Indian Ferro Alloy Industry –An Outlook

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InterfaceIndian Ferro Alloy Industry –An Outlook

Steel Industry Snap Shot

Ferro Alloy Industry
Demand Drivers

Industry Structure

Capacity, Production, Exports & Imports


Raw Materials and Inputs

Manganese

Chrome

Power

Demand of Steel

Ferro Alloy Capacity Utilisation
Capacity Addition

Infrastructure

India’s Competitiveness

Conclusions

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  • 1. Federation Of Indian Mineral Industries (FIMI) Presented At Manganese/Chrome Ores and Ferro-Alloys Buyer-Seller Interface Indian Ferro Alloy Industry – An Outlook Prabhash Gokarn, Tata Steel 13-14 May, 2010
  • 2. 2
  • 3. CONTENTS  Steel Industry Snap  Demand Shot Demand of Steel Expected Production Ferro Alloy Capacity Utilisation  Ferro Alloy Industry Capacity Addition Demand Drivers Industry’s Structure Capacity  Infrastructure Production, Exports & Imports  India’s Competitiveness  Raw Materials and Inputs  Conclusions Manganese Chrome Power 3
  • 4. STEEL INDUSTRY A SNAP SHOT 4
  • 5. PRODUCTION OF CRUDE STEEL 60000 50000 16933 18000 15390 40000 INDUCTION FURNACES 30000 13250 14820 14500 EAF UNITS 309 315 264 20000 ASP ,VISL 21868 21789 21759 10000 SAIL,RINL,TISCO 0 2006-07 2007-08 2008-09 2006- 2006-07 2007- 2007-08 2008- 2008-09 50817 53857 54523 9.38 % 5.98 % 1.24 % QTY IN ‘OOO TONNES 5
  • 6. CRUDE STEEL IN 2009-10(APR’09-JAN’10)  Production of Crude Steel was 52.20 MT, CRUDE APR’ 09 – % CHANGE a growth of 7.2 % STEEL JAN ’10  The main producers Main 19.43 MT 5.7 % produced 19.43 MT, Producers Others 32.77 MT 8.0 % a growth 5.7% . Producers  The other Producers Total 52.20 MT 7.2 % produced 32.77 MT, a growth of 8%. 6
  • 7. INDIA AS A GLOBAL MAJOR INDIA LIKELY TO OVERTAKE RUSSIA BY 2010-11 2010- 7
  • 8. STEEL GROWTH PROFILE  Indian economy is growing @ 8-9 % - Presently 7.75 %  In January 2010, Index of Industrial Production Growth was 17.9 % as compared to the level in January 2009 .The Cumulative growth for the period April 2009-January 2010 stands at 9.9 % over the corresponding period of the previous year.  Growth Index for Consumer Durables – 22 %  Growth in Automobile production was 17 %. 8
  • 9. STEEL CAPACITY (In Million Tonnes) Steel Plants Capacity likely in 2011-12 SAIL 24.80 RINL 6.80 TATA 10.00 ESSAR 14.50 JSW 11.00 JSPL 10.50 ISPAT 5.00 BHUSHAN POWER & STEEL 4.00 BHUSHAN STEEL LTD. 6.00 OTHERS 28.50 TOTAL 124.10 9
  • 10. FERRO ALLOY INDUSTRY 10
  • 11. DEMAND DRIVERS OF FERRO ALLOYS Ferro Alloys are used primarily in steel making as deoxidant and alloying agent. Depending upon the process of steel making and the product quality envisaged, the requirement of Ferro Alloys varies widely. Demand Drivers of Ferro Alloys: Crude Steel Production Alloy Steel Production Stainless Steel Production 11
  • 12. INTRODUCTION TO FERRO ALLOYS Principal Functions of Alloying : Increases Corrosion / Oxidation Resistance, Increases Hardenability, Tensile Strength Wear & Abrasion Resistance Increases High Temperature Strength, Creep, Strength, etc. Ferro Alloy Industry : Part of Core Sector under Ministry of Steel  Supplying Crucial Intermediates to Steel Industry  Completed Five Decades Bulk & Noble Ferroalloys used in Steel Production as De-Oxidant Alloying Agent 12
  • 13. INDUSTRY STRUCTURE  Fully Integrated Advantages - Having Ore and Electricity - Competitive cost of  Better Cost Advantage Production  Partially Integrated - Having either Ore or Electricity  Distinct Edge if Ore/ - Having Captive Ore/Electricity Electricity is available gives an edge  CPPs give an alternate  Non Integrated revenue stream - Dependant on buying Ore and Electricity - Facing tough Competition  Benefits if Prices are High 13
  • 14. CAPACITIES 32% 5% Capacity (in Million Tonnes) 1% Manganese Alloys 2.50 62% Ferro Silicon 0.20 Chrome Alloys 1.30 Noble Ferro Alloys 0.04 FeSi Mn Alloys Noble Fe Alloys FeCr TOTAL 4.04 14
  • 15. REGION-WISE CAPACITIES BULK FERRO ALLOYS – CAPACITY in MVA EAST WEST CENTRAL NORTH SOUTH INDIA  MANGANESE ALLOYS 875 150 317 7 225 1574  FERRO SILICON 119 - - 6 71 196  CHROME ALLOYS 695 24 42 13 106 880  TOTAL 1689 174 359 26 402 2650 64% 7% 14% 1% 15%  Ferro Alloy Industry is concemtrated in Eastern India :  Near major resources – Mn Ore & Chrome Ore  Near major Steel Plants  Near areas of cheap, available power 15
  • 16. PRODUCTION PERFORMANCE Qty in ‘000 Tonnes Ferro Alloys 2008-09 2007-08 2006-07 HC Fe Mn 370.5 378.0 281.0 Refined Fe Mn 14.1 13.2 15.7 Si Mn 845.4 858.6 738.3 Refined Si Mn 46.0 52.8 44.7 Fe Si 99.6 83.7 92.6 HC Fe Cr 814.9 948.4 801.1 Refined Fe Cr 2.4 0.2 0.2 Other Ferro Alloy 27.5 29.7 27.8 Total 2220.4 2364.6 2001.4 % of Increase (-)6.1 18.15 21.6. 16
  • 17. EXPORT PERFORMANCE Qty in ‘000 Tonnes Ferro Alloys 2008-09 2007-08 2006-07 HC Fe Mn 101.3 101.19 42.0 Refined Fe Mn 20.2 12.6 12.2 Si Mn 300.4 262.6 152.1 Fe Si 37.2 9.4 7.9 HC FeCr 491.7 483.0 287.7 Other Ferro Alloys 9.3 9.3 8.6 Total 960.1 878.8 510.5 % of Increase 9.25 72.14 20.51 Value In Million $ 1561.37 1131.78 377.55 % Increase In Value 37.96 199.77 38.93 17
  • 18. IMPORT OF FERRO ALLOYS Qty in ‘000 Tonnes Ferro Alloys 2008-09 2007-08 2006-07 HC Fe Mn 6.0 2.0 1.0 Refined Fe Mn 16.0 20.0 11.0 Si Mn 0.2 0.5 0.2 Fe Si 82.7 96.3 86.8 HC /LC Fe Cr/Ch Cr 12.4 20.2 19.1 Other Ferro Alloys 15.4 17.2 9.1 Total 132.7 156.2 127.2 % of Increase 15.04 22.80 30.73 Value in Million $ 340.99 271.17 172.13 % Of Value 25.75 57.54 28.88 Import Duty % 0 5 7.50 18
  • 19. IMPORT CUSTOMS DUTY 120.00% Import Duty on Ferro Alloys 105.00% 100.00% 85.00% 80.00% Axis Title 60.00% 50.00% 40.00% 30.00% 25.00% 20.00% 15.00% 25.00% 7.50% 5.00% 5.00% 20.00% 20.00% 0.00% 10.00% 0.00% 1992- 1993- 1994- 1995- 1996- 1997- 1999- Jan-04 Jul-04 Mar-05 Mar-06 22-Jan- 30-Apr- Jan-09 93 94 95 96 97 99 2003 07 08 19
  • 20. RAW MATERIALS & INPUTS 20
  • 21. Manganese Ore As Per Indian Bureau of Mines Survey Report of 1-4-2005 1- Total inferred reserves of Manganese Ore - 378 MT Proved Reserve 77 MT Probable Reserve 61 MT Total Recoverable Reserves 138 MT Present Production: Over 2 Million Tonnes Imports 2008- 2008-09 2007- 2007-08 2006- 2006-07 (In Tonnes) Tonnes) 824,297 686,052 284,202 Imports % 41 % 34 % 14 % (Mainly HG Mn Ores are imported) 21 Source: IBM/Ministry of Commerce
  • 22. Chrome Ore As Per Indian Bureau of Mines Survey Report of 1-4-2005 Total inferred reserves of Chrome Ore - 213 MT Proved Reserve 31 MT Probable Reserve 35 MT Total Recoverable Reserves 66 MT Present Production Around 3.5 Million Tonnes Imports 2008- 2008-09 2007- 2007-08 2006- 2006-07 (In Tonnes) Tonnes) 94,415 1,21,000 4,800 Imports % 3% 3% 1% (Imports are negligible, that too of Lumpy Cr Ore, which is in short supply) Source: IBM/Ministry of Commerce
  • 23. POWER Low Power Generation Cost in India - Comparable to the World High Power Tariff due to : - Low Plant Load Factor – inefficient generation -High Transmission & Distribution Losses - inefficient transmission -Cross Subsidies to Agriculture State wise variation in Electricity : availability, power tariff, power quality 23
  • 24. POWER Positive Impact of On-going Power Reforms : - Captive Power Plants – advantage of an alternate revenue stream. - Power Wheeling - - New Generation Capacities being set up - - Alternative Energy Sources apart from thermal : gas based, wind, nuclear CAPACITY ADDITIONS IN NEXT TWO YEARS (ESTIMATED)  CAPTIVE POWER PLANTS (13 UNITS) 1000 MW 24
  • 25. POWER CRISIS IN CHINA Positive Impact On Indian Ferro Alloy Producers of Power Crisis In China : China biggest electricity producer & consumer in the world China has been facing regional power shortages since 2002 (Liaoning, Jiangsu, Zhejiang, Guangdong provinces in particular) Lack of long-distance power transmission capacity – no national grid, 6 regional grids long- China needs to add new annual capacity of 48GW in a steady state growth model High dependence of China on Hydro-Power(30%) Hydro- Northern areas experience shortages in winter due to increased heating demand & problems with coal deliveries. Eastern & southern areas are prone to shortages in late spring/early summer as temperatures & air-conditioning demand rise, while reservoir levels & hydro-electric air- hydro- output falls. China power tariff increases – competitiveness of India increases. Opportunity of India to export ferro alloys in markets where China is till now dominent. dominent. 25
  • 26. POWER – SOUTH AFRICA • Electricity supply dominated by the State owned utility of South Africa, ESKOM. • ESKOM has a capacity of 35 200 MW from 20 power plants. • ESKOM generates around 2/3rd of the electricity produced in the whole of Africa • Eskom provides about 95% of South Africa's electrical power • Generation primarily coal-fired, One nuclear power station at Koeberg, Two gas coal- Koeberg, turbine facilities, Two conventional hydroelectric plants, and Two hydroelectric pumped- pumped-storage stations. • In 2008 South African electricity demand exceeded supply capacity. • Eskom increased tariff by about 30% and 20% recently, More importantly, all industries face power restrictions – including ferroalloy industry; limiting ability of South Africans to expand market share temporarily. Opportunity of India to consolidate position in global ferro alloys trade & seize the value-buildup opportunity!! value- 26
  • 27. DEMAND 27
  • 28. FINISHED STEEL DEMAND (INDIA) (Million Tonnes) Product 2011-12 (GDP growth at 9 %pa)  Flat 41.32  Non-Flat 29.02  TOTAL FINISHED STEEL 70.34 28
  • 29. PROJECTION – CRUDE STEEL PRODUCTION (INDIA) (Million Tonnes) Producer/Route 2010-11 2011-12  A) Oxygen Route  1) SAIL (Incl. VISL) 19.48 21.53  2) RINL 6.60 7.60  3) TSL 8.00 9.00  4) JINDAL:  a) Corex-BOF 1.50 1.50  b) BF-BOF 3.50 4.00  c) MBF-EOF 0.80 0.80  A) TOTAL OXYGEN ROUTE 39.88 44.43  B) Electric Furnace (EF) Route  1) SAIL (ASP & SSP) 0.65 0.65  2) Other EAF Units 11.25 12.15  Induction Furnace Units 10.50 11.00  B) TOTAL EF ROUTE 22.40 23.80  C) NEW UNITS PROPOSED 10.00 12.00  D) GRAND TOTAL A+B+C 72.28 80.23 29
  • 30. PROJECTED SS DEMAND IN INDIA IN ‘000.TONNES YEAR FLAT LONG TOTAL  2010 1685 373 2058  2015 3185 900 4085  GROWTH 11.5 % 17.5 % 12.3 % SOURCE: ISSDA MARKET RESEARCH 30
  • 31. CAPACITY UTILIZATION Quantity in Million Tonnes Capacity Production Capacity During 2009-10 Utilization %  Manganese Alloys 2.50 1.40 56  Ferro Silicon 0.20 0.10 50  Chrome Alloys 1.30 0.85 65  Noble Ferro Alloys 0.04 0.03 75  TOTAL 4.04 2.38 59 31
  • 32. CAPACITY ADDITIONS CAPACITY ADDITIONS IN NEXT TWO YEARS(ESTIMATED) FERRO ALLOYS CAPACITY MANGANESE ALLOYS (42 UNITS) 980 MVA FERRO CHROME (8 UNITS) 440 MVA FERRO SILICON (3 UNITS) 54 MVA TOTAL 1474 MVA 32
  • 33. INDIA’S COMPETITIVENESS Ore Power Reductants Logistics Labour Overall  CIS 2 2 2 3 2 11  China 1 2 3 3 3 12  Europe 1 2 1 3 1 8  India 2 2 2 2 3 11  Japan 1 1 2 3 1 8  South Africa 3 2 2 3 1 12 1 – Low availability, 2 – Moderate availability, 3 – Advantageous availability 33
  • 34. SWOT STRENGTHS: WEAKNESSES: Mineral Reserves High Cost of Capital Growth prospects of Steel Industries High Cost of Grid Power Low Labour Cost Dependency on Reductants Proximity to Consumers Unavailability of High Grade Ores Proximity to Ports for Exports Lowering Import Customs Duty Cheap Power Option from CPP Less importance to R&D and infrastructure OPPORTUNITY: THREATS: Booming Steel capacity/market Mushrooming growth of Ferro Alloy Plants Scope for improving infrastructure Increasing Imports of Ferro Alloys Industrial & Economic Reforms Exports of raw materials Captive Power Plants Increasing Export Market Opportunity in Ferro Alloys 34
  • 35. INFRASTRUCTURE – THE ROAD AHEAD Infrastructure includes:  Electricity, Telecommunication, Transport Sectors – Roads and Bridges, Railways, Ports, Airports, Irrigation, Water Supply and Sanitation, Storage and Gas Distribution Sectors  Project investments as % of GDP – 9 % in 2011-12 from 6.53 % from 2008-09  Investment Plan during 11th and 12th 5 year plans US$ 15200 trillion  Ports, Airports, Electricity and Storage are key focus areas  Private – Public participation to play major role  Private sector investment to be around 30 % - 40 % 35
  • 36. INFRASTRUCTURE -TARGETS  POWER Additional power generation capacity about 78,577 MW  NATIONAL HIGHWAYS Constructing 8,737 Km of roads, including 3846 Km of National Highways in the North East  RURAL Constructing 1,29,707 Km of new rural roads , and renewing and upgrading existing.  RAILWAYS Constructing Dedicated Freight Corridors between Mumbai-Delhi and Ludhiana – Kolkata 8132 Km of new railway lines; gauge conversion of 7148 Km. Modernisation and redevelopment of 22 railway stations. Introduction of private entities in containers trains for rapid additions of stocks and capacity 36
  • 37. INFRASTRUCTURE -TARGETS  PORTS Capacity addition of 485 MT in Major Ports,345 MT in Minor Ports  AIRPORTS Modernisation and redevelopment of 4 metro and 35 non-metro airports. Constructing 3 Greenfield airports in North East. Constructing 7 other Greenfield airports .  TELECOMMUNICATIONS AND INFORMATION TECHNOLOGY Achieving a telecom subscriber base of 600 million, with 200 million in rural telephone connections. Achieving a broadband coverage of 20 million and 40 million internet connections . 37
  • 38. OPPORTUNITIES AND POTENTIAL AREAS Power Roads Transmission & Generation Distribution US $ 143bn US $40bn US $116bn Coal Refineries US $ 26bn Investment US $22bn Estimated in Energy & Cross Country Infrastructure Oil & Gas Pipelines Upto 2012 US $100bn US $ 10bn US $ 587 bn Ports LNG Terminals Railways US $ 20bn US $ 10bn US $ 100bn 38
  • 39. CONCLUSIONS  Indian Economy is expected to grow at an accelerated growth rate of 8-10%.  Steel Production is expected to be around 75 million tonnes by 2011-12.  Welcome sign for Ferro Alloy Industry as domestic consumption of Ferro Alloys will increase.  Raw Material and Logistics will play a crucial role.  Captive power plants give the option of cheap, un-interrupted power as well as alternate revenue streams. 39
  • 40. CONCLUSIONS India has the potential to be a major player in the Global Ferro Alloy Industry replacing China in the coming years.  Industry’s dominance in Asian market to rise in future.  Industry’s capacity is more than sufficient to meet the domestic requirement of Steel Industry.  If export growth rate is not maintained domestic market will be plagued with overcapacity.  Need to acknowledge market factors & seize market opportunity ferro alloys and steel, now!! 40
  • 41. Minerals Ferro Alloys Mineral Ferro Alloy Producers Steel Producers WORKING TOGETHER TO DOMINATE THE WORLD 41
  • 42. 42