STEEL, METALS AND MINING
Indian Industry Update ( 18th November 2011 )
Steel Demamnd growth down to 2.8% in H1: P K Mishr
Growth in domestic steel demand dipped to 2.8 per cent in the first half this fiscal from 8.8 per cent in the first four years of the 11th Five-Year Plan, says Steel Secretary P K Mishra, who has opined that it will be a challenge to meet 12th Plan production targets. Mishra also said the country needs some policy corrections to ensure that promised private sector investments in the sector become a reality.
"The Indian steel industry is facing challenging times. The growth rate in steel demand, after registering an annual growth rate of 8.8 per cent in the first four years of the 11th Plan, has fallen to 2.8 per cent in the first six months of this current year," Mishra said. He said the first four years of the 11th Plan witnessed a slowdown in domestic steel supplies.
Growth in finished steel production during this period was low at 5.8 per cent, especially in comparison to growth in steel demand.
"It is felt that meeting domestic demand, which is likely to grow at the rate of 10.3 per cent per annum in the 12th Plan, will be a highly challenging task. It is estimated that the country will require a crude steel capacity of 140 million tonnes by 2016-17 to meet domestic steel demand," Mishra explained.
"It is clear that in a business-as-usual scenario, domestic supply of steel will significantly fall short of domestic demand," he added.
He said while there are a large number of domestic and international private investors keen to invest in the Indian steel sector, a proactive government role will be required to convert these prospects into concrete initiatives.
"There is an urgent need to make necessary policy corrections or adjustments to increase domestic production of crude steel to avoid over-dependence on steel imports," he added.
To ensure time-bound implementation of greenfield capacities and facilitate rapid growth of the domestic steel industry, the Steel Ministry is drafting a new National Steel Policy and the first draft is likely to be ready for public discussion in the next few weeks, he said.
The output of the Indian steel industry is expected to reach 113 million tonnes by the end of the 12th Five-Year Plan. Mishra said the Indian steel Industry is losing competitiveness in some traditional areas of strength and must take up R&D on a war-footing. For this, the ministry has brought out a roadmap on R&D and technology, he said.
"You may also be aware that investment in R&D by Indian steel companies is as low as -0.15 per cent to 0.25 per cent of turnover, as compared to 1 to 2 per cent in known steel companies across the globe," Mishra said. He also opined there is a need to discourage the export of iron ore from the country through appropriate measures.
Indian iron ore mining mess - SC panel clears only 2 mines in Karnataka
Supreme Court-appointed committee to survey 42 iron ore mines in two districts of Karnataka has cleared only two mines for resumption of operations and will decide on a third in a few weeks.
The report quoted a forest official who participated in the survey operations as saying that “The joint survey team deliberated on the findings of the field survey and decided to clear only two mines for resumption of operation.”
The panel, which completed the assessment last week, has cleared a private mine each in Chitradurga and Tumkur districts.
Among the 39 defaulting mines is Sesa Goa Ltd’s Narrain mine in Chitradurga, with production capacity of 6 million tonnes a year.
The survey was ordered by the apex court following a petition by Samaja Parivarthana Samudaya, a non governmental organization, against illegal mining in Karnataka.
Chitradurga saw a peak production of 6.5 million tonne in 2008-09, and Tumkur 2.5 million tonne. Along with Bellary’s production of nearly 40 million tonne that year, the three districts accounted for nearly 25% of the India’s iron ore production.
Indian iron ore mining mess - Panchayats in Goa wary of ban
Shah Commission, probing the illegal mining in Goa, might put a ban on iron ore exports, members of village panchayats have started appealing to the state government, through advertisements in leading newspapers, not to stop the mining activities in the state.
A series of advertisements in leading newspapers in Goa are showing the panchayat members, requesting the state government with folded hands, not to close down the mines, which, they say, could lead to unemployment, starvation and other serious issues.
In one such advertisement, the Collem panchayat in the mining belt of Sanguem, has given five days of deadline to the state government, to save Goa and its people, dependent on mining, from serious consequences of social and economic crisis.
Sarpanch of Collem panchayat, Mr Sandeep Desai said that the state government should explain to the Shah Commission the importance of mining in Goa's economy and people's huge dependence on it. He said that "Government should tell the Commission that if lawful mining activities are curtailed or stopped, it would have grave consequences.”
The panchayats have also demanded that there should be no buffer-zone between wildlife sanctuaries and mines, which will save several mines from being shut down.
Justice M B Shah Commission, enquiring into the illegal mining activity in the state, is expected to give its first report on December 1. Justice Shah had given indications that a ban on export of iron ore was likely.
Ultratech cement to invest Rs. 11000 crore to augment capacity to 62 MTPA
Ultratech Cement will invest Rs 11,000 crore to jack up its production capacity by 10 million tonnes per annum (mtpa) to 62 mtpa by the first quarter of 2013-14 fiscal.
"The company has a capital outlay of Rs 11,000 crore to be spent over the next three years ... Orders have been placed for major equipment. These expansions are expected to be operational by Q1 FY14," the company has said in a letter to the shareholders.
The company will use the proposed fund on clinkerisation plants through brownfield expansions at Chhattisgarh and Karnataka, installing waste-heat recovery systems, instituting bulk packaging terminal and setting up of ready-mix concerete plants.
"Upon completion of this round of capex, company's Cement capacity will stand augmented by 10 mtpa to 62 mtpa, captive power from 504 MW to 674 MW and generation of green power through waste recovery from 4 MW to 65 MW," Ultratech said.
The capacity expansion was being funded through a mix of internal accruals and borrowings, it said, adding that it has spent over Rs 1,100 crore on various capex initiatives so far during the first half of the current fiscal.
Meanwhile, the company said the current surplus scenario in the domestic market was likely to continue for the next 2-3 years, but the growing input costs would squeeze margins.
"Over the long-term, the sector is likely to grow over 8 per cent on the back of government's focus on infrastructure development and housing. Further, the enhanced capital allocation towrads infrastructure in the 12th Five Year Plan will give the desirde push to the sector," it said.
Rabi fertilizer consumption likely to be less in Maharashtra
The hike in fertiliser prices coupled with other agro-climatic reasons is likely to result in less consumption of fertilisers during this rabi season.
The government of India has partially decontrolled the fertiliser prices resulting in significant increase in non-urea based fertilisers during last two months.
"Though October is a lean season for fertilisers, we have started getting initial indications that the demand for fertilisers may be less this rabi season,"said RV Davkar, chief marketing manager (Kolhapur region) Zuari Industries.
Fertiliser dealers also feel that the demand for fertilisers is likely to go down. Kailas Thole, president, Maharashtra Fertiliser, Pesticides, Seeds dealers association said, "The sale of fertilisers during the rabi is likely to go down considerably as fertiliser prices have almost doubled."
There was shortage of fertilisers during the kharif season. As a result, big farmers have un-used fertilisers they had stored during the kharif season, which they will use for the rabi crops.
Sugar cane and cotton are the top consumers of fertilisers in Maharashtra. But uncertainty is ruling over their prices. It is a tendency of farmers to invest more on the agricultural inputs if the price of that agricultural commodity is good. As prices of cotton and sugarcane are likely to remain lower than last year, the farmer may lose interest in using more expensive fertilisers for these crops.
Deficient post-monsoon rainfall is also one of the factors that will impact the fertiliser demand. "Eventhough the reservoirs are full, farmers are not sure if they will get enough water during the summer season as the post-monsoon rainfall was not good in many parts of the state,"said Mr Thole.
India Meteorological Department ( IMD), Pune director (weather forecasting) said, "The post-monsoon rainfall was scanty in Vidarbha and Marathwada while it was deficient in Madhya-Maharashtra."
Anticipating lower sales, some fertiliser companies think that they may have to carry higher inventories. ""There was no issue of inventories during the kharif season. But now we have been told to book warehouses for stocking fertilisers,"" said an official of a fertiliser company in Maharashtra.
Rs. 120 Billion petroleum refinery to come up in Andhra
Amerind Petroleum Private Limited (Amerind) proposes to set up a nearly Rs.120 billion petroleum refinery near Visakhapatnam, in joint technical collaboration with US-based American Industrial Corporation (AIC).
The refinery to come up in Petroleum, Chemicals and Petro-chemicals Investment Region (PCPIR) near the coastal city of Visakhapatnam, will have an initial refining capacity to process 7.5 million tonnes of crude oil per annum (or 150,000 barrels per day) and will produce the entire range of petroleum products.
A memorandum of understanding between Andhra Pradesh government and Amerind to set up the refinery was signed here Thursday in the presence of Chief Minister N. Kiran Kumar Reddy. Major Industries Minister J. Geeta Reddy later told reporters that the first phase of the project would be set up on turn key basis by AIC by relocating an existing and running refinery acquired by it in the US. The estimated cost of the first phase would be Rs.25.25 billion ($505 million).
In the second phase, the project would be expanded to a total refining capacity of 15 million tons per annum along with a petro-chemical complex, at an additional cost of Rs.86.11 billion. The minister said this would be the first refinery in the state in the private sector. It would have its own captive floating marine terminal, with three underwater pipelines to receive the imported crude oil and to dispatch products for exports.
Promoted by Hyderabad-based technocrat entrepreneur Syed Badruddin, Amerind will set up the refinery with financial assistance from Exim Bank of the US. Exim Bank will provide loan funding of $375 million for US costs of the project and up to 30 percent of this for local costs in India.
AIC is a consortium of 14 American companies with 25 to 30 year experience in petroleum refineries. The minister said the total implementation time for the project would be 30 to 36 months from the date of receipt of all clearances from the state and the central governments.
The refinery is expected to contribute Rs.15,544 crore to the central and state governments by way of taxes. It would also provide direct employment to 55,000 people. Geeta Reddy said the refinery planned to set up 3,500 retail outlets to market its products over a period of three to five years from the date of commencement of commercial production.
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