Transcript Raw materials outlook for India

Raw materials outlook for India
- A Review
A D Baijal
VP (Raw Materials)
Tata Steel
IISI-OECD CONFERENCE
Date: 17th May, 2006
1
Presentation Outline
Steel Industry
- Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
2
Global steel demand poised for robust growth
Crude Steel Production (Million Tonnes)
1,200
1,000
800
The Early
Years
The 1st
Plateau
The 1st
Surge
The 2nd
Plateau
600
400
CAGR
5%
200
CAGR
2%
Great
WW 2
Depression
WW 1
CAGR
1%
CAGR
7%
Oil Crisis
The 2nd
Surge
CAGR 5
%
Fall of
USSR
Asian
Financial
Crisis
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
3
The Global Economic Forecast: Asia poised to be the
emerging power house of growth
• In 2020, the US and China will still be the two largest economies in the world (in PPP)
• India leaves Japan behind and moves up to 3rd place
• India, Malaysia and China will post the highest GDP growth rates (above 5%) over 2006-20
• Ireland, the US and Spain are the rich countries expected to grow the most
4
Indian Economy
 GDP per capita to increase from USD 2500 and USD 5000
in 2020.
 Poverty ratio dropped from 50% of population in 1950 to
26% in 2005.
 Economic growth rate ~ 8%
 Population growth rate of 1.3 - 1.5%
 33% population below 15 years and 5% above 65 years
 House hold savings rate go up from current 23% to 30%
 100,000 MW new capacity (90% of present) in next 7
years.
 The Fiscal Responsibility and Budget Management Act
 Literacy standards increase from 18% in 1951 to 65% in
2002.
5
Steel Consumption Vs. GDP
Steel Consumption and GDP per Capita in 2004
Steel consumption (kg/capita)
10000
1000
S.Korea
China
Taiwan
Japan
100
US
India
Other Africa
10
0
5000
10000
15000
20000
25000
30000
35000
40000
GDP per capita (US$000 at PPP rates)
Bubble size represents the population
The growth in BRIC will double the steel demand by 2050
Source: internal analysis
6
Growth in key sectors will drive the steel demand
Apparent Steel consumption
of countries
1400
U
A
E
Kgs per Capita
1200
T
1000
an
w
ai
So
h
ut
K
800
600
400
UAE – 1252
ea
or
H
g
on
K
g
on
an
p
Ja
> 150 MT, The
present gap
y
an
lia
a
m
tr
er
us
G
SA
A
U
200
0
ce
a
n
a
in
r
h
F
C
a
di
n
I
World Avg. – 170
India – 33
Countries
We feel the growth trigger has been fired…..…..
(Last 3 years GDP growth of + 7.5%)
7
Production sites will move to regions with both RM
source and demand.
Avail-ability of Iron Ore
Excess
CIS
Latin
America
Raw Material
basin
India
Growth basin
USA /
Canada
EU
Deficit
Japan
Low
Eastern
Europe
Mature basin
Forecasted Growth rate 2005-15
China
Other
emerging
Asian
countries
High
8
Indian Steel production likely to triple in next 15 years
National Steel Policy
Projections
Crude Steel : mtpa
Steel Production
150
Planning
Commission
projections
125
110
100
70
75
50
50
29
31
34
36
2000-01
2001-02
2002-03
2003-04
25
0
2006-07
2011-12
2020
Year
To realize the above projections, it would be necessary to put in place the
right policies as well as alignment of the policies
Presentation Outline
Steel Industry
- Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
10
Multifold increase in Raw Material Consumption
200
190
180
160
140
120
2004-05
2019-20 (F)
100
80
60
70
54
39
40
27
26
13
20
13
0
Iron Ore
Coking coal
Non coking coal
Fluxes
11
States
Ore
Fe
Range
(%age)
Alumina
(%age)
Phos
Max
(%ag
e)
A-Orissa,
Jharkhan
d
Haem
atite
62-64
2-4
0.040.1
BChattisga
rh, MP,
Maharash
tra
Haem
atite
64-66
1.0-4.0
0.040.15
CKarnataka
Haem
atite
D-Goa
EKarnataka
Haem
atite
Magn
e
62-64
2.0-4.0
60-63
2.0-4.0
35-45
1.0
*
0.040.09
0.040.07
-
*
Indian Iron Ore Reserves:
Five Zones
*
*
States
Major Mines / Deposits
A-Orissa,
Jharkhand
Chiria, Noamundi, Joda,
Kiriburu, Meghataburu,
Thakurani, Bolani, Gua,
Malangtoli, Gandhamardan,
Daitari
B-Chattisgarh,
MP,
Maharashtra
Bailadila, Dalli,Rajhara,
Rowghat, Mahamaya,
Aridongri, Surajgarh
C-Karnataka
Donimalai, Ramandurg,
Kumaraswamy, NEB Range,
Ettinahatti, Tumti, Belagal
D-Goa
N Goa, S Goa, Redi
E-Karnataka
Kudremukh, Bababudan,
Kudachadri
*
12
Iron Ore
Production Trend
Indian Resources: 23 bt
350
10%
million tonnes
300
AP
6%
250
200
150
Karnataka
14% Jharkhand
39%
100
50
3%
0
Orissa
'99-00 '00-01 '01-02 '02-03 '03-04 '04-05 2020
Production
Consumption
Exports
10%
18%
13
Natural iron ore resources can support lump: fines
ratio of 20:40 as against current adverse trend of 40:60
90.00
The current steel production through BF/BOF:DRI:others is 60:33:7
77.9
80.00
Lumps
70.00
67.1
Fines
Concentrates
60.00
55.1
Million Tons
53.0
50.00
41.2
40.00
47.4
45.2
39.6
33.6
34.6
6.0
6.4
6.5
6.1
7.1
2000-01
2001-02
2002-03
2003-04
2004-05
30.00
20.00
10.00
0.00
- Fines are mostly being exported
- DRI route uses 100% lumps, detrimental to mineral conservation
- Economies of scale not available with large number of small players to set up
sintering / pelletization facilities
- Increasing use of fines in agglomerates in bigger size blast furnaces can
increase its productivity and bring down cost/tss
14
Domestic DRI production : Trend and Forecast
million tonnes
40
Growing
@~7%
30
20
10
0
88
91
94
97
'00
Capacity
'03
'04 '05
'06
'20
Production
Increasing DRI production may lead to faster depletion of high
quality lumpy ore reserves
15
Source: Tata Steel analysis
With expected CAGR of ~7% and exports at 50 mtpa,
India will become an importer of iron ore in next 40 years.
Exports of iron ore =50 Mtpa
NATIONAL STEEL GROWTH
CAGR=3
CAGR=4
CAGR=5
CAGR=6
CAGR=7
15000.00
1000
Iron Ore Production MTPA
10000.00
Reserves
in MT
800
700
5000.00
600
0.00
500
Iron Ore
Production
in MT
400
300
-5000.00
200
Mineable Reserves (Mt)
900
-10000.00
2050-51
2048-49
2046-47
2044-45
2042-43
2040-41
2038-39
2036-37
2034-35
2032-33
2030-31
2028-29
2026-27
2024-25
2022-23
2020-21
2018-19
2016-17
2014-15
2012-13
2010-11
2008-09
2006-07
0
2004-05
100
-15000.00
Most of the iron ore reserves are in reserve forest and environment
sensitive areas making the actual availability of reserves much less
16
Imperative – Need for conservation and resource
enhancement
Challenges
- Selective mining of high grade
lumpy ores (DRI).
- Many low volume producers
- Mismatch in agglomeration
capacity and fines generation.
- Lower production (33%) routed
through beneficiation.
- Increasing exports.
Conservation ….for future
o Scientific Mining
o Agglomeration capacity
o Use of pellets for DRI
o Beneficiation.
o Technology for using
Slimes
o Restricting exports.
Enhancement …
o Detailed / Scientific
Exploration
17
Indian Coal Reserves
Billion tonnes
Proven: 35
Indicated: 30
Total : 65
Proven: 7
Indicated: 8
Total : 15
Proven: 11
Indicated: 12
Total : 23
Proven: 14
Indicated: 30
Total : 44
Proven: 5
Indicated: 2
Total : 7
Proven
90
Indicated
110
Inferred
46
Total
246
Proven: 9
Indicated: 25
Total : 34
Proven: 8
Indicated: 6
Total : 14
18
Domestic Coking Coal
Coal Reserves, BT
Coking Coal Producers
Washed Coal Ash
Semi-Coking
28
CIL
5.8
BCCL
18%
Prime Coking
6
Tata Steel
3.3
CCL
18%
Non Coking
212
Others
0.5
Tata Steel
13%
Total
246
3%
Coking
86%
14%
11%
Non-Coking
Prime Coking
Med Coking
The Indian Coal, both coking and non coking is characterized by
high ash and low washability index.
19
Geological Survey of India : As of 1.1.2001
Imports of Coking Coal to increase due to low
Indigenous availability
25
MTPA
15.1
16.8
18.4
20.0
8.3
8.2
88
Coking Coal
80
62
15
10
100
21.0
8.2
8.1
8.1
8.1
MTPA
20
20.0
60
40
20
5
28
8
13
10
0
0
2001-02
2002-03
2003-04
Indigenous Coal
2004-05
2005-06
Imported Coal
2006-07
2005
Demand
2015
2025
Domestic Supply
- The additional demand for coking coal will be 70 mt by 2020
for 110 mt steel demand as per national steel policy
- For coking coal, dependence on imports to continue
Source: 10th Plan report
Need to conserve the scarce coking coal resources
Challenges
- High ash
- Poor washability
- Over 40% coking coal used
for thermal use.
- 70% demand met through
imports
Conservation of resources for
future use
o Beneficiating
o Improving washing
capacity / efficiency
o Technology using
medium coking coal for
coke making
o Steel making technology
using non-coking coal
- Low domestic availability*
Enhancement of capacity
o Developing new sources
o Detailed exploration
21
*Coal Strategy: Reducing coking coal requirements
Mining:
- Beneficiation technology
- Improving mining / washing process efficiency
Coke & Sinter Making
- Quality Coke from semi coking indigenous coal.
- Using low ash imported coal for blending
- Reducing Alumina level in iron ore for improving sinter & BF
productivity and reducing coke requirement
Iron Making:
- Pulverized Coal Injection using semi/non coking coal
- Tar Injection
- Using more pellets
- Using sponge iron for feed
22
Limestone
Limestone
Reserves
BF grade
World
India
BF grade
SMS grade
SMS grade
Abundant
160 bt
15 bt
7 bt
Current Requirement
Requirement in 2020
3.1 mt
9.5 mt
7 mt
22 mt
• SMS Grade available in Rajasthan and Himalayan regions.
• While Environment and logistics constrains Himalyan
exploitation, high freight from Rajasthan is adverse.
• Stringent quality requirement further restricts availability
Therefore, Dependence on imports for steel grade limestone
to continue…
23
Chrome Ore
Figures in million tonnes
Cr Ore Reserves
Production Ore
Production Fe Cr
World
11068
18
6
India
115
3.2
0.6
• Ferro-Chrome industry in India is highly fragmented
• >98% Chrome ore reserves in Orissa.
• Chrome ore tons expected to ~ 10 mt by 2020.
• High conversion cost to Ferro Chrome due to high power cost
Globally competitive power tariffs to avoid shift to countries where
power is cheaper.
24
Manganese
Figures in million tonnes
Mn Ore/Reserves Production Ore
Production FeMn,
SiMn
World
5000
29
10.5
India
406
1.4
0.71
• International market for Mn alloys have dipped in recent years
• Manganese ore tons expected to grow to 4.5 mt by 2020
• The usage of Mn alloys for steel making is limited by
– Low Mn content and high phos in Mn Ores
– High power cost for conversion
Therefore ….
• Need to explore and develop more high grade Mn resources
• Beneficiation to improve the lower grade coupled with sintering
Source: Mineral Commodities Summary: 2002, IBM
25
Presentation Outline
Steel Industry
- Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
26
Evolution of India’s Regulatory Environment
1950 ~ 1991 – Tightly regulated industry
 Iron ore reserved for Public Sector Companies
 Growth subjected to “Industries (Development & Regulation)
Act 1951”
 Pricing regulated by “JPC Price Mechanism”
 Distribution subjected to controls such as “Freight Equalization
Scheme”
 Foreign Investment discouraged
 Foreign trade regulated by Canalization policy
An Industry insulated from Market forces
27
Evolution of India’s Regulatory Environment…
1991 onwards : Economic Liberalisation
 Steel Sector opened to private participation
 Included in list of “High Priority” industries
 Up to 100% FDI allowed in prospecting & mining Iron ore
 No separate approval for prospecting and mining necessary
 Decanalisation of low grade Iron Ore (Fe<64%) trade.
 Decanalisation of high grade Iron Ore (Fe>64%) - Export
License given for limited quantity and time .
28
Challenges & Policies for meeting growth demand
Challenges
- Fragmented capacities
- Unscientific operations
- Inadequate power & transport
infrastructure
- Delay in grant / renewal of
mineral leases
Policy Reforms under
consideration
o Minimum production
levels for lease grant
o Scientific Mining and
Mineral Beneficiation
o Lease grant solely on the
basis of technical &
financial capability
o FDI & private sector
participation for
infrastructure
development
o Time bound
29
grant/renewal process
Challenges & Policies for meeting the growth demand
Challenges
- Long drawn process
for land/forest/
environmental
clearance
- Socio/political
pressures
- Limited iron ore /
coking coal reserves
Policies reforms under consideration
o Creation of land bank / private
sector participation in afforestation
o Social / Environment cost to be seen
in Long Term perspective
o Transparent implementation of the
laws
o Technology / private participation
for detailed exploration
o Large area prospecting license
o Linking iron ore resources to
integrated and other steel plants
o De-nationalization of coal mines
o De-reserving areas for private sector
for a level playing field
30
Presentation Outline
Steel Industry
- Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
31
Rail Freight in India are high
Railway Distance & Freight of Major Players
900
9
800
8
700
7
600
6
500
5
400
4
300
3
200
2
100
1
0
Australia
Brazil
S.Africa
India
Transport Cost
3.03
3.5
5.87
8.11
Rail Distance
315
650
847
477
Transport Cost
US $/Ton
Km's
Weighted Ave. Rly distance & costs (Iron Ore) -2002
0
Rail Distance
32
Inland Transportation of Raw Material
Traffic in steel sector (mt)
Road
Railway
250
200
150
100
50
0
Raw Material
Finished Steel
Raw Material
2004
2020
Finished Steel
Inland transportation:
– Infrastructure being beefed up for the incremental volumes
33
Source: Economic Survey, 2003-04.
Railways – The challenges
Challenges
• Tariff & Capacity
out of sync with a
high growth
environment
• Operational
efficiencies.
Initiatives …
• Expansion of facilities
• Development of raw material
corridor for faster movement of
raw materials to ports and
consumption points
• Improving services
• Costlier longer hauls
• Reinforcing existing tracks
• Lower bulk
movement per haul
• Improvement in freight
structure
• Participation of private sector
through SPV / own your wagon
34
Ports
120
2003-04
100
2019-20
100
85
80
70
60
40
26
20
18
2
6
6
0
Import
RM
Export RM
Import
Finished steel
Export finished steel
• The port facilities would also have to be expanded substantially.
• Improving productivity, turn around time, capacity to handle larger
vessels and other operational parameters of efficiency are critical.
• Private sector participation in ports increasing
• Feeder balance (mainly railways) is a key issue
35
Port facilities comparison
250,000
25.00
Existing
200,000
20.00
150,000
15.00
100,000
10.00
50,000
5.00
0
Slg draft (Mtrs) & Tariff ($/Mt)
Ldg Rate & average parcel size (Mt)
Proposed
Ports
Being
designed
for higher
operationa
l efficiency
and
capacity
0.00
Dampier/Aus
Cape
Lambert/Aus
Total Tariff/Mt
PDM/Brz
Saldhana/SA
Parcel size
Vizag
Paradip
Ports
Haldia
Loading rate (act.ave.)
Dhamra
Paradip 2
Haldia/T'spr
G.Draft
36
Presentation Outline
Steel Industry
- Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
37
India – A Land Of Opportunities
India – A Land Of Opportunities
Rich Mineral Base
Fourth largest
Economy (PPP) - A
safe place
to do business
Largest reservoir of
skilled/semi-skilled
manpower at low
cost
Long-term sustainable
Competitive advantage
- High growth rate
economy
Developing
Infrastructure
Second Largest
Emerging Market
Largest democracy
– political stability
& consensus on
reforms
Liberal &
transparent
investment policies
High returns on
investment
Regulatory Reforms
38
THANK YOU
39
NOT required
40
==>
VALUE in USE .. or .. TOTAL COST
DELIVERED PRICE
COST
CONVERSION COST
TOTAL COST
QUALITY of RAW MATERIAL ==>
41
Productivity, t/m3/day
Productivity of the Blast Furnace and Raw
Materials
Impact of
superior
RM quality
2.85
2.6
2.35
2.1
1.85
1.6
500
1000
1500
2000
2500
3000
Inner volume, m3
3500
4000
4500
42
Blast furnaces Tata Steel
Typical size, m3
3800
4000
3500
2600
3000
2500
2000
1500
1600
F BF
1800
Upgraded
G BF
H BF
G BF
1000
1990
1995
2005
2010
43
Growth in Tuyere Injection
F BF, kg/thm
130
120
110
100
90
80
70
60
50
Before PCI
System Up
grdation
After PCI system
Up grdation
FY'06 (Plan)
44
Growth of Tar injection
Tar injection, '000 tpa
80
60
41
40
20
65
67
2003
Jan'05
rate
45
22
0
0
1995
1997
1999
2001
45
Reduction in Clean Coal Ash-West Bokaro
Raw Coal Ash: 35 %
19.6
20
17.6
18
18.0
18.1
17.0
16
16.2
16.5
16.0
15.2
14
14.2
12.0
12
19.6
13
Clean Coal Quantity LT
Clean Coal Ash %
Current rate
10
1993-94 2001-02 2002-03 2003-04 2004-05 2005-06 'Jan
46 06
Impact at Coke Plant………reduction in coke ash
Coke Ash
Stamp Charged
20.0
19.5
19.0
19.5
18.9
18.5
18.0
WB coal ash
reduced to
17%
17.5
17.0
16.5
17.8
Imported coal
amount
increased
17.4
WB coal ash
reduced to
16%
16.0
15.5
WB coal ash
reduced to
14%; Jharia
coal ash
reduced to
16%
16.3
15.7
15.0
99-2000
2000-01
2001-02
2002-03
2003-04
2004-05
47
Reduction in Coke Alkali with coke ash
Coke Alkali ,
CP1
Jun-05
Dec-04
Jun-04
WB coal ash
reduced to
14%
Jun-03
Dec-02
Jun-02
Dec-01
Jun-01
Dec-00
Jun-00
Dec-99
Jun-99
Dec-98
Jun-98
Dec-97
Jun-97
Dec-96
Jun-96
Dec-95
Jun-95
Imported coal
amount
increased
Dec-03
0.45
0.40
0.35
0.30
0.25
0.20
0.15
48
Response to low ash coke: ‘G’ bf
49
30-05-03
23-05-03
16-05-03
09-05-03
02-05-03
25-04-03
18-04-03
11-04-03
04-04-03
28-03-03
21-03-03
14-03-03
07-03-03
28-02-03
21-02-03
14-02-03
07-02-03
31-01-03
24-01-03
17-01-03
10-01-03
03-01-03
27-12-02
20-12-02
13-12-02
50
13-06-03
06-06-03
Response to low ash coke: ‘G’ bf
G bf: HM Si, %
1.1
1
0.9
0.8
0.7
Quality of Fine Ore supplied to Sinter Plants
2.75
2.56
2.45 2.41 2.42
2.50
2.25
2.39 2.38
2.25 2.23 2.21
Classification
started at
Joda
2.18
2.01
2.09
2.00
Jigging
at Noa
Adjoining Mines in same deposit
operate from 2.5% to 3% Alumina if FO
'05-06
'04-05
'03-04
'02-03
'01-02
2K-01
99-2K
98-99
97-98
96-97
95-96
94-95
1.75
Al2O3% in Fines
51
Impact at Sinter Plant….sinter alumina
Alumina in Sinter, %
Tata Steel, annual avearges
5.0
4.7
4.36
4.5
Improved washing,
classification
3.91
4.0
3.66
3.44 3.39
3.5
Blue dust, Dry Ckt
Increased volume
from better areas, use
of reverts
3.22
3.03
2.84
3.0
2.74 2.74 2.68
2.61 2.59 2.57 2.59 2.6
Low alumina
fuels & fluxes
2.51
2.5
2.43 2.44
2.28
03-04
02-03
01-02
00-01
99-2k
98-99
97-98
96-97
95-96
94-95
93-94
92-93
91-92
90-91
89-90
88-89
87-88
86-87
85-86
84-85
2.0
52
Impact at Sinter Plant…..sinter alkali
Sinter Plant K2O,%
SP2
0.070
0.065
Use of
Gotan L/s
0.060
0.055
0.050
Use of RPC
0.045
2000-01
2001-02
2002-03
2003-04
2004-05
53
SP2
2004-05
Sinter Plant Productivity
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
30.0
1990-91
Gross Productivity, t/m 2/d
Impact on Sinter Productivity
SP1
45.0
40.0
35.0
SP2
commissioned
25.0
20.0
54
Results at Blast Furnaces ………thru’ RM improvement initiatives
Increasing HM Production
Actual HM(A-G),mtpa
4.44 4.45
4.50
3.89 3.93
4.00
3.44 3.51
3.50
4.04
3.63
3.24
G BF down
for upgradation
2.92
3.00
2.60
2.50
4.34
2.40 2.44
04-05
03-04
02-03
01-02
00-01
99-00
98-99
97-98
96-97
95-96
94-95
93-94
92-93
91-92
2.00
55
Decreasing Fuel rate
A BF down
for hearth
repair
655
639
647
Fuel rate
622
613
625 Coal
injection
613
610
604 606
608
605
606
587
579
Coal injection
+
583
Tar injection (from FY’97)
550
546
559
554
543
558
552
541
536
528
'04-05
'03-04
02-03
01-02
00-01
99-00
98-99
97-98
96-97
95-96
94-95
93-94
92-93
Coke rate
56
9.2
9.0
9.1
8.3
7.9
331
7.1
311
7.0
6.8
6.7
281
279
279
04-05
316
03-04
321
02-03
330
328
297
01-02
00-01
99-00
98-99
97-98
96-97
288
9.9
9.6
9.3
9.0
8.7
8.4
8.1
7.8
7.5
7.2
6.9
6.6
6.3
6.0
57
Slag MgO, %
9.2
95-96
375
365
355
345
335
325
315
305
295
285
275
265
Slag Rate and slag MgO :'G' BF
9.8
94-95
Slag rate, kg/thm
Decreasing Slag rate
58
Productivity, t/m3/day
Productivity of the Blast Furnace and Raw
Materials
Impact of
superior
RM quality
2.85
2.6
2.35
2.1
1.85
1.6
500
1000
1500
2000
2500
3000
Inner volume, m3
3500
4000
4500
59
60
61
62
TARIFFS
Item
CTC Dubai
Sila
Eastern,
Thailand
FOB $/t
6.5
7.5
Freight, $/t
12
11
Gotan
Katni
Price at Port 1160
1160
356
250
Rly Freight
370
1463
771
370
Chemical Analysis %
Si02
o.36
0.77
1.19
3.86
Al2o3
0.24
0.21
0.21
0.68
CaO
54.82
54.38
54.06
50.17
MgO
0.59
0.84
0.75
1.90
Total Alkali
0.155
0.144
0.140
0.238
63
64
65
World Steel Production
1500
1410
1400
3% growth rate
1300
1200
1129
1057
Million tonnes
1100
965
1000
902
900
800
752
750
1995
1996
799
777
789
1997
1998
1999
848
850
2000
2001
700
600
500
2002
2003
2004
2005
2010
66
Iron Ore: India
Million Tons
350
300
Steel Production
Iron Ore Consumption
Iron Ore Exports
Iron Ore Production
250
200
150
100
50
0
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
4-0 05-0 06-0 07-0 08-0 09-1 10-1 11-1 12-1 13-1 14-1 15-1 16-1 17-1 18-1 19-2
0
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
50
0
Source: Tata Steel
Goa
Chattisgarh
10
Orissa
20
Karnataka
30
Others
Jharkhand
Major Producers
40
68
69
70
Seaborne Coking Coal Demand to rise
71
Seaborne Coking Coal Supply to increase mainly
from Australia
72
World Iron Ore and Steel Prices
Source: Australian Commodities Vol 13, Mar’06
73
World Iron Ore and Coal Resources
World Coal
Total Resource: 1000 bt
World Iron Ore
Total Resource: 180 bt
3%
12%
20%
13%
21%
5%
10%
14%
19%
9%
5%
16%
Australia
India
Ukraine
27%
17%
4%
5%
Brazil
Kazakistan
Others
China
USSR
Source: National Mineral Inventory, IBM, 2003
Australia
Russia
USA
China
Ukraine
Others
India
South Africa
74
Indian Economy poised to grow at a rate of ~ 8%
GDP Growth RATE OF INDIA
12
The GDP growth rate is about 6.1% in last 10 years.
Projected GDP growth in next 15 years ~ +8%
8.2
8
6.9
7.8
8
%
5.6
4.4
4.4
4
0
FY'01
FY'02
FY'03
FY'04
FY'05
FY'06 FY'07E
India has strong economic fundamentals like low inflation, high growth, strong
financial sector, large forex reserves, high savings rate and young / knowledgeable
75
workforce.
(*) Source: Economic Survey and RBI
Indian iron ore Resources
Iron ore resources (mt) Total reserves – 23 bt
Magnetite grades are
30-35% Fe
10000
8000
Reserve Forest
6000
Wild Life
4000
Remaining Reserves ?
2000
er
s
Magnetite
Haematite
Ot
h
AP
Go
a
ak
a
Ka
rn
at
ar
h
tis
g
d
Ch
at
ar
kh
an
Jh
Or
is
sa
0
Most of the iron ore reserves are in reserve forest and environment
sensitive areas making the actual availability of reserves much less76
Source: IBM estimates
Global Chrome Ore Reserves
Kazakhstan
7%
Zimbabwe
19%
Source: Heinz Pariser
Finland
1%
India
1%
Other
1%
South Africa
71%
77
Issues & Policies for meeting the growth demand
Issues
- Large capital requirement
for a risk prone mineral
industry with long
gestation period
- Lack of FDI inflow
Source: Ministry of Mines (figs do not include coal projects)
Policies reforms under consideration
o Improving labor laws
o Enforcing attractive R & R
initiatives
o Reduction in import duties on
mining equipment
o Accelerated depreciation /
Amortization benefits for premining expenditure
o Security of tenure
FDI inflows in US $ Billion (1992-2002)
Country
1999
2000
2001
2002
India
4
4.5
4.2
4.4
China
40
Total approved FDI in mining
41
47
Rs 4044 cr / $ 919 million
53
Actual Inflows
Rs 343.6 cr / $ 78 million (only 8%)
78
Freight Constitutes a significant portion of the raw
material cost
Domestic
Iron Ore
41%
50%
9%
Mining
Govt Levies
14%
7%
Imported
Coking
Coal
Rly Freight
11%
Domestic
Coking Coal
15%
71%
82%
FOB
Ocean Freight
Rly Freight
Mining
Govt Levies
Rly Freight
79
NEGATIVE IMPACT OF FRAGMENTATION OF MINES
Industry/players
Negative
impact of mine
fragmentation
• Higher cost of mining/processing
• Inability to undertake the following due
to huge investments involved
–Beneficiation of iron ore to maximize
utilization of reserves
–Reforestation of mined areas
• Inadequate availability of logistics
infrastructure and higher cost due to their
inability to give traffic guarantee
Country/society
Government
• Opportunity loss of
royalty
–Annually
–Over the life of the
reserve
• Under-exploitation of
natural resource
• Inadequate reforestation
of areas after mining with
severe environmental
impacts
80
81
82
83
84
85
86
87
Projected Additional Steel Capacity
Company
FY
05 A
FY 06
E
FY 07 E
Tata Steel
4.2
0.8
SAIL
10.8
1.0
Ispat
2.4
1.2
Essar
2.4
1.2
JVSL
2.5
1.3
JSPL
0.4
0.7
RINL
3.0
1.2
Bhushan
1.8
1.0
1.0
FY 08 E
0.8
FY 09 E
FY 10 E
2.4
7.7
0.8
1.0
FY 11 E
1.0
FY 12 E
Total Additional Capacity
6
16.9
1
6.6
1.2
4
5.2
1.3
1.2
1.9
1.2
1.2
3.6
1.0
Posco
3
3
6
12.0
Mitsui
5
5.0
Vedanta
5
5.0
Murugappa
1.6
1.6
Others
EAF/IF, Others
Total
13.4
40
3.8
2.9
3.2
3
2
5.0
5.9
1.0
1.4
2
1.5
6.8
6.2
25.9
17.5
Source: Industry data, Company data, Morgan Stanley estimates
14.2
73.8
88
World Reserves of Major Minerals
Mineral fuels
UoM
World
India
% of World
Coal
bt
1000
102
10
Bauxite
bt
34
3.1
9
Manganese ore
bt
5
0.4
8
Iron Ore
bt
180
13
7
Zinc & Lead
bt
3.4
0.2
7
Rare Earths
mt
110
1.3
1
Chromite
bt
11
0.1
1
89
Saleable Steel - Elements of Cost
Fluxes
12.3%
Others 60%
Net
Material
Cost 40%
Others
0.2%
Coal
53.0%
Iron Ore
34.5%
Saleable
Steel
Raw Material is the major cost driver of saleable Steel
The demand supply for Ferro Chrome is expected to increase
8000
Demand Supply of Fe Cr: World ( Forecast)
85
7500
70
70
7000
144
711
6500
6296
6025
6000
90
7846
80
7508
70
65 6772 60
50
5656
5500
40
6875
43
50
40
30
20
10
0
81
180
5000
2003
2004
2005
2006
Cum Effective Capacity
Fe Cr Demand
2007
2008
2009
2010
2011
Capacity Additions
Fe Cr Prices
91
Saleable Steel - Net Material Cost Rs./TSS
(Element, Rs./t, percentage)
Converted
Coke, 2%
Coal, 39%
Middling, 2%
Iron Ore, 8%
Limestone,
10%
Others 60%
Dolomite, 0%
Net
Material
Cost 40%
Pyrex, 1%
Saleable
Steel
Other RM, 0%
Pig
Iron/Sponge
Iron, 29%
Scrap Cons,
9%
Forecast : Steel Consumption in BRIC Economies
Growth in BRIC is enough to double the world consumption of steel by 2050.
93
BRIC Theory: Progressive shift of world power centers to
happen within next 3 decades.
• GDP of Brazil, Russia, India & China - expected to cross G-6 by 2036.
• China - Expected to attain global # 1 status in 2041
• India - Expected to attain global # 3 status in 2032
2032 :
India takes
over Japan
50000
2041 : China
takes over the US
GDP (USD - Bn)
45000
CHINA
US
40000
INDIA
35000
30000
JAPAN
25000
20000
BRAZIL
15000
10000
RUSSIA
5000
0
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
94
Source: Goldman Sachs Global Economy
New capacities are coming up for ferro chrome
The major New FeCr Capacities in pipeline
till 2007
Demand Supply of Fe Cr: World ( Historical)
Plant
Country
Capacity
(MT)
Year
SA Chrome
SA
120,000
2006
ASA Metals
SA
65,000
2006
Xtrata “Lion”
SA
330,000
2006-07
TVL
SA
245,000
2006
Tisco ,
R.Bay
SA
120,000
2006
Hernic
SA
160,000
2005
Kaz Chrome
Kaz
300,000
2005-06
Outokompu
Finland
250,000
2007
India
160,000
2005-07
Chelyabinsk
Russia
250,000
2005-07
IMFA Group
India
60,000
2006
Nav Bharat
FA
India
25,000
2006
Jindal
95
Enhanced use of agglomerates in big blast furnaces
World over the steel companies are using agglomerates in excess of 80%.
Increasing use of agglomerates increases BF productivity and reduction of
overall cost / tss .
96
Raw Material demand in India to increase by 13% to meet
the rise in steel demand
Sectoral Share % in 2004 - GDP
growth 6%
Sectoral Share % in 2010 - GDP
growth 8%
14
24.4
24.6
34
Agriculture
Services
Industry
Agriculture
Services
Industry
52
51
Imperatives for 8% GDP Growth
 Manufacturing must grow at 11%
 This means a growth of 13% for Mining Industry if it has to contribute 5% to
GDP by 2010 instead of 2.5% at present.
 13% growth in mining has to be driven by few lead minerals such as coal, iron
97
ore, supported by other minerals.
Robust growth in infrastructure, power, construction
and steel sectors will drive the Steel Demand
Investment in construction sector (Rs m)
2500
2000
Construction sector will grow
at CAGR of 15%.
1500
1000
500
0
FY'03
FY'04
FY'05
FY'06 E FY'07 E FY'08 E FY'09 E FY'10 E
Source: SSKISept’05 issue
Expenditure on Infrastructure
Incremental
Consumption in '000
tons
Incremental Steel demand for
Power Sector
1200
1000
800
600
400
200
0
'04
'06E
'08E
'10E
'12E
In addition there will be investment for additional 25 mt capacity in steel itself98by
2010. Potential for steel - 25-30% of the investment cost.
20
18
Supply Logistics - Indian ore weakness
16
Bleeding profitability
14
12
10
SSL & FOB costs - Directly
proportional
8
6
4
2
0
Marandoo
Mining costs are competetive
Robe
Carajas
Mining
SSL
Sishen
FOB price (fines)
Bailadila
Reference
FOB cost
99