Presentation on theme: "Sushim Banerjee, Director General Institute for Steel Development & Growth, Kolkata GROWTH PERSPECTIVES OF INDIAN STEEL INDUSTRY PRESENTATION ON BY Indian."— Presentation transcript:
Sushim Banerjee, Director General Institute for Steel Development & Growth, Kolkata GROWTH PERSPECTIVES OF INDIAN STEEL INDUSTRY PRESENTATION ON BY Indian Steel Conference March 2012, New Delhi
World Growth pattern in Real GDP growth (%) Country/ Region (P) 2012 (P) 2013 World USA (-) Germany (-) Japan (-) 1.2(-) (-) Russia (-) Brazil (-) China India World Trade Volume (Goods & Services) (-) Source : IMF, World Economic Outlook Jan 12
- 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 3
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
Shift in Production Base :
Global Steel Capacity Utilization
YEAREXPORTSPRODUCTIONEXPORTS % WORLD TRADE IN STEEL PRODUCTS (Million Tons finished Steel) Source: World Steel In Figures,2011
Apparent Consumption: (MT) Country Y-O-Y%2010 (P)Y-O-Y%2011 (P)Y-O-Y%2012 (P)Y-O-Y% China USA (-) India Japan (-) (-) 0.9 S. Korea (-) Russia (-) Germany (-) (-) 0.5 Italy (-) (-) 6.3 Brazil (-) (-) Turkey (-) Spain (-) (-) World (-) Source: WSA February 2012
GLOBAL PRICE MOVEMENT- FINISHED STEEL Source: HRC: Russia Black Sea Export FOB($/T) Source: Rebars: Turkey Export FOB($/T)
GLOBAL PRICE MOVEMENT- RAW MATERIALS 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 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 (QE) (AE) Primary Secondary (Manufacturing) (Construction) Tertiary Total100 GDP Growth (%) Gross Fixed Capital Formation (% of GDP at Market Prices) Domestic Saving (% of GDP at Market Prices) (e) 1.Data for onwards based on prices as per revised estimates. 2.Stagnant share of Manufacturing and Secondary Sector in GDP 3.Share of Industry in GDP: China (59), S. Korea( 44), Kazakhsthan (37) (Source : CSO, Economic Outlook : ) STRUCTURE OF INDIAN ECONOMY
PERCENTAGE GROWTH IN MAJOR INDL. SEGMENTS SegmentsWeight PERCENTAGE GROWTH DURING April- Jan12 (Apr – Jan11) ELECTRI- CITY (5.3) MANUFAC TURING (8.9) MINING (-) 2.6 (6.3) CAPITAL GOODS (-) 2.8 (17.0) CONSUME R DURABLES (13.7) TOTAL INDUSTRY (8.3) Source: CSO, Series for & on = 100 base and all others on = 100 base
4 th 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) 3 rd 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 17
Trend of Steel Consumption in India Source: JPC CAGR 8.9 ( to ) Steel Consumption in India 8.9 percent annually in last decade against 4% annual growth in Global Steel Consumption 18
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
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 : Building76%Mineral Plant18% Roads63%Medium Industry20% Bridges65%Transmission22% Domestic75%Urban Infrastructure66% Power38%Maintenance81% Railways78% 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 which may be reviewed subsequently are : CategoryInfrastructure Sub-sectors TransportRoads & Bridges, Ports, Inland Waterways, Airports, Railway Trucks & Bridges, Urban Public Transport EnergyPower Generation & Distribution, Oil & Gas Pipeline & LNG Storage Facility Water Sanitation Solid Waste Management, Water Treatment & Pipelines CommunicationTele-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 54 th among 57 th 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. CroreShare (%) Electricity (incl. NCE)6,66, Roads and Bridges3,14, Telecommunication2,58, Railways (incl. MRTS)2,61, Irrigation (incl. Watershed)2,53, Water Supply & Sanitation1,43, Ports87, Airports30, Storage22, Oil & Gas Pipelines16, Total *100 (at 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 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 Chinas 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 12 th Plan up from 37% in 11 th 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).
Source : Planning Commission
Steel demand projected to reach 113 mt by , the terminal year of 12 th 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. Steel and Infrastructure 26
Growth of Manufacturing and Processing Industries Source : MOC CategorySteel Items used April 11 – Jan12 Machinery & Equipments Strls/Plates (-) 3.0 Transport Equipment Strls/Plates Power & Dist. Transformer CRGO (-) Complete Tractors HRS/Strls 22.4(-) 2.2(-) Refrigerators (domestic) CRC/S (-) 12.2 Bicycles CR/Rounds (-) Passenger Cars HR/CR Two Wheelers CR/Rounds 14.7(-) Commercial Vehicles CRC/S/Plates (-) Drums & Barrels CRC (-) (-) LPG Cylinders HRC (-) 8.7 Washing Machines CRC (-) 0.8(-) 4.3 Diesel Engines Sheets/Plates/Strl Material Handling Equip. Plate/Sheets/Strls 115.5(-) 17.2(-) (-)
Processwise Crude Steel Production (% Share) Process BF – BOF5247 EAF1826 IF3027 Total100 Around 1174 no. of IF units are working with a Working Capacity of million tonnes
Projections for 12 th Plan (2012 – 13 to ) – 17 (Projections) CAGR (%) Crude Steel Capacity (MT) Crude Steel Production Finished Steel Production Export Import75(-) 5.5 Finished Steel Consumption *9.5 (*Based on a GDP elasticity of 1.14)
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.
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 INDIAS 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 INDIAS 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 Co 2 ) steel making : Breakthrough Technology & Hydrogen based steel making to reduce Co 2 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 Risk Elements
STEEL INDIAS 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