For Official Use DSTI/SU/SC(2006)43
Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 30-May-2006
______English text only DIRECTORATE FOR SCIENCE, TECHNOLOGY AND INDUSTRY STEEL COMMITTEE Use For Official DSTI/SU/SC(2006)43
d INDIA
RAW MATERIALS OUTLOOK FOR INDIA e
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Joint India/OECD/IISI Workshop, New Delhi (India), 16-17i May 2006.
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Presentation by Mr. A.D. Baijal, Vice President, Raw Materials, Tata Steel s
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Contact: Wolfgang Hübner, Head of Structural Policy Division and Steel Unit Tel: +33 1 45 24 91 32 Fax: +33 1 44 30 62 63 E-mail: [email protected] UUnclassified
English text only
JT03209761
Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format
DSTI/SU/SC(2006)43
Raw materials outlook for India - A Review A D Baijal VP (Raw Materials) Tata Steel
IISI-OECD CONFERENCE Date: 17th May, 2006
1
Presentation Outline
Steel Industry
-Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
2
2 DSTI/SU/SC(2006)43
Global steel demand poised for robust growth
Crude Steel Production (Million Tonnes) 1,200
1,000 The Early The 1st The 1st The 2nd The 2nd 800 Years Plateau Surge Plateau Surge
600 CAGR CAGR 5 % CAGR 1 % 400 CAGR 7 % CAGR 2 % 5 % Fall of USSR 200 Great WW 2 Oil Crisis Depression Asian WW 1 Financial 0 Crisis 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
3
The Global Economic Forecast: Asia poised to be the emerging power house of growth
• In 2020, the US and China will still be the two largest economies in the world (in PPP) • India leaves Japan behind and moves up to 3rd place • India, Malaysia and China will post the highest GDP growth rates (above 5%) over 2006-20 4 • Ireland, the US and Spain are the rich countries expected to grow the most
3 DSTI/SU/SC(2006)43
Indian Economy
GDP per capita to increase from USD 2500 and USD 5000 in 2020. Poverty ratio dropped from 50% of population in 1950 to 26% in 2005. Economic growth rate ~ 8% Population growth rate of 1.3 - 1.5% 33% population below 15 years and 5% above 65 years House hold savings rate go up from current 23% to 30% 100,000 MW new capacity (90% of present) in next 7 years. The Fiscal Responsibility and Budget Management Act Literacy standards increase from 18% in 1951 to 65% in 2002. 5
Steel Consumption Vs. GDP
10000 Steel Consumption and GDP per Capita in 2004
1000
ption (kg/capita) S.Korea China Taiwan Japan 100
Steel consum US India Other Africa
10 0 5000 10000 15000 20000 25000 30000 35000 40000 GDP per capita (US$000 at PPP rates)
Bubble size represents the population
The growth in BRIC will double the steel demand by 2050
6 Source: internal analysis
4 DSTI/SU/SC(2006)43
Growth in key sectors will drive the steel demand
Apparent Steel consumption of countries
1400 AE U UAE – 1252 1200 n a wa re ai o T K th 1000ita ou p S g o n K 800 g n
er Caer n a o ap > 150 MT, The p H J y an lia s 600 rm r a g e t present gap G u s A present gap K A U S 400 ce an na a r hi di F C In 200 World Avg. – 170 India – 33 0 Countries
We feel the growth trigger has been fired…..….. (Last 3 years GDP growth of + 7.5%)
7
Production sites will move to regions with both RM source and demand.
Excess CIS Latin America Raw Material basin
India Growth basin
USA / Canada Eastern EU Europe Avail-ability Iron of Ore China
Other Deficit Mature basin emerging Japan Asian countries
Low Forecasted Growth rate 2005-15 High 8
5 DSTI/SU/SC(2006)43
Indian Steel production likely to triple in next 15 years
National Steel Policy Steel Production Projections
150 Planning 125 Commission projections 110
100
75 70
50
Crude Steel : mtpa Steel : Crude 50 34 36 29 31 25
0 2000-01 2001-02 2002-03 2003-04 2006-07 2011-12 2020
Year To realize the above projections, it would be necessary to put in place the right policies as well as alignment of the policies
Presentation Outline
Steel Industry
-Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
10
6 DSTI/SU/SC(2006)43
Multifold increase in Raw Material Consumption
200 190
180
160
140
120 2004-05 100 2019-20 (F) 80 70
60 54 39 40 27 26 20 13 13
0 Iron Ore Coking coal Non coking coal Fluxes
11
Indian Iron Ore Reserves:
States Ore Fe Alumina Phos Five Zones Range (%age) Max States Major Mines / Deposits (%age) (%ag e) A-Orissa, Haem 62-64 2-4 0.04- A-Orissa, Chiria, Noamundi, Joda, Jharkhan atite 0.1 Jharkhand Kiriburu, Meghataburu, d Thakurani, Bolani, Gua, Malangtoli, Gandhamardan, B- Haem 64-66 1.0-4.0 0.04- Daitari Chattisga atite 0.15 rh, MP, B-Chattisgarh, Bailadila, Dalli,Rajhara, Maharash MP, Rowghat, Mahamaya, tra Maharashtra Aridongri, Surajgarh C- Haem 62-64 2.0-4.0 0.04- Karnataka atite 0.09 * C-Karnataka Donimalai, Ramandurg, D-Goa Haem 60-63 2.0-4.0 0.04- * Kumaraswamy, NEB Range, atite 0.07 Ettinahatti, Tumti, Belagal D-Goa N Goa, S Goa, Redi E- Magn 35-45 1.0 - Karnataka e E-Karnataka Kudremukh, Bababudan, * * Kudachadri *
12
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Iron Ore
Production Trend Indian Resources: 23 bt
350 10% AP 300 rs the 6% 250 O 200 150 Karnatak 14% Jharkhand a 100 39% m illio n to n n es h oa r 50 G a g is 3% tt 0 a h '99-00 '00-01 '01-02 '02-03 '03-04 '04-05 2020 C Orissa 10% Production Consumption Exports 18%
13
Natural iron ore resources can support lump: fines ratio of 20:40 as against current adverse trend of 40:60
90.00
The current steel production through BF/BOF:DRI:others is77.9 60:33:7 80.00 Lumps 70.00 Fines 67.1 Concentrates
60.00 55.1 53.0
s 47.4 50.00 45.2 41.2 39.6 40.00 Million Ton Million 33.6 34.6
30.00
20.00
10.00 6.0 6.4 6.5 6.1 7.1
0.00 2000-01 2001-02 2002-03 2003-04 2004-05
- Fines are mostly being exported - DRI route uses 100% lumps, detrimental to mineral conservation - Economies of scale not available with large number of small players to set up sintering / pelletization facilities
- Increasing use of fines in agglomerates in bigger size blast furnaces can 14 increase its productivity and bring down cost/tss
8 DSTI/SU/SC(2006)43
Domestic DRI production : Trend and Forecast
40
30 Growing @~7%
20
million tonnes 10
0 88 91 94 97 '00 '03 '04 '05 '06 '20
Capacity Production
Increasing DRI production may lead to faster depletion of high quality lumpy ore reserves 15 Source: Tata Steel analysis
With expected CAGR of ~7% and exports at 50 mtpa, India will become an importer of iron ore in next 40 years.
Exports of iron ore =50 Mtpa NATIONAL STEEL GROWTH CAGR=3 CAGR=4 CAGR=5 CAGR=6 CAGR=7
1000 15000.00 900 Reserves in 10000.00 800 MT 700 5000.00 600
500 0.00 Iron Ore 400 Production -5000.00 300 in MT Mineable Reserves (Mt) Iron Ore Production MTPA Production Iron Ore 200 -10000.00 100
0 -15000.00 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 2020-21 2022-23 2024-25 2026-27 2028-29 2030-31 2032-33 2034-35 2036-37 2038-39 2040-41 2042-43 2044-45 2046-47 2048-49 2050-51
Most of the iron ore reserves are in reserve forest and environment 16 sensitive areas making the actual availability of reserves much less
9 DSTI/SU/SC(2006)43
Imperative – Need for conservation and resource enhancement Conservation ….for future Challenges o Scientific Mining - Selective mining of high grade o Agglomeration capacity lumpy ores (DRI). o Use of pellets for DRI o Beneficiation. - Many low volume producers o Technology for using - Mismatch in agglomeration Slimes capacity and fines generation. o Restricting exports.
- Lower production (33%) routed Enhancement … through beneficiation. o Detailed / Scientific - Increasing exports. Exploration
17
Indian Coal Reserves Billion tonnes Proven: 35 Indicated: 30 Total : 65
Proven: 7 Proven: 11 Indicated: 8 Indicated: 12 Total : 15 Total : 23
Proven: 14 Proven: 5 Indicated: 30 Indicated: 2 Total : 44 Total : 7 Proven: 9 Indicated: 25 Total : 34 Proven 90 Indicated 110 Proven: 8 Indicated: 6 Inferred 46 Total : 14 Total 246 18
10 DSTI/SU/SC(2006)43
Domestic Coking Coal
Coal Reserves, BT Coking Coal Producers Washed Coal Ash Semi-Coking 28 CIL 5.8 BCCL 18% Prime Coking 6 Tata Steel 3.3 CCL 18% Non Coking 212 Others 0.5 Tata Steel 13% Total 246
3%
Coking 86% 14% 11%
Non-Coking Prime Coking Med Coking The Indian Coal, both coking and non coking is characterized by
high ash and low washability index. 19 Geological Survey of India : As of 1.1.2001
Imports of Coking Coal to increase due to low Indigenous availability 25 21.0 100 88 20.0 20.0 Coking Coal 20 18.4 16.8 80 15.1 62 15 60
MTPA 8.1 MTPA 10 8.3 8.2 8.2 8.1 8.1 40 28 13 5 20 8 10 0 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2005 2015 2025
Indigenous Coal Imported Coal Demand Domestic Supply
- The additional demand for coking coal will be 70 mt by 2020 for 110 mt steel demand as per national steel policy - For coking coal, dependence on imports to continue
Source: 10th Plan report
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Need to conserve the scarce coking coal resources
Challenges Conservation of resources for future use -High ash o Beneficiating - Poor washability o Improving washing capacity / efficiency - Over 40% coking coal used o Technology using for thermal use. medium coking coal for - 70% demand met through coke making imports o Steel making technology using non-coking coal - Low domestic availability* Enhancement of capacity o Developing new sources o Detailed exploration
21
*Coal Strategy: Reducing coking coal requirements Mining: - Beneficiation technology - Improving mining / washing process efficiency Coke & Sinter Making - Quality Coke from semi coking indigenous coal. - Using low ash imported coal for blending - Reducing Alumina level in iron ore for improving sinter & BF productivity and reducing coke requirement Iron Making: - Pulverized Coal Injection using semi/non coking coal - Tar Injection - Using more pellets - Using sponge iron for feed
22
12 DSTI/SU/SC(2006)43
Limestone Limestone BF grade SMS grade Reserves World Abundant India 160 bt 15 bt 7 bt Current Requirement Requirement in 2020 BF grade 3.1 mt 9.5 mt SMS grade 7 mt 22 mt
• SMS Grade available in Rajasthan and Himalayan regions. • While Environment and logistics constrains Himalyan exploitation, high freight from Rajasthan is adverse. • Stringent quality requirement further restricts availability Therefore, Dependence on imports for steel grade limestone
to continue… 23
Chrome Ore
Figures in million tonnes Cr Ore Reserves Production Ore Production Fe Cr World 11068 18 6 India 115 3.2 0.6
• Ferro-Chrome industry in India is highly fragmented • >98% Chrome ore reserves in Orissa. • Chrome ore tons expected to ~ 10 mt by 2020. • High conversion cost to Ferro Chrome due to high power cost
Globally competitive power tariffs to avoid shift to countries where power is cheaper.
24
13 DSTI/SU/SC(2006)43
Manganese
Figures in million tonnes Mn Ore/Reserves Production Ore Production FeMn, SiMn World 5000 29 10.5 India 406 1.4 0.71 • International market for Mn alloys have dipped in recent years • Manganese ore tons expected to grow to 4.5 mt by 2020 • The usage of Mn alloys for steel making is limited by – Low Mn content and high phos in Mn Ores – High power cost for conversion
Therefore …. • Need to explore and develop more high grade Mn resources • Beneficiation to improve the lower grade coupled with sintering 25 Source: Mineral Commodities Summary: 2002, IBM
Presentation Outline
Steel Industry
-Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
26
14 DSTI/SU/SC(2006)43
Evolution of India’s Regulatory Environment 1950 ~ 1991 – Tightly regulated industry
Iron ore reserved for Public Sector Companies
Growth subjected to “Industries (Development & Regulation) Act 1951”
Pricing regulated by “JPC Price Mechanism”
Distribution subjected to controls such as “Freight Equalization Scheme”
Foreign Investment discouraged
Foreign trade regulated by Canalization policy
An Industry insulated from Market forces 27
Evolution of India’s Regulatory Environment…
1991 onwards : Economic Liberalisation
Steel Sector opened to private participation
Included in list of “High Priority” industries
Up to 100% FDI allowed in prospecting & mining Iron ore
No separate approval for prospecting and mining necessary
Decanalisation of low grade Iron Ore (Fe<64%) trade.
Decanalisation of high grade Iron Ore (Fe>64%) - Export
License given for limited quantity and time .
28
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Challenges & Policies for meeting growth demand
Challenges Policy Reforms under consideration - Fragmented capacities o Minimum production - Unscientific operations levels for lease grant - Inadequate power & transport o Scientific Mining and infrastructure Mineral Beneficiation o Lease grant solely on the - Delay in grant / renewal of basis of technical & mineral leases financial capability o FDI & private sector participation for infrastructure development o Time bound grant/renewal process29
Challenges & Policies for meeting the growth demand Policies reforms under consideration o Creation of land bank / private sector participation in afforestation Challenges o Social / Environment cost to be seen - Long drawn process in Long Term perspective for land/forest/ o Transparent implementation of the environmental laws clearance o Technology / private participation - Socio/political for detailed exploration pressures o Large area prospecting license o Linking iron ore resources to - Limited iron ore / integrated and other steel plants coking coal reserves o De-nationalization of coal mines o De-reserving areas for private sector for a level playing field 30
16 DSTI/SU/SC(2006)43
Presentation Outline
Steel Industry
-Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
31
Rail Freight in India are high
Railway Distance & Freight of Major Players Weighted Ave. Rly distance & costs (Iron Ore) -2002 900 9
800 8
700 7
600 6
500 5
400 4 $/Ton US Km's
300 3
200 2
100 1
0 0 Australia Brazil S.Af rica India
Transport Cost 3.03 3.5 5.87 8.11 Rail Distance 315 650 847 477
Transport Cost Rail Distance
32
17 DSTI/SU/SC(2006)43
Inland Transportation of Raw Material
Traffic in steel sector (mt) Railway Road 250 200 150 100 50 0 Raw Material Finished Steel Raw Material Finished Steel
2004 2020 Inland transportation: – Infrastructure being beefed up for the incremental volumes
33 Source: Economic Survey, 2003-04.
Railways – The challenges … Challenges Initiatives • Expansion of facilities • Tariff & Capacity • Development of raw material out of sync with a high growth corridor for faster movement of environment raw materials to ports and • Operational consumption points efficiencies. • Improving services • Costlier longer hauls • Reinforcing existing tracks • Lower bulk • Improvement in freight movement per haul structure • Participation of private sector through SPV / own your wagon 34
18 DSTI/SU/SC(2006)43
Ports
120
2003-04 100 100 2019-20
85
80 70
60
40 26 18 20 6 6 2 0 Import Export RM Import Export finished steel RM Finished steel • The port facilities would also have to be expanded substantially. • Improving productivity, turn around time, capacity to handle larger vessels and other operational parameters of efficiency are critical. • Private sector participation in ports increasing
• Feeder balance (mainly railways) is a key issue 35
Port facilities comparison
250,000 25.00 Existing Proposed Being designed Ports for higher 200,000 20.00 operation al efficiency and 150,000 15.00 capacity
100,000 10.00 Slg draft (Mtrs) & Tariff ($/Mt) Ldg Rate & average parcel size (Mt) size parcel average & Rate Ldg
50,000 5.00
0 0.00 Dampier/Aus Cape PDM/Brz Saldhana/SA Vizag Paradip Haldia Dhamra Paradip 2 Haldia/T'spr Lambert/Aus Ports Total Tariff/Mt Parcel size Loading rate (act.ave.) G.Draft 36
19 DSTI/SU/SC(2006)43
Presentation Outline
Steel Industry
-Global
- Indian
Raw materials for Steel
Policy / Legislation
Infrastructure
Conclusion
37
India – A LandIndia Of – Opportunities A Land Of Opportunities Rich Mineral Base
Fourth largest Economy (PPP) - A safe place to do business Largest democracy – political stability & consensus on reforms Largest reservoir of Second Largest skilled/semi-skilled Emerging Market manpower at low Liberal & cost transparent investment policies
Long-term sustainable Competitive advantage High returns on - High growth rate investment economy
Developing Regulatory Reforms Infrastructure 38
20