Steel In The News A compilation of leading news items on Indian steel industry as reported in major national dailies - Joint Plant Committee
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Steel In The News
A compilation of leading news items on Indian steel
industry as reported in major national dailies
CONTENTS Page
Raw Materials 2
Policy 3
Financial 4
Company News 4
Projects 6
Global 6
Price 6
A Weekly Report by Joint Plant Committee July 4- 10, JulySteel In The News 4-10 July, 2015
RAW MATERIALS
Sponge iron declines on weak demand from steel mills
Sustained weak demand from the steel industry has pushed sponge iron prices down by 6
per cent in June to touch the cost of production. Experts believe the price of the raw
material used to make steel will rebound after the lean season. Non-integrated players like
JSW Steel are better placed over the next few years due to operational efficiency and
continued focus on selling value-added products, Kunal Motishaw, an analyst with
Reliance Institutional Equity Research, said in a report. “Steel demand is plagued by
cheap exports from Korea and Japan. The recent 2.5 per cent import duty hike by the
government is negligible. Immediately after the duty hike, the steel price is corrected by
$6. To protect the interest of steel producers, the government should hike the import duty.
Once that happens, steel demand will grow and so will sponge iron,” said Amitav
Mudgal, VP Maketing & Corporate Affairs, Monnet Ispat.
Source: Business Standard, 5th July, 2015
NMDC June iron ore output at 5.93 mt
NMDC Ltd has fixed the prices of lump ore at Rs 2,950 per wet metric tonnes (WMT)
and fines at Rs 1,660 (WMT) with effect from July 4. In a statement to the BSE, NMDC,
has informed that the production for the month of June was 5.93 mt and sales was 6.65
mt. While the Chhattisgarh mine recorded an output of 3.30 mt, Karnataka mine had an
output of 2.63 mt during June 2015. The sales from Chhattisgarh and Karnataka was 3.54
mt and 3.11 mt.
Source: Business Line, 6th July, 2015
Ferrochrome makers want extension of chromite mine leases till 2020
Ferro chrome makers in Odisha have appealed to the state government to extend lease
validity of chromite ore leases till March 31, 2020. The ferrro chrome manufacturers were
battling an acute shortage of ore due to drop in production and halt in supplies of chrome
ore and chrome ore concentrates. Leases held by Misrilal Mines and B C Mohanty are
under shutdown while the chrome ore lease of Tata Steel is operating at depleted capacity
due to uncertainty over its lease status. A delegation of ferro chrome players under the
banner of Indian Chamber of Commerce (ICC) called on the state chief secretary, G C
Pati and apprised him on the raw material crisis faced by their units. With the new
MMDR Amendment Act prescribing that non-captive mines would come up for auction
in 2020 and captive mines in 2030, change in the status of the mines from non-captive to
captive would result in loss of auction revenue for ten years, they pleaded. Similarly, as
the captive miners are required to raise mineral to the extent of their in-house need, the
ore production would fall sharply compared to the previous years, leading to loss of
royalty revenue as well. Hence, extension of validity of chrome ore mines only upto 2020
with non-captive status would be a win-win situation for the state government,
leaseholders and ferro chrome units, said a ferrochrome producer.
Source: Business Standard, 7th July, 2015
A JPC Report 2Steel In The News 4-10 July, 2015
Ore-rich States to be involved in stepping up steel output
The Union Ministry of Mines is working out a strategy to involve ore-rich States to step-
up steel production. As part of the strategy, the Ministry has identified four States —
Jharkhand, Chhattisgarh, Odisha and Karnataka — to set up 3-million-tonnes steel mills
each. Union Minister for Steel and Mines, Narendra Singh Tomar said: “We have already
signed memorandum of understanding (MoUs) with the State governments of Jharkhand
and Chhattisgarh. At present we are in talks with the Karnataka government for a 3-
million-tonne steel plant at an investment of Rs18,000 crore,” Tomar was speaking at the
consultative committee meeting of his Ministries at Bengaluru. The National Mineral
Development Corporation (NMDC) and Steel Authority of India Ltd have been identified
as partners for setting up the mills. They will partner with the State governments and then
look for a strategic partner to build the mills through special purpose vehicle (SPV) route,
he added. NMDC has been allowed to partner with Karnataka and Jharkhand, while SAIL
will partner with Chhattisgarh and Rashtriya Ispat Nigam Ltd (RINL) with Odisha. The
Ministry of Steel will facilitate setting up the Steel Research & Technology Mission of
India (SRTMI) to promote collaborative research programmes in steel and contribute 50
per cent in the corpus of the mission to spearhead R&D activities. On research and
development (R&D), the Ministry of Mines has issued an advisory to all large steel
companies to set up an R&D unit and enhance investments up to one per cent of their
sales turnover.
Source: Business Line, 8th July, 2015
POLICY
Essar Canada Arm Seeks Duty on Indian Steel for Dumping
Indian steelmakers aren’t the only ones feeling the pressure of cheap imports. Essar
Algoma, the Canadian arm of Essar Steel, has sought anti-dumping and counterveiling
duty against Indian and Russian steel. The complaint filed was filed in April this year
seeking import duty on carbon and high-strength low-allay steel plates, of 5-10 mm
thickness mostly. “In our complaint, we identified 58 subsidy programmes, which we feel
have provided actionable benefits to Indian plate producers and are, therefore, countervail
able under Canadian law,” said Essar in response to questions. Essar Algoma claims that
24,064 tonnes of the steel in question were imported into Canada in 2012 and 17,971
tonnes in 2013.These imports grew seven fold to 149, 847 tonnes in 2014. Citing
Statistics Canada Import data, Essar says 110,000 tonnes of Carbon and HSLA plate were
imported from India along in 2014.
Source: The Economic Times, 9th July, 2015
A JPC Report 3Steel In The News 4-10 July, 2015
FINANCIAL
Steel companies sell assets, recast loans to cut debt
Indian steel companies are resorting to asset sales, refinancing of local loans with dollar
loans, and recasting loans under the Reserve Bank of India’s 5/25 scheme to control their
spiralling debt. The RBI had warned steel companies would not be able to service their
debt as the infrastructure sector grappled with stalled and delayed projects. Five of the top
10 private steel companies were under severe stress, the RBI said. The companies say
they are taking steps to reduce their debt and intend to sell more assets in 2015-16. “All
companies are in the same boat, and they have been told to either sell assets or bring more
cash to the table”. India’s most indebted steel company Tata Steel has announced plans to
sell its long products division in Europe, but it has not been able to close the deal because
steel prices fell internationally reducing the valuation of the unit. The sector’s woes are
low demand and falling prices. To help Indian companies to tide over the debt crisis, the
RBI came out with a 5/25 scheme that extends the tenure of loans to 25 years with an
option to refinance in five years. Bhushan Steel and Essar Steel have opted for it. One of
India’s better managed steel firms, JSW Steel, with Rs 34,889 crore of loans on its books,
does not foresee any problem with its spiraling debt. Chairman Sajjan Jindal said the
company’s margins were strong to service its debt.
Source: Business Standard, 5th July, 2015
Bhushan Steel soars 20% on lenders’ nod to loan refinancing
Shares of Bhushan Steel soared 20 per cent today as the company received lenders'
approval for long-term restructuring of about Rs 30,000 crore loans under a scheme of
Reserve Bank of India. The stock zoomed 20 per cent to Rs 66 - its highest trading
permissible limit for the day - on the BSE. At the NSE, the stock jumped 19.96 per cent
to Rs 65.80. The company's market value rose by Rs 249.97 crore to Rs 1,494.97 crore.
The Joint Lenders Forum (JLF) has agreed to extend the loans of BSL for a tenure of 25
years under the RBI's scheme for long-term structuring of loans in line with cash flows. A
consortium of bankers led by Punjab National Bank (PNB) has a total exposure of about
Rs 30,000 crore in the company.
Source: The Financial Express, 10th July, 2015
COMPANY NEWS
JSPL’s crude steel output up 38%
Jindal Steel and Power Ltd (JLPS) said its steel production grew by a healthy 38 per cent
to 1.10 million tonnes in April-June quarter of this fiscal helped by capacity upgrade and
better utilization. The Delhi-based firm had produced around 800,000 tonnes of crude
steel and direct reduced iron (sponge iron) during the same quarter of 2014-15, it said in a
BSE filing. Commenting on the performance, JSPL’s Group CEO and Managing
A JPC Report 4Steel In The News 4-10 July, 2015 Director, Ravi Uppal said: “We achieved this on the back of capacity upgrade at our plants as well as better utilization of our existing resources. During the January-March quarter, JSPL’s crude steel production rose by 45 per cent to 1.1 mt compared to the same quarter in 2013-14. Production of sponge iron rose by 18 per cent to 0.87 mt during the same period. Source: Business Line, 6th July, 2015 Lenders to Electrosteel undecided on buyer Lenders to Electrosteel Steels are finding it hard to decide on a buyer for the company with the Tata Group asking for a 50% haircut on the existing debt and a Singapore-based investor said to be interested in the company not willing to bring in equity capital but wanting to extend a loan instead. Sources familiar of the development told while the Singapore investor’s offer is more lucrative, since there is no haircut involved, most lenders want it to bring in equity capital. The Tatas have offered to infuse funds via cumulative redeemable preference shares, sources added. Meanwhile, lenders have requested the Singapore investor to consider infusing some amount of equity while bringing in the remaining investment via debt. According to Bloomberg data, the company’s net debt at the end of March 2015 was R9,208 crore, up 13% over the previous year. Lenders said that the strategic debt restructuring (SDR) could also be used to take over the company, but only once a new investor had been lined up. Bankers confirmed to FE that the company had delayed payments of interest by over 60 days and consequently the exposure has been classified as an SMA-2 (Special Mention Account) account in line with the rules. According to a banker, the Tata Group wants to buy out the promoter’s stake at a cheaper valuation than that of the Singapore investor. Electrosteel needs around Rs 1,300 crore to complete its 2.51 million tonnes per annum integrated steel and ductile iron pipes project in Bokaro, Jharkhand, and the stake sale would help it complete the project. Source: The Financial Express, 8th July, 2015 Tata, JSW top global debt league A stretched balance sheet in a persistently hostile business environment had made JSW Steel, the country’s largest producer in the sector, and Tata Steel, a fully integrated alloy producer, the most heavily indebted companies in the segment across the globe. As on end-March, Tata Steel’s consolidated net debt was Rs 69,000 crore. That of JSW Steel was Rs 36,000 crore. In the case of JSW, despite consistently rising revenue and operating profit, the company has not been able to significantly cut debt. Tata Steel, the country’s oldest in the sector, has taken timely non- cash impairment charges, sold non-core assets and even refinanced its loans. However, it has not been able to bring its balance sheet in a healthy position. In fact, after its recent earnings performance, brokerages decided deleveraging would remain slow as realizations are expected to remain weak due to lower steel prices. Tata Steel has been unable to keep its revenue moving consistently up in the past three-four years. Operating profits have been on a roller-coaster ride, leaving the company into losses in some A JPC Report 5
Steel In The News 4-10 July, 2015
quarters. All domestic steel firms have been working in a hostile business climate for
quite some time.
Source: Business Standard, 10th July, 2015
PROJECTS
Monnet Ispat to sell power subsidiary to JSW Energy
Monnet Ispat & Energy (MIEL) said that it has signed a memorandum of understanding
with JSW Energy to sell the controlling stake in its subsidiary, Monnet Power (MPCL),
which is implementing a 1, 050-MW thermal power project in Odisha. Financial terms of
the deal were not disclosed. With the current market prices pegged at Rs 7 crore per MW,
the deal could be valued around Rs 7,000 crore, at a potential discount to the seller. JSW
Energy said in a separate statement that the MoU enables the company to initiate due
diligence of MPCL. According to sources, MIEL has been looking to offload its power
business for some time now to reduce its debts. The project started in June 2009, with
Bhel executing the setup. However, MPCL said the project was delayed due to delays in
acquiring regulatory approvals and disbursement of loans from banks.
Source: The Financial Express, 10th July, 2015
GLOBAL
China steel prices lowest in 20 years, nip small mills
Chinese steel prices are at their lowest in more than 20 years as demand in the world’s top
producer wanes, industry data show, and some analysts say the free-fall is not even close
to an end, threatening the survival of small steelmakers. A composite price index of eight
steel products compiled by the China Iron & Steel Association (CISA) fell to 65.28 points
last Friday. The stuttering Chinese economy is hitting demand for arrange of commodities
including iron ore, steel and copper. The price slide has meant local steel mills have failed
to benefit from the rapid decline in iron ore.
Source: The Financial Express, 8th July, 2015
PRICE
Steel firms face furnace of costs, prices, imports
With an exposure of close to $50 billion, India’s banks have a lot riding on the country’s
steel companies. But with steel prices having come off sharply; imports surging and
demand anaemic, revenues and profits for most producers are shrinking. On Wednesday
A JPC Report 6Steel In The News 4-10 July, 2015 steel stocks crashed as the price of the metal continued to slide – China domestic HR sheet prices fell to &330 per tonne from $344 on Tuesday, clocking a loss of more than 42% since January. Most analysts predict Tata Steel, JSW Steel and JSPL will report losses for the three months to June. Those steelmakers that have access to captive iron ore mines may be better off but the problem is that almost all companies are highly leveraged. JSW Steel, for instance, has a gross debt of Rs 34,885 crore while its Ebitda last year was Rs 9,400 crore. JP Morgan believes that if global prices stay where they are - $340 to $370 per tonne – margins can’t expand unless imports come off sharply or demand revives. Source: The Financial Express, 9th July, 2015 A JPC Report 7
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