A Review of developments in Global & Indian Steel Industry · • India imported around 219 MT of...
Transcript of A Review of developments in Global & Indian Steel Industry · • India imported around 219 MT of...
A Review of developments in
Global & Indian Steel Industry
Bi-monthly edition
Issue No. 4
May 2016 (for the period March & April 2016)
Strictly for internal circulation
Our eight Full Members are:
• Steel Authority of India Ltd.
• Tata Steel Ltd.
• JSW Steel Ltd.
• Rashtriya Ispat Nigam Ltd.
• Essar Steel Ltd.
• Jindal Steel & Power Ltd.
• Bhushan Power & Steel Ltd.
• Bhushan Steel & Strips Ltd.
Our six Affiliate Members are Monnet
Steel, INSDAG (Institute for Steel
Development and Growth), KISMA
(Karnataka Iron and Steel
Manufacturer’s Association), Gerdau
Steel, Visa Steel & Jindal Stainless.
About Indian Steel Association
Slide No.
CONTENTS
RAW MATERIAL 4
PRODUCTION & CONSUMPTION 9
TRADE 14
COUNTRY REPORTAGE 17
PRICE & FORECASTS 23
SIGNIFICANT ECONOMIC PARAMETERS 30
RAW MATERIAL
Source: World Bank
Highlights of World Bank’s
Commodity Markets Outlook
5
Report released in April 2016 for the quarter Jan – March 2016; Points highlighted above in italics have been reproduced verbatim
World Bank’s quarterly report titled “Commodity Markets Outlook” states the following:
• Thermal coal prices fell 3 percent in the first quarter of 2016—and down 60 percent overpast five years—on continued weak import demand and excess supply.
• Natural gas prices fell 15 percent in the first quarter of 2016 amid weak demand and largestocks.
• Metals prices fell 1 percent in the first quarter, a sixth straight quarterly decline.
• Iron ore prices rose 3 percent in the quarter, but soared 33 percent in February/March on aspike in steel prices and restocking at Chinese mills ahead of the construction season.
• Global mining investment has fallen by more than half since peaking in 2012, although newlower-cost supply continues to expand for some metals from legacy investment.
• Metals prices are projected to decline by 8 percent in 2016 due to slowing demand inemerging economies, notably China, and increases in new production capacity.
• Coal prices are expected to decline by 13 percent in 2016, averaging $50/ton, on continuedweak demand and oversupply.
Source: SteelMint
Trend of Iron Ore Prices
April 2016
6
• Global iron ore prices peaked at USD 68.7/MT, CFR China on April 21, 2016. This was
a 16-months high as last seen in the month of January 2015.
• Production cuts by world’s top four miners also supported prices, such as that of BHP
(around 10 MT) andVale (around 10 MT).
Source: SteelMint
Iron Ore Exports by India
April 2016
7
• Uptick in global iron ore prices, abolition of export duty on low grade ore as well as
increased demand in China led to kickstart of iron ore exports by India.
• Iron Ore exports from Goa (Mormugao and Panaji Ports) is likely to touch 2 MnT
mark in first month of FY16.
Source: SteelMint
Coal Imports by India
2015-16
8
• India imported around 219 MT of coal (excluding pet coke) in 2015-16. This came at a
decline of 11 MT against last fiscal.
• India recorded a growth rate of 375 percent for its met coke imports from March
2016 to April 2016.
Grade FY15 FY16 %Change
Non-coking 183.7 167.75 -9%
Coking Coal 45.5 47.84 5%
Pet Coke 5.83 9.92 70%
Coke & Anthracite 4 3.69 -8%
Total 239.03 229.2 -4%
PRODUCTION &CONSUMPTION
Source: World Steel Association
Top Producers for Q1CY16 As Per
World Steel Association
According to World Steel Association, world’s top ten nations with regards to cumulative
crude steel output during Jan-Mar ’16 is given below:
Rank Nation Output (in ‘000 tonnes)
1 China 192,010
2 Japan 25,770
3 India 22,913
4 United States 19,628
5 Russia 17,224
6 South Korea 16,176
7 Germany 10,782
8 Turkey 7,697
9 Brazil 7,392
10 Ukraine 6,082
10
Source: World Steel Association
Crude Steel Output by Asian Region
steady in March 2016
2015
11
Country March 2016 % Change over March 2015
China 70.650 +2.9
India 8.059 +3.4
Japan 8.648 -6.8
South Korea 5.927 -8.4
Taiwan 1.775 -14.7
Thailand 0.25 -22.7
Output in million tonnes
According to World Steel Association, the crude steel production by Asia remained flat at
0.8 percent rise during the month of March 2016 year-on-year.
Source: SEAISI
Outlook on Apparent Steel Consumption in ASEAN
APRIL 2016
12
As per preliminary data collected by South East Asia Iron & Steel Institute (SEAISI),
apparent steel consumption in ASEAN would have most likely reached 70 MT in 2015, an
increase of 7 percent y-o-y. This was mainly contributed by the strong consumption
growth rates inVietnam and Philippines.
• Vietnam’s steel demand is estimated to have jumped by 26 percent y-o-y to touch 18 MT in
2015, enabling it to overtakeThailand as the largest steel consuming country in the region.
• Philippines’ steel demand also grew robustly, by 15 percent y-o-y, to cross the 8 million tonnes
threshold in 2015.
• Malaysia and Singapore both registered moderate growth rates of 5% y-o-y. Malaysia’s steel
demand is expected to edge closer to 11 MT in 2015.
• Thailand’s steel demand is expected to decline by 3% y-o-y, to fall below 17 MT in 2015.
• Indonesia’s steel demand is expected to drop by more than 3% y-o-y to register a volume of
slightly above 12 MT in 2015.
Source: U.S. Department of Commerce
Statement on Excess Capacity and Structural
Adjustment in the Steel Sector
13
High-level Government representatives of Canada, the European Union, Japan,
Mexico, the Republic of Korea, Switzerland, Turkey, and the United States, met
in Brussels in April 2016, and urged the OECD, to develop a global forum where all can
participate on an equal footing, for conducting further work on global restructuring issues
in steel, including:
• Developing an information-sharing mechanism for monitoring crude steel capacity
developments and the formulation and implementation of policy and support measures taken
by governments aimed at reducing excess capacity and otherwise facilitating industrial
restructuring in the steel sector.
• Developing guidelines on government policies and support measures to facilitate industry
restructuring in ways that minimise market distortions.
• Monitoring the nature and extent of export credit agency support for new steel sector
projects.
• Developing longer-term supply and demand forecasts for steel, taking demographic trends and
innovation in steel-consuming sectors into account.
• Exploring ways to more effectively provide technical assistance on restructuring.
• Strengthening ties with other international organisations and institutions, including
international financial institutions, working on issues that are relevant to the work on excess
capacity and restructuring.
TRADE
Source: Joint Plant Committee, Ministry of Steel (MIS & DO Reports)
Status of India’s Steel Trade
15
Total Finished Steel
(Alloy + Non Alloy)April 2015 – March 2016
Qty (in MT) % Change
Import 11.714 +25.7
Export 4.079 -27.1
• India became net importer of steel during 2015 – 16.
• Contribution of non-alloyed steel in total imports stood at 29.1 percent, while
the rest was accounted by alloyed steel.
• Imports in March 2016 (0.994 MT) increased by 9.1 percent compared to
February 2016 and by 18.2 percent compared to March 2015.
Source: World Trade Organization16
WTO's Committee on Safeguards, the Committee on Subsidies and
Countervailing Measures and the Committee on Anti-dumping Practices met
in April 2016 and following was brought forth:
• Several members said they believed overcapacity in the steel sector and the resulting
distortions in steel trade were triggering an increase in the initiation of safeguard and anti-
dumping investigations on steel products.
• One member said 41 new anti-dumping investigations targeting steel imports were triggered
in 2015 compared to 23 in 2012 and 2013 respectively.
• In addition, the member cited serious concern with the growing number of safeguard
measures targeting steel imports over recent years.
• Concerns were also expressed about the absence of information regarding government
subsidy programmes in general as well as subsidy programmes provided to steel producers.
• Many members observed that compliance with the obligation to notify specific subsidies was
low and declining, and that this was a major systemic problem for the operation of the
Subsidies Agreement.
WTO release post Committee Meetings on
Safeguards, Subsidies & Anti-Dumping
COUNTRY REPORTAGE
Source: European Commission
Highlights of Industry Status
European Union
18
Points highlighted above in italics have been reproduced verbatim from press release
A High-Level Meeting on excess capacity and structural adjustment in thesteel sector convened on 18 April 2016, in Brussels, co-organised by the OECDand the Belgian government, European Commission highlighted the followingpoints:
• The European Commission is aware of the situation in the steel sector, which not only suffers from a global problem of overcapacity but also from unfair trade, i.e. dumped and subsidised exports.
• The EU currently has over 100 trade defence measures in place, 37 of them targeting unfair imports of steel products, 16 of which from China.
• At bilateral level, the Commission has set up Steel Contact group meetings with China, Japan, India, Russia, Turkey, and the United States. During the meeting with Japan on 8 March and that with China on 10 March 2016, the Commission put the issue of overcapacity at the core of the discussions.
• The Commission will propose a prior surveillance system on steel products. Prior surveillance measures are foreseen in the EU's safeguard instrument and are based on an automatic import licensing system. They can be introduced when import trends threaten to cause injury to Union producers.
Source: U.S. Department of Commerce, International Trade Adminstration
Highlights of Industry Status
United States
19
Report released in April 2016; Points highlighted above in italics have been reproduced verbatim
• The U.S. steel industry posted a combined net loss of USD1.4 billion in Q4 2015.• U.S. Steel posted a net loss of USD 999 mn, followed by Steel Dynamics posting a USD
253 mn loss,AK Steel with a USD 147.1 mn loss, and Nucor with a USD 62 mn loss.• Commercial Metals reported the highest quarterly net profit at USD 25.1 mn,• followed by Carpenter Technology at USD 11.5 mn.
• Benchmark domestic steel prices showed modest increases in March 2016 after steadydeclines.• U.S. domestic prices for hot-rolled band increased to USD 466 per metric ton in March
2016. Compared to one year ago, the price for hot-rolled band was down 10.7 percent.• Cold-rolled coil prices increased to USD 656 per metric ton in March, a 2.8 percent
drop from last year, while standard plate prices increased to USD 570 per metric ton, an18.8 percent drop from a year ago.
• U.S. domestic capacity utilization continued its slight recovery after sliding downwards inrecent months and hitting a 6-year low.• Overall capacity utilization in 2015 averaged 70.1%, a 9.5% drop from 77.5% in 2014.• Though capacity utilization has increased 79.2% from the twelve year low reached in
April 2009, it still remains well below the pre-recession historical averages.
Source: The State Council, People’s Republic of China
Developments in China
Industry Outlook
20
At a press conference following the conclusion of the annual parliamentary
session in March 2016, Premier Li Keqiang made the following comments:
• A growth target range for 2016 at 6.5 percent - 7 percent.
• China will balance reform and development well and avoid massive layoffs while cutting
overcapacity.
• Some sectors are burdened with overcapacity, especially in heavy and petro-chemical
industries, and China has selected the steel and coal sectors to start cutting overcapacity while
avoiding massive layoffs.
• In the past two years, China has phased out over 100 MT of steel-making capacity involving
some 1 million employees.
• To cushion the effect of job losses on families and society, the central government decided to
allocate 100 billion yuan (15.34 billion U.S. dollars) to help the laid-off workers find new jobs.
Points highlighted above in italics have been reproduced verbatim from the Press Release
Source: Ministry of Commerce, People’s Republic of China
Developments in China
Trade Related
21
Official Spokesperson comments from the Trade Remedy and Investigation
Bureau of Ministry of Commerce (MOFCOM) on India’s Trade Remedy and
Investigation against Steel and Iron Products Imported from China:
• The Chinese government hopes the Indian side could conduct the investigation in strict accordance with the WTO rules.
• It’s a global issue for all countries to cope with the overcapacity of steel and iron products. The Chinese government has attached much importance to the overcapacity issue and adopted a series of measures to solve the problem. Positive effects have been made.
• Protective trade policies not only have no effect on solving the problem of global overcapacity of steel and iron and the industrial development basically, but also impede the normal progress of international trade order.
• The Chinese government has insisted on prudent, restrained and standard use of trade remedy measures and has made active efforts to encourage the Chinese steel and iron enterprises to seek common development, solve trade frictions and realize mutually beneficial cooperation with overseas enterprises through various ways of trade, investment and technical cooperation.
Points highlighted above in italics have been reproduced verbatim from the press release dated April 20, 2016
Source: SteelMint
Developments in China
Iron Ore related
22
China’s iron ore imports went down by 2 percent in April 2016, imported 83.9
MT of the ore in the month. Among total imports in April 2016, Australia contributed
61%, Brazil 19% and South Africa contributed 5% to the total imports into China.
PRICE & FORECASTS
Source: Commodity Markets Outlook, World Bank
World Bank’s Commodity Price Forecasts
April 2016
2016 2017 2018 2019 2020
Coal
(USD/tonne;Australia)50.0 51.0 52.1 53.1 54.2
Iron ore
(USD/dmt)50.0 51.5 53.0 54.6 56.2
Natural gas
(USD/mmBtu, US)2.50 3.0 3.5 3.68 3.88
Crude Oil
(USD/barrel; average spot)41.0 50.0 53.3 56.7 60.4
24
As on April 2016;
All figures in Nominal US dollars;
mmBtu - One million British Thermal Units;
One barrel - 42 U.S. gallons or 158.9873 litres
Source: World Steel Dynamics estimates
2016e 2018e 2020e 2025e
Japan 103 100.7 99.2 95.6
South Korea 68.9 71.4 72.3 75.1
China 765 705 690 654
United States 82.5 86.5 88.9 95.4
India 93.3 101.7 108.5 127.3
25
Report released on April 1, 2016;
All figures in million metric tonnes
World Steel Dynamics
CRUDE STEEL FORECAST
Source: World Steel Dynamics26
Report released on March 24, 2016;
Prices in USD per tonne
World Steel Dynamics
Hot Rolled Band Price Trends
Source: World Steel Dynamics 27
Report released on March 24, 2016;
Prices in USD per tonne
World Steel Dynamics
Hot Rolled Band Price Trends
Source: World Steel Dynamics 28
Report released on March 24, 2016;
Prices in USD per tonne
World Steel Dynamics
Hot Rolled Band Price Trends
SIGNIFICANT
ECONOMIC PARAMETERS
Source: The Economist Intelligence Unit, Global Forecasting Service
Growth Forecasts
2016 - 2020
As of May 18, 2016;
The assumptions for forecasts are available on the website of the Economist Intelligence Unit
In % 2016 2017 2018 2019 2020
IndiaReal GDP Growth 7.4 7.3 7.3 7.2 7.2
Inflation 5.1 5.4 5.1 4.5 4.6
ChinaReal GDP Growth 6.7 6.0 5.1 4.5 4.3
Inflation 2.4 2.1 2.5 2.0 2.4
U.S.AReal GDP Growth 2.0 2.3 2.3 1.0 2.1
Inflation 1.3 2.2 2.3 1.3 1.7
JapanReal GDP Growth 0.5 0.1 0.8 0.7 1.0
Inflation 0.0 1.1 0.9 0.8 1.0
Euro AreaReal GDP Growth 1.5 1.6 1.6 1.5 1.5
Consumer Price Inflation 0.2 1.2 1.4 1.6 1.6
30
Source: Reserve Bank of India; Points highlighted above in italics have been reproduced verbatim
Highlights of RBI Monthly Bulletin
April 2016
31
• World trade remains subdued due to falling import demand from EMEs and stress in miningand extractive industries.
• While exports declined in February in US dollar terms for the fifteenth successive month, therate of contraction narrowed to a single digit for the first time
• India’s share in world exports has declined from its recent peak of 1.7 percent in 2014 to 1.6percent in 2015. This suggests that factors such as the rising incidence of protectionism andcompetitive depreciation might have affected export performance, since depressed globaldemand is common to all exporting countries.
• The manufacturing PMI for March 2016 expanded on the basis of growth of output, neworders, including exports. The Make in India drive, together with new measures announced inthe Union Budget to widen the space for FDI, and custom and excise concessions, areexpected to help lift industrial performance.
• In Q3 of 2015-16, the Reserve Bank started the Asset Quality Review (AQR) to ensure thatbanks were taking proactive steps to correctly classify their loan portfolios, with the deadlineof March 2017 to clean up by making full provision. Fifteen public sector banks reportedlosses on their domestic operations in Q3 of 2015-16 as a result of increased provisions fordoubtful/loss assets and write-offs of bad loans.
EME – Emerging Market Economics; FDI – Foreign Direct Investment
Source: Reserve Bank of India
RBI’s Sectoral Deployment of Bank Credit
April 2016
32
Note: Data are provisional and relate to select banks which cover 95 per cent of total non-food credit extended by all scheduled commercial
banks (excludes ING Vysya which has been merged with Kotak Mahindra since April 2015).
Deployment of Gross Bank Credit by Major Sectors
(INR Billion)
Industry
Outstanding as on Growth (%)
Mar 21,
2014
Mar 20,
2015
Mar18,
2016
Mar 20, 2015 / Mar
21, 2014
Mar 18, 2016
/ Mar20, 2015
1 2 3 4 5
1 Industry
(Micro & Small, Medium
and Large )
25165 26576 27307 5.6 2.7
1.13 Basic Metal & Metal
Product3608 3854 4160 6.8 7.9
1.13.1 Iron & Steel 2674 2834 3115 6.0 9.9
1.13.2 Other Metal & Metal
Product934 1020 1046 9.2 2.5
Source: International Monetary Fund
Highlights of World Economic Outlook
Projections by IMF, Apr 2016 Update
33
For India, data and forecasts
are presented on a fiscal year
basis and GDP from 2011
onward is based on GDP at
market prices with
FY2011/12 as a base year.
The World Economic Outlook Projections by IMF, updated in APRIL 2016 state the
following :
In India, lower commodity prices, a range of supply-side measures, and a relatively
tight monetary stance have resulted in a faster-than-expected fall in inflation,
making room for nominal interest rate cuts, but upside risks to inflation could
necessitate a tightening of monetary policy.
Overview of World Economic Outlook Projections (%)
2016 2017
United States 2.4 2.5
Japan 0.5 -0.1
China 6.5 6.2
India 7.5 7.5
Brazil -3.8 0.0
Russia -1.8 0.8
Mexico 2.4 2.6
Source: Reserve Bank of India
Rates at Reserve Bank of India
February 2016
CRR – Cash Reserve Ratio; SLR - Statutory Liquidity Ratio
CurrencyDate
April 29, 2016
I USD 66.5176
1 EUR 75.7303
1 GBP 97.4017
100 YEN 61.9600
Policy Repo Rate : 6.50%
Reverse Repo Rate : 6.00%
Marginal Standing Facility Rate : 7.00%
Bank Rate : 7.00%
Reference Rates
Policy Rates Reserve Ratios
CRR : 4%
SLR : 21.5%
34
Lending/ Deposit Rates
Base Rate : 9.30% - 9.70%
Savings Deposit Rate : 4.00%
Term Deposit Rate > 1 year : 7.00% - 7.50%
THANK YOU
On behalf of Indian Steel Association,Ms. Ashima Tyagi
DISCLAIMER
The material in this presentation has been prepared by Indian Steel Association (ISA) and is a general background information reviewing the status of the
developments in the global and Indian steel industry as at the date of this presentation. This presentation is strictly for internal use of all the member
companies of ISA, whose names have been stated in the presentation.
Information is given in summary form and does not purport to be complete or all inclusive. The information has been sourced from independent third party
databases, knowledge sources and news reports, and the authenticity of the same has not been independently verified by ISA.
Additionally, any third party forecasts on financial or economic parameters, projections or estimates should not be construed as an investment advice or a
recommendation to any ISA member. Recipients of this presentation from member companies of the ISA should each make their own evaluation of the
contents and adequacy of the information contained in the presentation.
ISA does not undertake any obligation to publicly release any changes to any revisions, modifications or forward looking statements in the subsequent
editions of this bi-monthly presentation. Unless otherwise specified, all information is for the period March & April 2016.