Transcript PRESENTATION ON “ STEEL – THE PREFERRED CHOICE OF MATERIAL

PRESENTATION
ON
GROWTH PERSPECTIVES OF
INDIAN STEEL INDUSTRY
BY
Sushim Banerjee, Director General
Institute for Steel Development & Growth, Kolkata
Indian Steel Conference
23-24 March 2012, New Delhi
World Growth pattern in 2005-2010
Real GDP growth (%)
Country/
Region
2005 2006
2007
2008
2009
2010
2011
(P)
2012
(P)
2013
World
4.5
5.2
5.6
2.8
- 0.6
5.2
3.8
3.3
3.9
USA
3.1
2.7
1.9
0.0
(-) 2.6
3.0
1.8
1.8
2.2
Germany
0.8
3.4
2.7
1.0
(-) 4.7
3.6
3.0
0.3
1.5
Japan
1.9
2.0
2.3
(-) 1.2
(-) 5.2
4.4
(-) 0.9
1.7
1.6
Russia
6.4
8.2
8.5
5.2
(-) 7.9
4.0
4.1
3.3
3.5
Brazil
3.2
4.0
6.1
5.1
(-) 0.2
7.5
2.9
3.0
4.0
China
11.3
12.7
14.2
9.6
9.1
10.4
9.2
8.2
8.8
India
9.2
9.7
9.9
6.4
5.7
9.9
7.4
7.0
7.3
World
Trade
Volume
7.8
8.9
7.4
2.9
(-) 11.0
12.7
6.9
3.8
5.4
(Goods &
Services)
Source : IMF, World Economic Outlook Jan ‘12
WHY STEEL ?
-
Steel : green and recyclable
-
Steel : fast-track construction with least Public
inconvenience and nuisance during construction
and thus more Environment friendly
-
Steel Structures : neighbourhood
creating dust - free environment
-
Wood largely replaced by steel preventing large
scale deforestation


friendly
Steel : more freedom of expression
Steel : more creativity and viability in design
and opportunity to express functional
requirements in structured way
3
WHY STEEL ?
FLEXIBILITY
- Steel : large column free clear spans, ideal for long spans
upto 40 metre long
- Steel structures : provide larger usable space (more carpet
area) for multi-storeyed building and large spans for bridges
and flyovers with uninterrupted traffic movement
- Latest developments in Steel making meet up the challenges
of corrosion with application of latest developed paints over
bare structural steel
- Latest development in painting technology like application
of intumescent paints or vermiculite protect bare Steel
structures directly from fire
- Steel : sustain reversible loads due to inherent properties like
ductility
- Steel more cost effective than concrete as a framing solution
4
WORLD CRUDE STEEL PRODUCTION 1995 - 2011
1527
2500
1430
1346
2000
1341
1236
1247
1144
1072
1500
970
848
1000
752
750
799
777
850
904
788
500
0
95
101
109
115
124
127
151
182
220
281
95
96
97
98
99
00
01
02
03
04
China
349
428
490
500
568
05
06
07
08
09
Rest of the World
639
695
10
11
Shift in Production Base : 2000 - 2011
USA, 12.0
Brazil, 3.3
Japan,
12.5
2000
USA, 5.6
Brazil, 2.3
India, 3.2
South
Korea, 5.1
EU-27,
11.0
2011
Japan, 7.0
India, 4.7
South
Korea, 4.5
Ukrane, 2.3
Russia, 4.5
EU-27,
24.1
China,
15.0
ROW, 11.8
Ukrane,
Russia,
3.8
7.0
China, 45.5
ROW, 14.0
Global Steel Capacity Utilization
WORLD TRADE IN STEEL PRODUCTS
(Million Tons finished Steel)
YEAR
EXPORTS
PRODUCTION
EXPORTS %
1980
140.6
578.7
24.3
1990
171.0
654.0
26.2
2000
307.1
782.5
39.2
2002
313.1
836.2
37.4
2004
366.2
992.5
36.9
2005
371.3
1062.2
35.0
2006
418.3
1158.6
36.1
2007
443.8
1251.4
35.5
2008
436.2
1234.6
35.3
2009
326.3
1147.0
28.4
2010
386.4
1316.4
29.4
Source: World Steel In Figures,2011
Apparent Consumption:2008-2011 (MT)
Country
2008
2009
Y-O-Y%
2010 (P)
Y-O-Y%
2011 (P)
Y-O-Y%
2012 (P)
Y-O-Y%
China
447
551.4
23.4
587.6
6.7
623.3
6.1
649.4
4.2
USA
98.4
59.2
(-) 39.8
79.9
35.0
89.2
11.6
93.8
5.2
India
51.4
57.9
12.5
64.9
12.2
68.0
13.6
73.1
7.9
Japan
78.0
52.8
(-) 32.3
63.5
20.2
64.0
0.8
63.4
(-) 0.9
S. Korea
58.6
45.4
(-) 22.5
52.4
15.4
56.1
7.2
56.7
1.0
Russia
35.4
24.8
(-) 30.1
35.9
43.8
40.9
14.0
42.6
4.1
Germany
42.4
28.0
(-) 34.0
35.9
27.3
39.1
8.8
38.9
(-) 0.5
Italy
33.3
20.1
(-) 39.7
25.7
27.2
26.8
4.5
25.1
(-) 6.3
Brazil
24.0
18.6
(-)22.8
26.1
40.5
25.0
(-) 4.2
26.7
6.9
Turkey
21.5
18.0
(-) 16.0
23.6
30.7
26.9
14.1
29.0
6.9
Spain
18.0
11.9
(-) 34.0
13.1
13.0
13.2
(-) 1.0
12.8
7.8
World
1218
1140
(-) 6.4
1302
14.2
1378
5.8
1431
3.9
Source: WSA February 2012
GLOBAL PRICE MOVEMENT- FINISHED STEEL
1800
1600
1530
1400
1230
1200
925
1000
785
910
776
863
697
800
635
570
600
502
580
575
598
555
668
625
580
425
400
550
592
584
630
610
665675
610
590
420
365 463
435
470
675
681
525
603
552
710
623
545
493
491
446
200
0
Dec'0 6 M ar '0 7
Jun e'0 7 Sept '0 7
Dec'0 7 M ar '0 8
July'0 8
Sept '0 8 Dec'0 8
HRC
Rebars
Apr '0 9
Jun e'0 9 Sept '0 9
Sept 07-July 08
114%
177%
Source: HRC: Russia Black Sea Export FOB($/T)
Dec'0 9
M ar '10
July 08-Apr'09
-70%
-70%
Apr '10
M ay'10 Jun e'10
Apr'09-Feb'11
113%
42%
July'10
Nov'10
Dec'10
Feb'11 - March'12
(-) 5.3%
(-) 13%
Source: Rebars: Turkey Export FOB($/T)
Feb'11 M ar ch'12
GLOBAL PRICE MOVEMENT- RAW MATERIALS
800
700
743 585
600
525
500
493480
473 455 465 470
435 445
560
425 390 395
400
385
340
464 437
317418 433 440 465
300
275
405
395
245
376
358 358 367
203 185
200
323 315
176 182 152.5
312
165 172 193 148
158 189
285 172 187
266
1
32
257
1
25.5
1
03
100
91
91
91
76
77 63
0
Dec'06
M ar '07
June'07 Sept '07
Dec'07
M ar '08
Jul y'08
Dec'08
Series1
A pr '09
Jul y'09
Oct '09
Series2
Jan'10
A pr '10
M ay'10
June'10
Jul y'10
Nov'10
Dec'10
Feb'11 M ar ch'12
Series3
Sept 07-July 08 July 08-Apr'09 Apr'09-Feb'11 Feb'11 - March'12
11%
-66%
206%
(-) 23.3%
102%
-65%
16%
(-) 5.7%
148%
-27%
71%
7.90%
Source : SBB - India Iron Ore: China CFR; Coke: China; Export (FOB) Melting Scrap:
East Asia Import HMS(80:20)
CURRENT FEATURES IN GLOBAL STEEL MARKET
Global Economy projected to grow by 3.3 percent in 2012
after clocking 3.8 percent in 2011.
Subdued steel demand in EU, Japan and USA.
Restriction on real estate and restructuring of small scale
polluting steel units and recent strategy of moderating
GDP growth rate by China leads to a suppressed growth
in steel demand. Would Surplus steel in China cause
concern to India?
Marginal hike in Finished Long Steel prices following
rise in scrap prices with less volatility in coal & iron ore
prices – may dampen move for immediate price increase.
STRUCTURE OF INDIAN ECONOMY
(% SHARE IN GDP)
Category
198081
200001
200607
2007-08
2008-09
2009-10
2010-11
(QE)
2011-12
(AE)
Primary
38.1
23.9
18.1
18.0
17.2
14.6
14.5
13.9
Secondary
25.9
25.8
28.9
29.1
28.5
28.1
27.8
27.0
(Manufacturing)
13.8
15.3
16.1
16.1
15.6
15.9
15.8
15.4
(Construction)
6.6
5.8
8.2
8.4
8.6
7.9
7.9
7.7
Tertiary
36.0
50.3
53.0
52.9
54.3
57.3
57.7
59.1
Total
100
100
100
100
100
100
100
100
GDP Growth (%)
7.6
4.4
9.6
9.3
6.8
8.0
8.4
6.9
22.7
31.3
32.9
32.3
31.6
30.4
29.2
23.7
34.6
36.8
32.0
33.8
32.3
31.6 (e)
Gross Fixed
Capital
Formation (% of
GDP at Market
Prices)
Domestic
Saving (% of GDP
at Market Prices)
1.
2.
3.
Data for 2006-07 onwards based on 2004-05 prices as per revised estimates.
Stagnant share of Manufacturing and Secondary Sector in GDP
Share of Industry in GDP: China (59), S. Korea( 44), Kazakhsthan (37)
(Source : CSO, Economic Outlook : 2011-12)
PERCENTAGE GROWTH IN MAJOR INDL. SEGMENTS
Segments
---------------PERCENTAGE GROWTH DURING----------------
Weight
199495
199596
200506
200607
200708
200809
200910
201011
AprilJan’12
(Apr –
Jan’11)
ELECTRICITY
103.16
8.5
8.1
5.2
7.3
6.3
2.7
6.1
5.5
8.8
(5.3)
MANUFAC
TURING
755.27
9.8
13.6
10.3
15.0
18.4
2.5
4.8
9.0
4.4
(8.9)
MINING
141.57
9.8
9.7
2.3
5.2
4.6
2.6
7.9
5.2
(-) 2.6
(6.3)
CAPITAL
GOODS
88.25
24.8
17.9
18.1
23.3
48.5
11.3
1.0
14.8
(-) 2.8
(17.0)
CONSUME
R
DURABLES
84.60
10.2
36.1
16.2
25.3
33.1
11.1
17.0
14.2
3.9
(13.7)
TOTAL
INDUSTRY
1000.00
8.4
12.7
8.6
12.9
15.5
2.5
5.3
8.2
4.0
(8.3)
Source: CSO, Series for 1994-95 & 1995-96 on 1993-94 = 100
base and all others on 2004-05 = 100 base
Indian Steel Industry
 4th largest producer of crude steel in the world
 Current capacity of crude steel : 78 mt slated to go upto
140 mt by 2016-17 and around 200 mt by 2020
 Largest producer of sponge iron in the world (27.6 mt
comprising of 43.5% share in world production)
 3rd largest consumer of finished steel in the world
 Crude Steel Capacity estimated to rise by 11% by 2012
 Weight of 6.68 in Infrastructure Index
 A Net Importer of Steel
17
70
Trend of Steel Consumption in India
65
65.610
59.340
60
CONSUMPTION IN MILLION TONNES
55
52.12552.351
50
46.783
45
41.433
40
36.377
35
33.119
30.677
28.523
26.500
25.100
23.546
22.634
21.29422.128
18.661
30
25
20
15
8.848
10
5.361
5
0
0.000
6.280
1.227
YEAR '51-52 '64-65 '74-75 '84-85 '94-95 '95-96 '96-97 '97-98 '98-99 '99-00 '00-01 '01-02 '02-03 *0304
Source: JPC
*0405
*05- '06-07 '07-08 '08-09 '09-10 10-11
06
Steel Consumption in India grew @ 8.9 percent annually in last decade
against 4% annual growth in Global Steel Consumption
18
Indian Steel:Demand Drivers
Construction (Infrastructure)
 Projects
 Transport of Petroleum/ Water
 TLT
 Rail tracks
Manufacturing
 Tube Making
 Wire drawing
 Fabrication
 Fastners
 Power plant equipment
 Agricultural implements
 Household appliances
Auto

Commercial Vehicle

Passenger cars

Two wheelers

Auto Components
Each of these segments has good potential to grow
Infrastructure Building and Construction
 Construction Sector composed of :
- Infrastructure : 54 percent
- Industrial Expansion : 36 percent
- Residential and Commercial : 10 percent
Sectoral Break-up of Construction Sector :
Building
76%
Mineral Plant
18%
Roads
63%
Medium Industry
20%
Bridges
65%
Transmission
22%
Domestic
75%
Urban Infrastructure
66%
Power
38%
Maintenance
81%
Railways
78%
 Assuming 80% fulfillment, the projected investment
in infrastructure (at current prices) to generate on an
av. steel demand for around 214 mt for next 5 years i.e.
43 mt per annum for infrastructure sector
INFRASTRUCTURE DEFINED
The tentative master list of infrastructure subsectors as on
01.03.2012 which may be reviewed subsequently are :
Category
Transport
Energy
Water
Sanitation
Communication
Social &
Commercial
Infrastructure
Infrastructure Sub-sectors
Roads & Bridges, Ports, Inland
Waterways, Airports, Railway Trucks &
Bridges, Urban Public Transport
Power Generation & Distribution, Oil &
Gas Pipeline & LNG Storage Facility
Solid Waste Management, Water
Treatment & Pipelines
Tele-communication
Educational Institutions, Hospitals,
3-star or more Hotel, Industrial Park,
SEZ Fertilizers, Cold Storage, etc.
ENABLING INFRASTRUCTURE FOR MANUFACTURING GROWTH
 India ranks 54th among 57th countries in Infrastructure facilities against
China (37), Brazil(32), Thailand(20).
 Energy (27% T&D losses, 14% peaking deficit) and Logistics costs
impacted by quality of Infrastructure
 Cost of Power comparable, but erratic and unreliable power supply
leading to frequent use of Generators and enhancing cost.
 Poor Roads increase Freight (only 20% of NHs are 4 lanes, 50% 2 lanes
& 30% single lane)
 Average Port turnaround time is 84 hrs against Thailand (10 hrs), Sri
Lanka(17 hrs) and poor port connectivity – inadequate berths and draft.
 Average Truck speed in India at 40 kmph against China(60) and
USA(100) leading to higher logistic costs.
 Average time taken for Environment and Forest clearance is 1 to 3 years
resulting in delay in 60% of power projects and 40% of Road projects.
Projected Investment in Infrastructure (Revised)
(at 2006-07 prices)
XI Plan
Rs. Crore
Share
(%)
Electricity (incl. NCE)
6,66,525
32.42
Roads and Bridges
3,14,152
15.28
Telecommunication
2,58,439
12.57
Railways (incl. MRTS)
2,61,808
12.73
Irrigation (incl. Watershed)
2,53,301
12.32
Water Supply & Sanitation
1,43,730
6.99
Ports
87,995
4.28
Airports
30,968
1.51
Storage
22,378
1.09
Oil & Gas Pipelines
16,855
0.82
100
Sectors
Total
2056151*
Infrastructure Investment to reach 7.1% of GDP in 11th Plan from 5.15% of GDP in 10th Plan
* Anticipated Investment in infrastructure in 11th Plan : Rs.1948069 Cr
Investment in Infrastructure : Volume and Pattern
*
Projected investment in infrastructure in XII Plan :
$ 1 trillion (Rs. 49,50,000 cr reaching around 9.7% of GDP) against China’s
current infrastructure investment of 11%
*
Public investment predominantly in non-commercial sector like rural
roads and Private investment in commercial sectors e.g. roads, ports,
airports. Viability Gap Funding, setting up of IIFCL.
*
Private Investment to reach 50% of total investment in infrastructure in
12th Plan up from 37% in 11th Plan. 100% FDI for Ports, Roads and
Aviation Infrastructure.
*
Private Capital in public projects via PPP route – Maximum in NHDP and
also in State Roads, Airports and Ports
*
Transparent, investor – friendly standardized documents with specific
guidelines / safeguards on user charges / interest (RFP for selection of
Consultants & Financial Bids ,RFQ for pre-qualification of bidders).
Share of Private Investment in 11th Plan
90
80
70
60
50
40
30
20
10
0
83
82
61
45
42
4
Electricity
Telecom
Source : Planning Commission
Roads
Railway
Ports
Airports
Steel and Infrastructure
 Steel demand projected to reach 113 mt by 2016-17, the
terminal year of 12th Plan.
 Demand
realization
contingent
on
Gross
Fixed
Capital
Formation to reach 35-36 percent of GDP and investment in
infrastructure to at least 9% of GDP.
 Manufacturing sector comprising of steel-intensive capital
goods, consumer durables and construction sectors slated to
enhance its share in GDP from current level of 16% to 25% by
2020 as per New Manufacturing Policy.
 Creation of industrial clusters for growth of manufacturing
requires development of infrastructure.
26
Growth of Manufacturing and Processing Industries
<-----------------------------------% Growth in Production --------------------------------->
Category
Steel Items used
2006-07
2007-08
2008-09
2009-10
2010-11
April ’11 – Jan‘12
Machinery &
Equipments
Strls/Plates
14.2
9.3
8.8
21.0
29.4
(-) 3.0
Transport Equipment
Strls/Plates
15.0
2.8
2.5
24.4
23.2
14.3
CRGO
4.6
2.7
(-) 1.9
16.5
13.4
21.4
HRS/Strls
22.4
(-) 2.2
(-) 0.4
26.3
23.9
22.7
CRC/S
25.0
14.1
3.1
25.8
9.8
(-) 12.2
CR/Rounds
27.4
6.8
(-) 2.4
13.6
8.8
4.5
HR/CR
18.3
14.8
6.7
26.0
28.4
2.3
CR/Rounds
14.7
(-) 5.2
4.6
24.2
24.7
15.4
CRC/S/Plates
33.0
4.8
(-) 23.6
36.0
32.8
24.1
Drums & Barrels
CRC
17.0
3.3
(-) 21.4
42.7
(-) 2.5
2.9
LPG Cylinders
HRC
51.5
13.4
5.7
55.0
13.9
(-) 8.7
Washing Machines
CRC
11.3
11.5
8.1
26.4
(-) 0.8
(-) 4.3
Diesel Engines
Sheets/Plates/Strl
35.3
11.6
18.8
5.3
11.2
6.8
Material Handling
Equip.
Plate/Sheets/Strls
115.5
(-) 17.2
(-) 3.5
22.9
(-) 8.4
9.2
Power & Dist.
Transformer
Complete Tractors
Refrigerators
(domestic)
Bicycles
Passenger Cars
Two Wheelers
Commercial Vehicles
Source : MOC
DOMESTIC STEEL SCENARIO OF FINISHED STEEL
PRODUCTION
IMPORTS
EXPORTS
APPARENT CONSUMPTION
(Net of double counting)
SOURCE: JPC
Million Tonnes
LONG
FLAT
TOTAL
GROWTH/CPLY
2006-07
24.7
26.8
52.5
12.7%
2007-08
26.3
29.8
56.1
7%
2008-09
27.0
27.2
57.2
2%
2009-10
27.0
33.6
60.6
5.9%
2010-11
31.0
35.1
66.1
9.1%
2006-07
0.5
4.4
4.9
14%
2007-08
0.7
6.3
7.0
43%
2008-09
0.7
5.1
5.8
(-) 17.1%
2009-10
0.8
6.6
7.4
27.6%
2010-11
0.7
6.1
6.8
(-) 8.1%
2006-07
0.6
4.6
5.2
8.3%
2007-08
0.7
4.4
5.1
(-) 2%
2008-09
0.4
4.0
4.4
(-) 13.7%
2009-10
0.4
2.9
3.3
(-) 25%
2010-11
0.4
3.1
3.5
6.17
2006-07
26.1
30.7
46.8
13%
2007-08
28.0
24.1
52.1
11.1%
2008-09
27.1
25.3
52.4
0.6%
2009-10
29.0
30.3
59.3
13.2%
2010-11
33.5
32.1
65.6
6.2%
Processwise Crude Steel Production (% Share)
Process
2005-06
2010-11
BF – BOF
52
47
EAF
18
26
IF
30
27
Total
100
100
Around 1174 no. of IF units are working with a Working Capacity of 25.84
million tonnes
Projections for 12th Plan (2012 – 13 to 2016-17)
2010 - 11
2016 – 17
(Projections)
CAGR
(%)
78
140
10.2
69.6
126
10.4
Finished Steel Production
66
115
9.7
Export
3.8
7
10.7
Import
7
5
(-) 5.5
65.6
113*
9.5
Crude Steel Capacity (MT)
Crude Steel Production
Finished Steel
Consumption
(*Based on a GDP elasticity of 1.14)
Growth Prospects and Constraints
 Modern day EAFs using chemical heat of
Hot Metal to get low power and electrode
consumption.
 Oxygen injection, ladle furnace, slag
practice, water cooled wall etc lead to
high productivity.
 Can produce customized, high quality
alloy / special steel to
Automobile,
Railways,
Aerospace, etc.
cater to
Defence,
Raw Marterial Scenario
 Melting Scrap from domestic sources dwindling
 Rising Price of imported melting scrap
 Good quality scrap availability is a concern
 Sponge iron / DRI emerged as a substitute (mostly coal
based – non coking coal and iron ore fines in pellet form)
 Nearly 80:20 ratio as a charge mix
 Current trend of minimizing cost of power (60% of cost of
production) is to set up captive power plants and sponge
iron unit by IF producers.
 Gas availability being limited and earmarked for priority
sectors like Power, Fertilizers, no capacity expansion for gasbased S I Unit.
Constraining Factors in Steel Promotion
 Low awareness on benefits of steel in
Construction.
 Limited knowledge on steel design w r t RCC
 Non availability in required sizes and shapes
 Unfavorable Codes and Standards
 Lack of appreciation for Life Cycle Cost
 Inadequate
manpower
fabrication
facilities
 PFP & HPP Paints not in Codes.
/
trained
STEEL INDIA’S GLOBAL JOURNEY
Risk Elements
 Management of Economic policies : Investment led
rather than consumption led. Set of Economic
Reforms.
 Use of raw materials for value addition within the
country.
 MM&DR and land acquisition policies must favour
industry.
 Steel capacity enhancement to lead to Massive load on
transport infrastructure. Need for National Integrated
logistics policy
STEEL INDIA’S GLOBAL JOURNEY
Risk Elements
 Technology transfer on a large scale –
-
Iron making : FINEX, HISMELT, COREX, ITBK-3, CDI
Steel making : Thin slab casting, Thin strip processing
Rolling mills : Secondary Refining, CRGO Steel, API
X- 100, Bake Hardened Steel, AHSS, TRIP Steel
Critical segments to be Partners in Progress in Product
Development
ULCOS (Ultra low Co2) steel making : Breakthrough
Technology & Hydrogen based steel making to reduce
Co2 emission (POSCO)
 Implementation of New Manufacturing Policy
 To make Indian steel globally competitive and preferred
source of supply by reducing the cost of Doing Business in
India. (132 ranked out of total 183 countries)
 Quality awareness to be the inherent process of activities by
both the consumers and suppliers
STEEL INDIA’S GLOBAL JOURNEY
Risk Elements
 Merger, Acquisition and Consolidation to take route in
India
 Thrust on Retail Marketing – Make Steel available in
Rural and Semi Urban Areas
 Active promotion of use of steel in actual construction –
Steel Concrete Composite Construction and develop
Steel Fabrication facilities through Skill-cumEntrepreneurs Development Programme in rural areas.
 Integrated
approach by Govt, industry and all
stakeholders to make Indian steel a top class global
player in the next decade