The Indian Ferro Alloy Industry - Prabhash Gokarn & TS Sunderesan, Indian Ferro Alloy Producers Association

About IFAPA Indian Ferro Alloy Producers Association (IFAPA) is committed to the growth of the ferro alloy industry in India. It represents the Indian Ferro Alloy Industry with almost all ferro alloy producers being members of the association. IFAPA imbued with the philosophy that while individual initiative, enterprise and efforts are the foundation of a nation’s progress, a co-operative and complementary functioning of the ferro alloy industry is needed for consensus in all its interfacing activities with various outside agencies, like the government and other industry bodies to avoid confrontational and conflicting facets. IFAPA is the sole industrial body that interfaces with government, trade and other industry bodies, educational and R&D institutions on — legal, tenurial, fiscal, regulatory, forests and environmental — all matters connected with the functioning of the ferro alloy industry on a continuing basis.

INTRODUCTION: What are Ferro Alloys Ferro Alloys are vital inputs for the production of all steel : carbon, low alloy and high alloy steels, including stainless steel. Ferro Alloys are used during the production of steel, as deoxidants, to make clean steels and as alloying agents. Ferro Alloys are classified into two categories, based on the nature of manufacture and useage pattern, namely :

1. Bulk Ferro Alloys viz., High Carbon Ferro Manganese, Silico Manganese, Ferro Silicon, High Carbon Ferro Chrome etc., usually manufactured by carbo-thermic reduction using submerged electric arc furnaces and,

2. Noble Ferro Alloys viz., Ferro Molybdenum, Ferro Vanadium, Ferro

Tungsten, Ferro Silico Magnesium, Ferro Titanium, Ferro Boron, etc., usually manufactured by alumino-thermic reduction in the Thermite process.

The requirement of Ferro Alloys, both type and quantity, depends upon the process of steel making and the type of steel being made. For instance, the quantity of silico manganese and ferro silicon, traditionally used to make killed and semi-killed steels and for aiding desulphurization had reduced as steel plants adopted newer technologies (like Basic Oxygen Steelmaking, external desulphurization using cored wire injection, and vacuum degassing). However, with the steep increase in the demand for alloy steels, the specific consumption of ferro alloys is on the increase. Steel is alloyed to increases its resistance to Corrosion and Oxidation, to improves its Hardenability and Tensile Strength, its High Temperature Strength & Creep Resistance, to increase Wear and Abrasion resistance and modify the nature of inclusions in steel, that decreases the tendency of steel to crack during processing or during service.

The Indian Ferro Alloy Industry – the genesis The Indian Ferro Alloy Industry in the organized Sector came into production in mid sixties, at the behest of the Planning Commission, which thought it proper that instead of raw materials abundantly available in the country being exported at throw away prices, the country could build up the infrastructure where it could use the natural resources of Ores like Manganese Ore, Chrome Ore, Titanium Ore and produce value added products like Ferro Alloys. In the Second Five Year Plan, the Planning Commission formulated a Policy and suggested licensing units based on 50% of the production capacity for exports, besides meeting the local requirements. Initially, the Ferro Alloy Units came up in what are now the states of Orissa, Karnataka, Maharashtra, and Andhra Pradesh mainly due to availability and proximity of raw material & power. Ferro Manganese plants came up at Joda in Orissa, Dandeli in Karnataka, Tumsar in Maharashtra and near Vizag, A.P. Today the Ferro Manganese plant at Joda is the one of oldest continuously operating Ferro Alloy plants. The first phase of expansion of the industry took place between the late sixties and seventies and 14 furnaces with capacity addition of 178 MVA undertook bulk production of Ferro Silicon and Ferro Chrome. The second phase of expansion was during the eighties on product diversification, assimilation and advance technology and setting up of Export Oriented Units to earn substantial foreign exchange for the country. This resulted in addition of 12 more furnaces and the capacity addition during the eighties was about 308 MVA. The Ferro Alloy Industry was thrown open and liberalized during 1991-92. As a result, a number of Small and Medium Units having transformer rating of 2.5 MVA to 10-12 MVA emerged in production of Bulk Ferro Alloys, particularly in the State of Madhya Pradesh, West Bengal, Kerala, Pondicherry, Goa, Jharkhand, Chhattisgarh, Jammu and Meghalaya.

The Indian Ferro Alloy Industry Today Since liberalization, the Indian Ferro Alloy industry has truly become global. The ferro alloy industry in India has grown far in excess of the growth in the steel industry and the estimated production capacity of ferro alloys in India is more than double the domestic demand, with a significant proportion (upto 50% in some years) of the ferroalloys being exported. Despite this, the ferro alloy industry operates at an average 65% capacity utilization. The estimated production capacity has crossed 2200 MVA and fresh capacity of around 500 MVA is coming up, mostly in Manganese ferro alloys to feed the proposed steel expansion.

Table 1 : The Indian Ferro Alloy Industry

Current Capacity Units Furnaces MVA Capacity, mill MT

MMaannggaanneessee AAllllooyyss 76 161 1182 22..11

FFeerrrroo SSiilliiccoonn 29 38 266 00..22

CChhrroommee AAllllooyyss 28 53 803 11..33

NNoobbllee FFeerrrroo AAllllooyyss 37 - - 00..0044

TTOOTTAALL 117700 225522 22225511 33..6644

Contribution of the Indian Ferro Alloy Industry to the Indian Economy Like the software industry that propelled India to global fame and made India the hub for software development, properly nurtured, the Indian Ferro Alloy industry has the potential to make India the hub for ferroalloys to the world. Already, the Indian Ferro Alloy industry is : a. A Valuable Foreign Exchange Earner India is a major ferro alloy exporter and Ferro alloy exports are a major Foreign Export earner.

Of this over 60%-70% is earned by export of HC Ferro Chrome. b) Earnings from Export of Ferro Alloys ploughed back to society :

The earnings from the total sales of Ferro Chrome the Industry has re-invested in the Industry by setting up Captive Power Plants, acquiring Coal Mines, Ore Mines and spending a huge amount on Society by setting up Residential complexes, Schools, Colleges and Hospitals, etc., which has created additional jobs for the people. Ferro Alloy industries are located in remote areas creating islands of prosperity in states of Orissa, Karnataka, West Bengal, Chattisgarh, Kerela & Andhra Pradesh.

266 266

364

1118

1547

0

200

400

600

800

1000

1200

1400

1600

1800

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Foreign Exchange Earned from Ferro Alloy Exports in Million USD

548* *in 3 Qtrs , Apr-Dec’09

c) Electricity generation Electricity generation by the Ferro Chrome Industry through Captive Power Plants is also supplied to the grid, thus increasing availability of power in India.

Also, although generation costs for power is not high, the industry pays a high tariff due to cross subsidization to Agriculture, Low Plant Load factor and high T & D losses. The Units have to maintain a minimum demand of 85 % of Power in their operation. This clearly shows that the Industry has paid much more than the normal power tariff applicable for this Industry, which has earned substantial revenue to the State and Central Governments

d) Industrialization of the eastern region –

particularly Orissa, West Bengal and Andhra Pradesh e) Employment to people :

It is estimated that a 50k/MT Ferro Alloy plant supports around 750 families around the plant(ie a total of about 60,000 families by the ferro alloy industry in India), and these plants are located in remote areas where there is no other source of employment.

The steep increase in power tariff in South Africa and China coupled with increases in freight, labour, and regulatory costs in China has made the Indian Industry highly competitive. Decreased Chinese competitiveness has resulted in a sharp reduction in ferroalloy exports from China, which has turned into a net ferroalloy importer since 2009. This presents an opportunity for the Indian Ferro Alloy industry to consolidate its position as a leading Ferro Alloy exporter to the world. As stated earlier, due to the low capacity utilization of existing capacities and with new facilities coming up, India has the unique ability to immediately scale up production of ferro alloys. India enjoys a freight advantage in markets such as China, Korea & Japan, which are large consumption centres. China, in particular has shown a nearly 25% growth in steel production and is still growing. Other advantages include comparable power, labour & inland freight costs to major ferroalloy production regions like China and domestic availability of ore.

However, there are some bottlenecks that need to be resolved if India is to claim its position, namely: 1. Infrastructural Bottlenecks

Inadequate roads, railway network capacity & ports for handling large scale ore imports & ferroalloy exports. The Government action on encouraging investments for rapid infrastructure development; creation of special economic zones and special freight corridors is a step in the right direction and action needs to be speeded up.

2. Transport Bottlenecks & Problem of Transport Union Transportation has been the bane of the ferroalloy industry, due to high cost of transportation, low reliability and frequent disruptions. In many major ferroalloy manufacturing regions, the transport sector is in the clutches of powerful transport unions who do not allow outside trucks in the sector. Consequently transport rates in some sectors are amongst the highest in the world. It is necessary for the industry and the local authorities to jointly tackle.

3. Power Availability & Cost Indian average power tariffs are at similar level to China, after steep increase in power tariffs in China recently, which has made the Indian Industry competitive. Also, power sector reforms - allowing for Captive Power Plants & Power Wheeling has made the industry somewhat inured to grid power. However, as small captive power plants are not energy efficient, there is an urgent need to increase grid power generation to support ferroalloy industry growth. Recent power shortages in summer in Eastern India (the hub of Ferro Alloy production) and South India, is also a matter of concern.

4. Regulatory Framework The industry needs a regulatory framework that encourages ferroalloy exports for India to consolidate its position as major ferroalloy exporter. Incentives to ferroalloy export hubs by way of priority power allocation, rake availability, and tax structure will help boost ferro alloy exports further.

In conclusion, the ferroalloy industry in India is all set to further consolidate its position as the major source of ferroalloys to the world, if the above bottlenecks are resolved.

Ferro Alloy Plant

Tapping of a Ferro Alloy Submerged Arc Furnace

Casting of Ferro Alloy into pans for sizing

Sized Ferro Alloy ready for Packing

Automation of Submerged Electric Arc furnace for Ferro Alloy making

Quality Control during Ferro Alloy Making

Casting of tapped liquid ferro alloys into cast pans before sizing

The strategic advantage of the ferro alloy industry in India stems from India’s resource base in terms of manganese & chrome ores

A fully mechanized Manganese ore mine

A mechanised Chrome Ore Mine in Orissa

A mechanized Manganese ore mine in Orissa