Steel firms plan biggest price hike from January
Major domestic steel companies are planning to raise product prices by a whopping Rs 6,000 per tonne from January as an unprecedented rise in coking coal rates and weak retail sales due to demonetisation are hurting margins.
“Not just us, all domestic steel producers are planning to raise product prices from January. There is no option for us. Coking coal prices have gone to Rs 22,000 per tonne from Rs 7,000. The cost push is huge and we have to pass it on whether the market can absorb it or not,” Nitin Johari, director (finance) at Bhushan Steel told Business Standard.
Currently, the price of domestically produced hot-rolled coil stands at Rs 36,750 a tonne as on December 9. A Rs 6,000-a-tonne hike in product prices would be the biggest upward revision by steel producers since the government started taking measures to curb cheap imports in October 2015.
Sajjan Jindal-led JSW Steel, Essar Steel, Tata Steel, and Naveen Jindal-led Jindal Steel & Power, among others, are the major steel producing companies in the domestic market.
“Demonetisation has hit our retail sales by nearly 10 per cent since November 8,” said a JSW Steel source close to the development.
Bhushan Steel, on the other hand, has taken a hit of nearly 20 percent in November on its retail sales. “November onwards is usually the peak demand season but this time, our retail sales have not taken place as per expectations,” said Johari. “The impact of demonetisation could be one factor since consumers and retailers usually deal in cash. The OEMs business segment is also likely to take a hit as auto companies are expected to go on a longer shutdown of 20 days than normal 12-15 days due to demonetisation.”
While calls made to Tata Steel went unanswered, Essar Steel said its pricing will be in line with the market.
“Our prices will all be in line with the market,” said Vikram Amin, executive director at Essar Steel.
According to Joint Plant Committee data, domestic steel consumption in November rose 3.8 per cent from same period last year but was down 14.3 per cent from October. During April-November, the country's imports fell 40 per cent, while production for sale was up 10.3 per cent against the corresponding period last year. Consumption of steel in the period under review stood at 54 million tonnes, up three per cent from the same period last year.
Meanwhile, the industry sees the need for continuation of minimum import price regime on 66 imported products for six months as demand continues to remain disappointing.
“The full impact of MIP (minimum import prices) imposed on 173 products in February this year has not yet trickled down to boost domestic demand. Recent developments including liquidity crunch among consumers on account of currency demonetisation by the government as well as the imposition of anti-dumping duties on import of coke are expected to further dent demand and production situation, respectively,” Sanak Mishra, secretary-general at Indian Steel Association (ISA) was quoted as saying in its recent release. The association represents 60 per cent of steel capacities in the country.
While domestic prices of hot-rolled coils did begin to recover from February 2016 onwards, they witnessed a drop from June-August on account of sluggish construction activity during monsoon, said ISA.
After subsequent extensions on a limited set of 66 in August and October, the prices rose marginally, primarily on the back of a three-fold jump in international spot prices of coking coal, while the demand for steel continued to remain weak.
Gautam Adani says debt level not a concern, eyes new sectors
Adani Enterprises Ltd is aiming to start production at its $16 billion integrated mining project in Australia by end of 2020, after facing a four-year delay because of stiff resistance from environmental groups.
In an interview, group chairman Gautam Adani brushed aside concerns about the group’s indebtedness and said it was looking at investment opportunities in sectors such as defence, coal conversions and water. He added that the group continues to explore opportunities in the mining sector as it looks at an integrated “pit-to-plug” strategy encompassing mines, rail and the port sector.
“Infra is a capital intensive business. At group level, our long-term debt to Ebitda (earnings before interest, taxes, depreciation and amortization) is at a comfortable level of 3.25:1. Overall, for infra business, we are robustly placed,” said Adani, 54.
At the end of fiscal 2016, Adani Power Ltd had a consolidated debt of Rs49,130 crore, Adani Ports and Special Economic Zone Ltd Rs19,500 crore and Adani Enterprises Ltd Rs19,298 crore.
For the debt, the group carries, the “corresponding value of net fixed asset is Rs1.25 trillion”, said Adani.
The billionaire also said that in a growth economy, even the group’s existing businesses of ports, power and mining remain sunrise sectors. “That being said, we are certainly evaluating other sectors that include coal conversions, defence and water. However, it’s too early to say which of these would be the next sunrise sector for us.”
When asked about the group’s plan in the defence sector, which has recently been opened up to private firms, Adani said that it was in “discussions to enable the Make in India programme but it’s too early to... comment.” He, however, clarified that the group had no plans to build ships for the defence sector.
Adani has set a target of 10,000 megawatts (MW) of solar power plants and at least 10,000MW of solar parks by 2020. The group is planning to invest $1 billion in solar manufacturing project in Kutch in Gujarat, besides setting up the world’s largest single-location solar plant in Tamil Nadu.
The group is also planning to expand its power business and some of this expansion will be “inorganic”, said Adani.
He said the company was evaluating opportunities but a lot of the power projects up for grabs had multiple challenges such as transmission evacuation, rail connectivity issues, no power purchase contracts and so on.
The Carmichael mines in Galilee, Australia, will produce about 25 million tonnes of coal a year in fiscal 2021. The group has invested close to $4.5 billion in the first phase, Adani said. It is planning to use the coal to fuel its Mundra and Udupi power plants.
Adani also said he sees the ports business—one of the group’s most successful ventures so far—to meet its target of setting up 200 million tonnes of cargo handling capacity by the end of 2018, two years before schedule.
The Dhamra port, which Adani Ports and Special Economic Zone Ltd acquired from L&T Infrastructure Development Projects Ltd and Tata Steel Ltd in 2014, is likely to rival Mundra port in size in the future as Adani said that plans are in place to enhance the port’s cargo handling capacity from 20 million tonnes per year to 100 million tonnes per year.
China bars banks from funding coal, steel "zombie firms"
China's banking regulator said on Friday that banks must strictly control credit to coal and steel firms that are violating capacity cuts, the latest in a series of regulations aimed at reducing loans to industries struggling with over-capacity.
The China Banking Regulatory Commission (CBRC) told banks to stop providing financial support to "zombie firms" and companies in breach of the government's capacity reduction plans, the CBRC said in an online statement.
The regulator also required banks to increase their awareness of the "strategic status" of the coal and steel sectors, and meet the "reasonable" funding demand of competitive firms.
The banking regulator said it encourages lenders to use financing for mergers and restructuring in the steel and coal sectors. (Reporting By Shu Zhang and Matthew Miller; Editing by Shri Navaratnam)
http://in.reuters.com/article/china-banks-regulator-idINB9N1E700H
NTPC, Nalco to set up power, aluminium plants for Rs36,000 crore
State-owned power producer NTPC Ltd and aluminium producer National Aluminium Co. Ltd (Nalco) on Friday signed a deal to jointly set up a 2.4 giga watt (GW) power plant and one million tonne aluminium production facility in Odisha with an investment of Rs36,000 crore, the companies said in a statement.
The proposed power plant at Gajmara will comprise three units of 800 mega watts (MW) each and will source coal from the mines operated by Nalco. The plants will have Nalco’s factory at Angul as a power customer.
Formal joint venture and power purchase agreements will be in place by the end of the current financial year, the companies said in the statement issued after the deal was signed.
“The aluminium smelter project (that converts raw material alumina into aluminium) and the power project will act as a catalyst for industrial growth in the region creating direct and indirect employment for engineers, supervisors and skilled, semi-skilled and unskilled workers,” according to the statement.
Power minister Piyush Goyal, who was present at occasion, said coal, which is sufficiently available at present, will make the new power project viable in Odisha and also enable production of aluminium cost competitive. “Today, aluminium use is going up in the automobile and aerospace industries in order to improve energy efficiency,” Goyal said, adding that the joint venture was part of the ‘Make in India’ drive.
Oil minister Dharmendra Pradhan, who was also present, said the government was committed to building these plants with the best clean coal technology available in the world to keep pollution under check.
Nalco chairman and managing director Tapan Kumar Chand said construction of the power plants and the aluminium production unit will be completed in four years.
The joint venture will strive to keep the cost of power generation to a minimum so as to benefit aluminium production, NTPC chairman and managing director Gurdeep Singh said.
NTPC is in the process of diversifying into the commodities business, besides venturing into clean energy and nuclear energy sectors.
The government had approved a deal between NTPC and Coal India Ltd in May for setting up three fertilizer factories with a total investment of Rs20,000 crore. State-owned Indian Oil Corp. Ltd is expected to join the project for which state-owned Fertilizer Corp. of India Ltd. will provide land. The power producer also has a joint venture with Nuclear Power Corp. of India Ltd (NPCIL) for establishing two 700 MW nuclear power plants in Gujarat.
Indian Railways, Steel Ministry ink unique deal, transport costs of slurry to fall
The steel ministry has signed a unique way-leave agreement with the railways under which slurry pipelines will be laid alongside railway tracks, a move which will bring raw material transportation costs down by 20-35% for pellet manufacturers. It will also reduce pressure on the railway infrastructure and environmental degradation.
A slurry pipeline is intended for transportation of iron ore fines subsequent to its conversion to iron ore concentrate in the slurry form. The transpiration of iron ore lump and fines to iron making units and ports is now done mostly through the railways from their respective linked sources. This puts pressure on the railway infrastructure.
The situation is expected to aggravate considering the fact that India is looking at ramping up its installed steel capacity to 300 MT in the next 14-15 years.
Pellet manufacturing clusters are spread across mineral bearing states such as Odisha, Jharkhand, Karnataka and Goa. While it takes R4 for every tonne of fines transportation by road and R2.5 by the railways, it would be just 75 paisa per tonne for carrying fines through slurry pipelines.
“The railways has given us permission for the first time to lay slurry pipelines across the rail lines. Fines will be carried through slurry pipelines. This will reduce the transportation cost by 1/3-1/5th of the pellet industry. This is being done to ensure that they don’t pay the transportation cost of finished products,” steel secretary Aruna Sharma told FE.
Following repeated representation from pellet manufacturers on the merits of the laying of the slurry pipeline along the existing railway lines, the steel ministry had asked state-run consultancy firm Mecon to assess the feasibility of setting up pipelines across the railway lines.
C’GARH AMONG 7 STATES CONTRIBUTING TO ADDL. MINING REVENUE
Chhattisgarh is among seven states where mineral blocks have been auctioned resulting in total additional revenue of Rs47,551 crore to the Central government as on November 2016.
The other states where the mineral blocks were auctioned were Andhra Pradesh, Madhya Pradesh, Rajasthan, Odisha and Jharkhand, the Central Government has informed.
Notably, Chhattisgarh has collected Rs712.04 crores under 'District Mineral Foundations' (DMFs) from all the 27 districts of the State where the Foundation had been established, the Central government has informed.
Notably, the Mines and Mineral (Development and Regulation) Act, 1957 (MMDR Act, 1957) was amended through the MMDR Amendment Act, 2015. One of the amendment provisions relates to introduction of section 9B which provides for the establishment of District Mineral Foundation (DMF) in any district affected by mining related operations.
The objective of the DMF is to work for the interest and benefit of persons, and areas affected by mining related operations.
The Union Ministry of Mines has also commenced the process for pilot launch of Mining Surveillance System (MSS) for keeping vigil on illegal mining of even minor minerals in Chhattisgarh besides two other states, officials informed.
The process is underway to launch a system for minor minerals in coalition with the State Governments. The states of Haryana, Telangana and Chhattisgarh have been selected for a pilot launch, officials informed.
Notably, Union Minister of State (Independent Charge) for Power, Coal, New and Renewable Energy and Mines, Piyush Goyal had launched the Mining Surveillance System (MSS) in New Delhi recently.
Notably, the Union Ministry of Mines, through Indian Bureau of Mines (IBM), has developed the MSS, in coordination with Bhaskaracharya Institute for Space Applications and Geo-informatics (BISAG), Gandhinagar and Ministry of Electronics and Information Technology (MEITY), to use space technology for curbing illegal mining activity in the country.
Been developed under the Digital India Programme, MSS is one of the first such surveillance systems developed in the world using space technology. The current system of monitoring of illegal mining activity is based on local complaints and unconfirmed information. There is no robust mechanism to monitor the action taken on such complaints.
Notably, the Automatic software leveraging image processing technology generates automatic triggers of unauthorized activities. These triggers will be studied at a Remote Sensing Control Centre of IBM and then transmitted to the district level mining officials for field verification.
A check for illegality in operation is conducted and reported back using a mobile app.
A user-friendly mobile app has been created which can be used by these officials to submit compliance reports of their inspections. The mobile app also aims to establish a participative monitoring system where the citizens also can use this app and report unusual mining activity.
The advantages of remote sensing technology based monitoring system are that it is Transparent (Public will be provided an access to the system); Bias-free and Independent (The system has no human interference); Deterrence Effect (‘Eyes watching from the sky’); Quicker Response and Action (The mining areas will be monitored regularly. Sensitive areas will be monitored more frequently); Effective Follow-up (action taken on triggers will be followed-up at various levels like DMG, State Mining Secretary, State Office and Headquarters Office of IBM and Ministry of Mines, GoI).
There are in total 3843 mining leases of major minerals in India. Out of which, there are 1710 working mines and 2133 non-working mines.
The Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) has been launched by the Government which will be implemented through funds collected under DMF.
At least 60% of PMKKKY funds will be utilized for high priority areas like: (i) drinking water supply; (ii) environment preservation and pollution control measures; (iii) health care (iv)education; (v) welfare of women and children; (vi) welfare of aged and disabled people; (vii) skill development; and (viii) Sanitation. The rest of the funds will be utilized undertaking works like for: (i) physical infrastructure; (ii) irrigation; (iii) energy and watershed development; and (iv) any other measures for enhancing environmental quality in mining district.
Notably, the South East Central Sector which includes Chhattisgarh is also set to play a key role in Central government’s ambitious coal loading and transportation plans.
A Memorandum of Understanding (MoU) has been signed recently between Ministry of Railways and Coal India Limited (CIL) which will lead to procurement of 2000 wagons (33 rakes) in the first outgo, officials stated.
The agreement which will result into speedy supply of wagons for coal loading in dedicated circuits.
Initially, the rakes will be inducted and run in the 2 main coal loading Zones of Indian Railways i.e South East Central coal sector and East Coast circuit.
These rakes will be inducted in circuits for transporting coal from MCL Talcher & IB area and SECL to Paradip/Dharma ports, Vishakhapatnam area and the power houses of Nagpur/Raipur region.
Under this strategic partnership, the wagons will be procured by Indian Railways on behalf of CIL, the maintenance of these wagons will be done by Railways at its own cost. Also, the brake vans will be provided by Railways itself.
It may be recalled that the Chhattisgarh government on the other hand had also sent a proposal to the Union Coal Ministry for increasing the rate of coal royalty from existing 14 % to 30 %.
A Study Group has been constituted to consider the revision of rate of royalty. Final recommendation of Study Group is under consideration.
Significantly, the South Eastern Coalfields Ltd (SECL) is targetting total coal production of 250 million tonnes (MT) from its underground and open cast mines by 2019-20, officials stated.
The company recorded coal production (provisional) of 12.10 million tonnes (MT) against target of 11.70 MT as on February 2016, Coal India Ltd (CIL) informed the Bombay Stock Exchange in its filing.
Warm Regards
Anurag Singal
Sr Manager –Business Development
Essel Mining & Industries Ltd
14th Floor, Industry House
10,Camac Street –Kol-71
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