Monthly Archives: May 2015

What Can We Infer from SAIL’s Result?

Steel Authority of India Limited (SAIL) recently announced its annual production figures and gave a guidance for next financial year.

SAIL, India’s largest steelmaker, has declared its annual production result, in which the company has produced 13.91 MnT crude steel and 12.84 MnT saleable steel (finished flat, finished long and semis) in FY15. The saleable steel sales declined to 11.71 MnT in the last fiscal from 12.1 MnT in FY14.

The company’s crude steel production has increased to 13.91 in FY15 against 13.58 MnT in FY14. In addition, out of the total saleable steel production of 12.84 MnT,  3.21 MnT was Semis, 6.93 MnT was flats and 2.69 MnT was longs salebable steel.

SAIL’s Steel Production of 3 Fiscal Years

Particular FY15 FY14 FY13
Crude Steel Production 13.91 13.58 13.41
Saleable Steel Production 12.84 12.88 12.39
Saleable Steel Sales 11.7 12.1 11.1

Quantity in MnT
Source: SAIL; JPC

Guidance for FY16

SAIL has targeted an incremented production of 2.7 MnT crude steel in FY16. 1.5 MnT will be from IISCO (Burnpur) and 1.2 MnT will be from Rourkela Steel Plant. The company has also planned to produce 2.5 MnT finished steel in FY16, which will be in the form of rebar, structure and wire rod. This idea has brought about a mixed response in the market; for one section of industry it will be beneficial, while, for other, it will create more challenges.

Challenge for Rebar & Structure Manufactures

SAIL’s incremented capacity of about 2.5 MnT will come in the form of long steel (rebars, wire rod and structure). Increased capacity will poise a big challenge for secondary steelmakers, who are currently struggling with slow demand, rising import and hike in power tariff.

It is expected that price premium between secondary and primary manufacturers will narrow down drastically. Currently, the difference has narrowed down to INR 2,000-2,500/MT, which used to be INR 4,000-5,000/MT at one point of time.

Pig Iron Prices will Find Support

We expect that there will be low sales of Pig iron by SAIL in coming year from its Rourkela plant. This will provide some support to Pig iron domestic prices. In FY15, the company has produced about 0.41 MnT Pig iron from its Rourkela plant.

Amid increase in production by primary producers coupled with rising import and weak demand in domestic market, it is expected that secondary steel producers will be under extreme pressure in coming years.

 

Imported Iron Ore Offers to India Move Up

Amid increase in spot iron ore prices, imported iron ore offers to India have also witnessed improvement.

Imported iron ore offers to India have moved up further by USD 3/MT W-o-W. Offers for South African lump (Fe 64%) are at USD 80/MT, CIF India for shipments to arrive on last week of June or early week of July.

Last week the offers for South African lump (Fe 64%) were in the range of USD 75-78/MT, CIF India for June shipments.

Pellet manufacturers in southern India are hopeful that over increasing prices of imported iron ore, sponge iron manufacturers might prefer pellets available in domestic market.

A market participant based in Southern India stated that – “Imported iron ore offers from South Africa which were in the range of USD 70-72/MT, CIF India in Apr’15 have increased to USD 80/MT, CIF India. We expect that Pellet prices in southern India might improve in the beginning of July as sponge iron manufacturers are silent over rising global  iron ore prices.”

India imported 0.9 MnT iron ore till 29 May, 2015. Out of which, share of imports from South Africa is around 78% i.e 0.7 MnT. 0.3 MnT is yet to arrive by the end of this month.

Monthly Average Spot Iron Ore Prices Up by USD 9/MT

Monthly average Spot iron ore fines (Fe 62%) prices in China have increased by USD 9/MT M-o-M to USD 60/MT in May’15 over increased buying from steel mills which were falling short of inventories.

 

Indonesian Thermal Coal Prices Under Pressure

Indonesian thermal coal prices are still under pressure, driven by over supply and slow demand in the global market.

Indonesian grade thermal coal offers are still under pressure. Indonesian 4200 GAR coal, majorly imported by Indian manufacturers, again declined by USD 1-2/MT in this week and is currently offered at USD 38/MT CFR Krishnapatnam Port for June’15 shipments. Meanwhile few traders are offering same grade material at USD 37/MT CFR East Coast India for June’15 on the grounds of lack in Indian buyers, as well as their negotiations on offer prices.

An East Coast based trader highlighted, “Prices of Indonesian 4200 GAR grade material and below declined due to lack of buying interest in the market. Currently stock and sale material of Indonesian 4200 GAR coal is being offered at INR 2900-3000/MT at East Coast ports. VAT and CST will be calculated further.”

Indonesian Grade Stock and Sale Offers at Vizag Port:

  1. Indonesian 3800 GAR (5500 GCV KCAL/Kg) coal is being offered at INR 2625-2650/MT.
  2. 4200 GAR is being offered at INR 3100/MT for June’15 Shipments.
  3. Indonesian 5000 GAR coal stock and sale material is offered at INR 4500-4600/MT (all duties and clearance included).

Waiting Time at Ports

Indonesian coal FOB prices have declined about USD 4-5/MT since the beginning of 2015, as driven by major market factors such as slow global demand persistent with oversupply, continuous falling consumption of coal in many countries as they become environmentally concerned and focus on energy source replacement, continuous mining activities by major suppliers etc.

On the other side, India still seems an emerging market for major coal exporting countries as coal demand in the country is expected to increase this year also. India’s total coal import increased about 29% to 233 MnT in FY15.

Indonesian Coal Imports & Prices to India

Indonesian Coal Prices

Indonesian Coal to India

1.Currently, about 2.9 MnT Indonesian grade coal is expected to arrive at different Indian ports till 30 May’15 (updated as on 26 May’15).

2.Indonesian coal vessels carrying about 2.1 MnT of the material are waiting at anchorage position. In May’15, about 9.5 MnT coal has been discharged at Indian ports.

 

Bangladesh Re-rollers Resist Imported Billet on Possible Duty Hike

Bangladesh based re-rollers avoid importing billet on anticipation that government may increase import duty on it by USD 25-30/MT in annual budget.

Bangladesh’s government had raised import duty on MS billet by USD 20/MT (i.e. 1,500 Bangladeshi Taka) in last budget. The re-rollers here, are anticipating the same for this budget also, which is about to announce in the first week of Jun’15.

According to markets’ anticipation, the government may increase import duty to USD 90-95/MT in upcoming budget, in order to promote steel-making in the country. Currently, import duty on billets is USD 65/MT (i.e. 5,000 Bangladeshi Taka).

“Offers at Bangladesh for containerized shredded 211 scrap is at around USD 305/MT, whereas billet at USD 370/MT, CFR Chittagong basis. You can see some bookings taking place for scrap, but for billets, nothing such is about to happen, as all major player have already concluded their deals anticipating the changes in duty”, said a manufacturer based in Bangladesh.

Bangladesh is one of the major importer of billets in Asian region. It imports around 1.5-1.75 MnT billet annually to meet the country’s demand.

Re-rolling mills consuming greater volume of billets are strongly in favor of lowering duty on billet, while some local producers of billets want that the duty be hiked further to protect the domestic industry.

Indian Billet Exports will be Hampered

India billet exports will definitely get hampered if Bangladeshi government increases import duty, as it is one of the important export market for billet in India. In the recent export tender of bloom floated by Vizag Steel, the entire lot went unsold, sending a clear message that traders were not willing to take positions amid uncertainty.

Global billet Offers as on 29 May’15

Particulars Size in mm Prices in USD/MT
FOB India 150*150 370
FOB India 125*125 395
FOB China 125*125 340
FOB Black Sea 125*125 375
CIF India (From China) 125*125 370
CIF Bangaldesh (From China) 125*125 370-375

Source: SteelMint Research

1 USD = 77.84 BDT (Spotted on 29 May, 2015)

 

Australian Coking Coal Offers May Not Rise

Coking coal offers from Australia have limited scope for improvement in the weeks to come.

Most of the Indian steelmakers are placing orders for Coking coal imports as per their requirement only. No excess quantity to maintain coal stock interests them as of now.

Premium Hard coking coal prices are at USD 84.5-85.5/MT FOB Australia and Semi-hard coking coal at USD 77-78/MT FOB Australia.

Freight charges at USD 14/MT for Supramax, USD 10/MT for Panamax and USD 7/MT for Capesize remain unchanged for the past couple of weeks.

With no big shift in demand from Indian steelmakers, Australian Coking coal prices are expected to go up by may be not more than USD 1.5-2/MT.

In the current month, 3.5 MnT Coking coal has already been imported to India and may go up to around 3.8-3.9 MnT. Thus, a comparison with the previous month imports at 3.3 MnT, shows that they have improved.

The rise in imports has probably taken place so as to stock ahead of monsoon, when coal extraction, transportation and handling, comes up as major constraint.

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NMDC

NMDC to Raise Iron Ore Production to 35-38 MnT in FY16

NMDC is planning to increase iron ore production by 5-8 MnT to 35-38 MnT in this fiscal.

NMDC- India’s largest iron ore producer has planned to ramp up iron ore production by 5-8 MnT to 35-38 MnT in FY16.

The company’s performance has remained stable last fiscal. The miner produced 30.44 MnT iron ore in FY15 which has improved marginally against FY14. Total iron ore production in FY14 amounted to 30.02 MnT in FY14.

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NMDC’s Iron Production stood at 7.94 MnT in Q4 FY15

NMDC produced 7.94 MnT iron ore in the last quarter of FY15 against 9.96 MnT in Q4 FY14 which is down by 20%.

 

Indian Pellet Sponge Prices Decline Sharply by INR 400-500/MT

Domestic pellet sponge (P-DRI) market has witnessed fall in prices; Durgapur by INR 600/MT, Rourkela by INR 800/MT and Raipur by INR 200/MT.

C-DRI prices in Odisha, India’s largest sponge maker with an installed capacity of 11 MnT, have declined sharply by INR 800/MT. And in Durgapur, sponge iron prices fell by INR 600/MT. However, Chhattisgarh, India’s 2nd largest sponge maker with an installed capacity of 9 MnT, has witnessed a minor correction of INR 200/MT in prices.

The major cause of price correction in Odisha and West Bengal is price cut by Odisha miners; fines by upto INR 200/MT and lumps by upto INR 700/MT in May’15. Sources revealed prices may come down further by INR 200-300/MT due to low sponge prices. However in Chhattisgarh, prices declined slightly because of no correction in NMDC’s iron ore prices for May deliveries.

It is to be noted that out of the total sponge requirement, Chhattisgarh based sponge manufacturers purchase 55-60% of iron ore from NMDC (CG) and rest from Odisha.

Currently, MS billet offers in Duragpur are assessed at INR 25,000/MT, Rourkela at INR 24,700/MT and Raipur at INR 25,700-25,800/MT.

South Based Sponge Makers Looking for Bulk Deals

SteelMint while talking with sellers, who deal in bulk quantities, assessed sponge buying in bulk quantities from other states is not viable in South market because of continuous fall in prices amid surge in production. Currently, 78 FeM C-DRI is being offered at INR 15,300-15,500/MT and 82 FeM at INR 16,100-16,300/MT. However, buyers are willing to purchase the material at INR 200-300/MT less than the offered price.

Semi Finish Prices as on 28 May’15

Particular C-DRI (FeM) P-DRI (FeM) Billet (125*125) Premium (C-DRI – P-DRI)
Raipur 16,800 (80) 14,900 (80) 25,700-25,800 1,900
Durgapur* 16,400 (78) 14,600 (78) 25,000 1,800
Rourkela 15,000 (78) 13,500 (78) 24,700 1,500
Bellary 15,400 (78) 14,000 (78) NA 1,400
Hyderabad 17,100 (84) 14,700 (78) 26,000 2,400

Basic prices in INR/MT on ex-works basis
*Delivered/FoR
Source: SteelMint Research

 

Ship Breaking Offers to India Remain Unchanged

Continuous fall in global offers of ships coming for demolition to India takes a break this week.

Ship breaking offers in Asia’s three most active ship breaking yards namely, India, Bangladesh and Pakistan, witnessed a price stability this week. Offers for ships remained unchanged in the range of USD 365-395/ LT LDT.

Stability in Indian currency this week, clubbed with slight improvement in domestic ship-plates and billets, W-o-W have given ship recyclers at Alang some confidence.
Buying in Bangladesh and Pakistan remained low. Upcoming monsoon and pre-budget rumors have confined the ship recyclers to limited ships. Budget in these two nations are to be announced early June.

Global Ship Offers for Demolition as on 28 May’15

Delivery Grade Prices in USD/LT LDT W-o-W Change
CNF Chittagong, Bangladesh General Cargo 365 0
Tanker 390 0
CNF Alang, India General Cargo 370 0
Tanker 395 0
CNF Gadani, Pakistan General Cargo 370 0
Tanker 395 0

Source: SteelMint Research

Ship Breaching at Alang

Ship breakers at Alang have breached 15 ships this May, recovering around 137,513 LDT. A bulk carrier and a general cargo is expected to arrive this week, which would yield around 29,620 LDT.

Meanwhile, six vessels (two general and four bulk cargoes) are waiting to breach and would yield around 46,269 LDT.

Prices at Alang

Ship plates market at Alang has slightly improved this week by around INR 100-200/MT W-o-W owing to some stability in billet prices in the country. Current offers for 6-8 mm are at INR 23,500MT, ex-yard. While, melting scrap is offered at INR 20,550/MT, ex-yard.

Domestic Prices of Ship-Cutting as on 28 May’15

Particular/Delivery Size/Grade Prices in INR/MT
D-o-D Change W-o-W Change
Ex-Bhavnagar 1 Inch 24,800 + 200 + 100
1-2 Kg 21,500 + 100 -300
12-14mm 24,300 + 200 + 100
15-18mm 24,550 + 150 + 50
19-22mm 24,700 + 200 + 100
2-5 Kg 23,900 + 100 0
5-10 Kg 24,300 + 200 + 100
6-8mm 23,500 + 200 + 100
9-11mm 24,000 + 150 + 100
HMS(80:20) 20,550 + 50 -300

* Day-on-Day
**Week-on-week
Source: SteelMint Research
INR as on 28 May’15 assessed at 63.8 against USD

 

MMTC to Focus on Domestic Market for Pig Iron Sales

Indian Pig iron exports dropped 40% in FY15, where as production rose by 30%.

MMTC, on behalf of NINL, has released an expression of interest (EOI) for signing MOU with the domestic buyers for sale of Pig iron . The period of sale will be from Jul’15 to Mar’16. The EOI should be submitted till 16 June’15 at 17:00 hrs.

The company will consider the prevailing prices mentioned in the valid price circular at the time of actual delivery on ex-NINL basis. The MOU signing party will be given an additional discount of INR 100/MT in the open sale offers declared by MMTC through price circulars.

Minimum quantity lifted by the buyer will be at least 18,000 MT +/- 10% of Pig iron till March 2016 at the rate of 2,000 MT per month.

Steep Fall in Export in FY15 a Matter of Concern for Domestic Sellers

Export of Pig iron in FY15 has been noted as 0.6 MnT. The figures has dropped by 0.4 MnT; it was around 1 MnT in FY14. On the other hand, saleable production of Pig iron has increased by about 30%. In FY15, production recorded at around 9 MnT against 7 MnT in FY14.

However, MMTC managed to export around 0.3 MnT. Reasons for lesser exports could be jotted down as continuous fall in Pig iron prices, preferred choice of imported scrap over Pig iron for steel smelters, lucrative billet offers from China & Russia shifts buying interest of Pig iron consumers.

Due to above reasons regarding fall in figures of Pig iron exports, the company is more concerned over domestic market and through signing MOUs it will secure buyers in domestic markets.

In India, Pig iron is majorly exported by MMTC, Vizag Steel and Sesa Sterlite. MMTC and Vizag steel offer their material through tender route, while Sesa Sterlite sells it directly.

 

Essar Steel Aims to Raise Capacity Utilization to 80% in FY16

Essar Steel plans to ramp up its capacity utilization in current fiscal and raised profit to INR 6.48 bn in FY15.

Essar Steel, which has a total capacity of producing 10 MnT of liquid steel, has targeted to ramp up its capacity utilization to 80% in FY16, from 50% at the end of FY15. The utilization has so far been constrained owing to delay in completion of the plant and unavailability of gas.

The company’s Executive Vice Chairman, Firdose Vandrevala stated, “The company targets on value added products, increasing production, introducing new products and improving profitability in order to ensure sustainable operations of the company.”

In addition, the group’s CEO, Prashant Ruia mentioned that the company, which operates 6.8 MnT gas-based steel making facility, will move towards coal based production of steel from gas based production.

He further added, “We are the largest gas based steel making capacity in the world. However, we are not producing at that level. We don’t see any significant rise in gas availability in India soon.”

Essar Gains Profit of INR 6.48 Billion in FY15

Ruias-promoted Essar Steel has gained a net profit of INR 6.48 bn in the last fiscal FY15. The major factors for such hike in profit are better operating margins, consolidation and higher demand for its value added steel products. Gross revenue of the company has moved up by 19.6% to INR 171.62 bn in the fiscal against INR 143.48 bn in FY14, as per sources.

Now, the company is planning to monetize Vizag slurry pipeline and coke oven for around INR 70 bn in FY16.