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MOSL: METALS-Seven learnings from FICCI’s steel conference-Retain JSPL as our top pick

Metals: Seven learnings from FICCI’s steel conference; Retain JSPL as our top pick

 

We attended the steel industry conference organized by FICCI on 22-23rd January 2019 in Mumbai. The event saw participation of management of primary steel mills, ministers and secretaries from Ministry of Steel, Ministry of Mines, Ministry of Commerce, and Ministry of Shipping (details in the Annex.). In this report, we highlight the key takeaways from the speeches and our interaction with the participants:

• Stiff emission reduction targets: Dr Edwin Basson, Director General, World Steel Association, highlighted the need to reduce emission from the steel industry for sustainable growth. While annual global steel production is likely to grow from 1.7Gt now to 2.35-2.7Gt by 2050, the carbon budget for the sector poses a substantial challenge for speedy and radical transformation of carbon efficiency over the next three decades. Breakthrough innovation has become the need of the hour. Emission intensity needs to be reduced by 68% to 0.6 tCO2/tcs, according to IEA-Energy Technology Perspectives.
• Rising scrap supply to crowd out coking coal and iron ore demand in China: Platts expects China’s pig iron production to decline on account of rising supply of steel scrap. This will reduce demand for iron ore and coking coal in China. On the other hand, India’s demand for coking coal imports will keep rising. Platts also highlighted that winter production cuts in China have been less severe this year than in 2017. Spot trades of hard, semi-hard, soft coking coal and PCI declined, while those of prime hard coking coal increased 10% in 2018.
• Steel outlook by JSW Steel: Mr Seshagiri Rao, joint MD and group CFO, JSW Steel highlighted that credit market tightness is hurting steel demand globally, yet India’s steel demand is expected to increase at 7-7.5% in 2019. He expects steel prices to stabilize at current levels. About USD100/t fall in prices in recent months has squeezed margins for producers and impacted their steel production in China, allaying the fear of oversupply.