STEEL SCENARIO AND INTERNATIONAL CONTRACTING IN INDIA

A project undertaken in

STEEL AUTHORITY OF INDIA LTD. (SAIL)

Under the supervision ofMr. RAKESH GUPTA(DGM, MARKETING-LP)

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

BYAYESHA SIDDIQUE

ENROLLMENT NUMBER: 2007-502-019

TODEPARTMENT OF MANAGEMENT STUDIES

FACULTY OF MANAGEMENT STUDIES AND INFORMATION TECHNOLOGY JAMIA HAMDARD

HAMDARD NAGAR, NEW DELHI – 110062

ACKNOWLEDGEMENT

A project can never thrive in solitude. Project work is never the work of an individual. It is more the combination of views, suggestions, contributions and work involving many individuals. The project also bears the imprint of many people. Thus one of the pleasant parts of writing the report is the opportunity to thank all who made the project possible.

This project is one of the most important milestones in my voyage to be a complete manager.

I would like to thank SAIL, for providing me the opportunity to work in their esteemed organization. My sincere gratitude to Mr Imteyaz Arshad (Asstt. Manager in Corporate Affairs), and Mr S. K. Ghosh (Manager in Marketing) who have helped me to undergo the training in their prestigious organization.

I am highly obliged and deeply thankful to Mr. Rakesh Gupta, Dy. General Manager (M-LP), for his efforts and constant guidance and support at each and every step in development of the project. Without his guidance the project would have never been possible.

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CONTENT

1. Introduction of Steel 42. Introduction of SAIL 5

3. World Steel Scenario 15

4. Why International Trade 21

5. Factors Affecting International Trade 25

6. Role of India in World Steel Trade 28

7. Various forms of International Trade 31

8. FOB 31

9. CFR 50

10. Practices followed by Indian Steel Companies 60

11. Steel Futures 61

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STEEL

“Politics is run by blood and steel”, said Bismark, the Chancellor of Germany. Perhaps this was the major reason behind the First World War in the early 20 th century. It was commonly said at that time that German Steel is being sold in Manchester- the hub of industries in British empire. Steel has all along the history played an important role in the development of any country. In fact, the per capita consumption of steel clearly defines the development status of that country.

The volume of steel consumed has been the barometer for measuring development and economic progress. Whether it is construction or industrial goods, steel is the basic raw material. Lighter metals and stronger alloys have been developed. Plastics and synthetics have replaced steel in many areas. But steel continues to rule. As was once said by Dr. V. Krishnamurthy, former Chairman SAIL, “only steel can replace steel” i.e. better quality steel replacing earlier steel quality.

Steel is made from ores still found in abundance around the world. Technological developments have brought down the time for transformation from iron ore to steel to within a day. Even after decades of use, it can be sent back to the furnaces as scrap, melted and remade into new qualities of steel. It is the most recycled material in the world. In developed countries, recycling accounts for almost half of the steel produced.

Another major feature is the continuous improvement of steel grades. Half of today’s steel grades were not available ten years ago. Just take the example of the most commonly used steel – rods or bars, used as reinforcement material with cement concrete. It used to be plain bars even in the sixties, then came the ribbed bars, followed by the cold twisted deformed bars and now it is thermo mechanically treated bars. Each development has added to the strength of construction. Older varieties of steel have been improved upon and newer grades introduced. The process continues.

Steel fulfils a unique place in our lives. It is one of the most common materials that we come into contact with every day. Today, developing countries lead the growth in world steel demand. Steel is one of the critical elements in sustainable economic development. It provides infrastructure, energy delivery, housing, construction and key consumer goods. Steel occupies this position because of its versatility, its strength and its recyclability. There are few other materials that can be recycled over and over again

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without loss of properties. Even steel created 100 years ago can be recycled today and used in new products and applications.

SAIL is synonymous to steel. Each and every individual has significant requirement of steel in their everyday lives, SAIL ‘S tagline emphasizes steel presence in our lives beautifully- “There’s a little bit of SAIL in everybody’s life.”

SAIL

The Steel Authority of India Ltd. (SAIL) is the largest steel manufacturer in India. The company's five integrated steel plants and three specialized facilities produce a variety of steels used in the construction, engineering, utilities, railway, automotive, and defense industries. SAIL's product line includes hot- and cold-rolled sheets and coils, galvanized sheets, electrical sheets, structurals, railway products, plates, bars and rods, stainless steel, and alloy steels. While India's government owns approximately 85 percent of the company, SAIL operates under a "navratna" status, that is, it enjoys substantial operational and financial autonomy.

  Vision

To be a respected world class corporation and the leader in Indian steel business in quality, productivity, profitability and customer satisfaction.

C redo

We build lasting relationships with customers based on trust and mutual benefit. We uphold highest ethical standards in conduct of our business.

We create and nurture a culture that supports flexibility, learning and is proactive to change.

We chart a challenging career for employees with opportunities for advancement and rewards.

We value the opportunity and responsibility to make a meaningful difference in people's lives.

Key Dates:

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1913: Production of steel begins in India. 1918: The Indian Iron & Steel Co. is set up to compete with Tata Iron and Steel Co. 1948: A new Industrial Policy Statement states that new ventures in the iron and steel industry are to be undertaken only by the federal government. 1954: Hindustan Steel Ltd. is created to oversee the Rourkela plant. 1959: By now, Hindustan is responsible for two more plants in Bhilai and Durgapur. 1964: Bokaro Steel Ltd. is created. 1973: The Steel Authority of India Ltd. (SAIL) is created as a holding company to 1993: India sets plans in motion to partially privatize SAIL. 1999: The company posts losses as a result of an industry downturn. 2003: SAIL's output surpasses ten million tons of saleable steel.

History

The history of the iron and steel industry in modern India is closely bound up with political and economic developments since the country achieved independence from Britain in 1947. Most of the productive units run by SAIL were built as state ventures with aid and assistance from industrially developed countries, and operated by SAIL's predecessor, Hindustan Steel Ltd. and the Indian Iron & Steel Company Ltd., (now an integrated steel plant of SAIL) India's largest single iron and steel company, developed separately as a private company before nationalization, but it depended on state subsidies from 1951 onward and had to function within the terms of the government's planning system.

The industry, however, did not spring from nowhere in 1947. Iron had been produced in India for centuries, while Indian steel was superior in quality to British steel as late as 1810. With the consolidation of the British raj the indigenous industry declined and the commercial production of steel did not begin in earnest till 1913, when the Tata Iron and Steel Company began production at Sakchi, on foundations laid by Jamsetji Tata, whose sons had raised the enormous sum of INR 23 million to set up the company, partly from family funds but mostly from Bombay merchants, several maharajahs, and other wealthy Indians who supported the movement for Indian self-sufficiency (Swadeshi) but did not want to appear openly anti-British. Tata was to dominate the Indian steel industry until the 1950s. The Indian Iron & Steel Company was set up in West Bengal in 1918 by the British firm Burn & Co., with plans to become a rival steelmaker. Steel prices declined in the early 1920s, however, and the company produced only pig iron until 1937. The acute depression suffered by the iron and steel industry after World War I was alleviated by the government's protective measures. The industry continued to make steady progress.

From the late 1920s, when the British authorities introduced a system of tariffs that protected British and Indian steel but raised barriers against imports from other countries, the Indian market was divided in the ratio of 70 to 30 between British producers on the

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one hand and the Tata company on the other--thus effectively excluding indigenous newcomers. By 1939 the Tata works were producing 75 percent of the steel consumed in what was then the Indian Empire, consisting of the present-day India, Sri Lanka, Pakistan, Bangladesh, and Burma.

In the late 1930s, as European rearmament pushed iron and steel prices upward, the export of Indian pig iron increased and two small firms began to compete directly with the Tata company in steel production. The first was the Mysore State Iron Works, which had been set up by the maharajah of Mysore in 1923 to produce pig iron at Benkipur, now Bhadravati. The second was the Steel Corporation of Bengal, a subsidiary established by the Indian Iron & Steel Company in 1937, the year after it had bought up the assets of the bankrupted Bengal Iron and Steel Company. The Steel Corporation of Bengal was reabsorbed into its parent company in 1953. All three companies profited from the British connection during World War II. Annual output rose from one million tons in 1939 to an average of 1.4 million tons between 1940 and 1945.

In 1947, when India became independent as the biggest, but not the only, successor state to the British raj, the three major iron and steel companies had a total capacity of only 2.5 million tons. A great deal of their plant was already more than three decades old, and badly in need of repair and replacement, while demand for iron and steel was growing.

Industry Changes in the Late 1940s-50s

Like other Third World states that achieved political independence but found their economic prospects determined by their subordinate position in the world economy, the new republic's policymakers decided to seek economic growth through a combination of protection for domestic industries, heavy public investment in them, encouragement of savings to finance that investment, and state direction of production and pricing. The Mahalanobis model of the Indian economy, based on the assumptions that exports could not be rapidly increased and that present consumption should be curbed for the sake of long-term growth through import substitution by the capital goods sector, provided the theoretical justification for this set of policies, which closely resembled what was done in the Soviet Union in the 1930s, in China in the 1950s, and in Africa and Asia in the 1960s, though with much less loss of life than in most of these cases.

Under the terms of the new government's Industrial Policy Statement of 1948, confirmed in the Industries Development and Regulation Act three years later, new ventures in the iron and steel industry were to be undertaken only by the federal government, but existing ventures would be allowed to stay in the private sector for the first ten years. Thus the First Five Year Plan, from 1951 to 1956, involved the use of government funds to help Tata Iron and Steel and Indian Iron & Steel to expand and modernize while remaining in the private sector. As for new projects, in 1953 the government signed an agreement with the German steelmakers Krupp and Demag on creating a publicly owned integrated steel plant, which was sited at Rourkela, in the state of Orissa, to make use of iron ore mined at Barsua and Kalta. Krupp and Demag were chosen after the failure of Indian requests for aid from Britain and the United States, but were excluded from the project by 1959, when the Estimates Committee of the Lok Sabha, the lower house of the Indian Parliament,

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concluded that getting investment funds from them was equivalent to borrowing at an interest rate of 12 percent.

In order to carry out its side of the agreement the government set up Hindustan Steel Ltd. in 1954, as a wholly state-owned company responsible for the operation of the Rourkela plant. By 1959, when the plant was commissioned, Hindustan Steel had become responsible for two more plants, at Bhilai in Madhya Pradesh and at Durgapur in West Bengal, under the Second Five Year Plan, which started in 1956. The Bhilai plant, located between Bombay and Calcutta, was designed and equipped by Soviet technicians, under an agreement signed in 1955, and by 1961 it included six open-hearth furnaces with a total capacity of one million tons, supplied from iron ore mines at Rajhara and Dalli. The Durgapur plant, meanwhile, was built with assistance and advice from Britain and sited near the Bolani iron ore mine. Hindustan Steel took over the operation of all the iron ore mines supplying its plants, all three of which had been located to take advantage of existing supplies. This policy of locating steel production near raw materials sources reflected the relatively small and dispersed nature of the domestic market for steel at that time, and contrasted with the market-related location policies of companies in more advanced steel-producing countries, such as the United States.

Hindustan Steel's other major venture was its Alloy Steels Project, also based at Durgapur, which was inaugurated in 1964. Hindustan Steel's tasks included not only steel production but also the procurement of raw materials, and its subsidiaries included, in addition to the iron ore mines already mentioned, limestone and dolomite mines and coal washeries. It also operated a fertilizer plant at Rourkela.

Durgapur, Rourkela and Bhillai were selected as sites for integrated steel plants primarily due to their proximity to large reserves of iron ore , availability of water from perennial rivers and existing rail links. Setting up of these steel plants were mainly aimed for the economic and industrial growth of these remote and underdeveloped region.

The modernization of the two private sector leaders and the program of public sector investment together raised Indian steel output from about one million tons a year in the 1940s to three million tons in 1960, then to six million tons only four years later. Pig iron output rose by an even greater margin, from 1.6 million tons in 1950 to nearly five million tons in 1961. Both wings of the iron and steel industry contributed to the expansion of the engineering and machinery industries envisaged in the Mahalanobis model, and in turn were stimulated by the increased demand to raise production volume and quality. In 1965 Hindustan Steel's latest project, for an iron and steel plant with an associated township at Dhanbad in the state of Bihar, was transferred to a new company created one year earlier, Bokaro Steel Limited. Contact continued between the two companies, however, mainly through an arrangement whereby the chairman of each company was made a part-time director of the other. Like the Bhilai plant the Bokaro project was initiated with aid and advice from the Soviet Union, including blueprints, specialist equipment, technical training, and a loan at 2.5 percent interest. After the establishment of SAIL the Bokaro company was changed back into a division of the public sector steel company.

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Throughout its first five years of production, 1958 to 1963, Hindustan Steel's losses rose steadily from INR 7.51 million to INR 260 million. It made a small profit in 1965 and 1966, only to slip back into the red and stay there until 1974, the last year of the company's existence under that name. Among the reasons the company gave for these disappointing results were the losses incurred at the Rourkela fertilizer plant, the Steel Alloys Project, and the Durgapur steel plant; an increased rate of interest on government loans; an increase in provision for depreciation; and the high costs of imported plant and equipment.

Problems Leading to the Creation of SAIL in 1973

The rate of growth of the iron and steel industry, and of the engineering and machinery producing sectors with which its fate was so closely linked, declined significantly once the phase of import substitution was complete and the droughts of the mid-1960s had forced a diversion of resources from industry. Pig iron output, which had risen so spectacularly in the 1950s, rose from seven million tons in 1965 to ten million tons in 1985, while production of steel rose from 6 million tons to 12 million tons in the same period. The industry suffered due to state intervention to keep its domestic prices low as an indirect subsidy to steel users, and--though the technical problems were different--from a heritage of outdated and inefficient plants and equipment.

Indian government policy since 1965 has been to use its iron ore less as a contribution to domestic growth than as an export, earning foreign exchange and helping to reduce the country's chronic deficit on its balance of trade. Production of ore increased, from 18 million tons in 1965 to 43 million tons in 1985, in order to supply a growing number of overseas markets.

With the expansion and diversification of Hindustan Steel, the separate establishment of Bokaro and the beginning of planning for new plants at Salem, Vishakhapatnam, and Vijaynagar, it became increasingly clear that public sector iron and steel production would need some new form of coordination to avoid duplication and to channel resources more effectively. The Steel Authority of India Ltd. was established in January 1973 for this purpose, to function as a holding company along the lines of similar but older bodies in Italy and Sweden. The new organization was placed on a secure footing when the Indian Iron & Steel Company was nationalized, giving SAIL control of all iron and steel production apart from the venerable Tata Iron and Steel Company and a number of small-scale electric-arc furnace units. At the time of nationalization the Indian Iron & Steel Company included a steel plant at Burnpur in West Bengal; iron ore mines at Gua and Manoharpur; coal mines at Ramnagore, Jitpur, and Chasnalla; and a specialist subsidiary, the IISCO-Ujjain Pipe and Foundry Co. Ltd., based at Kulti.

Both SAIL and its predecessor sought to expand capacity to meet predicted rises in demand for steel. In 1971 Hindustan Steel had unveiled plans for India's first coastal steel plant, at Vishakhapatnam. The project, which in 1991 was in the process of being opened, with one blast furnace already in operation, was expected to allow productivity of 230 tons per man year compared with less than 50 in SAIL's existing plants. The Authority also invested heavily in modernizing its oldest plants, at Rourkela and Durgapur.

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Challenges in the 1980s

The 1980s were not a happy decade for SAIL. It suffered losses between 1982 and 1984 but went back into the black in the following two years. Meanwhile Tata Iron and Steel was consistently profitable. By 1986, when the Indian steel industry's total capacity was 15.5 million tons, only 12.8 million were actually produced, of which SAIL produced 7.1 million. Thus imports of 1.5 million tons were needed to meet total demand, after years of exporting Indian steel. By 1988 all the main steel plants in India except Vishakhapatnam were burdened with obsolescent plants and equipment, and Indian steel prices were the highest in the world. The government proposed a ten-year plan to modernize the plants, based on aid from West Germany, Japan, and the Soviet Union just at a time when the worldwide economic recession was deepening and the World Bank was recommending the privatization of SAIL and the liberalization of steel imports.

In 1989 SAIL acquired Visvesvaraya Iron and Steel Ltd. In its first year under SAIL's wing this new subsidiary's production and turnover showed an improvement over its last year in the private sector. This progress contrasted with results for SAIL as a whole in 1989-90, since production declined, and once again planned targets were not met. Various factors contributed to this disappointing outcome, including unrest at the Rourkela plant as a result of the management's decision not to negotiate with a new union, Rourkela Sramik Sangha, which had challenged the established union, Rourkela Mazdoor Sabha, and had even won all the seats on the plant's elected works committee. Another problem, continuing over several years, arose from defects in power supply; the impact of power cuts on steel output in 1989-90 was estimated as 170,000 tons lost, and the supply of coal was unreliable.

During this time period, SAIL remained in the public sector as a central instrument of state plans for industrial development. The country's reserves of iron ore and other raw materials for iron and steel made the industry central to the economy. At the beginning of the 1980s India had recoverable reserves of iron ore amounting to 10.6 billion tons, a natural endowment that it would take 650 years to deplete at then current rates of production. The high-grade ore within this total--that is, ore with an iron content of at least 65 percent--was, however, thought likely to reach depletion in only 42 years; yet it still represented about one-tenth of the world total. SAIL struggled to maintain production, let alone expand it, in large part because of circumstances outside its control. Since the purchase of raw materials typically accounted for 30 percent of the Indian steel industry's production costs, any rise in the prices of coal, ferro-manganese, limestone, or iron ore cut into the industry's profitability. In the first half of the 1980s, for example, prices for these materials rose by between 95 and 150 percent, at the same time as electricity charges rose by 150 percent. Most of these increases were imposed by other state enterprises.

Nor did it help SAIL that the high sulfur content of Indian coal required heavy investment in desulfurization at its steel plants. Indeed, the industry had chronic problems in trying to operate blast furnaces designed to take low-sulfur coking coal. The more suitable process of making sponge iron with non-coking coal, then converting it to steel in electric arc furnaces, was introduced in the private sector later, though by 1989 only 300,000 tons were being produced in this way. India's basic output costs of INR 6,420 per ton in 1986

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compared well with the averages for West Germany (INR 6,438), for Japan (INR 7,898), and for the United States (INR 6,786). What finally kept Indian steel from being competitive was the imposition of levies that raised its price per ton by about 30 percent, and which included excise duties, a freight capitalization surcharge, and a Steel Development Fund charge.

In spite of such problems, and in response to them, SAIL announced in December 1990 an ambitious plan to increase its annual output of steel from 11 million to 19 million tons, thus transforming itself from the world's thirteenth largest steel producer to its third largest, within ten years. SAIL's use of its steel production capacity, running at about 77 percent in 1990, would be raised to 95 percent by 1996, thus permitting output of crude steel to rise by two-fifths over its current level. Output for 1990 had actually been only six million tons, however, compared with 6.9 million tons in 1988, and eight million tons in 1989. SAIL was no more able than large steel companies in other countries to achieve the optimum balance between demand and supply, between increasing the quantity of output and improving its quality by modernizing, and thus escaping from its heritage of outdated plant and equipment. Neither Hindustan Steel nor SAIL was ever in a position to defy the circumstances of the Indian economy or of the world steel industry on their own, but they achieved, in large part, the more modest goal of contributing to India's postwar economic growth.

The 1990s and Beyond

As part of an economic reform policy, India set plans in motion to partially privatize its nationalized industries in 1993. As such, 10 percent of SAIL was offered to private investors over the next several years. In 1994, the company announced its plans to offer an additional 10 percent to international investors in order to raise funds for plant modernization and expansion.

While SAIL worked to reach the goals set forth in the early 1990s, the company faced severe challenges in the latter half of the decade. Falling international steel prices, high costs related to its modernization program, increased inventory levels brought on by private sector growth, the Asian economic crisis, and falling export sales took their toll on SAIL's bottom line. In fact, during the 1998-99 fiscal year, the company posted one of the largest net losses in its history--$360 million.

Overall, the global steel industry struggled during the late 1990s and into the new millennium. By 2002, a turnaround appeared to be on the horizon and demand in India had increased by 5.7 percent. V.S. Jain was named chairman that year and was tapped to reverse SAIL's fortunes. Under his leadership, the company planned to raise its production capacity to 20 million tons by 2011. SAIL's output surpassed ten million tons of saleable steel in 2003 while exports grew by 53 percent over the previous year. By 2004, the company was producing 12.5 million tons.

Although SAIL appeared to have weathered the industry downturn, it continued to face problems related to coking coal supplies. Jain explained the issue in a June 2004 Hindustan Times article. "Coking coal has been a global problem," he claimed. "Since China restricted exports to bolster its domestic industry, global prices have gone through

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the roof. Our current coking coal requirements are 13 million tons, of which 9 million tons is imported. Due to constraints, we had to cut production last year and make exorbitant spot purchases." Jain added, "We are exploring the option of buying equity stakes in coking coalmines in Australia and New Zealand. We are also looking at substitutes like coal tar and other petroleum derivatives."

Along with the challenges brought on by the coking coal concerns, SAIL was forced to deal with rising steel prices. Over the past several years, the company had worked to overcome industry problems by diversifying into new business areas in an attempt to bolster profits. In 2001, the company formed a joint venture with the National Thermal Power Corp. to create NTPC SAIL Power Company Ltd., a company designed to manage the Captive Power Plants. Other newly formed joint ventures included the Bokaro Power Supply Co. Ltd. and the Bhilai Electric Supply Co. Ltd.

Believing that it had a solid strategy in place, SAIL's management team remained optimistic about the company's future. India's economy was growing, leading SAIL to assume that the country's steel consumption would nearly double the 2004 levels, reaching 55 to 60 million tons by 2012. Although the company's bottom line stood to benefit from this estimate, the cyclical and turbulent nature of the steel industry left SAIL's future hanging in the balance.

Products

Sl No PRODUCT PLANTS

1Billets

Billets

Billets

Bhilai Steel Plant

Durgapur Steel Plant

IISCO Steel Plant

2 Cold-rolled Coils Bokaro Steel Plant

3 Cold-rolled Sheets Bokaro Steel Plant

4 Electrical Steels Rourkela Steel Plant

5 Galvanised Sheets Bokaro Steel Plant

6 Hot-rolled Coils Bokaro Steel Plant

Hot-rolled Coils Rourkela Steel Plant

7 Hot-rolled Plates/Sheets Bokaro Steel Plant

8 Pig Iron IISCO Steel Plant

9Reversing Mill Plates Bhilai Steel Plant

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Reversing Mill Plates Rourkela Steel Plant

10 Rails Bhilai Steel Plant

11 Wire Rods Bhilai Steel Plant

12 Customised Products Service Centre

Applications

Hot Rolled Coils, Sheets and Skelp

Hot rolled coils, sheets and skelp (narrow coil), are the largest product category of the company in terms of both sales volume and revenue. Hot rolled coils are primarily used for making pipes and have many direct industrial and manufacturing applications, including the construction of tanks, railway cars, bicycle frames, ships, engineering and military equip-ment and automobile and truck wheels, frames and body parts. Hot rolled coils are also used as feedstock for cold rolling mills where they undergo further process-ing.Hot rolled coils are also delivered to the company's own cold rolling mills and silicon sheet mill and pipe plant in a wide range of widths and thicknesses as the feedstock for higher value-added steel products. The company is the largest producer of hot rolled coils, sheets and skelp in India.

Semi-Finished Products The company produces semi-finished products, including blooms, billets and slabs, which are converted into finished products in the company's processing plant and, to a lesser extent, sold to rerollers for conversion to finished products.

Plates

Steel plates are used mainly for the manufacture of bridges, steel structures, ships, large diameter pipes, storage tanks, boilers, railway wagons and pressure vessels. The company also produces weatherproof steel plates for the construction of railcars. The company is currently the largest producer of steel plates in India with a domestic market share of more than 80 per cent for these products. The company is the only producer of wide and heavy plate products in India.

Cold Rolled Products

Cold rolling of hot rolled products produces a superior surface finish, improves the physical properties of the steel, such as tensile strength, and reduces its thickness to

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precise gauges. As a result, cold rolled products generally command higher prices thanhot rolled products. The products of the cold rolling mill include cold rolled sheets and coils, which are used primarily for precision tubes, containers, bicycles, furniture and for use by the automobile industry to produce car body panels. Cold rolled products are also used for further processing, including for colour coating, galvanising and tinning. The company also produces further processed cold rolled products, including galvanised sheets and tin plates.

Railway Products

Railway products, including rails, wheels and axles, sleeper and fish plates (which are used to connect and strengthen rails), are produced through a process of hot rolling blooms in the finishing mills and forging ingots and blooms in the forging press or hammer. Railway products are used primarily to upgrade and expand the existing railway network in India.

Structurals

Structural steel products are produced through a process of hot rolling in the section or structural mills. They are long steel products with cross sections of various shapes. I-beams, channels and angle steel are used in mining, the construction of tunnels, factory structures, transmission towers, bridges, ships railways and other infrastructure projects.

Bars and Rods

The company produces steel bars and rods through a process of hot rolling billets in the finishing mills. Reinforcement steel and wire rods are primarily used by the construction industry. The company is one of the largest producers of reinforcement bars in India which are primarily sold to the construction industry.

Speciality Products

Speciality products, include electrical sheets, tin plates and pipes. Electrical sheets are cold rolled products of silicon steel for electrical machinery. Tin plates are cold rolled steel electrolytically coated with tin for food packaging.Pipes are longitudinally or spirally welded from hot rolled coils for conveying such things as water, oil and gas.

Alloy and Stainless Products

In addition to the steel products indicated above, SAIL produces a wide range of alloy steel products at ASP. Elements including chromium, nickel, vanadium and molybdenum are used in the alloy mixture to impart special properties to steel. These alloy steels are primarily used for sophisticated applications, including in the automobile, railway and defence industries.

A wide variety of alloy and stainless steel plates, hot rolled sheets, cold rolled sheets, bars, billets, blooms, forgings and die blocks are manufactured at ASP in an Electric Arc Furnace. SAIL is able to produce different qualities of alloy steels to meet the

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requirements of its customers. To increase steel's corrosion resistance properties, nickel and chromium are used in the making of stainless steel. SSP produces cold rolled stainless steel coils and sheets with thickness ranging from 0.3 mm to 6 mm and width ranging from 500 mm to 1,250 mm. These materials can be produced in a large number of grades for different applications. Stainless steel products are used for diverse applications including household utensils, automobile trims, conveyor belts, elevators, chemical and food processing equipment, building and interior decoration and pharmaceutical equipment.

SAIL has contributed immensely to the development of the nation’s infrastructure by supplying products for key sector of the economy like defence, railways, housing, roads, and power, among others. SAIL has worked tirelessly for economic development, profit maximization, employment generation, and social welfare and amenities for its employees and the community at large. Hospitals and schools at SAIL’s township are models of excellence in their respective areas. The SAIL story is a saga of visionaries who had the foresight to break new ground where none existed – converting sleepy pastrol villages into pulsating cosmopolitan giants.

The organization is looking to the future by directing all its energies towards achieving synergy in maximizing profits, expanding capacity and serving the society in equal measure. SAIL plans to install two rolling mills at IISCO Steel Plant(ISP) IN Burnpur, West Bengal, which will incorporate all the latest hot rolling technologies in bar and rod production, enhancing ISP’s competitive position in the market. Startup for both the plants is scheduled at the end of 2009.

SAIL strives to be a respected world class corporation and the leader in Indian steel business quality, productivity, profitability, and customer satisfaction.

Former Chairman Mr. K.C. Khanna had said that “the success of a multi-dimensional organization like SAIL lies in its capacity to look into the future.”

WORLD STEEL SCENARIO

Steel experienced a tremendous hike in international trade in the last decade.

World steel trade by area, 2007

million metric tonnes

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* - excluding intra-regional trade marked

Top steel producing companies :

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The crude steel production has seen a sudden rise in the period of 2001-2006. The production of steel was 595MT in 1970.The production of crude steel increased to 848MT in 2000 and suddenly the production in 2007 was 1354MT.

The major players of steel in international trade are Japan, United States, China, European Union, Russia, Germany.

In 2007, China was the largest steel exporter, exporting 65.2MT. Following China was Japan with 35.9MT, EU27 WITH 32.4MT, Ukraine with 29.9MT, Russia with 29.2MT, South Korea with 18.1MT, Turkey with 14MT, Taiwan with 10.9MT, Brazil with 10.4, USA with 10.3MT. Having jumped from 5th to largest exporter in 2006, China recorded a further 33% growth in exports in 2007 to 65.2 million tonnes.  This increase came despite exports falling every month from a peak in April 2007 to 7.6 million tonnes to a 19 month low in November 2007 of 3.9 million tonnes as changes to export rebates and taxes reduced export levels.  The world's 2nd largest exporter, Japan, saw exports rise 5% to 35.8 million tonnes.  EU27 total exports remained largely unchanged at 32 million tonnes with falls in shipments to the Americas and the Middle East being offset by increases elsewhere, particularly Non-EU Europe, the CIS and Africa.  Elsewhere the tonnage exported by both Russia and Ukraine fell.  This coincided with an increase in imports by both countries reflecting strong domestic demand.  

Production of crude steel for the 66 countries reporting to the IISI in April 2008 was estimated to be 116.4 million tonnes, an increase of 5.6% over April 2007. The total of the 4 months to date was 457.3 million tonnes, 5.7% above the January to April period in 2007. Excluding China, which accounted for 37% of world production in the first four months of 2008, the rise in April was only 2.9%, with the four months total only up by 3.7%. Global trade in steel was 440 million tonnes in 2007 (including internal EU trade), 5% higher than in 2006. China increased its exports by one third to 68 million tonnes, almost double the Japanese total.

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In the European Union 27, crude steel production was flat in April at 18.2 million tonnes compared to April 2007, and fell by 0.7% in the 4 months to date to 71.6 million tonnes. Monthly production in Germany decreased by 1.3% in April, and by 1.9% in the January to April period to 16.1 million tonnes. Steel production in France fared even worse dropping by 9% in the month, and by 7.9% in the four months to date to 6.5 million tonnes. However, Italian crude steel production increased by 7.2% in April, and by 1.5% in the year to date to 11.2 million tonnes. Spanish production rose by 1% in April, while the year to date was up 2.5% to 6.4 million tonnes. In the UK, production fell by 10.3% in April, bringing the 4 months total down 0.8% to 4.8 million tonnes.

In the rest of Europe Turkish production increased by 2.7% in April and by 8.2% in the four months to 9.2 million tonnes. The four months total for Serbia was up 14.1% to 664 thousand tones.

Crude steel production in the CIS countries only rose by 0.3% in April, with Russian production down 0.4%, bringing the year to date for the CIS up 3.0% with Russias four month total up 3.6% to 25.3 million tonnes. Ukrainian steel production increased by 2.7% in April, with the year to date total up 3.3% to 14.7 million tonnes. Kazakhstans steel production fell by 12.4% in the four months to 1.3 million tonnes.

In 2007 the Ukraine overtook Russia as the third largest exporter of steel after China and Japan, and it has remained third into 2008. In the first four months of 2008 Ukraine exported 10.9 million tonnes of steel, up 6.2% on the same four months in 2007. Exports of semis rose by 13.5% to 4.6 million tonnes, with hot rolled plate lengths up 20.7% to 1.6 million tonnes. Exports of hot rolled wide coil fell slightly to 1.1 million tonnes. The large increase in semis was primarily in semis over 0.25% carbon, with some increase in slabs uti 0.25% carbon. The rise in plate exports was mostly in plate over 10mm thick, with some increase in the 4.75 to 10mm range.

In terms of markets, the middle east was the destination for 20% of total Ukrainian exports in the first four months of 2008, up 48% from the previous year. The next largest market was the EU27 at 17.5%, with Italy by far the largest recipient, although the EU total was down 12% from 2007. The other CIS countries received a further 15% of Ukrainian exports, with the tonnage to the far east more than doubling to 14% of the total. Turkey remained the largest single market at 1.3 million tonnes, followed by Russia at one million tones.

On the North American continent US steel production increased by 1.1% in April, bringing the year to date total up 6.5% to 33.8 million tonnes. Canadian steel production rose by 3.7% in April, while the four months total was up 3.0% to 5.6 million tonnes. Mexican steel production, however, increased by 10.5% in April, with the year to date total up 10.4% to 6.3 million tonnes.

Crude steel production in South America showed an increase with Brazilian production up 7.1% in April and by 7.8% in the year to date to 11.5 million tonnes. Steel production in Venezuela fell by 2.1% in April, while the four months total was down 13% to just under 1.5 million tonnes. Argentinian production, however, rose by 5.9% in April, while the year to date total was up 9.9% to 1.9 million tonnes.

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In Africa and the Middle East, South African production rose by 0.5% in April, although the year to date total was down 2.6% to 3 million tonnes. Egypts steel production, however, increased by 1.7% in April, while the four months total was 14.5% up at 2.3 million tonnes. Iranian production increased by 3.1% in the month, although the year to date total was down 1.1% to nearly 3.4 million tonnes.

Turning to the Far East, Chinas steel production increased by 10.2% in April to 44.7 million tonnes, and by 9.1% in the four months to 169.8 million tonnes. Japanese crude steel production was up 4.2% in April, while the January to April total increased by 4.4% to 41 million tonnes. South Korean production fell by 0.4% in April with the year to date total at 17.5 million tonnes, 3.7% up on the same period in 2007. In India, production showed a rise of 12.7% in April, bringing the four months total up by 7.7% to 19 million tonnes. Crude steel production in Taiwan was up 12.2% in April, while the year to date total was up by 11.2% to 7.6 million tonnes.

Japanese steel exports increased by 15.7% to 13.4 million tonnes in the first four months of 2008 compared to 2007. Hot rolled coil exports were 3.1 million tonnes, up 15.4%, semis were 1.8 million tonnes, up 16.2%, and galvanised steel exports were just below 1.8 million tonnes, up 10.5%. Some 84% of Japanese exports in 2008 went to other far eastern countries with 3.5 million tonnes to South Korea, up 19%, 2.3 million tonnes to China, up 12%, 1.5 million tonnes to Thailand, up 9%, and 1.3 million tonnes to Taiwan, up 18.5%. These four countries accounted for 64% of Japanese exports, the same percentage as in the previous year.

EU27 imports surged 25% in 2007 to over 49 million tonnes.  Meanwhile US imports fell 27% to 29.5 million tonnes on the back of a slowdown in the US economy.  Chinese imports continued to fall, down 9% to 16.9 million tonnes.   In conjunction with their escalating exports this took the Chinese trade surplus in steel to over 48 million tonnes, an increase of 18 million tonnes in 2007 and a swing of 83 million tonnes since their peak trade deficit of 35 million tonnes in 2003.  Exports to the Middle East were particularly strong in 2007 increasing 35% to 35 million tonnes, and led by shipments to Iran, up 60% to 12 million tonnes, and UAE, up 36% to 9 million tonnes.  The dominant

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origins were China, up 200% to 8.5 million tonnes, Russia up 60% to 5.7 million tonnes and Ukraine upto 21% to 5.0 million tones.

The global steel market grew by 8.2% in 2007 to reach a value of $529.7 billion.In 2012, the market is forecast to have a value of $759.1 billion, an increase of 43.3% since 2007.The market grew by 9.6% in 2007 to reach a volume of 1,053.8 million tonnes.In 2012, the market is forecast to have a volume of 1,662.7 million tonnes, an increase of 57.8% since 2007.

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WHY INTERNATIONAL TRADE

The need for trade in steel arises due to the cyclic nature of steel demand and production. The uncertainty in forecasting the demand of steel in a market leads the producers to evacuate certain quantities into the International market to bring in stability in domestic market.

International trade has been a major driver of global growth and prosperity over the last fifty years. As trade has expanded, global incomes have grown. Open economies have been able to harness the power of trade to boost competitiveness and productivity, helping improve living standards and sustain economic growth.

Being a core sector, steel industry tracks the overall economic growth in the long-term. Also, steel demand, being derived from other sectors like automobiles, consumer durables and infrastructure, its fortune is dependent on the growth of these user industries.

The import and export of iron and steel products is a relatively labor intensive process. As the ships carrying the traded iron and steel enter the channels leading to the ports, pilots who assist in navigating the vessels into the port meet the ships. Tugboats also meet the vessels to assist in the docking of the ships at the port’s marine terminals. The iron and steel products are then off-loaded.

After the products are discharged from the vessels (or the barges moving the products along the inland waterways), some steel is moved by forklifts operated by the terminal workers (most often members of the ILA or the ILWU) to dockside warehouses, while other products are moved to outside storage areas. Still other products are loaded directly onto rail cars. The imported iron and steel products are then moved from the port storage facilities by truck and rail cars to end users such as the nation’s steel mills, steel processors, and inland steel service centers for further distribution to end users or intermediate processors. In some cases, the products such as slab, are imported directly by the domestic mills for use in the steel production process. Freight forwarders, logistics companies, customhouse brokers, and numerous federal government agencies are also involved in the import process.

At each stage of this process economic impacts are generated. The import of iron and steel products contributes to the local and regional economies by generating business revenue to local and national firms providing vessel and cargo handling services. These firms, in turn, provide employment and income to individuals, and pay taxes to state, local and federal governments. The impact of the iron and steel products to the economy is not reduced to a single number, but instead, the imports create several impacts. These are the revenue impact, employment impact, personal income impact, and tax impact.

Business Revenue Impact

At the outset, iron and steel products imported via the marine terminals generate business revenue for firms which provide the cargo and vessel handling services, including stevedoring firms, vessel agents, trucking firms and railroads, steel trading companies,

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customhouse brokers, cargo and vessel surveyors and warehousemen. This business revenue impact is dispersed throughout the economy in several ways. It is used to hire people to provide the services, to purchase goods and services, and to make federal, state and local tax payments. The remainder is used to pay stockholders, retire debt, make investments, or held as retained earnings.

Employment Impact

The employment impact of the iron and steel imports consists of three levels of job impacts.

Direct employment impact - jobs directly generated by the movement of the imported iron and steel products beginning when the vessel enters the port area to the distribution of the products to the inland ports, steel warehouses, steel service centers and end users. Direct jobs generated by the import of iron and steel products include jobs with trucking companies moving the products between the port and inland warehouses and ultimately to the end users, longshoremen, steamship agents, stevedores, warehousing, freight forwarders/logistics companies and customhouse brokers.

Induced employment impact - jobs that are created throughout the local economy because individuals directly employed due to the import of the iron and steel products spend their wages locally on goods and services such as food, housing and clothing. These jobs are held by residents located throughout the port region, since they are estimated based on local and regional purchases.

Indirect Jobs - jobs that will be created locally due to purchases of goods and services by firms directly involved with the import of the iron and steel products, not individuals. These jobs include jobs with local office supply firms, maintenance and repair firms, parts and equipment suppliers, etc.

Personal Earnings Impact

The personal earnings impact is the measure of employee wages and salaries (excluding benefits) received by individuals directly employed due to handling the imported iron and steel products at the various stages of the distribution process, from the vessel discharge to the distribution to the final users. Re-spending of these earnings throughout the regional economy for purchases of goods and services is also estimated. This, in turn, generates additional jobs -- the induced employment impact. This re-spending throughout the region is estimated using a regional personal earnings multiplier, which reflects the percentage of purchases by individuals that are made within the port’s regional economy. The direct earnings are a measure of the local impact since they are received by those directly employed by the iron and steel import activity at the ports.

Tax Impact

Federal, state and local tax impacts are tax payments to the federal, state and local governments by firms and by individuals whose jobs are directly dependent upon and supported (induced and indirect jobs) by the imported iron and steel products. Tax

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impacts are based on the percentage of per capita income paid in state, local and federal taxes, as obtained from the Tax Foundation for each state in which the ports are located.

The impact models include mathematical models of the specific terminals and support operations, including:

Stevedoring operations – tons of iron and steel products discharged per longshoremen hour (ILA, ILWU and non-union) for specific types of imported iron and steel products and for midstream operations and dockside operations. Also, revenue models associated with the stevedoring and terminal operations have been developed for each port and by specific type of product;

On-terminal and off-terminal warehousing and storage operations; Truck operations and geographic distributions;

Barge operational models for inland river distribution of the iron and steel products;

Rail distribution models.

In addition to direct terminal impacts, economic impacts are also estimated for support activities, including steamship agency activities, towing and pilotage activities, as well as vessel chandlering (supplies) and bunkering (purchase of fuel). These impacts of support operations are based on interviews conducted with these service providers in each port. Towing and pilotage impacts are based on data developed from interviews with the vessel agents serving ships calling the terminals, as well as interviews with the various pilot organizations and tug assist operations serving each port area.

Jobs with trucking firms are estimated based on the average truck distance to inland steel service centers and/or to the intermediate or end users.

An induced model was developed for each port area to measure the economic impacts of the local purchases for goods and services by those directly employed in handling the iron and steel imports at each port. Indirect impacts are those created by the purchases of goods and services by the firms directly dependent on the import of iron and steel products through the marine terminals in the port regions.

Manufacturers depend on the “just in time” deliveries and rely on the integrity of their contracts with service centers to provide the steel at the time and price that was agreed upon. The larger customers get their supplies first, leaving smaller industries, , to absorb the costs of delays, lengthened lead times, and broken contracts. Manufacturers are unable to meet the demand from their customers when their steel service centers cannot provide on-time deliveries of the raw materials needed to manufacture their products.In addition to delivery delays and broken contracts, perhaps the most egregious effect of the tariffs on THE manufacturers is price increases.

Manufacturers cannot simply increase the price of the finished products to builders and retail customers because of increased steel costs. This pricing differences could force the

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manufacturers to move their production overseas where they can obtain steel at cheaper, global prices.

The demand of steel in world is being fuelled by:

China’s unprecedented infrastructure growth especially on account of the three mega projects, the Yangtze, the Beijing Olympics in 2008 and the Shanghai Expo in 2010;

massive infrastructure build-up in India and CIS countries;

the reconstruction of Iraq;

housing boom in the USA; and

white goods resurgence in Europe.

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FACTORS AFFECTING INTERNATIONAL TRADE

The most effective factor effecting international trade is cost competitiveness. Some other factors affecting international trade are location, quality of product, servicing, brand equity, import duties, etc.

Cost competitiveness

Cost competitiveness is essential to compete in the global market with so many players using different technologies for steelmaking. Competitive advantage comes from operational efficiency and this in turn is dependent on : i) quality and cost of raw materials, ii) cost of energy (coal / natural gas / electricity), iii) technology, iv) productivity, and v) logistics.

Today countries like CIS, China, South Korea, Brazil, Taiwan, Australia, Mexico etc are ranked as low cost steel producers in the world. These countries enjoy cost advantage in some form or the other when it comes to raw materials, labour, productivity and efficiency. Brazil enjoys the advantage of best quality iron ore whereas China has the advantage of productivity on the other hand. Australia has the best reserves of coking coal while CIS countries bank upon low labour cost. India ranks ninth as the most cost competitive steel producer in the world. It even ranks over countries like Japan and USA. The main reasons that can be attributed to its competitiveness are its low cost of iron ore and pellets where it is ranked second while in labour cost it is ranked third in the world over. The substantial cost advantage of iron ore and labour is more or less neutralized by the high cost of coking coal in India and lower labour productivity and the cost competitiveness does not translate into international competitiveness due to various factors like high tariffs, high transportation cost and other non-tariff barriers like stiff antidumping and countervailing duties. Relatively higher costs of infrastructure (transportation and power costs) and the prospects of tariff reduction remain the important concern areas of the Indian steel industry.

Location

The new theories of international trade have incorporated the role of multinational companies (MNCs) in the location of production. The main, specific assumptions used to incorporate MNCs' activities relate to joint inputs at the company's level combined with assumptions regarding costs at the plant level and spatial transaction costs. It is claimed that this approach explains multi-plant location.

Quality of product

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Product quality is a prime criteria in gaining access to competitive markets. Commercial markets require a stable supply and a consistent quality. The main reason for having quality control is to ensure that products are made to the standards demanded by management. The fundamental purpose of a quality control program is to acquire dependable information on all the attributes of a product which affect its quality. Quality control ensures that raw materials meet set standards, processing methods perform as designed, finished products meet company standards, and consumer confidence in the company remains high.

Quality is a critical factor in accessing competitive new markets and all efforts must be made to ensure that products meet and exceed established standards.

Servicing

There are several intermediaries in an industrial supply channel from the mill to the product producer (original equipment manufacturer, OEM) that may hold title or process the material, or both. Traditionally, wholesalers and importers hold inventories of different items while OEMs, component suppliers or contract manufacturers do the processing. Steel service centers (SSCs) are relative newcomers that combine the stockholding and processing activities. The tremendous growth of the international SSC industry during the late nineteen hundreds has coincided with several structural changes in most steel-using industries. Some service providers such as transport companies, carriers, forwarders and consultants, stock or process the products.

The findings indicate that transformation from ordinary stockholding to value-added processing and specialization in local and international steel distribution has taken place. The differentiation of the logistics roles has created a competitive market of regional, multi-location SSCs with a full-line availability and versatile processing service and stockists each specialized on a narrow range of product lines.

The recent development in steel industry does indicate that suppliers and service centers are differentiating and expanding their logistic roles further, thereby narrowing down the domain of mills and OEMs within the distribution channel.

Brand equity

The brand equity is built around brand personality as one of the core dimensions. The psychographic variables like emotions associated with the brand image constitute the personality of a brand. The experiences of the consumers with the brand cultivate such personality. The most recent literature on competitive advantage views brand equity as a relational market-based asset because it arises from the relationships that consumers have with brands. Trust is viewed as the corner-stone, as well as one of the most desirable qualities in any relationship. The fact that brand equity is best explained when brand trust is taken into account reinforces the idea that brand equity is a relational market-based asset.

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Lowering of import duty

Import duties are the most important and most common types of custom duties. They may be levied either for revenue or protection or both, but tariffs are not a satisfactory means of raising revenue, because they encourage uneconomic domestic production of the dutied item. Even if imports constitute the bulk of the available revenue base, it is better to tax all consumption, rather than only consumption of imports, in order to avoid uneconomical protection.

Tariff reduction creates many economic benefits. Proponents of the WTO have emphasized its positive results by pointing to reductions in the cost of living, increases in income, and improvements in efficiency.

All participants ceased the introduction of any new non-tariff barriers and converted existing non-tariff barriers into tariffs. These new tariffs had to be significantly reduced (by 36%) over the six year implementation period. This was a very significant step because it eliminated new barriers and made existing barriers transparent. This promised to change the nature of future world.

Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer's sales price in its home market, or at a price that is lower than its cost of production.  Subsidizing occurs when a foreign government provides financial assistance to benefit the production, manufacture, or exportation of a good.  If the Department of Commerce finds that an imported product is dumped or subsidized and the ITC finds that a domestic industry producing a like product is materially injured or threatened with material injury, an antidumping duty order or countervailing duty order will be imposed to offset the dumping or subsidies.

Commerce and the ITC review each outstanding antidumping and countervailing duty order every five years to determine whether revocation of the order would be likely to lead to continuation or recurrence of dumping or subsidies and of material injury within a reasonably foreseeable time.  If both agencies make affirmative determinations, the order is continued for another five years; if not, the order is revoked.

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ROLE OF INDIA IN WORLD STEEL TRADE

Steel is the backbone of any growing economy.

After independence in the early decades, the imbalance between the demand and the availability of steel has led the Indian steel industry to curb down the imports. The situation continued till the mid 1980’s when Government decided to withdraw all such measures other than pricing. This has been triggered by the new economic policy initiated in 1991. The development strategy based on import substitution and centralized planning gave away to globalization and market oriented economic development. The changed environment coupled with the advantage of natural resources saw a large influx of private capital and emergence of private sector matching public investment.

Indian steel industry has been predominantly catering to the domestic market. Since the year 1950, steel consumption in India had approximately doubled in every decade and it could experience very substantial growth during the next few decades. As the infrastructure and rural economy in India would grow, the consumption trend of flat and non-flat products is expected to increase considerably.

It is a well-known fact that fortunes of steel companies rise and fall with the strength and weakness in steel cycle. In other words, whenever steel prices are on an upswing, profitability of steel companies usually takes a quantum leap. Furthermore, whenever prices start abating, profitability comes under pressure. Integrated companies from the Indian steel sector are no different. Led by record realisations and improved demand, these companies have been raking up huge profits over the past few years.

The history of Iron and Steel industry in India is nearly 4000 years old. The Iron pillars at the outskirts of Delhi prove that Indians were familiar with iron and steel even during the Vedic age. But the father of the modern Steel industry Sir Jamshedji Tata set up the Tata Iron and Steel Company (TISCO) in 1907. The first steel ingots were rolled in TISCO in 1911. This was followed by the establishment of the Mysore Iron and Steel Works in 1936, later renamed as Visveswaraya Iron and Steel Works. In 1939, Indian Iron and Steel Company (IISCO), now a subsidiary of Steel Authority of India Limited (SAIL) was started. At the time of Independence, India possessed a small but viable steel industry with an annual capacity of 1.3 million tonnes. In 1951, India produced 1.1 million tonnes of finished steel. In the era of planned economy, iron and steel - a core and basic sector - received the full attention of the government and with the foreign assistance and own resources, many new steel plants were set up.

 Steel Ministry, at present, has 12 public sector undertakings (PSUs) including the Steel Authority of India Limited (SAIL), National Mineral Development Corporation

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(NMDC), Kudramukh Iron Ore Company Limited (KIOCL), Rastriya Ispat Nigam Limited (RINL), Metallurgical and Engineering Consultants India Limited (MECON).

For developing countries such as India and Brazil, the steel sector is pivotal to growth. If it slumps due to the vicissitudes of international trade, these countries would be seriously hurt. There is thus an asymmetry in the role of the steel industry in the US vis-à-vis the developing countries.

Apart from the vast domestic market, India has also bright prospects to develop as a global manufacturing and outsourcing base for iron and steel based products. A recent study by the Kellogg School of Business on the manufacturing competitiveness in 15 countries including Brazil, India and Korea had found that India is the most competitive place for metal based manufactured products (14). As per analysis, there is vast scope to develop exports of automobile components, equipment for construction industry, and oil/gas sector that shall boost the demand for steel products in a big way. Indian auto and the engineering goods sector with its inherent strengths could become an integral part of the global production systems through collaborative research for product and market development. Industry with due support from the government must strive to exploit the global opportunities like China to expand the manufacturing base and sustained growth in the demand for the steel products. Indications available on Chinese market reveal that mismatch between demand and supply of steel still exists in China.

Although India started exporting steel way back in 1964, exports were not regulated and depended largely on domestic surpluses. However, in the years following economic liberalization, export of steel recorded a quantum jump. The antidumping duty was imposed on SAIL, Tata Steel, Essar Steel, Jindals and Ispat Industries making HR products unremunerative in the US market. However, the industry appeared to have factored in the US impact and found alternative markets in Asian countries especially China.

India attained the position of the 5th largest crude steel producing country in the world in 2007, as per the yearly benchmarking surveys conducted by the International Iron & Steel Institute (IISI), an improvement over India’s international ranking of 8th position in 2003.

Crude Steel Production grew at more than 10 % annually from 34.71 million tonnes in 2002-03 to 53.90 million tonnes in 2007-08. Production of finished steel at 55.27 million tonnes during 2007-08 as against  40.71 million tonnes in 2003-04. 

India’s present per capita consumption of crude steel is only 40 kg. which is very low compared to the developed and developing countries – 422 kg. in USA, 417 kg. in Germany, 109 kg. in Russia and 87 kg. in China. Our consumption is less than 1/3rd of the world average i.e. 121 kg. Government of India has taken a number of steps to boost up the per capita consumption of steel in the country.

Steel production capacity in the country by the year 2012 will be nearly 124 million tonnes. India is expected to become the second largest steel producing nation in the world by 2015. The Minister for Steel and Chemicals & Fertlisers Shri Ram Vilas Paswan has

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said that the likely capacity achievable by 2019-20 will be over 290 million tonnes.   He says the total investment in the sector is expected to be Rs. 2,76,880 crore by 2012.

The steel industry has now been exposed to new challenges in the form of tough competition from both, within and outside the country. The industry needs to change the work culture; the maximum emphasis will have to be on cost reduction and simultaneous improvement in quality of product. With domestic steel demand on the rise and the Government’s announcement to give more emphasis to rural infrastructure, steel makers feel that the rural sector will becomes a good business opportunity. Since domestic steel consumption is increasing by leaps and bounds, there is a lot of potential for steel makers as this sector is largely unexplored and can prove to be an important market for them. Indian steel industry can extract some useful mileage from the upsurge in demand for steel within China. With a steadily growing domestic market and a thriving export market in the neighboring region where India has a location advantage and hence a competitive edge over other suppliers – Indian steel industry is in a highly positive frame of mind. Steel industry is directly linked with the national economic standards. Steel business will continue to take initiative with the application of innovations.

India's trade reform programme resulted in strong economic growth in the globalization age. The recent slowdown, although partly due to the overall slowdown in the world economy, also demonstrates the necessity of continuing these reform efforts. In particular, difficult decisions are required to redress the fiscal imbalance, by reducing subsidies, completing the process of tariff and tax reform, and stepping-up privatizationof state-owned enterprises.

The efforts are needed to balance the trade and consider other parts of the world for its export and import. Major trading partners should be given importance and more of liberalizing attitude to be followed.

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VARIOUS FORMS OF INTERNATIONAL TRADE

FOB CFR

FOB

FOB is an abbreviation for Free On Board. The term FOB (often seen as f.o.b.) is commonly used when shipping goods, to indicate who pays loading and transportation costs, and/or the point at which the responsibility of the goods transfers from shipper to buyer. FOB shipping is the term used when the ownership/liability of goods passes from the seller to the buyer at the time the goods cross the shipping point to be delivered. FOB destination designates that the seller is responsible for the goods until the buyer takes possession. This is important in determining who is responsible for lost or damaged goods when in transit from the seller to the buyer. The buyer is responsible when shipped FOB shipping and the seller is responsible if shipped FOB destination. CAP, or customer arranged pickup, is used to denote that the buyer will arrange a carrier of their choice to pick the goods up and the liability for any damage or loss belongs to the buyer.

A. GENERAL TERMS AND CONDITIONS FOR EXPORT (FOB)

1.0 Trade Terms

1.1 To interpret all commercial terms and abbreviations used herein and which have not been otherwise defined, the rules of ‘INCOTERMS 2000 shall apply.

2.0 Prices

2.1 Price(s) as agreed between the Seller and the Buyer are inclusive of the labour charges involved in the work of dunnaging/ stowing/ lashing/ shoring and securing of the materials supplied by the Buyer.

2.2 The Buyer shall arrange at his own costs and expenses to provide to the Master of the vessel at the LOAD PORT all the materials including materials for dunnage required for stowing, dunnaging, lashing, shoring and securing of the materials inside the hatches/ holds of the vessel.

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2.3 The Seller shall under no circumstances be liable for any costs, charges, liabilities of whatsoever nature arising subsequent to the delivery / loading of the materials on board the vessel on the basis of FOB (Stowed) Load Port, such as ocean freight, insurance charges, port dues, taxes including income tax, customs duties, unloading and handling charges, levies and fees, if any, of whatsoever nature and kind, payable or leviable at the time of or by reason of importation of the materials in the country of import.

3.0 Test Certificate and Inspection

3.1 The materials shall be covered by Works Test Certificate issued by Steel Plant(s) of the Seller. The Works Test Certificate shall be furnished showing Heat / Cast Number, material, chemistry as per Ladle Sample Analysis, mechanical properties as may be required in the specification mutually agreed to.

3.2 The materials will be inspected at the load port prior to loading by a Pre-shipment Inspection Agency, mutually acceptable to the Seller and the Buyer. The Inspection Certificate shall certify (a)that the materials were inspected at the load port prior to loading and the markings (except for pigiron) were as per the requirements of the Agreement between the Seller and the Buyer (b) totalnumber of pieces / bundles/ packets/ coils (except for pig iron) and weight in Metric tonne (MT) and(c) that the materials loaded on board the vessel are without apparent damage, properly lashed andsecured (except for pig iron) inside the hatches/ holds of the vessel. The cost of such Pre-shipmentInspection at the load port shall be borne and paid for by the Seller.

3.3 Remarks such as ‘materials partly rust stained/ rusty edges/ wet before shipment/ rust stained/some rusty edges’ and/or ‘stored in open area prior to loading’ and/or ‘unprotected cargo’ appearingin the Pre-Shipment Inspection Certificate shall be acceptable to the Buyer.

4.0 Delivery/ Shipment

4.1 The shipment schedule will be subject to the condition that the Seller is in possession of the Letter of Credit satisfactory in all respects to the Seller, within the time schedule.

4.2 Subject to acceptance by the Seller of vessel(s) nominated by the Buyer and subject to the arrival of such vessel(s) at the load port within the agreed lay can with such extensions as may be mutually agreed upon in writing (in which event the validity of the Letter of Credit for shipment and negotiation shall be promptly extended by the Buyer), the Seller shall deliver the materials on FOB[(SLSD) stowed, lashed, secured and dunnaged} load port terms.

5.0 Risk and Title

5.1 With respect to each shipment, the risk shall pass from the Seller to the Buyer as soon as the materials cross the ship’s rails at the LOAD PORT.

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5.2 The title to the materials shall pass from the Seller to the Buyer only after the Seller has negotiated the documents and has received payment of the full invoice value of the materials.

5.3 The clauses 5.1 & 5.2 shall be applicable in case of all overseas shipments.

5.4 Clause 5.2 shall also apply to documents under the Clause 9 hereunder, if such an eventuality has arisen.

6.0 Right of Transfer

6.1 Neither the Buyer nor the Seller shall be entitled to assign or transfer contract resulting from this Agreement except to its successor or permitted assignee(s) and in the case of any such assignment or transfer, the contract shall be binding upon such successor or transferee.

7.0 Modification of the Contract

7.1 This Agreement cancels all previous negotiations/ agreements between the parties hereto. There are no understanding(s) or agreement between the Buyer and the Seller which are not fully expressed herein and no statement or agreement, oral or written, made prior to or at the signing hereof shall affect or modify the terms hereof or otherwise be binding on the parties hereto. No change in respect of the contract covered by this Agreement shall be valid unless the same is agreed to in writing by both the parties hereto specifically stating the same to be an amendment to this Agreement.

8.0 Waiver

8.1 Failure to enforce any condition herein contained shall not operate as a waiver to the condition itself or any subsequent breach thereof.

9.0 Red Clause

9.1 In the event of:

(a) The failure of the Buyer to nominate a suitable vessel within the specified laydays, as mentioned in the Seller’s Notice of Readiness (NOR)

or

(b) The vessel nominated by the Buyer and accepted by the Seller failing to arrive at the designated load port within the agreed laycan for reasons other than Force Majeure, as defined under Clause 10 herein below:

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or

(c) The vessel (nominated by the Buyer and accepted by the Seller) being found unsuitable after its arrival at the designated loadport, as certified by independent marine surveyor(s), the seller shall be entitled to negotiate their Commercial Invoice against the L/C opened by the Buyer and realise 100% of the value of the materials ready for shipment on the basis of certificate issued by the Pre- shipment Inspection agency certifying that the contracted materials and quantity are ready for shipment and also that the materials are in good condition. Remarks such as “materials partly rust stained/rusty edges/wet before shipment/rust stained/ some rusty edges’ and/or “stored in open area prior to loading” and/or “unprotected cargo” appearing in the Pre-Shipment Inspection Certificate are acceptable.

9.2 The title having already passed on to the buyer, the materials will thereafter be held in custody by the seller at the risk and responsibility of the buyer at the storage yard of the seller. The materials will be covered by tarpaulin at the buyer’s request and cost at the storage yard of the seller. The cost of holding materials shall be as follows till the date of acceptance of vessel’s NOR, when the vessel finally calls at the loadport :

US $ PMT

1. For the first 15 days from the date of expiry of Seller’s NOR Laycan Nil2. For any subsequent week(s) (7 days) or part thereof 1

Buyer to ensure that payment towards Ground Rent and/or Tarpaulin cost is remitted and remittance instruction duly forwarded by SWIFT message, before actual shipment, against the debit invoice.

9.3 The Buyer shall however nominate [another] suitable vessel within reasonable time from the date of realisation of payment, as mentioned above, for taking delivery of the cargo and subject to such vessel arriving at the designated loadport, the seller shall at his cost deliver the materials FOB [SLSD] in terms of Contract.

9.4 The Letter of Credit * established by the buyer in favour of the seller shall make specific and unconditional provision to the above [9.1 to 9.3] effect.

* L/C to be opened with First Class International Bank having Correspondent relationship with State Bank Of India. Name of the Banks can be obtained by the buyer from seller.

10.0 Force Majeure

10.1 If the Seller and/ or the Buyer be prevented from discharging its or their obligation under this Agreement by reason of arrests or restraints of Princes or Rulers , Government of People , War, Blockade, Revolution, Insurrection, Mobilization, Strikes, Riots, Civil Commotion, Lock Outs , Accidents, Acts of

35

God, Plague or other epidemics, destruction of the materials by fire or flood or other natural calamity or on account of any other cause beyond the Seller’s or the Buyer’s control and interfering with the production and/or delivery of the materials as herein above contemplated, the time for delivery shall be postponed by the time or times during which production and/or delivery is prevented by any such causes as herein above mentioned, provided that in the event of such delay exceeding ninety days , the party other than the party which invokes the force majeure may at their option, cancel this Agreement by Notice in writing to the other party in respect of the undelivered quantity of the materials without , however, any right against or being responsible to the other party for such cancellation. The party invoking force majeure shall within 15 days of the occurrence of force majeure causes, put the other party on notice, supported by certificate from the Chamber of Commerce or concerned governmental authority and shall likewise intimate the cessation of such causes. If the force majeure condition continues beyond a period of six months, the Seller or the Buyer may at his option cancel this Agreement by notice in writing to the other party in respect of the undelivered quantity of the materials without, however, any right against or being responsible to theMother party for such cancellation.

11.0 Legal Interpretation

11.1 This contract shall be governed and construed in accordance with the Laws of India for the time being in force.

12.0 Settlement of Disputes

12.1 All disputes or differences whatsoever between the parties hereto arising out of or relating to the construction, meaning or operation or effect of this contract or the breach thereof shall unless amicably settled between the parties hereto, be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration (ICA) ,New Delhi, India by a sole Arbitrator appointed by the Arbitration Committee of the Indian Council of Arbitration, New Delhi, India and the Award made in pursuance thereof shall be binding on both the parties. The venue for the arbitration proceedings shall be New Delhi, India.

13.0 Import/ Export License

13.1 It shall be the responsibility of the Seller to arrange export license(s), if any, required and it shall be the responsibility of the Buyer to arrange for the import license(s), if required, in the country into which the materials are intended to be imported.

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14.0 General Clause

14.1 It is expressly understood and agreed by and between the Buyer and the Seller that the Seller is entering into this Agreement solely on its own behalf and not on behalf of any other person or entity. In particular, it is expressly understood and agreed that the Government of India is not a party to this Agreement and has no liabilities, obligations or rights hereunder. It is expressly understood and agreed that the Seller is an independent legal entity with power and authority to enter this contract solely in its own behalf under the applicable laws of India and general principles of Contract Law. The Buyer expressly agrees, acknowledges and understands that the Seller is not an agent, representative or delegate of the Government of India. It is further understood and agreed that the Government of India is not and shall not be liable for any acts, omission(s), commission(s), breaches or other wrong(s) arising out of the contract. Accordingly, the Buyer hereby expressly waives, releases and foregoes any and all actions or claims including cross claims, impleader claims or counter claims against the Government of India arising out of this contract and covenants not to sue the Government of India as to any manner, claim, cause of action or thing whatsoever arising out of or under this Agreement.

15.0 Change in Destination

15.1 The contracted cargo has to be taken to the designated station only. Any change in destination shall be made through a formal agreement to this Agreement and on the mutually agreed terms and conditions.

FOR AND ON BEHALF OF FOR AND ON BEHALF OF

THE SELLER THE BUYER

ADDRESS : ADDRESS :

SIGNATURE : SIGNATURE :

NAME : NAME :

DESIGNATION : DESIGNATION :

COMPANY : COMPANY :

PLACE : PLACE :

DATE : DATE :

B. SHIPPING TERMS AND CONDITIONS

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1.0 Limitations at the Indian Ports relating to dimensions and permissible draught of vessels:

1.1 While-engaging vessel(s) for shipment of the Materials under this Agreement, the Buyer shall take into account the following limitations at Indian Ports relating to the dimensions and permissible draught of the vessel(s):

Name of the Port Length Overall (LOA) of vessel (Maximum) in Mtrs Beam Length of Vessel (Max) in Mtrs Maximum Laden draught of Vessel Vishakhapatnam 182 30 10.03 Mtrs. Available water Haldia 200 32 AWAD*/7-8 Mtrs. Available water

* Always available arrival draft.

2.0 Sellers Notice of Readiness of the Materials for shipment:

2.1 Keeping in view the contract delivery period and the quantity of the Materials received at the load port(s), the Seller serve on the Buyer, by Fax/e-mail, the Notice of readiness of Materials for shipment (i.e., Seller’s NOR) indicating the laycan during which the vessel should arrive, to nominate suitable vessel for shipment of the Materials.

3.0 Type of vessels to be nominated:

3.1 For the shipment of the Materials under this Agreement, the Buyer shall nominate singledecker geared vessel equipped with cranes/derricks (Min 15/25 MT capacity) located at each hatch capable of lifting the Materials of the weights and dimensions indicated in the contract in such sling load as tendered by the seller limited to the maximum lifting capacity of the Cranes/Derricks and also capable of placing the Materials in the places of the hatches including wing spaces. Since there are no forklifts and other facilities available at the loading port, the cargo has to be loaded in all hatches including the wing spaces with the ship’s gear only. In case Forklift requirement becomes essential, the same shall be arranged by the Vessel Owner/by their Agents. In case vessel has Union Purchase system derricks, the same would not be accepted. Vessels nominated by the buyer should not be over 25 years of age. On vessel’s arrival at load port, if the seller finds that the vessel is not a single decker as per terms of particulars given by the Seller in which case the seller can reject the vessel outright without any liability including dead freight and all other consequences/losses arising thereof that the buyer may incur/suffer. Buyer to nominate single decker only. If buyer nominates, tween decker vessel, subject to acceptance of the seller, cost, time utilized between completion of loading in LH and commencement of loading in tween deck will not be on SAIL account.

3.2 On arrival of the vessel nominated by the buyer at the load port(s), if the seller considers that the Cranes/gears of the vessel are not capable of lifting the materials of the weights and dimensions indicated in the contract, as a result of which the vessel may not be capable of maintaining the load rate guaranteed by the Seller, an independent marine surveyor shall be appointed at the load port to

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investigate and to asses the capacities of the Cranes/gears of the vessel and to establish the effective rate of loading which the vessel is capable of maintaining. The findings of the independent marine surveyor shall be final and binding on both the buyer and the seller. The survey charges shall be borne and paid for by the Buyer and the Seller in equal proportions.

3.3 According to the findings of the independent marine surveyors as aforesaid, if the vessel is not found to be capable of maintaining the loading rate guaranteed by the Seller, the effective rate of loading which the vessel may in fact be capable of maintaining as per the findings of the independent marine surveyors, shall be recorded in the Statement of Facts and computation of the laytime used shall be based on the rate of loading as assessed by the independent marine surveyor.

4.0 Nomination of vessel(s) by the Buyer:

4.1 Within 21 days including laydays, from the date of Seller’s NOR referred to in Clause 2 above, the Buyer shall nominate suitable vessel, furnishing following particulars in respect of such vessel by Fax/e-mail to the seller viz.

1. VESSEL DETAILS

1.1 Name of the Vessel Present & Old

1.2 Age and Flag

1.3 Nationality of the Ship Owner

1.4 Class

1.5 Type

1.6 Dead Weight Carrying capacity (DWCC)

1.7 Dead Weight (DWT)

1.8 Draft in metres

1.9 Whether Vessel will lift the entire nominated quantity

1.10 Vessel Gross Registered Tonnage / Net Registered Tonnage

1.11 Whether the vessel is a Tween Decker

1.12 Tank top strength

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1.13 Length Overall (LOA)

1.14 Beam Length

1.15 Details of previous voyages

1.16 Whether vessel carrying any other cargo

2.1 HATCH DETAILS

2.1.1 Whether Center Line Bulkhead Exists

2.1.2 No. Of Holds / Hatches

2.1.3 Type of Hatch Covers and Pontoons

2.2 HATCH DIMENSIONS

2.2.1 Cover

2.2.2 Opening Tween Decker -Hold-wise

2.2.3 Opening Weather Deck - Hold-wise

2.2.4 Tween Deck

2.2.5 Lower Hatch

2.3 CRANES/DERRICKS

2.3.1 No. Of Derricks/cranes

2.3.2 Capacity of each Derrick/crane

2.3.3 Position of each Crane/derrick

2.3.4 Whether Cranes can reach the entire Hatch square area

2.3.5 Whether Cargo Gear register endorsed

2.3.6 Whether Fork lift is required to stow cargo in Hatch coamings

3 Name of the Vessel agents at load port

4 Loading Term

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4.1 Demurrage

4.2 Dispatch Rate

4.3 CQD

5. Laydays (Laydays not to exceed a span of 10 days. Buyer to also indicate estimated time of arrival (ETA) of the vessel at the load port within the laydays)

6. LETTER OF CREDIT points

6.1 LC amendments as desired by shipper executed and e mailed/faxed to shipper

6.2 Last date of shipment

6.3 Last date of negotiation

The vessel offered should be free from all encumbrances. The aforesaid e mail/fax intimation shall be sent by the Buyer to the Seller.

4.2 At the time of nomination of the vessel, the buyer would submit the relevant Charter Party/Fixture Note indicating the despatch/demurrage rate at load port. In case the relevant portion of the Charter Party/Fixture Note indicating the demmurage/dispatch rate at Load port is not available, the NOR of the vessel shall not be accepted at the loading Port.

4.3 Within two working days from the date of receipt of the Buyer’s Fax/e-mail as aforesaid, the seller shall inform the Buyer by Fax/e-mail regarding the acceptability of the vessel/suitability of the laydays of the vessel nominated by the Buyer. If the vessel is not accepted by the Seller, the reason for the same would be intimated.

5.0 General provisions to be incorporated in the Charter Party governing shipment of theMaterials under the Agreement:

5.1 The Buyer shall endeavor that the charter party governing the shipment of the Materials underthe Agreement contains, inter-alia, the following provisions:

i. The ship owners shall appoint their own agents at the Indian Port(s) of loading. The seller reserves the right to appoint his own protective agent at the Indian Port(s) of loading.

ii. The ship owners shall bear and pay all port dues/charges related to the vessel except cargo related charges. However Forklifts if used, shall be at the cost of the Buyer.

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iii. Ten days prior to the ETA of the vessel at the load port, the Master of the vessel shall give Fax/e-mail intimation to the seller.

Thereafter at the interval of 7 days/72 hours/24 hours before the ETA of the vessel at the load port(s) the Master of the vessel shall send Fax/e mail/Radio messages regarding the ETA of the vessel, to the seller at the above mentioned address.

iv. Each vessel shall hold a gear certificate in conformity with the International Dock Safety Convention, covering the duration of each voyage and confirming that all the gears have been duly tested. The gear certificate shall be made available by the Master of the Vessel to the representative of the Seller for verification after berthing of the vessel at the load port(s), but prior to the commencement of loading. Similarly, the hatch wise loading plan for the Materials shall be furnished by the Master of the Vessel at the time of the serving of Master’s NOR. In case the Port Authorities refuse berthing of the vessel for improper stowage plan, the time lost, cost and consequences shall be on account of the Buyer.

v. The Master of the vessel shall allow on board the representatives of the Independent inspection agency appointed by the seller and provide such information/assistance as may be required by them in connection with the performance of their assigned duties.

vi. The Master of the vessel shall provide free use of light on board the vessel as may be required for working the vessel at the load port at all times and in each case free of expense to the Seller.

vii. Subject to the acceptance by the seller of the vessel(s) nominated by the Buyer and subject to the arrival of such vessel(s) at the load port within the agreed laydays with such extensions as may be mutually agreed upon the seller shall deliver the materials as per the relevant contract on FOB (Stowed/Lashed/Dunnaged/Secured) basis, at the agreed port. The Buyer shall arrange to provide to the Master of the vessel at the load port free of cost to the Seller all materials including Dunnage required for stowing, lashing, dunnaging, shoring and securing of the materials inside the hatches /holds of the vessel. However, the labour charges involved in the work of dunnaging/stowing/lashing/shoring and securing of Materials shall be born and paid for by the seller.

viii. The opening and closing of the hatches of the vessel shall always be done by the vessel’s crew and the cost involved therein and the time used therefore shall be to the account of the vessel. The time used in the initial opening and closing of the hatches shall be to the account of the vessel unless the vessel is on demurrage.

ix. The time lost due to shifting of the vessel within the port limits shall not count as laytime. However, if the shifting is required by the seller, the shifting charges shall be to the account of the seller and time lost in shifting shall count as laytime.

x. The overtime of the crew and officers shall be to the account of the vessel.

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xi. If any damage is caused to the vessel at the load port at the time of loading of the Materials by the Stevedores engaged by the Seller, the claim, if any, for such damage shall be settled directly between the ship owners and stevedores. The Master of the vessel shall lodge such claim, if any, on the stevedores, promptly after the damage has been sustained and then confirm in writing duly supported by the Third Party damage Reports, prior to the departure of the vessel from the loading port, failing which the claim shall stand barred and the stevedores shall stand absolved and relieved of all responsibility. Subject to compliance with the conditions enumerated in this clause, in case the stevedores fail to settle the same, the seller will assist in settlement of such claims.

xii. The Master of the vessel shall deliver to the representative of the seller the Stowage Plan in triplicate duly signed by him immediately after the completion of loading and sailing of the vessel.

xiii. The ship owners shall instruct their Agents at the load port(s) to issue the Bill(s) of Lading (CONGEN) to the representative of the seller, immediately but not later than two working days from the date of completion of loading of the materials into the vessel. In case of delayed issuance of B/L (beyond two working days), the ship owners/buyers will be responsible for the consequences including interests for delayed receipt of value of the material.

xiv. The vessel should not contain any other cargo that may be hazardous to the materials under this Contract, in the same hatches/holds offered to the Seller

6.0 Service of Notice of readiness of the Vessel for loading of the Materials (i.e., Master’s Notice of Readiness):

6.1 Upon arrival of the vessel within the limits of the loading port(s) and after

A. Ensuring that the hatches/holds of the vessel have been thoroughly cleaned.

B. Obtaining free pratique.

C. Ensuring that the vessel is load ready in all respects.

The Master of the vessel shall serve the Notice Of Readiness of the vessel to load the materials (i.e., Master’s NOR) on the port office of the seller at the loading port, during normal office hors which are 9.30 AM to 4.30 PM from Monday to Saturday, except on Second and Fourth Saturdays. The Master’s NOR shall not be served on Sundays/Port holidays/Charter Party holidays.

7 Laytime and excepted period:

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7.1 Laytime shall commence at 1300 hours if Master’s NOR is served in the forenoon and at 0800 hours of the next working day if Master’s NOR is served in the afternoon.

7.2 Time between noon on Saturday and 0800 hours on Monday and /or between noon on the last working day preceding a legal holiday and/or port holidays/Charter Party holidays and 8 AM on the next working day thereafter, shall not count as laytime, even if used. In case of local holidays/ strike/ bundh, if loading takes place, the time of actual loading shall count as Laytime.

7.3 After berthing, if the port authorities or representative of the seller find that the vessel is not ready in all respects to load, the laytime will not commence until the vessel is in fact ready in all respects to load. The time used by the vessel in proceeding from the anchorage to the berth shall not count as laytime, unless the vessel is on demurrage.

7.4 In the event of break-down of gear/cranes/winches/derricks and other equipment of the vessel by reason of disablement of insufficient power etc; the period of such breakdown, disablement/insufficient shall not count as lay time. Lay time shall also not count during breakdown of Forklifts employed by the Buyer. Time during fork lift operation will be considered as 50 % of the loadrate.

7.5 Time lost by reason of any or all of the following causes preventing loading of the Materials shall not be computed as laytime, unless the vessel is on demurrage.

i. War, Rebellion, Tumult, Political Disturbances, Insurrection;

ii. Lockout, Strikes, Riots, Civil Commotions;

iii. Epidemics, Quarantine, Landslips, Floods, Frost or Snow, Boretides, Bad Weather.

iv. Stoppage of work, whether partial or general, by workmen/longshoremen/ tug-boatmen or other hands essential to the working of the vessel or loading of the materials into the vessel;

v. Accidents at Wharf;

vi. Intervention of Sanitary, Customs and/or other constituted Authorities.

vii. Stoppage, whether partial or total, on rivers and canals; and

viii. Any other cause beyond the control of the Seller.

7.6 In case Red Clause has been invoked, it will be the buyer’s responsibility to arrange for berthing of the vessel and Laytime shall commence after vessel is berthed, gangway is placed and hatch inspection, if required, is over. If any vessel comes beyond agreed Laycan, the responsibility of berthing the vessel will be to the buyer’s account and Laytime to commence after the vessel is berthed,

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gangway is placed and hatch inspection, if required, is over. If a vessel calls on Before her Laycan and tenders NOR, but does not get a berth to load then NOR to be accepted from 9:30 AM of the first day of the Laycan period. If loading of a vessel starts prior to Laycan period, then Laytime would commence from loading commencement time.

8.0 Guaranteed Loading Rate:

8.1 The Seller shall deliver the Materials free in vessel’s holds in one or two safe berths reachable on arrival always afloat at the port(s) of loading.

8.2 The Master of the vessel shall make available all the hatches for loading of the Materials throughout the period the vessel is worked for loading of the Materials, unless the Materials have been completely loaded in other hatches.

8.3 Subject to the provisions in Clauses 3.3,5.1.viii,5.1.ix.7.1 to 7.5.viii herein above, the seller shall guarantee the loading of the Materials into the vessel at the rate of _____MT per weather working day of 24 consecutive hours Sundays and Holidays excepted, even if used (WWD-SASHEX-EUI), basis five or more available/workable hatches/cranes. Pro-rata if less.

- 2500MT for Billets (bundled form only) and Plates.

- 900 MT for Rails MT per day basis 5 hooks prorata,if less, equipped with cranes with minimum 20MT lifting capacity on

WWDSASHEX – EIU Basis.

- 750 MT for Tin Plates*.

- 300 MT for ERW Pipes*.

- 1050 MT for CRNO Coils*.

- 4000 MT for Pig Iron

- 1650 MT basis 5 or more available, workable hatches/cranes prorate, if less served by 15MT, minimum capacity cranes for Billets.

- 2500 MT for CR Coil/GP Coil.

- 3500 MT for HR Coil

- 900 MT for Rails MT per day basis 5 hooks prorata, if less, equipped with cranes with minimum 20MT lifting capacity on WWDSASHEX – EIU Basis.

- 750 MT for Tin Plates.

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- 300 MT for ERW Pipes.

- 1050 MT for CRNO Coils

- 2200 MT for Pig Iron

9.0 Payment of Dues/Taxes etc.:

9.1 The seller shall under no circumstances be liable under this Agreement for any costs, charges, liabilities of whatsoever nature arising subsequent to the delivery of the materials on the basis of the FOB (Stowed) such as but not limited to, ocean freight, insurance charges, port dues, taxes including income taxes, custom duties, unloading and handling charges, levies and fees, if any, of whatsoever nature and kind payable or leviable at the time of or by reason of importation of the Materials in the country of import.

10.0 Statement of Facts:

10.1 Immediately after completion of loading of the Materials into vessel and before the sailing of the vessel from the load port(s) a statement of facts shall be made out at the load port(s) duly signed by and distributed amongst:

a) Master of the vessel/Agent of the vessel at the load port.

b) Agents/Representative(s),if any ,of the Buyer at the load port and

c) Representative of the seller at the load port.

11.0 Settlement of demurrage/Despatch Money Account in respect of each shipment:

11.1 In the aforesaid Statement of Facts, the computation of laytime allowed and laytime used shall be based on the provisions contained in Clauses 3.3,5.1.viii,5.1.ix,7.1 to 7.5.viii hereinabove. Despatch /Demurrage money , if any, shall be as per governing Charter Party, subject to a maximum of USD 2500/5000 or pro-rata. In the case of demurrage, the Seller shall endeavour to remit to the Buyer the agreed amount of demurrage money within about 60 days from the date of receipt of the claim of the Buyer together with all supporting documents. In the case of despatch money , the Buyer shall remit to the seller the agreed amount of Despatch money within 60 days from the date of receipt of the claim of the Seller together with the supporting documents.

FOR AND ON BEHALF OF FOR AND ON BEHALF OF

THE SELLER THE BUYER

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ADDRESS ADDRESS

SIGNATURE: SIGNATURE :

NAME : NAME :

DESIGNATION : DESIGNATION :

COMPANY : COMPANY :

PLACE : PLACE :

DATE : DATE :

FORMAT FOR LETTER OF CREDIT (FOB)

FROM :( NAME * & ADDRESS OF OPENING BANK )

TO :( NAME & ADDRESS OF ADVISING BANK )

40A TYPE OF L/C : IRREVOCABLE / REVOCABLE

20 L/C Number :

31C DATE OF ISSUE :

31D DT. & PLACE OF EXPIRY : __________________________________IN INDIA

50 NAME & ADDRESS OF THE:

APPLICANT

59 NAME & ADDRESS OF THE:

BENEFICIARY

32B AMOUNT OF CREDIT IN :

US DOLLARS /EURO/ANY

OTHER FREELY

EXCHANGEABLE CURRENCY

(IN FIGURES & WORDS)

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39A PERCENTAGE CREDIT : AS PER CONTRACT

AMOUNT TOLERANCE

41A CREDIT AVAILABLE WITH:

CREDIT AVAILABLE BY : NEGOTIATION

42C DRAFTS : AT SIGHT

42A DRAFTS TO BE DRAWN ON:

43P PARTIAL SHIPMENT : AS PER CONTRACT

43T TRANSHIPMENT : AS PER CONTRACT

44A SHIPMENT FROM :

44B SHIPMENT TO :

44C LATEST DATE OF SHIPMENT :

45A DESCRIPTION OF GOODS :

a) Description of Materials

b) Size ( in mm) (except for Pig Iron) and Quantity (in MT)

c) Specification

d) Tolerance (except for Pig Iron)

e) Quantity

f) Quantity Tolerance

g) Price per MT (in USD/Euro/any other freely exchangeable currency)

46A DOCUMENTS REQUIRED:

1. Beneficiary’s Commercial Invoice - one original plus two signed copies covering materials shipped. Invoices will be raised on the basis of (THEORETICAL/ ACTUAL/ DRAFT SURVEY) WEIG

2. Full set 3/3 original on board ocean or charter party Bills of Lading (CONGEN) issued to the order of the Shipper notifying applicant and blank endorsed marked “Stowed under deck” further more marked “freight prepaid/freight payable as per charter party/ freight to pay” evidencing shipment from __________ Port, India to ________ Port in ________ . Bills

48

of Lading (CONGEN) with remarks “Materials partly rust stained/ rusty edges/ wet before shipment/ rust stained/ some rusty edges” and/or “unprotected cargo” and/or “said to be” and/or “said to weigh” and/or “stored in open area prior to loading” are acceptable.

3. Works Test Certificate in duplicate issued by the Steel Plant (s) of the beneficiary and confirming that the materials are as per contracted specification.

4. Pre- shipment Inspection certificate issued by M/s_______________, (herein after referred to as) certifying the following:

a) The materials were inspected prior to loading at the load port and that the markings were as per General Terms and Conditions for Export (FOB) between beneficiary and the opener.

b) Quantity loaded on board the vessel.

c) The materials were loaded on board the vessel without apparent damage and were found to be in good order and condition. That the loading was done under their supervision , and were properly lashed and secured (except for pig iron) inside the hatches / holds of the vessel.

Remarks such as “materials partly rust stained/ rusty edges/ wet before shipment/ rust stained/ some rusty edges” and/or “stored in open area prior to loading” and/or “unprotected cargo” appearing on Pre-shipment inspection certificate are acceptable.

5. Beneficiary’s packing list (except for pig iron) indicating details of the materials shipped - 3 copies.

6. Certificate of origin.

7. Copy of Telex/e-mail or Fax from ________ addressed to the opener’s FAX No. __________ within FIVE working days after the on board Bill of Lading (CONGEN) date advising the name of the vessel, Bill of Lading (CONGEN) number and date, materials and quantity, destination ports in __________ (Country).

47A ADDITIONAL CONDITIONS:

1. Ocean freight is payable by the openers over and above the value of this Letter of Credit.

2. Marine Insurance to be covered by the opener.

3. In the event of (a) the failure of the opener to nominate a suitable vessel within 21 days, including lay days , from the date of beneficiary’s Notice of Readiness of

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cargo (herein after referred to as NOR) OR (b) the vessel nominated by the opener and accepted by the beneficiary failing to arrive at __________ port within 21 days including lay days from the date of NOR for reasons other than Force Majeure as defined under Clause 10 of the said contract OR (c) the vessel (nominated by the opener and accepted by the beneficiary) being found unsuitable after its arrival at _______ Port as certified by independent marine surveyors, this credit is payable at sight at your counters in _______________ against presentation of beneficiary’s draft drawn on ourselves for 100 per cent value of invoice accompanied by the following documents:

a) Beneficiary's commercial invoice in duplicate.

b) Copy of Beneficiary’s Notice of Readiness,

c) One copy of Works Test Certificate issued by the Steel Plant (s) of the beneficiary.

d) Certificate issued by M/S ..............., certifying that the materials were inspected at the storage yard of the beneficiary at ______ (Place) and that the markings are as per requirement of the said contract and that the materials are in good condition and further that the materials and quantity as per the Commercial Invoice are ready for shipment.

Remarks such as “materials partly rust stained/ rusty edges/ wet before shipment/ rust stained/ some rusty edges’ and/or ‘stored in open area prior to loading’ and/or ‘unprotected cargo’ appearing in the Pre-Shipment Inspection Certificate are acceptable.

e) Beneficiary’s declaration that suitable vessel has not been nominated by the opener within 21 days including lay days from the date of NOR OR that the vessel nominated by the opener and accepted by the beneficiary failed to arrive at ________ Port within the agreed lay days for reasons other than Force Majeure as defined in Clause No. 10 of the General Terms and conditions for export of FOB contract OR that the vessel (nominated by the opener and accepted by the beneficiary) being found unsuitable after its arrival as certified by the independent Marine Surveyors (copy of certificate of Marine Surveyors to be presented in such an event) as the case may be.

Beneficiary’s declaration that

the materials as mentioned in the commercial invoice will be held in custody by the beneficiary at the risk and responsibility of the opener at the storage yard of the beneficiary at ____________ Port.

the materials will be covered by tarpaulin at the cost of the opener.

the Materials shall be held by the beneficiary free of ground rent for a period of 15 days from the date of expiry of Seller’s NOR (against documents negotiated under this clause) and for storage extending beyond 15 days from the date of expiry of Seller’s NOR the

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cost of holding the materials (ground rent) calculated at the rate of USD 1.00 per metric tonne for every week(s) (7 days) or part thereof shall be paid by the opener to the beneficiary till the date of acceptance of vessel’s NOR, when the vessel finally calls at the loadport.

Opener/Buyer to ensure that payment towards Ground Rent and/or Tarpaulin cost is remitted and remittance instruction duly forwarded by SWIFT message, before actual shipment, against the debit invoice.

Upon nomination of suitable vessel within reasonable time by the opener for taking delivery of the materials for which payment has been realized by the beneficiary as aforesaid and subject to such vessel arriving at ______________ Port within the agreed lay days, the beneficiary shall at his cost deliver FOB (Stowed) as per terms of the said contract the materials for which payment has been realized by the beneficiary as aforesaid.

4. Any amendment to the letter of credit without the prior written consent of the beneficiary shall not be taken cognizance of, under this letter of credit.

71B CHARGES:

All Bank charges incurred outside India including payment Cable charges, reimbursement charges, etc. shall be borne and paid for by the opener.All Bank charges incurred in India shall be borne and paid for by the beneficiary.

48 PERIOD FOR PRESENTATION:

Within 21 days from the date of B/L.

49 CONFIRMATION INSTRUCTIONS:

Paying Bank may add their confirmation to this Letter of Credit at the request and expense of the beneficiary and such confirmation shall also apply to any amendment (s) to this credit.

78 REIMBURSEMENT INSTRUCTIONS:

Upon presentation of documents complying in all respects to Letter of Credit terms, the negotiating bank is authorised to claim on us by tested telex certifying that all terms and conditions have been complied with and that the relative documents have been forwarded to us by Registered Airmail/ Courier. We undertake to remit within two working days after receipt by us of your tested telex/swift claim in US Dollars/Euro/any other freely exchangeable currency in accordance with your instructions. This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce Brochure No. 500. This telex/swift may be treated as the operative instrument.

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All apparent spelling mistakes/mistakes in LC documents, which do not alter meaning/ specification/ description/ Quantity/ value of goods are acceptable and will not count as a discrepancy.

Cost and Freight (CFR) is an Incoterm .

It means that the seller pays for transportation to the Port of Loading (POL), loading and freight. The buyer pays for the insurance and transportation of the goods from the Port of Discharge (POD) to his factory. The risk of loss shifts from the seller to the buyer, and who pays the costs of freight. The passing of risk occurs when the goods pass the ship's rail at the port of shipment which means that this term cannot be used for airfreight or land transport and also is inappropriate for most containerised sea shipments - the term CPT is the appropriate one for these.

A. GENERAL TERMS AND CONDITIONS FOR EXPORT (CFR)

1.0 Trade Terms

1.1 To interpret all commercial terms and abbreviations used herein and which have not been otherwise defined, the rules of 'INCOTERMS 2000' shall be applied.

2.0 Prices

2.1 The Seller shall under no circumstances be liable for any costs, charges, liabilities of whatsoever nature arising subsequent to the delivery /loading of the materials on board the vessel on the basis of CFR (FO/LT) Port, such as insurance charges, port dues, taxes including income tax, customs duties, unloading and handling charges, levies and fees, if any, of whatsoever nature and kind payable or leviable at the time of or by reason of importation of the materials in the country of import.

3.0 Test Certificate and Inspection

3.1 The materials shall be covered by Works Test Certificate issued by Steel Plant of the Seller. The Works Test Certificate shall be furnished showing Heat/ Cast Number, material, chemistry as per Ladle Sample Analysis, mechanical properties as required in the specification.

3.2 The materials will be inspected at the load port prior to loading by a Pre-shipment Inspection Agency, mutually acceptable to the Seller and the Buyer. The Inspection Certificate shall certify (a) that the materials were inspected at the load port prior to loading and the markings ( except for pig iron) were as per the requirements of the Agreement between the Seller and the Buyer (b) total number of pieces/ bundles/ packets/ coils (except for pig iron) and weight in MT and (c) that the materials loaded on board the vessel are without apparent damage, properly lashed and secured (except for pig iron) inside the hatches/ holds of the

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vessel. The cost of such Pre-shipment Inspection at the load port shall be borne and paid for by the Seller.

3.3 Remarks such as ‘materials partly rust stained/ rusty edges/ wet before shipment/rust stained/ some rusty edges’ and/or 'stored in open area prior to loading' and/or ‘unprotected cargo' appearing in the Pre- Shipment Inspection Certificate and Bills of Lading shall be acceptable to the Buyer.

4.0 Delivery/Shipment

4.1 The shipment schedule will be subject to the condition that the Seller is in possession of the Letter of Credit, within the time schedule, satisfactory in all respects to the Seller.

5.O Risk and Title

5.1 With respect to each shipment, the risk shall pass from the Seller to the Buyer as soon as the materials cross the ship's rails at the port of loading and the title to the materials shall pass from the Seller to the Buyer only after the Seller has negotiated the documents and has received payment of the full invoice value of the materials shipped.

6.0 Right of Transfer

6.1 Neither the Buyer nor the Seller shall be entitled to assign or transfer contract resulting from this Agreement except to its successor or permitted assignee/ s and in the case of any such assignment or transfer, the contract shall be binding upon such successor or transferee.

7.0 Modification of the Contract

7.1 This Agreement cancels/ supersedes all previous negotiations/ agreements between the parties hereto. There are no understandings or agreement between the Buyer and the Seller which are not fully expressed herein and no statement or agreement, oral or written, made prior to or at the signing hereof shall affect or modify the terms hereof or otherwise be binding on the parties hereto. No change in respect of the contract covered by this Agreement shall be valid unless the same is agreed to in writing by both the parties hereto specifically stating the same to be an amendment to this Agreement.

8.0 Waiver

8.1 Failure to enforce any condition herein contained shall not operate as a waiver of the condition itself or any subsequent breach thereof.

9.0 Force Majeure

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9.1 If the Seller and/or the Buyer be prevented from discharging its or their obligation under this Agreement by reason of arrests or restraints of Princes or Rulers, Government of People , War, Blockade, Revolution, Insurrection, Mobilization, Strikes, Riots, Civil Commotion, Lock Outs, Accidents, Acts of God, Plague or other epidemics, destruction of the materials by fire or flood or other natural calamity or on account of any other cause beyond the Seller's or the Buyer's control and interfering with the production and/or delivery of the materials as herein above contemplated, the time for delivery shall be postponed by the time or times during which production and/or delivery is prevented by any such causes as herein above mentioned, provided that in the event of such delay exceeding ninety days, the party other than the party which invokes the force majeure may at their option, cancel this Agreement by Notice in writing to the other party in respect of the undelivered quantity of the materials without, however, any right against or being responsible to the other party for such cancellation. The party invoking force majeure shall within 15 days of the occurrence of force majeure causes, put the other party on notice, supported by certificate from the Chamber of Commerce or concerned governmental authority and shall likewise intimate the cessation of such causes. If the force majeure condition continues beyond a period of six months, the Seller or the Buyer may at his option cancel this Agreement by notice in writing to the other party in respect of the undelivered quantity of the materials without, however, any right against or being responsible to the other party for such cancellation.

10.0 Legal Interpretation

10.l This contract shall be governed and construed in accordance with the Laws of India for the time being in force.

11.0 Settlement of Disputes

11.1 All disputes or differences whatsoever between the parties hereto arising out of or relating to the construction, meaning or operation or effect of this contract or the breach thereof shall unless amicably settled between the parties hereto, be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration (lCA) ,New Delhi, India by a sole Arbitrator appointed by the Arbitration Committee of the Indian Council of Arbitration, New Delhi, India and the Award made in pursuance thereof shall be binding on both the parties. The venue for the arbitration proceedings shall be New Delhi, India.

12.0 Import/ Export Licence

12.1 It shall be the responsibility of the Seller to arrange export licence(s), if any, required and it shall be the responsibility of the Buyer to arrange for the import licence(s), if required, in the country into which the materials are intended to be imported.

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13.0 General Clause

13.1 It is expressly understood and agreed by and between the Buyer and the Seller that the Seller is entering into this Agreement solely on its own behalf and not on behalf of any other person or entity. In particular, it is expressly understood and agreed that the Government of India is not a party to this Agreement and has no liabilities, obligations or rights hereunder. It is expressly understood and agreed that the Seller is an independent legal entity with power and authority to enter this contract solely in its own behalf under the applicable laws of India and general principles of Contract Law. The Buyer expressly agrees, acknowledges and understands that the Seller is not an agent, representative or delegate of the Government of India. It is further understood and agreed that the Government of India is not and shall not be liable for any acts, omissions, commissions, breaches or other wrongs arising out of the contract. Accordingly, the Buyer hereby expressly waives, releases and foregoes any and all actions or claims including cross claims, impleader claims or counter claims against the Government of India arising out of this contract and covenants not to sue the Government of India as to any manner, claim, cause of action or thing whatsoever arising out of or under this Agreement.

FOR AND ON BEHALF OF FOR AND ON BEHALF OF

THE SELLER THE BUYER

ADDRESS : ADDRESS :

SIGNATURE : SIGNATURE :

NAME : NAME :

DESIGNATION : DESIGNATION:

COMPANY : COMPANY :

PLACE : PLACE :

DATE : DATE :

B. SHIPPING TERMS AND CONDITIONS (CFR)

I) FOR EXPORT SHIPMENT ON CFR (LINER TERMS)

1.0 Fixing of Vessel for Shipmen t

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1.1 After fixing the vessel for shipment, the Seller shall intimate to the Buyer by cable / telex/ fax (i) Name of the vessel and (ii) quantity planned to be loaded in the vessel. In the event of shipment of materials by overage vessel/s, overage insurance, if any, incurred by the Buyer shall be to the Seller's account up to a maximum of 1 % of the value of the materials shipped, subject to the Buyer furnishing necessary documentary evidence.

1.2 The Seller shall, within 5 working days from the date of B/L (s), send by cable/ fax/telex, to the Buyer, the details of shipment made, viz. the name of the vessel, B/L No. (s) with date(s) , details of materials loaded, and destination port (s).

1.3 Owner/master of the vessel shall serve notice of arrival at discharge port(s)to the buyer(s) prior to 7/5/3/2/1 days of arrival of the vessel at discharge port(s).

II) FOR EXPORT SHIPMENT ON CFR ( FREE OUT TERMS)

1.0 Fixing of Vessel for Shipment

1.1 The Seller shall endeavor to effect shipment of the materials in suitable geared vessel/s. In the event of shipment of materials by overage vessel /s ,overage insurance, if any, incurred by the Buyer shall be to the Seller's account up to a maximum of 1 % of the value of the materials shipped, subject to the Buyer furnishing necessary documentary evidence.

1.2 After fixing the vessel for shipment, the Seller shall intimate to the Buyer by cable / telex/fax (i) Name of the vessel (ii) Length Overall (LOA),Beam, Draft (iii) Flag (iv) Year of built (v) Number of hatches / derricks and (vi) quantity planned to be loaded in the vessel.

2.0 Service of Notice of Readiness of the vessel for discharging of the materials (i.e. Master's Notice of Readiness)

2.1 The Buyer shall intimate to the Seller by a e mail/cable/ Fax latest by ......................(Date) the name and address of the party on whom the Notice of Readiness of the vessel for discharge of cargo shall be served by the Master of the vessel at the Destination Port.

2.2 The Notice of Readiness of the vessel to discharge the materials at the destination port shall be served by the Master of the vessel on the Buyer/ their representatives, during the normal office working hours from 9.30 AM to 4.30 PM from Monday to Saturday, when the vessel is within the port limits or in roads and in free pratique whether in berth or not. The Master's NOR shall not be served on Sundays/Port holidays/Charter Party holidays.

3.0 Berthing of the vessel

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3.1 The Buyer shall arrange safe berth for the vessel for unloading the materials at the destination port at their own cost. Time lost in waiting for berth shall count as lay time.

3.2 In the event of the vessel not being able to take berth due to the arrival draft at the destination port being less than the Guaranteed Minimum Arrival Draft in the Agreement, the Buyer shall arrange at his own expenses for lightening the vessel and time used therefore shall count as lay time.

4.0 Lay time and excepted period

4.1 Lay time shall commence at 1300 Hrs. the same day if NOR is served by the Master of the vessel before noon, and at 0800 Hrs. the next working day if NOR is served in the afternoon. Time between noon on Saturday and 0800 Hrs on Monday, or between noon on the last working day preceding Port / Charter Party holiday and 0800 Hrs on the first working day thereafter shall not count as lay time unless used. If used, actual time used shall count as lay time. The Buyer shall however be free to unload the materials even during the excepted period. If any time is used for unloading the materials during the excepted period as indicated above, the actual time used shall count as lay time.

4.2 Any time lost due to shifting of the vessel within the port area or in the opening/ closing of the hatches shall be treated as time used and all expenses including the overtime of the crews and officers of the vessel /s arising out of this shall be to the account of the Buyer.

4.3 The time taken by the vessel for proceeding from anchorage to the berth shall not be treated as transit time and shall be to the account of the Buyer even when the vessel is not on demurrage.

4.4 Time lost by reason of any or all the following causes preventing discharge of the cargo from the vessel shall not be computed as lay time unless the vessel is already on demurrage.

a) War, rebellion, tumult, political disturbance, insurrection.

b) Lockout, strikes, riots, civil commotion.

c) Epidemics, quarantine, land slips, floods, frost or snow, bore tides, bad weather.

d) Stoppage of work, whether partial or general, by workmen, long shore men ,tug boat men or other hands essential to the working of the vessel or discharge of cargo from the vessel.

e) Accidents at the wharf.

f) Intervention of sanitary, Customs and/or other constituted authorities.

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4.5 In the event of breakdown of gears/ cranes/ winches of the vessel by reason of disablement or insufficient power, the period of such inefficiency shall not count as lay time.

4.6 Discharge rate and demurrage-Despatch rate at discharge port(s) shall be as per governing charter party signed between SAIL and vessel owner.

5.0 Documents concerning Discharge of vessel

5.1 The Buyer shall forward to the Seller within 15 (fifteen) days from the date of completion of discharge of the materials (i) copy of the NOR of the vessel for discharge of cargo served by the Master of the vessel duly accepted by the Buyer / their Agents; (ii) Statement of facts duly signed by the Master/ Agent of the vessel and the buyer/ their agents (the Buyer shall ensure that the Statement of Facts is signed by all concerned immediately but not later than 72 (seventy two) hours after completion of discharge of the materials) and (iii) Time Sheet.

6.0 Settlement of Demurrage / Despatch Money Account

6.1 Demurrage/ Despatch money at the destination port shall be calculated as per the governing Charter Party subject to the maximum amount mentioned in the Agreement. Despatch money, if any, earned by the Buyer shall be calculated on the basis of working time saved. The Seller shall endeavor to remit dispatch money ,if any, earned by the Buyer at the destination port within 60 (sixty) days from the date of receipt of the claim from the Buyer. The Buyer shall endeavor to remit the demurrage, if any, incurred on the vessel at the destination port within 60 (sixty) days from the date of the Seller's claim.

7.0 Contamination/ Damages

7.1 The Seller shall not be responsible for any contamination of the materials after the same have passed the ship's rails.

7.2 Damages, if any, caused to the vessel by the Buyer's stevedores, and claims for such damages are to be settled directly between the Buyer/their stevedores and the vessel owners. Such claims shall be lodged by the Master of the vessel on the Buyer's stevedores promptly after the damage has been sustained and then confirmed in writing to the Buyer/ their stevedores duly supported by third-party damage report.

8.0 Charter Party conditions

8.1 In the event of variation between the terms and conditions of Charter Party and the terms and conditions of this contract, the latter shall prevail.

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FOR AND ON BEHALF OF FOR AND ON BEHALF OF

THE SELLER THE BUYER

ADDRESS : ADDRESS :

SIGNATURE : SIGNATURE :

NAME : NAME :

DESIGNATION : DESIGNATION:

COMPANY : COMPANY :

PLACE : PLACE :

DATE : DATE :

C) FORMAT FOR LETTER OF CREDIT (CFR)

FROM :( NAME & ADDRESS OF OPENING BANK)*

TO :( NAME & ADDRESS OF NEGOTIATING BANK)

40A TYPE OF L/C: IRREVOCABLE / REVOCABLE

20 L/C Number

31C DATE OF ISSUE

31D DATE & PLACE OF EXPIRY

50 NAME & ADDRESS OF THE:

APPLICANT

51 NAME & ADDRESS OF THE BENEFICIARY :

32B AMOUNT OF CREDIT IN : US DOLLARS/EURO/ANY OTHER FREELY EXCHANGEABLE CURRENCY.(IN FIGURES & WORDS)

39A PERCENTAGE CREDIT AMOUNT TOLERANCE: As per contract

41A CREDIT AVAILABLE WITH :

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CREDIT AVAILABLE BY: PAYMENT

42C USANCE OF THE DRAFTS: AT SIGHT

42A DRAFTS TO BE DRAWN ON: OPENER

43P PARTIAL SHIPMENT: AS PER CONTRACT

43T TRANSHIPMENT: AS PER CONTRACT

44A SHIPMENT FROM:

44B SHIPMENT TO:

44C LATEST SHIPMENT DATE:

45A DESCRIPTION OF GOODS:

a) Description of Materials b) Size ( in mm) (except for Pig Iron) and Quantity (in MT) c) Specification d) Tolerance (except for Pig Iron) e) Quantity f) Quantity Tolerance g) Price per MT (in USD/Euro/any other freely exchangeable currency)

46A DOCUMENTS REQUIRED:

1. Beneficiary's Commercial Invoice - one original plus two signed copies covering materials shipped. Invoices will be raised on the basis of (THEORETICAL/ACTUAL/ DRAFT SURVEY) WEIGHT.

2. Full set 3/3 original on board or charter party Bills of Lading (CONGEN) issued to order of the Shipper and blank endorsed marked "Stowed under deck" further more marked "freight prepaid" evidencing shipment from _____ Port, India to ____ Port in ____ . Bills of Lading (CONGEN) with remarks "Materials partly rust stained / rusty edges/ wet before shipment/ rust stained/ some rusty edges" and/or "unprotected cargo" and/or "said to be" and/or "said to weigh" and/or "stored in open area prior to loading" are acceptable. Bills of Lading (CONGEN) to give details of the contracted materials with quantity ( as mentioned under Clause 5 of the said Contract).

3. Works Test Certificate in duplicate issued by the Steel Plant (s) of the beneficiary and confirming that the materials are as per contracted specification.

4. Pre- shipment Inspection certificate issued by M/s ___________,herein after referred to as ___) certifying the following:

(a) The materials were inspected prior to loading at the load port and that the same were as per requirements of the contract for sale and purchase between beneficiary and the opener (herein after referred to as the said Contract).

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(b) Quantity loaded on board the vessel (giving details as mentioned under Clause 5 of the said Contract).

(c) The materials were loaded on board the vessel without apparent damage and were found to be in good order and condition. That the loading was done under their supervision, and were properly lashed and secured (except for pig iron) inside the hatches / holds of the vessel. Remarks such as "materials partly rust stained/ rusty edges/ wet before shipment/ rust stained/ some rusty edges" and/or "stored in open area prior to loading" and/or "unprotected cargo" appearing on Pre-shipment inspection certificate are acceptable.

5. Beneficiary's packing list indicating details of the materials shipped (as mentioned under Clause 5 of the said Contract) - 3 copies.

6. Certificate of origin.

7. Copy of cable or Telex/e-mail or Fax from _____________, ___ addressed to the opener's Telex No. ___ or FAX No. ____ within FIVE working days. after the on board Bill of Lading (CONGEN) date advising the name of the vessel, Bill of Lading (CONGEN) number and date, materials and quantity, destination ports in _____ (Country) ,covering shipment of ____METRIC TONNES.

47A ADDITIONAL CONDITIONS

1. Marine Insurance to be covered by the opener.2. Any amendment to the letter of credit without the prior written consent of the

beneficiary shall not be taken cognizance of under this letter of credit.

71B CHARGES

All Bank charges incurred outside India shall be borne and paid for by the opener. All Bank charges incurred in India shall be borne and paid for by the beneficiary.

48 PERIOD FOR PRESENTATION

Within 15 days from the date of B/L.

49 CONFIRMATION INSTRUCTIONS:

Paying Bank may add their confirmation to this Letter of Credit at the request and expense of the beneficiary and such confirmation shall also apply to any amendment (s) to this credit.

78 REIMBURSEMENT INSTRUCTIONS:

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Upon presentation to you of documents complying in all respects to Letter of Credit terms, you are authorised to claim on us by tested telex certifying that all terms and conditions have been complied with and that the relative documents have been forwarded to us by Registered Airmail Courier. We undertake to remit within two working days after receipt by us of your tested telex/swift claim in US Dollars/Euro/any other freely exchangeable currency, in accordance with your instructions. This Letter of Credit is subject to the Unifom Customs and Practice for Documentary Credits (2007 Revision) International Chamber of Commerce Brochure No. 600. This telex/swift may be treated as the operative instrument. All apparent spelling mistake/mistakes in LC documents, which do not alter meaning/specification/description/quantity/value of goods are acceptable and will not count as a discrepancy.

PRACTICES FOLLOWED BY INDIAN STEEL COMPANIES

Different companies practices different forms of trade as per their own requirements and necessities. SAIL and RINL practices FOB in maximum number of cases, whereas other companies like Tata, ESSAR, Jindal, Ispat mostly goes for CFR.

STEEL FUTURES

There have been almost revolutionary changes in the global steel scene with fierce competitive pressures on performance, productivity, price reduction and customer satisfaction. National boundaries have melted to encompass an ever increasing world market. Trade in steel products has been on the upswing with the production facilities of both the developed and the developing countries complementing each other in the making of steel of different grades and specialty for the world market.

Raw materials constitute 80% of the cost of hot metal. Therefore, raw materials are determining productivity and quality which in turn constitute the foundation for industrial development in a country. Major raw materials are iron ore, coking coal, sinter/pellet, limestone,/ dolomite/ pyroxinite. Iron ore is the most important basic raw material that is required for making iron and steel which provides foundation for industrial development of a nation. The quality and quantity of iron

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ore requirement is the key subject in today’s context. Superior quality is prerequisite for sinter making, iron making and sponge iron making.

Minerals are available to us in limited quantity. To ensure longer period of ore availability, selective and manual mining activities must be stopped and resorted to scientific mining. A plan should be worked out to use low grade iron ores after beneficiation and explore the techno-economic viability of utilizing magnetite iron ores. Products obtained from low grade iron ore and magnetite ore would be high grade concentrate suitable for sinter or pellet making. Beneficiation encompasses all of the methods used to process ore to improve its chemical or physical characteristics.

With the increase in demand of steel, we need to develop better technology to help us so that no hindrance comes in the way of production of quality steel and hence in development of the economy.

True to what Bismark, German Counsell said,” Steel is and will continue to play a prevital role in any country’s economic division.”

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