Indian steel demand is expected to be muted over the next two years due to economic slowdown affecting end user demand. Global flat steel prices are set to decline in 2012-2013 as global prices for iron ore and coking coal decline due to weak demand and oversupply. Profitability for players across the steel value chain will come under pressure due to demand side concerns and potential shortages of iron ore and coal in the domestic market. Indian steel demand is projected to pick up from 2013-2014 as infrastructure project execution gains traction.
India has become the worldâs fourth-largest producer of crude steel. The country is slated to become the second-largest steel producer by 2015 as large public and private sector players strengthen steel production capacity in view of the rising demand.
The total market value of the steel sector in India stood at US$ 57.8 billion in 2011 and is expected to touch US$ 95.3 billion by 2016. Total crude and finished steel production grew at a compound annual growth rate (CAGR) of 6.6 per cent and 4.2 per cent over FY08-11 to reach 69.6 million tonnes (MT) and 66 MT respectively.
Steel consumption is expected to grow at an average rate of 6.8 per cent to reach 104 MT by 2017 driven by rising infrastructure development and growing demand for automotives. The infrastructure sector is Indiaâs largest steel consumer, accounting for 63 per cent of total consumption in FY11. Attracted by the growth potential of the Indian steel industry, several global steel players have been planning to enter the market. The Government of India (GOI) has allowed 100 per cent foreign direct investment (FDI) in the sector through automatic route in order to attract foreign investments.
Challenges & future scenario of steel industry 1GS Dhir
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Power point copy of Presentation made by me on "Challenges & Future Scenario of Steel "Industry in Reliance General Insurance (RGICL's) National Conference on "Latest Trends & Practices in Steel Sector" held at Mumbai on 17-18 Jan 2014
Global steel industry and in particular China: future outlookMining On Top
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Mining On Top: Stockholm 2013
26-27 Nov 2013
Global steel industry and in particular China: future outlook â Dr Nae Hee Han, World Steel Association; Chief Economist
India has become the worldâs fourth-largest producer of crude steel. The country is slated to become the second-largest steel producer by 2015 as large public and private sector players strengthen steel production capacity in view of the rising demand.
The total market value of the steel sector in India stood at US$ 57.8 billion in 2011 and is expected to touch US$ 95.3 billion by 2016. Total crude and finished steel production grew at a compound annual growth rate (CAGR) of 6.6 per cent and 4.2 per cent over FY08-11 to reach 69.6 million tonnes (MT) and 66 MT respectively.
Steel consumption is expected to grow at an average rate of 6.8 per cent to reach 104 MT by 2017 driven by rising infrastructure development and growing demand for automotives. The infrastructure sector is Indiaâs largest steel consumer, accounting for 63 per cent of total consumption in FY11. Attracted by the growth potential of the Indian steel industry, several global steel players have been planning to enter the market. The Government of India (GOI) has allowed 100 per cent foreign direct investment (FDI) in the sector through automatic route in order to attract foreign investments.
Challenges & future scenario of steel industry 1GS Dhir
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Power point copy of Presentation made by me on "Challenges & Future Scenario of Steel "Industry in Reliance General Insurance (RGICL's) National Conference on "Latest Trends & Practices in Steel Sector" held at Mumbai on 17-18 Jan 2014
Global steel industry and in particular China: future outlookMining On Top
Â
Mining On Top: Stockholm 2013
26-27 Nov 2013
Global steel industry and in particular China: future outlook â Dr Nae Hee Han, World Steel Association; Chief Economist
This reports gives reader an overview of India steel industry. It will explain India position from world prospective, its working and dominant players.
about the steel industry,Product of the industry, PEST analysis, Porter's five forces, Market Share, Future of the industry, Growth of the industry, Nation steel policy.
Iron and Steel Industry in India ( Seminar Presentation)DineshKumar4749
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This file is all about understanding about Iron and Steel Industry in India. This file can directly be used for seminar presentations about India and the steel industry in India.
This reports gives reader an overview of India steel industry. It will explain India position from world prospective, its working and dominant players.
about the steel industry,Product of the industry, PEST analysis, Porter's five forces, Market Share, Future of the industry, Growth of the industry, Nation steel policy.
Iron and Steel Industry in India ( Seminar Presentation)DineshKumar4749
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This file is all about understanding about Iron and Steel Industry in India. This file can directly be used for seminar presentations about India and the steel industry in India.
Indian steel is doing well from many years. Steel industry is contributing near about 1.2% in the total GDP. Because of the industrial growth and other important developments happening all over the world the so rapid rise in demand of the steel is observed in this sector. The major players in the steel industry are SAIL (Steel Authority of India.) TATA STEEL and ESSAR STEEL. Indian steel mainly contributes in the finished steels, semi-finished steel, pig iron and stainless steel. Private sector plays very important role in the Indian steel industry. The private sector in the steel industry contributes approximately 2/3rd of the total market of the steel. With the growing position steel industry is supporting in the continuous growth in the economic.
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Govt. Policies for Non Ferrous Metal Industry-Primary/Secondary/MSME - Mr. J C Laddha, CEO, Copper Business, Hindalco Industries Ltd.
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Continuous Casting: Get more from your CasterRakesh Niranjan
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Putting the SPARK into Virtual Training.pptxCynthia Clay
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This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
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Vat Registration is a legal obligation for businesses meeting the threshold requirement, helping companies avoid fines and ramifications. Contact now!
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RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
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Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
[Note: This is a partial preview. To download this presentation, visit:
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Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
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To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
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Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
2. Key discussion points
Indian steel demand to be muted over the next 2 years
â End user demand for steel in India affected by the economic slowdown.
alDistributionhtsreserved.
Global flat steel prices set to decline in 2012 & 2013
Gl b l i f i ki l t d li d t k d d d l
OnlyâNotForExternabyCRISILLtd.Allrigh
â Global prices of iron ore, coking coal to decline due to weak demand and over supply
â However, domestic price of flat and longs to remain firm
ForInternalUseOCopyrightŠ2011
Profitability of players across the value chain to under pressure
â Demand-side concerns will be exacerbated by
⢠temporary shortage of both iron ore and non-coking coal in the domestic market
Need for pelletisation in the Indian context
2
Need for pelletisation in the Indian context
3. India steel demand to moderate in near term; pick up from 2013-14
St l ti tt 2011 12I di t l d d O tl k Steel consumption pattern: 2011-12India steel demand: Outlook
Automobile
11%
Capital
goods
6%
alDistributionhtsreserved.
Others
33%Pipes &
Tubes
10%
44
66 70 74
95
OnlyâNotForExternabyCRISILLtd.Allrigh
Infrastructure
21%
Industrial
Construction
19%
44
2006-07 2011-12 2012-13E 2013-14P 2016-17P
ForInternalUseOCopyrightŠ2011
Domestic demand for steel in the interim has been hit by;
â Lower demand from end-user sectors (namely construction automobiles and consumer
E: Estimated; P: Projected
Source: JPC, CRISIL Research
Source: CRISIL Research
â Lower demand from end-user sectors (namely construction, automobiles and consumer
durables)
Domestic steel demand expected to pick up from 2013-14 onwards
â Execution of infrastructure projects expected to gain traction
3
â Execution of infrastructure projects expected to gain traction
â Pickup in domestic and export demand expected in the automobiles sector
4. Demand assessment framework
Industrial
Infrastructure
Industrial
construction
Pipes & Tubes Automobiles Real estate OthersEnd-use
segments
alDistributionhtsreserved.
Assessment of
steel product
intensity
- per capacity (e.g. 1 mtpa plant) e.g. steel, cement
- per unit e.g. auto, construction equipments, railway
(per km), real estate (per sqft)
- per Rs invested e.g. ports, airports, roads
Average tonnage of steel products
Plates HRC
Structural
GP/GC
TMT CRC
OnlyâNotForExternabyCRISILLtd.Allrigh
Investments made
Size of the end
Capacity additions
Supply / new
development during
Output / production
during the year
ForInternalUseOCopyrightŠ2011
during the year
(e.g. airports, ports)
Size of the end-
use sectors
during the year
(e.g. steel, cement)
development during
the year
(e.g. real estate)
during the year
(e.g. automobile,
pipes and tubes)
Product level
steel demand Aggregation of steel product demand from various end-use sectors
N t
CRISIL Researchâs estimate of steel
product demand and end-use pattern
Note:
Infrastructure includes roads & highways, power, ports,
airports, railways, water supply & irrigation, urban infra
Industrial construction includes â oil & gas, steel,
automobiles, petrochemicals, textiles, fertilisers, etc.
5. Flat steel demand to grow at 8-9% over FY 2013-17
⢠Investments in oil & gas, water
and irrigation
⢠Oil & gas pipeline to increase
Pipelines
Flat steel consumption pattern: 2011-12
alDistributionhtsreserved.
g p p
from 53,677 km to ~72,000 km
Pipelines,
18.2
Oil & Gas,
4 9
Consumer
durables,
8.8
Others, 14.5
OnlyâNotForExternabyCRISILLtd.Allrigh
⢠Cars and UVs: 15-16% CAGR
⢠Commercial vehicles: 12-13%
CAGR
Automobiles
4.9
Automobiles,
18.8
Capital
goods, 6.1
ForInternalUseOCopyrightŠ2011
Flat steel demand: 49-50 million
tonnes by 2016-17
Source: CRISIL Research
⢠Oil & gas refining capacity ~250
million tonnes by 2015-16
Oil & gas tonnes by 2016-17
Flat steel share to be ~52% of total
consumption
⢠Investment growth of 8% (~ Rs 7.3
trillion)
Oil & gas
5
7. Long steel demand poised to grow at 6-7% over FY 13-17
Over Rs 35 trillion to be spent on infrastructure Long steel consumption pattern: 2011-12
⢠75-85 GW of capacity additions expected
⢠Investment growth of 14-15% (~Rs 11Power
Over Rs 35 trillion to be spent on infrastructure Long steel consumption pattern: 2011-12
Industrial
Railways, 2.0 Others, 17.6
alDistributionhtsreserved.
trillion)
⢠Focus to improving road network, to drive
investments
Industrial
construction,
30.3
Capital
goods, 6.1
Automobiles,
4.4
Pipes, 1.6
OnlyâNotForExternabyCRISILLtd.Allrigh
Source: CRISIL Research
investments
⢠Investment growth of 12-13% (~Rs 7.7
trillion)
Roads
O R 12 5 t illi t b t i d t i l
Infrastructure
, 38.1
ForInternalUseOCopyrightŠ2011
Subdued investment climate to
translate to muted growth in the short-
medium term
⢠Oil & gas refining capacity ~250 million tonnes
by 2015-16Oil & gas
Over Rs 12.5 trillion to be spent on industrial
construction
medium term
Long steel demand: 44-45 million
tonnes by 2016-17
C ti f l t l 48% f
⢠Investment growth of 8% (~ Rs 7.3 trillion)
⢠~Rs 1.1-1.2 trillion of investment to flow in
steel sector
Steel
Consumption of long steel: ~48% of
total
7
steel sector
8. Huge capacity additions over the next 5 years
Capacity additions (in mn tonnes)Capacity additions (in mn tonnes)
⢠Capacity
⢠Location
⢠Product type
Company
announcement
Company 2010â11 2011â12 2012â13E 2013â14P 2014â15P 2015â16P 2016â17P
SAIL 13.6 13.6 17.2 21.2 21.2 21.2 21.2
TataSteel 6.8 6.8 9.7 9.7 9.7 12.7 12.7
JSWSteel 7 8 11 0 11 0 11 0 11 0 13 0 13 0
alDistributionhtsreserved.
⢠Land acquisition
⢠Environmental
clearance
⢠Financial closure
Project
progress
JSWSteel 7.8 11.0 11.0 11.0 11.0 13.0 13.0
RINL 3.3 3.3 3.3 6.6 6.6 6.6 6.6
JSPL 3.0 3.0 3.0 4.6 4.6 4.6 4.6
BhushanSteel 2.2 2.2 2.2 4.7 4.7 4.7 4.7
MonnetIspat 0.3 0.3 1.5 1.5 1.5 1.5 1.5
OnlyâNotForExternabyCRISILLtd.Allrigh
⢠Policy framework
⢠Macro-economic
conditions
Other factors
MonnetIspat 0.3 0.3 1.5 1.5 1.5 1.5 1.5
NMDC â â â â â â 3.0
Essar 8.6 10.0 10.0 10.0 10.0 10.0 10.0
JSWIspat 3.3 3.3 3.3 3.3 3.3 3.3 3.3
BhushanPowerandSteel 2.3 2.3 2.3 2.3 2.3 2.3 2.3
ForInternalUseOCopyrightŠ2011
Source: CRISIL Research Capacity additions over the next 5 years
Others 27.1 28.1 29.1 30.1 31.1 32.1 33.1
Total Capacity 78.3 83.9 92.6 105.0 106.0 112.0 116.0
30-35 mn tonnes of crude steel capacity to materialise vis-Ă -vis announcements of over 60
mn tonnes
â Many players focusing on setting up capacities in value added products
Majority of additions coming up in 2012-13 2013-14 & 2015-16Majority of additions coming up in 2012-13, 2013-14 & 2015-16
9. Domestic demand-to-capacity rates to moderate
India: Demand supply and demand to capacity rates
82
85
89 88
84 83 85
90
90.0
100.0
90
120
(per cent)(million tonnes)
India: Demand, supply and demand-to-capacity rates
alDistributionhtsreserved.
9
6
3
6
0
4
9
6
4
0
6
0
6
3
5
5
01
04
82
78
83 85
60.0
70.0
80.0
30
60
90
OnlyâNotForExternabyCRISILLtd.Allrigh
4
5
6
6
7
7
7
8
9
6
6
7
7
8
9
9
1
1
50.0-
2008-09 2010-11 2012-13P 2014-15P 2016-17P
Finished steel demand Total finished steel capacity Finished steel demand / capacity
P: Projected
ForInternalUseOCopyrightŠ2011
Finished steel capacity of 28-30 million tonnes expected over the next 5 years
â Incremental demand to be lower at 26-28 million tonnes
Source: WSA, CRISIL Research
â Large companies adding most of the capacities (SAIL, RINL, Tata Steel, Bhushan, JSPL)
Steel players will need to focus on exports, to maintain operating rates
â Large integrated players will be able to export as they are cost-competitive
â Small & mid-size players will operate at lower utilisation
9
10. Global demand outlook â Steel
1.20 x 1 01 x 1 12 x1 03 x
2006 2011 2012E4% CAGR
1.01 x
~1 % 2016P
1.12 x
3-4% CAGR2013P
1.03 x
1-2%
alDistributionhtsreserved.
1,373 mt
1,392 mt
43
3
1,602 mt
1,430 mt
OnlyâNotForExternabyCRISILLtd.Allrigh
India
ROW
91
67
64
36
5
96
70
67
37
5
11
5
77
91
3
46
33
1
1,142 mt
10
72
71
38
5
7-9% CAGR
5-6%
3-5%
ForInternalUseOCopyrightŠ2011
2 5%
EU (27)
US
Japan
624
15
3
91
14
6
96
725
16
1
18
8
12
0
79
6
14
8
1
3 5% CAGR~2.5%
China
624 638
725
378
654~2%
3.5% CAGR
Global steel demand: 2-4% CAGR over next 5 years
â Developing and emerging economies to drive demand
10
11. China and India account for bulk of global steel capex
1 993 t 2 201 t
1.1 x
O tl k Gl b l d d t it ti
327
421
84
116125
160
1,993 mt 2,201 mt~2% CAGR
~7% CAGR
Outlook: Global demand-to-capacity ratio
83
76
68
73 74
73 73 78
80
100
2 000
2,500
(per cent)(million tonnes)
alDistributionhtsreserved.
841
884
459 458
158 161
327
~1% CAGR
16
00
20
11
76
97
37
22
83
04
04
23
93
43
15
01
68
20
40
60
80
500
1,000
1,500
2,000
OnlyâNotForExternabyCRISILLtd.Allrigh
841
2011 2016P
China EU NAFTA Japan+S.Korea+Taiwan India Row
1,31
1,30
1,22
1,41
1,47
1,49
1,53
1,72
1,58
1,70
1,80
1,92
1,99
2,04
2,11
2,20
-
20
-
500
2007 2008 2009 2010 2011 2012E 2013P 2016P
Crude steel demand Crude steel capacity Demand to Capacity (RHS)
ForInternalUseOCopyrightŠ2011
205-215 million tonnes to be added globally
China India to acco nt for 36 % of the total addition (Asian dominance
P: Projected
Source: WSA, CRISIL Research
E:Estimated, P: Projected
Source: WSA, CRISIL Research
China, India to account for ~36 % of the total addition (Asian dominance
to increase to about 65%)
Global operating rates to not near pre-crisis levels (2007) even by 2016
11
12. Global input costs to moderate in 2012 &13
I i t l d
(Million tonnes) 2008E 2009E 2010E 2011E 2012E 2013P
Trade import demand 845 934 979 1,031 1,032 1,052
Trade exportable supply 820 932 1,011 1,029 1,073 1,162
Iron ore prices to cool down:
â new mining capacities; and
Iron ore trade flow
Company Country 2011 (mn tonnes) 2013 (mn tonnes)
Vale Brazil 358 445
alDistributionhtsreserved.
p pp y , , , ,
Surplus/(deficit) (25) (3) 32 (2) 41 110
Contract price ($/tonne) 92 61 110 140-150 115-125 105-115
P : Projected, E : Estimated
Source: UNComtrade, CRISIL Research â moderation in global steel
Vale Brazil 358 445
BHP Billiton Australia 153 223
Rio Tinto Australia 262 298
Fortescue Australia 55 155
OnlyâNotForExternabyCRISILLtd.Allrigh
demand
ForInternalUseOCopyrightŠ2011
(Million tonnes) 2008E 2009E 2010E 2011E 2012E 2013P
Contract price ($/t) 293 129 191 289 209 175-185
In 2012 and 2013: Prices to correct
as supply eases and demand
moderates
Coking coal trade flow
P : Projected, E : Estimated
Source: CRISIL Research
12
13. Global HR steel prices to soften
Gl b l HR t l i tl kGlobal HR steel price outlook
8 9 695800
1,000
($ per tonne) Pre-crisis:
prices soared
on demand
Crisis: prices
crashed from peak,
with demand
slowdown
Post-crisis: prices
on rise with rise in
demand and input
cost
Steel prices to moderate on
account of weak demand and
lower input costs
alDistributionhtsreserved.
115 102
233 168
187
275
200-210 180-190214 206
388
302
383
534
410-430
370-390
520
588
879
469
614
695
590
545-565
200
400
600
800
OnlyâNotForExternabyCRISILLtd.Allrigh
P: Projected
99 104 155 134 196 259 210-220 190-200
115 102
-
2006 2007 2008 2009 2010 2011 2012P 2013P
Total iron ore cost Total coking coal cost Total raw material cost HR Steel (CIS, FoB, Black Sea)
ForInternalUseOCopyrightŠ2011
Domestic HR steel price outlook
j
Source: WSA, CRISIL Research
Year Domestic prices (Rs/tonne)
Domestic long steel price outlook
Year Domestic prices (Rs/tonne)
2010-11 36,500
2011-12 42,769
2012-13P 43,000-44,500
2013-14P 42,000-43,500
2010-11 36,812
2011-12 39,575
2012-13E 39,000-40,500
2013-14P 37,500-39,000
13
Source: CRISIL Research Source: CRISIL Research
14. Domestic iron ore market in the middle of a clean-up drive
State wise production break up: 2011 12 (170mt) India: Iron ore production (in mn tonnes)
Jharkhand,
12%
Others, 2%
State-wise production break-up: 2011-12 (170mt) India: Iron ore production (in mn tonnes)
State 2009â10 2010â11 2011â12 2012â13 2013â14
Odisha 79 76 68 50 55
Karnataka 44 38 14 12 18
alDistributionhtsreserved.
Odisha, 40%
Chhattisgarh
, 18%
Goa 39 37 34 15 â
Chhattisgarh 26 29 31 33 35
Jharkhand 22 23 20 24 32
Others 9 5 3 4 4
OnlyâNotForExternabyCRISILLtd.Allrigh
Karnataka,
Goa, 20%
Total 219 208 170 138 144
Total excludingGoa 180 171 136 123 144
Domesticdemand 112 120 125 130 137
ForInternalUseOCopyrightŠ2011
8%
Domesticdemand 112 120 125 130 137
Surplus/Defecit 68 51 11 â7 7
Source: Ministry of mines, CRISIL Research Source: Industry, CRISIL Research
Indian iron and steel companies to face an acute shortage of iron ore in
2012-13
â many facing closure, others experiencing low utlisation levels
14
Supply situation expected to be marginally better during 2013-14
15. Domestic iron ore prices to remain firm (1)
In $/tonne 2012E 2013P
CFR price at Indian port 120 110
Domestic iron ore lump price
alDistributionhtsreserved.
Add: Lump Premium 10 10
Add: Port + Handling charges 4 4
134 124
In Rs/ tonne 2012-13E 2013-14P
OnlyâNotForExternabyCRISILLtd.Allrigh
In Rs/ tonne 2012-13E 2013-14P
Exchange rate (Rs/USD) 54 53
Iron ore import parity price 7,236 6,572
E:Estimated; P: Projected
S I d t CRISIL R h
ForInternalUseOCopyrightŠ2011
Source: Industry, CRISIL Research
Prices of lumps in the domestic market set in line with import parity:
â Global iron ore spot prices taken as a proxy andâ Global iron ore spot prices taken as a proxy and
â A premium of 10-15 $/tonne is usually considered while signing contracts
Lump ore prices in India to increase by 12% y-o-y in 2012-13
15
â and decline going forward on account of a dip in international prices
16. Domestic iron ore prices to remain firm (2)
In $/tonne 2012E 2013P
CFR price at Indian port 120 110
Iron ore fines prices in India: Various methodologies
Import parity price
Import price
alDistributionhtsreserved.
CFR price at Indian port 120 110
Add: Port + Handling charges 4 4
124 114
In Rs/ tonne 2012-13E 2013-14P
Exchange rate (Rs/USD) 54 53
I i t it i 6 696 6 042
Export parity price
Domestic price
range
OnlyâNotForExternabyCRISILLtd.Allrigh
Iron ore import parity price 6,696 6,042
Outlook: Domestic iron ore fines prices
Export parity price - 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Rs/tonneIn $/tonne 2012E 2013P
CFR price at Chinese port 120 110
ForInternalUseOCopyrightŠ2011
Outlook: Domestic iron ore fines prices
1,600-1,800
2,300-2,500
2,400-2,600
2,200-2,400
2 000
2,500
3,000
(Rs/ tonne)
Less: Sea freight 15 15
FoB price at Indian port 105 95
Less: Port + Handling charges 5 5
Less: Export Duty(30 per cent) 32 29
68 61 1,600 1,800
-
500
1,000
1,500
2,000
In Rs/ tonne 2012-13E 2013-14P
Exchange rate (Rs/USD) at Rs 54 and Rs 53, respectively 3,672 3,233
Less: Domestic freight (export specific) 1,800 1,800
Iron ore import parity price 1,872 1,433
16
2010-11 2011-12 2012-13 P 2013-14P
Iron ore fines (62% Fe)
E:Estimated; P: Projected
Source: Industry, CRISIL Research
17. Domestic iron ore and coal prices to increase further in 2012-13
Iron ore contract prices DomesticIron ore contract prices - Domestic Thermal coal prices - Domestic
3,500-4,000
5,000
(Rs/ tonne)
4,700-4,900
6,400-6,600
7,200-7,400
6,500-6,700
5,000
6,000
7,000
8,000
(Rs/ tonne)
alDistributionhtsreserved.
2,505
1,000
3,000
2010 11 2011 12 2012 13P 2013 14P
1,600-1,800
2,300-2,500 2,400-2,600 2,200-2400
-
1,000
2,000
3,000
4,000
2010-11 2011-12 2012-13 P 2013-14P
OnlyâNotForExternabyCRISILLtd.Allrigh
Note: Lumps are Sponge iron grade CLO (Calibrated Lump Ore), 65% Fe Source: Industry, CRISIL Research
2010-11 2011-12 2012-13P 2013-14P
E-auction non-coking coal (Rs/tonne)
Source:Industry, CRISIL Research
Iron ore fines (62% Fe) Iron ore lumps
ForInternalUseOCopyrightŠ2011
Supply situation in the domestic iron ore market is expected to improve
marginally during 13-14
â Prices are expected to go down with the increase in supply
However, non-coking coal costs to remain firm
17
18. Small & mid-size players margins to remain under pressure
Ch i t d i t t t f ll d di l
2009-10 2012-13 E
Iron ore
Changing trends in cost structure of small and medium players
6 120
2013-14P
10 56011 600
alDistributionhtsreserved.
Non-coking Coal
Iron ore
5,634
(19-20%)
6,120
(21-22%)
9,520
(22-23%)
10,560
(25-26%)
9,008
(21 22%)
11,600
(27-28%)
OnlyâNotForExternabyCRISILLtd.Allrigh
Power
Scrap
2,122
2,728
(9-10%)
3,023
(10-11%)
3,654
(8-9%)
4,840
(11-12%)
(22 23%)
3,640
(8-9%)
4,964
(11-12%)
(21-22%)
ForInternalUseOCopyrightŠ2011
39,500-40,500
25 000 25 500
Excise duty
Other 5,500
(19-20%)
(7.5)
37,500-38,500
5,500
( 13-14%)
4,300
(10.5%)
5,500
( 12-13%)
4,500
(10.5%)
39,500 0,500
EBITDA/tonne
Rs 3,000-3,500
Operating margin
6-8%
25,000-25,500
EBITDA/tonne
Rs 3,500-4,000
Operating margin
12-13%
Operating cost
3 ,500 38,500
EBITDA/tonne
Rs 3,000-3,500
Operating margin
6-8%
18
42,000-43,00028,000-29,000Realisation 41,000-42,000
19. Long prices to remain firm in 2012-13
Trend in domestic flat and long steel prices*Trend in domestic flat and long steel prices
42,769
43,000-44,500
42,000-43,500
45,000
50,000
(Rs/tonne)
alDistributionhtsreserved.
34 330
37,810
32,313
36,354
39,575 39,000-40,500
37,500-39,00031,790
36,544
31,833
36,500
30,000
35,000
40,000
OnlyâNotForExternabyCRISILLtd.Allrigh
34,330 32,313
25,000
,
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13E 2013-14P
HR Coil TMT
ForInternalUseOCopyrightŠ2011
Traditionally, prices of long and flat steel products have moved in tandem
*Long prices are those of primary steel manufacturers; secondary players sell at a discount owing to differences in quality
E: Estimated; P: Projected
Source: Industry, CRISIL Research
â Trend has reversed in 2011-12: Higher domestic iron ore and non-coking coal prices
Domestic long steel prices to stay firm over next 2 years
19
20. Structure of steel industry in India
Steel Industry
Large Integrated Players
(Mainly produce flat steel)
Small and mid-sized Players
(Mainly produce long steel)
alDistributionhtsreserved.
( y p ) (Mainly produce long steel)
With Mine
(WM)
Without Mine
(WoM)
Small Integrated
(SI)
Small Non-
Integrated (SNI)
Re-Rollers
(RR)
OnlyâNotForExternabyCRISILLtd.Allrigh
Captive
availability of iron
ore and coking
coal mines
Non availability of
captive iron ore,
coking coal mines
Have backward
integration with respect
to iron making
manufacture steel from
steel intermediates and
scrap
Buy semis and
converts into finished
long steel
ForInternalUseOCopyrightŠ2011
BF â BOF
process
EAF/ IF
Processprocess Process
Hot metal/ pig iron/ scrap Hot metal/ Sponge iron/ scrap/ pig iron
20
Note: BF-BOF: Blast Furnace-Basic Oxygen Furnace; EAF: Electric Arc Furnace; IF: Induction Furnace
21. Large players to face margin pressure in 2012-13
L l O ti fit iLarge players: Operating profit margins
40.0
50.0
(per cent)
19â20 20â21 16â18 15â17
80
100
(as a % of sales)
EBITDA Margin
alDistributionhtsreserved.
25.7
21.9
19.8
17.510.0
20.0
30.0
9 10
6 7
15 15
2 2
34 31
63 64
20
40
60
Raw material costs
Salaries and wages
Power and fuel
OnlyâNotForExternabyCRISILLtd.Allrigh
WM: SAIL, TATA Steel
WoM JSW Steel
0.0
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
WM WoM
22 24
11 12
6 7
â
2012â13E 2013â14P 2012â13E 2013â14P
Withmine Without mine
Other expenses
WM: SAIL, TATA Steel
W M JSW St l
ForInternalUseOCopyrightŠ2011
Players with mine
WoM: JSW Steel
E: Estimated; P: Projected
Source: CRISIL Research
WoM: JSW Steel
E: Estimated; P: Projected
Source: CRISIL Research
â 2013-14: Marginal improvement in margins due to decline in coking coal costs
Players without mine
â 2013-14: Margins to continue to remain under pressure owing to supply constraints in the domestic raw
material market
21
22. Cost pressures to impact OPMs
S ll d id i d l O ti fit iSmall and mid sized players: Operating profit margins
16
20
25
(per cent)
alDistributionhtsreserved.
14
6
10.2
6-8 6-8
3
5
1-3 1-3
3 4
3.7
1 2
5
10
15
OnlyâNotForExternabyCRISILLtd.Allrigh
E:Estimated; P: Projected
1.5
3 4
1-2
1-2
0
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12E Mar-13P Mar-14P
SI SNI RR
ForInternalUseOCopyrightŠ2011
High input costs (iron ore and non-coking coal) to impact margins
Source: CRISIL Research
â Iron ore mining ban in Karnataka and ban on illegal mining in Orissa and Goa to hit smaller players
â Current shortage of non-coking coal coupled with CILâs price hike will put further pressure on
margins
22
23. Key messages
Domestic demand growth to remain muted; long-term growth intact
Domestic capacity to outpace demand through FY13-FY14;
alDistributionhtsreserved.
â Operating rates to decline from 87% (2011-12) to 78% (2013-14)
Flat steel prices to decline but long steel prices to remain firm
OnlyâNotForExternabyCRISILLtd.Allrigh
Flat steel prices to decline, but long steel prices to remain firm
Domestic iron ore and non coking coal prices to remain firm due to
s ppl iss es
ForInternalUseOCopyrightŠ2011
supply issues
Margin pressure to remain through FY13-FY14
23
24. Need for pelletization
I i th t b th G t t d t il bilit f i t thIncreasing thrust by the Government to ensure adequate availability of iron ore to the
domestic steel industry and promote export of value added products:
â Ad-volerum export duty on iron ore fines increased to 30% (Union Budget â 2012-13)
â No export duty on iron ore pellets
alDistributionhtsreserved.
No export duty on iron ore pellets
â Import duty reduced (Union Budget â 2012-13) on the capex incurred for setting up pellet plants
⢠Imported parts account for 10-12% of total setup costs
With high-grade lumpy ores rapidly depleting, pelletizing is becoming paramount
OnlyâNotForExternabyCRISILLtd.Allrigh
With high grade lumpy ores rapidly depleting, pelletizing is becoming paramount
â Steep rise in the prices of raw materials for DRI & Pig Iron production
â Indian steel making capacity to reach ~110 mt by 2015-16, translating to huge demand for iron ore
Improved productivity and efficiency with superior reducibility behavior of pellets
ForInternalUseOCopyrightŠ2011
Improved productivity and efficiency with superior reducibility behavior of pellets
compared to lump ore in
â Rotary kiln
⢠Use of pellets to translate to savings of Rs 2,900-3,500/ tonne
â Blast Furnace
⢠Use of pellets to translate to savings of Rs 2,300-2,800/ tonne
No losses in handling iron ore as pellets do not break during transport or handling
24
25. DRI- cost savings and capacity additions
Without pellet With pellet
Lump ore 17.1 17.2
20.0
(mn tonnes)
Pellet capacity additions by DRI players
alDistributionhtsreserved.
p
Rs 6,550/t
Iron ore fines
2 300 2 400 *1 050
8.0
10.7
13.9
10.0
15.0
OnlyâNotForExternabyCRISILLtd.Allrigh
I/O norm
1 65
Iron ore
ll t
2,300-2,400 *1.050
Pulverised coal (33-35 kgs) 550-650
4.5
0.0
5.0
2010-11E 2011-12P 2012-13P 2013-14P 2014-15P 2015-16P
ForInternalUseOCopyrightŠ2011
1.65 pellet
3,900-4,400
550-650Heavy oil (16/18 litres)
Electricity (55-60 kWh)
Other costs
200-250
250-300
1.5
DRI - Pellet
Cost
Rs 10,800/t
of DRI
Other costs 250-300
Lump ore
Rs 7,200-
8,000/t
of DRISavings of upto-> Rs 2,900-3,500/ tonne
25
of DRI Lump ore
6,500-6,600 0.2
of DRIg p , ,
26. BF- cost savings and capacity additions
Without pellet With pellet
Lump ore
alDistributionhtsreserved.
p
Rs 5,300/t
Iron ore fines
2 300 2 400 *1 050
OnlyâNotForExternabyCRISILLtd.Allrigh
I/O norm
1 7
Iron ore
ll t
2,300-2,400 *1.050
Pulverised coal (33-35 kgs) 550-650
Savings due to
reduced coke
intake
ForInternalUseOCopyrightŠ2011
1.7 pellet
3,900-4,400
550-650Heavy oil (16/18 liters)
Electricity (55-60 kWh)
Other costs
200-250
250-300
1.5
intake
Rs 800-900/t
Cost
Rs 9,000/t
of hot metal
Other costs 250-300
Lump ore
Rs 6,200-
6,700/t
of hotSavings of upto-> Rs 2,300-2,800/ tonne
26
of hot metal Lump ore
6,500-6,600 0.2
metal
g p , ,
27. Pellet vs Sinter
U f ll t dditi l R 500 700/ t f h t t l l ti tUse of pellets save an additional Rs 500-700/ tonne of hot metal relative to
sinter feed
Consequently, incremental capacity additions in pellet more than the capex
i i t i
alDistributionhtsreserved.
in sintering
Pellet capacity additions by BF players Sinter capacity additions by BF players
OnlyâNotForExternabyCRISILLtd.Allrigh
41.7
49.7
50.0
60.0
(mn tonnes)
60 3 62 6
69.1
77.8
84.0 84.0
80.0
100.0
(mn tonnes)
ForInternalUseOCopyrightŠ2011
17.5
27.7
33.7 33.7
10.0
20.0
30.0
40.0 60.3 62.6
20.0
40.0
60.0
0.0
2010-11E 2011-12P 2012-13P 2013-14P 2014-15P 2015-16P
BF - Pellet
Source: Industry, CRISIL Research Source: Industry, CRISIL Research
0.0
2010-11E 2011-12P 2012-13P 2013-14P 2014-15P 2015-16P
BF-Sinter
27
28. Summing up: Pelletization to cut ore costs by 10-20%
Iron production
alDistributionhtsreserved.
DRI BF
DRI players primarily use iron ore lumps BF players primarily use iron ore a mix of
OnlyâNotForExternabyCRISILLtd.Allrigh
DRI players primarily use iron ore lumps
Current mix
Lump 90%
BF players primarily use iron ore a mix of
lumps and sinter
Current mix
Lump 43%
ForInternalUseOCopyrightŠ2011
Pellet 10%
Use of pellets to translate to savings of
Sinter 47%
Pellet 10%
Use of pellets to translate to savings of Rs
2 300 2 800/ tonne of hot metalRs 2,900-3,500/ tonne of DRI
Future Mix (2015-16)
Lump 70%
2,300-2,800/ tonne of hot metal
Future Mix (2015-16)
Lump 32%
Sinter 36%
28
Lump 70%
Pellet 30%
Sinter 36%
Pellet 32%
29. Miners: Forward integrating into pellet manufacturing owing to the regulatory climate
EBITDA/ tonne
Moisture at 5% 3.7
4.4
7.8
2 years ago 1 year ago CurrentlyChanging landscape for exporters: iron ore fines
Rs 600- 1,000/
tonne
alDistributionhtsreserved.
58.8
District mineral fund tax (equal to royalty)
Administration and selling expenses
Royalty
Export duty
5.0
30.0
3.7
3.0
37.5
OnlyâNotForExternabyCRISILLtd.Allrigh
16.0
-
5.0
3.7
2.0
Forest Development tax
Demurrage
Handling charges at port
Railway freight
T t t il t ti
32.8
5 0
21.3
-
20.0
ForInternalUseOCopyrightŠ2011
7.0
3.7
Transport to railway station
Mining and processing cost 7.0
3.7
7.0
3.7
Assumptions: 1) Iron ore has an Fe content of 63%
2) Exchange rate : Rs 55/ USD
3) Iron ore fines price: Rs 120/ dry metric tonne
Currently, miners getting an EBITDA/ tonne of Rs 3,500-4,500 on pellets
â Robust demand and better realizations from the domestic market
N t d t ll t
Source: Industry, CRISIL Research
29
â No export duty on pellets
30. ~55 mt of pellet capacity to be added over the next 5 years
Steel players to add 46 million tonnes
47 6
58.8
66.9
60
70
80
(mn tonnes)
Steel players to add 46 million tonnes
alDistributionhtsreserved.
Steel
players
22.0
35.7
44.4 47.6
10
20
30
40
50
OnlyâNotForExternabyCRISILLtd.Allrigh
Total pellet capacity
~85 mt by 2015-16
0
2010-11E 2011-12P 2012-13P 2013-14P 2014-15P 2015-16P
Steel - pellet additions
Miners to add 5 million tonnes
ForInternalUseOCopyrightŠ2011
Miners9.1
11.1 11.1
8
10
12
(mn tonnes)
Miners to add 5 million tonnes
5.9 5.9 5.9
0
2
4
6
8
Standalone
pellet
plants
30
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Miners - pellet additions
Source: Industry, CRISIL Research
plants
(6.4mt)
31. About us
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also the foremost provider of high-end research to the world's largest banks and leading corporations.
CRISIL Research
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alDistributionhtsreserved.
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industries, capital markets and companies. We are India's most credible provider of economy and industry research. Our industry research covers 70
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ForInternalUseOCopyrightŠ2011
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Di l iDisclaimer
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31
y y
Ratings Division / CRISIL Risk and Infrastructure Solutions Limited (CRIS), which may, in their regular operations, obtain information of a confidential
nature. The views expressed in this Report are that of CRISIL Research and not of CRISILâs Ratings Division / CRIS. No part of this Report may be
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33. Site-wise capacity additions
Site wise capacity additions (in mn tonnes)Site-wise capacity additions (in mn tonnes)
Company Site Nature Crude Steel capacity
IISCO Brownfield 2.2
Rourkela Brownfield 2.0
Bhil i B fi ld 2 1SAIL 7 2 t
alDistributionhtsreserved.
Bhilai Brownfield 2.1
Durgapur Brownfield 0.3
Bokaro Brownfield 1.0
Jamshedpur Brownfield 2.9
Orissa Phase 1 Greenfield 3.0
SAIL
TATA
7.2 mt
5.9 mt
OnlyâNotForExternabyCRISILLtd.Allrigh
Orissa Phase 1 Greenfield 3.0
JSW Vijaynagar Brownfield 2.0
RINL Vizag Brownfield 3.3
JSPL Angul Phase 1 Greenfield 1.6
Bhushan Steel Angul Brownfield 2.5
ForInternalUseOCopyrightŠ2011
Source: CRISIL Research
Monnet Ispat Raipur Brownfield 1.2
NMDC Nagarnagar Greenfield 3.0
34. Delayed capacity additions adds up to ~28 mt
Delayed capacity additions (in mn tonnes)Delayed capacity additions (in mn tonnes)
Company Site Nature Crude Steel capacity
OrissaPhase 2 Brownfield 3.0
J d l G fi ld 5 0
Tata 8 mt
alDistributionhtsreserved.
Jagdalpur Greenfield 5.0
Vijaynagar Brownfield 3.0
Salboni Phase 1 Greenfield 3.0
Jharkhand Phase 1 Greenfield 3 0
JSW 6 mt
OnlyâNotForExternabyCRISILLtd.Allrigh
Jharkhand Phase 1 Greenfield 3.0
Raigarh expansion Brownfield 2.0
SAIL Bokaro Brownfield 2.0
Posco Dhinkiya Greenfield 4
JSPL 5 mt
ForInternalUseOCopyrightŠ2011
Source: CRISIL Research
Posco Dhinkiya Greenfield 4
ArcelorMittal Torpa Greenfield 3
35. Iron ore supply in Karnataka
in mn tonnes 2010 11 2011 12 2012 13E 2013 14Pin mn tonnes 2010â11 2011â12 2012â13E 2013â14P
NMDC 7 7 7 7
Other miners 31 7 5 11
Total 38 14 12 18
alDistributionhtsreserved.
They will be allowed to start
mining under the following
conditions:
⢠Validation of mining plan
Similar processes to be followed
as with Category âAâ mines. In
addition, they have to meet
conditions like depositing the
penalty for illegal mining, as
â˘CEC has recommended for both
penalty and cancellation of
OnlyâNotForExternabyCRISILLtd.Allrigh
14-15 mt in 10-11
⢠Validation of mining plan
⢠Acquisition of forest and
environmental clearances
⢠Reclamation and Rehabilitation
of the affected areas
p y g g,
decided by the court . leases for these mines
⢠Decision still pending
ForInternalUseOCopyrightŠ2011
Category A
Category B
(72 mines)
Category C
12-13 mt in 10-11 10-12 mt in 10-11
166 mines
g y
(45 mines)
g y
(49 mines)
35
166 mines
surveyed
36. Iron ore supply in Orissa
â Operations without requisite clearances â forest, environment, pollution control board, operating mine beyond the deemed
lease period, overproduction beyond limits allowed by Mining Plan, irregularities in transport â missing dispatch certificates,
overloading of material, theft, etc.
Irregularities in iron ore mining in Orissa
alDistributionhtsreserved.
Captive mining (~30 mt of 68mt)
As per the Government of Odisha circular dated
3rd Oct 2012
OnlyâNotForExternabyCRISILLtd.Allrigh
Merchant mining divided into two broad categories
First 30 years of lease period (28 mn)
â The mining lease to be renewed provided it is being used for
captive purpose by the lessee.
â The area to be renewed shall be limited to the captive
requirement of 30 years of the existing capacity of the lessee
ForInternalUseOCopyrightŠ2011
Crossed the 30 year lease period (10 mn)
Allowed to do merchant sale
requirement of 30 years of the existing capacity of the lessee.
â The balance land shall be reserved for the Odisha Mining
Corporation.
As per the Government of Odisha circular dated
Not allowed to do merchant sale
in mn tonnes 2010 11 2011 12 2012 13E 2013 14P
p
5th Dec 2012
â 50% of the production of merchant miners, not put to captive
36
in mn tonnes 2010â11 2011â12 2012â13E 2013â14P
Total 76 68 50 55
use, to be sold to the standalone end users within the State.
â To be effective from the month of Dec 2012