steel insights, june 2015

4 Steel Insights, June 2015

COnTEnTs

32 | INTERVIEWIs recasting foundries in sight?Govt and IIF working together to evolve schemes to make foundries competitive.

22 | SPECIAL FEATUREIndia taking small steps to move up steel capacity order Country is lone exception among the major producing nations.

36 | INTERVIEWActual sales can only revive during festive season: GMAuto sales in last couple of months have been based on new launches.

15 | COVER STORY At full blast! Large blast furnaces offer better economies of scale.

6 | COVER STORY Iron ladies!Enter the fascinating world of mega blast furnaces.

17 The great guzzler 18 ‘Power’ point 19 NMDC plans to step up iron ore production 20 Domestic iron ore supplies to increase, prices

to slide 25 Is raising output levels answer to dumping? 28 Realty sector sends mixed signals 29 Auto sector eyes better FY16 following rate cut 31 Coking coal offers continue to slide in May 37 ‘Steel to become costlier, post coal auctions’ 39 Major ports’ Apr iron ore handling down 75%

y-o-y 40 Railways’ iron ore handling down 13% in Apr

m-o-m 41 Essar Ports acquires iron ore handling complex

of Vizag Port 42 Global crude steel output edges down 2% in

April m-o-m 43 Tata Steel posts Q4 loss of `5,674.29 crore 44 SAIL Q4 PAT falls 26%, crude output up 10% 44 RINL, Powergrid in transmission tower JV 45 Steel consumption likely to rise 8-9% in FY16:

SAIL 45 SAIL, MIDHANI sign MoU for steel sector R&D 46 ArcelorMittal, SAIL in automotive steel JV 47 JSW Steel targets 6% increase in FY16 crude

output 48 EssarSteel’sFY15netprofitat`648crore 49 JSPL aims to hike steel output 50% in 2015-16 50 Energy demand in 2040 may double 2010

levels: ExxonMobil 51 Jindal Power emerges as best performer in

PowerMin study 52 HotDRIchargingforenergybenefits,

productivity 55 Primetals supplies new dedusting system 56 Energy shortage burning hole in African steel? 61 China’ssemi-finishedsteelproductsexportsup

in April m-o-m 62 India’s steel output, international iron ore prices

create buzz

6 Steel Insights, May 2015

COvER sTORy

Iron Ladies!Madhumita Mookerji

Kalyani at ISP, Durga at RSP, Godavari at RINL and many more… An even larger one is in the process of being created at NMDC’s Nagarnar facility that is coming up… Plus-sized and volatile but invested with the regenerative power to be the source of the mother metal of iron, they are the steel mills’ mystery women! Yes, we are talking about the mega blast furnaces! If India has to meet its Vision 2025 target of 300 million tons of crude steel capacity by 2025-26, then the expansion plans of all large steel manufacturers are based on installation of blast furnaces above 4,000 cbm. However, on the flipside, the larger the blast furnace, the insatiable appetite for higher volumes and better quality of raw materials increases in tandem, both of which are a challenge at present.

Steel Insights, June 2015 7

In what could, perhaps, be ambiguity at one of its best, in the starkly “masculine” world of the large, integrated steel

manufacturing plants in India, in whose belly lie the blast furnaces (BF) – the womb from where flows that hot metal – the soul food that nurtures the steel that emerges as the final progeny, the Durgas and Kalyanis and their ilk play mother to perfection. Nay, their role holds sway over the entire country’s economy, in a way, since steel has an almost umbilical link to a nation’s growth story.

Overtaking “Durga” late last year as the largest blast furnace in the country was “Kalyani”, a state-of-the-art furnace with a useful volume of 4,160 cubic metres and regarded as the culmination of a massive modernisation and expansion (MEP) drive at Steel Authority of India’s (SAIL’s) IISCO Steel Plant (ISP) at Burnpur, towards the installation of a 2.5-million-tons-per annum, state-of-the-art steel plant.

Durga is also a state-of-the-art BF that was built and set up in 2013 at SAIL’s flagship, Rourkela Steel Plant (RSP), at an investment of around `1,600 crore and has a useful volume of 4,060 cubic metres and will take up the steel major’s hot metal capacity by a whopping 2.5 million tons per annum. Further, it can produce an average 8,000 tons of hot metal per day and is the life force that will propel SAIL towards achieving its share in the country’s Vision 2025 target in steel. Durga has been built using environment-friendly techniques, and boasts a lifespan of 20 years.

The role of a blast furnace is to chemically reduce and physically convert iron oxides into liquid iron which is called “hot metal”. The blast furnace is a huge, steel stack lined with refractory material, where iron ore, coke and limestone are dumped in from the top and pre-heated air (blast) is blown into the bottom. It takes 6-8 hours for the raw materials to descend to the bottom of the furnace where they become the final product of liquid slag and liquid iron. These liquid products are drained from the furnace at regular intervals. The hot air that is blown into the bottom of the BF moves up to the top in about 6-8 seconds after undergoing several chemical reactions. Once a blast furnace begins operations, it can continuously run for a long time, sometimes as long as 20 years with only short shut-downs for planned maintenance.

So, is the trend for large blast furnaces the way forward for forthcoming steel plants?

Today, definitely, the expansion plans of all big steel manufactures are based on installation of blast furnaces above 4,000 cbm. With India positioned as a developing country, nursing growth ambitions, it is an inevitable trend for blast furnaces to become increasingly larger if the country has to meet the mother of all steel targets . It may be recalled that the National Steel Policy 2012 entails a crude steel capacity of 300 million tons by 2025-26 (Vision 2025).

As a thumb-rule, one ton of crude steel capacity addition requires an investment of `4,000 crore. Thus, the steel sector requires investment in excess of `800,000 crore by 2025-26. India’s per capita steel consumption is still around 60 kg against the world average of 210 kg. India’s steel export stood at mere 5.59 mt in 2013-14 which is not even close to the 23 percent target set by National Steel Policy (NSP) 2005.

Speaking on the express need for these mega BFs in the future, steel industry analyst Goutam Chakraborty says, most of the projects had started before the market conditions weakened drastically. “No doubt that there is huge scope of demand growth in India. So, to address massive infrastructural need, India needs bulk steel and, thus, started walking the China way. Although, the recent demand slowdown has placed many producers on the wrong foot, once this phase gets over, they should be in a sweet spot.”

At the same time, it must be kept in mind that larger the blast furnace, the higher would be the demand for the quality and consistency of raw material (read coking coal and iron ore) that is to be fed into it, which is a huge challenge in India at present.

“The BF route is the only viable one for large-scale production of high deformability steel and if our country’s capacity is to grow

towards 200 million tons per annum in the next few decades, we need to commission three large furnaces per year, despite their impressive scale,” Gajendra Panwar, Managing Director, India operations, Danieli Corus, tells Steel Insights. In fact, the 4,060 m³ Durga has been supplied to SAIL by Danieli Corus.

New greenfield projects in India will all be based on large blast furnaces, say experts. Smaller players might go in for smaller capacities as investments in large blast furnaces are quite high. The specific investment of one 3-million tons per annum (mtpa) blast furnace is around `2,500 crore (only blast furnace).

At present, large blast furnaces are under construction at Jindal Steel & Power’s (JSPL’s) Angul plant (4,500 cbm, start-up 2016), Tata KPO (4,300 cbm, start-up end-2015), NMDC (4,500 cbm, start-up likely 2017), SAIL Bhilai BF#8 (4,060 cbm, start-up likely 2016).

At present, Danieli is building a 4,506 m³ furnace for NMDC, which will be India’s largest, once it is commissioned.

In India, most of the blast furnace modernisation programmes have been executed by Primetals Technologies (formerly VAI Metals Technologies Private Limited), claims the company. BF projects like JSPL’s Angul BF#1 (4,554 cbm), Tata Steel Kalinganagar (4,384 cbm), Vizag Steel’s BF#2 (3,800 cbm) are under execution by Primetals Technologies.

“Primetals is currently, executing the JSPL Angul BF, Tata KPO BF and the Vizag BF2 which is a revamp job to upgrade the capacity to 3,800 cbm,” says Dr Friedemann Plaul, Head of Iron-making, Primetals Technologies India Private Limited.

It may be mentioned that the first “large” blast furnaces with a capacity for over 4,000 cubic metre volumes, were build buy Siemens

COvER sTORy

The world of blast furnaces is afire with interesting nuggets of information. These large engineering marvels produce enough hot metal for up to 20,000 cars per day, all flowing through two or three holes the size of an adult man’s wrist! And more than 70 percent of the world steel production is processed by the blast

furnace route.


Once these begin to produce, they should add 2.5 mt of ore to the market this year.

At present, 23 mines in the private sector and two mining leases of NMDC are producing around 20 mt of ore a year in Karnataka. The annual requirement, however, is about 35 mt.

And, in Odisha, as many as 29 non-captive iron ore mines recently had their lease validity extended. In the year ended March, the state had seen a sharp decline in iron ore production to 47.4 mt, the lowest in 10 years, due to closure of key mines after the Supreme Court order of May 2014. Output was even lower than the cap decided by the state for ore at 57 mt.

Iron ore production from non-captive mines for the current financial year is yet to be worked out and will take at least a month, sources in the mines department of the state said.

About 50 percent of the non-captive production will be directed towards local end-use. The balance can be sold by these miners to whosoever they want, sources said.

Separately, state-run Odisha Mining

Domestic iron ore supplies to increase, prices to slide

Steel Insights Bureau

Steel companies without captive iron supplies have a reason to cheer. Domestic iron ore prices are expected

to slide in the coming months, with improved supply from Odisha and Karnataka, apart from higher production by NMDC.

Government-owned NMDC will be raising its output by 31 percent to 46 million tons this financial year, as two new mines with 7 mt capacity each will be contributing.

“We are hoping that with the increased NMDC supply, ore prices will reduce in the coming months,” Seshagiri Rao, Joint Managing Director and Group Chief

Financial Officer at JSW Steel, had said early this month.

Local ore prices have not kept pace with the sharp fall in global rates, down 29 percent since January to around $50 a ton. In India, with less availability, prices have been stickier. NMDC, though, the country’s biggest iron ore miner, cut prices by 20 percent in mid-April.

Mumbai-based JSW is heavily dependent on e-auctioned iron ore, as it does not have any captive source to feed its 10-mt steel plant at Ballari (former Bellary) in Karnataka, a high-grade ore producing state. Supply from this state is now likely to go up. The government there had recently extended the leases of mines where these had expired.

sPECIAL fEATuRE


InTERvIEw

Is recasting foundries in sight?

Excerpts:

The government is serious about rebranding the foundry industry and Kalraj Mishra, the Indian Union Cabinet Minister for Micro, Small and Medium Enterprises (MSME), spoke of a roadmap that is being drafted to take this industry forward. What are the key points in this roadmap?The government has recognised that the foundry industry will play a very major role in “Make in India”. Because, you see, this campaign cannot succeed unless core manufacturing gets its components. If the components are imported then job creation is not going to happen in India. Further, apart from not contributing to the Indian economy, it will drain precious foreign exchange as well. So, India would just

remain an assembling hub for the various automobile and other manufacturing companies.

The foundry industry’s contribution to the GDP may be less than 1 percent directly but the significance of the sector is huge as it is major contributor to engineering and manufacturing and practically no equipment or machinery can be manufactured without castings!

In view of this, the Institute of Indian Foundrymen (IIF) has been engaging with the Government of India (GoI) very aggressively for the last 2-3 years.

But, now with the renewed focus of the present government on manufacturing, we are getting better results at this juncture.

We are working with the Department of Industrial Policy & Promotion (DIPP)

Though plans had been on the anvil for recasting the foundry industry, things at last seem to be moving on the ground.

It has dawned on the powers-that-be that, in order to grow core manufacturing and make in India, the castings industry, from which the former sources its components, must be given a fillip. Such an approach can not only create jobs but also stem precious foreign exchange outflow in the form of component imports.

Thus, the Department of Industrial Policy & Promotion (DIPP), Micro, Small and Medium Enterprises (MSME) and the Ministry of Environment & Forests (MoEF) and various other related ministries are working in conjunction with the Institute of Indian Foundrymen (IIF) to evolve schemes to make the foundries competitive in terms of energy efficiency, funding and other areas, Vikas Garg, President, IIF, tells Madhumita Mookerji of Steel Insights in a free-wheeling interview.

in GoI, MSME, and the Ministry of Environment & Forests (MoEF) and various other related ministries. We are working on schemes to make the industry competitive. This relates to modernisation of the foundries in terms of energy efficiency and various other schemes.

What is the average output level like for the foundries in the MSME space? What is the percentage of these 5,000 units that are in the MSME space?Well, 80 percent of the 5,000 foundry units in India are in the MSME space. The share of MSME foundries in the total production is approximately 60 percent. And their share also depends on the components they manufacture.

With regard to modernisation, have any concrete decisions been taken?The government has policies in place and these proposals will roll out. We expect these to be implemented in the next one to one-and-a-half years. This time-frame is required because these have to go through the various channels and then get notified – follow a process.

With regard to policies related to energy efficiency, there are plans to have an energy audit of the foundries post which these units would be recommended the equipment they should install to render them energy-efficient. The government will give funds to the units to install modern equipment and the foundries will pay the government back through the savings they incur through energy efficiency.

You see, the energy audit itself is a barrier, because, for a small foundry to locate an expert and bear the costs will not be feasible, since the latter will be quite significant. Thus, the government will provide the audit through energy experts who will work out the cost savings through which the debt can be repaid to the government.

What is the quantum earmarked for energy audits by the government and how much would the foundries require towards this initiative?That depends on the scale of the foundry but the total budget outlay from the government is `3,000 crore towards energy


Kingshuk Banerjee

Could Africa really become the next big thing in the world of steel? Or would she remain a perpetual

backbencher?According to World Steel Association

(WSA) statistics, 716.401 million tons (mt) of crude steel was globally produced in the year 1980. Out of this, Africa’s contribution was 11.488 mt or mere 1.60 percent. Around 33 years later, in 2013, the situation has become worse and Africa has become more of a marginal player in the global steel arena. Out of 1649.303 mt of global crude steel production, Africa’s share was a mere 16.078 or 0.97 percent.

In other words, while the world increased its crude steel production from 716.401 mt to 1,649.303 mt in this 33-year span, that is, by more than two times, Africa barely managed to augment production by 4.59 mt.

Why the dismal picture? This situation is rather ironical especially when the United

Nations Development Programme (UNDP) has started viewing Africa as the next big thing in the world of development.

So what is the negative current that has put breaks on Africa in the world of steel?

Earliest steel According to the University of Houston, the earliest steel was made in Africa. According to findings published in 1997 by Peter R Schimidt, an American archaeologist, writer and historian, in his Book Iron Technology in East Africa: Symbolism, Science, and Archaeology, steel was made in Africa at least 2,000 years back.

Astonishing, but true.It was in the year 1847, when William

Kelly of Kentucky found he could make superior structural iron if air is blown through molten pig iron, oxygen from air would burn the harmful elements out of the iron and thereby would help to form a very strong carbon steel. This process is named converter steel.

Energy shortage burning hole in African steel?

Nine years later, an Englishman named Henry Bessemer reinvented Kelley’s method and the real conquest of steel is paved through Bessemer process throughout the world.

But the truth is that carbon steel was invented long before the Kelleys and Bessemers by native Tanzanian Haya tribes. Around 2,000 years back they made steel in a kiln shaped, upside down, five feet high cone which was made with termite mound and charred swamp reed was used to fill the kiln bed. A mixture of charcoal and iron ore was placed above the charred reed. Before loading iron ore into the kiln, the carbon content was raised by roasting it.

The key to the Haya process was high operating temperature. Sitting around the base of the kiln, eight men would pump in air with a hand bellow. Air was blown through the fire through clay conduits and the heated air got blasted through charcoal fire itself. The result was a much hotter process than contemporary Europeans could think of.

Iron technology begun in East Africa particularly in the area between Lake Victoria and Lake Albert during ancient times. Although archaeologists have long held that iron making spread from a single point of origin in Europe, Peter R Schmidt showed that African iron smelting developed independently, based on the use of indigenous natural resources and local invention. Schmidt

InTERnATIOnAL


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steel insights, june 2015

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