Posted on 03 Nov 2015
Malaysian ferroalloys industry a threat to Indian exports
Industry officials will love to believe the
worst is over for the ferroalloys industry and prices of intermediate
products that go into adding strength and rust proofing of carbon, alloy
and stainless steel, have bottomed out. Crystal gazing into commodity
prices is, however, fraught with risk. Did anyone foresee that prices of
commodities from iron ore to coal and from aluminium to steel would
slide to their current levels since the end of super cycle? As for
ferroalloys, the fortunes depend on the steel industry. In the current
year, steel prices are down one-third and the fall in gross margins of
steel producers is alarming. In their drive to cut costs in every
possible way, steelmakers are forced to bargain hard when they buy raw
materials or intermediate products, including ferroalloys. India has a
significant profile in mining of chrome and manganese ores and
production of ferrochrome, ferromanganese and ferrosilicon. Our
production of chrome ore progressively came down from 3.3 million tonnes
(mt) in 2005 to 2.8 mt in 2014 in keeping with the policy to conserve
the resource and mining disruptions due to court interventions and
environment issues.
In any case, India with chrome ore reserve of 70 mt has only one per
cent share of global proven deposit. Around 85 per cent of world reserve
of this ore is found in South Africa and Zimbabwe. No wonder, India is
importing growing quantities of high-grade chrome ore for blending with
locally mined material. However, with an annual output of 1 mt, India
figures prominently in the global chrome alloys industry and trade. Our
stainless steel production being 3 mt, the domestic requirement of
ferrochrome is about 460,000 tonnes, leaving us with an exportable
surplus of half the alloy production. China, which had a share of 22 mt
in world stainless steel production of 42 mt in 2014, remains the
biggest importer of ferrochrome despite its building major capacity of
the alloys depending entirely on foreign origin chrome ore. Naturally,
China is a major market for Indian ferrochrome. Japan, South Korea and
European Union are the other leading importers of the alloy used in
making stainless steel.
India has reserves of 138 mt and resource of 240
mt of manganese ore, the raw material for production of ferromanganese
and ferrosilicon. The country being traditionally slow in converting
resource into reserve and also because of insufficient investment in ore
beneficiation, we required to step up imports of mostly high-grade
manganese ore from 2.2 mt in 2013-14 to 3.17 mt last year. The crisis in
the industry is manifest in a major way in Andhra Pradesh (AP) where
high power tariff is playing havoc. In AP, which accounts for 30 per
cent of industry capacity, power alone has a share of "anything between
40 and 65 per cent of ferroalloys production cost." As the crisis is
deepening in AP, ferroalloys exports by state units are taking a hit.
This is happening at a time when a new ferroalloys supply hub is fast
emerging in Sarawak in Malaysia. Industry officials have apprised the
government that as power rates in Sarawak will be considerably lower
than here, Malaysian ferroalloys factories getting ready for
commissioning in close succession will have a competitive edge in world
market.
Besides the advantage of low-cost power, the distinguishing feature of
the Malaysian industry is the convergence of promoters with major stakes
in manganese ore mining in South Africa and consumption of finished
products like ferromanganese and ferrosilicon. An Indian industry
official tracking the Malaysian development says the "principal action
is at Samalaju Industrial Park at Sarawak's Bintulu region". A major
plant at the park belonging to Sakura Ferroalloys has two dual product
submerged electric arc furnaces with annual capacity of 107,000 tonnes
of high carbon ferromanganese and 67,000 tonnes of silicomanganese. The
South African group Assamang - with 54.36 per cent ownership of Sakura -
will be supplying manganese ore, while the other two promoters Sumitomo
Corporation and China Steel Corporation of Taiwan will buy or help in
marketing finished products. The Malaysian development will make it
difficult for Indian groups to strike long-term sale contracts with
foreign steelmakers.
