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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

INDIA RAW MATERIALS OUTLOOK FOR INDIA

Joint India/OECD/IISI Workshop, New Delhi (India), 16-17 May 2006.

Presentation by Mr. A.D. Baijal, Vice President, Raw Materials, Tata Steel

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]

JT03209761

Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format

DST

I/SU/SC

(2006)43 For O

fficial Use

English text only

DSTI/SU/SC(2006)43

2

1

Raw materials outlook for India- A Review

A D Baijal

VP (Raw Materials)

Tata Steel

IISI-OECD CONFERENCEDate: 17th May, 2006

2

Steel Industry

- Global

- Indian

Raw materials for Steel

Policy / Legislation

Infrastructure

Conclusion

Presentation OutlinePresentation Outline

DSTI/SU/SC(2006)43

3

3

Global steel demand poised for robust growthGlobal steel demand poised for robust growth

Crude Steel Production (Million Tonnes)

0

200

400

600

800

1,000

1,200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Great Depression

WW 2 Oil CrisisFall of USSR

CAGR 7 %

CAGR 1 %

The Early Years

The 1st

Surge The 2nd

PlateauThe 2nd

Surge

Asian Financial

Crisis

The 1st

Plateau

CAGR 2 %CAGR

5 %

WW 1

CAGR 5 %

4

The Global Economic Forecast: Asia poised to be the The Global Economic Forecast: Asia poised to be the emerging power house of growthemerging 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

• Ireland, the US and Spain are the rich countries expected to grow the most

DSTI/SU/SC(2006)43

4

5

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 yearsHouse 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 ActLiteracy standards increase from 18% in 1951 to 65% in 2002.

Indian EconomyIndian Economy

6

Steel Consumption Vs. GDPSteel Consumption Vs. GDP

Steel Consumption and GDP per Capita in 2004

10

100

1000

10000

0 5000 10000 15000 20000 25000 30000 35000 40000

GDP per capita (US$000 at PPP rates)

Stee

l con

sum

ptio

n (k

g/ca

pita

)

ChinaS.Korea

Taiwan

US

Other AfricaIndia

Japan

Bubble size represents the population

The growth in BRIC will double the steel demand by 2050Source: internal analysis

DSTI/SU/SC(2006)43

5

7

UAE

Taiwa n

Sou th Ko rea

Hong Kong

Japan

G ermany

Austr alia

USA

France

ChinaIndi a

0

200

400

600

800

1000

1200

1400K

gs p

er C

apita

Countries

UAE – 1252

World Avg. – 170 India – 33

> 150 MT, The > 150 MT, The present gap present gap

Apparent Steel consumptionof countries

Growth in key sectors will drive the steel demandGrowth in key sectors will drive the steel demand

We feel the growth trigger has been fired…..….. (Last 3 years GDP growth of + 7.5%)

8Low High

Deficit

Excess

Ava

il-ab

ility

of I

ron

Ore

Forecasted Growth rate 2005-15

CIS Latin America

USA / Canada

Eastern EuropeEU

Japan

India

China

Other emerging Asian countries

Raw Material basin

Growth basin

Mature basin

Production sites will move to regions with both RM Production sites will move to regions with both RM source and demand. source and demand.

DSTI/SU/SC(2006)43

6

National Steel PolicyProjectionsSteel Production

29 31 34 3650

70

110

0

25

50

75

100

125

150

2000-01 2001-02 2002-03 2003-04 2006-07 2011-12 2020

Year

Cru

de S

teel

: m

tpa

Planning Commission projections

Indian Steel production likely to triple in next 15 yearsIndian Steel production likely to triple in next 15 years

To realize the above projections, it would be necessary to put in place the right policies as well as alignment of the policies

10

Steel Industry

- Global

- Indian



Infrastructure

Conclusion


DSTI/SU/SC(2006)43

7

11

Multifold increase in Raw Material Consumption Multifold increase in Raw Material Consumption

54

2713 13

190

70

2639

0

20

40

60

80

100

120

140

160

180

200

Iron Ore Coking coal Non coking coal Fluxes

2004-052019-20 (F)

12

**

* **

Indian Iron Ore Reserves: Five Zones

Kudremukh, Bababudan, Kudachadri

N Goa, S Goa, Redi

Donimalai, Ramandurg, Kumaraswamy, NEB Range, Ettinahatti, Tumti, Belagal

Bailadila, Dalli,Rajhara, Rowghat, Mahamaya, Aridongri, Surajgarh

Chiria, Noamundi, Joda, Kiriburu, Meghataburu, Thakurani, Bolani, Gua, Malangtoli, Gandhamardan, Daitari

Major Mines / Deposits

E-Karnataka

D-Goa

C-Karnataka

B-Chattisgarh, MP, Maharashtra

A-Orissa, Jharkhand

States

Magne

Haematite

Haematite

Haematite

Haematite

Ore

35-45

60-63

62-64

64-66

62-64

Fe Range (%age)

1.0

2.0-4.0

2.0-4.0

1.0-4.0

2-4

Alumina (%age)

E-Karnataka

D-Goa

C-Karnataka

B-Chattisgarh, MP, Maharashtra

A-Orissa, Jharkhand

States

-

0.04-0.07

0.04-0.09

0.04-0.15

0.04-0.1

PhosMax (%ag

e)

DSTI/SU/SC(2006)43

8

13

050

100150200250300350

'99-00 '00-01 '01-02 '02-03 '03-04 '04-05 2020

mill

ion

tonn

es

Production Consumption Exports

Iron Ore

10%

3%

10%

6%

39%14%

18%

Production Trend Indian Resources: 23 bt

Karnataka

OrissaChatti

sgar

hGoa

Jharkhand

OthersAP

14

Natural iron ore resources can support lump: fines Natural iron ore resources can support lump: fines ratio of 20:40 as against current adverse trend of 40:60ratio of 20:40 as against current adverse trend of 40:60

33.6 34.639.6

47.4

55.1

41.245.2

53.0

67.1

77.9

6.0 6.4 6.5 6.1 7.1

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

2000-01 2001-02 2002-03 2003-04 2004-05

Million

Ton

s

LumpsFinesConcentrates

- 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 increase its productivity and bring down cost/tss

The current steel production through BF/BOF:DRI:others is 60:33:7

DSTI/SU/SC(2006)43

9

15

Domestic DRI production : Trend and Forecast

Increasing DRI production may lead to faster depletion of high quality lumpy ore reserves

0

10

20

30

40

88 91 94 97 '00 '03 '04 '05 '06 '20

mill

ion

tonn

es

Capacity Production

Growing @~7%

Source: Tata Steel analysis

16

NATIONAL STEEL GROWTH

0

100

200

300

400

500

600

700

800

900

1000

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

Iron

Ore

Pro

duct

ion

MTP

A

-15000.00

-10000.00

-5000.00

0.00

5000.00

10000.00

15000.00

Min

eabl

eR

eser

ves

(Mt)

CAGR=3 CAGR=4 CAGR=5 CAGR=6 CAGR=7

Exports of iron ore =50 Mtpa

With expected CAGR of ~7% and exports at 50 With expected CAGR of ~7% and exports at 50 mtpamtpa, , India will become an importer of iron ore in next 40 years.India will become an importer of iron ore in next 40 years.

Reserves in MT

Iron Ore Production

in MT

Most of the iron ore reserves are in reserve forest and environment sensitive areas making the actual availability of reserves much less

DSTI/SU/SC(2006)43

10

17

Imperative Imperative –– Need for conservation and resource Need for conservation and resource enhancementenhancement

Challenges

- Selective mining of high grade lumpy ores (DRI).

- Many low volume producers

- Mismatch in agglomeration capacity and fines generation.

- Lower production (33%) routed through beneficiation.

- Increasing exports.

Conservation ….for futureo Scientific Miningo Agglomeration capacityo Use of pellets for DRIo Beneficiation. o Technology for using

Slimeso Restricting exports.

Enhancement …o Detailed / Scientific

Exploration

18

Proven: 8Indicated: 6Total : 14

Proven: 5Indicated: 2

Total : 7


Total : 34


Total : 44


Total : 23


Total : 65

Proven: 7Indicated: 8Total : 15

246Total46Inferred110Indicated90Proven

Billion tonnes

Indian Coal Reserves

DSTI/SU/SC(2006)43

11

19Geological Survey of India : As of 1.1.2001

86%

3%

14%11%

Non-Coking Prime Coking Med Coking

Coking

Domestic Coking Coal Domestic Coking Coal

The Indian Coal, both coking and non coking is characterized by high ash and low washability index.

Coal Reserves, BT

6Prime Coking

246Total212Non Coking

28 Semi-CokingCoking Coal Producers

0.5Others3.3Tata Steel5.8CIL

Washed Coal Ash

18%CCL13%Tata Steel

18%BCCL

8.3 8.2 8.18.18.18.2

15.1 16.8

21.020.020.018.4

0

5

10

15

20

25

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

MT

PA

Indigenous Coal Imported Coal

Imports of Coking Coal to increase due to low Imports of Coking Coal to increase due to low Indigenous availability Indigenous availability

Source: 10th Plan report

28

62

88

8 10 13

0

20

40

60

80

100

2005 2015 2025

MT

PA

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

Coking Coal

DSTI/SU/SC(2006)43

12

21

Need to conserve the scarce coking coal resourcesNeed to conserve the scarce coking coal resources

Challenges

- High ash

- Poor washability

- Over 40% coking coal used for thermal use.

- 70% demand met through imports

- Low domestic availability*

Conservation of resources for future use

o Beneficiating o Improving washing

capacity / efficiencyo Technology using

medium coking coal for coke making

o Steel making technology using non-coking coal

Enhancement of capacityo Developing new sourceso Detailed exploration

22

*Coal Strategy: Reducing coking coal requirements

Mining:- Beneficiation technology - Improving mining / washing process efficiencyCoke & 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

DSTI/SU/SC(2006)43

13

23

Limestone Limestone

• SMS Grade available in Rajasthan and Himalayan regions.

• While Environment and logistics constrains Himalyanexploitation, high freight from Rajasthan is adverse.

• Stringent quality requirement further restricts availability

Therefore, Dependence on imports for steel grade limestone to continue…

7 bt15 bt160 btIndiaAbundantWorld

SMS gradeBF gradeLimestone Reserves

22 mt7 mtSMS grade9.5 mt3.1 mtBF grade

Requirement in 2020Current Requirement

24

Chrome OreChrome Ore

• 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.

0.6 6

Production Fe Cr

3.2 115 India18 11068 World

Production OreCr Ore ReservesFigures in million tonnes

DSTI/SU/SC(2006)43

14

25

Manganese Manganese

• 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

0.7110.5

Production FeMn, SiMn

1.4 406India29 5000World

Production OreMn Ore/Reserves

Figures in million tonnes

Source: Mineral Commodities Summary: 2002, IBM

26

Steel Industry

- Global

- Indian



Infrastructure

Conclusion


DSTI/SU/SC(2006)43

15

27

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

EvolutionEvolution of Indiaof India’’s Regulatory Environments Regulatory Environment

28

Evolution of IndiaEvolution of India’’s Regulatory Environments 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 .

DSTI/SU/SC(2006)43

16

29

Challenges & Policies for meeting growth demandChallenges & Policies for meeting growth demand

Challenges

- Fragmented capacities

- Unscientific operations

- Inadequate power & transport infrastructure

- Delay in grant / renewal of mineral leases

Policy Reforms under consideration

o Minimum production levels for lease grant

o Scientific Mining and Mineral Beneficiation

o Lease grant solely on the basis of technical & financial capability

o FDI & private sector participation for infrastructure development

o Time bound grant/renewal process

30

Challenges & Policies for meeting the growth demandChallenges & Policies for meeting the growth demand

Challenges

- Long drawn process for land/forest/ environmental clearance

- Socio/political pressures

- Limited iron ore / coking coal reserves

Policies reforms under considerationo Creation of land bank / private

sector participation in afforestationo Social / Environment cost to be seen

in Long Term perspectiveo Transparent implementation of the

lawso Technology / private participation

for detailed explorationo Large area prospecting licenseo Linking iron ore resources to

integrated and other steel plantso De-nationalization of coal mineso De-reserving areas for private sector

for a level playing field

DSTI/SU/SC(2006)43

17

31

Steel Industry

- Global

- Indian



Infrastructure

Conclusion


32

Railway Distance & Freight of Major PlayersWeighted Ave. Rly distance & costs (Iron Ore) -2002

0

100

200

300

400

500

600

700

800

900

Km's

US

$/To

n

0

1

2

3

4

5

6

7

8

9

Transport Cost Rail Distance

Transport Cost 3.03 3.5 5.87 8.11

Rail Distance 315 650 847 477

Australia Brazil S.Africa India

Rail Freight in India are highRail Freight in India are high

DSTI/SU/SC(2006)43

18

33

Inland Transportation of Raw MaterialInland Transportation of Raw Material

Inland transportation:

– Infrastructure being beefed up for the incremental volumes

Source: Economic Survey, 2003-04.

Traffic in steel sector (mt)

050

100150200250

Raw Material Finished Steel Raw Material Finished Steel

2004 2020

Railway Road

34

Railways Railways –– The challengesThe challenges

• Tariff & Capacity out of sync with a high growth environment

• Operational efficiencies.

• Costlier longer hauls• Lower bulk

movement per haul

• Expansion of facilities

• Development of raw material corridor for faster movement of raw materials to ports and consumption points

• Improving services

• Reinforcing existing tracks

• Improvement in freight structure

• Participation of private sector through SPV / own your wagon

Challenges Initiatives …

DSTI/SU/SC(2006)43

19

35

PortsPorts

• 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

18

70

26

85

100

6

26

0

20

40

60

80

100

120

ImportRM

Export RM ImportFinished steel

Export finished steel

2003-042019-20

36

Port facilities comparisonPort facilities comparison

0

50,000

100,000

150,000

200,000

250,000

Dampier/Aus CapeLambert/Aus

PDM/Brz Saldhana/SA Vizag Paradip Haldia Dhamra Paradip 2 Haldia/T'spr

Ports

Ldg

Rat

e &

ave

rage

par

cel s

ize

(Mt)

0.00

5.00

10.00

15.00

20.00

25.00

Slg

dra

ft (M

trs)

& T

ariff

($/M

t)

Total Tariff/Mt Parcel size Loading rate (act.ave.) G.Draft

Existing Proposed Ports

Being designed for higher operation

al efficiency

and capacity

DSTI/SU/SC(2006)43

20

37

Steel Industry

- Global

- Indian



Infrastructure

Conclusion


38

Second Largest Emerging Market

Largest democracy – political stability

& consensus on reforms

Liberal & transparent

investment policies

High returns on investment

Fourth largest Economy (PPP) - A

safe place to do business

Largest reservoir of skilled/semi-skilled manpower at low

cost

Long-term sustainableCompetitive advantage

- High growth rate economy

India – A Land Of OpportunitiesIndia – A Land Of OpportunitiesRich Mineral Base

Regulatory ReformsDeveloping Infrastructure

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