NOBLE FERRO ALLOYS _PROBLEMS _ PROSPECTS_

NOBLE FERRO ALLOYS (PROBLEMS & PROSPECTS) Noble Ferro alloys are one of the vital inputs required for producing special types of steel and used as additive inputs especially in the Production of Alloy and special steels These Ferro Alloys are of high value and consumed in low proportions namely Ferro Molybdenum, Ferro Vanadium, Ferro Tungsten, Ferro Titanium and Ferro Niobium. In India, Noble Ferro Alloys are mostly manufactured through Alumino-thermic process. These are used in the production of steel as de-oxidant and alloying agent. Their quantum of consumption varies widely based on steel making process and grade of steel. Ferro Molybdenum It is used as an alloying agent in Steel, Cast Iron & super alloys to enhance hardenablility, strength, toughness and wear & corrosion resistance. Basic Raw Material for mfg Ferro Molybdenum is Molybdenum oxide, which is basically an ore having its reserves and production capacity concentrated in only few countries. Nearly 92% of the world’s ore production is carried out in the following countries:       United States Chile China Peru Mexico Canada Above countries also possess about 90% of the estimated 12mt of Molybdenum in the world reserve base. Abundant resources and adequate production capacity worldwide (specially, in USA, Chile, China & the European countries) is capable of meeting the future requirement of Molybdenum. There is no reserves for this ore in India hence the entire production is solely dependent on imports. The price of Molybdenum Oxide is highly volatile in the international market. 7 6 5 5.73 4.263 3.19 2.648 2.553 2.514 $/lb 4 3 2 1 0 98-99 99-00 00-01 01-02 02-03 03-04(AprDec) The price increase is owing to the following reasons:     Increased demand. The recent flooding problems in several parts of China Power and mining problems in China. Due to cut back in molybdenum oxide production by at least 300 tpm for the next four months by JDC, China and other producers  Imposition of Export certification and reduction in VAT reimbursement in China  “Rorsk” fire incidence in Russia Capacity There is abundant production capacity in India, which is sufficient enough to meet the domestic requirements. Qty/MT Capacity Demand 1999-00 3200 1925 2000-01 3500 2200 2001-02 3500 2550 2002-03 4000 2750 2003-04 (f) 4000 3100 It is apparent that there is a scope for exports from the available capacity, but there is no economic feasibility as the raw material is 100% imported which adds extra cost on account of Sea freight, Port clearance, duties & finance cost, though Indian quality is comparable to the international standards. 2. Ferro Vanadium World consumption of vanadium increased from 20,400MT in 1991 to approx. 70,000MT in 2003 due to growing world economies and the increased use of vanadium as a micro-alloying element in carbon steel Vanadium output has likewise increased with China emerging as a major source of vanadium, second only to South Africa. Other than India, Ferro Vanadium is produced largely from Titani-ferrous magnetite ore in the world. It’s also recovered from spent catalyst, fly ash and petroleum residues. Japan and the United states are believed to be the only countries to recover significant qty. of Vanadium from petroleum residues. In India it is produced from Vanadium pent oxide, which is extracted from Vanadium bearing aluminum sludge- a by-product of prime Aluminum metal producers using white bauxite as the basic ore. China, Russia, South Africa and USA are the largest producers in the world. World’s major producers of Ferro Vanadium are:      Xstrata Plc Highveld Steel and Vanadium Corporation Precious Metals Australia Ltd Stratcor, Treibacher Industries AG Ferro Vanadium is normally used in two grades i.e. 50-55% & 75-80%. Other than India, all other countries mostly use 75-80% grade In India, the Capacity, Demand and Production is as under: Qty/MT Capacity Demand Production Imports 1999-00 1200 640 485 155 2000-01 1200 715 550 165 2001-02 1500 825 535 290 2002-03 1500 935 755 180 2003-04(f) 1500 1140 915 225 The domestic supplies are not meeting the total requirement of Ferro vanadium in the country. This gap is met by imports. The principle Raw material for Ferro Vanadium is Vanadium Pentoxide which is extracted from Vanadium bearing Aluminium sludge (A By-product of Aluminium Industry). Due to limited availability of sludge, total demand in the domestic market is not being met by the Indian manufacturers. Price Because of new reserves emerged in Austria and South Africa, the prices in the international market slipped heavily over last 2-3 years and fluctuates quite often. 25.00 20.00 20.76 $/Kg 15.00 10.00 9.85 11.50 9.16 7.39 9.00 5.00 0.00 98-99 99-00 00-01 01-02 02-03 03-04(Apr'Dec) Recently, due to the production cut backs announced by the Xtrata, prices of Ferro vanadium has started improving and went up as high as USD 16.00/Kg. Though there is a silver lining emerging in the form of demand from the steel industry, it will be long before there appears a major change in the India’s demand-supply equation. Looking to the increase in demand, Indian production is required to be enhanced but it largely depends on increased availability of Vanadium sludge, which again depends on expansion in the Aluminum industry in the coming years Ferro Tungsten Tungsten is a vital metal of strategic importance, particularly in times of war. The basic sources of tungsten are the ores -scheelite and wolframite. It is used in the manufacturing of high-speed cutting and drilling tools. World reserves of tungsten are concentrated in China, Canada, Russia, USA and Bolivia. World production in 2000 was 31,500 tons, 1.6% lower than in 1999. World tungsten continues to be dominated by Chinese production accounting for almost 85% of global output. Particularly after the break up of the former USSR which led to a collapse in tungsten production in that region. A prolonged period of relatively low prices for tungsten, triggered by oversupply in the industry, has forced many Western producers out of the market. Production of tungsten is declined steadily during the last decade from 55,000MT during 1990 to 35600MT during 1999. This decline has created a Gap between Output and consumption. However, till now this gap has been met by stockpiles in Russia. But the future is totally dependent on production situation and government’s mining policy in China, which has at present restricted new mining operations in view of the foreseeable future of depleting ore resources. Despite the above conditions, due to other key factors including general economic conditions, disposals from stockpiles, as well as Chinese government policy - have combined to keep tungsten prices low in recent years. However, due to recent announcement for VAT reduction in China as well as condition for export certification in China has resulted upsurge in the tungsten prices. In the Indian context, the requirement is very meager unlike other Noble Ferro Alloys. The present capacity and demand in India is estimated as under: Capacity: 200MT per Annum Demand : 100MT per Annum Since the demand in the domestic market is low, the capacities are not being used at optimum levels. Ferro Titanium Titanium, being light, corrosion and erosion resistant, is well suited for chemical, petrochemical, nuclear, marine and aerospace applications. In addition, due to its nontoxic property, it finds extensive applications in medical implants that have a niche market of high commercial value. Ferro titanium in India is manufactured from various raw materials viz Titanium scrap, Ilemenite sand, Rutile & Titanium sponge. Titanium is present in most rocks and soils and is the ninth most abundant element in the earth’s crust. In India, Indian rare earth ltd (IREL), orissa is the only mining co. of Ilemenite sand and rutile. Ferro titanium is produced and sold in two grades namely 30-35% and 65-75%. Though requirement of 30-35% grade Ferro Titanium is met mostly by domestic producers but nearly 90% of 65-75% grade requirement is met by imports. Current Demand and supply Grade-Ti 30-40% 65-75% Demand (MT) 850 1500 Domestic Supplies 850 150 Gap 0 1350 According to the sources, 65-75% grade is preferable for use due to better recoveries and environmental reasons, but due to its little availability in India, most of the material is imported.. Ferro Niobium Vacuum-purity Ferro niobium and nickel-niobium are used in super alloys for the aerospace industry, Niobium oxide in optical glass, ceramic capacitors and lithium niobate crystals. It is used in specialty-alloyed steels having very low consumption. In India its annual demand is nearly 450 MT, which is largely met by imports. Basic raw material for producing Ferro Niobium is Pyrochlore ore, which is not available in India. Though India can manufacture Ferro Niobium but due to limited availability of ore, very small quantity is manufactured since the producers all over the world are themselves using it to produce Ferro Niobium. The market for niobium in China has grown rapidly over the past decade, rising from under 80t in 1991 to around 1,335t in 2001. China is the largest steel producer in the world, and as the proportion of niobium-bearing steels increases, the demand for Ferro niobium will also rise. There is considerable excess niobium capacity in place at present, and the prospect of additional capacity coming on stream in Canada by 2004. However, at the projected growth rates, this capacity could be required by the second half of the decade. The main producers of Ferro niobium are likely to continue to install capacity as required in order to maintain their firm grip on the market and to ensure stable supplies and prices for the foreseeable future. In Indian context, the demand distribution of various Noble Ferro Alloys in terms of Volume and Value is shown as under: BY VOLUME 6.30% 32.90% 43.40% 9.47% 1.10% 64% 15.50% BY VALUE 9.80% 1.40% Import duty Ferro moly Ferro Titanium 16% Ferro Vanadium Ferro Niobium Ferro Tungsten Ferro moly Ferro Titanium Ferro Vanadium Ferro Niobium Ferro Tungsten There has been substantial reduction in import duty since 1992-93. 120 100 105 85 %AGE 80 60 50 40 30 20 0 92-93 93-94 94-95 95-96 25 20 97-98 20 98-99 25 20 Present 96-97 99-03 Add to this worst, the WTO bound duty tariff on this product is 15%. If the duty is reduced to these levels as against the existing 25%, the domestic manufacturers will be severely affected and this may lead to closure of many small and fragmented manufacturers. PROSPECTS The global steel prices continued to witness rising prices. On the production side too, there is an upsurge in countries like Japan and China. As per ISSF, the annual growth rate of Stainless steel for the year-2003 is 5.80% (Source: Metal bulletin-29.12.2003). The recovery of the global economy will result in the corresponding recovery of other industries, i.e., automobile, construction, consumer goods, capital equipment etc. As per the latest available data, the consumption of finished steel is expected to be 1 billion tonnes during 2004. Indian Steel Industry has also seen substantial increase in demand as well as prices during the year 2003 and expected to grow at 10.30%. (Source: International Iron & Steel Institute) FACTORS CONTRIBUTING TO THE GROWTH OF NOBLE FERRO ALLOYS    Strong steel demand due to o Infrastructure developments for Beijing Olympics-2008 o Shanghai Expo-2010 o Common wealth games in India during 2010. Growth in Automobiles and appliance industry Other infrastructure developments STEEL SCENARIO IN INDIA The following table shows the forecast for the demand of Alloy steel for the Xth Five year plan : Forecast of Steel Demand for Xth Five Year Plan Particulars Units 2002-03 2003-04 2004-05 2005-06 2006-07 Demand of Alloy Steel Million Tonnes 1.654 1.736 1.823 1.914 2.01 Growth over 2002-03 is expected to be 21.52% (Source: Planning commission report) Ratio of Steel Cost to Total Cost in different sectors Sector Construction Household appliances Automobiles Electrical Equipment Transport equipment Fabricated metal products Per capita Steel consumption Country India China Developed countries World Average Per capita steel consumption (kg) 27 120 600 140 % Age 0.80 6.80 3.40 4.60 5.40 15.90 Strong growth in stainless steel is expected in the near future with generally healthy economic conditions over the next few years. Demand for Noble Ferro Alloys has been growing at an average rate of 14% since 2000 and looking to the expected growth of the Steel industry, demand of all Noble Ferro Alloys is likely to grow at about 18%. Due to the WTO implementation, though the import duties will come down and the industry will be facing global competition, but the industry has started gearing itself to face the future challenges for its survival and growth.