1. PRESENTATION ON GROWTH PERSPECTIVES OF INDIAN STEEL INDUSTRYBY
Sushim Banerjee, 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 (%)
Country/
Region
2005
2006
2007
2008
2009
2010
(P)
(P)
2013
World
4.5
5.2
5.6
2.8
- 0.6
3.8
3.3
3.9
USA
3.1
2.7
1.9
0.0
(-) 2.6
3.0
1.8
2.2
Germany
0.8
3.4
1.0
(-) 4.7
3.6
0.3
1.5
Japan
2.0
2.3
(-) 1.2
(-) 5.2
4.4
(-) 0.9
1.7
1.6
Russia
6.4
8.2
8.5
(-) 7.9
4.0
4.1
3.5
Brazil
3.2
6.1
5.1
(-) 0.2
7.5
2.9
China
11.3
12.7
14.2
9.6
9.1
10.4
9.2
8.8
India
9.7
9.9
5.7
7.4
7.0
7.3
World Trade Volume (Goods & Services)
7.8
8.9
(-) 11.0
6.9
5.4
Source : IMF, World Economic Outlook Jan ‘12 2

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 3

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 4

6. Shift in Production Base : 2000 - 2011

8. Global Steel Capacity Utilization

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

11. Apparent Consumption:2008-2011 (MT)
Country
2008
2009
Y-O-Y%
2010 (P)
2011 (P)
2012 (P)
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
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
Spain
11.9
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

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

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) 13

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. 14 14

15. STRUCTURE OF INDIAN ECONOMY
(% SHARE IN GDP)
Category
(QE)
(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
15.6
15.9
15.8
15.4
(Construction)
6.6
5.8
8.2
8.4
8.6
7.9
7.7
Tertiary
36.0
50.3
53.0
52.9
54.3
57.3
57.7
59.1
Total
100
GDP Growth (%)
7.6
4.4
9.6
9.3
6.8
8.0
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
31.6 (e)
Data for onwards based on 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 : ) 15

16. PERCENTAGE GROWTH IN MAJOR INDL. SEGMENTS
Weight
 PERCENTAGE GROWTH DURING 
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
9.7
2.3
4.6
2.6
7.9
(-) 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
8.4
12.7
8.6
12.9
15.5
5.3
8.2
4.0
(8.3)
Source: CSO, Series for & on = 100
base and all others on = 100 base 16

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 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
( to )
CAGR
Steel Consumption in India 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
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

21. INFRASTRUCTURE DEFINED
The tentative master list of infrastructure subsectors as on which may be reviewed subsequently are :
Category
Infrastructure Sub-sectors
Transport
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, star or more Hotel, Industrial Park, SEZ Fertilizers, Cold Storage, etc.

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 and 40% of Road projects.

23. Projected Investment in Infrastructure (Revised)
(at prices)
XI Plan
Sectors
Rs. Crore
Share (%)
Electricity (incl. NCE)
6,66,525
32.42
Roads and Bridges
3,14,152
15.28
Telecommunication
2,58,439
12.57
Railways (incl. MRTS)
2,61,808
12.73
Irrigation (incl. Watershed)
2,53,301
12.32
Water Supply & Sanitation
1,43,730
6.99
Ports
87,995
4.28
Airports
30,968
1.51
Storage
22,378
1.09
Oil & Gas Pipelines
16,855
0.82
Total *
100
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 Cr

24. 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). 24 24

25. Source : Planning Commission

26. Steel and Infrastructure
Steel demand projected to reach 113 mt by , the terminal year of 12th Plan.
Demand realization contingent on Gross Fixed Capital Formation to reach 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
Category
Steel Items used
< % Growth in Production >
April ’11 – Jan‘12
Machinery & Equipments
Strls/Plates
14.2
9.3
8.8
21.0
29.4
(-) 3.0
Transport Equipment
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
4.5
Passenger Cars
HR/CR
18.3
14.8
6.7
26.0
28.4
2.3
Two Wheelers
14.7
(-) 5.2
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
5.7
55.0
13.9
(-) 8.7
Washing Machines
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
Material Handling Equip.
Plate/Sheets/Strls
115.5
(-) 17.2
(-) 3.5
22.9
(-) 8.4
9.2
Source : MOC 27

28. DOMESTIC STEEL SCENARIO OF FINISHED STEEL (Net of double counting)
Million Tonnes
LONG
FLAT
TOTAL
GROWTH/CPLY
PRODUCTION
24.7
26.8
52.5
12.7%
26.3
29.8
56.1 7%
27.0
27.2
57.2 2%
33.6
60.6
5.9%
31.0
35.1
66.1
9.1%
IMPORTS
0.5
4.4
4.9
14%
0.7
6.3
7.0
43%
5.1
5.8
(-) 17.1%
0.8
6.6
7.4
27.6%
6.1
6.8
(-) 8.1%
EXPORTS
0.6
4.6
5.2
8.3%
(-) 2%
0.4
4.0
(-) 13.7%
2.9
3.3
(-) 25%
3.1
3.5
6.17
APPARENT CONSUMPTION
(Net of double counting)
26.1
30.7
46.8
13%
28.0
24.1
52.1
11.1%
27.1
25.3
52.4
0.6%
29.0
30.3
59.3
13.2%
33.5
32.1
65.6
6.2%
SOURCE: JPC

29. Processwise Crude Steel Production (% Share)
BF – BOF 52 47
EAF 18 26 IF 30 27
Total
100
Around 1174 no. of IF units are working with a Working Capacity of million tonnes

30. Projections for 12th Plan (2012 – 13 to 2016-17)
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 5
(-) 5.5
Finished Steel Consumption
65.6
113*
9.5
(*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. 33

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