A Review of developments in

The Global & Indian Steel Industry

Monthly edition

Issue No. 10

December 2016 (covering November 2016)

Compiled on behalf of Indian Steel Association,

Mr. Anup Kashyap

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 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

2016 - 2021

As of November 16, 2016;

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

In % 2016 2017 2018 2019 2020 2021

IndiaReal GDP Growth 7.3 7.3 7.5 7.4 7.5 7.9

Inflation 5.1 5.0 5.0 4.7 4.9 4.9

ChinaReal GDP Growth 6.7 6.2 4.2 4.3 5.4 4.8

Inflation 2.1 2.0 1.7 1.8 2.5 2.3

U.S.AReal GDP Growth 1.6 2.3 2.1 1.0 2.0 2.0

Inflation 1.1 2.1 2.2 1.3 1.7 1.9

JapanReal GDP Growth 0.5 0.4 0.5 0.6 -0.1 0.4

Inflation -0.1 0.4 0.4 0.6 1.3 0.8

RussiaReal GDP Growth -0.8 0.7 1.1 1.4 1.6 1.8

Inflation 7.1 5.5 4.7 5.0 4.7 4.7

4

Source: World Steel Association; Figures in thousand tonnes

Region wise Crude Steel Production

As Per World Steel Association

Region

10 months

(2016)

Jan - Oct

10 months

(2015)

Jan - Oct

% Change

EU-28 135,407 141,384 -4.2

Other Europe 29,663 28,302 +4.8

CIS 84,746 84,880 -0.2

N.America 92,885 94,082 -1.3

S.America 33,010 37,164 -11.2

Africa 9,938 10,878 -8.6

Middle East 21,891 20,916 +4.7

Asia 921,140 912,327 +1.0

Oceania 4,811 4,816 -0.1

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 during Jan-Oct’16 is as follows:

Rank Nation Output (in ‘000 tonnes)

1 China 672,960

2 Japan 87,450

3 India 79,521

4 United States 65,969

5 Russia 58,598

6 South Korea 57,009

7 Germany 35,517

8 Turkey 27,413

9 Brazil 25,638

10 Ukraine 20,188

6

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 crude steel

output during October 2016 is as follows:

Rank Nation Output (in ‘000 tonnes)

1 China 68,510

2 Japan 9,062

3 India 8,267

4 United States 6,382

5 South Korea 5,961

6 Russia 5,942

7 Germany 3,506

8 Turkey 2,975

9 Brazil 2,720

10 Italy 2,133

7

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-Oct’16 is as follows:

Rank Nation Output (in ‘000 tonnes)

1 Iran 13,418

2 India 11,798

3 Mexico 4,471

4 Saudi Arabia 4,233

5 UAE 2,803

6 Egypt 2,111

7 Canada 1,183

8 Argentina 589

9 South Africa 570

10 Libya 540

8

Source: World Steel, Press release on 21st Oct. 2016 9

World steel Capacity utilisation ratio

Jan 2014 to Oct 2016

50

60

70

80

90

100

Jan-1

4

Feb-1

4

Mar

-14

Apr-

14

May

-14

Jun-1

4

Jul-

14

Aug-

14

Sep-1

4

Oct

-14

No

v-1

4

Dec-1

4

Jan-1

5

Feb-1

5

Mar

-15

Apr-

15

May

-15

Jun-1

5

Jul-

15

Aug-

15

Sep-1

5

Oct

-15

No

v-1

5

Dec-1

5

Jan-1

6

Feb-1

6

Mar

-16

Apr-

16

May

-16

Jun-1

6

Jul-

16

Aug-

16

Sep-1

6

Oct

-16

PE

RC

EN

TA

GE

(%

)

World Steel Capacity Utilisation ratio

• World crude steel production for the 65 countries reporting to the World Steel

Association (worldsteel) was 136.5 MT in October 2016, 3.3% up on October 2015.

• The crude steel capacity utilisation ratio of the 65 countries in October 2016 was

69.6%. It was 68.2% in October 2015. The October 2016 capacity utilisation ratio is

0.6 percentage points lower than the September 2016 ratio.

Source: World Steel Dynamics 10

Daily Benchmark Prices *

Chinese HRB Price-$ per metric tonne

Ex-works Nov-16 Dec-16

14th 15th 16th 17th 18th 21st 22nd 23rd 24th 25th 28th 29th 30th 1st 2nd

Hot – rolled

band

(5mm thick

X1200-1500 mm

wide)

415 410 404 400 399 396 403 409 413 419 434 439 430 437 441

Cold –Rolled coil

(0.7mmX1200-

1500 mm wide)

529 527 524 521 523 520 523 526 530 535 546 551 549 549 554

Rebar#5**

(16 mm in

diameter)

376 373 366 361 359 356 360 363 366 369 383 389 384 386 389

Standard plate

(24mmX2400mm

X6000mm)

397 394 390 386 385 382 386 390 394 397 413 419 414 416 420

Scrap (incl VAT)

(6-10 mm

thickness)

253 254 252 252 252 248 249 251 253 256 259 261 260 261 257

*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.

Source: Steel Mint,

China Focus

Hike in Steel Prices

11

• Amid higher coking coal and coke prices, semi-finished and finished steel prices in China

also moved up. Domestic billet offers in northern regions in China moved up and was

recorded at yuan 2,480/t (ex-works) on 08 Nov’16 against 2,100/t a month back.

• China’s HRC prices witnessed northwards movement amid tight inventory amid transport

restrictions and improved demand. China HRC export offers which were seen at $ 375-

380/t FoB .China beginning of last month have increased to $ 440-445/t, FoB China in

1st week of Nov’16.

• Similarly CRC export offers which were at $ 440-445/t, FoB China towards beginning of

Oct’16 has gone up to $ 500-505/t, FoB China this month. Offers for 25 mm rebar (HRB

400 grade) in Beijing stood at RMB 2,760/t ($ 405.7/t) which is higher by RMB 360/t ($

52.9/t) against its assessment a month back of RMB 2,400/t ($ 353/t).

• In line with this, Chinese rebar export offers also noticed sharp rise on monthly premises.

Export offers for commercial grade rebar has increased by $ 45/t M-o-M. Presently rebar

export offers are assessed at $ 380-385/t, FoB China.

Source: World Steel Dynamics Strategic Insight # 84 Published on 28th October 2016,Text has been quoted verbatim 12

Trend in Chinese Coking Coal prices

A WSD Analysis $ p

er

ton

ne

• The coking coal price in China has lagged somewhat behind the international price.

• As of mid-October 2016, the coking coal price in China’s Shanxi Province was “only”

$149 per tonne, with no VAT and not including perhaps $15 per tonne to deliver the

product to the steel mill.

Chinese Shanxi Mine Ex-works Coking Coal Price versus Australian FOB Export Spot Price

($ per tonne)

Source: Japan Custom Data, Steel Mint research, MT-Million tonnes

Japan Focus

Trend of steel Export and Import

13

• As per latest custom data, Japanese steel imports jumped by 2.7% M-o-M basis to 0.38 MT in Oct’

16 against 0.37 MT in Sep’16.In first ten month (Jan-Oct) of 2016, country’s steel imports

declined by 1.9% to 3.53 MT against the corresponding period of previous year.

Month Plates HRC CRC

Jan-16 0.21 1.03 0.22

Feb-16 0.23 1.04 0.2

Mar-16 0.28 1.18 0.24

Apr-16 0.22 1.03 0.21

May-16 0.25 1.26 0.22

Jun-16 0.25 1.06 0.21

Jul-16 0.32 1.04 0.25

Aug-16 0.27 1.17 0.54

Sep-16 0.2 1.04 0.22

Oct-16 0.21 1.27 0.24

Total 2.44 11.12 2.55

Japan Steel Export-Jan to Oct 2016-in MT

Month Plates HRC CRC

Jan-16 0.04 0.12 0.063

Feb-16 0.036 0.14 0.076

Mar-16 0.053 0.14 0.065

Apr-16 0.035 0.14 0.065

May-16 0.044 0.15 0.063

Jun-16 0.046 0.12 0.06

Jul-16 0.030 0.07 0.04

Aug-16 0.054 0.16 0.08

Sep-16 0.14 0.07 0.05

Oct-16 0.06 0.2 0.07

Total 0.39 1.13 0.6

Japan Steel import-Jan to Oct 2016-in MT

Source: International Trade Administration, Department of Commerce-United States of America

USA Focus

Highlights of Steel Industry November 2016

14

• From August to September 2016, U.S. imports of steel mill products decreased 9.2% to 2.5

MT from 2.8 MT.

• In September 2016, steel mill imports from China increased 54.2% to 89.3 thousand

metric tons from 57.9 thousand metric tons in August.

• U.S. steel production decreased by 3.8% to 6.3 MT in September 2016 from 6.6 MT in

August.

• In year-to-date 2016, U.S. imports of steel mill products have amounted to 22.5 million

metric tons, a 19.7% decrease from 28 million metric tons in YTD 2015 (through

September).

• In value terms, year-to-date imports have shown a larger decrease than by tonnage,

declining by 32.7% to $16.5 million in 2016 from $24.6 million in 2015.

• Canada accounted for the largest share of U.S. imports by partner country thus far in

2016 at 17%, followed by Brazil (13%) and Korea (12%).

• The U.S. has imported 9.5 MT of flat products in YTD 2016, accounting for 42% of

total steel mill imports, followed by long products at 5.5 MT or 24% of total imports.

Source: Korean Custom data, Steel Mint research; MT-Million tonnes

South Korea Focus

Trend of Steel Export

15

• According to custom data of South Korea, country's flat steel export under HS codes 7208 (Hot

rolled products),7209 (cold rolled products) and 7225 (electrical sheets) have increased by 3% M-o-

M basis in Oct’16.The same is recorded at 1.39 MT in Oct’16 against Sep’16.

• However, if Y-o-Y comparison is done country’s flat steel export have witnessed the downfall of 9% in

Oct’16 against Oct’15 as flat steel export of South Korea in Sep’ 15 stood at 1.52 MT.

• In current year ,the country’s flat steel products exports are majorly directed towards China followed

by Japan and US out of the total export of 13.43 MT in ten months of 2016, exports to India are

recorded at 1.45 MT.Country Quantity in MT

China 2.04

Japan 1.80

US 1.38

India 1.45

Vietnam 1.02

Others 5.74

Total 13.43

Country Wise

Flat Steel

Export by

Korea

(Jan – Oct 2016)

Source: Moody Investor Service-Steel - Asia 2017 Outlook - Weakening Production and Earnings Keep Outlook Negative released on 30th Nov 2016.16

• According to Moody's Investors Service, India is the only area of strength with rising demand and

protectionist measures in place even as it predicted a negative outlook for Asian steelmakers in

2017 as earnings will weaken amid declining production and lower profitability.

• In India, growing domestic demand, minimum import prices and antidumping duties will support

steel producers, but the increase in their steel production will not offset the fall in regional

production. The country only accounts for only about 8% of Asian steel production. Moody's

expects Asian steel production volumes to fall in 2017 because demand from China which

accounts for about three quarters of Asian steel production will contract, while rising trade

barriers will constrain exports from Asia. One of the main drivers for declining demand in China

is the forecast that property sales volumes will decline moderately following the tightening of

regulatory measures in September and October 2016.

• In this context, continued infrastructure investments are insufficient to avert a decline in China's

demand, and its manufacturing activities remain vulnerable to slowing GDP growth and are

therefore unlikely to boost steel demand.

• With Japan, Korea and Taiwan, which export around 40% - 50% of their steel output, increasing

trade frictions will curb their steel exports and production.

Moody’s Investor Service

Analysis on steel demand in Asian Countries

DOMESTIC DEVELOPMENTS

Source: Joint Plant Committee, Ministry of Steel (MIS & DO Reports); *Over same period last year, MT-Million tonnes

Status of India’s Steel Trade

18

Total Finished Steel

(Alloy + Non Alloy)April 2016 – November 2016

Qty (in MT) % Change*

Import 4.730 -39.2

Export 4.237 +53.3

• India remained a net importer of steel during April – November 2016.

• Imports in November 2016 (0.598 MT) was down by 30.8% over November 2015 but

was up by 11.8% over October 2016.

• Exports in November 2016 (0.67 MT) was up by 163% over November 2015 and by

24.8% over October 2016.

Source: CMIE;Figures in ‘000 tonnes

Trend in india ’s Monthly Finished Steel

Production and Consumption: Nov-11 to Sep 16

19

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

Consumption Production

Source: CMIE; Figures in ‘000 tonnes

Trend in india ’s Monthly Finished Steel

Export and Import: Nov-11 to Sep 16

20

0

200

400

600

800

1000

1200

1400

Nov-

11

Jan-1

2

Mar

-12

May

-12

Jul-12

Sep-1

2

Nov-

12

Jan-1

3

Mar

-13

May

-13

Jul-13

Sep-1

3

Nov-

13

Jan-1

4

Mar

-14

May

-14

Jul-14

Sep-1

4

Nov-

14

Jan-1

5

Mar

-15

May

-15

Jul-15

Sep-1

5

Nov-

15

Jan-1

6

Mar

-16

May

-16

Jul-16

Sep-1

6

Imports Exports

Source: CMIE; Figures in tonnes

Production of Long and Flat Products

JAN – Oct 2016

21

Long Products Flat Products

Bars &

Rods

Steel

Structural

GP/GC

Sheets

HR

Coils

CR

Sheets/Coils

Pipes HR

Sheets

Plates

Jan-16 2,951 666 581 1,615 626 167 159 326

Feb-16 2,927 598 533 1,528 588 181 59 638

Mar-16 2,318 529 523 1,813 534 149 76 417

Apr-16 2,740 599 579 1,651 634 163 191 295

May-16 3,097 686 628 1,868 715 187 94 383

Jun-16 2,914 660 596 1,683 658 184 92 364

Jul-16 2,654 587 584 1,673 556 152 56 354

Aug-16 2,841 717 599 2,315 706 169 111 350

Sep-16 2,815 652 637 2,165 709 166 80 381

Oct-16 2,972 633 607 2,159 707 167 62 362

Source: Steelmint Research;Custom data; Figures in tonnes

Trends in Bars & Rod Imports

Apr-Nov 2016

22

Month

Alloy BAR

AND ROD

(CH-7228)

Non Alloy -

BAR AND

ROD

(CH-7214)

Non Alloy -

BAR AND

ROD-Coil

(CH-7213)

Other Non

Alloy - BAR

AND ROD

(CH-7215)

WIRE of

alloy Steel

(Ch-7227)

WIRE of Non

alloy Steel

(CH-7217)

Grand

Total

M-o-M

Change

Apr-16 41,300 18,300 2,300 3,000 29,300 13,300 1,07,500

May-16 40,300 22,000 2,200 2,200 20,600 24,600 1,11,900 +4 %

June-16 21,000 6,600 3,100 1,900 12,300 38,900 83,800 -25%

July-16 20,800 13,900 1,500 700 12,000 5,000 53,900 -36%

Aug-16 30,500 7,100 1,900 1,500 28,600 13,500 83,100 +54%

Sep-16 36,400 28,500 3,700 2,000 29,600 15,400 1,15,600 +39%

Oct-16 31,900 17,500 1,400 1,700 8,000 12,500 73,000 -37%

Nov-16 21,600 11,700 3,300 1,300 4,700 11,900 54,500 -25%

Apr to

Nov-162,43,800 1,25,600 19,400 14,300 1,45,000 1,35,100 6,83,300

Source: SteelMint, Prices are inclusive of Excise duty of 12.5 %

Trend in Steel Prices

Jan – Nov 2016

23

• Major Steel Players have raised flat products price owing to increased cost of raw material.

therefore higher production cost has compelled the manufacturer to increase the price as the

escalated cost is passed to the consumer.

• Current offer of HRC 2.5 mm (IS 2062) are assessed in the range of INR 41000-41500(Ex-

Mumbai),INR 48000-48500 (Ex- Delhi), INR 41500-42000 (Ex-Chennai).Prices are inclusive of

Excise Duty 12.5%.

• Current offer of CRC 0.9 mm are assessed in the range of INR 46000-46500(Ex-Mumbai),INR

48000-48500 (Ex- Delhi),INR 46000-46500 (Ex-Chennai). Prices are inclusive of Excise Duty

12.5%.

Domestic HRC/CRC prices-INR/MT

Pri

ces

in I

NR

/MT

Source: SteelMint; Figures in ‘000 tonnes

Trends in Indian Pellet Export

Jan-Nov 2016

24

• India’ s monthly pellet export have crossed 1 MT mark in November 2016 since April 13.Indian

Pellet Export have registered the growth of 15.7 % due to increased pellet demand from China.

• In Nov’16, Indian pellet export were registered at 1,047,600 tonnes against 747,755 tonnes in

Oct’ 16.

1,19,50051,000 48,000

1,10,500

2,26,350

4,99,600

3,87,370

7,45,4008,02,370

7,47,775

10,47,600

0

2,00,000

4,00,000

6,00,000

8,00,000

10,00,000

12,00,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Status of Indian Pellet Export (in 2016)-in ’ 000 tonnes

Source: SteelMint; Iron Ore Insight Released on 11th November 2016

Trends in Indian Iron ore Export and Import

Jan-Oct 2016

25

0

5,00,000

10,00,000

15,00,000

20,00,000

25,00,000

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16

Export Import

• Indian iron ore import fell by 13% M-o-M from 0.55 MT in Sept’16 to 0.48 MT in Oct’16 amid

higher global iron ore prices.

• Iron ore export from India witnessed sharp increase in Oct’16. Indian iron ore export increased

from 0.87 MT in Sept’16 to 1.62 MT in Oct’16. After monsoon Goan exporters resumed

exports in last month.Vedanta was the largest exporter at 0.67 MT followed by Fomento

Resources at 0.32 MT and Rungta Mines at 0.23 MT

Indian Iron Ore Export and Import in ’000 tonnes-Jan to Oct 2016

Source: CRU Insight

Demonetisation of Currency and its Implications

India

26

• On 8th November 2016, the Government of India demonetised INR 500 and 1000 currency

notes, the highest denominations in the country at that time, with effect from the following

midnight. While those notes ceased to be legal tender with immediate effect, the government has

allowed up to 30th December 2016 for these currencies to be exchanged with new notes (only

up to a certain small amount) or to be deposited in bank accounts (with no limit on amount

deposited).

• The three principal reasons cited by the Government for this move were the following:

1.FICN (Fake Indian Currency Notes) of these denominations are in circulation, thus weakening

the economy

2.The fake currency is evidently being used to finance terrorism and other anti-national activities

3.Hoarders of black money are primarily using these high denomination currency notes to stash

away illegal cash.

• Demonetisation is expected to uncover more black money and generate higher revenue via

taxation and penalties than the IDS. The government has also cited its intention of targeting

benami transactions. In this regard, it has already amended the Benami Transactions Act this year

to give officials more authority in dealing with such cases. A benami transaction is one where a

person holds a property but another has paid for it.

Source: CRU Insight

Demonetisation of Currency and its Implications

India

27

Sector Impact of Demonetisation Implication on Metal Demand

Automotive

Demand is likely to dip over the current

and upcoming quarter for two wheelers, but

passenger Vehicles and tractor will be less impacted.

Major Players in the Indian automotive

segment have not cited any major plans of

production cuts during H2 FY 17.Thus,the

demand for steel and aluminium flat

products from segment is unlikely to be

impacted much during the period.

•In two wheeler companies around 35-40 %

purchases are made via financing, while rest via

banked cash or simply are “unaccounted”.•In passenger vehicles segment, close to 75-80 %of

sales are either through financing, or even down

payments are mostly by cheques.so this segment

could face less heat.•As for tractors close to 65 % of the purchases are

financed, therefore the impact of cash squeeze

could be minimal.

Infrastructure Infrastructure demand, backed by government

spending which has been driving growth is unlikely to

be impacted.

No major impact. related project sales of

primary steel players will remain secure

Power and Coal A possible fall in the interest will be positive for debt

laden power sector players.

Coal Prices have risen recently, with china cutting

domestic with Donald Trump focussing on US

competitiveness, there's a good chance that China will

reciprocate allowing coal prices to fall again

Metal demand ,however small from these

segments is unlikely to be impacted much.

Source: Reserve Bank of India report released on Nov 10, 2016

RBI’s Sectoral Deployment of Bank Credit

Nov 2016

28

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 Sept.18 Aug.19 Sept.30 2016-17 2016

2.13 Basic Metal &

Metal Product4160 3899 4172 4163 0.1 6.8

2.13.1 Iron & Steel 3115 2907 3109 3113 -0.0 7.1

2.13.2 Other Metal &

Metal Product1046 992 1063 1050 0.4 5.8

Source: Reserve Bank of India; as on 09.12.2016

Rates at Reserve Bank of India

Nov 2016

CRR – Cash Reserve Ratio; SLR - Statutory Liquidity Ratio

CurrencyDate

09/12/2016

I USD 67.43

1 EUR 72.61

1 GBP 85.24

100 YEN 59.44

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 : 20.75%

29

Lending/ Deposit Rates

Base Rate : 9.30% - 9.65%

Savings Deposit Rate : 4.00%

Term Deposit Rate > 1 year : 6.50% - 7.10%

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 November 2016 or prior.