Established in 1961 in the mineral-rich state of Odisha, Indian Metals and Ferro Alloys (IMFA) is the country’s one of the largest producer of ferro chrome with 187 MVA installed furnace capacity backed up by 261 MW captive power generation and extensive chrome ore mining tracts. Recognized globally as a reliable and cost-competitive producer, IMFA has, over the years, developed relationships with multinationals like POSCO of South Korea, Marubeni Corporation and Nisshin Steel of Japan as well as leading stainless steel producers in China and Taiwan. In India, Jindal Stainless and Shah Alloys are its leading customers. In conversation with DK Mohanty, Vice President of IMFA, SteelMint turns the spotlight on emerging trends in the domestic ferrochrome market, new vistas in global trade, and the near-term expansion plans of the company. Excerpts from the interview:
How will the stainless steel market evolve in the coming years, and will this drive domestic demand for ferro chrome?
The world has witnessed a steady CAGR growth of 7-8% per annum in stainless steel production over the last 5 years. Considering the comparatively low Indian per capita consumption of stainless steel despite being the second largest country in the world in terms of population, we feel there is huge potential for growth. While Indian stainless production was about 3.486 million tonnes in 2017, according to ISSF data, the installed capacity is already more than 5 million tonnes. With the Make in India initiative and stainless steel being used in newer applications, demand is poised for growth. As no stainless steel can be produced without ferro chrome, domestic demand for the commodity is certainly going to go up in the coming years.
What do changes in production costs tell us about the likely path and future level of ferro chrome prices?
Three major raw materials – chrome ore, electricity prices and reductants – will determine the production cost. Reductant i.e. low-ash and low-phosphorous coke is not available in India and we have to depend on imports. So, both availability and price would have a significant bearing on production costs. Also, apart from raw materials, logistics and labour also contribute to the overall cost. However, today both the floor and ceiling for ferro chrome prices are set by China as it is the largest producer of ferro chrome with bought out chrome ore and we are more or less a price follower. Domestic market prices also follow the Chinese price with a certain time lead/lag.
How much weightage does India hold in the global Ferro Chrome trade? What are the governing factors that majorly influence the industry?
India today plays a significant role in global ferro chrome trade with a share of about 13%. India stands at no. 3 with South Africa at no. 1 with a share of 50% and Kazakhstan at no. 2 with a share of 17%. While, understandably, South Africa having the largest resources of chromite ore stands at no. 1 and Kazakhstan has access to high grade chromite ore and cheap electricity, India is a good alternative to both due to our proximity to the ferro chrome market i.e. the far east where about 75% of the world’s stainless steel is produced. However, since we have limited resources of chromite ore and the cost structure is higher than both SA and Kazakhstan, we are a price follower rather than a price setter.
How will the government’s mandate to re-auction all merchant chrome ore mines in 2020 impact the existing and future Indian ferro chrome market?
We foresee a significant change in the ferro chrome industry structure in 2020 depending upon the guidelines for auction which are yet to be out.
What are the prospects for Indian ferro chrome demand in potential markets like the US and Europe, under the cloud of trade wars among the major economic powers of the world?
About 90% of India’s export is to the far east. So, trade war with US or Europe would not affect us directly. However, since a significant portion of exports also happen to China, any trade war/tariff changes on Chinese stainless steel products would definitely affect us.
Global stainless steel production and consumption is increasing. Does your company have any future plan for expansion in the near-term?
Our production is always in line with our chrome ore mining output and near-term expansion is still under planning.