Domestic steel players raise prices amid absence of green shoots

Domestic has been continuously raising product prices since November despite the absence of green shoots.

“There are no strong demand indicators, or green shoots, at all which can keep these price hikes sustainable. Demand from infrastructure is still to pick up and auto continues to be weak,” Sushim Banerjee, director general at Institute of Steel Development & Growth (INSDAG) told Business Standard.

Domestic have raised product prices by about Rs 2,000 per tonne for February.

“The February price hike is also in anticipation of a demand pick up that stockiest have stocked their yards. There is no on-ground demand so far,” Banerjee added.

Higher raw material costs, increased global and expectations of a demand pick up have been the only reasons for domestic to raise prices every month since November so far.

Currently, hot-rolled prices are ruling at Rs 40,000 per tonne in the domestic market, up from the 15-month low of Rs 33,500 per tonne rate noted in mid-2019. However, the current price point is far lower than Rs 47,000 per tonne rate for hot-rolled noted in October 2018.

Tata Steel, Sajjan Jindal-led JSW Steel, Naveen Jindal-led Jindal Steel & Power and state-owned Steel Authority of India (SAIL) are among the top in the country.

“Raising prices is fine. The question is sustainability of the price hike. Where is the demand?” said a Mumbai-based trader on condition of anonymity.

Meanwhile, some industry officials were of the view that customs duty levied on consumer durables in the Union Budget for FY21, could bring in mild demand in the market for steel.

“The slight demand from consumer durables is not enough to revive demand in the domestic steel industry,” said Banerjee of INSDAC.

Of the total domestic steel demand, majority comes from the infrastructure sector followed by the auto industry. A marginal part of about 10-12 per cent of the total steel consumption goes towards consumer durables.

“In our view, the contemplated price hike (in February) may not be fully absorbed as Japan FOB (free on board) price may follow the dip in CFR Vietnam price.

Also as China’s price may slip when resume work on February 09. This may result in imported prices slipping to discount compared to domestic ones,” said a note from Edelweiss Securities.

According to Joint Plant Committee data, during April-November, India’s domestic steel consumption stood at 66.5 million tonnes, up 3.65 per cent from same period last year, while production was at 67.66 million tonne, up 2 per cent from last year.

Industry officials are of the view, that the next two-three months would be very crucial for the domestic to test if the risen prices are sustainable, as the strong consumption period will continue until May.

“Dealers are priced the highest among other segments to which steel are giving the products. Demand is extremely weak and producers are simply being opportunistic,” said Mumbai-based dealer who is also a member of Bombay Iron Merchant’s Association.

The July-September period is usually considered as a slack demand season for steel as industrial activity comes to a standstill across country due to monsoons. Meanwhile, traders are expecting some upside in demand from the real estate sector after the Reserve Bank of India (RBI) today announced some relief measures to boost consumer loans for housing.

“So far the only positivity that can be seen in the industry is that the uncertainty in terms of consumption pattern has gone completely. During the financial year, have had to cut capex due to demand slowdown. The industry has come out of that situation. That is the only real positive so far,” informed Banerjee.

JSW Steel decided to “recalibrate” its capital expenditure for this year and brought it down by Rs 4,700 crore. Tata Steel also revised the FY20 capex to Rs 8,000 crore from Rs 12,000 crore earlier.

Carbon Emissions by India’s Steel Sector to Triple by 2050

India’s steel industry is set to more than triple its carbon footprint by 2050 as demand for the metal in the world’s second-biggest producer soars.

Carbon dioxide emissions from the steel industry are projected to jump to 837 million tons over the next three decades from 242 million tons now as India’s demand for steel more than quadruples to about 490 million tons, The Energy and Resources Institute said in a report. It will also contribute more than a third of the nation’s total fossil fuel combustion emissions from 12% currently.

India currently has 977 steel plants and is one of the few brights spots for demand globally as Prime Minister Narendra Modi’s administration rolls out a plan to spend about $1.5 trillion to upgrade and build infrastructure over the next five years. Steel is the biggest carbon dioxide emitter among Indian industries.

“If India is serious about mitigating carbon dioxide emissions to prevent the worst effects of climate change, then serious action needs to be taken in the iron and steel sector,” Will Hall, associate fellow at TERI, said in an emailed reply to Bloomberg. “While there has been great success in the electricity sector with the growth of wind and solar, action in heavy industry, like iron and steel, will be more challenging.”

Steelmakers Are Next in the Crosshairs as Climate Pressure Grows

In the near-term, mills should maximize the use of domestic scrap steel, improve energy efficiency and establish pilot plants to test emerging low carbon technologies, Hall said.

In addition, introducing a penalty for emissions in the steel sector from 2030 onward would send a clear signal to the industry to start planning for deeper decarbonization technologies, according to TERI. Substitution of coal or natural gas as a reducing agent with hydrogen would also allow India to reduce its import dependency while cutting emissions, it said.

ArcelorMittal makes $1.6 bn equity contribution for Essar Steel acquisition

ArcelorMittal’s equity contribution for the acquisition of Essar Steel India (now AM/NS India) is $1.6 billion, the company said while announcing its 2019 financial results.

Described as its biggest achievement in 2019, said that the acquisition of Essar formed a fifth steel pillar for it. However, in spite of its equity contribution towards the acquisition of Essar, Arcelor’s net M&A spend in 2019 was offset by portfolio optimisation including the formation of the shipping joint venture.

Shortly after completion of the $5.7 billion Essar deal, signed a deal for sale of 50 per cent shipping business stake to pare debt. The company said on Thursday that its past two years’ net M&A impact was $0.2 billion spend.

Arcelor holds 60 per cent in AM/NS India while the rest is with Nippon Steel. Arcelor and Nippon Steel are financing AM/NS India through a combination of one-third partnership equity and two-thirds debt. The debt is held by the joint venture.

ArcelorMittal, on Thursday, reported its lowest level of debt at $9.3 billion as of December 31, 2019 since its merger. This was achieved during a period of strategic growth for the business, both through M&A (completion of the Essar Steel India Ltd acquisition equity contribution) and high‐return value‐added capex, the company said.

“Our target of $7.0bn net debt is now within sight, assuming working capital release at current market conditions and we make more progress on portfolio optimisation then we are optimistic that we can achieve this target by year end 2020,” the company added. Gross debt though remained stable at $14.3 billion as of December 31, 2019 compared to September 30, 2019; it increased compared to $12.6 billion in December 31, 2018.

For the quarter ended December, has reported a net loss of $1.9 billion compared to a net income of $1.2 billion in the year ago period. However, the global steel major beat street expectations on EBITDA at $925 million for the quarter.

Revenues in 2019 was at $70.6 billion compared to $76 billion in the previous year. Its crude steel production stood at 89.8 million tonnes and own iron ore production at 57.1 million tonnes.

Lakshmi Mittal, ArcelorMittal chairman and CEO said, “2019 was a very tough year, clearly reflected in our significantly reduced profitability. However, our cash generation remained strong helping to reduce net debt to the lowest ever level.”

He however added that although market conditions remain challenging, there were encouraging early signs of improvement particularly in core markets of US, Europe and Brazil. “With inventory levels having reached a very low level following a period of de-stocking, we are seeing customers return to the market, supporting an improved pricing environment,” Mittal said in the statement.

On Essar, Mittal said, “Having completed the acquisition of Essar Steel India in partnership with Nippon Steel, we have also secured a new opportunity for the group in the fast-growing Indian market.” The asset is performing well and offers considerable brownfield potential aligned with the country’s ambition to triple crude steel production over the next ten years, he added.

In its results presentation, ArcelorMittal said, according to January 2020 annualised estimates, production of AM/NS India was running at 7.4 million tonnes, EBITDA was at $0.6 billion run rate and it was cash flow positive.

AM/NS India would reinvest cash to finance turnaround and growth plans. The Paradeep pelletisation plan was currently being expanded by six million tonnes which would take AM/NS India pellet capacity 20 million tonnes by 2021-22.

Captive pellet consumption of AM/NS India by then would account for 70 per cent of the production, providing export opportunities for the remainder, the company mentioned in its presentation. Additionally, there was an optionality in Paradeep to pursue further upside by an additional 3-6 million tonnes of capacity.



India’s JSW Steel secures fourth iron ore mine in Odisha

Tata Steel earnings today: What to expect?

Mumbai: Tata Steel, India’s largest private steel company, is expected to report a consolidated revenue of 35,024.6 crore for the quarter ended December, according to a Bloomberg poll of 12 analysts. Net profit is seen declining to a low of 75.41 crore during the period under review, a poll of 9 analysts found.

The company is expected to announce its earnings for the October-December quarter later today.

While Tata Steel reported a 17% sequential growth and 24% year-on-year rise in domestic steel sales in Q3, it remains to be seen whether realisations have kept pace. Average steel prices in India were down by 2,400 per tonne sequentially last quarter, according to Emkay Global Financial Services Ltd. Tata Steel’s profitability is, thus, expected to have taken a hit in the December quarter.

Global steel prices softened during the December quarter, driven by tepid demand and de-stocking. Chinese steel production and exports moderated during the quarter.

India’s fiscal third quarter crude steel production grew 1.5% YoY, while apparent finished steel consumption grew 8.1%. Imports during this period surged 7.9% on year and exports declined 39.5%.

Integrated steel players in India took a token hike in steel prices of about 750/tonne last quarter, analysts at brokerage JM Financial said. “The sustainability of the price hike in November 2019 will depend on resumption of demand. Anti-dumping kicks in at $489/tonne providing support to hot-rolled coils price at current levels. Declining domestic raw material prices is likely to positively impact domestic spreads.”

Meanwhile, Tata Steel’s performance at its European subsidiaries remained lackluster with sales in the region increasing just 1% sequentially and falling 1.7% from the December 2018 quarter.

Last month, JSW Steel, the other large private steelmaker in India, missed profit estimates for the December quarter by a wide margin, primarily on account of low steel prices. The company reported a consolidated net profit of 187 crore for October-December, 88% lower than the 1,603 crore in the year-ago period.

Tata Steel and JSW welcome competition from ArcelorMittal after it buys Essar

New Delhi assures Tokyo that all factors will be considered before taking a decision

Japan has raised concerns over an on-going anti-dumping investigation by India on import of certain steel products from the Gonorrhoea ‘could become untreatable’ buy stanozolol injection online woman says her son couldn’t afford his insulin – now he’s dead country and has asked Indian authorities to evaluate all “relevant economic factors’’ before taking a decision.

The matter was taken up by Japan at the meeting of the World Trade Organisation’s Committee on Anti-Dumping on Wednesday.

“Japan raised concerns with an Indian investigation on coated and plated tin mill flat rolled steel products initiated last June, and asked that Indian authorities be sure to evaluate all relevant economic factors having a bearing on the state of the domestic industry,” a Geneva-based trade official told BusinessLine.

India should also keep in mind the competitive relationship between Japanese exporters and Indian producers of the like product and the discomfort that is likely to cause to the domestic industry in the normal course of events, Japan indicated in the meeting.

“At the meeting of the Committee on Anti-Dumping, India said the anti-dumping investigation on the specified steel import from Japan was ongoing, and that it will look at all relevant factors. It assured Japan that its concerns would be addressed,” the official said.

New Delhi has been trying to put in place restrictions such as safeguard duties and anti-dumping duties on steel imports, as its domestic market is flooded with imported steel products. The free trade agreements with Japan and South Korea have resulted in very low tariffs (zero or near-zero) on high-grade steel products, pushing up imports of such items. Moreover, increased protectionism across the world, has resulted in a drop in India’s exports of steel products.

India turned a net importer of steel in 2018-19, the first time in three years, with shipments rising from countries such as China, South Korea and Japan. Its finished steel imports increased 4.7 per cent to 7.84 million tonnes while steel exports fell 34 per cent to 6.36 million tonnes.

“Although India has been taking protectionist measures to check import of cheap steel, it has been in line with WTO stipulations and proper procedures have been followed so far,” a government official said.

The WTO allows a member-country to impose anti-dumping and safeguard duties on imports if it can be proved that the items are either being dumped in the domestic market at prices lower than what it is available at in the country of the seller or there has been a surge in imports of a particular commodity in a particular period of time. In both cases, the complainant also has to proved that imports have caused injury to the domestic producer and caused disruption in the market.


Arcelor entry will energise India’s steel sector: Pradhan

KOLKATA: ArcelorMittal’s entry into India through its Rs 42,000-crore acquisition of Essar Steel should ‘energise’ the domestic market, benefiting consumers in one of the world’s fastest-expanding economies that is building infrastructure to underpin its growth ambitions.

“With ArcelorMittal entering India, we expect the domestic steel market to become more competitive, and bring in more innovation and stability,” steel minister Dharmendra Pradhan said Thursday on the sidelines of a conclave in New Delhi. “This will ultimately help consumers.”

ArcelorMittal, the world’s biggest producer of the alloy, is entering India at a time when the sector is going through a lean phase, facing a demand slump. Other steelmakers shared Pradhan’s sentiments about ArcelorMittal’s entry into India.

“Competition is good; it will keep us on our toes,” said Sajjan Jindal, chairman of JSW Steel. Jindal said Indian steelmakers appear to have had a headstart in the local markets since they have been operating here for several years, with a Brexit ‘already causing medicine shortages’ at pharmacies in England testosterone phenylpropionate in these states, you don’t need a doctor to prescribe you the pill good understanding of local needs.



Despite cost and steel downturn, time is right for ArcelorMittal to enter India

ArcelorMittal is the largest steel producer in the world. In 2018, its total steel output was 92.5 million tonnes (mt), based on installed capacity of 112mt. It has a global market share of about 5% and it is the largest producer of steel in Europe, the Americas and Africa and is the fifth-largest steel producer in the Commonwealth of Independent States (CIS) region.

On Friday, the Supreme Court cleared the deck for ArcelorMittal to enter India by buying out a stressed steel mill with 10 mt of capacity. The Essar plant has cost them (ArcelorMittal has a 60:40 joint venture with Nippon Steel and Sumitomo Corp) 50,000 crore and a further 7469 crore to pay off the debt of stressed mills Uttam Galva and KSS Petron, in which LN Mittal held some equity. But more importantly, this acquisition has cost ArcelorMittal time. Almost 650 days have passed since ArcelorMittal showed interest in the Essar assets, and today, with the sale nearing conclusion, the steel cycle has turned and domestic demand for the metal has fallen.

Leading private sector steelmakers in India reported a 25-50% fall in operating profits in the September quarter. With global steel consumption flailing, too, ArcelorMittal reported a net loss of $539 million for the September quarter, hit by lower sales and sticky prices.

Credit ratings agencies expect the Essar acquisition to weigh down ArcelorMittal’s balance sheet with more debt. As of June 2019, ArcelorMittal reported net debt of $10.2 billion, which it has projected to reduce to $7 billion. However, the Essar acquisition will instead further increase debt by about $3 billion. Standard and Poor’s revised the outllook for ArcelorMittal to negative this October, citing a “a significant increase in ArcelorMittal’s leverage ratio by the end of 2019 owing to a combination of very weak steel markets, the anticipated acquisition of the Indian steelmaker Essar Steel, and the disappointing performance of the recently acquired loss-making Italian steelproducer Ilva.” Fitch Ratings also revised their outlook to negative citing a worsening global steel market, decreasing industrial production, weak automotive demand, trade tensions, and pressures from elevated raw material costs squeezing ArcelorMittal’s profit margins.

However, with a 10mt plant, ArcelorMittal will be a steelmaker to reckon with in India. Local analysts expect that a third steel producer, after Tata Steel Ltd and JSW Steel Ltd, with both financial heft and expertise will be good for the domestic market.

Essar steel has a 10 mt per annum mill in Hazira, Gujarat. The company is a fully-integrated flat steel manufacturer with ore beneficiation, pellet making, iron making, steel making, and downstream facilities, including cold rolling mill, galvanizing, pre-coated facility, steel processing facility, extra wide plate mill and a pipe mill. In its FY17 annual report, the firm had said that it was the only private steel mill in the country which was allowed to supply steel for warships, submarines, battle tanks and armoured vehicles.

In a past interaction, Atanu Mukherjee, president of global metals and energy consultant M.N. Dastur, had told Mint: “Traditionally, in a fragmented steel market like India, there are a lot of secondary producers. This is a problem because it doesn’t give you economies of scale or the pricing power, and doesn’t help cost structure. With concentration happening among 3-4 larger players and some niche players in the value-added segment supporting them, India will have a more mature steel market without creating monopolies. The steel concentration ratio is moving up faster here than in any other country, but that is good for India.”

Mittal had made several attempts to get his foot in the door in India, notably with projects planned in Odisha and Jharkhand, but neither took shape. Despite the current slowdown, India’s steel consumption growth is expected to be positive in the long-term.India currently has per-capita steel consumption of only 70kg a year, less than half the average of other developing nations.

The global steel market is going through a protectionist phase, with the US and Europe erecting trade barriers against cheap steel coming in from China and Asia. The global demand for steel is likely to increase by 0.5%-1% in 2019 and in 2020. However, this increase is not applicable to all regions. Demand will continue to be propelled by Asia (close to 2%), followed by the U.S., Brazil, and the Commonwealth of Independent States, while the slower European market weighs on global demand. It makes sense now, despite the cost, for ArcelorMittal to set up shop here.



With SC Verdict on Essar Steel, Some Sanity has Been Restored to India’s Insolvency Process

The Supreme Court has finally brought the curtain down on the Essar Steel bankruptcy case.

In what is being hailed as a landmark order, the apex court threw the National Company Law Appellate Tribunal ruling out of the window and ushered in a sense of clarity in the nascent insolvency and bankruptcy resolution process in India.

The apex court order decidedly established the right, nay the supremacy, of the Committee of Creditors (CoC) in deciding the distribution of money raised from the sale of assets of an insolvent company. In doing so, the apex court also ruled that the financial creditors have primacy over the rest in the repayment of money. This should close the door for any ambiguity in the entire insolvency resolution mechanism.

The order, thus, paves the way for ArcelorMittal’s take over of Essar Steel. While confirming the larger responsibility of CoC in the insolvency resolution exercise, the apex court made it abundantly clear that the adjudication authority – NCLAT, in this instance, cannot tinker with the CoC-approved resolution plan in an insolvency case.

The Essar Steel case is among the first set of 12 big defaulter cases that the banks had sought to resolve under a fiat from the Reserve Bank of India (RBI) in 2017. This specific case had since seen many twists and turns, leading up to last week’s verdict by the Supreme Court. ArcelorMittal and Numetal came into the scene in early 2018. They were, however, found to be ineligible.

Subsequently, they were given a fresh opportunity by the Supreme Court to pay off the NPAs (non-performing assets) of their related corporate entities before resubmitting their resolution plans for Essar Steel. The process took an unexpected angle when the promoters of Essar Steel challenged the very insolvency proceedings and offered the entire debt by offering to cough up Rs 54,389 crore.

This was way high when compared to ArcelorMittal’s offer of Rs 42,000 crore. But the National Company Law Tribunal (NCLT) put its foot down. That did not settle the matter, though. Then came the issue of distribution of proceeds among various claimants (financial, operational and other creditors).

What upset the financial creditors was the decision of NCLAT overruled CoC’s distribution plan and sought to insert a sense of parity in the distribution of money among financial and operational creditors. Predictably, financial creditors were forced to knock at the doors of Supreme Court. In a way, the apex court sort of made it clear that there could be no equal treatment of unequals. It laid much store by according equitable treatment to each creditor depending on the class to which it belongs – such as secured, unsecured, financial, operational and the like.

Significantly enough, the Supreme Court also indicated that there is nothing sacrosanct about the 330-day window for insolvency resolution. This should take the pressure off creditors who could otherwise be resigned to accept below-par resolution deal.

The overall clarity ushered in by the Supreme Court order should go a long way in quickening the insolvency resolution exercise in the Indian corporate world. And, it should do a world of good for the banking industry which has been pulled down under the weight of bloated stressed assets.

An early end to their stressed assets imbroglio could help its quick return to health. The conclusion of the Essar Steel imbroglio could prove a sharp warning to recalcitrant-promoters who cared less for financial discipline.

Two classical instances – one pertains to the recent past and another related a distant history – bear testimony to the muddled thinking and avoidable interpretation.

In both cases, the end result proved disaster. In the case of Stayzilla, a Chennai-based start-up, the promoter landed in prison when an operation creditor filed a criminal complaint for non-payment. Eventually, the company was dragged to NCLT under IBC (Insolvency and Bankruptcy Code).

Very many summers ago, Readymoney, a Chennai-based listed entity, met with closure when angry depositors turned their ire on promoters. An eminent person, a leading auditor, associated with the company was arrested in this instance.  The two companies just collapsed.

Set against this backdrop, the Supreme Court order on the primacy of secured creditors must redefine the business play in the country. This can happen if only the entire chain in whole canvass – including India’s law-enforcing agencies – is made to understand it.



Slump in steel sector spreads to small, medium companies

A slowdown in India’s steel sector is spreading to medium and small enterprises, with several companies cutting production in response to lower demand.

Such units make up about one-half of India’s total steel production but higher iron ore prices and weak demand have forced many to trim output since August. In some Can Coconut Oil Be Used as a Sunscreen & Deodorant? buy oxymetholone online at least 68 people are nearly blind after a botched drug was injected into their eyeballs cases, production has been halved.

The steel companies are facing the heat from the slowdown in one of their biggest clients, the automotive industry. Demand for real estate has also been falling in a slowing economy and a liquidity crunch.

“There are no buyers in the market today. Sales are not happening,” said R.K. Goyal, managing director, Kalyani Steel, a Pune-based producer of auto grade steel. The company, which has an installed capacity of 250,000 tonnes per year, has cut production by 25-40% in the last 15 days, Goyal said.


Ludhiana-based auto grade steel manufacturer Vardhman Special Steels plans to start cutting production from October, said vice chairman and managing director Sachit Jain. “We were lucky because we already had a scheduled plant shutdown,” Jain said. “The plant has restarted now. We will be producing less than what we anticipated, maybe we will cut by about 30% but I guess we will be cutting less than our competitors.”

An unprecedented slowdown has engulfed India’s automobile industry, the world’s fourth-largest, since July last year forcing automakers and their vendors to cut jobs. Passenger vehicle sales in India plunged 32% year-on-year in August, according to the Society of Indian Automobile Manufacturers (Siam). It was the 10th straight monthly drop in passenger vehicle sales and the worst since Siam began compiling monthly sales data in 1997-98./

Steel prices fell below 40,000 per tonne in July, the first time since December 2017. Jefferies cited this to weak demand led by a slowdown in key sectors (automotives, real estate) and de-stocking by steel mills, pushing them to sell at an 8% discount to imports. In a report, the brokerage also found that inventory at steel mills are now at 14.6 million tonnes (45 days), much higher than the usual 20 days.

“We’ve reduced production over the last 2-3 months. Some people are doing maintenance shutdowns at plants even when it’s not needed. Salaries are being delayed by about 2 months after we started cutting production in July,” said P.V.S. Rao, president, Karnataka Sponge Iron Manufacturers Association, which represents 64 units that depend on iron ore supply from Karnataka.

Rao said that despite a weak market, iron ore prices of state-run NMDC and private miners have remained stubbornly high which is also one of the reasons several sponge iron producers have chosen to scale back production.

“We do about 10,000 tonnes a day of sponge iron production and we’ve reduced it by about 30% in the last two months,” he said.

Even large steelmakers are choosing to cut production.

In August, JSW Steel, the second largest private steelmaker, cut crude steel output by more than 13% from a year ago to 1.25 million tonnes (Mt). JSW attributed the drop in steel production to a planned shutdown at its Vijayanagar plant. In the June quarter, Steel Authority of India Ltd also saw its sales realisations fall despite stable volumes. Sail had to contend with higher raw material prices and rising expenses hurting margins.

Large producers likes JSW are banking on exports to meet their sales targets. To clear their inventories, Indian mills have exported aggressively in August, with exports rising 37% year-on-year, according to Jefferies.

In an interview with Bloomberg last Friday, Seshagiri Rao, Joint MD and Group CFO, JSW Steel, said the company expects to exceed its export target of 2.2 million to 2.4 million tons for the fiscal year as a response to the slowdown in the domestic sector. But small and medium companies, which traditionally supply to the domestic market, are left in the lurch.

Rao, who represents the sponge iron businesses in Karnataka, said that he expects more steel mills to decide by September on whether they should cut production.



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