It’s a good time time to be a steel producer in India: VR Sharma, MD, Jindal Steel and Power Ltd

Source: Economic Times, 24 August 2021

In a conversation with ET Now, VR Sharma, Managing Director at Jindal Steel and Power Ltd, talks about Chinese policies on the world, building up capacities, and why it is a good time to be a steelmaker in India. Edited excerpts:

Why is there a rapid fall in some of the ferrous metals? Iron ore, in particular, has had a 50% steep fall from record highs.

Iron ore has definitely played a very important role in overall reduction of the stock market. Internationally, iron ore was about $220 two months back and then there was steep fall. It came down about $140 but on the contrary, coking coal prices have firmed up, these are still at $225 to $230. It is unlikely that the prices will go down because other input costs like ferroalloys and the coking coal is still at its peak.

Steel has relatively stayed resilient as opposed to iron ore. In China, prices are still above $800 to a tonne despite the virus’ re-emergence. What is aiding this? Do you think this uptick in resilience that one can see in steel is here to stay?
Semi-finished steel’s prices are about $800 a tonne but whereas the finished material, that is hot rolled coil, specialty plates etc are still at about $1050 to $1080 a tonne so this is a good price as far as the overall steel scenario is concerned.

With a very low price of iron ore today at $130-$140, having prices of more than $1000 steel finished goods is a very good price. They are going to earn a lot of profits so metal market is going to be stable.

There is supply and there is demand and demand is strong. When do you think additional steel capacity will start kicking in from you and from the industry?
You are right, demand is strong and the overall IRR (internal rate of return) is better than the new investments and new capacities.

India has to reach to a level of about 300 million tonne by 2030, just nine years later, we may be producing about 300 million tonne steel and consuming same quantity. Overnight it is very difficult to build up capacities. Building up capacities takes about three to four years time for a small plant of about 3-5 million tonne. If you have to add facilities more than 3-5 million tonnes in a particular location, then the time consumed is about seven to eight years overall.

All steel mills whether it is JSPL or JSW or SAIL or Tata Steel or Arcelor Mittal, everybody is very bullish, everybody wants to invest in the country. A 2 lakh crore investment is likely to come in the next four to five years time which is a very healthy sign and the demand is also picking up. We feel that steel will definitely shine in times to come.

If iron ore prices have come down, why do you think finished steel prices will not come down?
Today the prices are holding only because of coking coal. Most of the steel used is through the blast furnace route in the country and the other is through the scrappage policy which has come.

The scrap availability as of now is very low. Electric car furnaces in the country are also very less in numbers. We have to put up more and more electric furnaces so that we can utilise and use the scrap which is going to be produced in India.

Unfortunately the energy cost is very high in the country. The prices are about Rs 10 to Rs 12 per unit which is a very high price. We consume about 600 units per tonne for steel making, so Rs 7200 to Rs 8000 is the energy cost which is very high, and is not viable in terms of producing steel.

I think Government of India will have to come out with a comprehensive policy with one tariff, one nation. The country should get power from Kashmir to Kanyakumari at Rs 5 per unit and only then will the electric car furnace would be viable in different parts of the country.

Steel demand will continue because infrastructure projects are in offing and there are lot many projects on the table now. The construction sector is booming and the ship building sector, defence sector, and the oxygen cryogenic plants are definitely increasing in terms of number.

Consumptions will be maintained but the prices can only be reduced if the coking coal prices come down from $220 to about say $120 or $130 a tonne.

What will be your pricing in terms of fixed contracts versus the spot market pricing? Last year if one followed the spot market, it was like a lottery. This year are you likely to take a risk of keeping your production open to the spot market?
Yes, we are still maintaining about 35% to 40% in the spot market. This spot market is still very remunerative. So if you see international spot market that is hovering around about $900 a tonne to $950 a tonne for the finished goods. For semi-finished goods, it is still about $680 to $700 a tonne depending on the size, grade and chemistry of the material and this is a very good price when compared with Indian prices.

Earlier it used to be about $200 to $250 a tonne or difference in domestic and the spot international prices but now it is about $100 a tonne. So still it is good to export. So we are exporting about 35% to 40% of the total steel total produce in our company and I think my peer group are also maintaining about more than 30% of the total sales that goes to spot market in the international markets.

What is keeping coking coal elevated, what is the supply situation? I think it is at $250 or $260 per tonne. This is the highest ever. It continues to stay over there despite the whole rout that we saw across commodities. What do you think is keeping coking coal, ferroalloys at that higher level?
The Chinese steel industry plays a very significant and vital role in maintaining, reducing or increasing prices. They produce 1,050 million tonne of steel which is a very huge quantity because they are doing about 60% to 65% of the total steel production in the world. So whenever they change policies, that impacts the whole world.

Hundreds of vessels are waiting in the south China sea because of the COVID situation or because of the current circumstances. You are seeing silicon chips not being available, so the downstream industry in India or anywhere in the world it is affected very adversely. Similarly with coking coal. The Chinese stopped buying coking coal from Australia and they started buying it from Russia,Venezuela, Colombia and South Africa and also from the US.

The Indian Ocean is now full of vessels having coking coal from America, Russia, South Africa, Colombia. We are importing coking coal from Australia so it is a crisscross movement of the vessels so that has also played a very adverse impact on the overall prices in terms of the shipping cost. Shipping cost has increased. The daily demurrage cost has gone up four to five times. It used to about $8000 to $10,000 a day, now it is $30,000 to $40,000 a day. In some of the cases it is more, even as high as $60,000.

We have to see that what the right way is and for a country like India, the only solution is that we should use our coal, which is called swadeshi coal. We can also reduce the carbon footprint by at least 60% if we utilise Indian coal and convert into gas that is syngas. Syngas to DRI and DRI to electric arc furnaces. I think that is the answer.

So in the next 20 to 30 years time we should be in a position to use maximum Indian coal which is very environmentally friendly if it is gasified, otherwise we will keep seeing such kind of ripples in times to come.

China’s exports have reduced considerably and the output is going to be a little on the lower side. So exports will continue to be low for the rest of the year. How well do you think Indian steel mills have captured the gap left by the Chinese?

Due to internal Chinese policies, they have reduced production from the mills which are generating relatively more CO2. While their total overall consumption will not reduce, they used to export about 100 million tons, now they will export only 10 to 20 million tons just to maintain presence.

There is a big potential existing in India because we are the nearest steel producer to China. Our vessels reach in time. We have bridged the gap in terms of exporting material to the customers of China as we are exporting most of our goods to Southeast Asia, which includes Philippines, Indonesia, Malaysia and Thailand and also Australia and part of the products we are selling into Middle East that is Saudi Arabia, UAE, Qatar, Oman, Bahrain, Kuwait.

So for Indian steel producers it is a very good time. We can maintain a perfect balance between exports and imports. We can make it perfect balance in the spot markets in the domestic market, we can still maintain a very good price for the exports and we can also maintain a concessional price for the domestic market so that our domestic consumers, MSMEs and other OEMs they do not suffer for the want of steel.

India’s Steel Output Outpaces World Average Of 0.1% Growth In November

• Source: Economic Times, December 23, 2014

Kolkata: India’s steel production grew at 4.8% in November outpacing the world average of 0.1% growth in November. During the month, India produced 6.89 million tonne (mt) of steel compared to 6.57 mt in the same month, last year.

With domestic production touching 76.19 mt during the first eleven months of calendar year (January-November 2014), India maintained its position as the world’s fourth largest steelmaker in 2014, like in the last four years, according to data released by Brussels-based World Steel Association (WSA).

China, Japan and the US were ahead of it in global rankings as the world’s largest steel producers.The WSA, a top global body that collates data from 65 countries which accounted for 98% of global steel in 2013, said world steel output touched 130.52 mt in November this year against 130.42 mt a year earlier. Lower production in China was mainly responsible for the subdued growth in the world average growth rate of steel, which is the largest producer and consumer of steel in the world.

JSW, JFE team up for India play

MUMBAI: JSW Steel on Thursday announced a strategic alliance with Japan’s second-largest steelmaker JFE Steel, but markets were disappointed that the pact does not immediately involve the acquisition of an equity stake in the Indian company.

JSW, India’s third-largest steelmaker, said on Thursday that the partnership will allow it access to JFE’s technology for producing steel used in automobiles and both companies may acquire stakes in each other. Other possible tie-ups include the production of other specialty steels, procurement of raw materials in and outside India and the construction of an integrated steel plant in JSW’s West Bengal project.

JSW vice-chairman and managing director Sajjan Jindal said the financial implications of the proposed collaboration could be “immense” but not quantifiable immediately, because the exact nature of the collaborations has not been finalised. “We have constituted two task forces to arrive at final agreements. It is difficult to provide a timeframe as to when it might take place.”

Investors in India and Japan sold stocks of both firms, after it became clear that a share sale is not imminent.

On Thursday, the JSW stock slipped 0.65% to close at Rs 959.35 after reaching a 17-month high of Rs 1,039 in the morning session on BSE. Shares in JFE Holdings, promoters of JFE Steel, fell 2.9% to 2,885 yen in Tokyo. JSW has a market value of $3.9 billion and JFE $20.4 billion.

“If the money were to come into the company, then there would be an immediate benefit (in the form) of a fall in interest cost,” said Deepak Jasani, head of retail research at HDFC Securities. “Operationally, the technology transfer will take some time to show up in margin improvement,” he added. JFE Steel CEO Hajime Bada described the co-operation in the automotive segment as “the first step” of the partnership. “Through our co-operative activities, we would like to secure a local production base in India,” he said.

JSW has been going slow on its West Bengal project mainly because of funding problems. JSW plans to build a 10-million-tonne-per-year steel mill in West Bengal at an investment of Rs 11,000 crore. The alliance will supply automotive steel to the Indian units of Suzuki, Toyota, Honda and Hyundai, which are global customers of JFE, the world’s sixth-largest steelmaker.

Attempts by global steel companies to set up plants on their own in India have run into trouble. ArcelorMittal, the world’s largest steel producer, and South Korea’s Posco, announced plans more than two years ago to set up plants with capacity totaling 24 million tonne, but they are yet to get the land for the projects.

JSW joint managing director Seshagiri Rao told ET that the market for auto grade steel is growing at 7% with nearly 1.9 million tonne of steel being consumed by the sector. If other collaborations with JFE do not fructify, the Indian company will pay royalty for the procurement of automotive technology from its Japanese partner, he added.

Among the world’s low-cost steelmakers, JSW plans to raise annual capacity to 11 million tonne from 7 million tonne in two years. The $3.5-billion firm sells products in 100 countries.

 Source : Economic   Times. 20/11/09

 

Steel production needs to be doubled: Minister

NEW DELHI: India needs to double its steel production from the current 55 mn tonnes in five years if it wants to bridge the demand-supply gap, Minister of State for Steel Prathap Annayyagari said here Wednesday.

“During the last five years, the growth in the demand for steel has averaged to around 10 percent. To meet this growing demand, the steel sector has to double its production in the next five years,” Annayyagari said at a seminar organised by the Confederation of Indian Industry (CII) here.

The country has to further increase the steel output to 200 million tonnes by 2020, he added.

The difference between current per capita consumption of steel of 47 kg and the world average of 190 kg could be bridged if the rural demand was met, the minister said.

Speaking at the conference, Steel Authority of India Ltd (SAIL) chairman S.K. Roongta outlined various problems like land acquisition, availability of water and other raw material, besides forest and environmental clearances and urged for immediate solution.

Source : Economic   Times.  05/11/09

SAIL cuts flat product prices

NEW DELHI: Steel Authority of India Ltd has cut flat product prices by 750 rupees to 1,500 rupees ($16 to 32) a tonne, its chairman said on Wednesday.

The company expects prices to stabilize at these levels, S.K. Roongta told reporters at an industry conference.

SAIL, the country’s top producer of the alloy, posted an annual rise in sales of 30 per cent in October.

Source :  Economic   Times.  05/11/09

 

Corus to use full capacity by fiscal-end

NEW DELHI: Tata Steel said its European subsidiary Corus will be able to meet full capacity utilisation by the end of the current fiscal, riding on revival in global demand.

Corus, which had cut production capacity of its mills by as much as 50% amid the demand slump last year, has currently revived the utilisation of its mills to 80%. “In October, the capacity utilisation had touched 80%. It should be 85% by the end of November and 100% by the end of this financial year,” said Tata Steel vice-chairman B Muthuraman, on the sidelines of CII Steel Summit. Corus produces about 20 million tonne of steel per annum.

“Demand is coming back in the west,” he added. Globally, steel producers have started reviving their production capacities with the rise in demand for their products. ArcelorMittal had revived the capacity utilisation of its mills to about 61% in the past three months and aims to take it up to 70% in the ongoing quarter.

However, the world’s largest steelmaker had warned against the over production at Chinese still mills and the resultant influx of cheap steel goods, especially in the South Asian market. But, Mr Muthuraman said the production by Chinese steel mills is only meant to feed its domestic market and there is no threat of dumping of cheap steel items. “Chinese steel production will meet its internal demand, which is high,” he added.

Source :  Economic   Times.  05/11/09