Category Archives: Currency and Policy

China’s Central Bank to Cut Reserve Ratio from Jan 6

The People’s Bank of China (PBOC), China’s central bank, announced on January 1 that it will shave the reserve requirement ratio of financial institutions by 0.5 percentage point from January 6, in order to support the development of the real economy and to lower financing costs for Chinese enterprises.

The latest blanket reserve ratio cut will free up over Yuan 800 billion ($114.9 billion) and thus secure stable and sufficient cash flow liquidity, state media Xinhua News reported.

PBOC always unveils such currency measures around this time of year to deal with cash constraints before Chinese New Year, Mysteel Global notes. Last January 4, the central bank also lowered the reserve ratio by a total of 1 percentage point in two phases on January 15 and 25 2019 respectively, as reported.

“The reserve ratio cut was announced on the very first day of 2020. It is clear that the central bank is firmly following the order of Premier Li Keqiang to apply various measures to lower enterprises’ financing cost and to strengthen countercyclical adjustment,” commented a Shanghai-based economist.

During a visit to Chengdu in Southwest China’s Sichuan province on December 23, the Chinese premier had commented that Beijing will study adopting various measures such as blanket and specially-targeted reserve ratio cuts, refinancing and rediscount measures, to lower the actual interest rate and financing cost, and to resolve the difficulty in financing that small-sized Chinese enterprises face.

Chinese steel market participants have welcomed the central bank’s cash injection to the market, believing that freeing-up money supply will boost steel market demand, Mysteel Global learnt.

“The money the measure unlocks will be flowing into main downstream consumption areas such as infrastructure and real estate, which will effectively support steel demand,” a ferrous analyst from Shanghai-based Dalu Futures Co commented.

Unlike the previous rounds of reserve ratio cuts that targeted mainly infrastructure, the latest blanket cut will entice new cash into the property market, the most important consumption area for steel products, she maintained.

The article has been published under article exchange agreement between Mysteel Global and SteelMint.

 

Does India have key Resources to set up Lithium-ion Battery projects domestically?

The year 2019 has proved to be a game changer for the Indian automobile sector with government’s announcement of INR 10,000 crore for Phase 2 of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles, or FAME 2 scheme, to boost electric mobility and increase the number of electric vehicles in commercial fleets.

The FAME scheme was first launched in 2015 but nothing major was achieved in time span of four years (Apr’15 – Mar’19) with 90% of vehicles produced being electric scooters. Also, these vehicles majorly used antiquated lead-acid batteries instead of modern lithium-ion ones. Subsequently with small enterprises cashing on the incentives and no major action being taken by the large automakers, Indian government hit back through a stricter move this year. Its Bharat Stage standards regulate the emission of air pollutants from motor vehicles. On April 1, 2017, the Indian government had made Bharat Stage-IV standards compulsory. The failure of its FAME-India policy made the government leapfrog Stage-V and move straight to Stage-VI emission standards last year. The Indian Supreme Court upheld the government’s Bharat Stage-VI decision that comes into effect on April 1, 2020 and this might dampen demand for petrol or diesel automobiles going forward.

Now with BS VI norms and FAME II policy which aims to have 30% of India’s vehicles powered by lithium-ion battery in another 10 years the Indian automakers have to gear up for the new range of electric vehicles and also have to secure supplies of its key raw material lithium-ion battery required to run it.

The scanty lithium and cobalt reserves

While Indian auto majors are focusing on developing electric vehicles amid still-low demand for the same, many international as well as domestic companies have shown interest to set up lithium-ion battery plant in India. But the big question that is hovering is does India has enough reserves of lithium and cobalt which are the two key raw materials for battery production.

The Indian government estimates its cobalt reserves to be just 44.9 MnT and has also admitted that “there is no production of cobalt in the country from indigenous ores.” In fact, production of cobalt declined in the early part of this decade from around 1,187 tonne in 2010 to 580 tonne in 2012. India imported the ore to refine this cobalt and then imported more cobalt in refined form to meet the domestic demand. The top cobalt producers across the globe include both China and Japan. They have been astute in acquiring mines in different parts of the world and developing global supply chains.

Indian government’s strategic move

However, now with the anticipated increase in demand for lithium and cobalt, the Indian government has instructed three state-owned companies to team up for a new venture which will scout and acquire strategic mineral assets (lithium and cobalt) abroad.

As per the market reports, the key partners in this joint venture are National Aluminium Company (Nalco), Hindustan Copper (HCL) and Mineral Exploration Corp. Ltd (MECL). This proposed joint venture is currently awaiting a few approvals before it can be operationalised and is likely to be formalised along the lines of ONGC Videsh, which buys oil and gas assets abroad. The modalities of the venture will be worked out later, but the joint venture could partner Indian mining companies or join hands with local mining entities abroad and if the JV take off, it will help India to build strategic reserves of key minerals used for battery manufacturing.

Apart from this, Bolivia, known to have the world’s largest reserves of lithium, has also offered the metal to India. The country has offered to sign PTA (Preferential Trade Agreement) with India which will provide preferential access to certain products (including lithium) by lowering tariffs.

However, India has to work hard to catch up as indeed, China already has a head start in this race for these strategic commodities, especially in Africa, just as it previously took the lead in its quest for oil and gas. As per media reports, Chinese imports of cobalt from the Congo, the world’s biggest producer of the mineral, was around USD 1.2 billion in the first nine months of 2017, compared with USD 3.2 million by India, the second-largest importer.

 

How India is becoming Favoured Destination to set up Lithium-Ion Batteries Plant used in EVs

India is making a big push for electric vehicles, signalling a turning point in its clean energy policy. While in 2017, the Indian government had announced its intent to shift to 100% electric vehicles cars by 2030, in March this year, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles or FAME 2 scheme—to expand commercial vehicle fleet—was also announced with an outlay of INR 10,000 crore. Amid this strong push by the government to make India a global manufacturing hub for electric vehicles and components, many companies globally are now taking keen interest to set up lithium-ion battery plants in the country, which is a key component for the EVs.

According to a conservative scenario envisaged by NITI Aayog, India will need six gigawatt-scale facilities (of 10GWh each) by 2025 and 12 by 2030. While this doesn’t include the export market potential, the base scenario envisions 11 such giga factories by 2025 and 24 by 2030.

Major investments by the global players

Last week, Japanese majors Suzuki Motors, Toshiba and Denso have formed a consortium to set up a lithium-ion battery and electrodes plant in Gujarat and the market sources claim that this will be the biggest battery plant in the world. While the total investment involved has not been officially disclosed by the consortium, the estimates are around INR 30,000 – 50,000 crore in a phased manner over eight years.

While Suzuki is a Japanese automobile major, Toshiba is a conglomerate that provides various services information technology, communications equipment and systems, and for electronic components, whereas Denso is a leading supplier of advanced automotive technology, systems and components for automakers. With Suzuki Motors being the leading partner in the consortium, the three companies will be in proportion of 50:40:10 between Suzuki, Toshiba, and Denso.

The consortium plans to purchase land close to Suzuki’s Hansalpur plant. This proposed investment by the Suzuki–led consortium is in addition to Suzuki’s current and proposed investment in its Hybrid cars plant where of about INR 8,000 crore.

Apart from this, Tata group has become the first company to buy land in the Dholera Special Investment Region (SIR) to set up 10 gigawatt lithium-ion battery plant. In fact as per the market sources, the company had paid first instalment of INR. 40 crore to buy land for its proposed lithium-ion battery plant.

Last month, Tesla and China’s Contemporary Amperex Technology Co. Ltd (CATL) are among the companies that have shown an interest in the Indian government’s plan to build large factories to make lithium-ion batteries at an investment of about INR 50,000 crore. Among the other firms that have shown an interest in the mega project is China’s BYD Co. Ltd.

The state-run IOCL (Indian Oil Corporation Ltd) has also announced its set up a 1 Giga Watt (GW) plant to make batteries used for running electric vehicles (EVs) in partnership with an overseas start-up using a non-lithium ion raw material that is locally available. Th battery plant will be set up through a special purpose vehicle (SPV) formed by IOC and the overseas entity and although the location of the plant has not been decided yet, the unit will be built in phases beginning with 25MW or 50MW and ramped up.

Government’s push to the industry

To encourage private sector investment in this sector, the government is looking at tax incentives for manufacturers and a basic customs duty safeguard from 2021-2030 for making advanced chemistry cells and battery in India. It may offer an output-linked subsidy on kilowatt hour of cells sold. India is also exploring a nearly USD 1 billion concessional loan facility to be drawn from multilateral lenders to boost battery storage plans.

To encourage sales of electric vehicles, the Goods and Services Tax Council last month decided to cut taxes on electric vehicles and chargers from 1 August. In the budget, the government announced tax rebates of up to INR 1.5 lakh for customers on interest paid on loans to buy EVs, with a total exemption benefit of INR 2.5 lakh over the entire loan period. The government also announced customs duty exemption on lithium-ion cells, which will help lower the cost of lithium-ion batteries in India, as they are not produced locally.

 

India: Copper Producers Seek Waiver in Import Duty on Concentrates

Indian refined copper producers and makers of value added products have sought waiver of 2.5% duty on copper concentrates ahead of the Union Budget 2019-20.

The domestic copper industry is under a compulsion to import copper concentrates in large quantities owing to lack of quality copper deposits inside the country.

“The domestic availability is merely 4% of the total requirement. Thus, import of copper concentrate by the industry is inevitable. In the last seven years since FY2011, the market share of copper imports to domestic consumption has expanded from 14% to 37% at the end of FY2018. On the contrary, the domestic producers have seen steady erosion of market share, with their share plummeting by 21 per cent CAGR (compounded annual growth rate) in the comparable period”, said an industry source.

Copper players feel that given the non-availability of copper concentrates domestically, there is no economic rationale to continue with the duty on imports. The abolition of the 2.5 % duty will enable the domestic copper industry to have a level playing field and compete with value added products manufactured by the countries that have inked Free Trade Agreements (FTAs) with India and hence, are pumping more volumes of wire rods and refined products where the domestic industry boasts of self-sufficiency.

Copper producers are flustered by existing duty anomalies which seemingly bolster imports at the expense of local production. Imports of finished goods with countries bound by Free Trade Agreements (FTAs) attract zero duty. Ironically, India’s copper producers have to fork out 2.5 per cent duty on import of copper concentrates, a raw material they are constrained to import due to lack of good quality copper deposits in the country. Domestic availability of the raw material meets only a measly four per cent of the industry’s requirement.

The inverted duty structure explains the immense growth in imports- they have soared 100 per cent CAGR (compounded annual growth rate) from FTA countries in the last six years. Import of refined copper (amply produced in India) is riding high only on account of the duty arbitrage under ASEAN FTA.

The domestic copper industry, comprising the primary and downstream segments, is estimated to be around Rs 60,000 crore per annum, employing over a lakh directly and generating indirect employment many times over.

Copper manufacturing boasts of a nameplate capacity of one million tonnes per annum (mtpa), sufficient to cater to the domestic demand pegged at 0.7 million tonnes. With major players like Adani Group and Vedanta Ltd having firmed up ramp-up plans, the rated capacity is envisaged at 2.4 mtpa by 2025 when domestic consumption is projected to touch 1.5 million tonnes.

 

Iran Needs USD 29 Billion Investment for Steel and Mining Project Expansions

Iran, one of the largest steel producer in MENA, has $29 billion of mining investments attracting interest of companies from Europe to Asia. Currently Iran has 2.7 billion pounds of iron ore and more than 3,000 active mines, mostly privately owned dedicated to nation’s steel production and export. It has plans to more than double steel production by 2025 and boost exports once international sanctions are lifted.

According to Mehdi Karbasian, deputy minister of IMIDRO“Sanctions imposed on Iran did certainly slowed development in steel and other fields, “Investment in Iran when sanctions are lifted will be win-win situation.”

He added,” Steel production is set to jump to 55 MnT by 2025 from 22 MnT this year, pending new investment and the end of international sanctions will help to achieve the nation’s target.”

“The projected capacity will help us to raise our steel exports by around 12 MnT a year,” he said. Last year, Iran exported 2.5 MnT of steel products to Italy, the United Arab Emirates, Iraq, Thailand, Spain and Britain.

German, French and Dutch delegations visited Iran in recent weeks, he said. “We have held extensive negotiations with them in regard to investments in the steel and mining industries,” Karbasian said. “We have also had negotiations with representatives of British and Austrian companies.”

Negotiations are under way with unidentified Japanese companies for them to invest in the Makran steel plant, which has capacity to produce 3 MnT of steel, in Iran’s free trade zone of Chabahar on the coast of the Gulf of Oman, he said.

Chabahar has rail links to bring in iron ore from Iran, along with Turkmenistan, Kazakhstan and Afghanistan, he said. Steel companies from India and South Korea are also considering investments in Chabahar, he said.

Inputs taken from Minews

 

Why Rupee Hit All Time Low and What Does it Mean for Steel Industry?

The Indian Rupee was one of the resilient currencies in the world till the beginning of 2018. Since 2018, it has tumbled about 8 per cent in value against the US dollar. The Rupee on Thursday morning hit an all time low to 69 per US dollar. Let us see, what is driving this depreciation and what does it mean for Indian steel industry

Reasons for Fall in Indian Rupee

1. The root cause is higher crude oil prices in global market which has reached to USD 77-78 a barrel against USD 75.49 a month back

2. Market is nervous on rising NPA’s. According to a recent financial stability report (FSR) from RBI (Reserve Bank of India), report bank’s gross NPAs increased to 12.2 percent by March 2019 from 11.6 percent in March 2018. This means every 100 rupee lent by bank, Rs 12.2 is less likely to come back

3) Market is also watching US and China trade war, which may have impact on global currency market

What does it mean for Indian Steel Industry?

1. Exporters will benefit on Rupee depreciation. We can expect more export deals taking place in coming weeks. Indian finished steel exports were recorded at 9.6 MnT in FY18, which is about 9% of total crude steel production.

2. Imports will become costly- Imports of coking coal, scrap, coke and steel will become expensive.

3. Domestic steel prices should find support, which have been under pressure in last few weeks.

 

RINL Introduces New Mandate for Ocean Export Tenders

The state-owned RINL (Rastriya Ispat Nigam Limited) also known as Vizag Steel has introduced new condition of compulsory EMD (Earnest Money Deposit)/Security Deposit (SD) to be deposited from all the bidders that are participating in the Ocean export tenders with effect from 7 June 2018. Prior to this there was no such rule of EMD deposits for Ocean export tenders.

This EMD/SD is required to be deposited by the bidders before two international banking days of tender opening date.

EMD shall be collected from all the bidders while participating in the tenders with the following two options:

Option 1: To take EMD @ USD 6/MT for Steel and USD 2.55/MT for Pig Iron (the existing rates of Security Deposit), which will be converted into SD in case of the successful bidder.

Option 2: To take EMD for an amount of USD 1,00,000 for a minimum period of nine (09) months from the date of BG (Bank Guarantee). The successful bidder shall submit Security Deposit @ USD 6 PMT for Steel and USD 2.55 PMT for Pig Iron. This EMD shall be applicable for all the tenders floated during the six months from the date of EMD.

EMD/SD can be remitted in the form of BG (Bank Guarantee)/DD (Demand Draft)/TT (Telegraphic Transfer) remittance. Bids received without EMD shall be rejected without any reference.

The modified Ocean Export terms and conditions dated 01/07/2018 is attached here. Also, the new BG formats for the above mentioned two options are available in the attached PDF in Annexures 1 to 3. All the other terms and conditions will remain the same as previously mentioned in the pdf issued on 19 June 2015 which is available on RINL website.

 

Bangladesh Budget: Govt Proposes to Reduce Duty on Ferro Alloys by 5%

Bangladesh Budget: Specific custom duty on import of Sponge Iron reduced by Tk. 200/MT & Regulatory duty (RD) on Ferro alloys reduced by 5%.

Finance Minister of Bangladesh Abul Maal Abdul Muhith on Thursday – 7 June, announced national budget for 12th time before parliament for fiscal year 2018-19. Overall, this budget is not very special for the iron and steel industries as a reduction of only 5 % is proposed on the regulatory duty of import of raw materials along with very few other reductions.

Finance minister allocated 27.34 percent of total budget for social infrastructure of which 24.37 percent allocation will go to human resource development (education, health and others), 30.99 percent for physical infrastructure of which 12.68 percent will go to overall agriculture, 11.43 percent for overall communication sector (roads, railways, bridges and others) and 5.36 percent for power and energy sector. 25.30 percent of total allocation has been proposed for general services and 4.78 percent for PPP, financial assistance and equity investments in various financial institutions, 11.05 percent for interest payment and the rest 0.54 for net lending and other expenditures.

Key highlights of the budget

1) The existing slabs of Customs Duty (0%, 1%, 5%, 10%, 15%, and 25%) on import stage will remain same in fiscal year 2018-19. However, government also aiming to decrease the use of Regulatory Duty (3%) and Supplementary Duty which is used to increase revenue.

2) For Iron and Steel sector, the minister has proposed reduction on Regulatory Duty of 5%  on import of raw materials i.e. Ferro Alloys from 15% to 10%. He also proposed reduction of specific customs duty on import of Sponge Iron (iron having a minimum purity by weight of 99.94%, in lumps, pellets or similar forms) from Tk.1000/MT to Tk. 800/MT.

The Finance Minister said “in recent years raw materials import for iron and still industries has been decreased. Consequently, the revenue from this sector has been decreased drastically. To keep both the production cost and market price of MS Rod low, duties have been reduced.”

3) The minister proposed to reduce Custom duty from 25% to 5% on Flat rolled products (Concession will be given to VAT registered refrigerator, air-conditioner and compressor manufacturing industry).

4) The Finance Minister also proposed to grant concession on raw material of motorcycle and removed existing RD from Angles, shapes and sections and Welded angles, shapes and sections. In the existing budget it was charged at the rate of 10%.

5) The existing description of Graphite paste imported by VAT registered ferro alloy manufacturing industry to Graphite or carbon electrode paste imported by VAT registered ferro alloy manufacturing industry.

Proposed Changes in Duty Structure are:

 

“ Indian Govt has no target of Raising Crude Steel Production Capacity to 300 MnT ” Steel Ministry

In a recent development it is understood that the earlier announced of the government target for crude steel production capacity to 300 MnT by 2030-31 has brought in line to do with demand & consumption than production which is based on the forecast of growth pattern of the country’s GDP.

A year back that is in 2017 the Steel Ministry had said that “ National Steel Policy 2017 sets a target to achieve 300 MnT of steel production capacity by 2030-31 and also gives a directional roadmap on how to achieve it”.

During a question hour in the Lok Sabha on 26th March 2018 three members that is V. Elumalai, K. Ashok Kumar, Dr. Manoj Rajoria has put forward questions to the steel ministry:

1. whether the target of more than doubling domestic steel making capacity to 300 MT by 2030-31 could be achieved smoothly, if so, the details thereof along with the steps taken by the Government in this regard?
The Minister of State for Steel Vishnu Deo Sai replied that “ The Government has not set any target of raising crude steel making capacity to 300 million tonnes by 2030-31. It is a projection of requirement based on a forecast of the growth path of GDP and steel consumption in the country. The Steel Policy 2017 has, however, discussed in detail the ways and means and the level of preparedness required to reach such a level.

2. Whether the Government has set up a task force to prepare a roadmap on increasing the use of steel in various infrastructure sectors, if so, the details thereof;
For which the minister of the state answered that “ The Ministry of Steel has constituted Task Force in conjunction with relevant ministries for increasing steel usage in the Railways, Urban development, Road Transport & Highways and Shipbuilding sector”.

3. whether the said task force will also analyse the impact of imported steel on domestic steel industry and the level of percentage of use of imported steel in the ongoing projects both in public and private sectors, if so, the details thereof;
Where the Minister of The State did not have any details

4. whether the Government has taken concrete steps to realise the aim of achieving a target of 150 MT steel consumption by the year 2020, if so, the details thereof along with the actual and the desired/targeted per capita consumption of steel in the country during each of the last four years and the current year?
The Government has not fixed any target of achieving 150 MT Steel consumption by the year 2020. However, as per National Steel Policy 2017 per capita steel consumption in the country is expected to be 160 kgs by 2030-31. Also there are no year wise targets for consumption of the steel in the country. The details regarding actual per capita consumption of finished steel for the last four years and the current year are as under:

Year India Crude
Steel Production (MnT)
Per captia consumption
of finished steel
in India

Qty. (kg)

2013-14 81.69 59.56
2014-15 88.98 61.15
2015-16 89.79 63.99
2016-17 98.14 65.25
2017-18, ( till February, 2018) (Provisional) 92.62 68.00
Source: JPC