, EEPC India chairman Mahesh Desai said, adding major European markets are witnessing a second wave of coronavirus while the US is reeling under the deadly impact of the pandemic.

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JSW Steel to ramp up production for 51% of iron ore need

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JSW Steel targets to meet 51 per cent of its iron ore requirement through production from captive mines by March 2021. At present, 27 per cent of the ore supply happens from captive sources.By end of this financial year, about 85 per cent of the iron ore requirement for the Dolvi plant will be met through supply from captive mines. Salem plant will get entire requirement of ore, while the Vijayanagar plant will get much lesser 35 per cent of its requirement from our mines. Overall supply will be 51 per cent of the requirement.

JSW Steel acquired four iron ore mines — Jajang, Nuagaon, Ganua and Narayanposhi — in Odisha in February. These mines have 1,131 million tonne reserves, which constitute about 60 per cent of the whole reserves of iron ore in Odisha. Once these four blocks function with full capacity, it is expected to produce around 36 M MT per annum and meet about 70 per cent of its requirements. The steelmaker has three more mines in Karnataka where availability is going up from 4 M MT to 7 M MT.

Indian Steel Ministry targets to double rural steel demand

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The government has a fixed objective of increasing rural consumption of steel from the current 19.6 kg/per capita to 38 kg by 2030-31. While the national steel consumption average stands at 74.7 kg, the government is aiming to increase rural per capita consumption to 36 mn t from the current 18-odd mn t/per annum. It deserves mention that demand emanating from rural India provided the silver lining during the COVID-19 lockdown when export demand coupled with rural recovery supported steel sales. A Ministry of Steel webinar held on 20thOct’20, with CII on board, deliberated on topics of pressing importance.

Tata Steel, JSW Steel to clock record profits as steel prices shoot up.

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Big steelmakers such as Tata Steel, JSW Steel and ArcelorMittal Nippon will reap high profits as the steel prices rise above the pre-COVID levels. Prices have been shooting up for the last four months in line with the rise in iron ore prices. Big steelmakers with captive iron ore mines are largely unaffected by the rise in raw material cost, but are getting the benefits of the resultant rise in steel prices.  

The second quarter is going to be an unexpected bumper for big steelmakers as steel prices are consistently moving up due to the pent-up demand in the domestic market. The margins are high in the domestic market, unlike the export. If first quarter survival was because of the export, the second quarter will be the resurgence story of the domestic market.

The high flat steel consumption of automobile and consumer durables industries has helped in the rise in domestic demand. However, the long products sale is yet to come back to normalcy because of the continuing gloom in the construction and infrastructure segments. The steelmakers expect that the construction and infrastructure segments will bounce back in the third quarter as road, bridges and metro works restart in most of the states.

Tata Steel traditionally procures entire iron ore from its mines. JSW Steel got big captive mines in Odisha recently and plans to scale up production to around 80 per cent of their requirement. ArcelorMittal had captive mines around the world and can route it to their unit in India.