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Overview on Imported Coking Coal Security For Sustainable Growth Of Indian Steel Sector. Harsh Sachdev Managing Director, S&T Mining (A SAIL-TATA Steel JV Co.) Coal Market in India-2013, New Delhi 27 th Aug, 2013. Index. Steel – The Global Scenario & Emerging Trends

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overview on imported coking coal security for sustainable growth of indian steel sector

Overview on Imported Coking Coal Security For Sustainable Growth Of Indian Steel Sector

Harsh Sachdev

Managing Director, S&T Mining (A SAIL-TATA Steel JV Co.)

Coal Market in India-2013, New Delhi

27th Aug, 2013

index
Index
  • Steel – The Global Scenario & Emerging Trends
  • Raw Material & Coking coal Availability .
  • Steel – The Indian current & emerging Scenario .
  • Indian Raw Materials & Coking Coal Scenario
  • Coking Coal – Domestic Issues – Emerging Legislation
  • Imperatives & issues
the global economic status
The Global Economic Status

Difficult global business scenario prevailing

  • Global Economy:
    • A marked downturn over the past two years (Global GDP to remain sluggish 2.8% in 2013 compared to 3.9% and 3.2% in 2011 & 2012 respectively)
    • Most regions likely to see a moderate pick-up, but growth to be below potential

Country ---Real GDP(2013)

      • US --–-----------1.5%
      • Canada --------1.7%
      • UK---------------1.0%
      • Germany ------0.3%
      • China------------7.3%
      • India ------------5.5%
      • Brazil ------------2.5%
    • Employment gains to remain weak at best.
  • Financial uncertainty & Crises
    • (Reduced liquidity in the market- higher cost of borrowing)

Newport Mining Outlook Report 2013-14

Source :Scotia Bank

global steel trends
Global Steel Trends
  • Global Steel Production in 2012 at 1.5 Bn. Mt was a growth of 0.7% over the PY. This has been slowest rate of growth since the economic downturn of 2008. EU was a decrease of 4.7 %, Germany a decrease of 3.7 %, North Amercia an increase of 2.5 %.
  • In the top 10 Steel producing nations , China, U.S., India , Russia , South Korea & Turkey grew in 2012.
  • Modest steel demand pickup expected in 2013.
  • China was 46.3 % of the world Steel Production in 2012 & is expected to continue to dominate Global Steel making till 2020.
steel global scenario emerging trends
Steel:Global Scenario & Emerging Trends
  • Expected Steel Demand Growth in 2014
    • China: 2.5%
    • India: 7.0%
    • Japan: -0.6%
    • US: 2.9%
    • Central & South America: 43%
    • EU 27: 3.3%

Future demand Growth Driver: Further economical development rather than recovery in developed world.

China to remain dominant steel producer & consumer

Indian steel demand to grow faster

slide6

Steel:Global Scenario & Emerging Trends

  • Crude Steel production (2.1# Bill. T.) is expected to marginally exceed the global demand (2.09* Bill. T.) in 2020 .
  • China to witness addition of more capacities along with consolidation of marginal players.
  • India too to add more capacities in current decade
    • Addition of more than 100 Mill. T. capacity by 2020.

# Source: Deutsche Research,

impact on raw materials
Impact On Raw Materials
  • Over 70 % of Steel made is through the BF route & is hence impacted by the costs & availability of raw materials, specially coking coal.
  • Major volumes of Iron Ore & coking Coal are required.
    • 1.6 tonne of Iron –ore and 0.9 tonne of coking coal for 1 tonne of Crude Steel
  • RM cost as a proportion of total cost of steel companies is a very significant & is a key driver of total steel cost .
    • Iron Ore comprises: 30% of Cost
    • Coking Coal: 26% of Cost
index1
Index
  • Steel – The Global Scenario & Emerging Trends
  • Raw Material & Coking coal Availability .
  • Steel – The Indian current & emerging Scenario .
  • Indian Raw Materials & Coking Coal Scenario
  • Coking Coal – Domestic Issues – Emerging Legislation
  • Imperatives & issues
global iron ore
Global Iron Ore

Total Reserves of Iron Ore: 800 Bill. T.

  • About 800 Bill. T. of Iron ore reserve with 230 Bill. T. of Iron Content have been proved
  • World iron ore export dominated by –Brazil & Australia
  • Key iron ore consumers: China, Japan, US, India and Russia
global coking coal production
Global Coking Coal Production:

2010-2020

Slow down of global demand growth, still driven mainly by China, India and South America

Globally Coking Coal Reserve: 246 Bill.T.

Coking Coal demand to grow at ~3% per annum during current decade

Coking Coal Production to shadow Steel Growth Globally

global coking coal import export present future
Global Coking Coal Import & Export:Present & Future

Australia to remain a dominant exporter though there will be emergence of new sources like Mozambique …

China to overtake Japan as leading coking coal importer.

Global Coking Coal export (2008-2015F)

Global Coking Coal import (2010-2025F)

2013 :

Australian Met coal export expected to grow by 11%

US to decrease by 5% y-o-y to 54 Mill. T.

Canada to increase 3% y-o-y to 31 Mill. T.

Mozambique 4-4.5 Mill.T. from Maotize mine, Vale

Mongolia not likely to grow in 2013

Source: KPMG Qtrly, March 2013

China’s import to increase by 18% in 2013 y-o-y to 58 Mill. T. – due to restocking of steel

India import to increase to 36 Mn in 2013

Imports by EU to remain flat at around 46 Mill. T.

index2
Index
  • Steel – The Global Scenario & Emerging Trends
  • Raw Material & Coking coal Availability .
  • Steel – The Indian current & emerging Scenario .
  • Indian Raw Materials & Coking Coal Scenario
  • Coking Coal – Domestic Issues – Emerging Legislation
  • Imperatives & issues
steel indian scenario current
Steel Indian Scenario - Current
  • India’s Steel Production
  • has risen steadily over the
  • Last decade. At 77 Mn. T
  • India is the 4th largest Steel
  • Producer Globally.
  • In 2012 it was a nett importer of Steel , mainly special grades.
  • The per capita consumption of
  • Steel in India remains low .
  • A high potential for growth.
steel indian scenario emerging
Steel Indian Scenario - Emerging

Yr 2020: India to witness emergence of 5-6 players controlling 65~70% of total prodn

180

107

With 77 Mill. T. of Crude Steel production in 2012, India is behind China , Japan & the USA .

By 2016, India is expected to become world’s 2nd largest crude steel producer

Fast urbanisation to drive India’s steel Industry growth

2020 india to emerge as net exporter
2020: India to emerge as net exporter……

Steel Export moving to China , India & South Amercia

index3
Index
  • Steel – The Global Scenario & Emerging Trends
  • Raw Material & Coking coal Availability .
  • Steel – The Indian current & emerging Scenario .
  • Indian Raw Materials & Coking Coal Scenario
  • Coking Coal – Domestic Issues – Emerging Legislation
  • Imperatives & issues
iron ore the domestic scenario
Iron Ore – The Domestic Scenario
  • With 18 Billion Tonnes (approx) of Haemetite and 11 Billion Tonnes (approx) of Magnetite resource, India is self sufficient to fulfill its Steel Industry requirement.
  • With a ban on illegal mining in Goa & Karnataka – Iron Ore output fell to 167 Mn. Tonnes in FY 13. Imports started.
  • The government of India, is taking various measures, including approaching the supreme court to correct the situation.
  • In 2020, India to consume ~300 Mill. T. of Iron Ore for producing 180 Mill. T. of crude steel.
coking coal sources for india 2012
Coking coal sources for India: 2012

Coking Coal Sources (2012

Increased dependency on overseas coking coal mining countries

Australia to remain a dominant coking coal exporter to India

*Indigenous coal at 17% avg ash, while imported met coal ash ~10%

met coal consumption forecast
Met Coal Consumption Forecast….

2020: India is expected to import whopping 83 mill. T. of coking coal (apart from 10 mill. T. of PCI) equallingforex outgo of atleast USD14* Bill. Per year.

Total 93 Mill. T. of metallurgical coal import implies that 86 % of India’s BOF steel production to depend on imports – High risk exposure

Hot Metal/Pig Iron Production -BOF

* At USD 170/t of coking coal price; conversion 1USD = Rs 54

index4
Index
  • Steel – The Global Scenario & Emerging Trends
  • Raw Material & Coking coal Availability .
  • Steel – The Indian current & emerging Scenario .
  • Indian Raw Materials & Coking Coal Scenario
  • Coking Coal – Domestic Issues – Emerging Legislation
  • Imperatives & issues
coking coal domestic issues
Coking Coal - Domestic Issues
  • A need to separate “Coking Coal” from Coal . At present Coking Coal also being used to meet India’s Power requirements . An opportunity for washing low grade of Coking Coals , to enhance valuations.
  • An increase in the infrastructure to evacuate coal from Pit heads to the point of consumption. Adequate Railway sidings & rakes.
  • Implementation of the Jharia Action Plan in the prime coking belt of India. Jharia has 5.3 Bn. tonnes of prime coking coal & 6.1 Bn. tonnes of medium coking coal , which has been on fire .
  • A concept of a “Single window Clearance” wherein all clearances which are sought are applied for, in one place, within the various Government departments.
  • Mining is a “Site Specific Activity “ and hence the same cannot be shifted to an alternate location. The Government needs to play a role a major facilitator in acquisition of land for critical coal projects .
  • Upgrading of efficiency levels by use Mass Production Technologies – Larger sizes of Heavy Earth moving Equipments in Opencast Mines & mechanization in underground mines .- Average output of underground mines is well behind global output at approx. 0.2 MTPA.

Some of these issues are under active consideration .

domestic legislative environment
Domestic Legislative Environment
  • Time taken in getting statutory clearances impact coking coal projects execution timeline.
  • A process of defined time frames for clearances , / default clearances in case of delay’s needs to be examined .
  • Emerging legislation making coal mining more complex & expensive , will increase lead time to starting coal production.
    • LARR
      • Consent of 80% Project Affected People (this might delay projects)
      • 4 times land price in rural and 2 times land price in urban area for compensation along with other compensation
    • MMDR bill
      • 26% of profit to be given to District Mineral foundation plus other taxes leads to overall tax of 61% for Indian coal Mining (against 30-40% in other countries).
  • Auction by competitive Bidding of Coal Mines Rules 2012 - Implemented for PSUs – Implementation for Private companies awaited .

Legislation to ensure inclusive growth & welfare of local communities.

Degree of complexity of Domestic Mining to increase .

index5
Index
  • Steel – The Global Scenario & Emerging Trends
  • Raw Material & Coking coal Availability .
  • Steel – The Indian current & emerging Scenario .
  • Indian Raw Materials & Coking Coal Scenario
  • Coking Coal – Domestic Issues – Emerging Legislation
  • Imperatives & issues
country rating for mining behr dolbear 20121
Country rating for Mining (Behr Dolbear – 2012)

Australia and Canada are two most favourable countries for mining;

Australia more favourable: Canadian coal has cost disadvantage compared to Australia in terms of freight

investment by indian companies
Investment by Indian Companies

Since import is an imperative a number of Indian companies have already coal assets abroad……

suggestions towards securing coking coal import
Suggestions towards securing coking coal import
  • Inter-Governmental level of agreement for developing and operating overseas coking coal mines.
  • Using sovereign fund for developing infrastructures in emerging coking coal sources like Mozambique.
  • Mining companies should form consortium with Infrastructure & Logistics companies to invest in infrastructure in new geographies.
  • Priority clearances at Indian ports .
  • Construct a dedicated rail corridor in the country for faster movement of coal from ports to end user plants.