STEEL
For updated information, please visit www.ibef.org January 2018 Table of Content
Executive Summary……………….….…….3
Advantage India…………………..….……...4
Market Overview …………………….……..6
Recent Trends and Strategies …….……..17
Growth Drivers……………………...... 22
Opportunities…….………...... ………….…30
Success Stories……………....……………33
Industry Associations……………....……...36
Useful Information………...... …………….38 EXECUTIVE SUMMARY
. Total finished steel production in India has increased at a CAGR of 8.39 per cent during FY12–17, with country’s steel production reaching to 111.254 million tonnes per annum (MTPA) in FY17. 2rd largest producer of . The country became the 2nd largest crude steel producer in 2017, as large public and private sector players crude steel strengthen steel production capacity in view of rising demand. . Moreover, capacity has increased to 128.28 million tonnes (MT) in FY17, which is 5.17 per cent more than FY16, while in the coming ten years the country is anticipated to produce 300 MT of steel
. India’s comparatively low per capita steel consumption and expected growth in consumption due to growing Strong growth infrastructure construction, automobile and railways sectors has offered scope for growth opportunities . National Mineral Development Corporation is expected to increase the iron ore production 75 million tonnes per annum (MTPA) until 2021 indicating new opportunities in the sector
. Domestic players’ investments in expanding and upgrading manufacturing facilities are expected to reduce Rising domestic and reliance on imports. In addition, the entry of international players would provide benefits in terms of capital international investments resources, technical know how and more competitive industry dynamics
Note: MTPA – Million Tonnes Per Annum Source: World Steel Association, Ministry of Steel, Aranca Research
3 Steel For updated information, please visit www.ibef.org Steel
ADVANTAGE INDIA ADVANTAGE INDIA
. Demand would be supported by growth in . To achieve steel capacity build-up of 300 the domestic market million tonnes per annum (MTPA) by 2030, . Infrastructure, oil and gas and automotives India would need to invest US$ 156.08 would drive the growth of the industry billion by 2030-31. . Lower per capita consumption compared to . 301 MoUs have been signed with various international average states for planned capacity of about 486.7 MT. . Steel production in India is forecast to double by 2031, with growth rate expected to go . Ministry of Steel plans to set up Steel above 10 per cent in FY18 Research and Technology Mission in India to promote R&D activities in the sector
ADVANTAGE INDIA . As of 2017, India is the world’s 2rd largest . 100 per cent FDI through the automatic producer of crude steel (up from 8th in route is allowed. Large infrastructure 2003) projects in the PPP mode are being formed . Easy availability of low-cost manpower . National Steel Policy (NSP) implemented to and presence of abundant iron ore encourage the industry to reach global reserves make India competitive in the benchmarks global set up . Policy clarity and stability expected in respect of mining leases and forest clearances . 20 per cent safeguard duty on steel imports
Notes: MT - Million Tonnes, FDI – Foreign Direct Investment Source: Metallurgical and Materials Engineering Division Board, Aranca Research
5 Steel For updated information, please visit www.ibef.org Steel
MARKET OVERVIEW EVOLUTION OF THE INDIAN STEEL SECTOR
. Foreign players began entering the Indian steel . Hindustan Steel Ltd and Bokaro Steel Ltd market were setup in 1954 and 1964, respectively . Production of steel started in . No license requirement for capacity creation . In the early 1990s, the public sector India (TISCO was setup in 1907) . Imposition of export duty on iron ore, to focus more dominated steel production . IISC was set up in 1918 to on catering growing domestic demand . Private players were in downstream compete with TISCO . Decontrol of domestic steel prices production mainly producing finished steel using crude steel products . Launch of Scheme for promotion of Research and Development in Iron and Steel sector
1907-18 1923-48 1954-64 1973-92 1993-2014 2015-17
. SAIL was created in 1973 as a holding company . In 2017, India ranked as the 2nd . Mysore Iron and Steel Company to oversee most of India's iron and steel largest crude steel producer in the was set up in 1923 production world, leaving behind United States. . According to the new Industrial . In 1989, SAIL acquired Vivesvata Iron and Steel . During FY17, 8.24 MT of steel was Policy Statement (1948), new Ltd exported from India. ventures were only undertaken by the central government . In 1993, the government set plans in motion to partially privatise SAIL Notes: (1)TISCO - Tata Iron and Steel Company; IISC - Indian Iron and Steel Company; SAIL - Steel Authority of India Ltd;
7 Steel For updated information, please visit www.ibef.org STRUCTURE OF THE STEEL SECTOR
Steel
Form Composition End use
Finished Non-alloy Liquid Steel Crude Steel Alloy Structural Steel Steel Steel
Low Ingots Flat Stainless carbon Construction Steel Steel
Medium Silicon Semis Non-flat carbon Rail Steel electrical Steel
High High Carbon Speed Steel
Source: Report on Indian steel industry by Competition Commission of India, Aranca Research
8 Steel For updated information, please visit www.ibef.org STEEL PRODUCTION IN INDIA HAS BEEN GROWING AT A FAST PACE
. In FY17, crude steel production in India was 97.42 MT, with the total Total crude steel production (million tonnes) crude steel production growing at a CAGR of 5.49 per cent over the last 6 years. 120 2CAGR 5.49% 100 . The steel sector contributes over 2 per cent to the GDP of the nation 18.5 80 17.2 17.9
and provides 20 lakh jobs in the country. 16.8
16.5 16.5 14.4
17.0
60
. During April-December 2017, crude steel and finished steel 78.91 71.87
40 71.77
64.92 61.94
production in India stood at 75.498 MT and 79.294 MT respectively. 75.50 57.81
20 53.68 . As of March 2017, the capacity utilisation of steel producers is set to 0 1 increase with strong export demand and signs of revival in domestic FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18P sales. Companies like JSW and Essar Steel have experienced a Private Sector Public Sector sharp increase in steel manufacturing in the last 2 months
. Steel manufacturing output of India is expected to increase to 128.6 Total finished steel production (million tonnes) MT by 2021, accelerating the country’s share of global steel production from 5.4 per cent in 2017 to 7.7 per cent by 2021. 120 2CAGR 8.39% 14.9
. India’s steel output is expected to grow at a CAGR of 8.9 per cent 100
80 13.4 12.8 13.0 11.8
during 2017-21 and India is expected to become top global steel 12.8
12.5
96.39
producer^. 60 13.3
79.34
78.00 79.29
40 74.24
68.86 63.18
20 55.37 0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18P 1
Private Sector Public Sector
Notes: FY - Indian Financial Year (April – March), MT - Million Tonnes, CAGR - Compound Annual Growth Rate; P – Provisional, 1April to December 2017 , 2CAGR is till FY17, Figures mentioned are as per latest data available, ^ As per BMI Research Report Source: Ministry of Steel Annual Report
9 Steel For updated information, please visit www.ibef.org SHARES IN PRODUCTION: SAIL AND TATA LEAD THE WAY
. As of FY17, SAIL dominated India’s steel sector, with the company India’s crude steel market share by production – FY171 accounting for 11.40 per cent of country’s finished steel production and 14.59 per cent of country’s crude steel production. During FY17, Tata Steel accounted for 11.46 per cent of finished steel production 14.59% and 12.46 per cent of the country’s crude steel production
. In January 2017, Indian government inaugurated Universal Rail Mill 12.46% (URM) worth US$ 178.49 million at SAIL’s Bhilai steel plant. The SAIL TATA RINL OTHERS production of the world’s longest single rail of 130 meters from the 4.47% new URM also commenced in the new mill. 68.49%
India’s finished steel market share by production – FY171
10.40%
10.46% SAIL
3.22% TATA RINL
OTHERS
75.91%
Notes: RINL - Rashtriya Ispat Nigam Limited ; (1)Provisional; Figures mentioned are as per latest data available Source: Ministry of Steel Annual Report 2016-17, Aranca Research
10 Steel For updated information, please visit www.ibef.org GROWTH IN MARKET VALUE OF THE INDIAN STEEL SECTOR HAS ALSO BEEN STRONG
. The sector has benefitted from the hike in prices and production, Market value of the Indian steel sector (US$ billion) especially since the beginning of the millennium
. Over 2007–17(E), the sector’s market value is estimated to have 120 CAGR 12.76% posted a strong CAGR of 12.76 per cent
100
100.00 95.30
80
87.9 81
60
57.8
40
46.8
43
36.5
20 30.1
0 FY07 FY08 FY09 FY10 FY11 FY14 FY15E FY16E FY17E
Note: E - Estimated Source: Ministry of External Affairs, Aranca Research
11 Steel For updated information, please visit www.ibef.org DEMAND HAS OUTPACED SUPPLY OVER THE LAST FIVE YEARS
. Total consumption of steel was 83.9 MT in FY17 as compared to Real consumption of steel (in million tonnes) 81.5 MT in FY16. Consumption during April-December 2017 stood at 64.867 MT. 90.00 2CAGR 5.44%
. Driven by rising infrastructure development and growing demand for
automobiles, steel consumption is expected to reach 104 MT by 80.00
2017. 83.90
81.52
70.00
. It is expected that consumption per capita would increase supported 76.99
74.10
73.50
by rapid growth in the industrial sector and rising infra expenditure 71.00
60.00
projects in railways, roads and highways, etc. 66.40
64.87
. The consumption of real steel has grew at a CAGR of 5.44 per cent 50.00 59.30
during FY08-FY17
52.40 52.10 40.00
30.00
20.00
10.00
0.00 1 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Note: MT - Million Tonnes, FY181-Up to December, 2CAGR- up to FY17 Source: JPC India Steel, Ministry of Steel, Aranca Research
12 Steel For updated information, please visit www.ibef.org TRENDS IN IMPORTS AND EXPORTS OF STEEL
. In April - December 2017, consumption of finished steel grew at a Steel exports and imports (in million tonnes) rate of 5.2 per cent to reach 64.867 MT as against 54.487 MT during the same period in 2016. 14.0
. In order to reduce imports and boost domestic steel manufacturing industry, the Central Government extended the minimum import 12.0 price (MIP) on 19 products, till February 4, 2017. These products 11.7 include semi-finished products of iron or non-alloyed steel, flat-rolled 10.0 products of different widths, bars and rods 9.3 . According to DGFT, the minimum import price (MIP) for these 8.0 8.2 products would range between US$ 643-752 per tonne 7.9 7.4 7.6 . Indian Government imposed Anti-Dumping Duty on 47 steel products 6.0 6.0 6.1 for five years beginning from August 2016. 5.4 5.5 5.6 . In FY 2016-17, the country’s steel exports has increased by 102.1 4.0 4.6 4.1 per cent year-on-year to 8.24 million tonnes (MT), as compared to 4.07 MT in 2015-16 2.0 . In FY 2016-17, the country’s steel imports fell by 36.6 per cent year-
0.9
on-year to 7.42 MT, as compared to 11.7 MT in 2015-16 0.0 1
. Exports and Imports of steel grew 52.9 per cent and 10.9 per cent to
FY12 FY13 FY14 FY15 FY16 FY17 FY18 reach 7.6 MT and 6.1 MT during April-December 2017, respectively. Imports Exports
Note: FY - Indian Financial Year (April - March), DGFT - Directorate General of Foreign Trade, FY181-Up to December 2017 Source: Ministry of Steel, JSPL Presentation, Aranca Research
13 Steel For updated information, please visit www.ibef.org KEY PLAYERS OF THE INDUSTRY
Company Products
Tata Steel Ltd Finished steel (non-alloy steel)
SAIL Finished steel (non-alloy steel)
JSW Steel Ltd Hot-rolled coils, strips and sheets
Jindal Steel and Power Ltd Iron and steel
Ispat Industries Ltd Hot-rolled coils, strips and sheets
Welspun-Gujarat Stahl Rohren Ltd Tubes and pipes
Bhushan Steel Ltd Cold-rolled coils, strips and sheets
Visa Steel Ltd Ferro Chrome, coke and special steel
Source: Aranca Research
14 Steel For updated information, please visit www.ibef.org KEY STEEL PLANTS IN INDIA
Steel integrated plants under SAIL (Bhilai, Rourkela, Bokaro, Durgapur and Burnpur)
Tata Steel’s largest steel plant, based in Jamshedpur
Alloy and special steel plants under SAIL (Bhadrawati and Salem); iron and steel plant RINL steel plant in at Visvesvaraya Vishakhapatnam
Source: Company websites, Aranca Research
15 Steel For updated information, please visit www.ibef.org PORTER’S FIVE FORCES FRAMEWORK
Threat of Substitutes
. Low - Aluminium and plastics are being used in few cases in automotive and other consumer durable sectors. However, it still does not pose significant threat to steel
Bargaining Power of Suppliers Competitive Rivalry Bargaining Power of Buyers
. Medium - Large integrated companies . Medium - The steel industry is highly . Medium - Major steel consumption have their own mines to source key raw concentrated, with the top five players sectors, such as automobiles, oil and gas, materials accounting for more than 70 per cent of shipping, consumer durables and power the market share generation, enjoy high bargaining power . Steel companies usually compete on the and get favourable bulk deals. Smaller basis of production capacity, economies customers, however, do not enjoy this of scale, access to raw material, etc. benefit
Threat of New Entrants
. Low - Capital intensive, industry players are large and enjoy economies of scale. Positive Impact Some have their own mines for sourcing key raw materials Neutral Impact . Several regulatory clearances required, Negative Impact including environmental, land acquisition, etc.
16 Steel For updated information, please visit www.ibef.org Steel
RECENT TRENDS AND STRATEGIES NOTABLE TRENDS IN THE INDIAN STEEL INDUSTRY … (1/2)
. Most of the companies in the industry are undertaking modernisation and expansion of plants to be more cost efficient. E.g. SAIL has undertaken modernisation and expansion for its 6 plants
. An Inter-Ministerial Group (IMG) functioning under the Ministry of Steel, is monitoring and coordinating major Growing investments steel investments across the country
. The production capacity of SAIL is expected to increase from 13 MTPA to 50 MTPA in 2025 with the total investment of US$ 24.88 Billion
. SAIL and Arcelor Mittal are going to form a joint venture to set up a 1.5 million tonne per annum steel plant.
. The consortium of SAIL and National Fertiliser Ltd. (NFL) has been nominated for revival of Sindri Unit of the Fertiliser Corporation of India Ltd Strategic alliances . RINL, Vishakhapatnam Steel Plant and the Power Grid Corporation of India Ltd (POWERGRID) signed an MoU to set up a JV company to manufacture transmission line towers and tower parts including R&D of new high-end products
. Attracted by the growth potential of the Indian steel industry, several global steel players have been planning Entry of international to enter the market companies . National Mineral Development Corporation (NMDC) has signed an MoU with Russia’s 3rd largest steelmaker, Severstal, for a greenfield steel plant in Karnataka
Notes: MTPA - Million Tonnes Per Annum Source: Ministry of Steel, Ministry of Railways, Aranca Research
18 Steel For updated information, please visit www.ibef.org NOTABLE TRENDS IN THE INDIAN STEEL INDUSTRY … (2/2)
. Indian steel companies have now started benchmarking their facilities and processes against global standards, to enhance productivity
. These steps are expected to help Indian companies improve raw material and energy consumption as well as improve compliance with environmental and pollution yardsticks
. Companies are attempting coal gasification and gas-based Direct-Reduced Iron (DRI) production. Other alternative technologies such as Hlsmelt, Finex and ITmk3 being adopted to produce hot metal Increased emphasis on technological innovations . Ministry of Steel has issued necessary direction to the steel companies to frame a strategy for taking up more R&D projects by spending at least 1 per cent of their sales turnover on R&D to facilitate technological innovations in the steel sector.
. Ministry has established a task force to identify the need for technology development and R&D
. Ministry has adopted energy efficiency improvement projects for mills operating with obsolete technologies
. In January 2017, Noamundi iron ore mine of Tata Steel introduced drone technology in mine monitoring
Source: Ministry of Steel, Aranca Research
19 Steel For updated information, please visit www.ibef.org STRATEGIES ADOPTED
. Companies in the steel industry are investing heavily in expanding their capacity. Major public and private companies, including Tata Steel, SAIL and JSW Steel, are expanding their production capacity. The government is targeting a steel production capacity of 150 million tonnes by 2020.
. India is the 2nd-largest crude steel producer in the world with production reaching 96 million tonnes in 2016.
. The government has stepped up infrastructure spending from the current 5 per cent of GDP to 10 per cent by 2017and the government has planned to invest US$ 61.8 billion in infrastructure in the Union Budget 2017-18. Considering 15 per cent as steel component in the total investment, the initiative has a potential to generate an Capacity expansion additional demand for steel of 18.75mtpa . The Ministry of Steel is encouraging R&D activities by providing financial assistance from Steel Development Fund (SDF) and Plan Scheme of the Central Government. Furthermore, the government has allowed 100 per cent FDI through the automatic route in the Indian steel sector
. A long term perspective is to achieve capacity of 300 mtpa by 2030, as per National Steel Policy 2017
. SAIL is increasing its production capacity by 60-70 per cent in the last leg of its US$10.79 billion programme.
. JSW Steel is looking at starting activity in the next fiscal on its 12 million tonnes mega steel plant proposed in Odisha.
. In the last few years, rapid and stable growth in demand has also prompted domestic entrepreneurs to set up Greenfield projects – fresh greenfield projects in different states of the country. Mittal Steel announced two 12 mtpa greenfield steel focus on downstream projects, one each in Jharkhand and Orissa value-added products . As India surges ahead in building infrastructure, investments in steel pave the way ahead
Note: GDP – Gross Domestic Product, MTPA – Million tonnes per annum Source: CCI, Ministry of External Affairs
20 Steel For updated information, please visit www.ibef.org STRATEGIES ADOPTED
. Steel companies are strengthening their position through cross border mergers and acquisitions. The focus is on improving existing technology to upgrade production process and developing new value added-products.
. In 2014, Arcelor Mittal along with Nippon Steel and Sumitomo Metal Corporation acquired ThyssenKrupp Steel USA. Notable deals include Essar Global’s acquisition of Canada-based Algoma Steel.
. On 1st August 2016, Kirloskar Ferrous Industries Ltd has announced to acquire pig iron plant of VSL Steels Ltd. for US$ 23.68 million. Also on 18 August 2016, JSW Steel Ltd. has acquired 74 per cent stake of Praxair Oxygen Pvt. Ltd. in their joint venture for US$ 36 million
. As on December 01, 2016, JSW Steel, the flagship steel company of JSW Group, entered into a consortium to acquire 35 per cent stakes of Ilva steel plant, in Italy.
Mergers and Acquisition . Tata Steel has executed an agreement with Creative Port Development (CPDPL) for the acquisition of the majority stakes, i.e., 51 per cent in CPDPL in January 2017
. Italy’s Marcegaglia ArcelorMittal have offered to buy Italy’s troubled Ilva steel plant, for an amount of US$ 2.4 billion and will boost production
. In March 2017, Central Government permitted sale of SAIL’s 3 units including Alloy Steels Plants, Visvesvaraya Iron and Steel Plant, Salem Steel Plant with the transfer of management in these plants for the strategic disinvestment.
. ArcelorMittal SA is looking to set up a joint venture (JV) factory in India with state-owned Steel Authority of India Ltd (SAIL), to manufacture high-end steel products which could be used in defence and satellite industries.
Source: CCI, Ministry of External Affairs
21 Steel For updated information, please visit www.ibef.org Steel
GROWTH DRIVERS STRONG DEMAND AND POLICY SUPPORT DRIVING INVESTMENTS
Growing demand Policy support Increasing investments
Growing demand in the 100 per cent FDI in the steel Rising investments from
construction industry sector domestic and foreign players Resulting Resulting in
Inviting Encouragement of sector-based Increasing number of MoUs Growing demand in the R&D activities by the signed to boost investment in
automotives sector
government steel
Foreign investment of nearly Rising demand for consumer Reduced custom duty and other US$ 40 billion committed in the durables and capital goods favourable measures steel sector
Notes: FDI - Foreign Direct Investment, MOU – Memorandum of Understanding
23 Steel For updated information, please visit www.ibef.org CAPITAL GOODS, CONSUMER DURABLES AND AUTOMOTIVES FURTHER DRIVING STEEL GROWTH
. Over FY05–20F, the consumer durables sector will expand at a Consumer durables market size (US$ billion) CAGR of 12.54 per cent as growth in disposable income is expected to result in increase in demand for such products. 25 CAGR 12.54% . The consumer durables market is estimated at US$ 15 billion and is 20 projected to reach US$ 20.6 billion in FY20.
15
20.60
. The capital goods and consumer durables sectors are expected to 10
15.00
grow at 7.5–8.8 per cent over 2012–21.
12.50
5
9.70
9.00
7.3
5.2 6.3
7.30 7.40 4.2
. Automobile production in India expanded at a CAGR of 8.76 per cent 4.7 3.8 0 3.5
during FY10–17.
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
FY20F *FY17E
Total automobile production in India (million units)
25 19.45 19.76 20.71 17.71 20 16.31 16.58 14.15
15 11.13
10
3.79
3.41
3.23
3.22
3.15
3.09 2.98
5 2.36
0.93
0.83
0.81
0.78
0.76
0.7 0.7 0.57
0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Passenger Vehicles Commercial Vehicles Two & Three Wheelers
Notes: *FY17 – As of November 2016, E - Estimated; F- Forecast, FY - Indian Financial Year (April - March) Source: SIAM, JSPL presentation, Corporate Catalyst India, Aranca Research
24 Steel For updated information, please visit www.ibef.org POLICY SUPPORT AIDING GROWTH IN THE STEEL SECTOR … (1/2)
. New National Steel Policy has been formulated by the Ministry of Steel in 2016, which will retain the objectives included in National Steel Policy (NSP) 2005. It aims at covering broader aspects of steel sector across the country including environment and facilitation of new steel projects, growth of steel demand in India and raw materials
. Under the policy, the central government stated that all the government tenders will give preference to domestically manufactured steel and iron products. Moreover, Indian steel makers importing intermediate National Steel Policy 2017 products or raw materials can claim benefits of domestic procurement provision by adding minimum of 15 per cent value to the product.
. The New steel policy, 2017 aspires to achieve 300MT of steel making capacity by 2030. This would translate into additional investment of Rs 10 lakh Crore (US$ 156.08 billion) by 2030-31.
. New Steel Policy seeks to increase per capita steel consumption to the level of 160 kgs by 2030 from existingFine level of around 60 kg.
. A new scheme, ‘The scheme for the promotion of R&D in the iron and steel sector’, was approved with budgetary provision of US$ 24.6 million to initiate and implement the provisions of the scheme as per the 11th Five-Year Plan which was continued in the 12th Five Year Plan
. The Ministry of Steel is also actively participating in the Impacting Research Innovation & Technology (IMPRINT) & Uchchatar Avishkar Yojana (UAY) Schemes launched by Ministry of Human Resource Development. IMPRINT scheme R&D and innovation aims to solve major engineering and technology challenges and UAY is promoting industry sponsored, outcome-oriented research projects.
. Ministry of Steel is setting up an industry driven institutional mechanism - Steel Research & Technology Mission of India (SRTMI) – with an initial corpus of US$ 30.89 million. The institute will facilitate joint collaborative research projects in the sector.
Note: MT - Million tonnes Source: Ministry of Steel, Aranca Research
25 Steel For updated information, please visit www.ibef.org POLICY SUPPORT AIDING GROWTH IN THE STEEL SECTOR … (2/2)
. The government hiked the export duty on iron ore to 30 per cent ad valorem on all varieties of iron ore (except Rise in export duty pellets)
. The government has reduced the basic custom duty on the plants and equipments required for initial set up or expansion of iron ore pellets plants and iron ore beneficiation plants from 7.5/5 per cent to 2.5 per cent . Customs duty on imported flat-rolled stainless steel products has been increased to 10 per cent from 7.5 per Reduction in custom duty cent on plants and equipment . Basic customs duty on steel grade dolomite and steel grade limestone is being reduced from 5 per cent to 2.5 per cent. Basic customs duty is being reduced from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind-operated electricity generators
Push due to Make in India . Going forward, the Make in India initiative and policy decisions taken under it are expected to augment the initiative country’s steel production capacity and resolve issues related to the mining industry
Foreign Direct Investment . 100 per cent FDI through the automatic route is allowed in the Indian steel sector
Source: The Economic Times, Ministry of Steel, Business Standard, Make In India, Aranca Research
26 Steel For updated information, please visit www.ibef.org STEEL SEZs IN INDIA
Developer Location Product
Viraj Profiles Ltd Thane, Maharashtra Stainless steel engineering products
SAIL Salem SEZ Pvt Ltd Salem, Tamil Nadu Steel
Orissa Industrial Infrastructure Development Metallurgical-based engineering and Jaipur, Orissa Corporation ancillary/downstream industry
Tata Steel Special Economic Zone (TSSEZ) Gopalpur, Odisha Steel and allied downstream industries
Source: Formal approvals granted in the Board of Approvals after the SEZ rules coming into force, Special Economic Zones in India website, www.sezindia.nic.in
27 Steel For updated information, please visit www.ibef.org THE SECTOR WITNESSED RISING INVESTMENTS IN THE LAST DECADE
Date announced Acquirer name Target name Value of deal (US$ million) Dec-17 Tata Steel Ltd Bhubaneshwar Power 39.5 Jan-17 Tata Steel Ltd Creative Port Development Pvt Ltd - Aug-16 JSW Steel Ltd Praxair Oxygen Pvt. Ltd. 36 Aug-16 Kirloskar Ferrous Industries Ltd VSL Steels Ltd. 23.68 Aug-14 JSW Steel Ltd Welspun Maxsteel Ltd 165.85 Apr-14 JSW Steel Ltd Vallabh Tinplate Pvt Ltd 7.63 Mar-14 Lalitanjali Group Pvt Ltd Centom Industries Ltd - Dec-13 Venus Insec Pvt Ltd Goodluck Steel Tubes Ltd 23.73 Oct-13 JSW Projects Ltd IST Steel and Power Ltd Aug-13 Readymade Steel India Ltd Kridhan Infra Solutions Pvt Jul-13 Swelect Energy Systems Ltd Amex Alloys Pvt Ltd Apr-13 Metallurgica Siderfoge S.r.l AMW-MGM Forgings Pvt Ltd Feb-13 Wayzata II Indian Ocean Ltd Ramkrishna Forgings Ltd 51.90 Nov-12 Rabale Engineering India Ltd Pradeep Metals Ltd 6.85 Nov-12 Suncoke Energy Inc Visa Steel Ltd-Coke division
Cumulative FDI inflows Period: April 2000 to September 2017 . Sector • Metallurgical industries US$ 10.42 billion
Source: Thomson ONE Banker, “Fact Sheet on Foreign Direct Investment (FDI)”, Department of Industrial Policy and Promotion
28 Steel For updated information, please visit www.ibef.org PLANNED CAPACITY ADDITIONS BY 2017-18
Crude steel capacity addition plans up to FY2017-18 (in MTPA) for private sector companies
Company Existing capacity Brownfield expansion Greenfield expansion Total capacity addition
Tata Steel Ltd 12.50 0.4 0 12.59
Essar Steel Ltd 10.00 0 0 10.00
JSW Steel Ltd 18.00 0 0 18.00
Jindal Stainless Limited 1.00 0.15 0 1.15
Jindal Stainless (Hissar) Ltd 0.78 0.08 0 0.86
Bhushan Steel Ltd 5.60 0 0 5.60
Bhushan Power and Steel Ltd 2.50 0 0 2.5
Monnet Ispat and Energy Ltd 1.80 0 0 1.80
Electrosteel Steel 1.88 0 0 1.88
Visa Steel Ltd 0.50 0 0 0.50
Notes: MTPA - Million Tonnes Per Annum Source: Ministry of Steel Annual Report, Joint Plant Committee
29 Steel For updated information, please visit www.ibef.org Steel
OPPORTUNITIES OPPORTUNITIES … (1/2)
Automotive Capital goods Infrastructure Airports
. The automotive industry is . The capital goods sector . The infrastructure sector . More and more modern and forecasted to grow in size by accounts for 11 per cent of accounts for 9 per cent of steel private airports are expected to US$ 74 billion in 2015 to US$ steel consumption and consumption and expected to be set up 260-300 billion by 2026 expected to increase 14/15 per increase 11 per cent by 2025- . In FY17, passenger traffic at cent by 2025-26 and has the 26. . With increasing capacity Indian airports stood at 264.99 potential to increase in addition in the automotive . Due to such a huge investment million and number of tonnage and market share industry, demand for steel from in infrastructure the demand operational airports stood at 94 the sector is expected to be . Corporate India’s capex is for long steel products would in July 2017. robust expected to grow and generate increase in the years ahead . Development of Tier-II city greater demand for steel . In 2016, Indian automotive airports would sustain sector is estimated to be 3rd consumption growth largest automotive market, by . Estimated steel consumption in volume airport building is likely to grow more than 20 per cent over next few years
Source: Capex – Capital Expenditure, P - Provisional Source: Make In India, SIAM, Ministry of Steel, Airport Authority of India
31 Steel For updated information, please visit www.ibef.org OPPORTUNITIES … (2/2)
Railways Oil and gas Power Rural India
. The Dedicated Rail Freight . Oil and gas amongst major . The government targets . Rural India is expected to Corridor (DRFC) network end-user segment accounted capacity addition of 100 GW reach per capita consumption expansion would be enhanced for ~34.4 per cent of primary under the 13th Five-Year Plan of 12.11 kg to 14 kg for in future energy consumption in FY16 (2017–22) finished steel by 2020.
. Gauge conversion, setting up . This would lead to an increase . Both generation and . Policies like Food for Work of new lines and electrification in demand of steel tubes and transmission capacities would Programme (FWP) and Indira would drive steel demand pipes, providing a lucrative be enhanced, thereby raising Awaas Yojana, Pradhan Mantri opportunity to the steel steel demand from the sector Gram Sadak Yojana are . Indian Railways started the industry driving growing demand for PPP mode of funding and has . Conventional power capacity construction steel in rural India already awarded projects addition of 23.98 GW has worth around US$ 1.73 billion registered to be the highest in . In FY16, per capita during the 1st 7 months (April- FY16 consumption of steel in rural October) of FY16 India is estimated at 60 kg, which is lower in comparison . In January 2017, Crisil with the global average of 216 estimated that the railways kg sector could create business opportunities worth US$ 99.65 billion
Source: Make In India, Ministry of Power, Aranca Research
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SUCCESS STORIES JINDAL STEEL AND POWER LTD: REAPING BENEFITS OF PRUDENT INVESTMENTS … (1/3)
. Incorporated in 1979, Jindal Steel and Power Ltd. (JSPL) is an ProjectedVisakhapatnam crude steel port production traffic (million (million tonnes) tonnes) integrated steel producer and the largest coal-based sponge iron manufacturer in the world. The company has an installed steel CAGR 41.76% production capacity of 3 MTPA at Raigarh in Chhattisgarh. JSPL is 35.00 engaged in manufacturing long products and is specialised in producing long rails for railways and large sized H-beams as well as 30.00 31.75 columns for the infrastructure and construction sector . JSPL also has significant presence across the mining, power 25.00 generation and infrastructure sectors . In March 2017, Jindal Steel has entered into an agreement with Defence Research and Development Organisation (DRDO), which 20.00 would allow the agency to transfer technology facilitating manufacturing of high-nitrogen steel, for application in defence 15.00 15.80 sector.
. New and expansion projects include setting up of a 7 MTPA 10.00 integrated steel plant in Chhattisgarh, 12 MTPA integrated steel plant in Jharkhand and a 12.5 MTPA integrated steel plant in Orissa. 5.00 . Achievements: • 2014 - Company has commissioned the billet caster plant with 0.00 capacity of 6 MTPA at Angul with record time of 1 year FY 17 FY 18 E • 2015 - Company has created history with its Raigarh steel facility producing 10,000 tonnes of crude steel in a single day • 2017 – Launched a 6 MTPA integrated steel plant in Odisha.
Source: Ministry of Steel, Company website (www.jindalsteelpower.com), Aranca Research; E- Estimated
34 Steel For updated information, please visit www.ibef.org JINDAL STEEL AND POWER LTD: REAPING BENEFITS OF PRUDENT INVESTMENTS … (2/3)
Sale of steel (million tonnes) Financial growth (US$ million)
5.0 4000
4.5
3500
4.6
4.0
3,542
4.2
3000
4.0
3,315
3.5 3,218
3.8
3,199
3,007
3.5
2500
3.0 2,813
3.2
3.27
3.1
3.0
2.5 2.9 2000
2.8 2.8
2,287
2.5
2.0
2.3 2.3
1500
2.2
2.1
1,803
2.0
1.9
1.5 1,596
958
910
1,488
1.6
1.6 1000
818
727
721
1.4
634
1.0
532
1.2
0.7
438
431
395
816
1.0 500
197 671
0.5 0.3 0.8
0.2 103 0.5
0.0 0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17
Finished Steel Products Semi - Steel Products Pellets Gross Revenue PBIDT
Note: Company clubs iron and steel segment ‘s performance; PBIDT (Profit Before Interest, Depreciation and Tax) Source: Company website (www.jindalsteelpower.com)
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KEY INDUSTRY ASSOCIATIONS INDUSTRY ASSOCIATIONS
Indian Stainless Steel Development Association
L-22/4, DLF Phase-II Gurgaon, Haryana –122 002 Phone: 91-124-4375501 Fax: 91-124-4375509 E-mail: [email protected]
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USEFUL INFORMATION GLOSSARY
. CAGR: Compound Annual Growth Rate
. FDI: Foreign Direct Investment
. FY: Indian Financial Year (April to March)
• So FY10 implies April 2009 to March 2010
. JV: Joint Venture
. MoU: Memorandum of Understanding
. MT: Million Tonnes
. MTPA: Million Tonnes Per Annum
. NPAT: Net Profit After Tax
. SEZ: Special Economic Zone
. TMT: Thermo Mechanically Treated
. US$ : US Dollar
. Wherever applicable, numbers have been rounded off to the nearest whole number
39 Steel For updated information, please visit www.ibef.org EXCHANGE RATES
Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)
Year INR INR Equivalent of one US$ Year INR Equivalent of one US$
2004–05 44.81 2005 43.98 2005–06 44.14 2006 45.18 2006–07 45.14 2007 41.34 2007–08 40.27 2008–09 46.14 2008 43.62
2009–10 47.42 2009 48.42 2010–11 45.62 2010 45.72 2011–12 46.88 2011 46.85 2012–13 54.31 2013–14 60.28 2012 53.46 2014-15 61.06 2013 58.44
2015-16 65.46 2014 61.03 2016-17 67.09 2015 64.15 Q1 2017-18 64.46 2016 67.21 Q2 2017-18 64.29 Q3 2017-18 64.74 2017 65.12
Source: Reserve bank of India, Average for the year
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