A Review of developments in

The Global & Indian Steel Industry

Monthly edition

Issue No. 13

March 2017 (covering February 2017)

Compiled on behalf of Indian Steel Association,

Mr. Anup Kashyap

Strictly for internal circulation

Our eight Full Members are:

• JSW Steel Ltd

• Steel Authority of India Ltd.

• Tata Steel Ltd.

• Rashtriya Ispat Nigam Ltd.

• Essar Steel Ltd.

• Jindal Steel & Power Ltd.

• Bhushan Power & Steel Ltd.

• Bhushan Steel & Strips Ltd.

Our seven 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 & Electrosteel Steels.

About Indian Steel Association

2

GLOBAL DEVELOPMENTS

Source: The Economist Intelligence Unit, Global Forecasting Service

Country-wise Growth Forecasts

2017 - 2021

As of February 15th ,2017 ;

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

In % 2017 2018 2019 2020 2021

IndiaReal GDP Growth 7.0 8.0 7.5 7.5 7.9

Inflation 5.1 5.2 4.9 4.9 4.8

ChinaReal GDP Growth 6.2 4.2 4.3 5.2 4.8

Inflation 2.0 1.6 1.9 2.7 2.5

U.S.AReal GDP Growth 2.3 2.1 1.1 2.0 2.0

Inflation 2.4 2.1 1.3 1.7 1.9

JapanReal GDP Growth 1.0 0.6 0.8 0.2 0.7

Inflation 1.2 0.9 0.9 1.2 0.7

RussiaReal GDP Growth 0.9 1.3 1.5 1.7 1.6

Inflation 5.4 4.4 4.6 4.7 4.6

4

Source: World Steel Association; Figures in Million tonnes

Region wise Crude Steel Production

As Per World Steel Association (in Jan 2017 Vs Jan 2016)

5

RegionJan-2017

(output in Million tonnes)

Jan-2016

(output in Million tonnes)

EU-28 13.8 13.5

Other Europe 3.1 2.8

CIS 8.9 8.0

N.America 9.4 9.1

S.America 3.6 3.2

Africa 1.2 1.0

Middle East 2.6 2.3

Asia 93.4 87.3

Oceania 0.5 0.5

Source: World Steel Association

Top Crude Steel Producing nations

As Per World Steel Association

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

crude steel output in Jan’17 is as follows:

Rank Nation Output (in ‘000 tonnes)

1 China 67,200

2 Japan 9,002

3 India 8,400

4 United States 6,874

5 Russia 6,183

6 South Korea 5,860

7 Germany 3,649

8 Turkey 2,930

9 Brazil 2,856

10 Ukraine 2,103

6

Source: World Steel Association

Top DRI Producing nations

As Per World Steel Association

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

Reduced Iron (DRI) output during Jan-17 is as follows:

Rank Nation Output (in ‘000 tonnes)

1 Iran 1,325

2 India 1,250

3 Mexico 415

4 Saudi Arabia 408

5 UAE 350

6 Egypt 260

7 Qatar 236

8 Canada 113

9 Argentina 77

10 South Africa 71

7

Source: World Steel Association, MT-Million tons

World Crude Steel Production Statistics

• World crude steel production for the 67 countries reporting to the World Steel Association (world

steel) was 136.5 million tonnes (Mt) in January 2017, a 7.0% increase compared to January 2016.

• The crude steel capacity utilisation ratio of the 67 countries in January 2017 was 68.5%. This is 3.4

percentage points higher than in January 2016. Compared to December 2016, it is 0.9 percentage

point higher.

67.7% 69.9% 67.8%

66.7%

64.9%

65.1%66.3%

70.5%

71.1%

71.1% 71.7%

68.1%

68.3%

70.0% 69.4%

69.2%

67.6% 68.5%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

World Steel Capacity Utilisation in %

%

8

Source:79th Truth and Consequences report released on 28th Feb,2017. Text has been quoted verbatim

Global Steel Demand may be Up Slightly in 2017

A WSD Report

• Global Steel Demand in 2017 may be up slightly-with China poised to have a moderate decline.Fixed asset investment in many countries may lag because contagion, which is fear about acountry’s economic stability, is still a factor in many regions of the world.Also ,when the globaleconomy grows slowly, services account for a higher share of the growth of GDP,which diminishessteel Intensity (steel consumption per unit of GDP).Chinese steel demand may decline moderatelyas the government’s promotion of infrastructure spending is offset by reduced residentialconstruction activity due to falling housing prices. Also Capital spending by Chinese manufacturersmay stagnate as they fear the consequences of President Trump’s shift to mercantilism to promotethe Growth of USA manufacturing.

• Development in Turkey,India,Brazil,Russia and Middle East will likely be a drag on steel demandthis year.

• Turkey- Long product steel demand is currently down sharply year-to-year. Assuming that the

Infrastructure projects are sustained by government, steel sheet demand may be about flat in 2017.

• India- Premier Modi’s decision to take 500 rupee and 1000 rupee banknote out of circulation and

replace them with a new currency has created enormous cash shortage, sharp decline in the

purchases of vehicles of all type, much reduced purchases of big ticket consumer goods and lessened

buying of new homes. The Economy deep slide may not end until April. Even granted a good recovery

thereafter ,Indian Steel demand in 2017 at best may be flat at just above 80 million tonnes.

9

Source:79th Truth and Consequences report released on 28th Feb,2017. Text has been quoted verbatim

Global Steel Demand may be Up Slightly in 2017

A WSD Report

• Egypt-The highly Centrally planned economy is just finishing its first year of recession. A downturn in

business activity has been linked to a scrap rise in inflation, a foreign currency crisis and inflation of a

new value add tax (VAT) system.

• Russia- While leading mills tend to be very low cost given their low cost sources of raw material, with

energy prices down there’s not sufficient domestic demand at home to absorb the mills capacity.

Hence their export ration is about 50 % at the present time. Russian HRB export to Iran seem to be

temporily slowed as buyers in that country may be waiting for a reduction of the country’s import tax

to 10 % from 20 %.Hence the Russians and Chinese may remained burdened with the world’s lowest

HRB export price offering this year.

• The Middle East-The current price of oil at about $ 53 per barrel is not sufficient to sustain capital

spending in the region. Steel demand is forecast to be down in Saudi Arabia as the construction of new

cities slows.

10

Source: World Steel Dynamics

Daily Benchmark Prices *

Chinese HRB Price-$ per metric tonne

11

*Ex-work (the same as FOB mill),$ per metric tonne. Hot rolled Band is the first product off the hot strip mill.

**since Apr.30, 2015, it has been changed to the price of HRB 400 rebar from HRB 335 rebar as later will be out of Chinese domestic market soon.

Ex-worksFebruary,2017 March,2017

14th 15th 16th 17th 20th 21st 22nd 23rd 24th 27th 28th 1st

Hot – rolled

band

471 471 471 471 472 476 474 472 469 474 473 470(5mm thick

X1200-1500 mm

wide)

Cold –Rolled coil

590 593 593 593 592 594 593 594 592 591 592 591(0.7mmX1200-

1500 mm wide)

Rebar#5**

428 430 432 433 443 452 452 451 449 462 465 464(16 mm in

diameter)

Standard plate

447 448 449 450 453 458 460 460 569 464 465 464(24mmX2400mm

X6000mm)

Scrap (incl VAT) 262 263 266 268 266 267 266 266 266 263 263 263

Source: 79th Truth and Consequences report released on 28th Feb,2017. Text has been quoted verbatim

China Focus

Highlights of WSD reports

• China’s the only country in the world whose hot rolled band home and expert prices are often about

same. As well, only the Chinese steel mills as far as WSD knows are paying a non refundable 8 %

export tax.

US

D p

er

ton

nes

12

Source: 79th Truth and Consequences report released on 28th Feb,2017. Text has been quoted verbatim

USA Focus

Current situation of Steel Industry

• The HRB home market price is sharply higher at about $ 690 per metric tonne versus the low of

about $ 630 per tonne in December 2016.The price compares to the current world export price of

about $ 520 per tonne.

• Domestic buyers are apparently not willing to book foreign steel three months in advance because by

the time it arrives, they worry the domestic price may be lower.

• Domestic shipment remained surprisingly low in 2016 87 million tonnes in part because of a sizeable

decline in deliveries of oil country tubular goods. There was also a reduction in the country’s steel

intensity. In 2016,WSD index of activity in steel consuming industries fell 1.9% yet, steel demand was

down 4.3%.

13

Source: Steel: Mint Research

Japan Focus

Trend of Steel export and Import

• According to latest customs data, Japan flat steel imports which includes 7208(HR

coils/plates),7209(CR Coils),7225(Electrical Sheets),7210/7212(GP/GC) have rose significantly by 12%

M-o-M to 0.38 Million tonnes in Jan’17 as compared to 0.34 Million tonnes in Dec’16.

• Japan Flat steel export have declined by 5.3 % M-o-M basis to 2.14 Million tonnes in Jan’17 against 2.26

Million tonnes in Dec’16.

Qu

an

tity

in

millio

n t

on

nes

Qu

an

tity

in

millio

n t

on

nes

14

Source: Steel: Mint Research

South Korea Focus

Trend of Flat Steel Import

• South Korean Flat steel import which includes 7208(HR coils/plates),7209(CR Coils),7225(Electrical

Sheets),7210/7212(GP/GC) have witnessed a decline of 4.4 % M-o-M basis in Jan ‘17 and stood at 0.85

Million tonnes as compared to 0.89 Million tonnes in Dec’16.

• In CY 16 from Jan-Dec country’s flat steel imports rose by 2.2 % to 11.44 Million tonnes against 11.19

Million tonnes in 2015.

• China remained the major flat steel exporter to South Korea and exported 560068 tonnes in Jan’17

against 578418 tonnes of flat steel in Dec’16.other major countries include Japan and Taiwan

Qu

an

tity

in

millio

n t

on

nes

Qu

an

tity

in

to

nn

es

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DOMESTIC DEVELOPMENTS

Source: World Steel, MT-Million tons, CY- Calendar Year,MTPA-Million ton Per Annum

Status of India’s Crude Steel production

• India produced 8.400 Million tonnes of crude steel, significantly higher by 12% when

compared with 7.501 Million tonnes production achieved during January last year.

• This was on account of higher output by the major Indian steel companies. The

imposition of Minimum Import Price (MIP) encouraged the producers to increase their

output.

Month wise Crude Steel Production in India - For CY 2015 ,2016 and 2017

MT

6.5

7

7.5

8

8.5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2015 2016 2017

17

Source: Joint Plant Committee, MT-Million tonnes

Status of India’s Steel Trade

• India emerged as a net exporter of total finished steel during February 2017 as well as

April-February 2016-17.

• Imports in February 2017 (0.491 MT) was down by 46% over February 2016 and by 19%

over January 2017.

• Exports in February 2017 (0.756 MT) was up by 150% over February 2016 but declined

by 15% over January 2017.

Apr 2016-Feb 2017 % Change over

April –Feb,2015-16%

Finished Steel Qty in Mt %

Production for Sale 91.846 11.1

Import 6.591 -38.5

Export 6.622 77.6

App. Consumption 76.229 3.4

18

Source: Steel Mint Research

Trend in Domestic Flat Steel Prices

• Currently HRC (IS2062) 2.5-8 mm is assessed in the range of INR 40,500-41,000 per tonne(ex-

Mumbai, INR 40,000-40,500 (ex-Delhi) and INR 40,500 per tonne (ex-tonne).Prices are inclusive of

excise duty 12.5 %.

• Currently CRC (IS513) 0.9 mm is hovering in the range of INR 46,000-46,500 per tonne(ex-

Mumbai).INR 46,000-47,000 per tonne(ex-Delhi) and INR 46,000-47,000 per tonne (ex-

Chennai).Prices are inclusive of excise duty 12.5 %.

• Few trade Sources are expecting stability in prices over dull demand until Holi festival. However,

others are anticipating some prices cut as March being end of accounting year will force companies to

clear inventories.

Pri

ces

in IN

R/t

onnes

Domestic Flat Steel Price-INR/T

19

Source: Steel Mint, Custom data, Quantity in tonnes

Trend of Bar and Rod Production

Apr 2016-jan 2017

Month Total ISP M-o-MMini &

Other ProducerM-o-M

Total Production

(in tonnes)

Apr-16 912,000 -13.6 % 1,840,000 32.0 % 2,752,000

May-16 999,000 9.5 % 2,110,000 14.7 % 3,109,000

June-16 935,000 -6.4 % 1,990,000 -5.7 % 2,925,000

July-16 940,000 0.5 % 1,727,000 -13.2% 2,667,000

Aug-16 936,000 -0.4 % 1,917,000 11.0% 2,853,000

Sep-16 852,000 -9.0 % 1,975,000 3.0% 2,827,000

Oct-16 996,000 16.9% 1,988,000 0.7% 2,984,000

Nov-16 928,000 -6.8 % 1,859,000 -6.5% 2,787,000

Dec-16 909,000 -2.0% 1,986,000 6.8% 2,887,000

Jan-17 1,111,000 22.2% 2,000,000 0.7% 3,111,000

Total (Apr 16 to

Jan-17)9,518,000 - 19,392,000 - 28,910,000

Total(Apr 15 to

Jan-16)8,999,000 5.80% 18,875,000 2.70% 27,874,000

20

Source: Steel Mint

Trend in Indian Iron Ore Export

FY 16 vs FY 17

• India has exported 14.23 Million tonne more low grade material in 11 months till Feb-17 compared

with 6 Million tonne in FY-16 which is 236 % higher before the financial year ends.

• In Feb-17,Iron Ore exports were recorded at 3.27 Million tonne against 2.76 Million tonne in Jan-16

compared with numbers for the month od feb-16,exports have increased remarkably by 256% Y-o-Y

as material exported then was at 0.92 Million tonnes.

• In recent period a substantial increase has been observed in Iron ore exports from Odisha Miners.

Qu

an

tity

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to

nn

es

Indian Iron Ore Export-FY 16 and FY 17

21

Source: Steel Mint, MT-Million tonne

Trend in Indian Coal Import

Jan 2017

Port Wise Indian Coal Import-in Million Tonne

Non Coking Coal-in MT Coking Coal-in MT

Total Coal Import-in MT

22

Source-Government of India Ministry of Commerce& Industry Department of Industrial Policy & Promotion Office of the Economic Adviser

Index of Eight Core Industries

Jan 2017

• The Eight Core Industries comprise nearly 38 % of the weight of items included in the Index of

Industrial Production (IIP). The combined Index of Eight Core Industries stands at 191.8 in January,

2017, which was 3.4 % higher compared to the index of January, 2016. Its cumulative growth during

April to January, 2016-17 was 4.8 %.

• Steel production (weight: 6.68%) increased by 11.4 % in January, 2017 over January, 2016. Its

cumulative index during April to January, 2016-17 increased by 9.2 % over the corresponding period

of previous year.

Sector Weight(in %)2011-12 2012-13 2013-14 2014-15 2015-16Apr-Jan

2015-16

Apr-Jan

2016-17

Coal 4.379 141.5 148.1 150 162.2 169.4 162.0 165.8

Crude oil 5.216 112.1 111.4 111.2 110.2 108.7 109.4 106.4

Natural Gas 1.708 149.7 128.1 111.5 106.0 101.5 102.6 100.6

Refinery Products 5.939 133.7 172.5 175.0 175.6 182.8 181.2 193.5

Fertilizer 1.254 103.8 100.2 101.8 101.7 114.3 113.9 117.2

Steel 6.684 174.0 174.0 181.1 201.9 211.4 209.4 209.0

Cement 2.406 175.2 188.7 194.5 205.3 215.3 210.6 212.7

Electricity 10.316 149.3 149.3 155.3 164.6 178.5 191.5 202.4

Overall Index 37.903 145.3 154.7 161.2 168.5 174.2 173.1 181.3

Index of Eight Core Industries (Base: 2004-05=100)-January, 2017

23

Source: Reserve Bank of India report released on 10th Feb,2017

RBI’s Sectoral Deployment of Bank Credit

Feb 2017

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.

Priority Sector is as per old definition and does not conform to FIDD Circular FIDD.CO.Plan.BC.54/04.09.01/2014- 15 dated April 23, 2015

Industry-wise Deployment of Gross Bank Credit

(INR Billion)

Outstanding as on Growth (%)

2016 2015 2016Financial Year

So farY-o-Y

Industry Mar.18 Dec.25 Nov.25 Dec.23 2016-17 2016

2.13 Basic Metal &

Metal Product4,160 4,008 4,093 4,127 -0.8 3.0

2.13.1 Iron & Steel 3,115 2,985 3,090 3,118 0.1 4.5

2.13.2 Other Metal &

Metal Product1,046 1,023 1,003 1,009 -3.5 -1.4

24

Source: Reserve Bank of India as on 3rd Mar,2017

Rates at Reserve Bank of India

Mar 2017

CRR – Cash Reserve Ratio; SLR - Statutory Liquidity Ratio

CurrencyDate

3rd Mar ,2017

I USD 66.83

1 EUR 70.35

1 GBP 81.96

100 YEN 58.55

Policy Repo Rate : 6.25 %

Reverse Repo Rate : 5.75 %

Marginal Standing Facility Rate : 6.75 %

Bank Rate : 6.75 %

Reference Rates

Policy Rates Reserve Ratios

CRR : 4 %

SLR : 20.50 %

Lending/ Deposit Rates

Base Rate : 9.25-9.65 %

Savings Deposit Rate : 4.00 %

Term Deposit Rate > 1 year : 6.50-7.00 %

25

THANK YOU

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 February 2017 or prior.