Steel industry-in-india-2013-report

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Published: 08.01.2013

IORR: Industry Outlook Reference Report

Steel Industry in India - 2013


1.

Index & Disclaimer

Index: Page

1. Steel Industry in India: Global Perspective 3-4

- Indian steel industry vs. global steel industry

- Contribution of India’s economy to global GDP

- India & the leading steel producers in the world

- India’s share in global steel consumption

- Competitiveness of the Indian steel industry

2. Steel Production Scenario in India: The Way Forward 5-7

- Indian steel industry: evolution and growth

- Steel production trend in India

- Leading steel producers in India

- Technology wise steel production

- Category wise steel production

3. India’s Steel Consumption Trend and the Growth Drivers 8-9

- India’s steel consumption on high growth trajectory

- Steel consumption trend in India

- Category wise steel consumption

- Prime growth drivers of steel demand in India

4. India’s Steel Import Export Scenario and Future Prospects 10

- Steel import trend and future scenario

- Steel export trend and future scenario

5. Raw Material Supplies for Steel Industry: Is India Self Sufficient? 11

- Assessing raw material supply scenario for India

- Raw material demand by steel industry

- Initiatives that will improve & secure raw materials supply

Disclaimer This report is for personal reference only, to increase knowledge and awareness about the steel industry.

Information provided in this report are sourced from standard sources however Corpotrade Global does not

guarantee exactness and accuracy of the information sourced. Corpotrade Global will not be responsible for

any losses claimed in relation to contents or material of this report. A detailed research and expert assistance

is advised for conclusions and decision making.

About IORR

IORR: “Industry

Outlook Reference

Report” is an initiative

by Corpotrade Global

Pvt. Ltd., India to

increase knowledge

and awareness about

a particular industry

among information

seekers, professionals

and executives of the

industry. The report

gives a quick overview

and insight of the

particular industry and

is meant only for

personal reference

and increasing

knowledge and

awareness.

Note

THIS REPORT IS

PREPARED IN A

CRISP & CONCISE

FORMAT FOR

QUICK REFERENCE




2.

Index Continued…

Index: Page

6. Inadequate Infrastructure: A Major Concern for Steel Industry in India 12

- Infrastructure issues for steel industry in India

- Infrastructure addition during twelfth five year plans (2012-17)

- Actions to boost infrastructure support to steel industry

7. Indian Steel Industry and Increasing Role of Technology 13

- Technological exposure of Indian steel industry

- Indian steel industry needs to adapt latest technologies

8. Prospective Analysis of Indian Steel Industry 14

- Potential Growth Drivers of Indian Steel Industry

- Strength, Weakness, Opportunity & Threat: SWOT Analysis

9. Executive Summary 15

10. Abbreviations and Bibliography 16



About IORR

IORR: “Industry

Outlook Reference

Report” is an initiative

by Corpotrade Global

Pvt. Ltd., India to

increase knowledge

and awareness about

a particular industry

among information

seekers, professionals

and executives of the

industry. The report

gives a quick overview

and insight of the

particular industry and

is meant only for

personal reference

and increasing

knowledge and

awareness.

Note

THIS REPORT IS

PREPARED IN A

CRISP & CONCISE

FORMAT FOR

QUICK REFERENCE

Disclaimer This report is for personal reference only, to increase knowledge and awareness about the steel industry.

Information provided in this report are sourced from standard sources however Corpotrade Global does not

guarantee exactness and accuracy of the information sourced. Corpotrade Global will not be responsible for

any losses claimed in relation to contents or material of this report. A detailed research and expert assistance

is advised for conclusions and decision making.


3.

1. Steel Industry in India: Global Perspective

INDIAN STEEL INDUSTRY VS. GLOBAL STEEL INDUSTRY

Global crude steel production reached 1527 MT in 2011 showing a 6.8 %

growth over 2010. India has emerged as a leading player in global steel

industry contributing to about 4.7 % of global crude steel production in 2011.

Large scale infrastructure expansion plans for twelfth five year plan (FYP:

2012-17) and raising per capita steel consumption in India promises

unprecedented growth potential of Indian steel Industry during next 10 years.

Exhibit 1: World crude steel production: 2007-11, country-wise contribution (%)

to world crude steel production in 2011

Source: World Steel Association

CONTRIBUTION OF INDIA’S ECONOMY TO GLOBAL GDP

India ranked as the third largest contributor (5.65%) to global GDP in 2011 in

terms of PPP ranking, only behind US and China. India’s economic growth has

slacked during past three years due to worldwide economic slowdown however

during next five years it’s GDP is expected to grow in 6-8 % range. The sectors

with high growth potential like manufacturing and construction sectors which

account for about one fourth(FY 12) of India’s GDP will be the key growth

drivers for the Indian Steel Industry

Exhibit 2: GDP (trillion $) of leading global economies in terms of PPP- 2011

Source: International Monetary Fund, Economic Times

KEY FIGURES

Global crude steel

production – 2011:

1527 MT

Global crude steel

production growth

during 2007-11: at

CAGR of 3.2 %

India’s crude steel

production -2011:

72.2 MT

India’s GDP

growth:

2010-11= 8.4%

2011-12= 6.5%

2012-13= 5.9%(E)

India’s GDP: 2011

Nominal - $ 1.85

trillion

PPP - $ 4.5 trillion

Approximate share

of infrastructure(8%

E) & manufacturing

sector(16 % E) in

India’s GDP (FY

12): one fourth

China, 45.5

Japan, 7

United States, 5.6

India, 4.7

Russia, 4.5

South Korea, 4.5

Ukraine, 2.3

Brazil, 2.3

RoW, 11.8

World Crude Steel Production in MT (2007-11)

1347 1341 1236

1430 1527

0

200

400

600

800

1000

1200

1400

1600

1800

2007 2008 2009 2010 2011

Share in % (2011)

US

15.1 CHINA

11.3 INDIA

4.5 JAPAN

4.4

Global Rank 1 3 2 4



India’s is gradually

evolving as global

leader in steel

production though it

lags in per capita

steel consumption


4.

1. Steel Industry in India: Global Perspective

INDIA & THE LEADING STEEL PRODUCERS IN THE WORLD

India is the largest producer of sponge iron and fourth largest producer of crude

steel in the world. India registered a 5.7 % growth in crude steel production in

2011 against 2010. Japan was the only nation among top ten crude steel

producers in the world posting negative growth of minus 1.8 % for crude steel

production in 2011 against 2010. Indian steel industry which is not

technologically as mature as steel industry of developed economies is

implementing latest technology, adapting backward integration and improving

efficiency in steel production to reduce cost, increase production and become

competitive globally.

Exhibit 3: Top ten crude steel producers in the world and their steel production

in: 2010 and 2011 (MT)


INDIA’S SHARE IN GLOBAL STEEL CONSUMPTION

India’s per capita steel consumption is only 57 kg against global average of 215

kg. This shows a broad scope for increase in per capita steel consumption in

India and potential unprecedented expansion of steel industry in India. Global

crude steel consumption for 2011 reached about 1373 MT

Exhibit 4: World crude steel consumption: 2007-11, country-wise contribution (%)

to world crude steel consumption in 2011

Source: World Steel Association, Ministry of Steel- GoI

COMPETITIVENESS OF THE INDIAN STEEL INDUSTRY

Abundance of raw materials, iron ore and cheap workforce makes Indian steel

industry competitive. However dependence on imported coking coal, low

production efficiency, inadequate infrastructure & technology and delays in

regulatory clearances & approvals are major hindrance to growth of Indian

steel industry.

KEY FIGURES

Global crude steel

consumption –

2011: 1373 MT

Global crude steel

consumption

growth during

2007-11: at CAGR

of 3.04 %


consumption -2011:

67.8 MT

India’s global rank:

Largest sponge

iron producer.

4th Largest crude

steel producer

Per capita steel

consumption-2011:

Global - 215 Kg

India’s – 57 kg

Country China Japan United

States India Russia

South

Korea Germany Ukraine Brazil Turkey

2011 695.5 107.6 86.2 72.2 68.7 68.5 44.3 35.3 35.2 34.1

2010 638.7 109.6 80.5 68.3 66.9 58.9 43.8 33.4 32.9 29.1

China, 45.1

NAFTA, 7.7 CIS, 7.4

India, 4.9

EU, 11.7

Japan, 7.1

Others, 6.3

Other Asian, 7.2

Other Europe, 2.6

World Crude Steel Consumption in MT ( 2007-11)

1218 1218 1140 1301 1373

0

500

1000

1500

2007 2008 2009 2010 2011

Share in % (2011)

OTHERS

Africa: 1%

Middle East: 1.5%

Central & South America: 3.3%

Australia & New Zealand: 0.5%



Potential growth of

steel consumption in

India will polarise

development of

global steel sector

towards India


5.

2. Steel Production Scenario in India: The Way Forward

INDIAN STEEL INDUSTRY: EVOLUTION AND GROWTH

Steel making in India can be traced back to 400 BC. The foundation of modern

steel industry in India was led down in 1874 by establishment of steel making

facility of Bengal Iron Works (BIW) in Kulti (West Bengal). Beginning of large

scale steel production started with establishment of Tata steel plant in 1907 in

Jamshedpur, which started production in 1912. Later large steel plants in India

were established in Bokaro, Durgapur, Bhilai, Burnpur and Bhadrawati. Except

Tata Steel, steel production in India was confined to public sector companies

under control of SAIL till 1990s. Post liberalisation(1991) large scale

development in steel industry was witnessed due to participation of private

players and huge influx of foreign investment in steel industry of India.

STEEL PRODUCTION TREND IN INDIA

Post independence steel production in India showed a considerable growth in

capacity. Finished steel production increased from 1.1 MT in 1951 to 14.33 MT

in 1991-92. Post liberalisation the growth trend continued however at a higher

pace and finished steel production reached 73.7 MT(provisional) for 2011-12.

Exhibit 5: Historical trend of steel production in India: 1951 to 2012

Source: Public Information Bureau-GoI, Ministry of Steel-GoI

During the period FY 07 to FY 12 crude steel production has attained growth at

CAGR of about 7.7 %. While the average capacity utilisation remained near 89

percent of the total production capacity. During the twelfth five year plan crude

steel production is estimated to grow at CAGR of about 11.3 % due to large

scale capacity addition plans for steel production during this period.

Exhibit 6: India’s crude steel production trend & projection- FY 2007 to FY 2017

Source: Ministry of Steel-GoI: working group report 2012-17, Annual Report-2011: MoS-GoI

0

20

40

60

80

FY 1951 FY 1992 FY 2012(P)

Finished Steel Production in MT

CAGR: 5.16 %

CAGR: 8.53 %

50.8 53.8 58.4 64.8 69.5 73.7 85.9 94.5 104 114.5 125.9

56.8 59.8 66.3

72.9 78 81.9 95.4

105 115.6

127.2 139.9

0

50

100

150

FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Production

Capacity

Estimates

Crude Steel Production vs. Capacity (MT)

Actual

KEY FIGURES

Modern steel

production facility

started in India in

1874

Post liberalisation

(1991) steel making

was made open for

private co.'s and

steel price was also

deregulated

Finished steel

production in India:

Year 1951: 1.1 MT

1991-92: 14.33 MT

2011-12:73.7 MT(P)


production growth

during 12th FYP

2012-17:

estimated at 11.3 %

(CAGR)

Estimated crude

steel volume India

reaches by FY 17:

Prod.: 125.9 MT

Capacity: 139.9 MT



Capacity utilisation

of the Indian steel

industry on average

remains high at 89%,

however the sector

suffers due to low

efficiency


6.

LEADING STEEL PRODUCERS IN INDIA

Steel making in India is concentrated along mineral rich belt of India, as vicinity

to supply of raw materials like iron ore and coal provides considerable

economic advantage. Most of the large scale steel making facilities are

concentrated in state of Jharkhand, Orissa, West Bengal, Chhattisgarh and

Karnataka. Steel production in India is leaded by SAIL, Tata Steel, JSW and

others, while SAIL continues to be the largest steel producer in India.

Exhibit 7: Leading steel producers in India and their production share: FY 2007 to FY 2011

Source: Joint Plant Committee: MoS-GoI working group report 2012-17

Steel production in India which was primarily reserved for government

companies till liberalisation now sees dominance of private companies in terms

of production share. Share of private sector companies in crude steel

production raised from 49 % in FY 01 to 75 % in FY 11. While the share of

private sector companies in finished steel production increased from 68 % in

FY 01 to 80 % in FY 11.

Exhibit 8: Share of private sector companies in steel production in India (%): FY 2011

Source: Joint Plant Committee

KEY FIGURES

SAIL is the largest

steel producer in

India with 13.76 MT

crude steel

production in FY 11

Top five steel

producers

contribute to

almost half of

crude steel

production in India

Steel production

through induction

furnace and electric

arc furnace route

contributes to more

than 50 % of steel

production

Steel production

share- FY 2011:

Crude Steel

Private Sector: 75%

Gov. Sector: 25%

Finished Steel

Private Sector: 80%

Gov. Sector: 20%




Producer FY 07 FY 08 FY 09 FY 10 FY 11(P)

SAIL 13.51 13.96 13.41 13.51 13.76

RINL 3.50 3.13 2.96 3.21 3.24

Tata Steel 5.17 5.01 5.65 6.56 6.86

JSW 2.64 3.15 3.22 5.26 5.85

ISPAT 2.76 2.83 2.20 2.69 2.38

ESSAR 3.01 3.56 3.34 3.47 3.37

JSPL - - 1.46 1.96 2.27

Others-1 4.84 5.28 8.15 9.36 9.79

Others-2 15.39 16.93 18.05 19.82 22.07

Total 50.82 53.86 58.44 65.84 69.58

Crude Steel Production Share in MT (2007-11) Share in % (2011)

Others-1: Includes production from EAF Units/ COREX-BOF

Others-2: Includes production from induction furnace

20%

5%

10%

8% 3%

5% 3%

14%

32%

SAIL RINL

Tata Steel JSW

ISPAT ESSAR

JSPL Others-1

Others-2

75

25

Crude Steel Production (% Share)

Private Sector Companies Government Sector Companies

80

20

Finished Steel Production (% Share) Post deregulation of

steel industry private

sector is gaining

dominance in terms

of cumulative

production share


7.

TECHNOLOGY WISE STEEL PRODUCTION

Steel production in India attained a high growth at CAGR of about 5.8 %

during the 11th FYP 2007-11 mostly contributed due to growth in steel making

through electric furnaces route. While the old method of steel making through

oxygen route still remains dominating and contributes to about 44 % of crude

steel production in 2011.

Exhibit 9: Technology-wise crude steel production share (%): FY 2011 vs. FY 2006

Source: Joint Plant Committee

CATEGORY WISE STEEL PRODUCTION

Most of the sponge iron produced in India, about 75 % (in FY 11) comes from

coal based units. Production of sponge iron touched 20.37 MT(P) in FY 12

while the capacity reached about 32 MT. India which is a net exporter of Pig

Iron produced 5.78 MT(P) of pig iron in FY 12.

Exhibit 10: Category-wise crude steel production share (MT): FY 2008 to FY 2012

Source: Joint Plant Committee: MoS

Exhibit 11: Product-wise crude steel production for sale (MT): FY 2007 to FY 2011

Source: Joint Plant Committee: MoS-GoI: working group report 2012-17

KEY FIGURES

Steel production

growth during 11th

FYP 2007-11: at

CAGR of 5.8 %

Sponge Iron figures

for FY 12 (P):

Prod.- 20.37 MT

Capacity- 32 MT

India is the largest

sponge iron

producer in the

world and

contributes about

one third of the

global sponge iron

production

Production of pig

iron and sponge

remained almost

flat during last five

years

Product-wise

growth in steel

production during

11th FYP 2007-11,

in CAGR terms:

Flat Prod.- 4.9 %

Long Prod.- 5.8 %

Alloy Prod.- 16 %




Basic Oxygen Furnace

(44%)

Electric Arc Furnace

(24%)

Induction furnace

(32%)

Process Route & % Share in Crude Steel Making

FY 11

FY 06 Total

100 %

Total

100 %

Basic Oxygen Furnace

(53%)

Electric Arc Furnace

(18%)

Induction furnace

(29%)

Decline

in %

share

Increase

in %

share

Steel Category FY 08 FY 09 FY 10 FY 11 FY 12(P)

Pig Iron 5.28 6.21 5.88 5.68 5.78

Sponge Iron 20.37 21.09 24.33 25.08 20.37

Total Finished Steel (alloy +

non alloy) 56.08 57.16 60.62 68.62 73.42

24.73 26.32 26.98 26.95 31

25.45 26.99 27.18 30.16 30.8

2.33 2.76 3.02 3.53

4.22

0

20

40

60

80

FY 07 FY 08 FY 09 FY 10 FY 11 (P)

Total of Alloy Products

Total of Flat Products

Total of Long Products

With increasing

number of small

steel producers steel

production through

electric furnaces

route is growing

substantially


8.

INDIA’S STEEL CONSUMPTION ON HIGH GROWTH TRAJECTORY

Steel consumption in India has grown substantially since evolving of modern

steel industry during nineteenth century. During the past two decade steel

consumption has grown at a faster pace driven by liberalisation, decontrol of

steel industry, growing population, infrastructure development and changing

lifestyle of people. Per capita steel consumption in India (57kg: 2011) which is

considerably low compared to global average (215 kg: 2011 ) is estimated to

grow substantially during the next five years in proportionate with the growing

economy.

Exhibit 12: Per capita steel consumption in India (kg): 2006 to 2011


STEEL CONSUMPTION TREND IN INDIA

Steel consumption growth during 11th FYP (2007-11) has outpaced steel

production growth. Steel consumption growth during this period was at CAGR

of 8.8 % compared to production growth at CAGR of 5.8 %. We have estimated

finished steel demand growth during 12th FYP (2012-17) in two scenarios. For

scenario- 1 we assumed finished steel demand to grow at CAGR of 9 % while

in more optimistic case of scenario-2 we assume demand growth at CAGR of

11 %, with respect to FY11 as base year.

Exhibit 13: Steel consumption trend in India (MT): FY 2007 to FY 2017

Source: WSA, Joint Plant Committee: MoS-GoI: working group report 2012-17, *Estimates

KEY FIGURES

Per capita steel

consumption

growth (CAGR in

%) 2006-2011:

World Avg.- 2.75 %

For India- 6.71 %

Steel consumption

growth during 11th

FYP (2007-11): at

CAGR of 8.8 %

Increasing

urbanisation and

infrastructure

growth to propel

per capita steel

consumption in

India

Finished steel

demand for India by

FY 17:

Scenario-1: 105

MT (Estimated)

Scenario-2: 107

MT (Estimated)



3. India’s Steel Consumption Trend and the Growth Drivers

41.2 45.8 45.1 50 55.4 57

187.5 198.4 196.4

181.9

205.5 214.7

0

50

100

150

200

250

2006 2007 2008 2009 2010 2011

India

World Average

India’s Per Capita Steel Consumption vs. World Average

46.78 52.12 52.35

59.34 65.61

0

20

40

60

80

FY 07 FY 08 FY 09 FY 10 FY 11(P)

Finished Steel Consumption (Actual)

Finished Steel Consumption

*Finished Steel Demand Growth (Estimates)

71.51

77.24

83.41

90.09

97.30

105.08

72.83

78.65

84.95

91.74

99.08

107.01

60.00

70.00

80.00

90.00

100.00

110.00

120.00

FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Scenario- 1 Scenario- 2

Steel consumption

growth in India

during 11th FYP has

outpaced domestic

steel production

growth with a

differential of 3% in

CAGR


9.

CATEGORY WISE STEEL CONSUMPTION

Steel consumption in India though maintained healthy growth during the

11th FYP (2007-11) but demand of steel in long product category remained

sluggish. Slow paced infrastructure and industrial projects development

due to worldwide recession was the major cause for sluggish demand of

long product. While the demand of flat product posted high growth (12.1%

CAGR) driven by robust domestic demand of consumer durables and

utility items.

Exhibit 14: Product-wise consumption of finished steel (MT): FY 2007 to FY 2011

Source: Joint Plant Committee: MoS-GoI: working group report 2012-17

PRIME GROWTH DRIVERS OF STEEL DEMAND IN INDIA

Steel demand has been proportionate with the GDP growth of the country.

Housing & real estate, construction & infrastructure and manufacturing

segment are the prime consumers and drivers of steel demand in India.

Exhibit 15: Steel demand drivers and their potential effect on steel demand growth during

next 5 year time frame

Source: Indicative model

KEY FIGURES

Product-wise

growth in steel

consumption during

11th FYP 2007-11,

in CAGR terms:

Flat Prod.- 12.1 %

Long Prod.- 5.9 %

Alloy Prod.- 9 %

India’s steel sector

growth is primarily

driven by domestic

demand as export

volume is low

Factors contributing

to steel demand

growth in India

- Economic growth

- Construction

- Infrastructure dev.

- Population growth

- Manufacturing



3. India’s Steel Consumption Trend and the Growth Drivers

24.73 26.45 27.07 26.81 31.16

19.59 22.97 21.83

29.27

30.99 2.46

2.74 3.36

3.26

3.47

0

10

20

30

40

50

60

70

FY 07 FY 08 FY 09 FY 10 FY 11 (P)

Total of Alloy Products

Total of Flat Products

Total of Long Products

Major Factors for Steel Demand Growth

Economic growth

Industrial, construction &

manufacturing growth

Growth in population

Rising middle class population and per

capita steel consumption

Growth in rural steel consumption

Infrastructure Development

Growth prospect of the segment

Potential

Demand

Driver

Construction &

Infrastructure

Housing & Real

Estate

Manufacturing

Sector

Energy & other

Sector

Agriculture,

Mining sector

activity

High

High

Construction,

infrastructure

development and

manufacturing

activity forms the

backbone of steel

industry demand


10.

STEEL IMPORT TREND AND FUTURE SCENARIO

India has been a net importer of steel, primarily of high grade steel and special

steel products. Deregulation and reduction in import duties on steel imports has

favoured steel imports. Steel imports has increased during the past decade due

to surge in domestic demand and reduction in price differential between

imported steel and domestic steel. Import volumes have been fluctuating

during the past five years and as per working group estimates steel imports

during 12th FYP is estimated to be in 5-6 MT range.

Exhibit 16: Steel import in India : past trends and future estimates- 2007-08 to 2017

Source: Joint Plant Committee - MoS, Working group report 2012-17- MoS

STEEL EXPORT TREND AND FUTURE SCENARIO

Liberalisation and free trade policy helped growth of steel exports from India.

Most of the steel exports from India consists of value added steel products

with higher margins. To remain competitive globally India needs to grow share

of value added and sophisticated steel product in its export basket. Steel

exports from India declined during 2008-11 period due to subdued demand of

steel globally. Steel export is expected to regain momentum as the global

economy revives . Steel exports is estimated to grow gradually from about 4

MT during FY 13 to 7 MT by FY 17.

Exhibit 17: Steel exports from India : past trends and future estimates- 2007-08 to 2017

Source: Joint Plant Committee - MoS, Working group report 2012-17- MoS

KEY FIGURES

India is net importer

of steel

India primarily

imports as well as

exports value

added and special

steel products

Steel import in

India touched 7.38

MT in FY 10

Working group on

Steel estimates

steel imports in

range of 5-6 MT

during 12th FYP

During 11th FYP

steel import posted

negative growth of

about 9 %

Working group on

Steel estimates

steel exports to

reach 7 MT during

12th FYP



4. India’s Steel Import Export Scenario and Future Prospects

7.03 5.84

7.38 6.66 6.83 6 5.5 5.5 5 5

0

2

4

6

8

FY 08 FY 09 FY 10 FY 11 FY 12 (P) FY 13 FY 14 FY 15 FY 16 FY 17

Finished Steel Import in MT

Steel Import

Actual Estimates

5.08 4.44

3.25 3.64 4.04 4 5

6 7 7

0

2

4

6

8

FY 08 FY 09 FY 10 FY 11 FY 12 (P) FY 13 FY 14 FY 15 FY 16 FY 17

Finished Steel Export from India in MT

Steel Export

Actual Estimates India’s steel export

will shift towards

higher percentage of

value added and

high margin steel

products in the

export basket


11.

ASSESSING RAW MATERIAL SUPPLY SCENARIO FOR INDIA

Raw material accounts for about 30-50% of the total cost of steel production in

India. Raw materials for steel making includes iron ore, coke, lime, ferro-alloys

and refractories etc. India has a huge iron ore reserve of about 28.52 billion

tons. About 60-70 % of the iron ore produced is consumed domestically and

remaining (mostly fines) is exported. India lags in coking coal reserves and

have only 5.3 billion tons of coking coal reserves. India meets more than 50

percent of coking coal demand through imports and imports will grow in parallel

with increasing steel production capacity.

RAW MATERIAL DEMAND BY STEEL INDUSTRY

About 2.5 to 3.5 ton of raw materials is required per ton of crude steel

production in India. With increasing crude steel production capacities demand

for main raw materials like iron ore and coking coal by steel industry will

increase at faster pace.

Exhibit 18: Raw material demand (MT) by steel industry during 12th FYP: 2012-17

Source: Working group report 2012-17- MoS, Projections by working group on steel industry

INITIATIVES THAT WILL IMPROVE & SECURE RAW MATERIALS SUPPLY

Indian steel industry requires reliable and economical raw material supplies to

remain competitive on global platform. Being deficient in coking coal and rich in

iron ore fines India needs to adapt steel making technologies which are

suitable for low grade Indian coal and iron ore fines. India requires technology

inputs and investments to increase sintering and pelletisation facility for making

use of iron ore fines. Indian companies needs to acquire coking coal assets

overseas to assure uninterrupted and economic supply of coking coal for its

steel Industry.

Exhibit 19: Major initiatives to improve and secure raw material supplies to steel industry


KEY FIGURES

Iron ore production

in FY 12 was

169.66 MT

India has 28.52

billion tons of iron

ore reserves

Estimated iron ore

consumption by

iron and steel

industry in FY 12

was 116.3 MT

Coking coal

production in India

for FY 12 is

estimated at about

22 MT

Coking coal import

in India for 2012 is

estimated at about

36.8 MT



5. Raw Material Supplies for Steel Industry: Is India Self Sufficient?

Estimated Demand Iron Ore Coking Coal Others Total

FY 12 115.03 43.25 11.13 169.41

FY 13 135.7 52.29 13.92 201.91

FY 14 149.43 57.91 15.33 222.67

FY 15 166.66 67.49 17.28 251.43

FY 16 185.24 77.23 19.48 281.95

FY 17 206.18 90.16 21.76 318.1

Others : PCI Coal, Manganese Ore, Chromite, Ferro Chrome, Ferro-Manganese, Silico-Manganese, Ferro-Silicon and Refractories

Reformation Measures Progressive Impact

Small Medium High

1. Limiting volatility in prices & assuring continuous supply through long term linkages

2. Assuring raw material supply security through overseas assets acquisitions

3. Consolidating steel industry and focus on backward integration

4. Adapting new technology to increase output and maximise efficiency

5. Allotting iron ore and coal mines for captive consumption by steel plants

6. Minimising duties & taxes on imports & increasing same for exports of raw material

7. Adding coal washing and iron ore sintering & pelletisation facility

India lags in coking

coal reserves,

acquiring coal

assets overseas can

assure reliable &

economic supplies

of coal in the future


12.

INFRASTRUCTURE ISSUES FOR STEEL INDUSTRY IN INDIA

Steel industry is heavily dependent on raw material and bulk movement. For

every tonne of steel produced about four tonnes of raw materials requires to be

transported. Indian steel industry is facing difficulties and delays caused due to

inadequate infrastructure for transportation and handling bulk materials. Most

of the steel plant does not have proper connectivity through rail network to

mines and ports. Bulk handling facility at majority of the ports, mines and steel

plants are of low capacity causing delays in loading & unloading. In most cases

road networks connecting steel plants to mines and ports are congested

leading to delays in supply and delivery of raw material and other items.

Exhibit 20: Bulk movements and associated issues faced by steel industry in India


INFRASTRUCTURE ADDITION IN INDIA DURING TWELFTH FIVE YEAR

PLANS (2012-17)

With increasing capacities of steel production in India more than 400 MT of

bulk handling capacity and transportation infrastructure will be required by steel

industry by 2017. Almost two fold rise in infrastructure demand by steel

industry during next five years will require massive investment in road, rail and

port infrastructure facility. An estimates investment (by public and private

sector) of $ 1 trillion has been envisaged for infrastructure sector(including

road, rail, port and other transportation infrastructure) during 12th FYP.

Exhibit 21: Estimated Investment in Infrastructure during 12th FYP: 2012-17

Source: Planning Commission - committee on Infrastructure

ACTIONS TO BOOST INFRASTRUCTURE SUPPORT TO STEEL INDUSTRY

KEY FIGURES

Estimated

investment in

infrastructure sector

during 12th

FYP(2012-17): $ 1

trillion

Estimated bulk

transportation &

handling capacity

requirement of

steel industry by

2017: more than

400 MT

Investment in

infrastructure sector

of India is

estimated to remain

in 9-10 % range

during 12th FYP

(2012-17)

Infrastructure

requirement by

steel industry is

estimated to

double in next five

years.



6. Inadequate Infrastructure: A Major Concern for Steel Industry in India

MARKET

STEEL PLANT

PORT MINES

Inadequate - Handling facility

- Road network

- Rail network Inadequate - Loading/unloading

Facility

Congested - Road network

- Rail network

Inadequate - Storage & Logistics

Lack of dedicated - Road network

- Rail network

528.3 619.4 712.7

809.5 918

1039.5

8.3 9 9.5 9.9 10.3 10.7

0

4

8

12

400

800

1200

FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Investment inINR,000 crore

Investment as% of GDP

- Rapid completion of “Dedicated Freight Corridor” by

railways to address increasing freight traffic

- Addition of large capacity siding and loading facility

at ports, mines and steel plant

- Developing road, rail and port infrastructure

dedicated for steel industry

- Developing self, part of project linked transportation

infrastructure by large project developers

- Widening congested road and railways

- Improving loading and transportation infrastructure

by adapting latest technology and equipment

- Introducing large capacity wagons for rail transport

Infrastructure

development will

drive steel demand

as well as support

infrastructural

requirement by steel

industry itself


13.

TECHNOLOGICAL EXPOSURE OF INDIAN STEEL INDUSTRY

Indian steel industry is highly fragmented with large number of small to large

scale producers. Use of steel making technologies varies among different steel

making units. With overall low level of advanced technological exposure, Indian

steel industry faces issues of quality, efficiency, hazards and process

standards. The overall use of latest and modern technologies is inadequate in

the entire steel industry value chain comprising of raw material mining and

processing, transportation and steel making. This leaves a broad scope for

process improvement through introduction of latest and efficient technology.

Exhibit 22: Technological input status at various process stages of Indian steel industry

Source: Indicative descriptive model

INDIAN STEEL INDUSTRY NEEDS TO ADAPT LATEST TECHNOLOGIES

With open trade policy for steel, Indian steel industry faces global competition,

hence to remain competitive and profitable it has to adapt latest and efficient

technologies. Using latest technologies can boost steel companies business

with advantages of scale, quality, productivity, safety and higher margins. As

overall exposure of Indian steel industry to latest technology remains low, so

there is a huge potential for increase in production and process optimisation.

Also with development and use of technologies suitable for steel making using

iron ore fines and low grade Indian coal, Indian steel Industry can have

advantage of raw material security and sustainability.

Exhibit 23: Potential benefits of technological up-gradation in steel Industry


KEY FIGURES

Expenditure on

research &

development by

Indian steel

Industry is

estimated to be

very low at an

average 0.2% of

the turnover

Introducing latest

technologies will

improve Indian

steel industry’s:

- Efficiency

- Product quality

- Carbon footprint

- Production cost

- Competitiveness

- Use of domestic

raw material

- Growth



7. Indian Steel Industry and Increasing Role of Technology

Use of latest

technology by Indian

steel industry

remains low so there

is huge potential for

improvement

through introducing

latest technology

STEEL INDUSTRY

PROCESS CHAIN

- Low mechanisation level & latest technology

input: for mining and processing raw materials

- Inadequate facility: for use of iron ore fines

using pelletisation & sintering technology

- Lack of coal processing & washing technology

: to make higher use of low grade Indian coal

- Inadequate facility: for raw material loading

and transportation

- Lack of facility: for use of raw material rejects

RAW MATERIAL SUPPLY STEEL MAKING PROCESS

- Most of steel making facilities use: old and less

efficient steel making technology

- Expenditure on research and development: is

considerably low

- Present steel making facility: not suitable for

Indian iron ore fines and high ash coal

- Relatively lower number of steel plants: with

facility to make complex steel products

- On average Indian steel industry lags: in

process efficiency and hazard control

Improving overall

efficiency and

competitiveness of

Indian Steel

Industry

Improvement In Steel Production Efficiency

Improving Cost Effectiveness & Profit Margins

Improving Unit Yield and Product Quality

Reduction In Environmental Impact and Hazards

Utilise Domestic Coal and Iron Ore Fines In Steel Making

Addition In Production Capacity

Reduction In Raw Material & Energy Wastage

Potential Benefits in the Value Chain


14.

POTENTIAL GROWTH DRIVERS OF INDIAN STEEL INDUSTRY

Indian steel industry is aiming for high growth during the next 5-7 years,

supported by economic growth and positive change in consumption behaviuor

of the large and growing population. The prime factors which will support

growth of Indian steel Industry are demand driving factors, government policies

and capacity addition plan for steel.

Exhibit 24: Factors propelling Indian steel industry’s growth


STRENGTH, WEAKNESS, OPPORTUNITY & THREATS: (SWOT) ANALYSIS

Indian steel Industry is evolving itself to become global leader in terms of

product quality and overall efficiency. It’s growth objective can be attained

efficiently by addressing the present issues and challenges and building the

growth strategies in cohesion with its strength.

Exhibit 25: Prospecting Indian Steel Industry via SWOT analysis


KEY FIGURES

Planned projects

for steel making is

likely to increase

steel production

capacity of India to

150 MT by 2017

Promising factors of

Indian steel

industry:

- Potential for

high growth

- Cheap labour

- Untapped market

- Abundant raw

material supply

- Growing

Economy



8. Prospective Analysis of Indian Steel Industry

There is a huge

potential growth

opportunity for

Indian steel industry

with untapped rural

markets and growing

economy

Steel Demand Drivers Government Policies Capacity Addition in Steel Making

- Growing economy

- Large population

- Low per capita steel

consumption

- Manufacturing &

construction activity

- Untapped rural market

- Industrial activity

growth

- Funding developments

- Stressing on R&D

- Offering incentives

- Policies favoring

domestic industry &

regulating dumping

- Judicious Import-

export taxes/duties

- Faster approvals

- SAIL, Tata Steel, JSW, ISPAT, RINL,

ISPAT etc. along with global multinationals

like POSCO, Arcelor Mittal, Nippon Steel,

Kobe Steel, Severstal and others have

large scale expansion plans for steel

making in India

- Planned projects by Indian and global

companies is likely to increase India’s steel

producing capacity to 150 MT by 2017

STRENGTH

Low manpower cost

Abundance of raw materials

Policies for long term linkages for raw

material supply

Option of getting project linked captive iron

ore, coal mines

Large economy and population driving steel

demand

OPPORTUNITY

Growing & untapped rural market

Infrastructure & manufacturing activity

growth to drive steel demand

Per capita steel demand to grow, which at

present is one fourth of the global average

Low present export volume: so potential for

growth in exports is considerable

Option for investment and stake acquisition

THREAT

Delays in approvals and regulatory

clearances

Land acquisition and rehabilitation issues

Competition from large number of small

steel producers

Threat from cheap import and dumping

Issues of capital for projects and high

interest on loans

WEAKNESS

Overall production efficiency is low

Inadequate infrastructure support

Lacking in coking coal reserve and most of

iron ore reserves consists of iron ore fines

Latest technological input and research and

development activity is low

SWOT

Analysis


15.

Post liberalisation in 1991 Indian steel Industry has attained a substantial

growth on domestic as well as global platform. Growing in pace with the

economy Indian steel industry has positioned itself as the largest sponge iron

producer and the fourth largest crude steel producer in the world. Global crude

steel production reached 1527 MT in 2011 in which India contributed a

significant 4.7%.

Though effect of global economic recession post 2008 was witnessed by steel

sector globally, but Indian steel industry showed resilience and growth due to

robust domestic demand. The credit of Indian steel industry’s growth goes to

policies of government and Indian public and private sector steel producers.

With present low per capita steel consumption at 57 kg in India against global

average of 215 kg there lies a huge potential for steel demand growth in India.

Also the estimated massive $ 1 trillion investment in India’s infrastructure

sector during 12th FYP will boost demand of steel. Significant steel demand will

also arise from rural markets and proactive steel producers in India have

started exploring untapped rural markets to get maximum share of this market.

Indian steel industry attained appreciable growth post liberalisation but it has

suffered due to issues of efficiency, quality, safety and productivity. Future

growth and sustainability of Indian steel industry lies in adapting latest

technologies, improving efficiency and optimising process.

Thanks,

Tarun Mishra

& CorpotradeGlobal Team

AUTHOR:

TARUN MISHRA Director- Consulting & Research

Corpotrade Global Pvt. Ltd., India

For any queries or information

regarding contents of this report

or for any type of assistance I can

be reached at following contacts:

Phone: +91 11 6469 7575

Mail: [email protected]

[email protected]

Web: www.cptgl.com

www.corpotradeglobal.com



9. Executive Summary


16.

ABBREVIATIONS



10. Abbreviations and Bibliography

BIBLIOGRAPHY

World Steel Association, International Monetary Fund, Economic Times, Ministry of Steel - India, Public

Information Bureau - India, Joint Plant Committee- India, Planning Commission - committee on

Infrastructure, Annual report 2010-11- MoS, World Steel in Figures 2012-WSA, Press Information

Bureau- GoI, moneycontrol.com, The Telegraph, The Economic Times, miningweekly.com, Wikipedia,

mjunction and CorpotradeGlobal Research & Database.

Short Name Full Name

CAGR Compounded Annual Growth rate

CIS Commonwealth of Independent states

E Estimates

EU European Union

FY Financial Year (April to March)

FYP Five Year Plan

GDP Gross Domestic Product

GoI Government of India

JPC Joint Plant Committee

MT Million ton

MoS Ministry of Steel

P Provisional

PPP Purchasing Power Parity

WSA World Steel Association

$ US Dollar

INR Indian Rupee

Crore 10^7




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