S & T Mining – August 27,2013 - New Delhi
Overview on Imported Coking Coal Security For
Sustainable Growth Of Indian Steel Sector
Harsh SachdevManaging Director, S&T Mining (A SAIL-TATA Steel JV Co.)
Coal Market in India-2013, New Delhi27th Aug, 2013
S & T Mining – August 27,2013 - New Delhi
Index1. Steel – The Global Scenario & Emerging Trends
2. Raw Material & Coking coal Availability .
3. Steel – The Indian current & emerging Scenario .
4. Indian Raw Materials & Coking Coal Scenario
5. Coking Coal – Domestic Issues – Emerging Legislation
6. Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
The Global Economic Status
• Global Economy:– A marked downturn over the past two years (Global GDP to
remain sluggish 2.8% in 2013 compared to 3.9% and 3.2% in 2011 & 2012 respectively)
– Most regions likely to see a moderate pick-up, but growth to be below potential Country ---Real GDP(2013)• US --–-----------1.5%• Canada --------1.7%• UK---------------1.0%• Germany ------0.3%• China------------7.3%• India ------------5.5%• Brazil ------------2.5%
– Employment gains to remain weak at best.
• Financial uncertainty & Crises – (Reduced liquidity in the market- higher cost of borrowing)
Difficult global business scenario prevailing
Newport Mining Outlook Report 2013-14
Source :Scotia Bank
S & T Mining – August 27,2013 - New Delhi
Global Steel Trends
• Global Steel Production in 2012 at 1.5 Bn. Mt was a growth of 0.7% over the PY. This has been slowest rate of growth since the economic downturn of 2008. EU was a decrease of 4.7 %, Germany a decrease of 3.7 %, North Amercia an increase of 2.5 %.
• In the top 10 Steel producing nations , China, U.S., India , Russia , South Korea & Turkey grew in 2012.
• Modest steel demand pickup expected in 2013.
• China was 46.3 % of the world Steel Production in 2012 & is expected to continue to dominate Global Steel making till 2020.
S & T Mining – August 27,2013 - New Delhi
Steel:Global Scenario & Emerging Trends
• Expected Steel Demand Growth in 2014– China: 2.5%– India: 7.0%– Japan: -0.6%– US: 2.9%– Central & South America: 43%– EU 27: 3.3%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
200
400
600
800
1000
1200
1400
1600
151 182 222 280356
423490 500
567627 683 709
27 2932
3346
4953 55 56
66.872 77
6781
850904
9701069
11451251
1351 13291219
14141490 1510
Others India US Russia Japan China Total
GLOBAL STEEL PRODUCTION POST 2000(Mill. T.)
Source: World steel Association
Future demand Growth Driver: Further economical development rather than recovery in developed world.China to remain dominant steel producer & consumerIndian steel demand to grow faster
2010 2015 2020 2025 20300
500
1000
1500
2000
2500
589 720 817 835 799
254364
473 584 706
74
87
131178
236
141
144
142142
141
141
144
142
142141
153
172
186
187187
1306
1611
18812065
2214
Apparent demand for finished steel products - 2030 (Mill. T)
Europe North America Developed Asia India ROW China TOTAL
Source: McKinsey & Co.
S & T Mining – August 27,2013 - New Delhi
• Crude Steel production (2.1# Bill. T.) is expected to marginally exceed the global demand (2.09* Bill. T.) in 2020 .
• China to witness addition of more capacities along with consolidation of marginal players.
• India too to add more capacities in current decade – Addition of more than 100 Mill. T. capacity by
2020.
Steel:Global Scenario & Emerging Trends
# Source: Deutsche Research,
S & T Mining – August 27,2013 - New Delhi
Impact On Raw Materials• Over 70 % of Steel made is through the BF
route & is hence impacted by the costs & availability of raw materials, specially coking coal.
• Major volumes of Iron Ore & coking Coal are required.– 1.6 tonne of Iron –ore and 0.9 tonne of coking coal
for 1 tonne of Crude Steel
• RM cost as a proportion of total cost of steel companies is a very significant & is a key driver of total steel cost .– Iron Ore comprises: 30% of Cost– Coking Coal: 26% of Cost
Iron ore31%
Coking Coal26%
Scrap+Ferroal-
loys+Fluxes
17%
Others27%
Cost Break Up- Crude Steel
Source; Steelonthenet
S & T Mining – August 27,2013 - New Delhi
Index1. Steel – The Global Scenario & Emerging Trends
2. Raw Material & Coking coal Availability .
3. Steel – The Indian current & emerging Scenario .
4. Indian Raw Materials & Coking Coal Scenario
5. Coking Coal – Domestic Issues – Emerging Legislation
6. Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Global Iron Ore
• About 800 Bill. T. of Iron ore reserve with 230 Bill. T. of Iron Content have been proved
• World iron ore export dominated by –Brazil & Australia
• Key iron ore consumers: China, Japan, US, India and Russia
Total Reserves of Iron Ore: 800 Bill. T.
S & T Mining – August 27,2013 - New Delhi
Global Coking Coal Production:
1990 1995 2000 2005 2010 2015 20200
200
400
600
800
1000
1200
1400
555
535
456 62
4 815 97
1
106012 21
53
91
139
170195
567 556509
715
954
1141
1255
PCICoking CoalTotal
Source: McKinsey & Co.
2010-2020Slow down of global demand growth, still driven mainly by
China, India and South America
Globally Coking Coal Reserve: 246 Bill.T.Coking Coal demand to grow at ~3% per annum during current decade
Coking Coal Production to shadow Steel Growth Globally
S & T Mining – August 27,2013 - New Delhi
Global Coking Coal Import & Export:Present & Future
2013 :Australian Met coal export expected to grow by 11% US to decrease by 5% y-o-y to 54 Mill. T.Canada to increase 3% y-o-y to 31 Mill. T.Mozambique 4-4.5 Mill.T. from Maotize mine, ValeMongolia not likely to grow in 2013 Source: KPMG Qtrly, March 2013
China’s import to increase by 18% in 2013 y-o-y to 58 Mill. T. – due to restocking of steel
India import to increase to 36 Mn in 2013
Imports by EU to remain flat at around 46 Mill. T.
Global Coking Coal export (2008-2015F) Global Coking Coal import (2010-2025F)
Australia to remain a dominant exporter though there will be emergence of new sources like Mozambique …China to overtake Japan as leading coking coal importer.
S & T Mining – August 27,2013 - New Delhi
Index1. Steel – The Global Scenario & Emerging Trends
2. Raw Material & Coking coal Availability .
3. Steel – The Indian current & emerging Scenario .
4. Indian Raw Materials & Coking Coal Scenario
5. Coking Coal – Domestic Issues – Emerging Legislation
6. Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Steel Indian Scenario - Current
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
102030405060708090
27.3 28.8 31.8 32.6
45.8 49.5 53.557.8
63.568.3
73.5 77.6
Indian Production - Mn tonnes Crude Steel
Production Mn tonnes Crude Steel
India’s Steel Productionhas risen steadily over theLast decade. At 77 Mn. TIndia is the 4th largest SteelProducer Globally. In 2012 it was a nett importer of Steel , mainly special grades.
India China USA EU (27) Russia Japan S Korea Aust. & N. Z.
World Average
0
200
400
600
800
1000
1200
57
477
306 279 293
506
1,114
257
217
Apparent Steel Use Kgs Per Capita - 2012
The per capita consumption of Steel in India remains low . A high potential for growth.
S & T Mining – August 27,2013 - New Delhi
With 77 Mill. T. of Crude Steel production in 2012, India is behind China , Japan & the USA .
By 2016, India is expected to become world’s 2nd largest crude steel producer
Fast urbanisation to drive India’s steel Industry growth
2012 2015 20200
20
40
60
80
100
120
140
160
180
200
77
107
180
Domestic Steel Production Forecast (Mill. T.)
C.A.G.R. 11 %
Yr 2020: India to witness emergence of 5-6 players controlling 65~70% of total prodn
BF-BOF (Mill. T.)
69
DRI & Others
38
107
BF-BOF (Mill. T.)
120
DRI & Others
60
180
Steel Indian Scenario - Emerging
S & T Mining – August 27,2013 - New Delhi
2020: India to emerge as net exporter……
Steel Export moving to China , India & South Amercia
S & T Mining – August 27,2013 - New Delhi
Index1. Steel – The Global Scenario & Emerging Trends
2. Raw Material & Coking coal Availability .
3. Steel – The Indian current & emerging Scenario .
4. Indian Raw Materials & Coking Coal Scenario
5. Coking Coal – Domestic Issues – Emerging Legislation
6. Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Iron Ore – The Domestic Scenario • With 18 Billion Tonnes (approx) of Haemetite and 11 Billion
Tonnes (approx) of Magnetite resource, India is self sufficient to fulfill its Steel Industry requirement.
• With a ban on illegal mining in Goa & Karnataka – Iron Ore output fell to 167 Mn. Tonnes in FY 13. Imports started.
• The government of India, is taking various measures, including approaching the supreme court to correct the situation.
• In 2020, India to consume ~300 Mill. T. of Iron Ore for producing 180 Mill. T. of crude steel.
S & T Mining – August 27,2013 - New Delhi
Coking coal sources for India: 2012
Total 43 Mill. T
Coking coal Import
32 Mill. T
Imported PCI
4 Mill. T.
Indigenous coking coal7* Mill. T.
Increased dependency on overseas coking coal mining countriesAustralia to remain a dominant coking coal exporter to India
*Indigenous coal at 17% avg ash, while imported met coal ash ~10%
Country Qty (approx) (Mill. T.)
%age
Australia 27 85%
Indonesia 3 10%
New Zealand
1 3.5%
Others 1 1.5%
TOTAL 32 100%
Coking Coal Sources (2012
S & T Mining – August 27,2013 - New Delhi
2010 2015 202025.0
55.0
85.0
115.0
145.0
37
69
120
36
63
108
Coking Coal Requirement (Mill. T.)
Met Coal Consumption Forecast….
2010 2015 20200
20
40
60
80
100
120
8 13 15
27
45
83
1
5
10
36
63
108
LV PCI Import (Mill. T.)
Imported Coking Coal (Mill. T.)
Domestic Supply (Mill. T.)
Coking Coal Re-quirement (Mill. T.)
Sources of Met Coal Mill. T.
2020: India is expected to import whopping 83 mill. T. of coking coal (apart from 10 mill. T. of PCI) equalling forex outgo of atleast USD14* Bill. Per year.
Total 93 Mill. T. of metallurgical coal import implies that 86 % of India’s BOF steel production to depend on imports – High risk exposure
Hot Metal/Pig Iron Production -BOF
* At USD 170/t of coking coal price; conversion 1USD = Rs 54
S & T Mining – August 27,2013 - New Delhi
Index1. Steel – The Global Scenario & Emerging Trends
2. Raw Material & Coking coal Availability .
3. Steel – The Indian current & emerging Scenario .
4. Indian Raw Materials & Coking Coal Scenario
5. Coking Coal – Domestic Issues – Emerging Legislation
6. Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
A need to separate “Coking Coal” from Coal . At present Coking Coal also being used to meet India’s Power requirements . An opportunity for washing low grade of Coking Coals , to enhance valuations.
An increase in the infrastructure to evacuate coal from Pit heads to the point of consumption. Adequate Railway sidings & rakes.
Implementation of the Jharia Action Plan in the prime coking belt of India. Jharia has 5.3 Bn. tonnes of prime coking coal & 6.1 Bn. tonnes of medium coking coal , which has been on fire .
A concept of a “Single window Clearance” wherein all clearances which are sought are applied for, in one place, within the various Government departments.
Mining is a “Site Specific Activity “ and hence the same cannot be shifted to an alternate location. The Government needs to play a role a major facilitator in acquisition of land for critical coal projects .
Upgrading of efficiency levels by use Mass Production Technologies – Larger sizes of Heavy Earth moving Equipments in Opencast Mines & mechanization in underground mines .- Average output of underground mines is well behind global output at approx. 0.2 MTPA.
Coking Coal - Domestic Issues
Some of these issues are under active consideration .
S & T Mining – August 27,2013 - New Delhi
Time taken in getting statutory clearances impact coking coal projects execution timeline.
A process of defined time frames for clearances , / default clearances in case of delay’s needs to be examined .
Emerging legislation making coal mining more complex & expensive , will increase lead time to starting coal production. LARR
Consent of 80% Project Affected People (this might delay projects) 4 times land price in rural and 2 times land price in urban area for
compensation along with other compensation MMDR bill
26% of profit to be given to District Mineral foundation plus other taxes leads to overall tax of 61% for Indian coal Mining (against 30-40% in other countries).
Auction by competitive Bidding of Coal Mines Rules 2012 - Implemented for PSUs – Implementation for Private companies awaited .
Domestic Legislative Environment
Legislation to ensure inclusive growth & welfare of local communities.
Degree of complexity of Domestic Mining to increase .
S & T Mining – August 27,2013 - New Delhi
Index1. Steel – The Global Scenario & Emerging Trends
2. Raw Material & Coking coal Availability .
3. Steel – The Indian current & emerging Scenario .
4. Indian Raw Materials & Coking Coal Scenario
5. Coking Coal – Domestic Issues – Emerging Legislation
6. Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Country Rating Investment options in Mining Countries
S & T Mining – August 27,2013 - New Delhi
Country Comparison Mining InvestmentCountries Australia Indonesia Mozambique S. AfricaReserves
(Thermal+Coking)
77 Bill.T 5.5 Bill. T. 16 Bill. T. 30 Bill. T.
Mining Costs High Moderate Moderate Moderate
Infra HighHigh.
Upgradation Required
Low.Needs huge Investments
Moderate.Inadequate Rail Infra
Tax Regime
Transparent introduction of MRRT &
Carbon Tax – Extra Burden
Frequent Changes in mine laws.
Favours domestic players
Favourable to foreign
investors with no such issues
of local ownership
No specific mine policy.Encourages
local ownership of
mines
Proximity to Indian Ports
Takes ~18 days to
India’s west coast; 14
days to east coast
Takes ~12 days to
west coast; 9 days to east coast
Takes ~10 days to west
coast; 12 days to east coast
Takes ~12 days to west
coast; 14 days to east
coast
Source: Infraline
Country wise mining rights processing timeCountry Time to
process rights (Months)
Colombia 1South Australia
<2
Brazil 2Chile 7South Africa
>12
India 48Source: Mckinsey & Co
26S & T Mining – August 27,2013 - New Delhi
Country rating for Mining (Behr Dolbear – 2012)Parameter Rank 1 Rank 2 Rank 3 Rank 4 Rank 5Economic System
AustraliaCanadaChile
US BrazilMexico
ColombiaPeruMongolia
China India Indonesia
Political system
CanadaChile
AustraliaBrazilUS
MexicoColombia
PeruIndiaIndonesia
Mongolia
Social Issues Australia Chile Colombia BrazilMongolia
CanadaIndonesia
Permitting Delays
Australia Mexico ChileColombia
BrazilMongoliaChinaSouth Africa
Canada
Corruption AustraliaCanada
US Chile BrazilComobia
27S & T Mining – August 27,2013 - New Delhi
Country rating for Mining (Behr Dolbear – 2012)Parameter Rank 1 Rank 2 Rank 3 Rank 4 Rank 5Currency Stability
AustraliaCanadaBrazil
Chile USChina
South AfricaIndia
Mongolia
Tax Regime CanadaMexico
Brazil AustraliaRussiaChina
ChileUSColombiaMongoliaIndia
Overall Australia Canada Chile Brazil Mexico
Australia and Canada are two most favourable countries for mining; Australia more favourable: Canadian coal has cost disadvantage compared to Australia in terms of freight
S & T Mining – August 27,2013 - New Delhi
Investment by Indian Companies
Since import is an imperative a number of Indian companies have already coal assets abroad……
S & T Mining – August 27,2013 - New Delhi
Suggestions towards securing coking coal import• Inter-Governmental level of agreement for developing and operating
overseas coking coal mines.
• Using sovereign fund for developing infrastructures in emerging coking coal sources like Mozambique.
• Mining companies should form consortium with Infrastructure & Logistics
companies to invest in infrastructure in new geographies.
• Priority clearances at Indian ports .
• Construct a dedicated rail corridor in the country for faster movement of coal from ports to end user plants.
S & T Mining – August 27,2013 - New Delhi
THANK YOU