A Review of developments in

The Global & Indian Steel Industry

Monthly edition

Issue No. 21

November 2017 (covering October 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

GLOBAL DEVELOPMENTS

Source: The Economist Intelligence Unit, Global Forecasting Service

Country-wise Growth Forecasts

2017 - 2021

As of October 18,2017;

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

In % 2017 2018 2019 2020 2021 2022

IndiaReal GDP Growth 6.7 7.7 8.0 7.5 8.3 8.5

Inflation 3.3 4.4 4.8 4.2 4.3 4.4

ChinaReal GDP Growth 6.8 5.8 6.1 5.6 5.2 4.8

Inflation 1.5 1.8 2.2 3.0 2.5 3.2

U.S.AReal GDP Growth 2.2 2.2 2.2 0.8 1.8 1.9

Inflation 2.0 2.0 2.2 1.3 1.8 1.9

JapanReal GDP Growth 1.6 1.2 1.4 0.4 1.1 1.0

Inflation 0.5 0.4 0.9 1.2 0.7 0.9

RussiaReal GDP Growth 1.9 1.6 1.6 1.5 1.6 1.7

Inflation 3.9 4.0 4.8 4.3 4.5 4.3

Source: IMF-World Economic Outlook Published on 10th October 2017.

IMF World Economic Outlook

October 2017

➢ In its latest World Economic Outlook, IMF projected that the global economy is going

through a cyclical upswing that began midway through 2016. It raised the global growth

estimate marginally for 2017 to 3.6% while flagging downside risks.

➢ The upward revisions in its growth forecasts including for the euro area, Japan, China,

emerging Europe, and Russia more than offset downward revisions for the United States,

the United Kingdom, and India.

➢ In India, growth momentum slowed, reflecting the lingering impact of the authorities

currency exchange initiative as well as uncertainty related to the midyear introduction of

the countrywide Goods and Services Tax. However, IMF expects the Indian economy to

recover sharply in 2018 to grow at 7.4%, though 30 basis points lower than its earlier

estimate in April 2017

➢ Highlighting the growing income inequality within and among emerging market economies,

IMF predicted a country’s growth rate does not always foretell matching gains in income for

the majority of the population. For example China and India, where real per capita GDP

grew by 9.6% and 4.9% a year, respectively, in 1993–2007, the median household income is

estimated to have grown less—by 7.3% a year in China and only 1.5% a year in India.

Source: World Steel Association, MT-Million tons

Top Crude Steel Producing nation

As Per World Steel Association in September 2017

Rank Nation 2017

(in MT)

1 China 71.82

2 Japan 8.62

3 India 8.20

4 United States 6.71

5 Russia 6.02

6 South Korea 5.88

7 Germany 3.51

8 Turkey 3.00

9 Brazil 2.95

10 Iran 2.23

• Table lists world’s top ten nations with regards to total crude steel output during Sept. 2017.

Source: World Steel Association, MT-Million tons

Top Crude Steel Producing nation

As Per World Steel Association- Jan to Sept. 2017

Rank Nation 2017

(in MT)

1 China 638.73

2 Japan 78.26

3 India 75.29

4 United States 61.45

5 Russia 54.20

6 South Korea 52.81

7 Germany 35.87

8 Turkey 27.74

9 Brazil 25.46

10 Italy 17.77

Source: World Steel Association

Top DRI Producing nations

As Per World Steel Association

• The table given below provides the list of world’s top ten DRI producers during Jan-Sept. of

2017.

Rank Nation Output (in MT)

1 Iran 14.29

2 India 11.01

3 Mexico 4.59

4 Saudi Arabia 3.80

5 Egypt 2.97

6 UAE 2.62

7 Qatar 1.88

8 Canada 1.19

9 Argentina 0.796

10 South Africa 0.702

Source: World Steel Association

Top DRI Producing nations

As Per World Steel Association

• The table given below provides the list of world’s top ten DRI producers during Jan-Sept. of

2017.

Rank Nation Output (in MT)

1 Iran 14.29

2 India 11.01

3 Mexico 4.59

4 Saudi Arabia 3.80

5 Egypt 2.97

6 UAE 2.62

7 Qatar 1.88

8 Canada 1.19

9 Argentina 0.796

10 South Africa 0.702

Source: World Steel Association, (f)-forecast, MT-Million Ton

Rank Nation 2016 2017(f) 2018(f)

1 China 681 765.7 765.7

2 United States 91.8 96.2 97.3

3 India 83.5 87.1 92.1

4 Japan 62.2 64.0 64.5

5 South Korea 57.1 56.2 56.4

6 Germany 40.5 41.4 41.6

7 Russia 38.2 39.2 40.5

8 Turkey 34.1 33.5 35.5

9 Mexico 25.4 26.8 27.6

10 Italy 24.1 23.9 24.2

▪ The World Steel Association (world steel) released its October 2017 Short Range Outlook (SRO). world steel

forecasts global steel demand will reach 1,622.1 Mt in 2017. In 2018, it is forecast that global steel demand will

reach 1,648.1 Mt. world steel forecasts that global steel demand excluding China will reach 856.4 Mt, an increase

of 2.6% in 2017 and 882.4 Mt, an increase of 3.0% in 2018.

Top 10 Steel Using Countries 2016 in MT

Top 10 Steel Using Countries

October 2017

Source-World Steel Dynamics, Truth & consequences #80

Global Steel production

A Report by World Steel Dynamics

▪ Output in September was 1.73 billion tonnes annualized with the Chinese figure at 874 Million tonnes. For

the year, global output is forecast at 1.69 Billion tonnes with China at 839 Million tonnes (including some

reported production making up for unreported induction furnace production).

▪ In 2017,the largest gain in steel production may occur in developing World ex-China with its production at

393 Million tonnes versus 375 million tonnes last year. Chinese output in 2018 is forecast to fall back to

821 Million tonnes due to flattish steel demand and less steel buyer inventory build.

▪ Looking ahead to 2025,WSD forecasts that global steel production will be little changed from 2017 at 1.68

billion tonnes. Chinese output drops to 709 million tonnes versus 839 million tonnes in 2017.

▪ Advanced Country output rises to 476 Million tonnes versus 457 Million tonnes; while Developing World-Ex

China output increases to 494 Million tonnes versus 393 Million tonnes.

▪ In India’s Case we forecast its output in 2025 at 141 million tonnes for a 6.1% per annum compounded

growth rate from about 99 million tonnes in the current year

▪ The fastest growing region looking ahead to 2025 is developing Asia, whose output is forecast at 50 Million

tonnes versus 27 Million tonnes in the current year for a growth of 8.1 % per annum compounded

Source-World Steel Dynamics, Truth & consequences #80

Global Steel production

A Report by World Steel Dynamics

Source-World Steel Dynamics, Truth & consequences #80

Chinese Steel Demand

A Report by world steel Dynamics

• The rise seems to be stronger than

expected in 2017,although the precise

amount is obscured by rising output by

integrated steel makers to make up for

the closed induction furnace (IF) steel

making facilities. Induction furnace output

in 2016 is assumed to have been 35

million tonnes although some observers

think was as much as 70 million tonnes.

• Chinese Governmental statistics this year

include much detail on steel product

output.WSD estimates that the long Steel

products demand this year will be up

about 3% while steel demand may rise

about 10%.

Source: US Customs, Steel Mint research

Trend in Flat Steel Export

USA Focus

• According to the custom data released, USA

flat steel exports which includes 7208 (HR

coils/Plates),7209 CR

coils),7225(Electrical sheets),7210/7212

(GP/GC) witness the Growth of 20% Y-o-Y basis

in Sept’17.Nation has exported 0.48 MnT of

flat steel in Sept’17 against 0.4 MnT in

sept’17.

• On monthly basis, nation’s flat steel export

moved down marginally by 2% in sept’17

against 0.49 MnT in Aug’17.

• Duirng first nine month of CY 17(Jan-Sept’17)

nation’s flat steel exports surged by 23% to

4.24 Mnt against 3.44 MnT in similar time

span of CY 16.

• Mexico was the major flat steel importer from

USA.

Source-Steel Mint Research

Trend in Steel Import

Japan Focus

• According to the custom data released, Japan flat steel exports which includes 7208 (HR

coils/Plates),7209 (CR coils),7225 (Electrical sheets),7210/7212 (GP/GC) witness the decline of

8% M-o-M basis to 0.34 MT in Sep’17 against to 0.37 MT in Aug’17

• On yearly basis, nation’s flat steel imports went down by 8% in Sept’17 in comparison with 0.37

MT in Sep’16.

• South Korea was the major exporter of flat steel to Japan in Sept 17 which was 0.24

MT followed byTaiwan which stood at 0.07 MT and China at 0.03 MT.

DOMESTIC DEVELOPMENTS

Source: Joint Plant Committee, MT-Million tonnes

Status of India’s Steel Trade

➢ Production for sale of total finished steel at 61.375 mt, registered a growth of 5.1% during

April-October 2017 over same period of last year.

➢ Export of total finished steel was up by 57.7% in April-October 2017 (5.626 mt) over same period of last year.

Overall exports in October 2017 (0.778 mt) was down by 30.2% over September 2017 and was up by 44.9%

over October 2016.

➢ Import of total finished steel at 4.916 mt in April-October 2017 was up by 18.9% over same period of last

year. Overall imports in October 2017 (0.6 mt) was down by 25.7% over September 2017 and was up by

11.5% over October 2016.

➢ India’s consumption of total finished steel saw a growth of 4.5% in April-October 2017 (50.337 mt) over same

period of last year, under the influence of rising production for sale and imports.

Apr – October

2017-18

% Change over April –

Oct. ,2016-17%

Finished Steel Qty in Mt %

Production for Sale 61.375 5.1

Import 4.916 18.9

Export 5.626 57.7

Consumption 50.337 4.5

Source: Steel Mint Research, DMF-District Mineral Foundations, NMET-National Mineral Exploration trust, GST-Goods and Service Tax

Indian Steel Market Overview

October 2017

Products Markets Taxes Prices in INR per ton M-o-M

Oct-17 Sept.-17

Iron Ore Fe

62%,5-18 mm

Joda

loaded to

wagon

Include Royalty,

DMF & NMET 4100 4100 No Change

Coking Coal,

Premium HCC

CNF India Prices in USD200 220 -9.09

HRC

(2.5-8mm)

Ex-Mumbai Include ED

12.5%,

VAT/CST Extra

38,100 39,188 -2.78

CRC

(0.90 mm)

Ex-Mumbai Include ED

12.5%,

VAT/CST Extra

42,650 43,400 -1.73

HR Plate

(5-10 mm)

Ex Mumbai Include ED

12.5%,

VAT/CST Extra

37,500 38,400 -2.34

Source: Steel Mint Research

Indian Steel Export Vs Export Offers

October 2017

➢ Indian Steel makers have resumed export bookings at a lower than the last month in order to offset

subdued domestic demand and to match Chinese and Russian offers.

➢ According to Ministry of Steel(Govt. of India),exports in September recorded at 1.12 MT, which is higher by

21 % as compared to last month and 71% as compared to last year during the same period.

➢ Indian exports may be recorded low in October due to local Holidays which kept trade activities limited.

But it should be high in November according to some expert.

➢ Chinese Steel exports are falling consistently since last month and likely to fall more amid production cuts.

This gives an opportunity to Indian Manufacturers.

Source: Steel Mint Research; Mt-Million tons

Trend of Indian Iron Ore Imports

October 2017

➢ Indian Iron Ore Imports were recorded at 0.49 MT in Oct’17 according to the customs data. India’s Imports

were up 27 % M-o-M against 0.39 MT in Sept’17.The Imports were also up 1% Y-o-Y in Oct’17 against 0.48

MT in Oct’16.

➢ Global iron ore prices have been witnessing downtrend since Aug’17 Monthly average spot Iron ore fines

(Fe 62%) prices were analysed at USD 61 per ton, CFR China in Oct’17 against USD 71 Per ton,CFR China

in sept’17

➢ So far in FY 18(Apr-Oct’17) India’s iron ore imports stood at 3.06 Mt down by 11% against the same period

last year that was 3.45 MT.

Source: Steel Mint Research,Basic Prices GST@ 18% extra

Trend in Domestic Steel Prices

• Currently HRC (IS2062) 2.5-8 mm is assessed in the range of INR 38,500-39,000(ex-Delhi),INR

39,000 per tonne (ex-Chennai) and INR 39,000-39,500 per tonnes(ex-Mumbai).Prices are the basic

excluding GST@18%.

• Currently CRC (IS 513) 0.9 mm is hovering in the range of INR 44,000 per tonne (ex-Delhi).INR

44,000-44,500 per tonne(ex-Chennai) and INR 43,500-44,000 per tonne (ex-Mumbai). Prices are the

basic excluding GST@18%.

INR

per

ton

Source: Short Range Outlook-October 2017,World steel Association

Indian Economy And Steel using Sector

A Report by World Steel association

➢ In 2017 India’s GDP is expected to grow by 7.2% and in 2018 by 7.7% (IMF). India’s GDP growth in the Q1 2017

slowed to 6.1%, bringing growth of the whole financial year to 7.1% and in Apr-June 2017 the growth decelerated to

5.6%. The deceleration can be explained by several factors, including slower recovery form demonetisation shock,

destocking before introduction of the new GST tax and deleveraging process in manufacturing and banking sectors.

Public investment and private consumption remain the main drivers of growth while private investments show

weakness.

➢ Infrastructure development, especially in Road & Railways coupled with Rural Housing remains strong despite weaker

growth in overall construction. Implementation of RERA (Real Estate Regulatory Act) from May ’17 is expected to

boost consumer confidence and consequently, construction activity.

➢ Industrial growth decelerated in May 2017, bringing the Jan-May 2016 industrial production index to 2.4% growth

(y-o-y). The capital goods production showed low growth whereas production of consumer durables fell by 5.3%. In

the electrical equipment sector, rail-car electrical equipment and HVAC are expected to grow with consistent

development of metro railways in tier 2 cities. Demand from the renewable sector is expected to remain healthy with

expected addition of ~25 GW in solar capacity by FY19 and ~17 GW in wind capacity by FY22 and localization of

imported components would help steel demand growth.

➢ GST implementation is expected to boost automotive growth by 1.5-2% point with UV’s and Sedans seeing 2.5-3%

point additional growth. Despite benefits from GST, the MHCV segment growth remains uncertain due to lower

replacement demand and advancement of purchases in FY17 due to implementation of BS-IV norms.

➢ Likely achievement of 100% village electrification by May 2018, increasing penetration of retail financing, emergence of

e-commerce, replacement demand and policy rate cut are expected to boost the rural demand for durable goods.

➢ Steel demand in India is expected to grow by 4.3% in 2017 and by 5.7% in 2018.

Source: Reserve Bank of India

Rates at Reserve Bank of India

November 2017

CRR – Cash Reserve Ratio; SLR - Statutory Liquidity Ratio, MCLR-Marginal Cost of fund lending rates

CurrencyDate

Nov.13, 2017

I USD 65.51

1 EUR 76.47

1 GBP 85.93

100 YEN 57.65

Policy Repo Rate : 6.00 %

Reverse Repo Rate : 5.75 %

Marginal Standing Facility Rate : 6.25 %

Bank Rate : 6.25 %

Reference Rates

Policy Rates Reserve Ratios

CRR : 4.00%

SLR : 19.50%

Lending/ Deposit Rates

Base Rate : 8.95-9.45%

Savings Deposit Rate : 3.50-4.00%

MCLR(Overnight) : 7.70-8.05%

Term Deposit Rate > 1 year : 6.00-6.75%

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 October 2017 or prior.