India’s Steel Vision in Light of Current

Iron Ore Mining Mess

International Metal Summit

29-30 November 2012

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Gouranga Sen Salva Report

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1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011

Crude Steel Production in India

Indian Steel: A Recent Growth Story

1948: New Industrial Policy

1952-70: Govt. built large ISPs Licensing of capacity

Dual Pricing System

Quantitative restrictions High tariff barriers

1976-1990: Slow economic

growth

1991: Economic Liberalization starts

Abolition of licensing for steel capacity expansion

1992: Deregulation of pricing & distribution of steel

Automatic approval of FDI up to 51%

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Policy reforms were instrumental for the growth of Indian steel industry

Source: WSA, Salva Report

India: Riding on the Steel Ladder

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USA

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Ind

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Ital

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Top 10 Steel Producers in World - 2004 (Mt)

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Top 10 Steel Producers in World - 2011 (Mt)

9th 4th

CAN WE ACHIEVE THESE? Source: WSA, Salva Report

India to become 2nd largest steel

producer

India to produce 180 Mt steel by

2020

India to require

~500 Mt iron ore by

2020

Karnataka – Symptomatic of the Malaise

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Karnataka was formerly the second-largest iron ore producing state in India, producing 47Mt in 2008-09;

It previously accounted for 22% of India’s iron ore production;

In FY11-12, it’s production had fallen to 13Mt, and it now accounted for only 8% of India’s production;

It has dropped from the 2nd largest producing state to the 5th in 3 years;

Smaller steel mills in Karnataka running at 50-60% utilisation;

Results – 18% drop in production & 37% slump in exports of i/o in FY11-12

Other States Now Involved

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Oct-11 Banned export of iron ore from dumps

Apr-12 Cancelled 460 iron ore traders’ licenses

Sep-12 Suspended all the 90 mining licenses in the state

Apr-12 Large number of mines suspended operations on mining irregularities

Sep-12 Sale and export of iron ore from captive mines banned

Jan-12 Directed NMDC to first meet state’s requirement before exporting

Mining of iron ore becoming more difficult in India daily

Goa

Orissa

Jharkhand

India

Nov-12 Imposed penalty of INR70,000 cr to 104 i/o mining lease holders

Iron Ore Mining in India: A Gloomy Situation

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Ages of excess iron ore production is almost over Production halted/stopped in 3 of India’s 5 largest iron ore producing states Steel majors like JSW & Essar are resorting for iron ore imports All of this despite India having abundant iron ore resources!

Source: IBM, Salva Report

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FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13*

Iron Ore Production & Consuption in India (Mt)

Iron Ore Mining Issues & Its Impacts

10 Source: CMIE

Company Location State Capacity (Mtpa)

Beekay Infraprojects Sagar Madhya Pradesh 0.7

Bramhani Industries Cuddapah Andhra Pradesh 2.0

Hospet Steels Ginigera Karnataka 1.0

Ind Synergy Gadchiroli Maharashtra 0.6

KIOCL Karnataka 1.5

Mineral Enterprises Hassan Karnataka 0.6

Narbheram Power & Steel Dhenkanal Orissa 0.6

Parwaz Sponge Iron Bellary Karnataka 0.1

Surya Vijaynagar Steel & Power Bagalkot Karnataka 5.0

Vir Sponge & Power Hassan Karnataka 0.1

Steel projects stalled/abandoned due to iron ore issues

Iron Ore Mining Issues & Its Impacts

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Even after being the fourth largest producer, India is importing iron ore

Some of the recently concluded deals

Company Imported Material Import Source

Essar Steel Lumps South Africa

JSW Steel Lumps South Africa

Bhushan Steel Ltd Pellets Brazil

JSPL Pellets Brazil

Welspun Maxsteel Pellets Brazil

SAIL Pellets Bahrain

Source: Industry, Salva Report

Indian Iron Ore – Reserves & Resources

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Source: IBM, Salva Report

Iron Ore Resources in India (Mt)

Haematite Magnetite

India has 28.5 Bt of i/o resources; out of which only 6 Bt is proved is reserves

Reserves mostly consist of high grade Haematite ore, mainly found in Orissa, Jharkhand & Chhattisgarh

Magnetite ore is found mainly in Karnataka, Andhra Pradesh and Goa

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1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Haematite Magnetite

Iron Ore Proved Reserves in India (Mt)

Proved Probable

How Long will Indian Iron Ore Last?

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5,000

10,000

15,000

20,000

25,000

30,000

0

400

800

1,200

1,600

2,000

20

10

20

13

20

16

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20

22

20

25

20

28

20

31

20

34

20

37

20

40

20

43

20

46

20

49

Iron Ore Resources to Meet Production (Mt)

Iron Ore Production (LHS) Remaining Resources (RHS)

Current iron ore production - 150 Mt & consumption - 130 Mt

Present proved reserve will suffice only for 20 years for steel making!

Assuming production will be allowed to the extent of consumption, iron ore resources will last only for 40 years!

Source: Salva Report

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1,000

2,000

3,000

4,000

5,000

6,000

7,000

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500

600

20

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22

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24

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28

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Iron Ore Reserves to Meet Production (Mt)

Iron Ore Production (LHS) Remaining Proved Reserves (RHS)

The Way Forward

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Utilize iron ore fines plied up as stock

Use more sinters & pellets instead of

lumps

Invest more on exploration

Clean up iron ore mining mess

Proper framework needs to

formulated for iron ore mining

business

Curb exports of iron ore

Source: Salva Report

A comprehensive approach needed to retain India’s competitive edge

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Major Pellet Producers in India (Mt)

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Iron ore availability as such should not derail India’s Steel

Vision. However, if the situation is not managed prudently

and quickly, accident is bound to occur

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