A Review of developments in The Global & Indian Steel Industry

Monthly edition Issue No. 46 JANAURY 2020 (Covering December 2019)

Compiled on behalf of Indian Steel Association, By Mr. Anup Kashyap, Deputy Manager-Technical

Strictly for Internal circulation About the Report

❑ The Indian Steel Association introduced a monthly report titled ‘A REVIEW OF DEVELOPMENTS IN GLOBAL & INDIAN STEEL INDUSTRY’, from August 2016.

❑ The report provides general background information reviewing the status of the developments in the global and Indian steel industry, pertaining to raw material, production & consumption, trade, shipping, pricing & forecasts, country reportage, policy developments, economic parameters etc.

❑ The consistent format of the report provides an insight into the relevant aspects of steel scenario globally and domestically .

❑ The information has been sourced from independent third party databases, knowledge sources and news reports, and the authenticity of the same has not been independently verified by ISA.

❑ The report is issued in the last week of each month to the members of Indian Steel Association , various ministries / departments / institutions. Contents of the Report

SI. Title Page No Number

1. Global Economic Development 4-6

2. Global Steel Development 7-14

3. Domestic Steel Development 15-19

4. Indian Economic Development 20-23

5. About ISA 24-30 GLOBAL ECONOMIC DEVELOPMENTS

4 Country-wise Growth Forecasts 2019 - 2024

In % 2020 2021 2022 2023 2024 Real GDP Growth 6.1 6.2 6.5 6.4 6.3 India Inflation 4.2 4.4 4.4 4.3 4.2 Real GDP Growth 5.9 5.7 5.5 5.0 4.7 China Inflation 4.9 4.2 3.1 2.9 2.7 Real GDP Growth 1.7 1.8 2.0 1.8 2.2 U.S.A Inflation 1.7 1.9 2.1 1.8 1.8 Real GDP Growth 0.4 0.9 1.1 0.9 1.0 Japan Inflation 0.7 0.9 0.8 1.1 1.2 Real GDP Growth 1.4 1.7 1.8 1.7 1.7 EU 28 Inflation 1.5 1.7 1.9 1.9 1.9

As of 20th January 2020 The assumptions for forecasts are available on the website of the Economist Intelligence Unit

Source: Global Forecasting Service, The Economic Intelligence Unit 5 Global Economic Scenario

▪ In 2020-21 global growth forecasts have long reflected our expectations that US-Iran tensions would remain high but remain short of a full-blown war. As such, we maintain our view that the global economy will grow by 2.4% in 2020 (up from an estimated 2.3% in 2019).

▪ Downside risks to this forecast remain high, however, especially if a flare-up in tensions leads to the closure of the Strait of Hormuz, through which about 20% of global oil supplies transit.

▪ Oil markets have so far reflected these fears; on January 6th crude oil prices briefly rose to US$70/barrel, but since then they have eased back to about US$68/b (the level that they were at before General Suleimani's assassination).

▪ We expect oil prices to remain elevated in the first quarter of 2020, at an average of US$68/b (up from US$65/b previously). However, coupled with record US oil production, an expected slowdown in the Chinese and US economies will keep a lid on oil prices in the coming months.

▪ Should US-Iran tensions flare up, however, oil prices could rise to as much as US$90/b, fuelling a rise in inflation and dampening sentiment. This represents one of the main risks to the global economy in 2020-21.

Source: Global Economic Scenario, The economist 6 GLOBAL STEEL DEVELOPMENTS

7 Global Steel Output

➢ Global crude steel production reached 1,869.9 million tonnes (Mt) for the year 2019, up by 3.4% compared to 2018. Crude steel production contracted in all regions in 2019 except in Asia and the Middle East.

➢ Asia produced 1,341.6 Mt of crude steel in 2019, an increase of 5.7% compared to 2018. China’s crude steel production in 2019 reached 996.3 Mt, up by 8.3% on 2018. India’s crude steel production for 2019 was 111.2 Mt, up by 1.8% on 2018. Japan produced 99.3 Mt in 2019, down 4.8% compared to 2018. South Korea produced 71.4 Mt of crude steel in 2019, a decrease of 1.4% compared to 2018.

➢ The EU produced 159.4 Mt of crude steel in 2019, a decrease of 4.9% compared to 2018. Germany produced 39.7 Mt of crude steel in 2019, a decrease of 6.5% on 2018. Italy produced 23.2 Mt in 2019, down by 5.2% on 2018. France produced 14.5 Mt of crude steel, a decrease of 6.1% on 2018. Spain produced 13.6 Mt of crude steel in 2019, a decrease of 5.2% on 2018.

➢ Crude steel production in North America was 120.0 Mt in 2019, 0.8% lower than in 2018. The US produced 87.9 Mt of crude steel, up by 1.5% on 2018.

➢ The CIS produced 100.4 Mt, a decrease of 0.5%. Russia produced 71.6 Mt of crude steel in 2019, down by 0.7% on 2018. Ukraine produced 20.8 Mt of crude steel in 2019, a decrease of 1.2% compared to 2018.

➢ Annual crude steel production for South America was 41.2 Mt in 2019, a decrease of 8.4% on 2018. Brazil produced 32.2 Mt in 2019, down by 9.0% compared to 2018.

Source: World Steel Association 8 TOP 10 STEEL PRODUCING IN THE WORLD 2019

Rank Country 2019 (MT) 2018 (MT) % 2019/2018 1. CHINA 996.3 920.0 8.3 2. INDIA 111.2 109.3 1.8 3. JAPAN 99.3 104.3 -4.8 4. UNITED STATES 87.9 86.6 1.5 5. RUSSIA 71.6 72.0 -0.7 6. SOUTH KOREA 71.4 72.5 -1.4 7. GERMANY 39.7 42.4 -6.5 8. TURKEY 33.7 37.3 -9.6 9. BRAZIL 32.2 35.4 -9.0 10. IRAN 31.9 24.5 30.1

Source: WORLD STEEL ASSOCIATION,MT-Million tons 9 Country wise Crude Steel % Share 2018 vs 2019

2018 2019

Source: World Steel Association 10 CHINA STEEL DEMAND IN 2020

➢ China’s finished steel consumption will increase 2% on the year to 889.8 million mt in 2020, driven by demand from construction sector, according to China Iron & Steel Association (CISA).

➢ The total steel consumption rose by 6% on the year in 2019 to 875.3 million mt.

➢ Steel market sources considered a further 2% rise in steel demand in 2020 as decent growth, considering domestic steel demand in 2019 had been strong enough to absorb most of China’s incremental steel production.

➢ The construction sector — property and infrastructure combined — will remain the biggest steel demand driver in 2020, consuming 498 million mt of finished steel, up 2% on year, according to CISA. The construction sector’s steel consumption increased 8% on the year in 2019 to 486 million mt.

➢ Growth in property new starts will slow in 2020, but infrastructure construction will accelerate and offset the downward pressure on steel demand from weaker property construction.

➢ CISA expects healthy steel demand growth rate in the machinery sector, due to steady demand growth from the petrochemical and construction industry. Source: CHINA IRON AND STEEL ASSOCIATION (CISA) 11 USA STEEL INDUSTRY CAPACITY UTILIZATION 2019

▪ The U.S. steel sector reached a capacity utilization rate of 82.3% for the year through Jan. 18, according to the American Iron and Steel Institute (AISI).

▪ Production for the year to date reached 4.94 million tons, up 2.6% from production during the same period last year (when capacity utilization rate reached 80.4%).

▪ By region, production for the week ending Jan. 18, 2020 broke down as such: • Northeast: 216,000 net tons • Great Lakes: 686,000 net tons • Midwest: 208,000 net tons • Southern: 730,000 net tons • Western: 88,000 net tons

▪ From the price side, U.S. steel prices have continued to trend upward after seemingly hitting a bottom from mid-October to mid-November 2019.

▪ The U.S. CRC price is up 2.39% over the past 30 days, reaching $772/st as of Jan 20.

▪ The U.S. HRC is up 3.21% to $578/st.

Source: American Iron and Steel Institute (AISI) 12 Trend in USA Steel Imports 2019 ➢ United States finished flat steel imports fell by 7.1 % M-o-M in Nov ‘19 against Oct’19 registered an Import volume 915476 metric ton. HRC /Plates fell by 15% M-o-M.

➢ Finish long imports volumes also fell to 189893 metric tons down 17.4 % M-o-M in Nov’19.

➢ On the Other hand ,Country’s semi finished steel imports volumes has observed a rise by 7.8 % M-o-M.

➢ Imports of ferrous scrap by US moved down by 12.9 % M-o-M in Nov’19 to 0.23 Million tons.

➢ Iron ore imports volumes have sharply fell to 212401 Metric tons in Nov’19 against ‘19 by 52.3 5 M-o-M.

Source: Steel Mint 13 AUSTRALIAN COKING COAL PRICE CHART

Source: Coal Mint 14 DOMESTIC STEEL DEVELOPMENTS

15 Indian Steel Industry - CY 19 Vs CY 18

Commodities Year Production in MT Export in MT Import in MT

2019 228.51 19.1 2.2 Iron Ore 2018 204 10.6 15.6 2019 67 13 0.1 Pellet 2018 63.6 8.2 0.7 2019 NA NA 55 Coking Coal 2018 NA NA 53 2019 111 NA NA Crude Steel 2018 106 NA NA 2019 45.31 5.45 2.37 HRC/Plates 2018 45.44 2.99 2.41 2019 15.71 0.62 0.5 CRC 2018 13.86 0.71 0.48 2019 40.43 0.51 0.28 Rebars/Rod 2018 38.11 0.42 0.22

Source: Steel Mint Research 16 Export Rise of Steel in India

▪ India’s Steel Export saw an increase of 23% in CY 19 compared to the figure in 2018.

▪ Steel makers shipped around 13.06 MT of steel products (long, flats and semis) in CY 2019 as against 10.64 MT in 2018.In this corpus the share of flats was 8.35 MT ,long products were 0.95 Mt and semis share was at 3.71 MT.

▪ Against this break up for 2018 6.42 MT flats ,0.9 MT of longs and 3.3 Mt of semis. Consequently in 2019 ,flats were up 30.06 % longs moved up 5.5 % and semis were also up by 12.42 % respectively.

▪ Chinese buying supported Indian exports in the second half of 2019.However it was mainly Vietnam ,Nepal and Italy which pushed exports in CY 2019 in terms of volumes. In terms of the highest percentage growth as well as volume ,Vietnam reported highest imports at 2.36 MT during the period against 0.48 MT in CY 18.

▪ The increase in steel exports from India was a result of subdued domestic demand and higher production in the year 2019 which goaded steel makers to look at market outside India. Source: Steel mint 17 Iron Ore Scenario of India

▪ Odisha-India’s largest iron ore producing state recorded total iron ore dispatches at 9.32 MT in Dec’19,up 11 % on a monthly basis as against 8.37 MT in Nov’19.

▪ Almost all the miners in Odisha increased iron ore fines and lumps offers in the last one month, fines around INR 600-700 per ton and in lumps around 1000-1100 per tons (ex- Mines).

▪ Indian Iron Ore imports for Dec’19 depicted 17% drop on monthly basis to 0.10 MT as against 0.12 MT in Nov’19.

▪ The exports for CY 19 witnessed at 19.14 MT up 82 % on yearly basis as against CY 18 exports at 10.53 MT ,Rungta Mines stood the largest iron ore exporter in CY 19 at 4.12 Mt yp by 78 % as against 2.31 MT in CY’18.

Source: Steel Mint 18 Domestic Steel Price of India

➢ Current trade reference prices for HR stands at INR 39,750-40,000 metric tons(ex- Mumbai),INR 39000-39,500 per metric ton(ex-Delhi) and INR 40,000-40,500 per metric ton(ex-Chennai).Prices mentioned above are basic and extra GST @18% will be applicable .

➢ Current trade reference prices for CRC (IS513) stands at INR 45000-45,500 metric tons(ex-Mumbai),INR 42,500-44,500 per metric ton(ex-Delhi) and INR 45,000-46,000 per metric ton(ex-Chennai).Prices mentioned above are basic and extra GST @18% will be applicable .

Source: Steel Mint 19 INDIAN ECONOMIC DEVELOPMENT

20 Highlights of Indian Economy in 2019

▪ It was a bit challenging for the Indian Economy to overcome all the hurdles and barriers. India saw a steep decline in its growth rate in the July-September quarter of 2019, when Gross Domestic Product (GDP) was at its lowest in 7 years at 4.5 percent.

▪ Several sectors such as real estate, aviation, automobile and construction sectors suffered a constant decline in demand. On the other hand, the Banking sector and financial services witnessed serious crisis due to rising NPAs & bad loans and squeezing credit limits.

▪ This economic slowdown could be attributed to weakened investments and declining consumer demand. To revive the Indian economy and improve its growth rate, the Central Government announced and undertook several measures and initiatives. Have a look at the major events of the Indian economy in 2019:

✓ Union Finance Minister Nirmala Sitharaman slashed India’s Corporate Tax Rate to 22 percent with effect from April 1, 2019. The tax cut aims to stimulate private investments from international players. As per PM Narendra Modi, the Corporate Tax cut will be a win- win situation for over 130 crore Indians. ✓ In order to encourage investments in Start-Ups, the Central Government approved exemption of Start-ups from the ‘Angel Tax’ under the Income Tax Act, 1961. The registered startups have been exempted from the Angel tax on funding or investment of up to Rs 25 crore. Before this, the limit was Rs 10 crore. Source: Economic Survey of India-2018-19,RBI report ,Ministry of Finance ,Ministry of Commerce and Industry 21 Highlights of Indian Economy in 2019

✓ Prime Minister Narendra Modi announced that India will not join the Regional Comprehensive Economic Partnership (RCEP) after it failed to address the key concerns of India. During the past 7 years of India-RCEP negotiations, several things including global trade scenarios have changed.

✓ The Central Government approved the disinvestment of 33 Central Public Sector Enterprises (CPSEs) in the year 2019. These 33 CPSEs include bug names such as Air India, Pawan Hans, Bharat Petroleum and others.

✓ Union Finance Minister Nirmala Sitharaman announced the merger of 10 public sector banks (PSBs) into four. Once the merger gets completed, India will have 12 Public Sector Banks from 27 Public Sector Banks in 2017. The banks being merged are - Oriental Bank of Commerce, Punjab National Bank, United Bank of India, Allahabad Bank, Indian Bank, Canara Bank, Syndicate Bank,Andhra Bank, Union Bank of India, and Corporation Bank.

✓ The first Economic Survey of the second tenure of Narendra Modi-led government outlined the blueprint to achieve the vision of making Indian a USD 5 trillion economy. The Economic Survey was prepared by the CEA Krishnamurthy Subramanian. It pressed for the adoption of behavioural economics and transformation from ‘Beti Bachao Beti Padhao’ to ‘BADLAV’ and from ‘Swachh Bharat’ to ‘Sundar Bharat’. The Economic Survey 2019 projected the GDP growth at 7 percent for FY 2019-20.

Source: Economic Survey of India-2018-19,RBI report ,Ministry of Finance ,Ministry of Commerce and Industry 22 Rates at Reserve Bank of India 2020

Reference Rates Date Lending/ Deposit Rates Currency 28th Jan 2020 Base Rate : 8.45- 9.40 %

I USD 71.32 Savings Deposit Rate : 3.25-3.50 % MCLR (Overnight) : 7.50-7.95 % 1 EUR 78.62 Term Deposit Rate > 1 year : 6.10-6.40 % 1 GBP 93.09 100 YEN 65.41

Policy Rates Reserve Ratios

Policy Repo Rate : 5.15 % CRR : 4 % Reverse Repo Rate : 4.90 % SLR : 18.25 % Marginal Standing Facility Rate : 5.40 % Bank Rate : 5.40 %

Source: Reserve Bank of India 23 ABOUT ISA

24 About ISA

➢ The Indian Steel Association (ISA) is the voice of the Indian Steel Industry, in both domestic and global forums. It is at the forefront of all deliberations pertaining to matters of public & regulatory policy, raw materials, international trade, logistics, environmental concerns, technology and other aspects of steel- making. The Indian Steel Industry looks at ISA to further its critical agenda of sustained growth, both in steel production and in generating domestic demand.

➢ ISA was formed in 2014 and has 15 members – eight full members and seven affiliates. The list of full members includes –Steel Authority of India (SAIL) and Rashtriya Ispat Nigam Ltd (RINL) – while heavyweights from the private sector include JSW Steel Ltd, Tata Steel Ltd, Jindal Steel and Power Ltd, Essar Steel India Ltd, Bhushan Power and Steel Ltd and Tata Steel BSL Ltd. ISA, an affiliate member of World Steel Association (WSA), regularly collaborates with WSA on the organisation of events, as well as taking part in other key meetings with global partners.

25 Members of Indian Steel Association

Our Seven Full Members are: • Tata Steel Ltd • Steel Authority of India Ltd. • JSW Steel Ltd. • Rashtriya Ispat Nigam Ltd. • Essar Steel Ltd. • Jindal Steel & Power Ltd. • Tata Steel BSL Ltd.

Our ten Affiliate Members are Monnet Ispat & Energy Ltd., INSDAG (Institute for Steel Development and Growth), KISMA (Karnataka Iron and Steel Manufacturer’s Association), Arjas Steel, Jindal Stainless, Electro steel Steels ,Shyam steel , Shyam Metalics ,Tata Steel Long Products Limited and Orissa Metalliks

Pvt. Ltd (Orissa Metalliks Pvt. Ltd.) 26 Vision and Objectives of ISA

➢ Vision of ISA- To work towards transforming the Indian Steel Industry as a global leader acclaimed for its Quality, Productivity and Competitiveness, with a focus on health, safety and environment, along with a growing thrust on innovation through R&D, adopting an inclusive and collective approach.

➢ Objectives of ISA- ▪ Promoting steel by raising awareness about the numerous advantages of good quality steel ▪ Collaborating with international steel organizations to tackle issues of mutual interest. ▪Working with the government on matters affecting the steel industry.

27 Important Ministries/Department/Organization

Ministry of Steel Name of the person Designation Contact Details Shri Binoy Kumar Secretary [email protected] Shri Saraswati Prasad Special Secretary & Financial Adviser [email protected] Smt. Rasika Chaube Additional Secretary [email protected] Smt. Ruchika Chaudhry Govil Joint Secretary [email protected] Shri Puneet kansal Joint Secretary [email protected] Ministry of Mines Name of the person Designation Contact Details Shri Anil Gopishankar Mukim Secretary [email protected] Dr. K. Rajeswara Rao Additional secretary [email protected] Ministry of Commerce Name of the person Designation Contact Details Shri Anup Wadhawan Secretary [email protected] Shri Shudhanshu Pandey Additional Secretary [email protected] Shri Alok Vardhan Chaturvedi DGFT [email protected] Dr. K.C.Rout Additional Secretary-DGFT [email protected] Ministry of Environment, Forest and Climate Change Name of the person Designation Contact Details Shri C K Mishra Secretary [email protected] Control Pollution Central Board Name of the person Designation Contact Details Shri S.P. Singh Parihar Chairman [email protected] Dr. Prashant Gargava Member Secretary [email protected] Ministry of Finance Name of the person Designation Contact Details Shri Rajiv Kumar Joint Secretary [email protected]

28 Contact Us for data related issues

Address:207-208, 2nd Floor Kailash Building New Delhi -110-001 India Tel: +011 4266 8811 Fax: +011 4266 8805 E-mail: [email protected] Website: http://indsteel.org/

29 THANK YOU

DISCLAIMER The material in this presentation has been prepared by Indian Steel Association (ISA) and is a general background information reviewing the status of the developments in the global and Indian steel industry as at the date of this presentation. This presentation is strictly for internal use of all the member companies of ISA, whose names have been stated in the presentation. Information is given in summary form and does not purport to be complete or all inclusive. The information has been sourced from independent third party databases, knowledge sources and news reports, and the authenticity of the same has not been independently verified by ISA. Additionally, any third party forecasts on financial or economic parameters, projections or estimates should not be construed as an investment advice or a recommendation to any ISA member. Recipients of this presentation from member companies of the ISA should each make their own evaluation of the contents and adequacy of the information contained in the presentation. ISA does not undertake any obligation to publicly release any changes to any revisions, modifications or forward looking statements in the subsequent editions of this bi-monthly presentation. Unless otherwise specified, all information is for the period DECEMBER 2019 or prior. 30