Sushim Banerjee, Director General
Institute for Steel Development & Growth, Kolkata
GROWTH PERSPECTIVES OF INDIAN STEEL INDUSTRY
PRESENTATION ON
BY
Indian Steel Conference
23-24 March 2012, New Delhi
World Growth pattern in 2005-2010Real GDP growth (%)
Country/
Region
2005
2006
2007
2008 2009 2010
2011 (P)
2012 (P)
2013
World 4.5 5.2 5.6 2.8 - 0.6 5.2 3.8 3.3 3.9
USA 3.1 2.7 1.9 0.0 (-) 2.6 3.0 1.8 1.8 2.2
Germany
0.8 3.4 2.7 1.0 (-) 4.7 3.6 3.0 0.3 1.5
Japan 1.9 2.0 2.3 (-) 1.2
(-) 5.2 4.4 (-) 0.9 1.7 1.6
Russia 6.4 8.2 8.5 5.2 (-) 7.9 4.0 4.1 3.3 3.5
Brazil 3.2 4.0 6.1 5.1 (-) 0.2 7.5 2.9 3.0 4.0
China 11.3
12.7
14.2 9.6 9.1 10.4 9.2 8.2 8.8
India 9.2 9.7 9.9 6.4 5.7 9.9 7.4 7.0 7.3
World Trade
Volume (Goods & Services)
7.8 8.9 7.4 2.9 (-) 11.0
12.7 6.9 3.8 5.4
Source : IMF, World Economic Outlook Jan ‘12
3
- Steel : green and recyclable - Steel : fast-track construction with
least Public inconvenience and nuisance during construction and thus more Environment friendly- Steel Structures : neighbourhood friendly creating dust - free environment- Wood largely replaced by steel preventing large scale deforestation
WHY STEEL ?
Steel : more freedom of expression
Steel : more creativity and viability in design and opportunity to express functional requirements in structured way
4
WHY STEEL ?FLEXIBILITY
- Steel : large column free clear spans, ideal for long spans upto 40 metre long
- Steel structures : provide larger usable space (more carpet area) for multi-storeyed building and large spans for bridges and flyovers with uninterrupted traffic movement
- Latest developments in Steel making meet up the challenges of corrosion with application of latest developed paints over bare structural steel
- Latest development in painting technology like application of intumescent paints or vermiculite protect bare Steel structures directly from fire
- Steel : sustain reversible loads due to inherent properties like ductility
- Steel more cost effective than concrete as a framing solution
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 110
500
1000
1500
2000
2500
95 101 109 115 124 127 151 182 220 281 349 428 490 500 568 639 695
752750 799 777 788
848 850904
970
1072
1144
1247
1346 13411236
1430
1527
WORLD CRUDE STEEL PRODUCTION 1995 - 2011
China Rest of the World
Japan, 7.0India, 4.7
South Korea, 4.5
China, 45.5
ROW, 11.8
Russia, 4.5
Ukrane, 2.3
EU-27, 11.0
Brazil, 2.3
USA, 5.6
Japan, 12.5
India, 3.2
South Korea, 5.1
China, 15.0
ROW, 14.0Russia,
7.0
Ukrane, 3.8
EU-27, 24.1
Brazil, 3.3
USA, 12.0
Shift in Production Base : 2000 - 2011
2000 2011
Global Steel Capacity Utilization
YEAR EXPORTS PRODUCTION EXPORTS %
1980 140.6 578.7 24.3
1990 171.0 654.0 26.2
2000 307.1 782.5 39.2
2002 313.1 836.2 37.4
2004 366.2 992.5 36.9
2005 371.3 1062.2 35.0
2006 418.3 1158.6 36.1
2007 443.8 1251.4 35.5
2008 436.2 1234.6 35.3
2009 326.3 1147.0 28.4
2010 386.4 1316.4 29.4
WORLD TRADE IN STEEL PRODUCTS (Million Tons finished Steel)
Source: World Steel In Figures,2011
Apparent Consumption:2008-2011 (MT)Country 2008 2009 Y-O-Y% 2010 (P) Y-O-Y% 2011 (P) Y-O-Y% 2012 (P) Y-O-Y%
China 447 551.4 23.4 587.6 6.7 623.3 6.1 649.4 4.2
USA 98.4 59.2 (-) 39.8 79.9 35.0 89.2 11.6 93.8 5.2
India 51.4 57.9 12.5 64.9 12.2 68.0 13.6 73.1 7.9
Japan 78.0 52.8 (-) 32.3 63.5 20.2 64.0 0.8 63.4 (-) 0.9
S. Korea 58.6 45.4 (-) 22.5 52.4 15.4 56.1 7.2 56.7 1.0
Russia 35.4 24.8 (-) 30.1 35.9 43.8 40.9 14.0 42.6 4.1
Germany 42.4 28.0 (-) 34.0 35.9 27.3 39.1 8.8 38.9 (-) 0.5
Italy 33.3 20.1 (-) 39.7 25.7 27.2 26.8 4.5 25.1 (-) 6.3
Brazil 24.0 18.6 (-)22.8 26.1 40.5 25.0 (-) 4.2 26.7 6.9
Turkey 21.5 18.0 (-) 16.0 23.6 30.7 26.9 14.1 29.0 6.9
Spain 18.0 11.9 (-) 34.0 13.1 13.0 13.2 (-) 1.0 12.8 7.8
World 1218 1140 (-) 6.4 1302 14.2 1378 5.8 1431 3.9
Source: WSA February 2012
GLOBAL PRICE MOVEMENT- FINISHED STEEL
502
570 580 575635
785
1230
925
425365
420
555525
598
697675
550584
610
776
630
470
625580
552
668
863
1530
910
435463 446
493 491
603
681
592 590545
610 623665675
710
0
200
400
600
800
1000
1200
1400
1600
1800
Dec'06 Mar'07 J une'07 Sept'07 Dec'07 Mar'08 J uly'08 Sept'08 Dec'08 Apr'09 J une'09 Sept'09 Dec'09 Mar'10 Apr'10 May'10 J une'10 J uly'10 Nov'10 Dec'10 Feb'11 March'12
Sept 07-July 08 July 08-Apr'09 Apr'09-Feb'11 Feb'11 - March'12HRC 114% -70% 113% (-) 5.3%Rebars 177% -70% 42% (-) 13%
Source: HRC: Russia Black Sea Export FOB($/T) Source: Rebars: Turkey Export FOB($/T)
GLOBAL PRICE MOVEMENT- RAW MATERIALS
76 91 103158 189 203 185
77 63 91 91 132 176 182 152.5 125.5 165 172 193148172 187245 275
385
525585
340425 390 395
473 455 465 470
317435 445 493480
285358 358 367 395
560
743
266 257323 315
376464 437 405
312418 433 440 465
0100200
300400500600
700800
Dec'06 Mar '07 J une'07 Sept'07 Dec'07 Mar '08 J uly'08 Dec'08 Apr '09 J uly'09 Oct'09 J an'10 Apr '10 May'10 J une'10 J uly'10 Nov'10 Dec'10 Feb'11 Mar ch'12
Series1 Series2 Series3
Sept 07-July 08 July 08-Apr'09 Apr'09-Feb'11 Feb'11 - March'1211% -66% 206% (-) 23.3%
102% -65% 16% (-) 5.7%148% -27% 71% 7.90%
Source : SBB - India Iron Ore: China CFR; Coke: China; Export (FOB) Melting Scrap: East Asia Import HMS(80:20)
CURRENT FEATURES IN GLOBAL STEEL MARKET
Global Economy projected to grow by 3.3 percent in 2012 after clocking 3.8 percent in 2011.
Subdued steel demand in EU, Japan and USA.
Restriction on real estate and restructuring of small scale polluting steel units and recent strategy of moderating GDP growth rate by China leads to a suppressed growth in steel demand. Would Surplus steel in China cause concern to India?
Marginal hike in Finished Long Steel prices following rise in scrap prices with less volatility in coal & iron ore prices – may dampen move for immediate price increase.
(% SHARE IN GDP)Category 1980-
812000-
012006-
072007-08 2008-09 2009-10 2010-11
(QE)2011-12
(AE)
Primary 38.1 23.9 18.1 18.0 17.2 14.6 14.5 13.9
Secondary 25.9 25.8 28.9 29.1 28.5 28.1 27.8 27.0
(Manufacturing) 13.8 15.3 16.1 16.1 15.6 15.9 15.8 15.4
(Construction) 6.6 5.8 8.2 8.4 8.6 7.9 7.9 7.7
Tertiary 36.0 50.3 53.0 52.9 54.3 57.3 57.7 59.1
Total 100 100 100 100 100 100 100 100
GDP Growth (%) 7.6 4.4 9.6 9.3 6.8 8.0 8.4 6.9
Gross Fixed Capital Formation (% of GDP at Market Prices)
22.7 31.3 32.9 32.3 31.6 30.4 29.2
Domestic Saving (% of GDP at Market Prices)
23.7 34.6 36.8 32.0 33.8 32.3 31.6 (e)
1. Data for 2006-07 onwards based on 2004-05 prices as per revised estimates.2. Stagnant share of Manufacturing and Secondary Sector in GDP3. Share of Industry in GDP: China (59), S. Korea( 44), Kazakhsthan (37)
(Source : CSO, Economic Outlook : 2011-12)
STRUCTURE OF INDIAN ECONOMY
PERCENTAGE GROWTH IN MAJOR INDL. SEGMENTS
Segments Weight ---------------PERCENTAGE GROWTH DURING----------------
1994-95
1995-96
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
April-Jan’12 (Apr – Jan’11)
ELECTRI-CITY
103.16 8.5 8.1 5.2 7.3 6.3 2.7 6.1 5.5 8.8(5.3)
MANUFACTURING
755.27 9.8 13.6 10.3 15.0 18.4 2.5 4.8 9.0 4.4(8.9)
MINING 141.57 9.8 9.7 2.3 5.2 4.6 2.6 7.9 5.2 (-) 2.6(6.3)
CAPITAL GOODS
88.25 24.8 17.9 18.1 23.3 48.5 11.3 1.0 14.8 (-) 2.8(17.0)
CONSUMER DURABLES
84.60 10.2 36.1 16.2 25.3 33.1 11.1 17.0 14.2 3.9(13.7)
TOTAL INDUSTRY
1000.00 8.4 12.7 8.6 12.9 15.5 2.5 5.3 8.2 4.0(8.3)
Source: CSO, Series for 1994-95 & 1995-96 on 1993-94 = 100 base and all others on 2004-05 = 100 base
17
4th largest producer of crude steel in the world
Current capacity of crude steel : 78 mt slated
to go upto 140 mt by 2016-17 and around 200
mt by 2020
Largest producer of sponge iron in the world
(27.6 mt comprising of 43.5% share in world
production)
3rd largest consumer of finished steel in the
world
Crude Steel Capacity estimated to rise by 11%
by 2012
Weight of 6.68 in Infrastructure Index
A Net Importer of Steel
Indian Steel Industry
18
Trend of Steel Consumption in India
Source: JPC
CAGR
8
.9
(200
0-01
to
2010
-11)
Steel Consumption in India grew @ 8.9 percent annually in last decade against 4% annual growth in Global
Steel Consumption
0.0001.227
5.361 6.2808.848
18.66121.29422.12822.63423.546
25.10026.500
28.52330.677
33.119
36.377
41.433
46.783
52.12552.351
59.340
65.610
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
YEAR '51-52'64-65'74-75'84-85'94-95'95-96'96-97'97-98'98-99'99-00'00-01'01-02'02-03 *03-04
*04-05
*05-06
'06-07'07-08'08-09'09-1010-11
CO
NSU
MPTI
ON
IN
MIL
LIO
N T
ON
NES
Indian Steel:Demand Drivers
Construction (Infrastructure)
Projects Transport of Petroleum/
Water TLT Rail tracks
ManufacturingTube MakingWire drawingFabricationFastnersPower plant
equipmentAgricultural
implementsHousehold
appliancesAuto Commercial Vehicle Passenger cars Two wheelers Auto Components
Each of these segments has good potential to grow
Infrastructure Building and Construction
Construction Sector composed of : - Infrastructure : 54 percent - Industrial Expansion : 36 percent - Residential and Commercial : 10 percent
Sectoral Break-up of Construction Sector :
Building 76% Mineral Plant 18%
Roads 63% Medium Industry 20%
Bridges 65% Transmission 22%
Domestic 75% Urban Infrastructure 66%
Power 38% Maintenance 81%
Railways 78%
Assuming 80% fulfillment, the projected investment in infrastructure (at current prices) to generate on an av. steel demand for around 214 mt for next 5 years i.e. 43 mt per annum for infrastructure sector
The tentative master list of infrastructure subsectors as on 01.03.2012 which may be reviewed subsequently are :
Category Infrastructure Sub-sectorsTransport Roads & Bridges, Ports, Inland
Waterways, Airports, Railway Trucks & Bridges, Urban Public Transport
Energy Power Generation & Distribution, Oil & Gas Pipeline & LNG Storage Facility
Water Sanitation
Solid Waste Management, Water Treatment & Pipelines
Communication
Tele-communication
Social & Commercial Infrastructure
Educational Institutions, Hospitals, 3-star or more Hotel, Industrial Park, SEZ Fertilizers, Cold Storage, etc.
INFRASTRUCTURE DEFINED
ENABLING INFRASTRUCTURE FOR MANUFACTURING GROWTH
India ranks 54th among 57th countries in Infrastructure facilities against China (37), Brazil(32), Thailand(20).
Energy (27% T&D losses, 14% peaking deficit) and Logistics costs impacted by quality of Infrastructure
Cost of Power comparable, but erratic and unreliable power supply leading to frequent use of Generators and enhancing cost.
Poor Roads increase Freight (only 20% of NHs are 4 lanes, 50% 2 lanes & 30% single lane)
Average Port turnaround time is 84 hrs against Thailand (10 hrs), Sri Lanka(17 hrs) and poor port connectivity – inadequate berths and draft.
Average Truck speed in India at 40 kmph against China(60) and USA(100) leading to higher logistic costs.
Average time taken for Environment and Forest clearance is 1 to 3 years resulting in delay in 60% of power projects and 40% of Road projects.
Projected Investment in Infrastructure (Revised)
XI Plan
Sectors Rs. Crore Share (%)
Electricity (incl. NCE) 6,66,525 32.42Roads and Bridges 3,14,152 15.28Telecommunication 2,58,439 12.57Railways (incl. MRTS) 2,61,808 12.73Irrigation (incl. Watershed) 2,53,301 12.32Water Supply & Sanitation 1,43,730 6.99Ports 87,995 4.28Airports 30,968 1.51Storage 22,378 1.09Oil & Gas Pipelines 16,855 0.82Total 2056151* 100
(at 2006-07 prices)
Infrastructure Investment to reach 7.1% of GDP in 11th Plan from 5.15% of GDP in 10th Plan* Anticipated Investment in infrastructure in 11th Plan : Rs.1948069 Cr
Investment in Infrastructure : Volume and Pattern
* Projected investment in infrastructure in XII Plan :$ 1 trillion (Rs. 49,50,000 cr reaching around 9.7% of GDP) against China’s current infrastructure investment of 11%
* Public investment predominantly in non-commercial sector like rural roads and Private investment in commercial sectors e.g. roads, ports, airports. Viability Gap Funding, setting up of IIFCL.
* Private Investment to reach 50% of total investment in infrastructure in 12th Plan up from 37% in 11th Plan. 100% FDI for Ports, Roads and Aviation Infrastructure.
* Private Capital in public projects via PPP route – Maximum in NHDP and also in State Roads, Airports and Ports
* Transparent, investor – friendly standardized documents with specific guidelines / safeguards on user charges / interest (RFP for selection of Consultants & Financial Bids ,RFQ for pre-qualification of bidders).
Electricity Telecom Roads Railway Ports Airports0
102030405060708090
45
82
42
4
83
61
Share of Private Investment in 11th Plan
Source : Planning Commission
26
Steel demand projected to reach 113 mt by 2016-17, the
terminal year of 12th Plan.
Demand realization contingent on Gross Fixed Capital
Formation to reach 35-36 percent of GDP and investment in
infrastructure to at least 9% of GDP.
Manufacturing sector comprising of steel-intensive capital
goods, consumer durables and construction sectors slated to
enhance its share in GDP from current level of 16% to 25% by
2020 as per New Manufacturing Policy.
Creation of industrial clusters for growth of manufacturing
requires development of infrastructure.
Steel and Infrastructure
Growth of Manufacturing and Processing Industries
Source : MOC
Category Steel Items used
<-----------------------------------% Growth in Production --------------------------------->
2006-07 2007-08 2008-09 2009-10 2010-11 April ’11 – Jan‘12
Machinery & Equipments
Strls/Plates 14.2 9.3 8.8 21.0 29.4 (-) 3.0
Transport Equipment Strls/Plates 15.0 2.8 2.5 24.4 23.2 14.3
Power & Dist. Transformer
CRGO 4.6 2.7 (-) 1.9 16.5 13.4 21.4
Complete Tractors HRS/Strls 22.4 (-) 2.2 (-) 0.4 26.3 23.9 22.7
Refrigerators (domestic)
CRC/S 25.0 14.1 3.1 25.8 9.8 (-) 12.2
Bicycles CR/Rounds 27.4 6.8 (-) 2.4 13.6 8.8 4.5
Passenger Cars HR/CR 18.3 14.8 6.7 26.0 28.4 2.3
Two Wheelers CR/Rounds 14.7 (-) 5.2 4.6 24.2 24.7 15.4
Commercial Vehicles CRC/S/Plates 33.0 4.8 (-) 23.6 36.0 32.8 24.1
Drums & Barrels CRC 17.0 3.3 (-) 21.4 42.7 (-) 2.5 2.9
LPG Cylinders HRC 51.5 13.4 5.7 55.0 13.9 (-) 8.7
Washing Machines CRC 11.3 11.5 8.1 26.4 (-) 0.8 (-) 4.3
Diesel Engines Sheets/Plates/Strl 35.3 11.6 18.8 5.3 11.2 6.8
Material Handling Equip.
Plate/Sheets/Strls 115.5 (-) 17.2 (-) 3.5 22.9 (-) 8.4 9.2
LONG FLAT TOTAL GROWTH/CPLY
PRODUCTION 2006-07 24.7 26.8 52.5 12.7%
2007-08 26.3 29.8 56.1 7%
2008-09 27.0 27.2 57.2 2%
2009-10 27.0 33.6 60.6 5.9%
2010-11 31.0 35.1 66.1 9.1%
IMPORTS 2006-07 0.5 4.4 4.9 14%
2007-08 0.7 6.3 7.0 43%
2008-09 0.7 5.1 5.8 (-) 17.1%
2009-10 0.8 6.6 7.4 27.6%
2010-11 0.7 6.1 6.8 (-) 8.1%
EXPORTS 2006-07 0.6 4.6 5.2 8.3%
2007-08 0.7 4.4 5.1 (-) 2%
2008-09 0.4 4.0 4.4 (-) 13.7%
2009-10 0.4 2.9 3.3 (-) 25%
2010-11 0.4 3.1 3.5 6.17
APPARENT CONSUMPTION(Net of double counting)
2006-07 26.1 30.7 46.8 13%
2007-08 28.0 24.1 52.1 11.1%
2008-09 27.1 25.3 52.4 0.6%
2009-10 29.0 30.3 59.3 13.2%
2010-11 33.5 32.1 65.6 6.2%
Million TonnesDOMESTIC STEEL SCENARIO OF FINISHED STEEL
SOURCE: JPC
Processwise Crude Steel Production (% Share)
Process 2005-06 2010-11BF – BOF 52 47
EAF 18 26
IF 30 27
Total 100 100
Around 1174 no. of IF units are working with a Working Capacity of 25.84 million tonnes
Projections for 12th Plan (2012 – 13 to 2016-17)
2010 - 11 2016 – 17 (Projections)
CAGR(%)
Crude Steel Capacity (MT) 78 140 10.2
Crude Steel Production 69.6 126 10.4
Finished Steel Production 66 115 9.7
Export 3.8 7 10.7
Import 7 5 (-) 5.5
Finished Steel Consumption
65.6 113* 9.5
(*Based on a GDP elasticity of 1.14)
Growth Prospects and ConstraintsModern day EAFs using chemical
heat of Hot Metal to get low power and electrode consumption.
Oxygen injection, ladle furnace, slag practice, water cooled wall etc lead to high productivity.
Can produce customized, high quality alloy / special steel to cater to Automobile, Railways, Defence, Aerospace, etc.
Melting Scrap from domestic sources dwindling
Rising Price of imported melting scrap
Good quality scrap availability is a concern
Sponge iron / DRI emerged as a substitute (mostly coal based – non coking coal and iron ore fines in pellet form)
Nearly 80:20 ratio as a charge mix
Current trend of minimizing cost of power (60% of cost of production) is to set up captive power plants and sponge iron unit by IF producers.
Gas availability being limited and earmarked for priority sectors like Power, Fertilizers, no capacity expansion for gas-based S I Unit.
Raw Marterial Scenario
Low awareness on benefits of steel in Construction.
Limited knowledge on steel design w r t RCC
Non availability in required sizes and shapes
Unfavorable Codes and Standards
Lack of appreciation for Life Cycle Cost
Inadequate fabrication facilities / trained manpower
PFP & HPP Paints not in Codes.
Constraining Factors in Steel Promotion
STEEL INDIA’S GLOBAL JOURNEY
Management of Economic policies : Investment led rather than consumption led. Set of Economic Reforms.
Use of raw materials for value addition within the country.
MM&DR and land acquisition policies must favour industry.
Steel capacity enhancement to lead to Massive load on transport infrastructure. Need for National Integrated logistics policy
Risk Elements
STEEL INDIA’S GLOBAL JOURNEY
Technology transfer on a large scale –- Iron making : FINEX, HISMELT, COREX, ITBK-3, CDI- Steel making : Thin slab casting, Thin strip processing
- Rolling mills : Secondary Refining, CRGO Steel, API X- 100, Bake Hardened Steel, AHSS, TRIP Steel- Critical segments to be Partners in Progress in Product Development- ULCOS (Ultra low Co2) steel making : Breakthrough Technology & Hydrogen based steel making to reduce Co2 emission (POSCO)
Implementation of New Manufacturing PolicyTo make Indian steel globally competitive and preferred
source of supply by reducing the cost of Doing Business in India. (132 ranked out of total 183 countries)
Quality awareness to be the inherent process of activities by both the consumers and suppliers
Risk Elements
STEEL INDIA’S GLOBAL JOURNEY
Merger, Acquisition and Consolidation to take route in India
Thrust on Retail Marketing – Make Steel available in Rural and Semi Urban Areas
Active promotion of use of steel in actual construction – Steel Concrete Composite Construction and develop Steel Fabrication facilities through Skill-cum-Entrepreneurs Development Programme in rural areas.
Integrated approach by Govt, industry and all stakeholders to make Indian steel a top class global player in the next decade
Risk Elements
