sponge iron industry –past-present-future - SIMA

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CHAIRMAN V S BAPNA VICE CHAIRMAN B L AGRAWAL EXECUTIVE DIRECTOR S S BHATNAGAR GOVERNING BODY V S Bapna B L Agrawal N K Patnaik Suresh Thawani G K Chhanghani Rajesh Gupta Sushil Maroo P L Mohanty P Mohanty T Srinivasa Rao V Ramachandran Prakash Tatia Narayan Tekriwal Amitabh Mudgal S S Bhatnagar EDITORIAL The Indian economy has been growing from strength to strength and is expected to grow by 9% in 2010-11 against 6.7% in 2008-09 & 7.4% in 2009-10. It is encouraging to see future projections that the economy shall continue to be robust and grow in double digits in the next few years. All indicators and authentic data show that the demand for steel will substantially grow from Infrastructure, Construction, Automobile & White goods sectors. These are all on an upswing and are supporting the consumption and demand of steel which is projected to steadily and strongly rise. Though the statistics forecast a promising future for the Indian Sponge Iron Industry, the ride may not be so smooth in the near to long term. In 2010,the Sponge Iron Industry faced unprecedented problems and struggled with sharp input cost increases with unmatched selling prices thereby putting tremendous pressure on the financial viability of most units. The situation has not changed much. The supplies of vital inputs namely Iron Ore, Coal and to some extent Natural Gas have been affected both in terms of availability & prices. To add to the hardships of Sponge Iron Manufacturers, poor infrastructure support is also increasing costs thereby putting further pressure and affecting the bottomline. We all know India has sufficient Iron Ore & Non Coking Coal based on which huge investments were made and large number of coal based units were established thereby making India the largest producer of sponge iron in the world. These inputs have now become a matter of serious concern. No doubt availability of natural gas is expected to improve in next 3-4 years but effective pricing policy here will play a very important role. The Indian Sponge Iron Industry is a very cost effective, efficient and high performance sector which is now passing through very critical times. With no clear cut policy initiatives from the Government for the sustained supply of the essential inputs, survival of the Industry is at stake, to meet the fast growing demands of quality metaliks by secondary steel sector in terms of National Steel Policy. SIMA has been regularly taking up the hardships being faced by the Industry with the Government authorities who are fully aware of the situation. However on this front very little has been done by the government to ensure raw materials availability in adequate quantities & affordable prices particularly Iron Ore. We are confident that with constant representations and through regular high level interactions, the Government will have to take some positive measures to give the much needed boost to the sponge iron sector which is the backbone of the secondary steel production. A study is being done by Ernst & Young on future sustainability of the Industry in collaboration with Tata Sponge. The report is likely to be ready by February, 2011 and shall bring to light lot of facts for the consideration of the members and for making further recommendations to the Government. We sincerely hope that as in the past with your active participation and full support to SIMA the year 2011 shall usher in new prospects and prosperity. Wishing you and your family a very happy, bright, prosperous and fruitful business like 2011. S S BHATNAGAR
During CY’2009, India accounted for 35% of global Sponge Iron production and once again, it has occupied the top slot for the past eight consecutive years, for being the largest producer of sponge iron across the globe. The Indian sponge iron industry has come a long way but instead of resting on its laurels it is looking steady and subsequently focusing on broadening its scope of growth. With the country’s strong economic environment poised for an upturn, the industry prospects are certainly bright in time to come. However there are immense challenges ahead for the industry. The sponge Iron industry is highly fragmented. Growth of gas based sponge iron, which is critical to growth of value added steel segment is constrained by high cost curve mainly due to pricing of natural gas and DR grade iron Ore ( key raw materials used for gas based sponge iron) and non coking coal ( key raw material for coal based sponge iron) . As high price of raw material impacts the bottom line of sponge iron producers making it unviable compare to other metalliks. Currently iron ore market is unquestionably in a state of flux, as everyone who opens a paper or watches the business news is aware, iron ore prices have been violently volatile. This very volatility is in large part what killed off the decades old annual price contracts which dominated the iron ore trade. This year the annual contract was announced officially dead and a quarterly price formula was introduced based on spot prices in the preceding months. This shift in price model of iron ore trade in year 2010, has completely messed up the growth of global steel industry and India is no exception. Steel industry being cyclic in nature, the good period benefit under CHAIRMAN’S MESSAGE this new price model is now being exploited by the miners by regulating their iron ore price under quarterly mechanism. These basic issues will have to be addressed if we want a vibrant and viable sponge iron sector. Our immediate task will be to tackle the problem of poor availability and unprecedented price hike of iron ore, which is in complete disparity with the finished steel prices. Concurrently, given the large coal-based capacity that already exists – the coal and coal mining sectors need to be given a substantial boost. Then there are the other endemic infrastructure constraints- by way of power availability, cost, severe transportation bottlenecks, lack of port infrastructures, shortage of railway rakes etc. Clearly, we are talking about the need for a very comprehensive approach. Every factor impinging on the Steel industry right from raw material to energy to transportation needs to be addressed for sustainable growth of Indian sponge iron industry. SIMA has been taking these issues with the government at various forums. SIMA role has been of facilitator and providing solutions and a link between its members and govt. As different problems have different solutions but the ultimate objective should be to nullify barriers and to increase efficiency, productivity and growth. Wishing you a Very Happy and Prosperous New Year V S BAPNA JANUARY-2011/1
Page 4 and 5: UPGRADING QUALITY OF INPUTS TO AUGM
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