India: New Quality Standard Norms may Put Billet Makers on Backfoot

A fresh diktat from the Bureau of Indian Standards, issued on July 22, 2019, that brings two grades of ingots and billets, namely IS2830 and IS2831, within the ambit of the mandatory quality control order, puts manufacturers of such products, primarily using induction route, in a spot of bother.

While IS2830 will be applicable with immediate effect, IS2831 will come into effect within nine months of the issuance of the order.

What are IS2830 and IS2831 norms?

In 2012, the Ministry of Steel, as per a gazette notification, had said no person shall manufacture or store for sale, sell or distribute steel and steel products… which do not conform to the BIS standards. These pertained to the schedule for long steel value chain.

The BIS had come out with the first Quality Control Order in 2012 which was applicable to several steel products, including ingots and billets. This order categorised these two products under two IS codes – IS2830 and IS2831. As per this order, the sulphur content in the products under IS2831 (2012) was capped at 0.055-0.060% while that of phosphorus was mandated at 0.055-0.075%. Under IS2830, both the sulphur and phosphorus content were to be restrained at 0.045-0.050%.

But it is a known fact that the secondary producers cannot meet these stringent norms in the production of such grades because of the raw material they use, which is essentially sponge iron, and which contains a high level of phosphorus. This, in turn, is due to the fact that iron ore itself contains sulphur and phosphorus. It is a costly process to desulphurise or de-phosphorise these products, disallowing the small manufacturers from adopting such technologies. As a result, the secondary ingots and billets producers lobbied with the government to get the order delayed, for six months or so each time.

Eventually, in 2013, the government omitted these grades altogether, saying these two categories will not come under the BIS standards and the status quo had been maintained all these years.

However, on July 22, 2019, the government issued an order saying these two grades will now come under the ambit of the mandatory quality control order. IS2830 will be applicable with immediate effect and IS2831, within nine months of the issuance of the order. While IS2831 is not so stringent, since the sulphur and phosphorus content can be 0.135%, IS2830 says these cannot be more than 0.110%.

‘Not any major impact’

Speaking to SteelMint, Ramesh Iyer, Deputy Vice-President, Product Development, Indian Commodity Exchange Limited (ICEX), said the order will not have a very major implication as the secondary sector has not exactly been conforming to the quality standards that have been prescribed, especially for ingots and billets.

“The IS2830 standard is already mandatory and IS2831 is proposed to be made mandatory within nine months. After speaking to various participants in the value chain, we feel that the chemistry of the ingots and billets manufactured using sponge iron as the raw material, majorly from the eastern part of the country, generally do not conform to the exiting processes. The sulphur and phosphorus content is far above the norm.”

He further said that the quality of the ingots being traded on ICEX at present is not conforming to the BIS norms, but added: “Eventually, we will have to comply with the order, from the date it becomes effective.” The volume of ingots and billets traded on ICEX is around 10,000 tonnes (MT) per day. The exchange trades one grade of ingots contract, with an option to deliver billets, at a deliverable date and at a premium.

But, Iyer added, the order will not have any strong implications for the exchange either, since the players get nine months from the date of the order to put things in order, and the market should be able to produce goods that conform to the BIS norms. “There is enough time for the manufacturers to conform to that order,” Iyer stressed.

There are two steps the secondary ingots and billet makers can adopt. One is to take the licence from the requisite department and two, upgrade their production processes to ensure that their quality conforms to the norms.

However, upgrading is a challenge for some of these players at present since it is cost- intensive and also because of the present sluggish demand scenario. “If you add any new process, there is inevitably an escalation in the price of the product,” a market source reminded.