STEEL REPORT

1 Mena Market Analysis for Steel Billets and Rebars

SUMMER TRAINING PROJECT REPORT

ON

EXPORT POTENTIAL OF STEEL REBAR AND BILLETS IN MENA REGION

Undertaken at

Submitted for the Partial fulfilment of the requirementtowards the award of Degree of

Master of International Business (MIB)

Session 2010-2012

Submitted by:

Soobian Ahmed

10-MIB-40

10-6537

Under the Supervision of

Mr. Rohan SinghJunior Manager (Marketing-ITD)

CENTRE FOR MANAGEMENT STUDIESJAMIA MILLIA ISLAMIA

New Delhi-110025


DECLARATION

I, SOOBIAN AHMED, a bonafide student of MIB (Full Time) Programme at the Centre

for Management Studies, Jamia Millia Islamia, New Delhi, hereby declare that I have

undergone the Summer Training at STEEL AUTHORITY OF INDIA LTD,

INTERNATIONAL TRADE DIVISION, India under the supervision of Mr. ROHAN SINGH

on export potential of Steel Billets and Rebars .

I also declare that the present project report is based on the above summer training

and is my original work. The content of this project report has not been submitted to

any other university or institute either in part or in full for the award of any degree,

diploma or fellowship.

Further, I assign the right to the university, subject to the permission from the

organization concerned, use the information and contents of this project to develop

cases, case lets, case leads, and papers for publication and/or for use in teaching.

SOOBIAN AHMED

10-MIB-40


ACKNOWLEDGEMENT

I am heartily thankful to my supervisor Mr .Rohan Singh, JM(Marketing-ITD), whose encouragement,guidance and support from the initial to the final level enabled me to develop an understanding ofthe project .It is his support and guidance due to which I remain able to come out with this projectreport.

I owe the highest sense of appreciation for the talented, Cooperating and hardworking team of SAIL(ITD) especially Mrs. Shanta Rao, DGM (Marketing-ITD) numerous other officials for cooperatingduring the Internship and for providing me the most valuable comments and suggestions withoutwhich this report might not have been complete.

I also wish to express my gratitude to the management of SAIL-INTERNATIONAL TRADE DIVISION,who rendered their help during the period of my project work.

Last but not least I wish to avail myself of this opportunity, express a sense of gratitude and love tomy friends and my beloved parents, my brother for their immense support, strength, their faith inme and for everything.

SOOBIAN AHMED


EXECUTIVE SUMMARY

Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is afully integrated iron and steel maker, producing both basic and special steels for domesticconstruction, engineering, power, railway, automotive and defence industries and for salein export markets. SAIL is also among the five Maharatnas of the country's Central PublicSector Enterprises.

SAIL manufactures and sells a broad range of steel products, including hot and cold rolledsheets and coils, galvanised sheets, electrical sheets, structurals, railway’s products,plates, bars and rods, stainless steel and other alloy steels. SAIL produces iron and steel atfive integrated plants and three special steel plants, located principally in the eastern andcentral regions of India and situated close to domestic sources of raw materials, includingthe Company's iron ore, limestone and dolomite mines. The company has the distinctionof being India’s second largest producer of iron ore and of having the country’s secondlargest mines network. This gives SAIL a competitive edge in terms of captive availability ofiron ore, limestone, and dolomite which are inputs for steel making.

SAIL's wide range of long and flat steel products is much in demand in the domestic aswell as the international market. This vital responsibility is carried out by SAIL's ownCentral Marketing Organisation (CMO) that transacts business through its network of 37Branch Sales Offices spread across the four regions, 25 Departmental Warehouses, 42Consignment Agents and 27 Customer Contact Offices. CMO’s domestic marketing effortis supplemented by its ever widening network of rural dealers who meet the demands ofthe smallest customers in the remotest corners of the country. With the total number ofdealers over 2000, SAIL's wide marketing spread ensures availability of quality steel invirtually all the districts of the country.

SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000 accredited unit ofCMO, undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integratedsteel plants.

The research has been carried out to Estimate the Export Potential of steel billets andRebars with focus on MENA (Middle East & North Africa) region. The scope of the studycovers the competition patterns of both the products globally as well as regionally. Thereport is based on the desk research methodology .The study covers the duty structure ofboth the products in prospective markets. The research study puts special emphasis onthe pricing pattern of billets from Turkey and CIS which are the major suppliers of theseproducts. The research is also done on three African states which, at the moment have nosuch big steel industry but the government policies and changing economic and political


environment makes it difficult to ignore such market.

The Middle East and North Africa (MENA) region is considered currently a key growthmarkets for the steel industry at the consumption and production alike due to the fast-expanding construction & fabrication sector. It has witnessed major transformations overthe past years, as Arabian countries try to emerge from the shadows of the developed worldand become more industry oriented.

The Middle East and North Africa (MENA) remains a source of high demand for steel, whichcontinues to outpace the rest of the world. Meanwhile, a persistent trend of recycling highgas and oil prices into construction and capital investments in the region continues to servefast-growing, increasingly wealth populations. These trends have been in place for nearly adecade now as a result supply is being developed to meet the higher levels of demand.Nonetheless, external suppliers remain important players as they fulfil over one-third ofdemand generated in the MENA region.

Over the past couple of years, the steel industry worldwide has been experiencing stunninggrowth and the Middle East has flourished to become major players in the steel market. Thereal estate sector has been at the heart of the demand, as this sector witnessed tremendousactivity. Consequently, steel companies in the MENA region entered 2008 strongly, pushedby their momentum and massive profits achieved in the previous year. In 2007, Egypt andSaudi Arabia ranked 27th and 35th, respectively, among the world’s steel producingcountries and in 2010, Egypt and Saudi Arabia ranked 24th and 28th respectively.

There are 67 steel plants in the Arab region. The demand for steel is rising at five to six percent every year. It is predicted that half of the world's steel production will be done in Arabcountries by 2012 and Arab countries succeed in keep up with worldwide development inthe steel industry. The MENA region is considered to be among the top five locations in theworld to establish a steel factory, due to a favourable demand ,congenial environment andrelatively cheap energy prices.

The Egyptian steel industry represents one of the cornerstones of Egypt’s economic growthand development, due to its linkages to almost all other industries that stimulate economicexpansion. Steel is everywhere, in construction, housing, infrastructure, consumer goodsand automotive industry, all rely heavily on the steel industry and so, the importance anddevelopment of the steel sector is imperative for the progress of the Egyptian economy ingeneral.


Egypt is definitely playing a key role as a major producer of steel in the Middle East & NorthAfrica. In addition to the rapid growth in population (now more than 88 million and rising at2% per year) and in the economy, which gained 7% last year to achieve per capita GDP of$5400. Further to, in a ranking of 59 countries, "FDI Intelligence" ranks Egypt 2nd in Africawith regard to Foreign Direct Investment (FDI) in FY 2009/2010. This affected on thegrowing of the steel industry in Egypt.

The recent political uprising in MENA region has certainly affected the business but there isa bigger opportunity for Exporters to MENA region as the governments of Kuwait, Kingdomof Saudi Arabia and Republic of Syria has announced the Billions of dollar packages ofdevelopments to suppress the dissent in protestors even by distributing cash subsidy andmoney to buy homes for them which will boost the demand for housing and infrastructuresectors once again in MENA region. Kingdom of Saudi Arabia has allotted US $ 6 billion forhousing projects for enabling people to buy home.

Morocco was ranked 3rd, Sudan 15th and Ethiopia 10th by Grail Research among Africannations in Steel producing capabilities. The Sudanese iron and steel industrybegan contributing to meeting the growing domestic needs of the iron and steel productsrepresented in the reinforcing steel, wire rods and tubes and pipes. This industry has seenits start-up in concurrence with founding Giad industrial city established by the SudanMaster Technology Company. The annual production capacities are estimated by 60thousand tons of crude steel, 150 thousand tons of long products and 140 thousand tons ofpipes. Sudan Master Technologies Company completed the iron and steel complexconsisted of two mills, the first specialised in billets production with a capacity of 60thousand tons per year, which comprises one electric arc furnace, and one Ladle furnace toreceive the molten metal with the capacity of 25 tons charge. The second mill is specialisedin reinforcing steel production of a range of 8 – 25 mm diameters, angles of 25 to 50 mmsizes and 3-4 mm thickness, and flats with 16-60 mm sizes and 3-10 mm thickness. Theinvestment value in this mill is 38 million U.S dollars. It employs 130 workers, engineers andadministrative personnel. It extends over an area of 33 km2.

The production of crude steel of MENA region has risen by 13% in 2010-2011.This is alsodue to the upcoming football world cup in 2022 in Qatar and the proposed housing projectsby many Arab nations.


CONTENTS

CertificateDeclaration by the TraineeAcknowledgement

Executive SummaryContents

CHAPTER 1 Page Number

1.1 Export Potential: Brief introduction of Issues 8

1.2 Export product of Steel Authority of India Limited 11

1.3 Scope of Study 11

1.4 Objectives of Research Study 12

1.5 Research Methodology 12

CHAPTER 2

2.1 World Steel Scenario 14

2.2 Indian Steel Scenario 22

2.3 A glance at Steel Authority of India Limited 29

2.4 Products of SAIL 30

2.5 Plants of SAIL 30

2.6 Main activities of SAIL 31

2.7 Ownership and Management 32

2.8 SAIL-International Trade Division (ITD) 34

2.9 SAIL’s corporate plan 35

2.10 SAIL FY 11 Report 39

CHAPTER 3EXPORT POTENTIAL OF BILLETS WITH FOCUS ON MENA

3.1 Market Introduction 42


3.2 Major steel Companies in MENA 41

3.3 MENA steel scenario 44

3.4 Steel Billet: Product introduction 45

3.5 Steel Manufacturing process 46

3.6 World Steel Billet Scenario 49

3.7 Black Sea Billet pricing 56

3.8 Turkey Billet and Scrap price Comparison 57

3.9 Final Analysis of Turkey Market: The Competitor 58

3.10 Steel Billet Manufacturers 59

3.11 Results and discussion 61

CHAPTER 4EXPORT POTENTIAL OF REBAR IN MENA REGION

4.1 Export potential of Rebar in MENA 62

4.2 List of Certifying Agency for Rebar 64

4.3 World rebar production 67

4.4 World Rebar Pricing 69

4.5 China Rebar Production- The Competitor 70

4.6 Asia Rebar Trend 71

4.7 MENA region steel Rebar producing Companies 71

4.8 MENA Apparent Steel Consumption 76

CHAPTER 55.1 INDIA –GCC FTA 80

5.2 Turkey A Key Competitor 81

5.3 Major Infrastructure project in MENA 83

5.4 World Steel Forecast 89Suggestion 91Bibliography 92


1.1 EXPORT POTENTIAL: A BRIEF BACKGROUND OF ISSUES

Export Potential involves studying, analysing the actual potential of a Product in anInternational Market. Export Potential involves doing a complete market research on aprospective market. It is through International Market Research that a Potential of aproduct is estimated and then implemented. The techniques or methods of estimating theexport potential are, by and large, the same/familiar for different markets but these mayhave to be varied depending upon the market characteristics, the time and money to bespent and the availability of data or information. Export potential is a highly technical andscientific activity, requiring good planning and methodology to find out the accurateinformation on the market.

EXPORT POTENTIAL COVERS

Estimating the Export Potential usually involves the following attributes:A. Exporting Country Trade Regulations.B. Market Access covering tariffs and Quotas, internal taxes, currency restrictions, health and

political factorsC. Market Size covering production, imports, exports, consumption, derived demand and

market segmentationD. Factors affecting demand such as economic , climate, geography, social and cultural factorsE. The most important and foremost is the level of CompetitionF. Product research covering such as packing for shipment and the product pack.G. Marketing Practices covering such as Transport logistics, Sales and Distribution, Pricing etc

RESREARCH TECHNIQUES OF ESTIMATING EXPORT POTENTIAL

The numbers of research techniques are used for appropriate information for exportmarketing. Different methodology is employed according to the objective and scope definedfor research.

Basically there are two methods

A. Desk Research or Secondary ResearchB. Field Research or Primary Research

DESK RESEARCH/SECONDARY DATA

Desk or secondary research is the search for information from relevant data alreadyavailable. The data could take the form of information from censuses or information readilyavailable from industry and trade directories.


A. Desk Research uses secondary data from:B. Internal sources i.e. company itselfC. External sources using libraries of industry and trade associations, chambers of commerce,

export promotion organizations, international bodies such as International Trade Centre,Geneva, CBI, Holland etc

D. Internet sites of various agencies/organizations such as ITPO,WTO,IMF,ITC etcE. Publications(books, magazines, journals, newspapers)F. Market study/survey reportsG. Trade delegation reportsH. Catalogues of MNC’s or leading world manufacturersI. Company profilesJ. Market intelligence reports

FIELD RESEARCH OR PRIMARY RESEARCH

Field research is employed to collect primary data by:

A. Observation methodB. Survey method

Field Research focuses on consumer or buyers motives (e.g. Why they will buy your productinstead of your competitors product), which forms the basis of the positioning strategy.

The process of conducting field research in estimating the export potential includes

1. visiting the researcher own country

2. Visiting potential overseas markets which involves

A. Planning of visitsB. Seeking /making appointments with target companies/organizationsC. Field research in exhibitions/trade fairs which involves “Right Timing”D. Questionnaire


1.2 EXPORT POTENTIAL OF PRODUCTS OF STEEL AUTHORITY OF INDIALIMITED: A BRIEF BACKGROUND

Steel Authority of India Limited exports its Steel Products through its International TradeDivision. International Trade Division (ITD) of SAIL at New Delhi – an ISO 9001:2000accredited unit of CMO, undertakes exports of Mild Steel products and Pig Iron from SAIL’sfive integrated steel plants.

SAIL from time to time conducts International Marketing research for estimating Exportpotential of its Steel Products. SAIL maintains a close liaison with various informationagencies, bodies, organizations for extracting a relevant PRODUCT-MARKET match.

ITD is vigilant in meeting the demands of its global customers; ITD maintains a close liaisonwith customers and the production units to cater to the customized requirements of itscustomers both in terms of quality and sizes. ITD exports its product through Vizag,Vishakhapatnam, Haldia, Paradip ports.

ITD exports steel products mentioned below via its joint venture service centre

A. Rails,B. Structural’s,C. Merchant Products,D. Wire Rods,E. Re-bars,F. Plate Mill Plates,G. Hot Rolled Coils,H. Hot Rolled Plates / Sheets,I. Cold Rolled steels,J. Chequered Plates,K. Slabs, Billets and Pig Iron.

1.3 OBJECTIVES OF RESEARCH STUDY

1.3.1 TO STUDY THE EXPORT POTENTIAL OF BILLETS WITH FOCUS ON MENA REGIONMARKET

A. To Study the product line of SAILB. To study the Billet production capacity of SAILC. To study the BILLET Specifications around the worldD. To study the Pricing pattern of BILLETS involving CIS, Turkey markets.E. To study the Global market players in BILLETS.F. To study the Import Prices of Billets in MENA Markets.G. To study the Market Access of Billets in MENA MarketsI. To study the Free Trade Agreements of India and MENA Markets


1.3.2 TO STUDY THE EXPORT POTENTIAL OF REBARS FROM SAIL

A. To study the product offering of sail in terms of Rebar.B. To study the Rebars standards and specifications around the world.C. To study the Rebar production capacity of SAILD. To study the global Rebar production.E. To study the market access for rebar.F. To study the Major Competitors in the Rebar segment.G. To recommend Steel Authority of India Limited on Export Potential of Rebar.

1.4 SCOPE OF STUDY

The research study covers the Export Potential of BILLETS manufactured by SAIL. The studyalso looks into the Export potential of Rebars in MENA market and Export potential of Billetsin MENA market. The study looks into the competition patterns of both the productsglobally as well as regionally. The study also covers the duty structure of both the productsin prospective markets.

The research study puts special emphasis on the pricing pattern of billets from Turkey andCIS which are the major suppliers of the product. The study also covers the product offeringof other market players for both the products.

1.5 RESEARCH METHODOLOGY

The data for determining the Export Potential was based on secondary research and wasentirely a desk based research. The data was collected in combination of literature searchand analysis. Data from secondary sources such as research papers, internet and magazineswas collected. The raw data were tabulated, processed and analyzed using the appropriatestatistical techniques such as percentage averages, values and units presented in the formof Bar Chart in the light of clarity obtained in the course of the type of data encountered.

DATA COLLECTION

The present study has made the use of the following sources of secondary study:

1. Iron and steel bulletins such as Metal Bulletin.

2. Relevant books, Magazines, newspapers such as Hindu, Economic Times

3. Relevant public records and statistics, historical documents and other sources of publicinformation related with iron and steel trade

4. Relevant websites of international organizations such as WTO, IMF, ITC


5. Information from within Steel Authority of India Limited

6. Government websites such as Customs Australia, DGFT India, DGCI&S

The sources for unpublished data are many, for example relevant data may be availablewith scholars and research workers. However, these sources are not easy to access andneed a lot of persuasion and lot of time. The researcher has not used such resources giventhe limitation of time available. The researcher has made used secondary data informulation of research problem and identification of research objectives. Due care wastaken to assess such data for its suitability for the study, because many such secondary datawas found to be irrelevant to the research problem as also inadequate in the context of theproblem which researcher want to study.


WORLD STEEL INDUSTRY SCENARIO


2.1 WORLD STEEL INDUSTRY SCENARIO

The 2009 global downturn and the subsequent recovery have brought to light the increasingimportance of China and India to the world steel industry. In 2010, recovery in steel demand was farfrom consistent across the globe and steelmakers had to work hard to manage their working capitalas a result of fluctuating demand. However, while most of the global steel industry continued to feelpressure from the recessionary trends of 2009, steel demand and associated production in the BRICK(Brazil, Russia, India, China and Korea) regions continued to be a key driver in growth. Brazil andSouth Korea recovered strongly from the economic crisis and are expected to register higher steelproduction in the medium term.

However, the real shining lights on the horizon as far as growth in crude steel production, and thenext frontier of growth, can be seen in both China and India. Both countries’ domestic steel demandnot only survived the economic slowdown, but they also grew at a significant rate. As aconsequence, China has become the virtual engine of the global steel industry, accounting for 45%of production in 2010, but India too has shown it is rapidly becoming an important part of theinternational steel market place. Indeed, it was recently confirmed as the fifth largest steel producerin the world, and there are strong predictions it will become the second largest steel producerglobally in coming years.

In 2011, global steelmakers are hoping for a more stable rate of recovery in demand. This will bedependent on whether there is an increase in consumer spending and business investment, tocompensate for the potential lessening of government fiscal stimuli. Due to the sovereign debt crisisof many developed countries, there has been a marked shift from stimuli to austerity. In addition,the massive rise in oil prices inspired by political turmoil in the Middle East, coupled with the recentcatastrophic events in Japan, increases the risks of a slowdown in growth during 2011. Global tradeis estimated to grow by 5.7% in2011, which is a significant softening from 2010 when globalrestocking fuelled an 11.5 % increase. The future of both the developed and the developing worldwill be governed by different sets of factors. The emerging markets of China and India will continueto witness strong growth in their steel industries due to robust demand for construction and civilengineering, automotive and mechanical engineering .The growth of developed market show everwill be more dependent on supply-side response, innovative product offerings and substitutions. Thekey driving factor for the profitability of all steel players will ultimately depend on more tightlymanaged operating expenses and capital expenditure.

Global Economy projected to grow by 4.4 percent in 2011 after clocking 5.0 percent in 2010.Subdued steel demand in EU, Japan and USA. Restriction on real estate and restructuring of smallscale polluting steel units accompanied by infrastructure build up of backward areas inside thecoastal belt in China maintain a moderate growth in demand in China. Rising trend in Finished Steelprices particularly in flat prices following rise in Coal and Iron Ore prices – more backed up by cost ofraw materials rather than by effective demand.

Steel industry will witness big changes such as less imports, higher domestic production and greaterinvestment in raw material. In 2011, it is expected that imports would consist mainly of raw materialand nearly zero semis and finished construction steel. Construction steel is a big sector that gathersmany top domestic steel businesses. Demand forecasts of construction steel, steel pipe and


galvanized products are optimistic. However, development of pipe and galvanized sections will meetdifficulty because of constrained supply of raw material.

World crude steel production in the first six months of 2011 was 757.8 mmt, 7.6% higher incomparison with the same period of 2010. All major steel-producing regions showed increasedproduction. China’s crude steel production for June 2011 was 59.9 mmt, an increase of 11.9%compared to June 2010.

Elsewhere in Asia, Japan produced 8.9 mmt of crude steel in June 2011, down -5% compared to thesame month last year. India produced 6.0 mmt for June 2011, an increase of 7.3% over June 2010.South Korea’s crude steel production for June 2011 was 5.7mmt, 19% up compared to June 2010.

In the EU, Germany’s crude steel production for June 2011 was 3.9 mmt, an increase of 0.2% on June2010. Italy produced 2.6 mmt, 15.2% higher than the same month in 2010. Spain’s crude steelproduction for June 2011 was 1.5 mmt, up 4.5% on June 2010. France produced 1.4 mmt of crudesteel in June 2011, a decrease of -6.1% compared to June 2010.

Turkey produced 2.8 mmt of crude steel in June 2011, 12.3% higher than June 2010. The USproduced 7.2 mmt of crude steel in June 2011, an increase of 1.7% compared to June 2010. Braziliancrude steel production was 3.0 mmt, 3.9% higher than June 2010.

The world crude steel capacity utilisation ratio of the 64 countries in June 2011 was 82.8%, 1.2percentage points higher than in May 2011. Compared to June 2010, the utilisation ratio in June2011 increased by 2.5 percentage points.


The World Steel Association forecasts an increase in the apparent use of steel finishedproducts during 2010 and 2011 by 10.7% and 5.3% respectively. World steel also expectsthe apparent steel use in 2010 to reach 1.241 billion tons compared to 1.121 billion tons for2009, and this shall rise to 1.306 billion tons in 2011.The report indicated that the MENA region will see a rise in steel apparent use in 2010 toreach 59 million tons, thus increasing by 8.9%, and to 62.5 million tons in 2011, i.e. anincrease by 5.9%. According to the report, it is predicted that Asia will stay on top in termsof steel demand with a share of 66.2% of the world steel demand in 2010 and 65.5% in2011. Meanwhile, some other regions will see improvement in apparent steel use during2011 after the huge drop of 2009. The report estimated the increment in NAFTA steelconsumption in 2010 to be at 23.5% after a 37.4% drop. In CIS, the rise is projected to reach11% compared to a 28.2% decline, and in EU27 there shall be a 13.7% rise as compared to a35.2% depression. Meanwhile, the crude steel production in Arab companies during Q12010 increased by 21.58% compared to the same period of 2009. Most of this increasecomes from countries like Egypt (11.2%), Qatar (87.5%), Saudi Arabia 41.8% and Morocco(25.2%).


World Steel Consumption 2010

Demand by Region

Region Steel Demand, mt

EU (27) 139

Other Europe 29

CIS 45

NAFTA 108

Central & South America 44

Middle East & Africa 74

Asia & Oceania 833

World 1272

Demand by Product Shape

Steel shape Steel Demand, mtFlat products 585Long products 562Tube products 125World 1272

Demand by Consuming End-Use Industry


Demand by Quality

Steel quality Steel Demand, mt

Carbon steel 1209

Engineering steel 38

Stainless steel 24

Tool steel ~1

World 1272

Demand Forecast

Year 2009 2010 2011 2012 2013World steel demand, mt 1125 1272 1359 1441 1491


Challenges and issues for the sector globally:

In the face of fluctuating demand and increasing raw material costs, steelmakers need to factor thevolatility into their business models. In doing so, they have to consider the following issues:

1. Scarcity of coking coal: Coking coal is a key raw material for the production of steel. There is asignificant supply-demand gap in the coking coal market and the shortage of this key material is areal concern, particularly as it is unlikely to improve any time soon. As a result steel players arelooking to secure coal assets via joint ventures or acquisition, and they are also investing in newtechnologies to reduce or eliminate coking coal from the steel-making process.

2. Raw material price volatility: With a scarcity of supply comes the obvious increase in prices,

which inturn creates a significant amount of margin squeeze for steel producers. In 2011, crude steelproduction costs are likely to increase due to forecast price increases for iron ore, coking coal andenergy. As a result, companies are looking to control raw materials via backward integrationstrategies; securing contracts through joint-venturing of associates and/or buying from a diversesupplier base.

3. Increasing operational efficiency and cost effectiveness: To offset the margin squeeze,

steelmakers have begun focusing on increasing operational efficiencies in order to reduce operatingcosts and improve the quality of output. Some operators are reducing operating costs by optimizingthe equipment that is being used, and adapting their maintenance strategies. Some companies arealso considering a shared services approach to capture the benefits of economies of scale forcommon activities.


















Crude Steel Production (Million Tonnes)

Rank Country/Region 2007 2008 2009 2010— World 1,351.3 1326.5 1,219.7 1,413.61 People's Republic of China 494.9 500.3 573.6 626.7

— European Union 209.7 198.0 139.1 172.9

2 Japan 120.2 118.7 87.5 109.6

3 United States 98.1 91.4 58.2 80.64 Russia 72.4 68.5 60.0 67.0

5 India 53.5 57.8 62.8 66.8

6 South Korea 51.5 53.6 48.6 58.5

7 Germany 48.6 45.8 32.7 43.88 Ukraine 42.8 37.3 29.9 33.6

9 Brazil 33.8 33.7 26.5 32.8

10 Turkey 25.8 26.8 25.3 29.0

Top steel producing Companies in the world

Ranking(2010)

2010 2009 2008 2007 Company Headquarters

1 98.2 77.5 103.3 116.4 Arcelor Mittal Luxembourg

2 52.9 40.2 33.3 31.1 Hebei Iron and Steel China

3 37.0 31.3 35.4 28.6 Baosteel Group China4 36.5 30.3 27.7 20.2 Wuhan Iron and Steel China5 35.4 31.1 34.7 31.1 POSCO South Korea

6 35.0 26.5 37.5 35.7 Nippon Steel Japan

7 31.1 25.8 33.0 34.0 JFE Japan8 23.2 20.5 23.3 22.9 Jiangsu Shagang China9 23.2 26.4 21.8 - Shandong Iron and Steel Group China10 23.2 20.5 24.4 26.5 Tata Steel India

21 13.6 13.5 13.7 13.9 Steel Authority of India Limited India




— European Union 209.7 198.0 139.1 172.9

2 Japan 120.2 118.7 87.5 109.6


5 India 53.5 57.8 62.8 66.8

6 South Korea 51.5 53.6 48.6 58.5

7 Germany 48.6 45.8 32.7 43.88 Ukraine 42.8 37.3 29.9 33.6

9 Brazil 33.8 33.7 26.5 32.8

10 Turkey 25.8 26.8 25.3 29.0


Ranking(2010)











— European Union 209.7 198.0 139.1 172.9

2 Japan 120.2 118.7 87.5 109.6


5 India 53.5 57.8 62.8 66.8

6 South Korea 51.5 53.6 48.6 58.5

7 Germany 48.6 45.8 32.7 43.88 Ukraine 42.8 37.3 29.9 33.6

9 Brazil 33.8 33.7 26.5 32.8

10 Turkey 25.8 26.8 25.3 29.0


Ranking(2010)









INDIAN STEEL INDUSTRY SCENARIO


2.2 INDIAN STEEL INDUSTRY SCENARIO

The year 2009 was not favourable for the steel industry as production dipped in response to weakdemand from end—user industries. However, amidst the turmoil in the global industry, China andIndia stood apart with positive growth at the time when the world was reeling under demandpressures. Even other BRIC countries — Brazil and Russia didn’t put up a good show with productiondown y-o-y.

While people may disagree, downturn of a short duration, in any industry, is a necessary evil as itforces the incumbents to refocus on long term strategy. Cost leadership is among the mostimportant drivers of sustained growth and profitability, especially for a commodity industry such assteel. Further, cost management should not be taken as a one—time exercise to fight pressures onprofitability during the period of downturn. Raw material security and vertical integration are otherkey aspects for sustained growth. In terms of raw material security, China is well placed as comparedto India due to its consistent efforts to acquire stakes in iron ore and coking coal mines in countriessuch as Australia and Brazil. The year witnessed the emergence of China at the forefront of M&Aactivity. China was involved in almost every second transaction of the top 20 steel related M&Adeals in 2009, as it scouted for steel and raw material assets worldwide. The country was involved inonly 5 of the top 20 transactions in 2008. Indian companies though have taken some steps in thisdirection but they are not as aggressive as their Chinese counterparts.

Steel demand in India is expected to remain strong. The key drivers of growth would be significantinvestments toward large scale public infrastructure development, including roads, ports, powerplants, airports, etc., as well as increasing levels of urbanization generating demand for housing,automobiles and white goods.

The global economy is exhibiting strong signals of recovery and the Indian economy with a GDPforecast of over 7% suggests that the worst is behind us and we are seeing a revival all around.Indian steel consumption is growing and the country has maintained its spot as the fifth largestcrude steel producer in the world. In fact, Steel consumption in India jumped 7.7 percent in the ninemonths to December, boosted by the government’s plan to spend $8.95 billion this fiscal year tobuild road and phone networks, power plants and irrigation facilities. The National Steel Policy hasenvisaged steel production to reach 110 million tonnes by 2019-20. However, based on theassessment of the current ongoing projects, both in Greenfield and Brownfield, the Ministry of Steelhas projected that the steel capacity in the county is likely to be around 124 million tonnes by 2011-12. Further, based on the status of MoUs signed by the private producers with the various stategovernments; it is possible that India’s steel capacity could reach nearly 293 million tonnes by 2020placing India clearly as the 2nd largest steel producer after China.

There is also an urgent need to ensure timely supply of essential raw materials particularly cokingcoal to produce the coke to fuel ‘The Great Indian Steel Dream’ for which an appropriate rawmaterial security plan has to be devised and implemented . It is also the time to review the role andimportance of China in global raw material and finished steel markets and look at the interplaybetween two great giants of the steel industry in the years ahead. This is therefore the right time tohave the best strategies in place and discuss the scope and opportunities for the Indian Steel


Industry with the leading industry players from the country and abroad, stalwarts of the sector andpolicy makers at Global Steel 2010, where this report is being released.

Production, consumption and growth of steel

The National Steel Policy 2005 had projected consumption to grow at 7% based on a GDP growthrate of 7-7.5% and production of 110 million tonne by 2019-20. These estimates will be largelyexceeded and it has been assessed that, on a 'most likely scenario' basis, the crude steel productioncapacity in the country by the year 2012-13 will be nearly 110 million tonne.The table below shows the trend in production for sale, import, export and consumption of totalfinished steel (alloy + non-alloy) in the country:

Total finished steel (alloy + non-alloy) ('000 tonne)

Year Production forsale

Import Export Consumption

2005-06 46566 4305 4801 414332006-07 52529 4927 5242 467832007-08 56075 7029 5077 521252008-09 57164 5841 4437 523512009-10 60892 7296 3235 57675Apr-Dec 10-11* 47296 5359 2462 44275Source: JPC; * =Provisional


















Crude steel production has shown a sustained rise since 2004-05 along with capacity. Data on crudesteel production, capacity and capacity utilization are given in the table below:

Year Crude steelCapacity

('000 tonne)Production('000 tonne)

CapacityUtilisation (%)

2005-06 51171 46460 912006-07 56843 50817 892007-08 59845 53857 912008-09 66343 58437 882009-10 72963 64875 89Apr-Dec 2010-11* 56597** 50594 89

Source: JPC; *=Provisional; ** 2.5 million tonne capacity added during April-December 201022

Annual Report 2010-11The growth was driven by capacity expansion from 47.99 million tonne per annum (MTPA) in 2004-05 to 75.463 MTPA in 2010-11 (up to December 2010). Crude steel production grew at a CAGR of 8.4per cent during the five years, 2005-06 to 2009-10. Production for sale of total finished steel at 60.89million tonne during 2009-10 as against 46.566 million tonne in 2005-06. With growth in productionfor sale lagging behind consumption growth, India has turned into a net importer of finished steel in2007-08. Exports have also declined to ensure greater domestic availability.The above crude steel performance has been contributed largely by the strong trends in growth ofthe electric route of steel making, particularly the induction furnace route, which accounted for 31per cent of total crude steel production in the country during 2009-10 and has emerged as a keydriver of crude steel production.The process route-wise production of crude steel in the country during 2005-06, 2009-10 and April-December 2010-11 (provisional) are shown in the table below and indicate the emergence of theelectric route of production compared to the oxygen route:

Crude steel production by Process Route Percentage share (%)2005-06 2009-10 2010-11*

Basic Oxygen Furnace (BOF) 52 45 47Electric Arc Furnace (EAF) 18 24 26Induction Furnace (IF) 30 31 27Total 100 100 100Source: JPC;*=Provisional

India is also a leading producer of sponge iron with a host of coal based units, located in the mineral-rich states of the country. Over the years, the coal based route has emerged as a key contributor tooverall production; its share has increased from 69% in 2005-06 to 70% in 2009-10. Capacity insponge iron making has also increased over the years and currently stands at 32 million tonne.


Global ranking of Indian steel

Global crude steel production reached 1414 million tonne in calendar year 2010, a growth of 15 percent over 2009. China was the largest crude steel producer in the world with production reaching626.56 million tonne, a growth of 9.2 per cent over 2009. India once again emerged as the 5thlargest producer in 2010 and recorded a growth of 11.3 per cent as compared to 2009. India alsoemerged as the largest sponge iron producing country in the world in 2010, a rank it has held onsince 2002. If proposed expansions plans are implemented as per schedule, India may become thesecond largest crude steel producer in the world by 2015-16.

World crude steel production in 2010*Rank Country Production (million tonne)1 China 626.562 Japan 109.603 USA 80.594 Russia 67.005 India 66.806 South Korea 58.457 Germany 43.828 Ukraine 33.569 Brazil 32.8210 Turkey 29.00Source: World Steel Association; *=Provisional










Present growth scenario and future outlook

India was the 5th largest producer of crude steel in the world in 2010, based on rankings released byWorld Steel Association. Domestic crude steel production grew at a compounded annual growth rateof 8.4 per cent during 2005-06 to 2009-10. This growth was driven by both capacity expansion (from47.99 million tonne in 2004-05 to 72.96 million tonne in 2009-10) and improved capacity utilisation.India, the world's largest producer of direct reduced iron (DRI) or sponge iron, is also expected tomaintain its lead in the near future. Sponge iron production grew at a CAGR of 11 per cent to reach alevel of 20.74 million tonne in 2009-10 compared to 14.83 million tonne in 2005-06. India isexpected to become the second largest producer of steel in the world by 2015-16, provided allrequirements for fresh capacity creation are met.

Indian steel industry has just come out of the slowdown that affected its performance during 2008-09. Domestically, 2010 ended on a relatively better and encouraging note, with CSO reporting anoverall improvement of economic situation through its GDP data, which showed a robust 8.9 percent growth during Apr-Sept 2010-11. IIP too had registered a strong 10.2 per cent growth duringApr-Sept. 2010-11, further bolstering the idea that the demand side is back on stable footing. Forsteel, this is of key importance and the growth rates registered for leading end-use segments likemanufacturing, consumer durables, construction, the stable growth of the service sector andagriculture sector spell good news. April-December 2010 provisional data released by JPC indicates a8 per cent rise in consumption of total finished steel. Globally also there are signs of improvement ineconomic conditions and firming up of demand and prices.










Trends in production, private/public sector

Traditionally, Indian steel industry has been classified into Main Producers (SAIL plants, Tata Steeland Vizag Steel/ RINL), Major Producers (plants with crude steel making capacity above 0.5 milliontonne - Essar Steel, JSW Steel, Jindal Steel & Power and Ispat Industries) and Other Producers. Thelatter comprises of numerous steel making plants producing crude steel/finished steel (longproduct/flat product)/ pig iron/ sponge iron and are spread across the different states of thecountry.

The following table highlights the total as also the contribution of the private and public sector incrude steel production in the country:

Indian Crude Steel production (in million tonne)2005-06 2006-07 2007-08 2008-09 2009-10 * 2010-11*

(April-Dec)Public Sector 16.964 17.003 17.091 16.372 16.714 12.579Private Sector 29.496 33.814 36.766 42.065 48.161 38.015Total Production 46.460 50.817 53.857 58.437 64.875 50.594% share ofPublic Sector

36.5 33.5 32 28 26 25

Source: JPC; *=Provisional

INDIAN STEEL COMPANIES AND CAPACITY (Million Ton)

Company Existingcapacity

Capacityadditions by2011-12

Total capacityexpected by2011–12

Total capacityproposed by2019

SAIL 12.5 7.7 20.2 23.1RINL 2.9 3.4 6.3 16.3TATA 6.8 3.0 9.8 22.8ESSAR STEEL 4.6 5.4 10.0 16.0JSW 6.6 3.2 9.8 29.8JSPL 2.4 1.2 3.6 25.8ISPAT 3 .9 4.2 4.2POSCO 12.0ARCELOR MITTAL 24.0BHUSHAN POWER & STEEL 1.5 1.5 1.5

BHUSHAN STEEL 2.2 2.8 5.0 5.0OTHERS & SECONDARY 21.9 9.1 31.0 31.0


BRIEF PROFILE OF SAIL


2.3 Steel Authority of India Limited - A Maharatna

Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fullyintegrated iron and steel maker, producing both basic and special steels for domestic construction,engineering, power, railway, automotive and defence industries and for sale in export markets. SAILis also among the five Maharatnas of the country's Central Public Sector Enterprises.

SAIL manufactures and sells a broad range of steel products, including hot and cold rolled sheets andcoils, galvanised sheets, electrical sheets, structurals, railway products, plates, bars and rods,stainless steel and other alloy steels. SAIL produces iron and steel at five integrated plants and threespecial steel plants, located principally in the eastern and central regions of India and situated closeto domestic sources of raw materials, including the Company's iron ore, limestone and dolomitemines. The company has the distinction of being India’s second largest producer of iron ore and ofhaving the country’s second largest mines network. This gives SAIL a competitive edge in terms ofcaptive availability of iron ore, limestone, and dolomite which are inputs for steel making.

SAIL's wide range of long and flat steel products is much in demand in the domestic as well as theinternational market. This vital responsibility is carried out by SAIL's own Central MarketingOrganisation (CMO) that transacts business through its network of 37 Branch Sales Offices spreadacross the four regions, 25 Departmental Warehouses, 42 Consignment Agents and 27 CustomerContact Offices. CMO’s domestic marketing effort is supplemented by its ever widening network ofrural dealers who meet the demands of the smallest customers in the remotest corners of thecountry. With the total number of dealers over 2000, SAIL's wide marketing spread ensuresavailability of quality steel in virtually all the districts of the country.

With technical and managerial expertise and know-how in steel making gained over four decades,SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide.

SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchiwhich helps to produce quality steel and develop new technologies for the steel industry. Besides,SAIL has its own in-house Centre for Engineering and Technology (CET), Management TrainingInstitute (MTI) and Safety Organisation at Ranchi. Our captive mines are under the control of theRaw Materials Division in Kolkata. The Environment Management Division and Growth Division ofSAIL operate from their headquarters in Kolkata. Almost all our plants and major units are ISOCertified. SAIL traces its origin to the formative years of an emerging nation - India. Afterindependence the builders of modern India worked with a vision - to lay the infrastructure for rapidindustrialisation of the country. The steel sector was to propel the economic growth. Hindustan SteelPrivate Limited was set up on January 19, 1954.

VISION

To be a respected world Class Corporation and the leader in Indian steel business in quality,productivity, profitability and customer satisfaction.


CREDO

We build lasting relationships with customers based on trust and mutual benefit. We uphold highest ethical standards in conduct of our business. We create and nurture a culture that supports flexibility, learning and is proactive to change. We chart a challenging career for employees with opportunities for advancement and

rewards.

We value the opportunity and responsibility to make a meaningful difference in people'slives.

2.4 PRODUCTS OF SAIL

LONG PRODUCTS FLAT PRODUCTS RAILWAY PRODUCTS SEMIS OTHERPRODUCTS

1.Structurals

2.Crane Rails

3. Z-Section Centre Sill

4. Z-Type Sheet-pilingSection

5. M S Arch

6. Bars, Rods & Rebars:SAIL TMT

7. Wire Rods

1. HR Coils, Sheets &Skelp

2. Plates

3. CR Coils & Sheets

4. GP Sheets & Coils, GCSheets:SAIL JYOTI

Tin Plates

Electrical Steel

5. PIPES

1. Rails

2. Wheels, Axles &Wheel Sets

1.Blooms2.Billets

3.Slabs

Pig Iron

2.5 PLANTS OF SAIL

SAIL Integrated Steel Plants

1. Rourkela Steel Plant (RSP) in Orissa set up with German collaboration (The first integrated

steel plant in the Public Sector in India, 1959)

2. Bhilai Steel Plant (BSP) in Chhattisgarh set up with Soviet collaboration (1959)

3. Durgapur Steel Plant (DSP) at Durgapur, West Bengal set up with British collaboration (1965)

4. Bokaro Steel Plant (BSL) in Jharkhand (1965) set up with Soviet collaboration (The Plant is

hailed as the country’s first Swadeshi steel plant, built with maximum indigenous content in

terms of equipment, material and know-how)

5. IISCO Steel Plant (ISP) at Burnpur, West Bengal


Special Steel Plants

1. Steel Authority of India Limited (SAIL), Kanpur, Uttar Pradesh

2. Alloy Steels Plants (ASP), Durgapur, West Bengal

3. Salem Steel Plant (SSP), Tamil Nadu

4. Visvesvaraya Iron and Steel Limited (VISL), at Bhadravathi, Karnataka

Subsidiaries

1. Maharashtra Elektro-smelt Limited (MEL) in Maharashtra

2.6 MAIN ACTIVITIES

A. It produces both basic and special steels for domestic construction, engineering, power,railway, automotive and defence industries and for sale in export markets.

B. SAIL manufactures and sells a broad range of steel products, including

1. hot and cold rolled sheets and coils,2. galvanized sheets, electrical sheets,3. structural’s,4. railway products,5. plates,6. bars and7. rods,8. stainless steel and other alloy steels

C. SAIL produces iron and steel at five integrated plants and three special steel plants,located principally in the eastern and central regions of India and situated close to domesticsources of raw materials, including the Company's iron ore, limestone and dolomite mines.

D. SAIL's wide range of long and flat steel products is much in demand in the domestic aswell as the international market. This vital responsibility is carried out by SAIL's own CentralMarketing Organisation (CMO) that transacts business thorough International tradeDivision.

E. SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000 accredited unitof CMO, undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integratedsteel plants.

F. With technical and managerial expertise and know-how in steel making gained over fourdecades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancyto clients world-wide.


G. SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) atRanchi which helps to produce quality steel and develop new technologies for the steelindustry.

2.7 OWNERSHIP AND MANAGEMENT

Steel Authority of India Limited is a public sector Undertaking. The Government of India owns about86% of SAIL's equity and retains voting control of the Company. However, SAIL, by virtue of its‘Maharatna’ status, enjoys significant operational and financial autonomy

SHARE HOLDING PATTERN

AS ON 31ST MARCH ' 2011

CategoryEquity Shareholders

No ofHolders

Amount inRs./Cr

% ofEquity

GOI 3544690285 1 3544.69 85.82

Financial Institutions 211213818 33 211.21 5.11

Banks 76138307 51 76.14 1.84

Mutual Funds 24511749 102 24.51 0.59

FIIs 175759727 282 175.76 4.26

GDRs 614245 2 0.61 0.02

Cos. (incl Soc & Tr) 21426619 3070 21.43 0.52

Individuals (inclemployees)

76045795 338069 76.05 1.84

Total 4130400545 341610 4130.40 100.00


2.8 INTERNATIONAL TRADE DIVISIONS

International Trade Division (ITD) of SAIL at New Delhi – an ISO 9001:2000 accredited unit ofCMO, undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integratedsteel plants. Ever ready to meet the exacting demands of its global customers, ITD maintainsa close liaison with customers and the production units to cater to the customizedrequirements of its customers both in terms of quality and sizes. Its major products are alsocovered by stringent certifications such as CE marking, TUV and ‘U’ mark required bysophisticated end uses in European markets.

ITD has. The critical function of ensuring efficient shipment of export materials is performedby Transport & Shipping Division (T&S) Headquartered at Kolkata. T&S has branch offices atHaldia, Paradip and Vizag ports.

ITD exports steel products mentioned below via its joint venture service centre

L. Rails,M. Structural’s,N. Merchant Products,O. Wire Rods,P. Re-bars,Q. Plate Mill Plates,R. Hot Rolled Coils,S. Hot Rolled Plates / Sheets,T. Cold Rolled steels,U. Cold Rolled Non Oriented (CRNO) coils,V. Chequered Plates,W. Slabs, Billets and Pig Iron.

Steel Authority of India Limited has successfully implemented its Export potential in thefollowing markets:

A. Japan,B. P.R. of China,C. Korea,D. Taiwan,E. Vietnam,F. Philippines,G. Singapore,H. Malaysia, Nepal, BangladeshI. Thailand, Sri LankaJ. Indonesia,K. Australia,L. Europe


2.9 SAIL CORPORATE PLAN 2012

SAIL’s newly announced Corporate Plan – 2012 sets out the blueprint for this growth plan.According to an official of the company, a major factor that prompted formulation ofCorporate Plan – 2012 was the continual improvement in operating efficiency achieved bythe company. “As pointed out by the Chairman in many forums, exceeding rated shopcapacity has become more of a norm rather than exception in the SAIL plants,” he says.Also, the culture of cost reduction and improvement in business processes has helped thecompany build up its internal resources which will contribute to achievement of the growthplan. For realistic accomplishment of targets set, the plan has been split into two stages –

Stage 1 pertaining to the period up to 2006-07 and Stage – 2 up to 2011-12.

The plan defines the following key strategic goals for SAIL:

• To continue in the business of steel and steel-related activities

• To enhance market share in growth segments

• To improve profits by cost reduction and high value added products

• To achieve excellence in quality across the value chain

• To secure availability of key raw materials, and alleviate infrastructure bottlenecks whichmay constrain long-term growth

• To build customer-centric processes, systems, structure and procedures A significantfeature of the plan is that it covers the 11th Five-year Plan period.

PRODUCTION

Corporate Plan – 2012 envisages production of hot metal from the integrated steel plants ofSAIL reaching an aggregate level of about 20 MT per annum by 2011-12 against the currentlevel of 13 MT. This would be achieved through optimal utilization of assets coupled withmarginal capacity expansion. Plant-wise break-up of hot metal production would be asfollows: The envisaged growth in volumes is to be achieved by:

• Realisation of full potential of existing assets

• Do-bottlenecking

• Linked facilities for value addition

• Capacity enhancement in growth segments


Based on the above, crude steel production by SAIL is planned to reach a level of 18.7million tonnes per annum (MTPA) by 2012 from the current level of 11.83 MT, leading tosaleable steel production of 17.38 MTPA against the level of 10.73 MT achieved in 2003-04.

In view of emerging market requirements, SAIL has also planned to raise its output offinished steel to 16.6 MTPA by 2011-12 from the current level of 8.6 MT, and reducegeneration of semi-finished steel from 20% of saleable steel to 5%. This will enable inclusionof more value-added products in the company’s product basket.

Broadly, this would enable SAIL to achieve 30% market share in flat products and 23% inlongs by 2011-12.

INVESTMENT

SAIL has estimated that the measures to be taken to achieve the targeted levels ofgrowth and sustain higher levels of cost and quality competitiveness will require investmentin the region of Rs.25, 000 crore by 2011-12. The immediate priority schemes, to betaken/completed by 2006-07, have been estimated to be around Rs.4, 300 crore.

The capital expenditure envisaged will be financed mainly through internal accruals, andwill be supplemented by market borrowing if the need arises. Care will be taken to ensurethat the company’s debt-equity ratio attains, and is maintained at, a level of 1:1. The planfor capital expenditure covers up gradation/modernization of some existing assets as well asinstallation of some new facilities. The areas broadly identified for investment pertain to:

• Development of iron ore mines

• Rebuilding Coke Oven Batteries as BSP, DSP and RSP

• Revamping of iron & steel making facilities at BSP, DSP and BSL

• Installation of one blast furnace at RSP

• Installation of auxiliary fuel injection systems in all blast furnaces in a phased manner

• Installation of new finished mills Among new finished mills planned to be set up are: BSP:Thin slab casting/inline Hot Strip Mill (1.1 MT), Bar & Rod Mill (1MT), Pipe Plant (0.2 MT)DSP: Bar & Rod Mill (1.4 MT), Structural Mill (0.4 MT) RSP: Plate Mill (0.7 MT), CRNO Mill(0.075 MT) BSL: Hot Strip Mill (2.5 MT), CRM Line (0.6 MT)

RAW MATERIALS

The growth plan and achievement of quality/cost competitiveness of SAIL to a significantextent will hinge on the availability, quality and cost of key inputs like coal and iron ore.


SAIL has the largest iron ore mining operations in India. “To enable production of around 20MT of hot metal by 2012, substantial development of mines to increase the iron oreproduction to a level of around 33 MT, including 6-7 MT of lump ore, will have to be takenup”, sources said. To meet the requirement, SAIL has planned to adopt following strategies:

• Development new blocks/mines

• Increased production from existing mines to their potential

• Improving the quality of iron ore by suitable beneficiation

• Achieving operating efficiencies by economic scale of operations

IMPLEMENTATION

Corporate Plan – 2012 has considered the following major risk factors in achievement of thetargeted growth have been identified as –

• Declining global steel demand and prices

• Constraints in availability, and cost of critical raw material – like coking coal, iron ore, etc.

• Infrastructure constraints, viz. ports, railways, etc.

These factors will be reviewed proactively and timely interventions will be ensured. Steelbeing a universal intermediary, its demand is driven by economic growth and the expansiontrajectory of the industrial sector. The growth trajectory (reflected in terms of percentage ofGDP growth) is essentially a range based on macro-economic parameters, governmentpolicies and global economic trends. While drawing up Corporate Plan – 2012, conservativemarket growth projections have been considered. However, while the growth trends andmacro indicator present opportunities for the company’s higher growth potential; major riskfactors have also been taken into consideration like decline in global steel demand andprices, non-availability/cost of major input materials like coal, etc. Therefore, in any case,SAIL’s plans may have to be revised from time to time, depending on the market growth,competition, international situation, change in country’s policies, resources availability, etc.

JOINT VENTURES AND MOU

SAIL has promoted joint ventures in different areas ranging from power plants to e-commerce:

A. NTPC SAIL Power Company Pvt. Ltd (NSPCL)

A 50:50 joint venture between Steel Authority of India Ltd. (SAIL) and National Thermal PowerCorporation Ltd. (NTPC Ltd.); manages the captive power plants at Rourkela, Durgapur and Bhilai


with a combined capacity of 314 megawatts (MW). It has installed additional capacity byimplementation of 500 MW (2 x 250 MW Units) power plant at Bhilai. The commercial generation of1st Unit has commenced in April’2009 and the 2nd Unit in October 2009

B. Bokaro Power Supply Company Pvt. Limited (BPSCL)

This 50:50 joint venture between SAIL and the Damodar Valley Corporation formed in January 2002is managing the 302-MW power generating station and 660 tonnes per hour steam generationfacilities at Bokaro Steel Plant. BPSCL has proposed to expand its capacity by installing 2x250 MWcoal based thermal unit at Bokaro. In addition, construction activities are underway for installationof 9th Boiler (300T/Hr) & 36 MW Back Pressure Turbo Generator (BPTG) project at Bokaro.

C. Mjunction Services Limited

A 50:50 joint venture between SAIL and Tata Steel formed in 2001. This company promotes e-commerce activities in steel and related areas. Newly added services include e-Assets sales, Events &Conferences, Coal Sales & Logistics, Publications etc...

D. SAIL-Bansal Service Centre Ltd.

SAIL has formed a joint venture with BMW industries Ltd. on 40:60 basis to promote a service centreat Bokaro with the objective of adding value to steel.

E. SAIL&MOIL Ferro Alloys (Pvt.) Limited

SAIL has incorporated a joint venture company with M/s Manganese Ore (India) Ltd on 50:50 basisto produce Ferro-manganese and silico-manganese required for production of steel:

MOU

A. POSCO to establish strategic alliance for cooperation in a wide range of business &commercial interest areas. Pursuant to this, another MoU has been signed for joint ventureinitiative in the area of (a) manufacture & commercialization of CRNO; & (b) Exploration ofupstream & downstream opportunities in utilizing FINEX technology by both the companies.

B. Rashtriya Ispat Nigam Ltd. (RINL) - To jointly explore and develop low silica Limestone minesin the Sultanate of Oman. .

C. Shipping Corporation of India Ltd (SCI) – To set up a joint venture which will provideshipping-related services to SAIL for imported coking coal and also participate in worldwidedry bulk shipping trade.

D. Government of Kerala (GOK) – To revive the existing facilities at Steel Complex Ltd in Calicutowned by the state government, and also set up, develop and manage a TMT rolling mill of65000 MT capacity along with balancing facilities and auxiliaries.

E. Larsen & Toubro Ltd (L&T) – To jointly set up, develop, manage and owncaptive/independent power plant(s) at suitable location/s to meet future powerrequirements of SAIL including opportunities to own captive thermal coal blocks to cater tothe power plants’ requirements..


FY 11 FINANCIAL REPORT

NET SALES OF SAIL (RS CRORE)

EARNING BEFORE INTEREST, DEPRECIATION AND TAX (Rs Cr.)










EARNING PER SHARE (RS)

PRODUCT MIX: PRODUCTION FIVE INTEGRATED STEEL PLANTS








CATEGORIES WISE SALES






3.EXPORT POTENTIAL OF BILLETS WITH FOCUS ON MENA

3.1 MARKET INTRODUCTION

MENA (MIDDLE EAST AND NORTH AFRICA)

The term MENA, for "Middle East and North Africa", is an acronym often used in academic andbusiness writing. The term generally covers an extensive region, extending from Morocco innorthwest Africa to Iran in southwest Asia. It generally includes all the Arab Middle East and NorthAfrica countries.

Gulf Cooperation Council (GCC), officially Cooperation Council for the Arab States of the Gulf,organization (est. 1981) promoting stability and economic cooperation among Persian Gulf nations.Its members are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. In 1991the GCC countries joined with Egypt and Syria to create a regional peacekeeping force. An aid fundwas also established to promote development in Arab states; it was used to help liberate Kuwait in1991. In 2003 GCC members eliminated tariffs on trade between member nations and establishedcommon external tariffs. They have agreed to establish a broader economic union (including a singlemarket and currency; Oman and United Arab Emirates have opted out); a common market wasestablished in 2008.

MAJOR STEEL COMPANIES IN THE MENA REGION

1. EZDK - (EGYPT)EZDK (Al-Ezz Dekheila Steel Co.) is the largest steel company in Egypt and the Middle East. It lies in

Dekheila, West of Alexandria, the second biggest city of Egypt and its main port.

2- Emirates Steel Industries (ESI)Emirates Steel Industries (ESI) is a wholly-owned government factory located in the Industrial City ofAbu Dhabi (ICAD). It uses rolling mill technology to produce rebar for the construction industry.Established in 2001, the mill currently operates at its full design capacity of 600,000 tonnes of rebarper year. It sells 100% of its products within the UAE.ESI has achieved Quality System Certificationfrom the UK Certification Authority and produces rebar conforming to BS4449/97 Grade 60 in sizesfrom 10m to 32mm, in lengths of 12m. The firm is on a major expansion push to increase its rollingcapacity and establish the factory as a fully integrated plant.

3- Qatar Steel (QASCO)Qatar Steel was formed in 1974 as one of the first integrated steel plants in the Arabian Gulf.Commercial production began in 1978 and the company became wholly owned by Industries Qatarin 2003. Qatar Steel now has a 707,000m² facility located in Mesaieed Industrial City, which includesa continuous casting plant and rolling mills with the latest automated technology. An adjacent375,000m² plot is reserved for future developments. The firm also operates a UAE-based subsidiaryto meet the growing demand for high-quality steel wire-rod products within the GCC. It operatestwo primary facilities at its 60,000m² Jebel Ali Free Zone site: an upgraded wire rod mill with aninstalled annual capacity of 240,000 metric tonnes and a rebar mill.


4- RAK SteelRAK Steel is a joint venture between Ras Al Khaimah Investment Authority and Middle East Tradersgroup. The second largest rebar manufacturing mill in the UAE, it has a design capacity of 500,000tonnes per year.

RAK Steel rebar are made from pure steel billets, hot rolled in a highly automatic rolling mill andsubjected to an online thermo-mechanical treatment called Quenching and Self Tempering (QST).The mill produces: 8mm, 10mm, 12mm, 14mm, 16mm, 20mm, 25mm and 32mm diameter steeldeformed reinforcement bars (Rebars) to international British and American standards according toclient requirements. The firm is aiming to increase its capacity by 50% by the end of this year tocater to increased local demand.

5- Sabic MetalsSabic is one of the largest and most profitable non-oil companies across the Middle East and one ofthe world’s five largest petrochemicals manufacturers. It is a leading steel producer in the MiddleEast, and the firm’s metals business has played a vital role in the construction, development andindustrialisation of the region. A number of flat and long steel products are manufactured at itsproduction facilities. Sabic is a public company with its headquarters in Riyadh. The Saudi Arabiangovernment owns 70% of its shares, while the remaining 30% are held by private investors acrossthe GCC.

6- United Gulf SteelUnited Gulf Steel is one of the largest producers of medium section steel products in the GCC. It hasa 450,000 tonnes per annum capacity facility located at Jubail Industrial City, Saudi Arabia. An ISO9001:2000 certified companies; it manufactures medium section structural steel products. The firm’sproduct range includes a wide variety of structural steel such as IPE beams; UPE channels; equalangles; flat, square and round bars in various sizes.

7- Zamil SteelZamil Steel Structural Steel Division is one of the largest steel fabricators in the GCC. The firmfabricates steel structures and plate works for a number of applications including high-rise buildings,with products including structural steel, pipe racks, ducting and equipment support structures. SaudiArabia-based Zamil has achieved ISO 9001:2000 certification for its quality systems, plus ISO 14001 &OHSAS 18001 certifications, which have resulted in the improvements of process efficiencies andworkforce safety. The Zamil Structural Steel Division is also certified by the American Society ofMechanical Engineers.

8. HADEED SABIC (SAUDI ARABIA)

9. LISCO (LIBYA)

10. SONASID (MOROCCO)

11. ARCELOR MITTAL ANNABA (ALGERIA)


3.3 MENA STEEL SCENARIO






Analysis:

1. MENA steel crude production has risen over the years due to increase in productioncapacity and setting up of new steel mills.

2. Although the steel production has risen but the domestic production is far below thedomestic demand for the steel.

3. Steel mills export to MENA region shows that there is at least a demand of 40 milliontons.

3.4 PRODUCT INFORMATION: STEEL BILLET

Raw steel cannot be of use while in its pure form, thus it has to be cast into shape. The freshly madesteel, which is still in the form of a metal bar or rectangle, is called steel billet. Steel billets becamepopular in the early 1800s, just after the British colonization of the United States ended andAmerican entrepreneurs began to manufacture brass and bronze billet, which later became one ofthe fast-rising industries in the new country. Copper and iron were almost not to be found in theUnited States back then, as the British transported all American copper to Britain for further moldingand processing.

Steel billets have distinct characteristics as compared with already furnished steel bars and products.Billets have a specific grain structure, which enables the metal to be processed more intricately.Steel billets are also known for their malleability and ductility, especially when exposed to varyingtemperatures during shaping and molding.

Billets or ingots are not of practical use until they have been formed into more functional shapesand sizes. While they have already been put in the furnace, they still require a series of shaping andmolding procedures such as hot and cold working, milling and cutting before they are sold inhardware stores, or used for different applications. The unformed billets, however, can be used instriking currency such as coins and as reserves, similar to gold bars. Steel billets are considered freshand raw, and they must undergo a series of manufacturing processes before they can be used forvarious purposes. Billets are made by means of freezing molten liquid, and are later exposed toextremely low temperatures in order to allow the metal to take shape and solidify in chemicalstructure. The temperature manipulates the metal's physical properties, and tones its strength anddurability. The subsequent processes provide the metal's curved mold design so that it can fit the


allotted space provided by other machines, which complete the finishing proceduresSteel billets result from the second stage of the steel production process. They are hot-rolled orforged from an ingot or strand cast. Smaller and longer than a bloom, billets are usually a squarecross section less than 36 square inches. They are used for the manufacture of all 'long' steelproducts such as bars, rods, pipes, tubes, wire and wire products.

3.5 MANUFACTURING PROCESS

1. Ladle2. Stopper3. Tundish4. Shroud5. Mold6. Roll support7. Turning zone8. Shroud9. Bath level10. Meniscus11. Withdrawal unit12. Slab










A. Liquid metalB. Solidified metalC. SlagD. Water-cooled copper platesE. Refractory material

Molten metal (known as hot metal in industry) is tapped into the ladle from furnaces. After

undergoing any ladle treatments, such as alloying and degassing, and arriving at the correct

temperature, the ladle is transported to the top of the casting machine. Usually, the ladle sits in a

slot on a rotating turret at the casting machine; one ladle is 'on cast' (feeding the casting machine)

while the other is made ready, and is switched to the casting position once the first ladle is empty.

From the ladle, the hot metal is transferred via a refractory shroud (pipe) to a holding bath called

a tundish. The tundish allows a reservoir of metal to feed the casting machine while ladles are

switched, thus acting as a buffer of hot metal, as well as smoothing out flow, regulating metal feed

to the molds and cleaning the metal.

Metal is drained from the tundish through another shroud into the top of an open-base

copper mold. The depth of the mold can range from 0.5 to 2 metres (20 to 79 in), depending on the

casting speed and section size. The mold is water-cooled to solidify the hot metal directly in contact

with it; this is the primary cooling process. It also oscillates vertically (or in a near vertical curved

path) to prevent the metal sticking to the mold walls. A lubricant can also be added to the metal in

the mold to prevent sticking, and to trap any slag particles—including oxide particles or scale—that

may still be present in the metal and bring them to the top of the pool to form a floating layer of

slag. Often, the shroud is set so the hot metal exits it below the surface of the slag layer in the mold

and is thus called a submerged entry nozzle (SEN). In some cases, shrouds may not be used between

tundish and mold; in this case, interchangeable metering nozzles in the base of the tundish direct












































the metal into the moulds. Some continuous casting layouts feed several molds from the same

tundish.

In the mold, a thin shell of metal next to the mold walls solidifies before the middle section, now

called a strand, exits the base of the mold into a spray-chamber; the bulk of metal within the walls of

the strand is still molten. The strand is immediately supported by closely spaced, water cooled

rollers; these act to support the walls of the strand against the ferrostatic pressure

(compare hydrostatic pressure) of the still-solidifying liquid within the strand. To increase the rate of

solidification, the strand is also sprayed with large amounts of water as it passes through the spray-

chamber; this is the secondary cooling process. Final solidification of the strand may take place after

the strand has exited the spray-chamber.

It is here that the design of continuous casting machines may vary. This describes a 'curved apron'

casting machine; vertical configurations are also used. In a curved apron casting machine, the strand

exits the mold vertically (or on a near vertical curved path) and as it travels through the spray-

chamber, the rollers gradually curve the strand towards the horizontal. In a vertical casting machine,

the strand stays vertical as it passes through the spray-chamber. Molds in a curved apron casting

machine can be straight or curved, depending on the basic design of the machine.

In a true "Horizontal Casting Machine", the mold axis is horizontal and the flow of steel is horizontal

from liquid to thin shell to solid (no bending). In this type of machine, either strand oscillation or

mold oscillation is used to prevent sticking in the mold.

After exiting the spray-chamber, the strand passes through straightening rolls (if cast on other than a

vertical machine) and withdrawal rolls. There may be a hot rolling stand after withdrawal, in order to

take advantage of the metal's hot condition to pre-shape the final strand. Finally, the strand is cut

into predetermined lengths by mechanical shears or by travelling oxyacetylene torches, is marked

for identification and either taken to a stockpile or the next forming process.

In many cases the strand may continue through additional rollers and other mechanisms which

might flatten roll or extrude the metal into its final shape.


3.6 WORLD STEEL BILLET:SCENARIOThe CIS organization was founded on 8 December 1991 by the Republic of Belarus, the RussianFederation, and Ukraine, when the leaders of the three countries met in the BelovezhskayaPushcha Natural Reserve, about 50 km (30 miles) north of Brest in Belarus and signed a CreationAgreement on the dissolution of the Soviet Union and the creation of CIS as a successor entity tothe USSR. At the same time they announced that the new alliance would be open to all republics ofthe former Soviet Union, as well as other nations sharing the same goals. The CIS charter stated thatall the members were sovereign and independent nations and thereby effectively abolishedthe Soviet Union. On 21 December 1991, the leaders of eight additional Soviet Republics –Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova,Turkmenistan, Tajikistan, and Uzbekistan –

signed the Alma-Ata Protocol and joined the CIS, thus bringing the number of participating countriesto 11.

STEEL BILLET PRODUCTION (‘000 MT)2006-07 2007-08 2008-09 2009-10

EU 9492 8209 6875 3922C.I.S. 46895 46568 40353 25607

North America 591 3446 2969 1745South America 2983 2894 2369 1139

Africa 221 221 187 60Asia 30094 33270 35944 33353

Oceania 59 62 65 57World 93381 94705 88794 65898

(Source: Steel Statistical Year Book 2010)

05000

100001500020000250003000035000400004500050000

EU C.I.S. NorthAmerica

SouthAmerica

Africa Asia Oceania

Steel Billet Production (‘000 MT)

2006-07

2007-08

2008-09

2009-10


Analysis:

1. Continent wise Asia has emerged the largest steel billet producer.2. Region wise also Asia has overtaken CIS in billet production.3. CIS was the largest steel billet producer in 2007,08 and 09 but Asia is now the

largest billet producer with 33353 thousand MT followed by CIS with 25607thousand MT.

4. Increase in the cost of manufacturing due to increased prices of coal andcoking coke has resulted in fall in output of CIS Steel makers.

5. The demand has also fallen due to uprising in Middle East a major market forCIS producers.


Analysis:






Analysis:






WORLD STEEL BILLET PRODUCTION (‘000 MT)

2006-07 2007-08 2008-09 2009-10

World 93381 94705 88794 65898


Analysis:

1. The world steel billet production has shown a declining trend over past threeyear.

2. The recession of 2008-09 and then increase in the price of raw material hasincreased the prices of billets and at increased prices the demand is low andproducing Long and Flat product has become more profitable for CISproducers (one of the major producers of steel billets).

3. CIS producers are cutting production due to low profit margin on billets.4. Low construction in Middle East is also a reason for fall in demand for CIS

billet, Middle East is the largest importer of CIS billet.

Comparison of Asia and CIS in Steel Billets Production

0

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WORLD STEEL BILLET PRODUCTION (‘000 MT)

0

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STEEL BILLET PRODUCTION (‘000 MT)

C.I.S.

Asia

World


STEEL BILLET PRODUCTION (‘000 MT)

2006-07 2007-08 2008-09 2009-10

Asia 30094 33270 35944 33353

C.I.S. 46895 46568 40353 25607

World 93381 94705 88794 65898

CIS Share (in %) 50.219 49.17164 45.44564 38.85854Asia Share (in %) 32.22711 35.13014 40.48021 50.61307

Analysis:

1. From the graph it can be seen that the CIS billet production and world billetproduction has a positive correlation since CIS was the world largest billetproducer.

2. From table it can be seen the share of CIS has been falling continuously andShare of Asia has been rising.

3. Asia share is rising due to increased production capacity of China and Indiansteel mills and high domestic demand.

EXPORTS OF BILLETS AND SEMIS (000' MT)


2006-07 2007-08 2008-09 2009-10

EU 13359 15684 15075 9060

C.I.S. 29289 28272 30367 26133

North America 2958 3897 4739 2478

South America 6384 5689 5943 4994

Africa 301 220 143 462

Middle East 22 27 56 48

Asia 15610 13844 9727 8466

Oceania 1 2 16 33

World 68401 67928 68719 54304


Analysis:1. World steel billet exports have fallen over previous year.2. Although CIS exports have fallen but still CIS has lived up to the reputation of being

the largest exporter of steel Billets.3. In Asia Japan, China, Taiwan, Malaysia and South Korea have been the largest

exporters.


Analysis:

1. Russia followed by Ukraine has been the world largest Exporters and Turkey is the 5th

largest exporter after Brazil and Japan.2. Exports of all major Exporting nations have fallen in 2010.

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2009-10

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Major Billet Exporting Nations('000 MT)

Turkey

Russia

Ukraine

India


Comparison of Asia and CIS in Steel Billets and Semis Export

Imports of Billets and Semis (000’ MT)

Imports of Billets and Semis(000’ MT)2006-07 2007-08 2008-09 2009-10

EU 19960 21700 20449 10625C.I.S. 405 520 507 299North America 11428 8328 7604 2777South America 1712 862 1111 649Africa 3630 2641 3404 3279Middle East 4394 6518 8370 6641Asia 22768 21162 22664 24838Oceania 53 39 109 5World 68425 66589 68880 53256

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C.I.S.

Asia

World

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EU C.I.S. NorthAmerica

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Asia

Imports of Billets and Semis(000’ MT)

2006-07

2007-08

2008-09

2009-10


Analysis:

1. Billet imports have fallen.2. CIS is the least importer which is quite understood since CIS is the largest exporter.3. The largest importer has been Asia and Europe. Asia has imported 24838 thousand MT of

billets followed by Europe with 10625 thousand MT.4. Middle East and Africa has shown promise of being big importer which is mainly due to

Infrastructural development there.

Major importers of Steel Billets and Semis in Middle East


2006-07 2007-08 2008-09 2009-10

Middle East 4394 6518 8370 6641

Lebanon 61 61 231 1305

UAE 411 411 1610 1215

Syria 477 477 480 743

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Middle East

Lebanon

UAE

Syria


3.7 Black Sea Billet Pricing

Analysis:

4. The prices of Turkey Billet were more volatile in 2nd and 3rd quarter year of2010 and prices ranged from $ 420 to $ 630 per ton.

5. Billet price also depends on demand for final product sine billet is a semifinished product (Bars, rods, Pipe, Tube and wires).

6. The price of Billet moves with the price of Rebar. It can be seen in graph thatbillet price moves with rebar price. If the Rebar prices rises than billet pricesalso rises.


Analysis:

1. There is also a correlation between prices of wire rod and billets.2. Prices of billet is always less than wire rod as billet is a semi product from which wire

rod is made as final product.3. With the increase in price of wire rod demand and price of billet also increases.

3.8 BILLET AND SCRAP COMPARATIVE PARICE STUDY-TURKEY

Turkey Scrap and Billet Price Comparison $/FOB/tQuarter Scrap BilletQ3 08 370 1150Q4 08 208 416 Co-Relation = 0.649346Q1 09 230 405Q2 09 216 393Q3 09 254 451Q4 09 250 438Q1 10 311 496Q2 10 360 549Q3 10 302 480Q4 10 340 525Q1 11 370 580

0

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Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Turkey Scrap and Billet PriceComparision $/FOB/t

Scrap

Billet


3.9 FINAL ANALYSIS OF TURKEY MARKET:

Turkey is the fifth largest producer of steel billets and it is the major exporter of billets to MiddleEast market. Billet demand is influenced by the demand for the final products like wire rod, wire,pipe and tubes. The price of turkey billet fluctuated in first half of 2010 but after that it has beensteadily raising and in July 2011 prices had reached US $650 per ton.

Due to Ramadan Black Sea region billet offer prices will changed but interest from buyers will dropahead of Ramadan which will slow down construction activity in key import areas.With Ramadan inAugust consumption will go down so nobody is willing to buy anything unless it is delivered afterRamadan. Billet is mainly used in construction. During Ramadan, workers is Muslim countries will befastening and this, coupled with hot weather, will slow down construction in Northern Africa andthe Middle East.

Sluggish demand, however, will push Turkish producers to cut their offers for rebar. Offers for rebarfell to $725-735 per tonne fob from $760-780 per tonne fob Turkey earlier in June and are likely tofall to $720 fob soon. The market is going down and the sentiment is more bearish.

The demand for Scrap (HMS 1&2) also determines the price of the Steel Billets. The analysis shows aCo-Relation of 0.65.

Political unrest in Middle East and North Africa has compounded the problem as many of thecaptive export markets for Black Sea based and Turkish mills have suddenly vanished creating avacuum, forcing them to find alternate destinations.


3.10 BILLET MANUFACTURERSCOMPANY NAME COUNTRY BASED Size in mm Export Markets Remark*

Kardemir Turkey 100 by 100 UAE,South East Asia,Europe,China $477-480(ExW)120 by 120130 by 130150 by 150

Evraz Russia 100 by 100 4mt(Capct)120 by 120130 by 130150 by 150

Angang New Steel China 100 by 100 North America,South America,South120 by 120 East Asia ,Africa,Europe,Middle East150 by 150

Kobe Steel Japan 100 by 100 Asia,South East Asia,Europe,Middle East120 by 120130 by 130140 by 140150 by 150155 by 155

Ningbo Shenlong Group China 100 by 100 North America,South America,South120 by 120 East Asia ,Africa,Europe,Middle East140 by 140

Henan China 150 by 150 North America,South America,South East Asia US$700-850(FOB)Africa

Changzhou Ropine Metal China 120 by 120 North America,South America,South East Asia US$400-700(FOB)100 by 100 Africa,Europe,Middle East150 by 150150 by 230165 by 225

Advanced Technology China 100 by 100 North America,South America,South East Asia US$550-560(FOB)Africa,Europe,Middle East


DHT Metal Azerbaizan 130 by 130 India,Russia,Yemen,Turkey,Middle East150 by 150

China Machinery Industry Corporation China

Machine 1 150 by 150 (Capct)900000120 by 120

Machine 2 150 by 150 (Capct)15000000135 by 135120 by 120

JSPL India 130 by 130 Europe,Middle East,SE Asia (Capct)0.75150 by 150200 by 200

Anshan Shegylin China 120 by 120 South Korea,Japan,Thailand150 by 150 Light Billets

Anshan Shenmao China 120 by 120 South Korea,Japan,Thailand150 by 150

Egi Cilik As Turkey 100 by 100 US,Middle Est,Europe,Far East110 by 110115 by 115120 by 120130 by 130140 by 140150 by 150160 by 160170 by 170200 by 200

Qatar Steel Qatar 130 by 130 Mainly Domestic use,Surplous exported to Neig- 3mt(Capct)150 by 150 bouring countries200 by 200

TKC Steel Phillipines 120 by 120 South East asian Countries 400,000(Capct)130 by 130140 by 140150 by 150


3.11 RESULT AND DISCUSSION ON STEEL BILLET

SAIL Annual Billet production capacity is 3.257 lakh tones/annum,the post expansion capacity willraise to 14.305 lakh tones. Billet is packed for shipment on loose basis.Asia is the largest importer ofthe steel billets followed by Europe.CIS being the largest exporter.Billet demand and prices areaffected by the demand and prices of Wire rod and other finished products and by demand forscrap.In recent times the economic depression then the flood of Australia the largest producer andexporter of coking coal and recently the uprising in MENA region has affected the demand and pricefor steel billets.China is levying high tax( called export tax) on export of steel billets , thusdiscouraging expot of steel billet.Qatar company Qasco is one the only major steel producer inMiddle East.

King Abdullah’s support package offers to give 18m lower and middle-income Saudi’s inflation-busting pay rises, unemployment benefits and affordable housing. The cash-rich Saudi governmentpledged to spend a total of $400bn by the end of 2014 to improve education, health care and thekingdom’s infrastructure. The Emir of Kuwait, Sheikh Sabah Al-Ahmed Al-Jaber Al-Saber gave its‘citizens’ free food rations and a grant of $4,000 as part of a $5 billion domestic aid package, in anattempt to ward off demonstrations. Oman government has also announced a cash subsidy forunemployed and subsidy to help people buy home.

IMPLICATION FOR SAIL

The construction industry once again will be booming in MENA region as many nations hasapportioned billions of dollars for building homes and improving infrastructure to curb the uprisingwhich provide an opportunity for SAIL to export more and capture good market share.


4.1 EXPORT POTENTIAL OF REBARS WITH FOCUS ON MENA

A Rebar (short for Reinforcing bar), also known as reinforcing steel, reinforcement steel, ora deformed bar, is a common steel bar, and is commonly used as a tensioning device in reinforcedconcrete and reinforced masonry structures holding the concrete in compression. It is usuallyformed from carbon steel, and is given ridges for better mechanical anchoring into the concrete.In Australia, it is colloquially known as reo.

Grades

Rebar is available in different grades and specifications that vary in yield strength, ultimate tensile

strength, chemical composition, and percentage of elongation. The grade designation is equal to the

minimum yield strength of the bar in ksi (1000 psi) for example grade 60 rebar has minimum yield

strength of 60 ksi Rebar is typically manufactured in grades 40, 60, and 75.

Common ASTM specification is:

ASTM A82: Specification for Plain Steel Wire for Concrete Reinforcement

ASTM A184/A184M: Specification for Fabricated Deformed Steel Bar Mats for Concrete

Reinforcement

ASTM A185: Specification for Welded Plain Steel Wire Fabric for Concrete Reinforcement

ASTM A496: Specification for Deformed Steel Wire for Concrete Reinforcement

ASTM A497: Specification for Welded Deformed Steel Wire Fabric for Concrete Reinforcement

ASTM A615/A615M: Deformed and plain carbon-steel bars for concrete reinforcement

ASTM A616/A616M: Specification for Rail-Steel Deformed and Plain Bars for Concrete

Reinforcement

ASTM A617/A617M: Specification for Axle-Steel Deformed and Plain Bars for Concrete

Reinforcement

ASTM A706/A706M: Low-alloy steel deformed and plain bars for concrete reinforcement

ASTM A767/A767M: Specification for Zinc-Coated(Galvanized) Steel Bars for Concrete

Reinforcement

ASTM A775/A775M: Specification for Epoxy-Coated Reinforcing Steel Bars

ASTM A934/A934M: Specification for Epoxy-Coated Prefabricated Steel Reinforcing Bars

ASTM A955: Deformed and plain stainless-steel bars for concrete reinforcement

ASTM A996: Rail-steel and axle-steel deformed bars for concrete reinforcement

ASTM marking designations are:

'S' billet A615

'I' rail A616


'IR' Rail Meeting Supplementary Requirements S1 A616

'A' Axle A617

'W' Low-alloy — A706

Historically in Europe, rebar is composed of mild steel material with yield strength of approximately

250 N/mm². Modern rebar is composed of high-yield steel, with a yield strength more typically 500

N/mm². Rebar can be supplied with various grades of ductility, with the more ductile steel capable of

absorbing considerably greater energy when deformed - this can be of use in design to resist the

forces from earthquakes for example.

Difference between Bars and Rod:

1. Shape - Bars are in the form of round bars, flat bars, hexa bars, etc Wire rods are alwaysround.

2. Size: Bars are in range of 8 mm to 50 mm (round bars); whereas wire rods come the range of5.5 to 22 (max upto 28.6 mm)


4.2 List of certification Agency for steel Rebar

ACRS-AUSTARLIA

The Australian Certification Authority for Reinforcing Steel (ACRS) administers an industry-based,independent, third-party product certification scheme, certifying reinforcing, pressurising andstructural steels to Australian Standards.

Benefits to the construction industry and specifies from ACRS certification include:

Assured quality and fitness for purpose of steel irrespective of origin of material Overseas experience shows certification neither affects availability nor competitive price

levels Preservation of Australia's world-class construction technologies Prevent reintroduction of site inspection and testing Removes the need for customers to check every supplier test certificate

Benefits to Certificate Holders include:

Process and materials benchmarked to appropriate Standards Reduced compliance costs for projects requiring certified materials Share in the benefits of ACRS promotion of the 'mark'

ACRS MARK

An important point to emphasise is that ACRS is voluntary and inclusive of imported steel. Our goalis simply to ensure that reinforcing and pressurising steels are quality-approved materials, whichcomply with Australian Standards, thereby maintaining confidence in reinforced concrete as the pre-eminent building material in Australia.

OCAB-BELGIUM

The OCAB is also the agency notified by the Belgian State to issue the CE mark of lighting columns(according to 40), structural steel (according to EN 10025), the structural supports (according to EN1337), and fasteners (according to EN 14399). It also certifies kits preload (as ETAG013).The OCAB manages BENOR the mark in the field of steel products for concrete, following themandate received from Mark Committee Benor, in accordance with the requirements of Articles 10-15 of the General Rules for Use and Control Mark Benor to Standards (published in 2000).


AFCAB-FRANCE

AFCAB is an independent body settled in 1990 to deliver certificates of conformity to companies thatmanufacture or fix on site concrete reinforcing steels or their accessories. Choose cut, bent orwelded steels certified by AFCAB, choose a fixing company certified by AFCAB, provides to thecontractor and to the user the guarantee that the reinforcing steel will not break the quality of thebuilding, from the design to the construction. The certification rules were established including allthe relevant parties. They ensure that the level of quality of the certified products meets the needsof all the members involved in the construction.

GLOBE CERT AB

GlobeCert AB is a private company established for the global certification of all reinforcing steel forthe Nordic market. The activities are mainly concrete reinforcing steel, pressurising and steelmesh. GlobeCert AB is since December 28, 2007 an accredited environmental auditor ascertification of products. GlobeCert Ltd is accredited to the international standard / regulation EN45011.Accreditation means that GlobeCert Ltd has been assessed in possession of the required skillsin defined areas and applies a quality management system meets the requirements.

DIBT-GERMANY

Deutsches Institut für Bautechnik (DIBt) is an institute of the Federal and Laender Governments for auniform fulfilment of technical tasks in the field of public law.These tasks include in particular:

Granting of European technical approvals for construction products and systems granting of allgemeine bauaufsichtliche Zulassungen ('national technical approvals') for

construction products and types of construction, recognition of testing laboratories, inspection bodies and certification bodies for tasks within

the framework of the Ü-Zeichen ('Ü mark') and the CE marking of construction products Publication of Bauregellisten ('Construction Products List') A and B as well as List C for

construction products.


UK-CARES

CARES is an independent, not-for-profit certification body, established in 1983 to provide confidenceto the users, purchasers and specifies of constructional steels through a regime of regulation, testingand inspection. It operates for the benefit of the construction industry offering certification schemesfor companies that produce materials, components or offer services, primarily to the reinforcedconcrete industry. Clients can specify CARES approved companies and products with confidence thatthey will comply with the relevant product or system standards and without the need for verificationtesting by the purchaser or contractor.

The Authority is accredited by the United Kingdom Accreditation Service (UKAS) to ISO Guide 65(product certification) and ISO 17021 (management systems certification using ISO 9001 and 14001).UKAS approves and monitors certification bodies on behalf of the UK government. CARES is aNotified Certification Body and a European Technical Approval Body under the ConstructionProducts Directive for the following:

Reinforcing and Prestressing steels Post-tensioning systems Structural Steels Precast concrete products

Certification by CARES can be used by manufacturers in support of CE marking. CARES is aninternational operator, providing certification in over 40 countries worldwide. In order to provideproduct users with the confidence that their products arrive at the construction site as specifiedCARES certificates firms at all levels through the supply chain, from the production of hot metalthrough processing and stocking and distribution. CARES endeavours to ensure that its certificationis required by major companies operating in the construction supply chain in the UK, Europe, MiddleEast and the Far East in particular. In the UK, CARES certification is a requirement in majorconstruction specifications such Specification for Highway Works, County Councils specifications, theNational Building Specification and the National Structural Concrete specification.


4.3 World Production of Concrete Rebars (000' MT)

World Production of Concrete Rebars (000' MT)2006-07 2007-08 2008-09 2009-10

EU 20351 20651 20730 13618North America 10553 11941 11733 8216South America 2982 3642 4333 3337Africa 1554 1612 1522 843Middle East 3547 4213 4414 1468Asia 108034 122490 115628 139038

World Rebar Production

Year 2006-07 2007-08 2008-09 2009-10

World 147082 164884 158675 166761

020000400006000080000

100000120000140000160000

EU NorthAmerica

SouthAmerica

Africa MiddleEast

Asia

Production of Concrete Reinforcing Bars (000' MT)

2006-07

2007-08

2008-09

2009-10

135000

140000

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170000

2006-07 2007-08 2008-09 2009-10

Production of ConcreteReinforcing Bars


Share of Asia in World rebar Production

Production of Concrete Reinforcing Bars (000' MT)2006-07 2007-08 2008-09 2009-10

Asia 108034 122490 115628 139038World 147082 164884 158675 166761Asia share (in %) 73.45154 74.28859 72.87096 83.37561

Co-Relation: 0.86

China's comparison with Asia Rebar Production

Year 2006-07 2007-08 2008-09 2009-10China 86786 101074 95600 121506Asia 108034 122490 115628 139038China Share (in %) 80.33212 82.51612 82.67894 87.3905

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Co-Relation: 0.86



2006-07 2007-08 2008-09 2009-10

2006-07 2007-08 2008-09 2009-10

China's comparision with Asia Rebar Production





Co-Relation: 0.86



Asia

World

China

Asia


Indian Rebars Export to Middle East

Country RankingUAE 1IRAN 2EGYPT 3BAHRAIN 4SAUDI ARABIA 5QATAR 6KUWAIT 7

4.4 GLOBAL LONG (REBAR) PRICE

World Average Rebar PriceMar-10 579Apr-10 675

May-10 681Jun-10 632Jul-10 588

Aug-10 612Sep-10 639Oct-10 649

Nov-10 651Dec-10 653Jan-11 740Feb-11 788

Mar-11 768Apr-11 748

(This is the average of all relevant Regions)

0

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World Average Rebar Price






May-10 681Jun-10 632Jul-10 588

Aug-10 612Sep-10 639Oct-10 649

Nov-10 651Dec-10 653Jan-11 740Feb-11 788

Mar-11 768Apr-11 748


World Average Rebar Price






May-10 681Jun-10 632Jul-10 588

Aug-10 612Sep-10 639Oct-10 649

Nov-10 651Dec-10 653Jan-11 740Feb-11 788

Mar-11 768Apr-11 748



4.5 CHINA REBAR PRODUCTION AND Y-O-Y %CHANGE (SHANGHAI MAREKTEX-17%VAT)-The Competitior

(In US$/tonne)

CHIN A REBA R DO MESTIC Y-O -Y% CHA N GEA pr-10 555 39

May-10 540 23Jun-10 550 16Ju l-10 520 5

A ug-10 500 0Se p-10 440 2O ct-10 420 1

N ov-10 420 5De c-10 400 16Jan-11 400 16

Fe b-11 420 12Mar-11 430 12A pr-11 460 17

5 5 5 5 4 0 5 5 0 5 2 0 5 0 04 4 0 4 2 0 4 2 0 4 0 0 4 0 0 4 2 0 4 3 0 4 6 0

3 9 2 3 1 6 5 0 2 1 5 1 6 1 6 1 2 1 2 1 7

C HIN A D OM E ST IC R E B A R (IN U S $/tonne

CHINA REBA R D O M ESTIC Y-O -Y%CHA NGE


4.6 ASIAN MARKET TREND OF REBAR IMPORT

ASIA REBAR IMPORT PRICE TREND FROM 2003 TO 2010(IN US$/tonne)

4.7 MENA REGION REBAR PRODUCING COMPANIESSaudi iron and steel(Hadeed)

REBAR IMPORT Y-O-Y%CHANGE

2003AVG. 2802004AVG. 451 612005AVG. 416 82006AVG. 446 72007AVG 572 282008AVG. 825 442009AVG 497 302010AVG. 650 31

280 451 416 446 572825

497 650

61 8 7 28 44 30 31

ASIA REBAR IMPORT PRICE TREND

REBAR IMPORT Y-O-Y%CHANGE

S a udi Iron a nd S te e l C om pa ny ( H A D E E D ) .

P R O D U C T G R A D E/A P P LIC A TIO N TY P IC A L Y IELD S TR EN G TH TY P IC A L TEN S ILE S TR EN G THR A N G E

R EB A R B U ILD IN G A N D C O N S TR U C TIO N M IN .420N / m m s q m in .620N / m m s q .

R EB A R IN C O ILS B U ILD IN G A N D C O N S TR U C TIO N M IN .460/ m m s q . m in .3000/ m m s q .IN D U S TR IA L A P P LIC A TIO NS TR A IG H TEN IN G

W IR E R O D IN D U S TR IA L A P P LIC A TIO N , 210- 360N / m m s q .W IR E D R A W IN G 210- 360N / m m s q .M ES H A P P LIC A TIO N 220- 360N / m m s q .& F EN C E

P R O D U C T TES T M ETH O D S TEEL G R A D E

R e in f o rce m e n t b a r A S TM G R A D E60 2100N ,2140,S H 2110A S TM G R A D E40 1300, 1303B S 4449,460 S H 2110,2113,2114,2120

R EB A R IN C O IL A S TM G R A D E60 2100N ,2140,S H 2110A S TM G R A D E40 1300,,1303B S 4449,460 S H 2110,2113,2114,2120B S 4449,260 1303

W IR E R O D A IS I 1006 400A IS I 1008 500A IS I 1012 610A IS I 1015 700A IS I 1018 800A IS I 1021 900A IS I 1025 810A IS I 1010 1100


Qatar steel

TECHNICAL SPECIFICATION

Mechanical Properties of Wire Rods and Rebars

GRADE Ys-N/mm2 Ts-N/mm2 %ElSAE 1008 250-300 350-425 30 minSAE 1018 300-350 450-525 22 min*ASTM GR60 420 min 620 min 9 min*BS4449; 460 min 600 min 14 minGR460

*For Non- Quenched Products using micro alloying

QATAR STEEL :REBAR AND WIRE ROD PROFILEAPRODUCT STANDARD YS(min.) TS(min.)

REBAR EQUIVALENT TOASTM A615,GR 40 280 420ASTM A615,GR 60 420 620SS A 2/1992 460 506BS 4449:1997 460 YS*1.08GRB460BBS 4449:2005 500 YS*1.08GRB500B

BPRODUCT SIZEWIRE ROD 5.5m to 12m STEEL GRADES:SAE/1008/SAE1018/SAE1012

SAE/1042/SAE/1060/SAE1065/SAE1070/ASTM GR60 BS/4449;GR460

REBAR IN COIL 8mm to 12 mm

*OTHER GRADES AS PER CUSTOMER SPECIFICATION**All products are certified by CARES/DCL/ESMA


Libya iron and steel (LISCO)

LISCO : PRODUCT PROFILE(W IRE & ROD)

DIMENSION length

ROD 5.5,6,8,10,12mm 12mREBAR 10,12,14,16,18,20,25,28,30,32,40mm 12m

L I S C O : P R O D U C T P R O F I L E ( W I R E & R O D )

D I M E N S I O N l e n g t h

R O D 5 . 5 , 6 , 8 , 1 0 , 1 2 m m 1 2 mR E B A R 1 0 , 1 2 , 1 4 , 1 6 , 1 8 , 2 0 , 2 5 , 2 8 , 3 0 , 3 2 , 4 0 m m 1 2 m

S T A N D A R D

A I S I 1 0 0 8 - 1 0 7 4D I N 4 4 8 B S t 4 2 0 sD I N 1 7 1 0 0 S t 3 7 - 2

s t 4 4 - 2s t 5 0 - 2s t 6 0 - 2s t 7 0 - 2

A F N O RN F A 3 5 - 0 1 5 : F e E 2 2 , F e E 2 4N F A 3 5 - 0 1 6 : F e E 4 0N F A 3 5 - 5 0 1 : E 2 8 - 2 , E 5 0 - 2 , E 6 0 - 2

A S T MA S T M A 6 1 5 : G R 4 0 , G R 6 0

T O L E R A N C ED I NR O D 4 8 8 5 9 1 1 0B A R 4 8 8 1 0 1 3


Sonasid (Morocco)

EMIRATES STEEL (UNITED ARAB EMIRATES)

FeE400NS FeE4005 FeE500S FeTE500 FeE215STANDARDS

ELASTICITY LIMIT 400 400 500 500 215RESISTANCE 440 440 550 550 330-490ELONGATION AS % 14 2.5 2.5 8 22DIAMETER 6,8,10,12, 6,8,10,12, 6,8,10,12, 4,5,6,7,8,9, 5.5,8,10,12,14,16

14,16 14,16 14,16 1020,25,30,32,

40

STANDARD STEEL REBAR BS 4449 (97) GR 460 B

MECHANICAL PROPERTIESYield Stress (N/mm2) Tensile Strength (N/mm2) Elongation (%)

As Specified Min. 460 Min. 1.08 x Act. Y.S. Min. 14Guarenteed By ESI Min. 500 Min. 590 Min. 16

BAR DIMENSIONSNominal Diameter (mm) Nominal Wieght (Kg/m) No.12m. Long Bars / 2ton Bundle

10 0.616 27012 0.888 18814 1.208 13816 1.579 10618 1.998 8420 2.466 6822 2.984 5625 3.854 4428 4.834 3432 6.313 26

Bundles are secured with 4-6 equidistant straps with 5.5 mm wire

BAR TOLERANCEBar length and with tolerance as per specification






10 0.616 27012 0.888 18814 1.208 13816 1.579 10618 1.998 8420 2.466 6822 2.984 5625 3.854 4428 4.834 3432 6.313 26







10 0.616 27012 0.888 18814 1.208 13816 1.579 10618 1.998 8420 2.466 6822 2.984 5625 3.854 4428 4.834 3432 6.313 26




4.8 APPARENT STEEL CONSUMPTION IN MENA

AFRICAN NATION-APPARENT STEEL CONSUMPTION

MIDDLE EAST-APPARENT STEEL CONSUMPTION

FINDING: From the above figure it can be concluded that Morocco and Egypt in the North

Africa and UAE and Saudi Arabia in the Middle East has promising demand of steel in future.

MENA REGION

ASU* (mmt) Growth rate(as%age)2009 (est.)2010(f)2010(f) 2009 (est.)2010(f) 2010(f)

AFRICA(TOTAL) 26.4 28.7 31.3 9.60% 8.60% 9.30%

Algeria 4.4 4.8 5.3 35.40% 10.10% 9.20%Egypt 9.2 9.5 10.1 40.00% 3.60% 6.20%Morocco 1.9 2.1 2.3 24.30% 8.20% 10.40%

*ASU-APPARENT STEEL CONSUMPTION

*ASU (mmt) Growth rate2009(est.) 2010(f) 2011(f) 2009(est.)2010(f) 2011(f)

Middle East, 40.7 44.7 48.4 -8.00% 10.00% 8.20%IRAN 16.3 16.6 17.5 4.60% 1.80% 5.50%SAUDI ARABIA 7.6 9.3 10 -13.10% 22.20% 7.90%U.A.E 6 6.9 7.4 -38.60% 16.40% 6.50%

*ASU (mmt) Growth rate2009(est.) 2010(f) 2011(f) 2009(est.) 2010(f) 2011(f)

MENA 57.5 62.9 68.2 0.80% 9.50% 8.40%


NET IMPORT OF STEEL PRODUCT IN MENA REGION

Findings:

The Middle East has traditionally had a very small ratio of capacity to demand, relying

heavily on imported steel to meet the demands of the construction and oil and gas sectors.

However due to capacity enhancement in the steel sector (in MENA region), led a

satisfactory level of production for the internal consumption. In near future MENA region

will produce enough to satisfy their internal demand at least. In MIDDLE EAST the

capacity/demand ratio could rise significantly in the future, as many mini-mill projects come

on stream. This would foster a reduction in the region’s wide steel trade deficit

In Africa, capacity has been greater than demand in recent years, but due to difficulties in

bringing production on stream, steel output has remained lower than consumption.

In the future, demand is projected to reach the region’s capacity, but production will

probably continue to lag and the region will remain a large net importer.


Findings:

The Middle East has traditionally had a very small ratio of capacity to demand, relying

heavily on imported steel to meet the demands of the construction and oil and gas sectors.

However due to capacity enhancement in the steel sector (in MENA region), led a

satisfactory level of production for the internal consumption. In near future MENA region

will produce enough to satisfy their internal demand at least. In MIDDLE EAST the

capacity/demand ratio could rise significantly in the future, as many mini-mill projects come

on stream. This would foster a reduction in the region’s wide steel trade deficit


Findings:

In Africa, capacity has been greater than demand in recent years, but due to difficulties in

bringing production on stream, steel output has remained lower than consumption.

In the future, demand is projected to reach the region’s capacity, but production will probably

continue to lag and the region will remain a large net importer.


5.1 INDIA- GCC FTA

India and the Gulf states are moving in the right direction to conclude a free trade agreement(FTA) for boosting comprehensive economic cooperation between the two sides.

“The pact covering goods, services and investment sectors will take economic ties between India andthe GCC (Gulf Cooperation Council) nations to a higher level. Al-Rabeeah said businesses have totake the lead and work with the government. “Investment and business opportunities from India inthe areas of education, IT, tourism, health care, biotechnology, telecommunications andautomobiles and components should be explored,”

While the India-GCC FTA is expected to open a billion-strong consumer market for the Gulfcountries, it will also benefit India substantially as the six-member bloc controls over 45 percent ofthe world's recoverable oil wealth and 20 percent of gas resources. The bloc also accounts for abouta fifth of the global crude output.

The free trade deal, which will remove restrictive duties and push down tariffs on goods trading, isexpected to provide Indian pharmaceutical and chemical industries a boost in their presence in theGulf region. Items having export potential from India to GCC countries include food products,pharmaceuticals, machinery and transport equipment, ceramic products, apparels and clothing,cotton and woven fabrics, plastic and rubber products, essential oils, perfumery and cosmeticsbesides iron and steel articles.

The potential sectors for investments by Indian entrepreneurs include information technology,software development, telecommunications, education, training and health care services, tourismand hotel industry, banking and financial services, oil, gas and petrochemicals, electricity, housing,road and rail network.

Two-way trade between India and the GCC could exceed $130 billion by 2013-14, up from $100billion in 2009-10,. While India-Saudi bilateral trade stood at to $21 billion in 2009-10, India’s exportsto the Gulf nation rose to $3.90 billion in 2009-10.

Saudi Arabia pumped in FDI worth $31.5 million between April 2000 and August 2010 into the Indianeconomy. The main sectors that attracted the investments were electrical equipment, foodprocessing, automobile, computer software and hardware, and telecommunications.


5.2 TURKEY- A KEY COMPETITOR IN MENA REGION

Turkey's steel product exports to the MENA (Middle East and North Africa) region in the first fourmonths of 2010 declined by 29.99 percent year on year to 3.27 million metric tons, according to thedata provided by the Istanbul Mineral and Metals Exporters' Association (IMMIB). Meanwhile, theregion continued to be Turkey's major export market, accounting for 61 percent of its total steelproduct exports. However, in January-April 2009, this figure was recorded at 69.44 percent.In January-April period of this year, the UAE again ranked first among Turkey's steel product exportmarkets with a steel product export volume amounting to 637,693 metric tons, up 14 percent yearon year, followed by Egypt, Turkey's largest steel export market in the first four months of 2009,with 547,689 metric tons, down 68.65 percent.

In the given period, Turkey's steel product exports to Iraq totalled 323,240 metric tons, down 40.43percent, exports to Saudi Arabia amounted to 417,362 metric tons, up 105.15 percent, and exportsto Libya came to 244,660 metric tons, down 20.32 percent, all compared to the correspondingperiod of 2009.

In the January-April period, steel bars, including rebar, was Turkey's most exported product to theregion, accounting for 37.12 percent of the country's total steel product exports to the region. Steelbar exports to the MENA region totalled 1.21 million metric tons in the first four months of 2010,regressing by 62.26 percent year on year. Meanwhile, steel billet exports to the region amounted to767,123 metric tons, climbing by 3.78 times compared to the year-ago period, and accounting for23.45 percent of Turkey's total steel export to the MENA region.

General Secretary of Turkish iron and steel producers’ association Veysel Yayan expects Turkey’sexports of rebar, as well as domestic crude steel production to be stronger in 2011 than they werelast year. Yayan also adds that the growth in Turkish steel consumption levels will continue. As wasdiscussed at the recent OECD steel committee meeting, consumption growth in China is expected toslow and that country will therefore attain a steel production-consumption level balance, whichgives a positive outlook for the global market.

Turkish rebar exports reached 710,000 tonnes in April 2011, increasing 52% year-on-year. In March2011, Turkish rebar exports were 645,000t. Yayan tells SBB that Turkish rebar exports have seen asignificant increase since the beginning of this year, in line with an overall increase in global steelconsumption. Turkey’s crude steel production also increased 31% y-on-y in the first quarter, whichwas the highest quarterly increase in crude steel production in the world. In Q1 2011 Turkish rebarexports totalled 1.8 million tonnes, up from 1.4mt in the same period of 2010.

Turkey's steel exports to the Egyptian market during the first 8 months of the year reached 799,950t,declining by 96.49% over the exports of the same period of 2009, according to the data provided bythe Istanbul Mineral and Metals Exporters' Association (IMMIB) and published by Steel Orbis.Turkish exports to Egypt, constituted mainly of rebar, account for 11.6% of the overall Turkish steelexports to the MENA region which amounted to 6.9 million tons during the first 8 months of thisyear. Egypt is the third largest export market for Turkish steel, while UAE comes first and SaudiArabia second.


Despite the decline of Turkish exports to the Egyptian market during the period in question, Egyptiansteel mills represented by the Chamber of Metal Industries are still demanding from the Ministry ofTrade & Industry in Egypt to take immediate measures in order to limit the rebar imports, either byimposing protective charges or levying customs duties until decisions are reached in the dumpinglawsuits filed by the Chamber.

Sources form the Chamber say that rebar mills in Egypt are facing a real crisis as a result of not beingable to sell their stockpiles that accumulated to huge amounts after large shipments of Turkish rebarentered the market, encouraged by the removal of customs duties between the two countries.Media reports say that the Chamber of Metal Industries has lately filed again a dumping lawsuitagainst imported Turkish rebar, demanding a 10% customs duty to be levied on imported rebar. Thecontinuous influx of steel imports into Egypt have lead to a partial shutdown of some mills andreducing production in others as a result of the inability of local mills to sell out their products.

Turkish rebar exports are reported to have fallen 17% year-on-year in May to 559,320 tonnes. Mayrebar exports were also 21% down from April’s 709,000t. Market sources tell that a strong domesticmarket in the last weeks of May and slow export demand, prior to that, caused producers to focusmainly on the domestic market. The gap between domestic market and export market pricesreached around $80/t in May, while in June this gap seems to have narrowed to $40/t.Producers expect export markets to accept higher rebar offer prices in the coming days, but exportsmay not strengthen significantly, since the domestic market is still found to be more attractive toproducers.

According to data released by General Secretariat of Istanbul Mineral and Metals Exporters’Association, Turkey's steelmakers exported 3.62 million tonnes of rebar in the H1 of 2011 up by16.89% YoY. Moreover, the total figures of the rebar exports amounted USD 2.42 billion jumped by38.70% YoY. However, the country’s rebar exports in this June declined by 17.11% YoY to 487,815tons. Among them, 94,105 tonnes were exported to UAE, 68,856 tonnes were to Egypt and 67,138tonnes were to Iraq.

Turkey's exports increased in April to USD 11.8 billion keeping the rate of increase in exports for thefirst 4 months of 2011 at more than 22% compared to the same period last year.Mr Mehmet Büyükekşi president of TİM said that “Turkey had exported nearly USD 43.3 billionoverseas in the January and April period up 22.2% from a year ago. If this sharp growth trend inexports continues at a similar pace for the rest of the year, Turkey will reach a record-high exportvolume of some USD 135 billion. April's increase in the export sector came despite the fact that theMiddle East and North Africa region has been experiencing havoc, and also while the Turkish lira hasgained notable value against the US dollar because of present uncertainties in the world's largesteconomy.” Mr Büyükekşi stated that “Exports to the MENA region have dramatically declined,nearing almost zero in Libya. However, recent revolts in Syria have not affected exports to thiscountry yet. Despite the ongoing uncertainties in the Middle East and North Africa and the increasedvalue of the Turkish lira against the US dollar, Turkey managed to export nearly USD 43.3 billion ingoods in the January to April period this year, signaling that it may earn an all time high of USD 135billion in export revenue in 2011”


SOME OF THE MAJOR INFRASTRUCTURAL PROJECTS IN THE MENA REGION

$4.3trn to be spent on MENA construction sector to 2020

A total of $4.3 trillion is forecast to be spent on construction in the Middle East and North Africaregion over the next decade, representing growth of 80 percent. The report, sponsored byPricewaterhouseCoopers and carried out by Global Construction Perspectives and Oxford Economics,predicts growth in global construction will outpace world GDP growth over the next decade.

The report, Global Construction 2020, forecasts that global construction will grow by 67 percentfrom $7.2 trillion to $12 trillion annually by 2020.

The MENA region is expected to outpace the global growth rate, driven by population increases,economic growth, the desire for diversification and, in some cases, preparations for global sportingevents, particularly the 2022 World cup in Qatar. Meanwhile, Qatar is looking to spend $70-billion tohost the FIFA World Cup in 2022 as part of its wider investment to achieve its 2030 Vision.

The report highlights Qatar as the fastest growing construction market.

Important facilitators of construction growth in the region are expected to include changes tomortgage laws in Saudi Arabia, driving residential construction, and more private participation ininfrastructure investment across the region. Mohammad Dahmash, PwC's leader of real estate,construction & engineering for the Middle East said: "Particular emphasis will be placed on socialand affordable housing to meet the needs of the growing indigenous populations.”

"The procurement process is also getting sophisticated and many countries within the Middle Easthave started applying 'Build Operate Transfer' and 'Public Private Partnership' schemes which notonly help in financing projects but also ensure the efficient implementation and execution tointernational standards."

Charles Lloyd, PwC's head of capital projects and infrastructure for the Middle East and North Africaadded: "This report shows that the MENA region is likely to continue to be a major source of growthin the global construction market.

"Demographic factors, economic growth and regional Governments' pursuit of more balancedeconomies will all be powerful stimuli of construction demand."

World’s tallest tower to be built for $1.2 bn in Saudi Arabia

Kingdom Holding , owned by Saudi billionaire Prince Alwaleed bin Talal unveiled plans on Tuesday tobuild the world’s tallest tower in the Red Sea port city of Jeddah, signing a 4.6 billion riyal ($1.23billion)

The proposed tower will stretch a kilometre high and include a hotel, serviced apartments, luxurycondominiums and offices, Kingdom said in a statement. The tower is part of the first phase ofKingdom City, which is being built north of the Red Sea port city.


The Kingdom Tower and Kingdom City, estimated to cost 75 billion riyals and to take around 10 yearsto complete, are among other projects to transform Jeddah into a city with high rise buildings torival Dubai. It is said that an elevator ride from the ground to the top takes about 12-minutes, butwe didn’t know that the entire structure would include 59 elevators with five of those being double-deck elevators.

Prince Alwaleed, a nephew of Saudi King Abdullah, said the Jeddah tower would eventually top1,000 metres, but the final height is a closely guarded secret.

Building this tower in Jeddah sends a financial and economic message that should not be ignored,Prince Alwaleed told reporters. “It has a political depth to it to tell the world that we Saudis invest inour country despite what is happening around us from events, turmoil and revolutions even.”

When completed, the tower would replace Dubai’s 828-metre Burj Khalifa as the tallest tower in theworld. The Burj Khalifa was built by Emaar Properties for a total cost of $1.5 billion. The KingdomTower is still an impressive skyscraper to look at, but we’ll reserve judgment for when we actuallysee it break ground and as its floors reach into the sky.

Dubai-Palm like $500m resort planned off Qatar coast

Plans are afoot to build a semi-submerged extravagant resort project on the Qatar coast that willcost a massive $500 million. The Amphibious 1000, which will be built in the middle of a marinereserve, is designed by the Italian firm Giancarlo Zema Design Group. The project will feature bothland and sea developments including four giant hotels with underwater rooms that resemble super-yachts.

There will also be 80 "jellyfish" self-contained floating suites, with each having four floors and anunderwater "aquarium lounge". Hydrogen-powered 20 metre aluminium yachts with underwaterviewing areas will transport guests around the resort. It will extend horizontally for one kilometreand it has a striking similarity to Dubai's Palm Island.

"It is like a big aquatic animal stretching out from the land into the sea and extends horizontally forone kilometre thanks to two long wide arms," Giancarlo Zema said. On land there will be a museum,floating walkways, a restaurant with panoramic views, exhibitions, aquariums and a glass tunnel thatwill lead to the underwater observatory in the centre of the marine park.

Dubai 2024

Dubai's bid to host the Olympics in 2024 is completely in line with the emirate's efforts to raise its

international profile and emerge as a vibrant global city capable of hosting major events. Hosting the

Olympics is seen as the ultimate stamp of approval and shows that a city is capable of hosting a

complex global event, across multi-disciplines that bring together the city's political, economic, social

and leisure capabilities to the fore. For the duration of the event, the host city would have the entire


world as a captive audience and it is a once-in-a-lifetime opportunity for the city to put all its

greatest attractions and capabilities on display. That sounds like something Dubai would thrive in.

But while the event may give the emirate just the fillip it needs, it would also raise interesting

questions on how the emirate will fund its Olympic-related investment needs.

Hosting the Olympics is as much about 'hard' infrastructure and economic acceleration as it is

about 'soft' stuff such as national pride and raising the host city's profile on the global scale.

Dubai's decision to bid for the 2024 Olympics is bold and ambitious - and suggests that after a couple

of years of lack of self-confidence, the city is once again looking to regain its status as the region's

most dynamic city.

Doha's winning bid - though not without its controversy - also shows Dubai that it can be done. No

Middle East country had ever hosted the Football World Cup before - the greatest single-sport event

in the world - and now Dubai's 2024 bid could well make it the first Middle East country to host the

Olympics - the biggest sporting spectacle on earth.

Dubai needed a stimulus and a higher aspiration for the city to revive its glorious years of can-do,

will-do attitude and this bid will be a leaf from the old Dubai book.

Hopefully though, this time it will not be a mad frenzy with poor legal and financial frameworks and

un-coordinated financing that led to the almost-scandalous downfall in real estate and other sectors

in Dubai.

A PriceWaterHouseCoopers study on Dubai's bid concludes that as much of 70% of the 'hard'

infrastructure was already in place or planned, noted a National Olympic Committee of the United

Arab Emirates.

North Africa, a Market worth More than 30 Billion Euros

The development policies adopted by governments in the area envisage massive investments ininfrastructures and tourism. The construction of more than 1 million homes is scheduled.North Africa is a market experiencing net growth and the development policies adopted bygovernments in the area envisage major investments in infrastructures – roads, railways – andtourism, not only with villages and hotels but also new ports and airports. Construction is envisagedof more than 1 million homes, business activities, prisons, schools and much more. All this createsenormous opportunities for Italian construction companies.In 2008 the construction market in Africa as a whole was worth about 167 billion Euros; in thesame year, the Italian market came to around 180. In the area of French-speaking countries –Algeria, Morocco and Tunisia – the 2008 figure was 30.5 billion. The most recent analysis indicatesgrowth of 4.9% in 2009 and 2010: distinctly against the trend world-wide.


Algeria alone has invested 145 billion dollars over the last three years in infrastructures and agrowing number of Italian companies are present on the market. The Government in Algiersrecently approved a plan that will be implemented between 2010 and 2014 for the construction ofpopular homes, schools, hospitals, roads and railways involving an investment of 286 billiondollars. The list of projects indicated by the Government envisages the construction of schools,health facilities, ‘popular’ homes, the extension and modernisation of the road and railway networkin the country, ports and airports and major efforts to upgrade the water distribution andprocurement network.These projects are envisaged: construction or modernisation of 5 thousand schools and 1 millionuniversity rooms, the construction of 1,500 health facilities, 2 million new homes, 80 stadiums and400 swimming pools. 220,000 new connections to the natural gas network, especially in rural areasof the country. 35 new dams, 25 large pipelines, 34 new water depuration stations, 8 newdesalination plant. 2 new urban arteries (Rocades) in Algiers, an interior motorway (Autoroute desHauts Plateaux) parallel to the East-West motorway, of about 1,200 km, a further 830 km ofmotorway connections, as well as 3,000 km of new roads, modernisation and renovation work onanother 8,000 km of roads. Production of 20 new fishing ports, re-qualification of 25 commercialports and container terminals, extension of the country’s 4 main ports. Modernisation andrestructuring of 10 airports.

In Morocco, the development of several important infrastructural projects is well underway:construction of ports and airports, railways, roads and motorways for a state investment estimatedat €10 billion. The construction of roads and motorways will see ADM (Autoroutes du Maroc) setaside €3 billion by 2015 to ensure by that date the construction of 1,500 Km of new sections of road.The railway sector, managed by ONCF (Office National des Chemins de Fer), has envisaged for itscoming business plan (2009-2013) about €3 billion, a large portion of which will go to theconstruction of the Kénitra-Tangiers high-speed section. Moreover, an investment of €1.8 million isenvisaged for the development the tram system in Casablanca, Rabat-Salè and the RER line betweenMohammedia and Nouacer. A further sum of €320 million is envisaged for the airports serving Fés,Rabat and Oujda (ONDA, Office National des Aéroports).

This rapid development in the construction of homes and urban re-qualification creates enormouspotential in the sector, where Italy can play a major role. Italian technology is held in very highregard and products have a good quality/price ratio. Bearing in mind the numerous projects to becompleted 2010-2012, the sectors where Italy could well improve its penetration are property withnew materials and the hotel field. The latter segment enjoys a cardinal role in the economicdevelopment of Morocco, given the need to meet growing demand for homes, offices and tourismfacilities, as well as to develop and enhance infrastructures. The constant development of thebuilding sector in recent years should inasmuch maintain the same rhythm for the next decade.

Libya has also seen authorities in Tripoli launch a huge infrastructural developmentprogramme (funded to a great extent by petroleum income accumulated in recent years) that is bynow vital for a country recently re-opening its doors to international markets and called upon totackle the challenges of a globalised and extremely dynamic economy. On the other hand, the recentnormalisation of diplomatic relationships between Libya and the European Union continues to


arouse growing interest among international investors, which is further stimulated by theencouraging economic performance.

North Africa is a promising market, yet much is still to be done for alignment with Europeanstandards. Labour is one of the discussion themes and training programs have also already beenlaunched in these countries for the construction sector. The way ahead is long since trainersthemselves have to be trained. Yet in the future it may be possible for Italian companies to operatein Morocco or Tunisia, for example, and rely on already qualified local labour aware of the safety andquality standards of Italian companies.

Mena Holding Group plans bond sales to fund $24bn project

Mena Holding Group, a Kuwait-based construction company, plans to take loans and sell bonds tohelp finance a $24.2 billion satellite city it aims to build in Egypt.

“The Ayaat City will be built on an area of 1.9 million sq m in October City, about 38km southwest ofCairo, and will cost us about 140 billion Egyptian pounds ($24.2 billion) over 20 years,” chiefexecutive officer Nasser Mogawer said. The city will include universities, an airport, malls, hospitalsand light industries amongst many other utilities. “Since this is a huge project, we cannot and willnot rely solely on bank loans for financing. A number of alternatives will be used to finance includingissuing bonds, selling sukuks, offering shares to the public of newly formed companies as well asforming partnerships. Some facilities, such as the airport, will be constructed in the form of a build-operate-and-transfer agreement,” Mogawer said. Mena Holding, a unit of International HoldingProjects Group, directly and indirectly holds about 33 percent of Egyptian Kuwaiti Holding Co., whichowns the Ayaat City project.

Qatar leads GCC infrastructure projects

Qatar is on course to lead the Middle East Gulf region in terms of infrastructure projects forthe next four years, despite a massive 22 percent drop in construction jobs last year.

By 2014, Qatar would have outperformed all other GCC countries. Over the past three years, Qatarhas seen massive growth that was hampered by a drop in construction last year with the sector'svalue falling to $7 billion. However, despite that, it is still one of the most prosperous markets in theMiddle East.

The Q3 Infrastructure Report stated that "despite these figures, BMI is still optimistic that Qatar willoutperform other countries in the region - in the short term, the low base effects from 2009 willdrive high growth in 2010 (forecast at 17 percent year-on-year).

"Over the next five years, growth is expected to average 9.9 percent between 2010 and 2014."Business Monitor International also added that its belief in Qatar stemmed from government


investment plans that would see 36.9 percent of the 2010/2011 fiscal budget ($11.9 billion)allocated to major capital projects.

Major infrastructure projects would include the $9 billion New Doha International Airport, the $7billion New Doha Port project, the $13 billion Qatar-Bahrain Causeway, the $17 billion developmentof a national rail network, as well as a handful of power and water plants.

"The country's comfortable fiscal position will enable it to continue to allocate large sums to theinfrastructure sector," the report said. "Strong project finance and infrastructure businessenvironment ratings means the country will continue to attract private investors to its infrastructuresector." The BMI noted that it was the government's support for infrastructure projects that wasalmost solely responsible for Qatar's growth in the sector.


5.4 WORLD STEEL FORECAST 2011 & 2012

worldsteel forecasts that apparent steel use will increase by 5.9% to 1,359 mmt in 2011, following13.2% growth in 2010. In 2012, it is forecast that world steel demand will grow further by 6.0% toreach a new record of 1,441 mmt.

This forecast suggests that by 2012, steel use in the developed world will still be at 14% below the2007 level whereas in the emerging and developing economies, it will be 38% above. In 2012, theemerging and developing economies will account for 72% of world steel demand in contrast to 61%in 2007.

The worldsteel Economics Committee met in Beijing in March 2011 to discuss the SRO, just beforethe natural disaster in Japan. The forecast has not been revised yet due to the difficulty of assessingthe impact of the earthquake and tsunami.

Commenting, Daniel Novegil, Chairman of the worldsteel Economics Committee said, “2010 saw asteady recovery of steel demand which began in the second half of 2009 driven by stimulus packagesglobally, the resilience of emerging economies and an overall market recovery. In 2011, we expect tosee a further 5.9% growth in world steel demand.

Our forecast is based on a stable and steady recovery of the world economy. There are howeveruncertainties deriving from financial fragilities in Europe, unrest in some oil producing countries inthe Middle East and the earthquake in Japan, which could have a negative impact on the recoveryand thereby affect steel demand. At our worldsteel board meeting last week the industry againexpressed its condolences and support to its Japanese members.”

China’s apparent steel use in 2011 is expected to increase by 5.0% to 605 mmt following 5.1%growth in 2010. Given the pace of steel production in the first quarter of 2011, Chinese apparentsteel use could be even higher. However, it is expected that the Chinese government’s efforts to cooldown the overheating economy, particularly the real estate sector, will impact Chinese steel demandsomewhat later this year. In 2012, Chinese steel demand is expected to maintain 5.0% growth, whichwill bring China’s apparent steel use to 635 mmt.

India is expected to show strong growth in steel use in the coming years due to its strong domesticeconomy, massive infrastructure needs and expansion of industrial production. In 2011, India’s steeluse is forecast to grow by 13.3% to reach 68.7 mmt. In 2012, the growth rate is forecast toaccelerate further to 14.3%.

The rebound in apparent steel use in the US is forecast to continue with growth of 13.0% to 90.5mmt in 2011, reflecting the second round of quantitative easing and new fiscal policy initiatives thatgave a boost to economic activities and sentiments in industrial and energy markets. Constructionmarkets remain at depressed levels. US is expected to grow by 6.9% to 96.7 mmt, bringing it back to90% of the 2007 level. For NAFTA as a whole, apparent steel use will grow by 10.9% and 6.3% in2011 and 2012 respectively.


In Central and South America, apparent steel use is forecast to grow by 6.6% in 2011 to 48.8 mmt. In2012, the region’s apparent steel use is forecast to grow by 8.3% to 52.8 mmt, almost 30% higherthan the 2007 level.

Apparent steel use in the EU is forecast to grow by 4.9% to 151.8 mmt in 2011 on the back of anexport-driven industrial rebound. The largest economy euro zone countries like Germany and Franceare forecast to enjoy solid recovery in steel use mainly in the automotive and machine buildingsectors. Other economies (i.e., Greece, Ireland, Portugal and Spain) are projected to show slowgrowth in steel use particularly as a result of weak construction activity. In 2012, the region will seean increase of 3.7% to 157.5 mmt in its apparent steel use, bringing it back to 80% of the 2007 peak.

Japan’s steel use was expected to decline by -1.2% to 63 mmt in 2011 as stimulus measures expire.However, the forecast was prepared before the natural disaster and it is too early to fully grasp theimplications of these recent tragic events. In 2012, apparent steel use in Japan was forecast toremain around 63 mmt, 78% of the 2007 level. The impact of the earthquake and tsunami points toa significant downward adjustment in steel use for 2011 and upward adjustment for 2012.

The recovery of steel use in the CIS has been surprisingly healthy due mainly to an unexpectedlystrong rebound from steel-using sectors in Russia. As domestic demand and business investmentcontinue to grow healthily in the region, apparent steel use is expected to grow by 7.5% to 52.1 mmtin 2011 and then by 8.9% to 56.7 mmt in 2012.

Steel demand in the MENA region is expected to remain stagnant in 2011, mainly due to downwardrevisions from North African countries. However, boosted by high oil prices, steel use in MENA isforecast to resume growth in 2012 at a rate of 7.9%. Given the political situation in the region, thereare considerable uncertainties to the current forecasts.


SUGGESSTIONFollowing are some of the suggestions which I arrived during my 6 weeks

training in SAIL-ITD The company should continuously monitor the potential market for their product.

There should be a complete idea about the competitor’s presence and their product mix in a

potential market.

Company should work for BRANDING of their product like Rebars and Billets in the

overseas market.

Company should open a marketing office in MENA region to push the demand of the

product.


Bibliography

Websites

www.sail.org

www.livemint.com

www.alibaba.com

www.metalbulletin.com

www.worldsteel.org

www.misif.org

www.arabsteel.org

www.jpc.org

Newspaper/ Magazines

Economic Times

Mint

4Ps Business & Marketing

Business World

Business Outlook

Metal Bulletin

Date post:	13-Sep-2014
Category:	Business
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