Sushim Banerjee , Director General Institute for Steel Development & Growth, Kolkata

1. PRESENTATION ON GROWTH PERSPECTIVES OF INDIAN STEEL INDUSTRY BY • SushimBanerjee, Director General • Institute for Steel Development & Growth, Kolkata • Indian Steel Conference • 23-24 March 2012, New Delhi

2. World Growth pattern in 2005-2010 Real GDP growth (%) Source : IMF, World Economic Outlook Jan ‘12

3. WHY STEEL ? • 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 • 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 metrelong • 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

6. Shift in Production Base : 2000 - 2011 2000 2011

8. Global Steel Capacity Utilization

10. WORLD TRADE IN STEEL PRODUCTS (Million Tons finished Steel) Source: World Steel In Figures,2011

11. Apparent Consumption:2008-2011 (MT) Source: WSA February 2012

12. GLOBAL PRICE MOVEMENT- FINISHED STEEL Source:HRC: Russia Black Sea Export FOB($/T) Source: Rebars: Turkey Export FOB($/T)

13. GLOBAL PRICE MOVEMENT- RAW MATERIALS Source : SBB - India Iron Ore: China CFR; Coke: China; Export (FOB) Melting Scrap: East Asia Import HMS(80:20)

14. 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.

15. (% SHARE IN GDP) STRUCTURE OF INDIAN ECONOMY • Data for 2006-07 onwards based on 2004-05 prices as per revised estimates. • Stagnant share of Manufacturing and Secondary Sector in GDP • Share of Industry in GDP: China (59), S. Korea( 44), Kazakhsthan (37) (Source : CSO, Economic Outlook : 2011-12)

16. PERCENTAGE GROWTH IN MAJOR INDL. SEGMENTS Source: CSO, Series for 1994-95 & 1995-96 on 1993-94 = 100 base and all others on 2004-05 = 100 base

17. Indian Steel Industry • 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

18. Trend of Steel Consumption in India CAGR 8.9 (2000-01 to 2010-11) Steel Consumption in India grew @ 8.9 percent annually in last decade against 4% annual growth in Global Steel Consumption Source: JPC

19. Indian Steel:Demand Drivers Construction (Infrastructure) Projects Transport of Petroleum/ Water TLT Rail tracks Manufacturing Tube Making Wire drawing Fabrication Fastners Power plant equipment Agricultural implements Household appliances Auto • Commercial Vehicle • Passenger cars • Two wheelers • Auto Components Each of these segments has good potential to grow

20. Infrastructure Building and Construction • Construction Sector composed of : - Infrastructure : 54 percent - Industrial Expansion : 36 percent - Residential and Commercial : 10 percent • 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

21. INFRASTRUCTURE DEFINED The tentative master list of infrastructure subsectors as on 01.03.2012 which may be reviewed subsequently are :

22. 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 and40% of Road projects.

23. Projected Investment in Infrastructure(Revised) (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

24. Investment in Infrastructure : Volume and Pattern

25. Source : Planning Commission

26. Steel and Infrastructure • 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.

27. Growth of Manufacturing and Processing Industries Source : MOC

28. DOMESTIC STEEL SCENARIO OF FINISHED STEEL Million Tonnes SOURCE: JPC

29. Processwise Crude Steel Production (% Share) Around 1174 no. of IF units are working with a Working Capacity of 25.84 million tonnes

30. Projections for 12th Plan (2012 – 13 to 2016-17) (*Based on a GDP elasticity of 1.14)

31. Growth Prospects and Constraints • Modern 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.

32. Raw Marterial Scenario • 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.

33. Constraining Factors in Steel Promotion • 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.

34. STEEL INDIA’S GLOBAL JOURNEY Risk Elements • 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

35. STEEL INDIA’S GLOBAL JOURNEY Risk Elements • 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 Policy • To 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

36. STEEL INDIA’S GLOBAL JOURNEY Risk Elements • 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

37. Thank You