Presentation on theme: "PRESENTATION ON GROWTH PERSPECTIVES OF INDIAN STEEL INDUSTRY"— Presentation transcript:
1PRESENTATION ON GROWTH PERSPECTIVES OF INDIAN STEEL INDUSTRY BYSushim Banerjee, Director GeneralInstitute for Steel Development & Growth, KolkataIndian Steel Conference23-24 March 2012, New Delhi
2World Growth pattern in 2005-2010 Real GDP growth (%)Country/Region200520062007200820092010(P)(P)2013World184.108.40.206.8- 0.63.83.33.9USA220.127.116.11.0(-) 2.63.01.82.2Germany0.83.41.0(-) 18.104.22.168.5Japan2.02.3(-) 1.2(-) 5.24.4(-) 0.91.71.6Russia22.214.171.124(-) 7.94.04.13.5Brazil126.96.36.199(-) 0.27.52.9China11.312.7188.8.131.52.49.28.8India184.108.40.206.47.07.3World Trade Volume (Goods & Services)7.88.9(-) 11.06.95.4Source : IMF, World Economic Outlook Jan ‘122
3WHY STEEL ?Steel : green and recyclableSteel : 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 deforestationSteel : more freedom of expressionSteel : more creativity and viability in design and opportunity to express functional requirements in structured way3
4WHY STEEL ?FLEXIBILITYSteel : large column free clear spans, ideal for long spans upto 40 metre longSteel structures : provide larger usable space (more carpet area) for multi-storeyed building and large spans for bridges and flyovers with uninterrupted traffic movementLatest developments in Steel making meet up the challenges of corrosion with application of latest developed paints over bare structural steelLatest development in painting technology like application of intumescent paints or vermiculite protect bare Steel structures directly from fireSteel : sustain reversible loads due to inherent properties like ductilitySteel more cost effective than concrete as a framing solution4
10WORLD TRADE IN STEEL PRODUCTS (Million Tons finished Steel) YEAREXPORTSPRODUCTIONEXPORTS %1980140.6578.724.31990171.0654.026.22000307.1782.539.22002313.1836.237.42004366.2992.536.92005371.31062.235.02006418.31158.636.12007443.81251.435.52008436.21234.635.32009326.31147.028.42010386.41316.429.4Source: World Steel In Figures,2011
12GLOBAL PRICE MOVEMENT- FINISHED STEEL Source: HRC: Russia Black Sea Export FOB($/T)Source: Rebars: Turkey Export FOB($/T)12
13GLOBAL PRICE MOVEMENT- RAW MATERIALS Source : SBB - India Iron Ore: China CFR; Coke: China; Export (FOB) Melting Scrap: East Asia Import HMS(80:20)13
14CURRENT 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.1414
15STRUCTURE OF INDIAN ECONOMY (% SHARE IN GDP)Category(QE)(AE)Primary38.123.918.118.017.214.614.513.9Secondary25.925.828.929.128.528.127.827.0(Manufacturing)13.815.316.115.615.915.815.4(Construction)220.127.116.11.18.104.22.168Tertiary36.050.353.052.954.357.357.759.1Total100GDP Growth (%)22.214.171.124.36.88.06.9Gross Fixed Capital Formation (% of GDP at Market Prices)22.731.332.932.331.630.429.2Domestic Saving (% of GDP at Market Prices)23.734.636.832.033.831.6 (e)Data for onwards based on prices as per revised estimates.Stagnant share of Manufacturing and Secondary Sector in GDPShare of Industry in GDP: China (59), S. Korea( 44), Kazakhsthan (37)(Source : CSO, Economic Outlook : )15
16PERCENTAGE GROWTH IN MAJOR INDL. SEGMENTS Weight PERCENTAGE GROWTH DURING April-Jan’12 (Apr – Jan’11)ELECTRI-CITY126.96.36.199.188.8.131.52.15.58.8(5.3)MANUFACTURING755.279.813.610.315.018.42.54.89.04.4(8.9)MINING141.5184.108.40.206.67.9(-) 2.6(6.3)CAPITALGOODS88.2524.817.918.123.348.511.31.014.8(-) 2.8(17.0)CONSUMER DURABLES84.6010.236.116.225.333.111.117.014.23.9(13.7)TOTALINDUSTRY8.412.78.612.9220.127.116.11.0(8.3)Source: CSO, Series for & on = 100base and all others on = 100 base16
17Indian 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 2020Largest 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 worldCrude Steel Capacity estimated to rise by 11% by 2012Weight of 6.68 in Infrastructure IndexA Net Importer of Steel
18Trend of Steel Consumption in India ( to )CAGRSteel Consumption in India 8.9 percent annually in last decade against 4% annual growth in Global Steel ConsumptionSource: JPC
19Indian Steel:Demand Drivers Construction (Infrastructure)ProjectsTransport of Petroleum/ WaterTLTRail tracksManufacturingTube MakingWire drawingFabricationFastnersPower plant equipmentAgricultural implementsHousehold appliancesAutoCommercial VehiclePassenger carsTwo wheelersAuto ComponentsEach of these segments has good potential to grow
20Infrastructure Building and Construction Construction Sector composed of :- Infrastructure : 54 percent- Industrial Expansion : 36 percent- Residential and Commercial : 10 percentSectoral 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
21INFRASTRUCTURE DEFINED The tentative master list of infrastructure subsectors as on which may be reviewed subsequently are :CategoryInfrastructure Sub-sectorsTransportRoads & Bridges, Ports, Inland Waterways, Airports, Railway Trucks & Bridges, Urban Public TransportEnergyPower Generation & Distribution, Oil & Gas Pipeline & LNG Storage FacilityWater SanitationSolid Waste Management, Water Treatment & PipelinesCommunicationTele-communicationSocial & Commercial InfrastructureEducational Institutions, Hospitals, star or more Hotel, Industrial Park, SEZ Fertilizers, Cold Storage, etc.
22ENABLING 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 InfrastructureCost 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.
23Projected Investment in Infrastructure (Revised) (at prices)XI PlanSectorsRs. CroreShare (%)Electricity (incl. NCE)6,66,52532.42Roads and Bridges3,14,15215.28Telecommunication2,58,43912.57Railways (incl. MRTS)2,61,80812.73Irrigation (incl. Watershed)2,53,30112.32Water Supply & Sanitation1,43,7306.99Ports87,9954.28Airports30,9681.51Storage22,3781.09Oil & Gas Pipelines16,8550.82Total*100Infrastructure 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
24Investment 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 PortsTransparent, 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).2424
26Steel 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.
28DOMESTIC STEEL SCENARIO OF FINISHED STEEL (Net of double counting) Million TonnesLONGFLATTOTALGROWTH/CPLYPRODUCTION24.726.852.512.7%26.329.856.17%27.027.257.22%33.660.65.9%31.035.166.19.1%IMPORTS0.54.44.914%0.76.37.043%5.15.8(-) 17.1%0.86.67.427.6%6.16.8(-) 8.1%EXPORTS0.64.65.28.3%(-) 2%0.44.0(-) 13.7%2.93.3(-) 25%18.104.22.168APPARENT CONSUMPTION(Net of double counting)26.130.746.813%28.024.152.111.1%27.125.352.40.6%29.030.359.313.2%33.522.214.171.124%SOURCE: JPC
29Processwise Crude Steel Production (% Share) BF – BOF5247EAF1826IF3027Total100Around 1174 no. of IF units are working with a Working Capacity of million tonnes
30Projections for 12th Plan (2012 – 13 to 2016-17) 2016 – 17 (Projections)CAGR(%)Crude Steel Capacity (MT)7814010.2Crude Steel Production69.612610.4Finished Steel Production661159.7Export3.8710.7Import5(-) 5.5Finished Steel Consumption65.6113*9.5(*Based on a GDP elasticity of 1.14)
31Growth 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.
32Raw Marterial Scenario Melting Scrap from domestic sources dwindlingRising Price of imported melting scrapGood quality scrap availability is a concernSponge 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 mixCurrent 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.
33Constraining Factors in Steel Promotion Low awareness on benefits of steel in Construction.Limited knowledge on steel design w r t RCCNon availability in required sizes and shapesUnfavorable Codes and StandardsLack of appreciation for Life Cycle CostInadequate fabrication facilities / trained manpowerPFP & HPP Paints not in Codes.33
34STEEL INDIA’S GLOBAL JOURNEY Risk ElementsManagement 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
35STEEL INDIA’S GLOBAL JOURNEY Risk ElementsTechnology 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 PolicyTo 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
36STEEL INDIA’S GLOBAL JOURNEY Risk ElementsMerger, Acquisition and Consolidation to take route in IndiaThrust on Retail Marketing – Make Steel available in Rural and Semi Urban AreasActive 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