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Ferro Alloy Industry in India – Challenges & Opportunities

Subodh Pandey

Chief of Marketing & Sales

Ferro Alloys & Minerals Division, Tata Steel India

Steel Furnace Association of India

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The presentation is an amalgamation of author’s own views and thoughts.

Tata Steel does not necessarily subscribe to the views and thoughts expressed in the presentation and should not be held responsible for the same.

DISCLAIMER:

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CONTENTS

CHROME ALLOYS INDUSTRY IN INDIA

MANGANESE ALLOYS INDUSTRY IN INDIA

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1.6

2.2

3.1

1.2 (78%)

1.8 (82%)

1.8 (60%)

0.1 (5%) 0.1 (5%)

0.4 (13%)

0.3 (17%) 0.3 (13%)

0.8 (27%)

2005 2010 2015

CrNi steels (300 series) Cr steels (400 series) CrMn steels (200 series)

STAINLESS STEEL DEMAND: SHIFT IN USAGE PATTERN

• Consumption mix shifting towards premium grades: 300S+400S likely to become 40% of total demand

• Construction, transport & industrial applications to drive future growth

All figs in million MT

End use application:300S: Rail, Construction, Process Equipment & Transport400S: Electronics & Transport200S: Tubular Products, Kitchenware

Ferro Chrome Demand in India (‘000MT)

2005 2010 2015

300 350 500

7%

7%

5

31

40

100

110 180

216

39

85

123

50

91

120

30

45

50

143 145

450

208

421

363

611

1,006

1,422

FY06 FY11 FY16

TSL IMFA Balasore Rohit JSL FACOR Others

INDIA FERRO CHROME PRODUCTION

Source: IFAPA

fig in ‘000 MT

• India has been a net exporter of value added Ferro Chrome to the world

• Further capacity additions are also planned in the next 5 yrs

• While the demand of Ferro Chrome in India would increase, still India will continue to be a net exporter of Ferro Chrome.

• 60% production by 6 players while the balance is fragmented

10%

7%

India’s position in the Ferro Chrome market is primarily because of the Chrome Ore availability in Orissa belt

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CHROMITE RESERVES IN INDIA

Source: IBM

SUKINDA VALLEY: The Chrome Capital

SUKINDA VALLEY: The Chrome Capital

Cr Ore Reserve

Source: IBM

3.5 million MT production in 2010 (12% of world in 2010)

Proven reserve: 213 million MT

• 8 players are having Cr ore mines with most of them having downstream Ferro Chrome production facilities

• U/G mines likely to be explored in next five years with higher grade of Cr Ore.

• Higher refractoriness in Indian ore

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• Indigenous Chrome ore available of High grade quality.

• Commissioning of many new power plants including captive ones(CPP)- may help reduce the gap in cost of power compared to SA, China

ADVANTAGE INDIA:

Strong Growth in Demand

• Stainless Steel production in India is projected to grow @ ~7-8% in the next five years including potential for increasing exports of Stainless Steel from India.

• This will lead to a sustained demand of FeCr in line with the Stainless Steel production.

Backward linkage

Power cost

• Freight advantage in SS markets such as China, Korea & Japan compared to Kazakh, South Africa

• Short sailing time.

Proximity to market

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HOWEVER, COMPETITIVE ADVANTAGES OF INDIA IS A CONCERN COMPARED TO OTHER PRODUCING REGIONS

Key Success Factor SA Kazakh China India

Power + +++ + -

Chrome ore reserves +++ ++ - ++

Availability of Chrome ore +++ ++ - +

Reductants (Coke/Char/Anthracite)

++ +++ +++ -

Proximity to markets ++ +++ +++ ++

Basic infrastructure (ports/ Rail/road) ++ - ++ -

Government Support +++ ++ ++ +

Overall Competitive Advantage +++ +++ ++ +

+++ : Strongly positive

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CONTENTS

CHROME ALLOYS INDUSTRY IN INDIA

MANGANESE ALLOYS INDUSTRY IN INDIA

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CARBON STEEL OUTLOOK IN INDIA

Source MBR, CRU

Projected Indian Carbon Steel Growth (Mn MT)

FY12 E FY13 FY14 FY15 FY16 FY17

30 32 34 38 41 45

3436

39

4448

5264

6873

8289

97

FP LP

PMT of FP FeMn : ~3.5 kg SiMn : ~ 2kg PMT of LP: FeMn : ~2 kg SiMn : ~12kg

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• Indian LP Steel production at CARG of 9% based on expected infrastructure lead demand in the 5 year period.

SiMn Demand – Domestic (kT)

SILICO MANGANESE DEMAND IN INDIA

FY 12 FY 13 FY 14 FY 15 FY 16 FY 170

100

200

300

400

500

600

700

800

388 413 438 474535 579

3535

3639

4346

461489

517560

632683

SiMn Long SiMn Flat SiMn Other

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• Indian Steel & Stainless Steel (200S) production at CARG of 9% in the 5 year period.

FeMn Demand – Domestic (kT)

FY12 FY13 FY14 FY15 FY16 FY170

50

100

150

200

250

86 89 96 107 115 126

25 2629

3235

39

18 2024

2933

34

1118

1812

1311

140153

166180

196210

Flat Long SS Fdy & Oth Series5

MANGANESE ALLOY DEMAND IN INDIA

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Shyam; 80

Hira; 70

MEL; 54

Sri; 50

Impex; 50

Sova; 50

Maithan; 48

Haldia; 30

MICL; 24

Oth 1250

1730

SiMn Production in 2010

MEL; 65

TSL; 50

SARDA; 32

HIRA; 32

IMPEX; 26SHYAM 19

CORP 18

OTHERS; 206

FeMn Production in 2010

449

MANGANESE ALLOY PRODUCERS IN INDIA

• Many Producers (~ 50) with wide range of furnaces : 4 to 33 MVA• Export led production growth (50% exports) of Mn Alloys based

on imported ore • Capacity addition of ~ 954 kt in next 5 yrs in SiMn and ~ 223 kT

in Fe Mn

Key concern:

• Availability of High Grade Mn Ore in India

• Increase in power cost across India

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DEPENDENCE ON Mn ORE ON GLOBAL ORE MARKET

CY11 CY12 CY13 CY14 CY15 CY16

3.5 3.7 3.848 4.00192 4.161996799999994.32847667199997

2.7 3.1 3.193 3.28879000000001 3.3874537 3.4890773112.1

2.4 2.496 2.59584 2.6996736 2.8076605441.51.6 1.664 1.73056 1.7997824 1.8717736964.24.2

4.3994.91889

5.479253500000036.2581429769999814.0

15.0 15.616.5

17.518.8

China Aus SA Gabon Others Series6

SA, Gabon, Brazil & Australia have high grade ore reserve( >44% Mn content). China has primarily low grade ore reserves(<30% Mn Content) India Produces ~ 3MnT of Mn Ore mainly Medium Grade

in million MT Mn content

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MAJOR MN ORE PRODUCERS (INDIA)

Manganese Ore India Ltd ;

1.1; 41%

Sandur , 0.3, 11%OMC, 0.25, 9%

Rungta , 0.2, 8%

Tata Steel, 0.32, 12%

Others, 0.5, 19%

In Million MT

Players Grade Mn MT UsageMOIL HG+MG 1.10 Own use + SaleSandur MG+LG 0.30 SaleOMC MG 0.25 SaleRungta MG 0.20 Own use + SaleTata Steel MG 0.32 Own UseOthers MG 0.50 Own Use+SellTotal 2.67

MOIL is the largest player in open market for HG Mn

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ADVANTAGE INDIA

Ability to immediately scale up

• Large Capacity for Ferro Alloys• Industry currently operating at 60% of rated capacity• New capacities coming up. Capacities coming up near

ports (Vizag, Haldia).

Location near high growth regions

• Freight advantage in markets such as China, Korea & Japan compared to Ukraine or South Africa

• Short sailing time, freight advantage

Cost Advantage over China

• Domestically sourced LG & MG Mn Ore available for blending with imported HG Mn Ore.

• Comparable power, labour & inland freight costs to China.

Import of Mn Ore has increased from ~ 0.3 MnT in FY07 to 1.3 MnT in FY11

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• India has grown rapidly in Ferro Alloy Production and is a significant producer with more than 50 % getting exported

• Robust growth in domestic consumption of both Ferro Chrome & Ferro Manganese alloys due to strong growth in both Crude & Stainless Steel

• Apart from domestic demand, proximity to fast growing developing & developed economies provides exciting export opportunity

IN SUMMARY…

Likely future growth of Ferro Alloys in India augurs well for demand of furnaces. However…

• Impending power crisis – availability and prices of coal is a cause of concern

• Infrastructure issues – bottleneck in road, rail transport, port etc may impede export driven growth as well imports of higher grade Mn Ore

• Investments in existing & new mines needs to be expedited to augment mineral resources

• Technological investments: Usage of low grade mineral resources; increase efficiency of furnaces for cost reduction / productivity enhancement

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THANK YOU

Ferro Alloys & Minerals Division

POWER TARIFF IN INDIA

CY11 (c/kwh) FeCr / Ch Cr producing countries

CY12 (F) (c/kwh)

8 China 9

7.6 SA – Winter Season 9.5

5.4 SA – Normal 6.8

4 Kazakh 4.5

10.3 India - Orissa 10.9

5.9 India – Andhra 9.6

CY12 rates considered at same exchange rate as in CY11 for all currencies

Source : Own resources, info in public domain

• Likely increase in power tariff in India/China due to escalation in raw material and input cost

• South African tariff continue to be on rise during winter season ~ 40%.• Normal tariff in SA also to increase by 25%• Indian power tariff to increase further due to unavailability and high

sourcing cost of imported thermal coal