India Steel. Market Watch CONTENTS

Transcription

1 Vol II Issue XII Subscribers of India Steel Market Watch will receive alerts over on day-to-day happenings in the Indian Steel sector. For Private Circulation only* India Steel Market Watch CONTENTS Domestic long steel market remain sluggish...2 Domestic flat steel market slow in July...2 World crude steel production down 0.1% y-o-y...3 India s Q1 steel production up 4.9%...4 Production, import, export, consumption data...5 HRC makers may retain prices in August...6 Tata Steel posts 5.67% y-o-y hot metal output...7 Credit Suisse cuts steel price estimates...8 SAIL, Kobe ink final pact...18 JSPL terminates Bolivian contract...20 RINL may look to defer IPO: reports...23 Railways carry mt freight traffic...26 Car sales rise 8.3% y-o-y in June...27 Iron ore prices ease in July...28 OMC cuts iron ore rates for Jul-Sep qtr...28 Scrap prices fall on low demand...30 Sloppy sponge, pig market in July Iron ore imports via major Indian ports June...33 Iron ore exports via major Indian ports Ferro alloys market remain sluggish in July...35 Rohit Ferro Tech starts ops in FeSi plant...37 Chandrapur ferro plant to go for expansion...40 Coking coal prices ease on low demand...43 Ferro Alloys imports (June) Ferro Alloys exports (June) Manganese Ore imports (June) Steel imports via major ports (June) Steel exports via major ports (June) Coking coal imports...71 Coke import data...72 Contact us: Have a question or comment about our coverage? A news tip or input on steel markets or prices? Don t hesitate to contact and Steel Insights to share your thoughts. rakesh.dubey@mjunction.in 1

2 STEEL PRODUCTS & PRICE TREND Domestic long steel market sluggish The domestic long steel market saw a slow start for the month of July on the back of gloomy market scenario and feeble demand conditions. The market witnessed lull demand and dropping prices. The economic factors like soaring inflation, high interest rates and liquidity crisis among the buyers have also kept the market slow. The power crisis issues have also affected the market badly and made it more volatile and difficult for the buyers to predict a direction for themselves. Thus a rise in apprehension and skepticism among the buyers has been a natural phenomenon which is keeping the transaction down to its bottom at the moment. The market for semi-finished steel items remained weak over the week. Billet markets in India continue to witness low demand. Manufacturers in states like Chhattisgarh, Goa and Rajasthan reduce offers while those in Odisha, Maharashtra and Southern region keep prices at same levels. The finished steel market remained extremely weak. There is hardly any demand in the market from the construction and infrastructure sector at present. On the other hand, the weak finished steel demand and rains have kept MS Ingot prices under pressure. The offers are seemed to be low on limited buying. The ingot market across the country remained sluggish with limited movements on account of feeble demand from the construction sector. Ingot Prices: N.B.: The steel ingot price at Durgapur is prevailing at a price of Rs. 28,820/MT (basic). The steel ingot price at Rourkela is prevailing at a price of Rs. 29,700/MT (basic). The above percentage changes have been calculated on the basis of weekly average ingot prices instead of day-on-day comparison in order to minimize the daily variations in the prices & the above ingot price chart shows the day on day price. The above prices are in Rs/MT (basic) Domestic flat steel market slow The opening for the domestic flat steel market for the month of July was by and large steady as the steel majors rolled over the prices. The demand failed to see any recovery with sluggish international cues and uncertain outlook. The transaction activities were slow moving as the buyers were skeptical to make purchases. The sluggish market sentiments kept the domestic flat steel market largely steady in terms of the price. Further, weak end user segment and liquidity crunch, kept the buyers away from the market. There is hardly any positive Contd. on next Pg India Steel Market Watch 2

3 STEEL PRODUCTS & PRICE TREND Contd. from previous Pg signal in the market as the economic indicators are not showing any optimistic signals and the buyers have no optimistic prediction about the market in the near future. The buyers preferred to stay out of the market and the transaction activities only included the purchases for the immediate requirement. On the other hand, initially the weak rupee kept the imports out of the market. However, recovery in rupee made the imports cheaper and back into the market. Market experts feel that cheaper imports might prompt Indian flat producers to lower their prices or increase the discounts. Some expect that the steel majors might lower their offers in the range of Rs /ton. HR coil Ex- RSP is being quoted at Rs 35,900/ton (basic), while Ex-BSL material is being traded at Rs 36,500/ton (basic). CR coil Ex- RSP is being quoted at Rs 38200/ton (basic) ), while Ex-BSL material is being traded at Rs 38800/ton (basic). World crude steel production at 128 mt in June World crude steel production for the 62 countries reporting to the World Steel Association (worldsteel) was 128 million ton (mt) in June 2012, a decrease of -0.1% compared to June World crude steel production in the first six months of 2012 was mt, a slight increase of 0.9% compared to the same period of North America and Asia showed an increase of 7.2% and 1.6% respectively (USA 8.4% and China 1.8%) while the EU (27) and South America recorded negative growth of -4.6% and -3.5% each. Crude steel production World Steel capacity utilisation ratio Contd. on next Pg India Steel Market Watch 3

4 STEEL PRODUCTS & PRICE TREND Contd. from previous Pg China s crude steel production for June 2012 was 60.2 mt, an increase of 0.6% compared to June Elsewhere in Asia, Japan produced 9.2 mt of crude steel in June 2012, up by 3.5% compared to the same month last year. South Korea s crude steel production for June 2012 was 5.9 mt, an increase of 4.3% compared to June India produced around 6.3 mt of steel in June. In the EU, Germany produced 3.7 mt of crude steel in June 2012, a decrease of -4.0% on June Italy s crude steel production for June 2012 was 2.4 mt, down by -7.9% on June In June 2012, France produced 1.3 mt of crude steel, down by -2.1% compared to June Spain s crude steel production for June 2012 was 1.3 mt, -8.8% lower than June Turkey s crude steel production for June 2012 was 2.9 mt, an increase of 4.0% compared to June The US produced 7.3 mt of crude steel in June 2012, up by 0.8% on June Brazil s crude steel production for June 2012 was 2.7 mt, -8.5% lower than June The world crude steel capacity utilisation ratio for the 62 countries in June 2012 rose slightly to 80.4% from 79.7% in May Compared to June 2011, it was 2.5 percentage points lower. India s Q1 steel production up 4.9% India s Q1 steel consumption up 8.8% India s Q1 steel imports up 41% India s finished steel production during April-June 2012 (first quarter) was up 4.9% to million tons (mt), compared to 18 mt produced during the same period last year, according to provisional data released by the steel ministry. The output during June 2012 was up 5.77% to 6.6 mt, compared to 6.24 mt in May. Steel production in April 2012 was 6.03 mt. Of the total production during the first quarter, the share of non-alloy steel (carbon) was mt (up 5% year-on-year) while that of alloy steel was 1.08 mt (up 2.8% year-on-year). According to the data, SAIL s production in April-June rose 5.3% yearon-year to 2.48 mt, RINL s production was up 5.7% to 615,000 tons and Tata Steel s production rose 3.4% to 1.38 mt. India s steel consumption was up 8.8% to million tons (mt) in the first quarter of , compared to mt in the same period last year, according to provisional data released by the steel ministry. Consumption of non-alloy steel (carbon) accounted for mt, while that of alloy steel was mt during the period, the data showed. India s steel imports in the first quarter (April-June 2012) period surged by 41.2% to 1.99 million tons (mt), compared to 1.41 mt in the same period last year, according to provisional data released by the steel ministry. Of the total imports, non-alloy steel (carbon) accounted for 1.53 mt while alloy steel accounted for mt, the data showed. In the month of June 2012, steel imports stood at 782,000 tons, up 44.8% over 540,000 tons in May. Import during April was 670,000 tons. India Steel Market Watch 4

5 STEEL PRODUCTS & PRICE TREND Production, Imports, Exports, Availability & Apparent Consumption (provisional) April - June 2012 (in 000 tons) FINISHED STEEL PIG IRON PRODUCERS Non-Alloy Steel (Carbon) Alloy Steel Total (Prov.) (Prov.) % Variation (Prov.) (Prov.) % Variation (Prov.) (Prov.) % Variation (Prov.) (Prov.) % Variation SAIL RINL TSL a) Prod. of Main Producers b) Prod. of Major Producers $ Others b) Prod. of Other Producers $ Less : IPT/Own Consumption c) Total Production for Sale d) Imports $ e) Exports $ e) Availability (c+d-e) f) Variation in Stock g) Apparent Consumption (e-f) Less : Double Counting Real Consumption India Steel Market Watch 5

6 STEEL PRODUCTS & PRICE TREND India s Q1 steel exports down 15.2% India s Q1 pig iron production up 6.5% HRC makers may retain prices in August HDG exporters hit by sluggish demand India asks WTO to resolve HRC dispute India s steel exports in the first quarter (April-June 2012) plunged 15.2% to million tons (mt), compared to mt in the same period last year, according to provisional data released by the steel ministry. Export of alloy steel was down 34% while that of non-alloy steel (carbon) dipped by 12.8% compared to the same period last year. Steel export in June 2012, however, was higher at mt, compared to mt in May and mt in April. India s pig iron production in was up 6.5% in the first quarter (April-June 2012) to million tons (mt), compared to 1.47 mt in the same period last year, according to provisional data released by the steel ministry. Production during June 2012 was mt, higher than mt in May and 0.5 mt in April, the data showed. Pig iron consumption during the quarter was up 11.1% to 1.5 mt, against 1.35 mt in the same period last year. Hot rolled coil makers may be able to roll over prices in August despite low domestic demand on expected lower imports as government has reportedly raised import tariffs of certain alloy flat steel products to 7.5% from 5% earlier, market sources told. could not confirm from government sources about increase in tariffs of certain alloys. There are reports that government has imposed higher 7.5% duty to certain alloy steel flat products under the HS codes of , , and For a coil import price averaging $600/ton cfr, the increased cost arising from the additional 2.5% import tariff is about $15/ton. Also, a new government quality control regulation is to take effect from mid- September after which foreign steelmakers not registered with the Bureau of Indian Standards would be unable to supply coils to India, sources said. However, it needs to be seen whether these developments would help HRC makers keep supplies under check with less imports because the Indian currency has averaged Rs against the dollar over the past fortnight compared with Rs seen in late June. Since May, Indian producers have been offering structural HRC, 3mm thick and above, at Rs 36,000-36,500/ton ex-works. Hot dip galvanized coil exporters were hit by sluggish overseas demand, market sources said. Offers for 0.3mm thick soft coils with 90 grams/ square metre zinc coating is at about $890/ton cfr USA, equivalent to $ / ton fob, for shipment in August. India has asked the World Trade Organisation to establish a dispute settlement panel to resolve its conflict with the US over its countervailing duties on Indian hotrolled coil imports, according to media reports. India had requested consultations with the US under the WTO dispute settlement system on April 12. Consultations are a first step in the dispute settlement process. If no resolution is reached in consultations, the complainant may request the establishment of a dispute settlement panel. The US currently levies CVDs of % on HRC from India. It also applies antidumping orders on the same product with margins at %. The CVD and AD orders have been in place since December India Steel Market Watch 6

7 STEEL PRODUCTS & PRICE TREND Tata Steel registers 5.67% y-o-y hot metal production Tata Steel registered hot metal and crude steel production of 2.05 million tons (mt) and 1.82 mt respectively for the first quarter of , higher by 5.67% and 1.67% year-on-year, the company said in a release. The key production and sales figures are as follows: Figures in million tons Items Q1FY12 Q4FY12 Q1FY13 Hot Metal Crude Steel Saleable Steel Sales During the first quarter of FY13 the company achieved best ever hot metal production of 2.05 mt in a quarter, the previous best being 1.96 mt in the fourth quarter of FY12. The sales were marginally lower quarter-on-quarter on account of power outages, which impacted downstream production. Performance of recently commissioned plants-- I Blast Furnace, LD#3 & TSCR-- was satisfactory. JSW reports 27% y-o-y growth in Q1 production JSW Steel reported 27% growth in production for the April-June quarter to 2.14 million tons (mt) over the same quarter a year ago. The company produced about 1.7 mt of crude steel in the same quarter of the last fiscal. Besides, its flat product output grew by 36% to 1.61 mt and long product by 27% to 0.44 mt during the quarter over the Q1 of last fiscal, JSW Steel said in a statement. Vijayanagar works could operate at only 80% capacity utilisation during the first quarter due to constraints in availability and quality of iron ore in e-auction in Karnataka, it added. The company operates a 10 mt steel plant at Karnataka s Vijaynagar and a 1 mt capacity at Salem in Tamil Nadu. For the current fiscal, the Sajjan Jindal-led company has kept a target of producing 8.75 mt of crude steel, while its production in the last fiscal was 7.43 mt. RINL posts y-o-y growth of 16% in Q1 of FY 13 Rashtriya Ispat Nigam Limited (RINL), has posted a turnover of around Rs 3000 crore during Q1 of , registering a growth of 16% as compared to the turnover earned during the corresponding period last year, the company said in a statement. RINL also registered a growth of 7% and 6% growth in hot metal and liquid steel production, respectively during the period. On the other hand, the saleable steel and iron production registered a growth of 2%, the statement said. The growth in turnover was supported by 20% improvement in project sales, 42% improvement in by-product sales and also improvement in value added steel sales during the quarter. On the techno-economic front, 22% reduction in water consumption could be achieved through a stream of water conversation measures. India Steel Market Watch 7

8 STEEL PRODUCTS & PRICE TREND BSP surpasses Q1 business plan targets Safeguard investigation on flat stainless imports Credit Suisse cuts steel price estimates Steel Authority of India Limited s (SAIL) Bhilai Steel Plant (BSP), has surpassed the annual business plan (ABP) targets in all the three major parameters of hot metal, crude steel and saleable steel production as also in production from the individual finishing mills during the first quarter of , the company said in a statement. The plant recorded a substantial growth of 4.6%, 8.7% and 2.6% over the last year in hot metal, crude steel and saleable steel production, respectively. All the finishing mills of the plant also performed to the maximum in the first quarter and achieved cent per cent fulfillment of ABP targets with a growth of 7.5% in total finished steel production from the mills over corresponding period of last year. BSP, in fact, recorded hot metal production of 1.34 million tons (mt), crude steel production of 1.28 mt and saleable steel production of 1.05 mt in Q1 of The component of special value added steel production in total saleable steel production was maintained at 64.7% for Q1 period and 63.4% for the month of June, This proportion is still the highest among all SAIL units. During Q1 of the current fiscal, the plant produced mt of special value added steel grades, the statement further added. Indian authorities have initiated a safeguard investigation into imports of 300-series hot rolled stainless steel flat products from China, according to market sources. Earlier, Jindal Stainless had applied for immediate imposition of safeguard duties on the products for four years to protect domestic producers. It was alleged that imports from China had shown a sharp and significant increase, rising almost seven-fold to 36,183 tons in fiscal year compared to FY Jindal also accused the imports of causing domestic producers to lose sales and market share, while inventories rose significantly in the domestic industry. India currently has dumping duties of $160-1,130/ton on grade 304 stainless hot rolled products originating in or exported from the European Union, South Africa, Taiwan and the US. The duties were introduced in 2011 following a complaint by Jindal Stainless. Jindal accounts for more than 80% of total production of 300-series HR flat products in India. Credit Suisse has cut its steel prices estimates after bigger-than-expected falls, and added it will impact EPS for companies in the sector by 5-25%. Credit Suisse downgraded Tata Steel to underperform from neutral while maintaining its target price at Rs 340, saying valuations are no longer supportive. The investment bank also cut its target price for Jindal Steel & Power to Rs 600 from Rs 534, citing higher costs at captive power plans and plans to scrap its iron ore and steel investment in Bolivia among its main reasons. India Steel Market Watch 8

9 STEEL PRODUCTS & PRICE TREND Apparent consumption of steel rises 7% in Apr-May The apparent consumption of steel rose 6.7% in the April-May period at million tons (mt) from mt in the same period last year, provisional data from a steel ministry wing showed. An analysis of the figures show that consumption of bars and rods, CR sheets/coils, GP/GC sheets and pipes (large dia) increased during the period. However, consumption of HR coils/skelp, HR sheets, elec sheets and tin free steel declined during the period in the non-alloy segment. Both the flat and non-flat segments declined during the April-May period. Apparent Consumption of finished steel April-May in 000 tons Category Apr-May 2012 Apr-May 2011 Variation % Non-Alloy Bars & Rods Structurals Rly Materials Plates HR Coils/Skelp HR Sheets CR Sheets/Coils GP/GC Sheets Elec Sheets Tinplate TMBP 0 0 Pipes (large dia) Tin free steel Less: Double Counting Total (non-alloy) Alloy Non-flat Flat Double Counting Total (alloy) Grand Total India s finished steel imports from China up sharply in April - May India s steel import from China during the period of April-May 2012 increased by 117% to 453,628 tons compared with 208,980 tons of steel imported from China during the corresponding month of previous year, according to provisional data of Ministry of Steel. Following is the countrywise import of steel to India (in 000 tons): Country April-May 12 (Prov) April-May 2011 China Japan Korea Russia Ukraine Other Countries Total Steel India Steel Market Watch 9

10 STEEL PRODUCTS & PRICE TREND India s finished steel imports in April-May up y-o-y Imports of various types of finished steel during April-May 2012 jumped 69% compared with corresponding period of 2011, according to provisional data of Ministry of Steel. Following is the detail of finished steel imports (in 000 tons) and by ports: Category April-May 2012 April-May 2011 SEMIS (Including RR Scrap) Non-Flat Products Flat Products Total Steel Portwise Break-up Port Name Apr-May 2012 Apr-May 2011 Mumbai Kandla Mundra Other Ports Total Steel May saleable steel production of main plants up The production of saleable steel by main producers SAIL, Tata Steel and RINL rose marginally by 0.8% in May 2012 compared with May 2011 and up by 2.77% compared with the production in April 2012, according to provisional data by a wing of Ministry of Steel. According to the data, the production of saleable steel by main producers rose to 1,852,000 tons in May 2012 from 1,837,000 tons in April 2011 and 1,802,000 tons in April Following is the detail of saleable steel production by main producers during the month of May 2012 (in 000 tons) Production of Saleable steel of Main producers in 000 tons Producer 12-May 11-May 12-Apr SAIL Bhilai Steel Plant Durgapur Steel Plant Rourkela Steel Plant Bokaro Steel Plant Indian Iron and Steel Alloy Steel Plant SSP Vis Iron & Steel Tata Steel RINL Total India Steel Market Watch 10

11 STEEL PRODUCTS & PRICE TREND CR products exports via Chennai port at 3413 tons in June HR products exports via Chennai port at 42,248 tons in June Long products exports via Chennai port at 1019 tons in June Exports of CR products via Chennai port stood at 3413 tons during the month of June 2012, according to provisional data available with. Following table shows the details of CR products exports via Chennai port during the month of June 2012: PRODUCT COUNTRY AVERAGE UNIT PRICE (Rs/ton) QUANTITY (In tons) BANGLADESH 42, CR PRODUCTS OTHERS 43,023 2,669 SRI LANKA 45, UAE 43, CR PRODUCTS Total 3,413 Exports of HR products via Chennai port stood at 42,248 tons during the month of June 2012, according to provisional data available with. Following table shows the details of HR products exports via Chennai port during the month of June 2012: PRODUCT COUNTRY AVERAGE UNIT PRICE (Rs/ton) QUANTITY(In tons) SRI LANKA 40,007 3,770 HR PRODUCTS THAILAND 34,370 8,091 UAE 33,276 30,387 HR PRODUCTS Total 42,248 Exports of long products via Chennai port stood at 1019 tons during the month of June 2012, according to provisional data available with. Following table shows the details of long products exports via Chennai port during the month of June 2012: PRODUCT COUNTRY AVERAGE UNIT PRICE (Rs/ton) QUANTITY (In tons) BANGLADESH 70, LONG PRODUCTS OTHERS 34, SRI LANKA 49, THAILAND 76, LONG PRODUCTS Total 1,019 Stainless steel products exports via Chennai port at 188 tons in June Exports of stainless steel products via Chennai port stood at 188 tons during the month of June 2012, according to provisional data available with. Following table shows the details of stainless steel products exports via Chennai port during the month of June 2012: PRODUCT STAINLESS STEEL PRODUCTS COUNTRY AVERAGE UNIT PRICE (Rs/ton) QUANTITY (In tons) OTHERS 91, SRI LANKA 114, UAE 90, STAINLESS STEEL PRODUCTS Total 188 India Steel Market Watch 11

12 STEEL PRODUCTS & PRICE TREND CR products import via Chennai port rises in June HR products import via Chennai port falls in June Imports of CR products via Chennai port stood at 26,583 tons during June 2012, recording an increase of 3.01% from 25,805 tons imported in May 2012, according to provisional data available with. However, the imports of CR products through the port in June 2011 stood at 22,499 tons. Out of the total quantity of materials imported during June 2012, 2024 tons came from China at an assessed average price of Rs 47,540/ton, 6174 tons came from Japan at an assessed average price of Rs 60,436/ton, tons came from Republic of Korea at an assessed average price of Rs 55,117/ton whereas the rest of 2228 tons came in from other countries at an assessed average price of Rs 57,434/ton. Imports of HR products via Chennai port stood at 26,297 tons during June 2012, recording a fall of 6.45% from 28,111 tons imported in May 2012, according to provisional data available with. However, the imports of HR products through the port in June 2011 stood at 24, tons. Out of the total quantity of materials imported during June 2012, 16,181 tons came from China at an assessed average price of Rs 42,311/ton, 2775 tons came from Japan at an assessed average price of Rs 57846/ton, 6801 tons came from Republic of Korea at an assessed average price of Rs 49082/ton whereas the rest of 540 tons came in from other countries at an assessed average price of Rs 142,011/ton. Following is the table showing imports of HR products via Chennai port in June 2012: PRODUCT COUNTRY AVERAGE UNIT PRICE (Rs/ton) QUANTITY (In tons) CHINA 42,311 16,181 HR PRODUCTS JAPAN 57,846 2,775 OTHERS 142, REPUBLIC OF KOREA 49,082 6,801 HR PRODUCTS Total 26,297 Long products import via Chennai port rises in June Imports of long products via Chennai port stood at 9,973 tons during June 2012, recording a rise of 76.01% from 5,666 tons imported in May 2012, according to provisional data available with. Out of the total quantity of materials imported during June 2012, 1282 tons came from China at an assessed average price of Rs 83,221/ton, 264 tons came from Japan at an assessed average price of Rs 233,344/ton, 1626 tons came from Republic of Korea at an assessed average price of Rs 81,321/ton, 73 tons came from United Kingdom at an assessed average price of Rs 163,352/ton whereas the rest of 6728 tons came in from other countries at an assessed average price of Rs 142,362/ton. India Steel Market Watch 12

13 STEEL PRODUCTS & PRICE TREND Plates & slabs import via Chennai port rises in June Imports of long products via Chennai port stood at 11,725 tons during June 2012, recording a rise of 56.42% from 7496 tons imported in May 2012, according to provisional data available with. Out of the total quantity of materials imported during June 2012, 8226 tons came from China at an assessed average price of Rs 40,192/ton, 849 tons came from Japan at an assessed average price of Rs 81,813/ton whereas the remaining 2651 tons came in from other countries at an assessed average price of Rs 79,278/ton. Scrap import via Chennai port rises in June Imports of long products via Chennai port stood at 192,009 tons during June 2012, recording a rise of 27.83% from 150,209 tons imported in May 2012, according to provisional data available with. Out of the total quantity of materials imported during June 2012, 51 tons came from Japan at an assessed average price of Rs 27,211/ton, 734 tons came from Republic of Korea at an assessed average price of Rs 26,668/ton, 6012 tons came from United Kingdom at an assessed average price of Rs 26,222/ ton whereas the rest of tons came in from other countries at an assessed average price of Rs 27,722/ton. Stainless steel products import via Chennai port falls in June Imports of stainless steel products via Chennai port stood at 1921 tons during June 2012, recording a fall of 90.22% from 19,647 tons imported in May 2012, according to provisional data available with. Out of the total quantity of materials imported during June 2012, 234 tons came from China at an assessed average price of Rs 153,529/ton, 248 tons came from Japan at an assessed average price of Rs 94,885/ton, 543 tons came from Republic of Korea at an assessed average price of Rs 161,612/ton, 66 tons came from United Kingdom at an assessed average price of Rs 274,019/ton whereas the rest of 830 tons came from other countries at an assessed average price of Rs 154,790/ton. Wire & wire rods import via Chennai port falls in June Imports of wires & wire rods via Chennai port stood at 6654 tons during June 2012, recording a fall of 58.87% from 16,177 tons imported in May 2012, according to provisional data available with. Out of the total quantity of materials imported during June 2012, 1239 tons came from China at an assessed average price of Rs 78,136/ton, 744 tons came from Japan at an assessed average price of Rs 181,013/ton, 843 tons came from Republic of Korea at an assessed average price of Rs 136,660/ton, whereas the rest of 3827 tons came from other countries at an assessed average price of Rs 98,827/ton. CR import via Cochin rises m-o-m in June Import of CR products via Cochin port during the month of June 2012 stood at 21 tons, up 5% from 20 tons imported during the previous month, according to provisional data available with. During June 2012, the entire material was imported through the port at an assessed average price of Rs 114,452/ton. India Steel Market Watch 13

14 STEEL PRODUCTS & PRICE TREND Long import via Cochin falls m-o-m in June Scrap imports via Cochin port up m-o-m in June Wires and wire rods imports via Cochin port up m-o-m in June CR products import via Kolkata port falls m-o-m in June HR products import via Kolkata port plunges m-o-m in June Import of long products via Cochin port during the month of June 2012 stood at 21 tons, down 68.18% from 66 tons imported during the previous month, according to provisional data available with. During June 2012, the entire material was imported through the port at an assessed average price of Rs 191,780/ton. Import of scraps via Cochin port during the month of June 2012 stood at 20,883 tons, up 9.6% from 19,053 tons imported during the previous month, according to provisional data available with. During June 2012, out of the total material imported, 215 tons came in from United Kingdom at an average price of Rs 27,591/ton while the remaining 20,668 tons came from other countries at an average price of Rs 27,712/ton. Import of wires and wire rods via Cochin port during the month of June 2012 stood at 234 tons, up 13.04% from 207 tons imported during the previous month, according to provisional data available with. During June 2012, out of the total material imported, 52 tons came in from China at an average price of Rs 150,891/ton while the remaining 182 tons came from other countries at an average price of Rs 58,083/ton. Import of CR products via Kolkata port during the month of June 2012 stood at 4,861 tons, down 4.27% from 5,078 tons imported during the previous month, according to provisional data available with. However, the imports of CR products through the port in June 2011 stood at 5,700 tons. During June 2012, out of the total amount of materials imported through the port, 61 tons came from China at an average price of Rs 76,595/ton, 4780 tons came in from Japan at an average price of Rs 45,471/ton while the remaining 21 tons came in from Republic of Korea at an average price of Rs 72,003/ton. Import of HR products via Kolkata port during the month of June 2012 stood at 14,744 tons, down 45.09% from 26,856 tons imported during the previous month, according to provisional data available with. However, the imports of HR products through the port in June 2011 stood at 6178 tons. During June 2012, out of the total amount of materials imported through the port, 423 tons came from China at an average price of Rs 41,261/ton, 10,669 tons came in from Japan at an average price of Rs 37,872/ton, 37 tons came in from United Kingdom at an average price of Rs 67,473/ton while the remaining 3615 tons came from other countries at an assessed average price of Rs 59,621/ton. India Steel Market Watch 14

15 STEEL PRODUCTS & PRICE TREND Long products import via Kolkata port up m-o-m in June Plates & slabs imports via Kolkata port up in June Wire & wire rods imports via Kolkata port up in June Stainless steel June products import via Kolkata slumps m-o-m Import of long products via Kolkata port during the month of June 2012 stood at 1,545 tons, up 39.31% from 1,109 tons imported during the previous month (May 2012), according to provisional data available with. In June 2012, out of the total amount of materials imported through the port, 658 tons came from China at an average price of Rs 68,633/ton, 697 tons came in from Japan at an average price of Rs 61,779/ton while the remaining 191 tons came from other countries at an assessed average price of Rs 103,262/ton. Import of plates & slabs via Kolkata port during the month of June 2012 stood at 1,042 tons, up by 825 tons from 217 tons imported during the previous month, according to provisional data available with. During June 2012, out of the total amount of materials imported through the port, the lion s share of 994 tons came in from Japan at an assessed average price of Rs 78,914/ton while the remaining 48 tons came in from other countries at an assessed average price of Rs 118,951/ton. Import of wires and wire rods via Kolkata port during the month of June 2012 stood at 2011 tons, up by 14.39% from 1758 tons imported during the previous month, according to provisional data available with. However, the imports of wire & wire rods through the port in June 2011 stood at 236 tons. During June 2012, out of the total amount of materials imported through the port, 224 tons came in from China at an assessed average price of Rs 130,613/ ton, 44 tons came from Japan at an assessed average price of Rs 87,074/ton, 89 tons came in from the Republic of Korea at an assessed average price of Rs 76,833/ton while the remaining 1,653 tons came in from other countries at an assessed average price of Rs 81,151/ton. Import of stainless steel products via Kolkata port during the month of June 2012 stood at only 10 tons, down by 392 tons from 402 tons imported during the previous month, according to provisional data available with. However, the imports of stainless steel products through the port in June 2011 stood at 167 tons. During June 2012, the entire quantity of stainless steel products was imported through the port from China at an average price of Rs 210,679/ton. Scrap import via Kolkata port up m-o-m in June Import of scrap via Kolkata port during the month of June 2012 stood at 63,353 tons, up 8.84% from 58,208 tons imported during the previous month, according to provisional data available with. During June 2012, out of the total amount of materials imported through the port, 1,811 tons came in from United Kingdom at an assessed average price of Rs 27,592/ton, 92 tons came from Republic of Korea at an assessed average price of Rs 27,464/ton while the remaining 61,450 tons came in from other countries at an assessed average price of Rs 29,879/ton. India Steel Market Watch 15

16 STEEL PRODUCTS & PRICE TREND Manganese ore import via Mormugao spurts m-o-m in June Scrap imports through Mormugao port at 4,996 tons in June Wire and wire rods imports via Mormugao at 54 tons in June Plates and slabs imports via Mormugao at 12 tons in June Exports of HR products falls 19.56% m-o-m in June Import of manganese ore through Mormugao port stood at 194,210 tons in June 2012, rising sharply compared to only a small amount of 562 tons in May 2012, as per information available with. In June, the entire quantity came in three consignments from Turkey and Indonesia. In May also, there were three small consignments from Oman and Indonesia. The average unit price of the imported material stood at Rs 18,329/ton in June against Rs 15,348/ton in May. Import of scrap via Mormugao port stood at 4,996 tons in June 2012, recording a fall of 13.9% as compared to 5,803 tons in the corresponding month of previous year, according to data available with. Out of the total quantity of scrap imported through the port during the month of June, 755 tons came from Germany at a unit price of Rs 29159/ton, 467 tons came from Mozambique at a unit price of Rs 28,950/ton, 227 tons came from Senegal at a unit price of Rs 29,160/ton, 906 tons came from South Africa within a price range of Rs 27,673/ton to Rs 29,367/ton, 715 tons came from Togo at a unit price of Rs 29,159/ton while the remaining 1,925 tons came in from USA within a price range of Rs 28955/ton to Rs 29,368/ton. Imports of wires and wire rods stood at 54 tons during June 2012 while during the previous month, imports of the material through the port stood at nil. During June 2012, the entire quantity of wires and wire rods imported through the port was brought in from China within a price range of Rs 72,376/ ton to Rs 73,498/ton. However, during June 2011, import of wires and wire rods imported though the port also stood at nil. Imports of plates and slabs stood at 12 tons during June 2012 while during the previous month imports of the material through the port stood at nil. During June 2012, the entire quantity of plates and slabs imported through the port was brought in from Germany at a unit price of Rs 115,286/ton. However, during June 2011, import of plates and slabs imported though the port also stood at nil. Exports of hot rolled (HR) products via Mormugao port during the month of June 2012 stood at 30,826 tons, down 19.56% as compared to 38,320 tons exported during May Out of the total quantity of HR products exported, 6,373 tons went to Antwerpen within a price range of Rs 33,592/ton-Rs 37,280/ton, 6,924 tons went to Dammam at a unit price of Rs 37,171/ton, 12,215 tons went to Haiphong at a unit price of Rs 34,523/ton, 267 tons went to Jebel Ali within a price range of Rs 35,295/ton-Rs 37,942/ton whereas 5,047 tons went to Setubal at a unit price of Rs 32,998/ton. In June 2011, HR products were exported via Mormugao port at an average unit price of Rs 35,324/ton, according to information available with. India Steel Market Watch 16

17 STEEL PRODUCTS & PRICE TREND Defective Billet attract low prices in e-auction Prices slide in e-auction for defective Wire rod cutting from Chhattisgarh The price realisations for defective Billet (upto 110) saw a fall in the e-auction conducted by metaljunction.com for material from Chhattisgarh in June 2012 as compared to May, according to information available with. Average realised price went down by 1.23% to Rs.31,979 per ton in June as compared to Rs.32,378 per ton in May. In June 2011, the same stood at Rs.28,430 per ton. Booked quantities fell to 8396 tons in June as compared to 9003 tons in May. In June 2011, the same stood at 7367 tons. The price realisations for defective wire rod cutting saw a fall in the e-auction conducted by metaljunction.com for material from Chhattisgarh in June as compared to May, according to information available with. Average realised price went down by 3.34% to Rs.30,769 per ton in June as compared to Rs.31,832 per ton in May In June 2011, prices stood at Rs.26,302 per ton. Booked quantities rose to 3770 tons in June as compared to 3466 tons in May In June 2011, the same stood at 1560 tons. Defective Bloom prices lower in e-auction The price realisations for defective wire rod cutting went down in the e-auction conducted by metaljunction.com for material from Chhattisgarh in June as compared to May, according to information available with. Average realised price fell by 1.61% to Rs.28,408 per ton in June 2012 as compared to Rs.28,872 per ton in May. In June 2011, prices stood at Rs.24,485 per ton. Booked quantities saw a rise to 2489 tons in June as compared to 1874 tons in May. In June 2011, the same stood at higher at 10,885 tons. Fall in prices of Defective HR Plate from Jharkhand in e-auction The price realisation for defective assorted mixed grade hot rolled plates -HR Plate (AMG) fell in the e-auction conducted by metaljunction.com for material from Jharkhand in June this year as compared to May 2012, according to information available with. Average realised price went down by 1.26% to Rs 31,957 in June 2012 as compared to Rs 32,366/ton in May. Average realised price in June 2011 stood at Rs 29,979/ton. Booked quantities fell to 2298 tons in June 2012 as compared to 3588 tons in May. In June 2011, the same stood at 3051 tons. Defective HR Coil from Jharkhand attract low prices in e-auction The price realisation for defective DD HR Pickled Coil fell in the e-auction conducted by metaljunction.com for material from Jharkhand in June 2012 as compared to May, according to information available with. Average realised price fell by 0.60% to Rs 31,554/ton in June as compared to Rs 31,743/ton in May Average realised price in June 2011 stood at Rs 28,602/ton. Booked quantities rose to 1318 tons in June 2012 as compared to 2112 tons in May. In June 2011, the same stood at 2298 tons. India Steel Market Watch 17

18 STEEL PRODUCTS & PRICE TREND Price Trend as observed in the auction held at metaljunction for Long Products Following graph shows the price trend observed in the auction services of Metal Junction for the months of May & June 2012 for different long products. Wtd. Avg. Price (Rs./MT) Long Products Price Trend May'12 Week 1 May'12 Week 3 May'12 Week 4 Jun'12 Week 1 Jun'12 Week 2 Jun'12 Week 3 Jun'12 Week 4 Defective Billet MM end Cutting Rejected Bloom Plate Cutting Price in `/t is basic Percent change (m-m, q-q, y-y basis) Products May 12 Price (Avg.) June 12 Price (Avg.) % change (M-M) % change (Qtr-Qtr) % change (Yr-Yr) Defective Billet Plate Cutting MM End Cutting Rejected Bloom Price in `/t is basic SAIL, Kobe ink final pact India s largest steel maker SAIL today inked the final pact with Japan s Kobe Steel to set up a 500,000-ton plant in West Bengal to produce a key steel making raw material. The facility entailing an investment of Rs 1,500 crore will use Kobe s specialised technology ITmK3 (iron making technology mark three) to produce nuggets to be shared equally by the partners for captive use, an official release said. The agreement was signed by SAIL Chairman C S Verma and Kobe Steel President & CEO H Sato in the presence of Steel Minister Beni Prasad Verma in Tokyo. The ITmK3 technology will also utilise dump iron ore fines, disposal of which is an environmental issue, the statement said quoting the steel minister, who also expressed hope that there will be more projects for the Indian steel industry with the help of Japanese technology. ITmK3 technology has successfully replaced coal as an input material for iron making and is recognised for its low energy consumption and environment friendliness. Contd. on next Pg India Steel Market Watch 18

19 STEEL PRODUCTS & PRICE TREND Contd. from previous Pg Kobe Steel is one of the prominent steel makers of Japan, which is the world s second largest steel producing country. It is also one of the largest suppliers of alloy steels to Japanese automobile companies. The SAIL-Kobe Steel JV project will harness the strengths of both the leading steel companies. While SAIL will contribute land, iron ore and other engineering services for the project, Kobe steel will provide the technology for setting up the plant and its operation, the statement said. A joint venture company SAIL-Kobe Iron India Pvt Ltd in which SAIL and Kobe Steel hold equal equity, has already been incorporated. The raw material for the joint venture would be supplied from SAIL s Gua mines in Jharkhand. The statement added that partnership with Kobe gives an opportunity for Indian steel firms to enter into strategic relationships with Kobe Steel so that strengths of respective companies could be leveraged. SAIL and Kobe Steel had earlier signed a pact on March 30, 2010 for conducting a joint feasibility study for exploring and commercialisation of ITmk3 technology developed by Kobe for production of iron nuggets used for steel production. SAIL plans to double capacity Cabinet clears disinvestment of 10.82% in SAIL Steel Authority of India Ltd (SAIL) is working on plans to almost double its production capacity to 45 million tons per annum (mtpa) by Chairman C.S. Verma told the media that the planned expansion is to meet the country s rising steel consumption, which is currently way below the world average. The state-owned company is expanding its crude steel production capacity from 13.8 mtpa to 23.4 mtpa in a programme due to be completed in On top of this, it plans to invest $23.4 billion to raise capacity further to 45 mtpa. A board-level committee is deliberating on increasing the steel-making capacity to 45 mtpa by 2020, Verma told the media. It will involve both brownfield and greenfield developments. Four of SAIL s current five integrated steelworks will have their capacities expanded. The odd one out is Burnpur where the current expansion programme, including a new blast furnace, is running a year behind schedule. The biggest expansion will be at the Bokaro works where capacity will be increased to mtpa from 4.62 mtpa. The Durgapur works will be raised to 8.8 mtpa from 2.2 mtpa. Some 3 mtpa of capacity will be added at the company s two other steelworks. The Cabinet Committee on Economic Affairs has approved the disinvestment of 10.82% equity of Steel Authority of India Limited (SAIL) out of Government of India shareholding of 85.82% through an Offer of Sale of shares through stock exchanges as per SEBI Rules and Regulations. After this disinvestment, the government of India shareholding in the company will come down to 75%, according to a government release. The paid up equity capital of the company, as on March 31, 2012 was Rs crore. SAIL is a listed Maharatna Central Public Sector Enterprise and is the largest domestic steel producing company. It is also engaged in the business of mining, production and marketing of iron and steel. India Steel Market Watch 19

20 STEEL PRODUCTS & PRICE TREND SAIL lays foundation for converter at Bhilai JSPL terminates Bolivian contract JSPL close to buying stake in Canadian coal mine owner: Reports The Steel Authority of India Ltd (SAIL) has laid the foundation for the first of three converters that will constitute a new basic oxygen steelmaking shop, No 3, at its Bhilai steelworks in Chhattisgarh. Supplied by Siemens VAI, the new shop includes three 160-ton converters. China s WISDRI Engineering & Research is installing the secondary refining unit. Siemens VAI is also supplying four continuous casters two 6-strand billet casters, a 6-strand combination billet/bloom caster, and a 3-strand beam-blank caster. As per SAIL s corporate plan, these projects are scheduled for completion before the end of the fiscal year (March 2013), but actual commissioning of equipment could spill over to the next fiscal, sources said. Last August, SAIL completed laying the foundations for its new blast furnace No. 8 at Bhilai. The 4,060 cubic metre furnace, with 2.8 million tons/ year of hot metal production capacity, is being supplied by Paul Wurth and Indian engineering and construction firm Larsen & Toubro. New upstream units include a 360 square metre sinter plant with 3.7m t/y capacity and a battery of 7-metre coke ovens. Downstream, SMS Meer and ABB will supply a 1.2 million tons/year universal rail mill and Danieli a 900,000 tons/year bar and rod mill. Crude steel capacity at Bhilai is being ramped up to 7 million tons/year from about 3 million tons/year previously. Jindal Steel & Power Ltd (JSPL) has terminated its contract for the El Mutún iron and steel project with the Bolivian government, after a meeting between the two parties failed to resolve outstanding issues. According to the Indian company, the non-fulfillment of contract conditions on the part of the Bolivian government was the reason the deal collapsed. The four pillars of the contract breach were: lack of availability to provide the requested natural gas to run the project; the US$36m bank guarantees charged; not decreasing the steelmaking quantity with the lower amount of gas; and demanding that Jindal maintain the same investment. JSPL requested 4m cubic meters/day of gas as last attempt to continue the project in a slimmed-down form, and Bolivia could supply only 2.5m cm/d. In a statement, JSPL said the termination comes due to the non-investor friendly attitude of the Bolivian government. The original contract signed in 2007 called for the development of and iron ore mine, pelletizing plant (10 mt/year), DRI plant (6 mt/year) and steelworks (1.7 mt/year). The Naveen Jindal-controlled Jindal Steel & Power is close to acquiring a controlling stake in a Canadian coal mine owner to feed its India-based power and steel plants, media reports said. Jindal is in advanced talks with the Toronto-listed CIC Energy, the owner of large undeveloped coal assets in Botswana, Africa. The deal, which could be valued upward of 1,000 crore at current rates, will give the Delhi-based company control over potential reserves of about 2.4 billion tons of high grade thermal coal from CIC s Mmamabula Coalfields and other properties, reports said. Contd. on next Pg India Steel Market Watch 20

21 STEEL PRODUCTS & PRICE TREND Contd. from previous Pg Jindal Steel officials had mandated Morgan Stanley to scout for potential mines in Australia, South Africa and Indonesia. It has five coal mine exploratory licences in Australia and is developing similar resources in Mozambique. In May, Jindal bought 10% in Gujarat NRE s subsidiary and also signing an offtake agreement for supply of 5 million tons annually. Miglanis make open offer for stake in Lloyds BOC gets Tata Steel s industrial gases contract Sesa Goa plans to close pig iron, coke plants Indian business family the Miglanis co-owners of cold-roller and galvanizer Uttam Galva Steels Ltd (UGSL) is making an open offer to lift its equity shareholding in long-struggling flats producer Lloyds Steel Industries to 51.99% from 24.53% presently. This was announced to the Bombay stock exchange on July 16. In February, two Miglani-promoted companies Ultimate Logistics Solutions Pvt Ltd and Metallurgical Engineering & Equipments Ltd, (formerly known as Siddharth Holdings) acquired a 24.5% stake in Lloyds Steel. Late last month, Lloyds Steel said it was issuing additional equity shares to the two companies that would lift the MIglanis shareholding to 51%. The open offer made by the Miglanis yesterday is to fulfil regulatory requirements pertaining to the additional share issue. Lloyds Wardha works has the capacity to produce 800,000 tons/year of hot rolled coils and 200,000 tons/year of galvanized products. BOC India announced that it has been awarded a major long term industrial gases supply contract by Tata Steel. Tata Steel is progressing with the first phase of its greenfield integrated steelworks in Kalinganagar Industrial Complex in Odisha which will come onstream in BOC will invest Rs 540 crore to construct two large new air separation plants each with a capacity of 1,200 tons per day (tpd), to supply gaseous oxygen, nitrogen and argon to meet the production requirements of Tata Steel s new steelworks. BOCs new air separation plants, which will be commissioned in 2014, will also produce liquid products to meet the growing demand for gases in the merchant market. Tata Steel s new 3 million tons per year (mtpy) steelworks, which will expand to 12 mtpy in the medium term, will be the first new major greenfield blast furnace based steelworks built in India in the past 15 years. Sesa Goa is planning to close its pig iron and coke plants at Amona, Bicholim due to stoppage of iron ore supply for the last one month, media reports said. Its spokesperson said that for the last one year, the supply of iron ore from Karnataka had become scarce and very costly due to ban on ore transportation from the neighbouring state and stocks getting sold in e-auction. As per south Goa collector s order, iron ore transport from its Codli mine in the South has been stopped for last one month. Its expanded facility is also bearing the brunt, reports said. India Steel Market Watch 21

22 STEEL PRODUCTS & PRICE TREND Credit Suisse report on understated debts is misleading: JSW Steel JSW Steel Limited, part of the O P Jindal Group, has denied a recent report by Credit Suisse which accused the company of understating its debt by Rs 119 billion. JSW Steel prepares its annual financial statements in accordance with Indian Generally Accepted Accounting Principles (Indian GAAP) and presented its Balance Sheet for year ended 31st March, 2012 in conformity with revised Schedule VI of Companies Act, 1956, said Seshagiri Rao, Joint Managing Director and Group CFO while commenting on this report. The classification of assets and liabilities in its financial statements is not only in compliance with Indian Accounting Regulations but also consistent with the practice being followed by the company for past several years, he added in a statement issued by the company. The company strongly objects to these misleading statements. These financial statements have been audited by a reputed firm of Chartered Accountants, he further added. Meanwhile, Credit Suisse has come up with a clarification, saying they had no reason to suspect any such thing, and it is far from the intent of their analysis, a company source at JSW Steel informed on July 9. This new clarification report has been issued by the leading financial services firm on facing strong objection from the steelmaking major, the source said. In our view, JSW s treatment of Acceptances, its securitisation of receivables, and its mark-to-market on un-hedged foreign currency liabilities is proper and as per accounting norms and normal business practice. Furthermore, there has been no change in these policies this year; the changes we flagged were incremental, the new report issued by Credit Suisse said. Highlighting that effective debt may be higher was only to aid valuation comparison with other companies in the sector. As we value steel companies on EV/EBITDA, proper assessment of net debt is as important as estimating EBITDA. Making net debt comparable across companies is thus critical, the report added. Bhushan Steel pulled up for environmental violating Bhushan Steel Limited (BSL), a leading steelmaking company in India, is facing trouble for going ahead with expansion work without environmental clearances, media reports said. The company which runs a 3.1 million tons (mt) steel plant at Meramundali, Dhenkanal district in Odisha was pulled up by the Dhenkanal district collector who has filed a case against the company in the local sub divisional judicial magistrate (SDJM) court for violation of the provisions of the Environmental Protection Act (EPA), the reports said. This follows a report by a committee of the Union ministry of environment and forest (MoEF) pointing out EPA violation. However, till this report is filed, no closure order has been issued against the plant, which is running smoothly. The BSL plant intended to ramp up its capacity from 3.1 mt to 5.6 mt and started the construction work without necessary environmental clearance, the reports said. India Steel Market Watch 22

23 STEEL PRODUCTS & PRICE TREND RINL may look to defer IPO: Reports Nalco exec to lead FIMI committee No plan to exit ICVL, says NMDC Rashtriya Ispat Nigam Ltd (RINL) may be looking to defer plans for an initial public offering of shares (IPO) following the June 13 accident at its Vizag Steel Plant (VSP) that claimed 19 lives. Reports said RINL has written to the Indian steel ministry requesting that the IPO, scheduled for late-july, be deferred. Merchant bankers managing the issue have reportedly advised the government to postpone the IPO to September- October. They are said to be concerned that any attempt to take the steelmaker public earlier would fail in the wake of the accident which is the subject of a high-level inquiry. An RINL spokesman contacted by declined to comment. The steelmaker is expanding VSP where it is ramping crude steelmaking capacity up to 6.3m tons/year from about 3.3mt/year previously. The accident occurred at the site where RINL is setting up its new steelworks as part of the expansion. The explosion resulted from a fire outbreak at the new oxygen pressure reducing station near steel melt shop No.2 at the works. It was in January this year that India s cabinet committee on economic affairs approved the divestment of 10% of RINL s shares. The IPO, at the time scheduled to hit the market in June, was estimated to raise Rs 25 billion. National Aluminium Company Ltd s director (production) S.S. Mahapatra has been elected member of the Managing Committee and Vice-Chairman of Standing Committee for Non-Ferrous Mineral Industries of Federation of Indian Mineral Industries (FIMI), Nalco said in a release. Coming into existence in 1966, FIMI is now a 350-member body, representing the entire non-fuel mining and mineral processing activities of the country. NMDC Ltd, the state-owned mining giant, has no plan to exit International Coal Ventures Ltd (ICVL), a special purpose vehicle floated in 2009 to pursue opportunities in overseas coal block acquisition. Refuting media reports, the company said in a statement that NMDC is very much a part of ICVL and there are no plans to quit from this consortium. Earlier, media reports said the PSU was mulling to exit ICVL and exploring acquisition opportunities in overseas coking coal blocks on its own. Two other constituents of ICVL, Coal India Ltd (CIL) and NTPC, have already expressed intentions to quit for different reasons. While CIL maintained it was not a rewarding venture for the coal miner, NTPC was not interested as the consortium was focused more on coking coal and not on steam coal, which is needed in the power sector. NMDC, however, clarified its stance saying, It is pertinent to mention that NMDC being a mining company is on lookout for additional mineral resources including coking coal both in India and abroad. This would not mean that NMDC is not a part of ICVL. For coal mines acquisition abroad, ICVL was incorporated in May 2009 as a JV between five state run firms. SAIL and CIL each hold 28% stake and RINL, NMDC and NTPC 14% each in ICVL. The ICVL board is empowered to make investments up to Rs 1,500 crore. However, despite efforts ICVL has not been able to make the cut so far. The consortium aims to own 500 million tons (mt) of coal reserves by India Steel Market Watch 23

24 STEEL PRODUCTS & PRICE TREND Three steelmakers vie for Odisha based sponge iron maker JSW Steel redeems FCCBs worth $274.4 mn Jai Balaji expects improvement in steel market from Q3 Three Indian steelmakers and sponge iron producers have made separate open offers to acquire equity in Orissa Sponge Iron & Steel Ltd (OSISL). Bhushan Power & Steel Ltd (BPSL) has made an open offer to acquire 26% of OSISL. Offers from Bhushan Steel Ltd and Monnet Ispat & Energy Ltd (MIEL) are each for a 20% shareholding in the Odisha-based sponge iron producer, according to announcements filed with the Bombay stock exchange. These offers follow similar attempts the three companies made in early 2009 to secure equity stakes in OSISL. The three were subsequently involved in a legal tussle and all three filed revised open offers earlier this week. BPSL s offer price is the lowest among the three, priced at Rs 300/share. MIEL is offering Rs 310/share and Bhushan Steel Rs 360/share. Bhushan Steel s sister company, Bhushan Energy Ltd, holds about 17% of OSISL, while MIEL is believed to hold about 15%. Bhushan Steel is believed to be interested in securing iron ore and sponge iron from OSISL. Bhushan Steel is building a 6 million tons/year integrated steelworks at Odisha. The works hosts eight direct reduced iron (DRI) kilns, each with a capacity of 500 tons/day. Some km north of Dhenkanal, OSISL operates a 250,000 tons/year sponge iron plant and a 100,000 tons/year billet works. It also has iron ore assets. JSW Steel Ltd has redeemed FCCBs worth $ million at % of the outstanding principal amount. This is in accordance with the terms of issue of the Zero Coupon Convertible Bonds of face value US$ 1,00,000 each issued in June 2007, due on June 28, 2012, the company said in a BSE filing. The company has thus fully discharged its obligation towards the holders of these FCCBs, by making the payment totalling to $391,845,944 (inclusive of redemption premium) to the Principal Paying Agent, Citibank, NA,, London. As a result of the above redemption, there has been no dilution in the Company s equity share capital, which would have otherwise occurred through the issue of 1,15,93,069 equity shares of Rs 10 each arising out of such conversion of the said FCCBs, the company said in the filing. Jai Balaji Industries Ltd, a leading producer of long steel in West Bengal, expects that the sluggish trend prevailing in steel industry would start improving from third quarter of The first quarter (April-June) of was much better than the fourth quarter of (January-March) when negativity factors had peaked in terms of availability of raw material and demand of steel, Jai Balaji s Chief Financial Officer Raj Kumar Sharma told. That the first quarter of FY13 was better can be said on the basis that both demand and prices more or less firm up, he said, adding, now after touching Contd. on next Pg India Steel Market Watch 24

25 STEEL PRODUCTS & PRICE TREND Contd. from previous Pg a downward peak if the things are better, it can be assumed that from here onwards the situation will only improve further. According to him the current quarter had seen improvement in EBIDTA margins of most of the steel maker even though sharp devaluation in the rupee might have caused losses to some. The market is likely to improve from September-October as by then it is expected that iron ore availability within the country will improve significantly and improved availability will lead to softness in prices and vice versa which would help the steel companies most of which are operating at very thin margins at present, Sharma said. The second reason why I feel optimistic about improvement in market situation is that a busy season, so far as demand is concerned, starts in India post monsoon and with the onset of festival season that would again be September- October, Sharma said. The third reason, according to him, that will help a large number of steel makers in India with no linked iron ore mines is expected end of a continuous boom in commodity prices globally, particularly of iron ore and coking coal. If that happens, the prices of two crucial raw materials for steel making will fall sharply and with the fall in prices, it has been seen that availability also goes up. Currently, a majority of steel makers are facing problems in getting iron ore eventhough the price of iron ore had been more or less stable during the past three months, Sharma felt. The prices of iron ore have been moving in a narrow band with fluctuation of Rs 100 to Rs 200/ton and this fluctuation is nothing as prices vary from mine to mine and location to location, he said. Meanwhile, prices of average various grades of steel have gone up on an average of 5% and that of sponge iron by 18% during the six month period between December 15, 2011 and May 15, 2012 in Kolkata market largely because producers passed on the increased cost of raw material to consumers and also because of slight firmness in demand. Sesa, Sterlite shareholders approve merger Shareholders of Sesa Goa and Sterlite Industries have approved the Sesa Sterlite merger. During February 2012, Vedanta Resources, the promoter of Sesa Goa and Sterlite Industries, had approved to merge the two companies in order to simplify the group s holding structure and lower its debt. According to the proposed structure, the merged entity (called Sesa Sterlite) will fully takeover the loss-making Vedanta Aluminium (at an enterprise value of Rs 32,695 crore). Also, the merged entity would take over Vedanta Resources 38.8% stake in Cairn India at a nominal consideration of $1 along with the associated Cairnacquisition debt of $5.9 billion. The deal is now subject to approvals by the high courts of Madras and Goa. India Steel Market Watch 25

26 STEEL LOGISTICS & OTHER DEVELOPMENTS Indian Railways carry mt of freight during April-June 2012 Factory output up 2.4% in May India s June imports and exports register negative growth Indian Railways have carried million tons (mt) of revenue earning freight traffic during April-June 2012, a government release said. The freight carried shows an increase of mt over the freight traffic of mt actually carried during the corresponding period last year, recording an increase of 4.77%. During the month of June 2012, the revenue earning freight traffic carried by Indian Railways was mt, the release said. There is an increase of 4 mt over the actual freight traffic of mt carried by the Indian Railways during the same period last year, which recorded an increase of 5.23%, the release added. Factory output grew 2.4% in May, much lower than the growth of 6.2% in the same month last year. The silver lining was that the latest index of industrial production (IIP) growth performance was better than the revised (-) 0.9% for April and (-) 3.2% level of March. The Central Statistics Office had earlier pegged the April industrial growth at a near-zero level of 0.1%. The better-than-expected industrial growth in May was driven by some rebound in manufacturing, which grew 2.5% against 0.1% in April. Manufacturing has a weightage of nearly 75% in the IIP. Mining continued to be weak with output down 0.9% in May. Electricity generation grew 5.9%, lower than the 10.3% growth in May last. In use-based classification, capital goods output declined 7.7% in May against 6.2% growth in same month last year. Consumer durables saw a robust growth of 9.3% (5.1%). India s imports and exports during the month of June 2012 registered a negative growth of 13.46% and 5.45% respectively, according to a provisional data released by the Department of Commerce on July 13. The country s exports during the month fell to $25.07 billion compared with $26.51 billion in June 2011 whereas imports fell to $35.37 billion leaving a balance of trade of $10.3 billion, the data revealed. The exports during the first quarter (April-June) of fell by 1.7% to $75.20 billion whereas imports fell by 1.7% to $ billion. During June 2012, exports of rise increased by 104%, iron ore by 40%, oil meal by 38% and spices by 35%. The import of petroleum during the quarter (April- June) stood at 12.9 billion, engineering goods at 14.6 billion, gems and jewellery at 10.0 billion, drugs at 2.1 billion and readymade garments at 3.2 billion. As regards imports during June, it is estimated that medicine imports grew by 14.7%, vegetable oil by 8%, iron and steel by 7.9%, professional equipment by 8.5% and artificial resin by 5%. The import of petroleum during the month stood at 12.6 billion, gold and silver at 1.9 billion, machinery parts at 2.7 billion, pearls at 1.8 billion and electrical goods at 2.6 billion. During the quarter (April-June), vegetable oil registered a growth of 49.8%, sulphur grew by 37%, project goods by 27%, transport equipment by 21.6% and artificial resin by 21.3%. The total imports during the quarter of petroleum stood at 41.5 billion, gold and silver at 9.4 billion machineries at 8.5 billion, pearls at 4.6 billion and electronic goods at 7.1 billion. India Steel Market Watch 26

27 STEEL LOGISTICS & OTHER DEVELOPMENTS Car sales rise 8.3% y-o-y in June Car sales in India rose 8.3% year-on-year in June, data from an industry body showed. The eighth straight monthly rise was however below industry expectations as a hike in excise tax has crimped demand. Automakers sold 155,763 cars in the domestic market in June, according to data released by the Society of Indian Automobile Manufacturers (SIAM). Sales of trucks and buses rose 4.7% in June to 64,926 vehicles. Motorcycle sales rose 6.6% to 879,713. Growth of core industries pick up in May The growth of eight core sector industries picked up at 4.6% in May, from 2.2% in April, government data showed. On an annual basis, growth for the April-May period stood at 4.2%, lower than the 5% reported in the same period last year. The eight core industries include coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity. Steel production (weight: 6.68%) had a growth rate of 4.9% in May 2012 against its 8% growth in May Cumulatively Steel production had a 5.8% growth during April-May compared to its 5.5% growth during the same period of Coal production (weight: 4.38%) registered a growth of 8% in May 2012 compared to its growth at 1.3% in May However, in cumulative terms Coal production had a growth of 5.9% during April-May compared to its growth at 2% during the same period of A pick-up in core sector numbers bodes well for the IIP data. The core sector accounts for 37.9% in the Index for Industrial Production, and any weakness in these numbers are reflected in overall industrial output data. India Steel Market Watch 27