VITAL INDUSTRY UPDATES – 06/05/2015

May 6, 2015 10:46 am Published by

Coal India starts off fiscal year with production spurt

 

Coal production is improving in the country. It was one of the brighter spots in the recently released core sector performance data, with coal production increasing 6% in March from a year earlier.

April, too, should be better. That’s because Coal India Ltd (CIL), the country’s largest coal producer, has performed well. Its production for April increased by 11% from a year ago while offtake or sales volume increased by 7.4%. For 2014-15 as a whole production rose 7% compared with the previous year

The government’s efforts on easing clearances have helped boost the company’s production. CIL’s production target for this fiscal year is 550 million tonne (mt). That translates into an 11% annual growth. According to Nomura Research, the implied run-rate to achieve CIL’s 2015-16 production target is 1.52 mt per day. But considering the company’s disappointing past record with meeting targets, analysts are relatively conservative in their production estimates. For instance, JM Financial is factoring 6% year-on-year growth in production this fiscal year and Nomura expects 6.8%.

However, while production has improved, evacuation bottlenecks make meaningful offtake improvement difficult. As JM Financial pointed out in a note, project approvals have seen delays and land acquisition remains a problem. “While the Central government has shown willingness to address these issues, State onboarding in the reform process is a necessity for success of any policy announced by GoI,” added JM Financial.

 

Global iron ore prices recover in April 2015; reverse price fall trend of past months

Global iron ore prices staged a recovery last month reversing a trend that witnessed a sharp fall in past months. Prime grade ore with iron content of 62% (Fe 62% grade) rose nearly 10% to $56.2 per tonne, in what markets term a relief rally on a month on month basis in April. Ore with Fe content of 58% gained 2.1%. However, domestic iron ore prices fell due to higher availability. This is expected to add stability to steel prices according to analysts.

 

Ore prices had shrunk to an almost ten year low in beginning of April 2015. The upturn, close to the biggest gain in prices in nearly two years was led by Australian giant BHP Billiton announcing a slower pace of expansion. Last week, Brazilian mining major Vale announced production cuts to contain price fall in iron ore. All eyes are on Rio Tinto and its iron ore strategy as the company is slated to hold its annual general meeting this week. Together with Fortescue group, BHP, Vale and Rio TinTO .. account for nearly three quarters of the global iron ore supplies.

 

Seaborne supply of iron ore will exceed demand by over 50 million tonne this year, rising to 184 million tons in 2018, according to estimates by Morgan Stanley. That is likely to keep the price outlook to a range of $55 to $65 over the medium term.

 

Domestic iron ore prices though, fell due to higher availability. This could lead to stability in domestic steel prices, according to analysts. “While steel prices have fallen around 2.5% during the month of April, there have been some indications of price consolidation in last couple of months,” Goutam Chakraborty, Analyst-Institutional Research at Emkay Global said in the latest metal sector report. “During the month, the CIS Export (free on board f.o.b Black Sea) hot rolled coil (HRC) prices  .

Subdued demand hits Sail, sales decline by 2.3% in FY’15

Sales of steel major SAIL took a hit of 2.3 per cent at 11.8 million tonne (MT) in the fiscal ended March, 2015, due to subdued demand in during the July-December period.

However, it achieved 1.24 MT of saleable steel sales in March 2015, which was higher compared to the year-ago period, indicating an uptick in the demand, an official source said.

 

“The Maharatna status firm also completed projects worth Rs 10,000 crore — the highest in any financial year,” the source added.

SAIL achieved a production of 13.5 MT of saleable steel in 2014-15 fiscal, which is higher by 3 per cent over 2013-14, the source added.

The global steel industry is going through difficult times, and likewise the domestic steel sector has also been subdued. Due to excess production and decline in demand in China, steel from that country has been finding its way to other countries, including India.

India’s steel imports jumped by over 67 per cent during April-February of 2014-15 to 8.39 MT, while the exports declined by 11 per cent to 4.8 MT.

Production of hot metal grew by 7 per cent to 15.4 MT in 2014-15, while crude steel output rose by 2 per cent at 13.9 MT during the same period.

Besides, iron ore production of 23.1 MT was achieved from the captive mines to meet the demand for SAIL plants, the source added.

“SAIL also achieved the highest ever crude steel output of 10.28 MT in 2014-15 through energy efficient concast route. This was higher by 5 per cent than the production in 2013-14 fiscal,” he said.

 

The state-run steel maker had reported an 8.6 per cent rise in net profit for October-December quarter at Rs 579 crore from Rs 533 crore in the year-ago period on the back of improved efficiencies and lower input costs.

Turnover of the company, however, was lower by 3 per cent for the quarter at Rs 12,291 crore impacted by higher imports and nearly flat steel consumption in the country.

The company is yet to announce its financial results for the last quarter of 2014-15.

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This post was written by Atlantic Admin