A Review of developments in

Global & Indian Steel Industry

Bi-monthly edition

Issue No. 4

May 2016 (for the period March & April 2016)

Strictly for internal circulation

Our eight Full Members are:

• Steel Authority of India Ltd.

• Tata Steel Ltd.

• JSW Steel Ltd.

• Rashtriya Ispat Nigam Ltd.

• Essar Steel Ltd.

• Jindal Steel & Power Ltd.

• Bhushan Power & Steel Ltd.

• Bhushan Steel & Strips Ltd.

Our six Affiliate Members are Monnet

Steel, INSDAG (Institute for Steel

Development and Growth), KISMA

(Karnataka Iron and Steel

Manufacturer’s Association), Gerdau

Steel, Visa Steel & Jindal Stainless.

About Indian Steel Association

Slide No.

CONTENTS

RAW MATERIAL 4

PRODUCTION & CONSUMPTION 9

TRADE 14

COUNTRY REPORTAGE 17

PRICE & FORECASTS 23

SIGNIFICANT ECONOMIC PARAMETERS 30

RAW MATERIAL

Source: World Bank

Highlights of World Bank’s

Commodity Markets Outlook

5

Report released in April 2016 for the quarter Jan – March 2016; Points highlighted above in italics have been reproduced verbatim

World Bank’s quarterly report titled “Commodity Markets Outlook” states the following:

• Thermal coal prices fell 3 percent in the first quarter of 2016—and down 60 percent overpast five years—on continued weak import demand and excess supply.

• Natural gas prices fell 15 percent in the first quarter of 2016 amid weak demand and largestocks.

• Metals prices fell 1 percent in the first quarter, a sixth straight quarterly decline.

• Iron ore prices rose 3 percent in the quarter, but soared 33 percent in February/March on aspike in steel prices and restocking at Chinese mills ahead of the construction season.

• Global mining investment has fallen by more than half since peaking in 2012, although newlower-cost supply continues to expand for some metals from legacy investment.

• Metals prices are projected to decline by 8 percent in 2016 due to slowing demand inemerging economies, notably China, and increases in new production capacity.

• Coal prices are expected to decline by 13 percent in 2016, averaging $50/ton, on continuedweak demand and oversupply.

Source: SteelMint

Trend of Iron Ore Prices

April 2016

6

• Global iron ore prices peaked at USD 68.7/MT, CFR China on April 21, 2016. This was

a 16-months high as last seen in the month of January 2015.

• Production cuts by world’s top four miners also supported prices, such as that of BHP

(around 10 MT) andVale (around 10 MT).

Source: SteelMint

Iron Ore Exports by India

April 2016

7

• Uptick in global iron ore prices, abolition of export duty on low grade ore as well as

increased demand in China led to kickstart of iron ore exports by India.

• Iron Ore exports from Goa (Mormugao and Panaji Ports) is likely to touch 2 MnT

mark in first month of FY16.

Source: SteelMint

Coal Imports by India

2015-16

8

• India imported around 219 MT of coal (excluding pet coke) in 2015-16. This came at a

decline of 11 MT against last fiscal.

• India recorded a growth rate of 375 percent for its met coke imports from March

2016 to April 2016.

Grade FY15 FY16 %Change

Non-coking 183.7 167.75 -9%

Coking Coal 45.5 47.84 5%

Pet Coke 5.83 9.92 70%

Coke & Anthracite 4 3.69 -8%

Total 239.03 229.2 -4%

PRODUCTION &CONSUMPTION

Source: World Steel Association

Top Producers for Q1CY16 As Per

World Steel Association

According to World Steel Association, world’s top ten nations with regards to cumulative

crude steel output during Jan-Mar ’16 is given below:

Rank Nation Output (in ‘000 tonnes)

1 China 192,010

2 Japan 25,770

3 India 22,913

4 United States 19,628

5 Russia 17,224

6 South Korea 16,176

7 Germany 10,782

8 Turkey 7,697

9 Brazil 7,392

10 Ukraine 6,082

10

Source: World Steel Association

Crude Steel Output by Asian Region

steady in March 2016

2015

11

Country March 2016 % Change over March 2015

China 70.650 +2.9

India 8.059 +3.4

Japan 8.648 -6.8

South Korea 5.927 -8.4

Taiwan 1.775 -14.7

Thailand 0.25 -22.7

Output in million tonnes

According to World Steel Association, the crude steel production by Asia remained flat at

0.8 percent rise during the month of March 2016 year-on-year.

Source: SEAISI

Outlook on Apparent Steel Consumption in ASEAN

APRIL 2016

12

As per preliminary data collected by South East Asia Iron & Steel Institute (SEAISI),

apparent steel consumption in ASEAN would have most likely reached 70 MT in 2015, an

increase of 7 percent y-o-y. This was mainly contributed by the strong consumption

growth rates inVietnam and Philippines.

• Vietnam’s steel demand is estimated to have jumped by 26 percent y-o-y to touch 18 MT in

2015, enabling it to overtakeThailand as the largest steel consuming country in the region.

• Philippines’ steel demand also grew robustly, by 15 percent y-o-y, to cross the 8 million tonnes

threshold in 2015.

• Malaysia and Singapore both registered moderate growth rates of 5% y-o-y. Malaysia’s steel

demand is expected to edge closer to 11 MT in 2015.

• Thailand’s steel demand is expected to decline by 3% y-o-y, to fall below 17 MT in 2015.

• Indonesia’s steel demand is expected to drop by more than 3% y-o-y to register a volume of

slightly above 12 MT in 2015.

Source: U.S. Department of Commerce

Statement on Excess Capacity and Structural

Adjustment in the Steel Sector

13

High-level Government representatives of Canada, the European Union, Japan,

Mexico, the Republic of Korea, Switzerland, Turkey, and the United States, met

in Brussels in April 2016, and urged the OECD, to develop a global forum where all can

participate on an equal footing, for conducting further work on global restructuring issues

in steel, including:

• Developing an information-sharing mechanism for monitoring crude steel capacity

developments and the formulation and implementation of policy and support measures taken

by governments aimed at reducing excess capacity and otherwise facilitating industrial

restructuring in the steel sector.

• Developing guidelines on government policies and support measures to facilitate industry

restructuring in ways that minimise market distortions.

• Monitoring the nature and extent of export credit agency support for new steel sector

projects.

• Developing longer-term supply and demand forecasts for steel, taking demographic trends and

innovation in steel-consuming sectors into account.

• Exploring ways to more effectively provide technical assistance on restructuring.

• Strengthening ties with other international organisations and institutions, including

international financial institutions, working on issues that are relevant to the work on excess

capacity and restructuring.

TRADE

Source: Joint Plant Committee, Ministry of Steel (MIS & DO Reports)

Status of India’s Steel Trade

15

Total Finished Steel

(Alloy + Non Alloy)April 2015 – March 2016

Qty (in MT) % Change

Import 11.714 +25.7

Export 4.079 -27.1

• India became net importer of steel during 2015 – 16.

• Contribution of non-alloyed steel in total imports stood at 29.1 percent, while

the rest was accounted by alloyed steel.

• Imports in March 2016 (0.994 MT) increased by 9.1 percent compared to

February 2016 and by 18.2 percent compared to March 2015.

Source: World Trade Organization16

WTO's Committee on Safeguards, the Committee on Subsidies and

Countervailing Measures and the Committee on Anti-dumping Practices met

in April 2016 and following was brought forth:

• Several members said they believed overcapacity in the steel sector and the resulting

distortions in steel trade were triggering an increase in the initiation of safeguard and anti-

dumping investigations on steel products.

• One member said 41 new anti-dumping investigations targeting steel imports were triggered

in 2015 compared to 23 in 2012 and 2013 respectively.

• In addition, the member cited serious concern with the growing number of safeguard

measures targeting steel imports over recent years.

• Concerns were also expressed about the absence of information regarding government

subsidy programmes in general as well as subsidy programmes provided to steel producers.

• Many members observed that compliance with the obligation to notify specific subsidies was

low and declining, and that this was a major systemic problem for the operation of the

Subsidies Agreement.

WTO release post Committee Meetings on

Safeguards, Subsidies & Anti-Dumping

COUNTRY REPORTAGE

Source: European Commission

Highlights of Industry Status

European Union

18

Points highlighted above in italics have been reproduced verbatim from press release

A High-Level Meeting on excess capacity and structural adjustment in thesteel sector convened on 18 April 2016, in Brussels, co-organised by the OECDand the Belgian government, European Commission highlighted the followingpoints:

• The European Commission is aware of the situation in the steel sector, which not only suffers from a global problem of overcapacity but also from unfair trade, i.e. dumped and subsidised exports.

• The EU currently has over 100 trade defence measures in place, 37 of them targeting unfair imports of steel products, 16 of which from China.

• At bilateral level, the Commission has set up Steel Contact group meetings with China, Japan, India, Russia, Turkey, and the United States. During the meeting with Japan on 8 March and that with China on 10 March 2016, the Commission put the issue of overcapacity at the core of the discussions.

• The Commission will propose a prior surveillance system on steel products. Prior surveillance measures are foreseen in the EU's safeguard instrument and are based on an automatic import licensing system. They can be introduced when import trends threaten to cause injury to Union producers.

Source: U.S. Department of Commerce, International Trade Adminstration

Highlights of Industry Status

United States

19

Report released in April 2016; Points highlighted above in italics have been reproduced verbatim

• The U.S. steel industry posted a combined net loss of USD1.4 billion in Q4 2015.• U.S. Steel posted a net loss of USD 999 mn, followed by Steel Dynamics posting a USD

253 mn loss,AK Steel with a USD 147.1 mn loss, and Nucor with a USD 62 mn loss.• Commercial Metals reported the highest quarterly net profit at USD 25.1 mn,• followed by Carpenter Technology at USD 11.5 mn.

• Benchmark domestic steel prices showed modest increases in March 2016 after steadydeclines.• U.S. domestic prices for hot-rolled band increased to USD 466 per metric ton in March

2016. Compared to one year ago, the price for hot-rolled band was down 10.7 percent.• Cold-rolled coil prices increased to USD 656 per metric ton in March, a 2.8 percent

drop from last year, while standard plate prices increased to USD 570 per metric ton, an18.8 percent drop from a year ago.

• U.S. domestic capacity utilization continued its slight recovery after sliding downwards inrecent months and hitting a 6-year low.• Overall capacity utilization in 2015 averaged 70.1%, a 9.5% drop from 77.5% in 2014.• Though capacity utilization has increased 79.2% from the twelve year low reached in

April 2009, it still remains well below the pre-recession historical averages.

Source: The State Council, People’s Republic of China

Developments in China

Industry Outlook

20

At a press conference following the conclusion of the annual parliamentary

session in March 2016, Premier Li Keqiang made the following comments:

• A growth target range for 2016 at 6.5 percent - 7 percent.

• China will balance reform and development well and avoid massive layoffs while cutting

overcapacity.

• Some sectors are burdened with overcapacity, especially in heavy and petro-chemical

industries, and China has selected the steel and coal sectors to start cutting overcapacity while

avoiding massive layoffs.

• In the past two years, China has phased out over 100 MT of steel-making capacity involving

some 1 million employees.

• To cushion the effect of job losses on families and society, the central government decided to

allocate 100 billion yuan (15.34 billion U.S. dollars) to help the laid-off workers find new jobs.

Points highlighted above in italics have been reproduced verbatim from the Press Release

Source: Ministry of Commerce, People’s Republic of China

Developments in China

Trade Related

21

Official Spokesperson comments from the Trade Remedy and Investigation

Bureau of Ministry of Commerce (MOFCOM) on India’s Trade Remedy and

Investigation against Steel and Iron Products Imported from China:

• The Chinese government hopes the Indian side could conduct the investigation in strict accordance with the WTO rules.

• It’s a global issue for all countries to cope with the overcapacity of steel and iron products. The Chinese government has attached much importance to the overcapacity issue and adopted a series of measures to solve the problem. Positive effects have been made.

• Protective trade policies not only have no effect on solving the problem of global overcapacity of steel and iron and the industrial development basically, but also impede the normal progress of international trade order.

• The Chinese government has insisted on prudent, restrained and standard use of trade remedy measures and has made active efforts to encourage the Chinese steel and iron enterprises to seek common development, solve trade frictions and realize mutually beneficial cooperation with overseas enterprises through various ways of trade, investment and technical cooperation.

Points highlighted above in italics have been reproduced verbatim from the press release dated April 20, 2016

Source: SteelMint

Developments in China

Iron Ore related

22

China’s iron ore imports went down by 2 percent in April 2016, imported 83.9

MT of the ore in the month. Among total imports in April 2016, Australia contributed

61%, Brazil 19% and South Africa contributed 5% to the total imports into China.

PRICE & FORECASTS

Source: Commodity Markets Outlook, World Bank

World Bank’s Commodity Price Forecasts

April 2016

2016 2017 2018 2019 2020

Coal

(USD/tonne;Australia)50.0 51.0 52.1 53.1 54.2

Iron ore

(USD/dmt)50.0 51.5 53.0 54.6 56.2

Natural gas

(USD/mmBtu, US)2.50 3.0 3.5 3.68 3.88

Crude Oil

(USD/barrel; average spot)41.0 50.0 53.3 56.7 60.4

24

As on April 2016;

All figures in Nominal US dollars;

mmBtu - One million British Thermal Units;

One barrel - 42 U.S. gallons or 158.9873 litres

Source: World Steel Dynamics estimates

2016e 2018e 2020e 2025e

Japan 103 100.7 99.2 95.6

South Korea 68.9 71.4 72.3 75.1

China 765 705 690 654

United States 82.5 86.5 88.9 95.4

India 93.3 101.7 108.5 127.3

25

Report released on April 1, 2016;

All figures in million metric tonnes

World Steel Dynamics

CRUDE STEEL FORECAST

Source: World Steel Dynamics26

Report released on March 24, 2016;

Prices in USD per tonne

World Steel Dynamics

Hot Rolled Band Price Trends

Source: World Steel Dynamics 27

Report released on March 24, 2016;

Prices in USD per tonne

World Steel Dynamics

Hot Rolled Band Price Trends

Source: World Steel Dynamics 28

Report released on March 24, 2016;

Prices in USD per tonne

World Steel Dynamics

Hot Rolled Band Price Trends

SIGNIFICANT

ECONOMIC PARAMETERS

Source: The Economist Intelligence Unit, Global Forecasting Service

Growth Forecasts

2016 - 2020

As of May 18, 2016;

The assumptions for forecasts are available on the website of the Economist Intelligence Unit

In % 2016 2017 2018 2019 2020

IndiaReal GDP Growth 7.4 7.3 7.3 7.2 7.2

Inflation 5.1 5.4 5.1 4.5 4.6

ChinaReal GDP Growth 6.7 6.0 5.1 4.5 4.3

Inflation 2.4 2.1 2.5 2.0 2.4

U.S.AReal GDP Growth 2.0 2.3 2.3 1.0 2.1

Inflation 1.3 2.2 2.3 1.3 1.7

JapanReal GDP Growth 0.5 0.1 0.8 0.7 1.0

Inflation 0.0 1.1 0.9 0.8 1.0

Euro AreaReal GDP Growth 1.5 1.6 1.6 1.5 1.5

Consumer Price Inflation 0.2 1.2 1.4 1.6 1.6

30

Source: Reserve Bank of India; Points highlighted above in italics have been reproduced verbatim

Highlights of RBI Monthly Bulletin

April 2016

31

• World trade remains subdued due to falling import demand from EMEs and stress in miningand extractive industries.

• While exports declined in February in US dollar terms for the fifteenth successive month, therate of contraction narrowed to a single digit for the first time

• India’s share in world exports has declined from its recent peak of 1.7 percent in 2014 to 1.6percent in 2015. This suggests that factors such as the rising incidence of protectionism andcompetitive depreciation might have affected export performance, since depressed globaldemand is common to all exporting countries.

• The manufacturing PMI for March 2016 expanded on the basis of growth of output, neworders, including exports. The Make in India drive, together with new measures announced inthe Union Budget to widen the space for FDI, and custom and excise concessions, areexpected to help lift industrial performance.

• In Q3 of 2015-16, the Reserve Bank started the Asset Quality Review (AQR) to ensure thatbanks were taking proactive steps to correctly classify their loan portfolios, with the deadlineof March 2017 to clean up by making full provision. Fifteen public sector banks reportedlosses on their domestic operations in Q3 of 2015-16 as a result of increased provisions fordoubtful/loss assets and write-offs of bad loans.

EME – Emerging Market Economics; FDI – Foreign Direct Investment

Source: Reserve Bank of India

RBI’s Sectoral Deployment of Bank Credit

April 2016

32

Note: Data are provisional and relate to select banks which cover 95 per cent of total non-food credit extended by all scheduled commercial

banks (excludes ING Vysya which has been merged with Kotak Mahindra since April 2015).

Deployment of Gross Bank Credit by Major Sectors

(INR Billion)

Industry

Outstanding as on Growth (%)

Mar 21,

2014

Mar 20,

2015

Mar18,

2016

Mar 20, 2015 / Mar

21, 2014

Mar 18, 2016

/ Mar20, 2015

1 2 3 4 5

1 Industry

(Micro & Small, Medium

and Large )

25165 26576 27307 5.6 2.7

1.13 Basic Metal & Metal

Product3608 3854 4160 6.8 7.9

1.13.1 Iron & Steel 2674 2834 3115 6.0 9.9

1.13.2 Other Metal & Metal

Product934 1020 1046 9.2 2.5

Source: International Monetary Fund

Highlights of World Economic Outlook

Projections by IMF, Apr 2016 Update

33

For India, data and forecasts

are presented on a fiscal year

basis and GDP from 2011

onward is based on GDP at

market prices with

FY2011/12 as a base year.

The World Economic Outlook Projections by IMF, updated in APRIL 2016 state the

following :

In India, lower commodity prices, a range of supply-side measures, and a relatively

tight monetary stance have resulted in a faster-than-expected fall in inflation,

making room for nominal interest rate cuts, but upside risks to inflation could

necessitate a tightening of monetary policy.

Overview of World Economic Outlook Projections (%)

2016 2017

United States 2.4 2.5

Japan 0.5 -0.1

China 6.5 6.2

India 7.5 7.5

Brazil -3.8 0.0

Russia -1.8 0.8

Mexico 2.4 2.6

Source: Reserve Bank of India

Rates at Reserve Bank of India

February 2016

CRR – Cash Reserve Ratio; SLR - Statutory Liquidity Ratio

CurrencyDate

April 29, 2016

I USD 66.5176

1 EUR 75.7303

1 GBP 97.4017

100 YEN 61.9600

Policy Repo Rate : 6.50%

Reverse Repo Rate : 6.00%

Marginal Standing Facility Rate : 7.00%

Bank Rate : 7.00%

Reference Rates

Policy Rates Reserve Ratios

CRR : 4%

SLR : 21.5%

34

Lending/ Deposit Rates

Base Rate : 9.30% - 9.70%

Savings Deposit Rate : 4.00%

Term Deposit Rate > 1 year : 7.00% - 7.50%

THANK YOU

On behalf of Indian Steel Association,Ms. Ashima Tyagi

DISCLAIMER

The material in this presentation has been prepared by Indian Steel Association (ISA) and is a general background information reviewing the status of the

developments in the global and Indian steel industry as at the date of this presentation. This presentation is strictly for internal use of all the member

companies of ISA, whose names have been stated in the presentation.

Information is given in summary form and does not purport to be complete or all inclusive. The information has been sourced from independent third party

databases, knowledge sources and news reports, and the authenticity of the same has not been independently verified by ISA.

Additionally, any third party forecasts on financial or economic parameters, projections or estimates should not be construed as an investment advice or a

recommendation to any ISA member. Recipients of this presentation from member companies of the ISA should each make their own evaluation of the

contents and adequacy of the information contained in the presentation.

ISA does not undertake any obligation to publicly release any changes to any revisions, modifications or forward looking statements in the subsequent

editions of this bi-monthly presentation. Unless otherwise specified, all information is for the period March & April 2016.