ferroalloys

Global Steel 2004 Dt. 30.1.04, MumbaiGlobal Steel 2004 Dt. 30.1.04, Mumbai

Indian Ferro Alloys Industry - The challenges ahead

Mr P Roy

Mr Gautam KumarFerro Alloys & Minerals,Tata Steel


Indian Ferro alloy Industry Status*

• Existing Capacity

– No. of Units : 105

– Total capacity ~ 1300 MVA & 1.64 Million Tonnes

• Working Capacity

– 51 Units

– 1.03 Million Tonnes

• Capacity Utilisation : ~ 62%

• Product range

– Manganese Alloys(50%), Chrome Alloys(35%), Ferro Silicon(9%) and Noble Alloys (6%)

* as of 2002-03


Production Trend of Ferro Alloys in India

Product 1998-99 1999-00 2000-01 2001-02 2002-03

Mn Alloys 357.5 369.0 446.0 442.3 540.9

Cr Alloys 305.3 313.8 381.9 302.1 396.7

FeSi 57.2 56.3 67.3 76.2 81.9

Noble FA 1.03 2.5 6.5 7.2 12.7

‘000 MT

Riding on strong growth for steel demand, Ferro Alloys sector

posted good growth in 2002-03 & 2003-04 and the trend is

expected to continue in 2004-05. The Capacity utilisation has

reached approx. 80% as of now


Demand Drivers for Ferro Alloys

• Ferro Alloys are used primarily in Steel making as deoxidant and alloying agent. Depending upon the process of steel making and the product quality envisaged, the requirement of ferro alloys varies widely

– Demand driver of Ferro Alloys :

• Steel Production ( Crude Steel & Alloy Steels)

• Unit Consumption trends


World Crude Steel Production

0

100

200

300

400

500

600

700

800

900

1000

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

P

0

50

100

150

200

250

World China

CAGR: 1.6%

Source: World Steel Dynamics

CAGR: 8.8%

Million Tonnes

From 1990-2002, world production growth averaged 1.6% a year; without China, it would have not grown at all


The Three Growth Phases – the Steel “Snake”(inverted S-Curve)

World Steel Consumption and GDP Per Capita, 1950-2010

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

7000

50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160

kg steel/capita

$U

S/c

ap

ita

($

19

95

) 20021997

19941989

1983 1979

19751971

1970

1973

1961First and second oil prices and subsequent recessions led to massive light-weighting of steel-containing products

Post war expansion to 1970 led to predictions of seemingless endless growth

Collapse of USSR led to steel consumption collapse in Eastern Europe

Asian crisis

China takes off!

1954

2005

2010

Phase 1

Phase 2

Phase 3

Source: Macquarie Research.


Crude Steel Output Forecast

789

125

849

129

851

152

902

182

950

215

1019

251

1017

262

1180

344

1999 2000 2001 2002 2003P 2004F 2005F 2010F

World China

Million Metric Tonnes

Steel Production to be fuelled by China’s growth

CAGR 2003-10

China: 6.9%

World :3.1%

Source: WSD


Indian Crude Steel Production Forecast

34.30

36.40

38.50

40.90

43.30

45.90

48.40

51.1053.90 62.82

FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14

Milllion Metric Tonnes

CAGR : 6.2%

India not to lag behind in Crude Steel Production


Global Stainless Steel Production

8,851

10,413

11,563

13,081

18,422

18,08516,209

14,835

7,643

10,175

‘000 MT


Indian Mn Alloys Production & Exports

368

58

362

43

361

57

357

70

369

63

446

93

442

50

541

90

1995-96 1997-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

Production Exports

‘000 MT

Source:IFAPA


Indian Cr Alloys Production & Exports

348

137

238

168

339

186

305

158

313

161

381

171

301

101

396

91

1995-96 1997-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

Production Exports

‘000 MT

Source:IFAPA


Indian Ferro Alloy Production Trends Contd.

79

3.7

57

1

56

2.5

56

4.8

76

7.2

82

12.7

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

FeSi Noble FA

‘000 MT

Source:IFAPA


Unit Consumption of Manganese (Kg/t of Steel)

6.25

6.58

6.23 6.2

6.9

6.23

6.8

6.4

6.2

5.8

6

6.2

6.4

6.6

6.8

7

2000 2001 2002 2003 2004 2005 2006 2007

World China India

Unit Mn Consumption in Crude Steel to decrease world-wide


Mn Alloys Demand Forecast

9886

8558

86048025762172457343

3065238022861962166613921219

2000 2001 2002 2003P 2004F 2005F 2010F

World China

Thousand MT


Mn Alloys Consumption Trends & Forecast for India

498382361

337325308296

2000 2001 2002 2003P 2004F 2005F 2010F

Thousand MT


Price Trends of Mn Alloys ( US $/t)

200

400

600

800

HC FeMn SiMn

US Warehouse

Source: MBR


•India is poised to grow in the Ferro Alloys production in line with the increased Crude Steel production

•Chinese FA Producers to focus on the needs of domestic demand

•Export Potential for Indian FA Producers

•However, Indian Ferro Alloys Business has to overcome few challenges to grab those opportunities fully.


Indian Ferro Alloy Industry – The Challenges

• High Power Cost

• High & Rising Reductant cost coupled with the low availability of Reductant

• High Freight costs on account of low priority for the raw materials requirement of Ferro Alloys by Railways

• Low Economies of Scale

• No Import duty, CVD & Sales Tax for FA imports from neighboring countries like Nepal & Bhutan


Power Cost

• Power tariff in India is 3-5 times higher than that in the

competing countries

• Hence, globally Ferro Alloys production is situated

geographically in cheaper power locations

FeSi SiMn FeMn FeCr

Sp. Power Consumption (KWH/MT)

8000 4000 2900 3800

% of Power in total cost 65 50 45 45


Power Tariff India Vs Other Countries

Country Power Tariff (INR/KWH)

India 2.0 – 4.0

Norway 0.85

South Africa 1.09

Canada 0.63

USA 1.14

Brazil 1.26

Venezuela 0.87


Power Cost

• Though generation cost is not so high in India, tariff borne by

the industry is very high because of cross- subsidisation of

agriculture sector, low plant load factor and sizable T&D losses

• Electricity Duty, which varies widely from state to state also

creates additional burden for Ferro Alloys industry

• Though Power Reforms are on (with the introduction of

Electricity Act, 2003 in India), the impact of this development on

long-term prices generally - and specifically for intensive power

consumer such as ferroalloys producers – is difficult to assess,

since the electricity “market” still seems to be in a state of flux.


Raw materials

• Raw materials viz. Mn Ore , Cr Ore Quartz, Fluxes are available in India.

• However, Indian Mn Ore is predominantly low grade(~45%)

17%2%

35%

46%

Low Medium High Dioxide


Mn Ore Production World & India

1600

7604

World India

1997

1640

7613

World India

Thousand MT

2003 Proj.

Globally, Ferro Alloys is being controlled by few integrated

producers from South Africa & Australia


Reductants

• Coke is most widely used reductant in Ferro Alloys production. Ferro Alloys consume roughly 0.6-0.7 tonnes of reductant per tonne of production

• Coal & Coke of Indian Origin suffers from high ash and volatile matter content

• Due to non-availability of Low Ash Low Phos Met. Coke, Indian Ferro Alloy Industry depends on imports

• Stricter environmental controls in many countries have also put merchant coke batteries under long-term threat of closure.

• Increase demand for Coke in China and curtailment of Coke exports

High and rising coke costs globally


Reductants Contd.

FOB ($)250

180140

12111792

727068808470736363

50

100

150

200

250

Price Trend of ULP Coke (FOB US $/t China)

Source: Resource Net


Reductants

• Locally available Reductants following the same price trends, affecting the input costs of Ferro Alloys

• Indian FA Industry is further burdened by

– High level of Import duty on Coke (15%)

– Anti Dumping Duty on low Phos Met coke


Logistics Cost

• The industry produces around 1.6 Million Tonnes of ferro alloys annually. Nearly 2.5-3 tonnes of such raw materials have to be moved by railway wagons for one tonne of ferro alloy

• The industry has been experiencing shortage of wagons for procuring raw materials

• Freight element is very high, thus reducing the competitiveness of the industry

• Poor Infrastructure facilities at Port also leading to berthing delays for ships & longer loading time


Economies of Scale

• Though labour costs are a small percentage in Ferro Alloy cost of production, the impact still varies from region to region.

Plant Capacity ‘000 tpy

Labour Productivity MT/Man

Tornio 260 1477

Rustenburg 415 576

Indian Plant Typical

50000 278

• Indian FA Plants suffer from Economies of scale and low automation levels


Overall Assessment

Ore Power Reductant Freight Labour Overall

China 1 1 4 3 2 11

India 2 1 2 3 2 10

Africa 3 4 2 3 1 13

Scandinavia 2 3 1 1 3 10

CIS 2 2 2 3 2 11

Scale :

Lowest : 1Power is available at global tariffs, India can match the African Countries!


How to Overcome the Challenges

• Power Cost

– Power be made available at internationally comparable tariff to give a level playing field to Indian FA Industry with International players

– The Power tariff should be of Long-term arrangement

– Cross subsidies to other industries must be removed and Ferro Alloy Industry should be treated separately and a separate tariff should be fixed


How to Overcome the Challenges

• Raw materials

– To increase exploration efforts for evaluation of minerals reserves

– To step up R&D activity to develop techno-commercially feasible techniques of low grade Ore beneficiation

– By waiving Customs duty, Addl. Duty on Ores used in production of Noble Ferro Alloys

– By Reducing Customs Duty on Coke from 15% to 5%

– By removing ADD on low ash low phos Met. Coke imports


Indian Ferro Alloy Industry – The Way Ahead

• Further

– Ferro Alloy Industry should be given special status, and priority should be accorded for raw material movement

– To reduce the rail freight on movement of raw materials for Ferro Alloys by classifying them as low freight category

– To impose counter veiling duty on Ferro Alloys imported from neighboring countries like Bhutan, Nepal etc.,


Thank You

Date post:	24-Nov-2014
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