SURGE IN INDIAN STEEL INDUSTRY : CHALLENGES OF INPUT SECURITY

Dr Subir Bhattacharya, Senior Manager U. K. Vishwakarma, DGM A. P. Singh DGM I/c & K. K. Mehrotra, Director (Engineering)

MECON Limited, Ranchi 834002, India

International Conference on INDIAN METAL INDUSTRY SHAPING THE NEXT DECADE, organized by The Indian Institute of Metals, Pragati Maidan, New Delhi

PREAMBLE
Indian steel industry has entered the high growth phase& Ministry of Steel, Government of India, is foreseeing a huge steel market of ahead (by 2020) Here, the thought process begins on some crucial issues What about the supply side?....is the expected supply of steel products going to match the demand by 2020? If it is so,

A very important issue arises..

Input security !! .. How secured India is with respect to availability of steel-makers inputs. Without this, where will we land up?. What needs to be done to bring the success for Indian steel industry in future years to come ? .

This presentation deals with these queries

Conclusions
This presentation, through its enquiry, would be reaching the following conclusions By 2020, a demand of around 180 Mt seems attainable.. The supply side also indicates a positive response as per the proposed brown field and green field projects Demand supply analysis of steel industrys inputs suggests scarcity on account of almost all the major steel industry inputs.. Indian steel industry does not seem to have much input security

..iron ore, coking coal, power, natural gas, water, land, human capital, engineering & consultancy etc. etc.. . Unless meticulous Strategic Planning is done, meeting even a conservative domestic demand, by 2020, will be a distant reality
WE ARE AT THE ROCK BOTTOM OF THE SEA..

Changing dynamics of global steel market

Developing world High Globalization & high competition
Economic growth
High consolidation

Product Demand

Low
High

Developed world Low

Low

Competition
Economic growth caused shifting of steel demand from developed world to the developing world High globalization and competition leading to high consolidation in the global steel market

High

Consolidation

THE DEMAND SIDE Pattern of finished steel consumption in India 1980-81 to 2009-10
70
59.9

60

Demand (Mt)

50
30.6

40 30 20 10
1981-82 9.6 1993-94 14.9
: 8.3% CAGR

R AG C

0 :1

.1%

2002-03

% CAGR : 3.7

-8 2

-8 8

-0 6

-0 2

00

-9 6

-8 6

-9 0

-9 8

-0 8 07 20

-8 4

-9 2

-0 4

-9 4

81

-2 0

01

87

83

91

89

95

03

05

93

85

97

19

99

20

19

19

19

20

19

19

19

19

19

There is a dip in 1993-94 and significant up-turn since 2002-03 in the Pattern of steel consumption in India

19

20

20

09

-1 0

Forecasts on finished steel demand in India ..India, a Tiger awaken.

250 200
Demand (Mt) 200.2 156.5 76.7 84.5 48.7

150 100 50 0 200607

Realistic Optimistic

201112

201920

Demand projections were made using econometric modelling technique. Separate demand functions were fitted to historical data for all major categories of steel products. The best fitted models (selected on the basis of R2 and t-test of the parameters) were used for making projections. Category-wise demands were added to obtain the total demand.

Producer-wise crude steel capacity in Indiaby 2015-16 this is likely to increase further by 2019-20
A . M a in p ro d uc e rs S A IL R IN L Ta t a S t e e l Es s a r S t e e l Is p a t Ind us t rie s JS W

22.9 6.3 13 14.5 4.2 11 10.45 2.8 6 4.5 0.5 0.5 3 35.35 135

Producers

JS PL B PS L B hus ha n S t e e ls S A IL- P OS C O S A IL- KO B E S A IL J a g d is hp ur NM DC

B . S ma lle r EA F s / IF s To t a l

Crude steel capacity (Mtpa)

International Forecasters say

India emerging as a big player in global steel market

Global community also says, .yes India, the tiger awaken.

S W NE A World Steel
Dynamics report says, India is one of the best country for building new steel plant

OX B

India to play the Key role in Steel Market dynamics

Buoyant supply & demand side ahead.

Now the problem beginsAchieving the high target

production generates huge demand for steel-makers inputs and the issue of input security crops up??!!!

Mining Infrastructure

External Infrastructure

Iron ore Coking coal Limestone Dolomite etc.

Power, natural gas Water Railways Roads Ports Human capital Engineering & Consultancy etc. is

A demand supply analysis of the inputs needed.

Iron ore poses the first challengethe situation is not very healthy
Iron ore reserve (Mt) in bars
19000 18500 18000 17500 200 17000 16500 16000 15500 15000 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 201910 11 12 13 14 15 16 17 18 19 20 100 50 0 350

Iron ore requirement (000t) in line

300 250

2050 / 55/ 60.

150

Fast exploration required.with host of new techniquesotherwise;..

SAIL may have deficits in iron ore by 2029-30 unless it acquires new minesor, enters into long-term contracts with mining companies for acquisition of mines in India & abroad.. 3000 Demand 223.4 Mt SAIL F Supply 150.8 Mt SE O A C Reserv 2500 e THE New mines to be acquired
2000
Mt

1500 1000 500 0 -500

Iron ore Requirement (BF grade) , if finished steel demand in India grows by 8.4% p a & SAIL retains 35% share in All India crude steel production

Requirement of iron ore and depletion of captive reserve.?

20 09 -1 0 20 11 -1 2 20 13 -1 4 20 15 -1 6 20 17 -1 8 20 19 -2 0 20 21 -2 2 20 23 -2 4 20 25 -2 6 20 27 -2 8 20 29 -3 0 20 31 -3 2 20 33 -3 4

2029-30

2019-20

Re ser ve

Coal requirement is quite high to achieve target steel production.

120

Coking coal requirement (Mt)

Proved reserve of coking coal is 16.5 Bn tonnes, though of poor quality

78.6

100 80 60
44.1

97

40 20
5.6

35

Steel Plants are now importing 80-90% of their Coking Coal

3.5

8.7

9.8

0 2011-12 2019-20

Pig iron

BF-BOF Route

EAF/IF Route

Total

Demand for non-coking coal in steel industry : 25Mt by 2011-12, 50Mt by 20190-20 Non-coking coal is abundant (proven reserve 79 Bn tonnes). But availability of the desired quality for production of DRI is restricted.we are still importing Non-coking coal

Natural gas demand will soar due to increase in production of steel products from EAF /IF route..& sponge iron industry.
20

Natural gas requirement

18 16 (MMSCMD) 14 12 10 8 6 4 2 0

Meeting the natural gas requirement will be a tough Job

7.86 6

17.3

2007-08

2011-12

2019-20

Present supply : 111 MMSCMD; it is likely to increase to 192.4 MMSCMD by 2011-12 & then, at All India level, there will be a deficit of 88 MMSCMD.Extensive exploration efforts needed

Alarming situation in case of water infrastructure

250 215 200

Water demand

(000 m3 / day)

150 100 50 0 100

2011-12

2019-20

Present water resource potential : 1123 Bn cubic meter National Perspective Plan envisage increase in utilizable water by about 200 Billion cubic meter

Challenges are many.Land..Human capital Engineering & Consultancy..etc. etc Availability Availability of of Land Human Capital Land acquisition Even the best Metallurgical Engineer is now Engineering in IT sector & Consultancy Services Heavily constrained

Meticulous Strategic Planning is needed

Gradual reduction in iron ore exports
Exploration to be accorded highest priority with necessary incentive & removal of various legal and porcedural constraints Adoption of latest technology for beneficiation Priority in allocation of mines to the existing steel plants without captive mines

Iron Ore

Indigenously available coal need to be blended

with imported coal to make these more suitable for metallurgical operations Acquiring mines overseas Indian steel-makers may enter into long-term contracts with coal majors Alternative technologies like coal tar injection, PCI into BF to reduce dependence on imports

Coal

Meticulous Strategic Planning required.

More efforts on exploration of natural gas Strengthening & expanding the distribution network

Natural gas

Power

More deepening of the power sector reform Capacity built up by promoting captive power plants, through incentives / tax breaks and by removing various porcedural constraints Small producers may be encouraged to pool their efforts as consortium for such activities

Meticulous Strategic Planning required.

Increase in salary Extensive man-hunt through visits to the standard engineering institutes Better training

Human capital

Engineering & consultany

More private initiatives Collaboration with foreign consultancy organizations More R&D effort

Strategic Planning is required, in an integrated Framework combining various ministries

Ministry of Mining Ministry of Power Ministry of Petroleum & Natural gas Ministry of Steel

Strategic Planning Team

Ministry of Railways

Ministry of Water resources

Ministry of Shipping, Surface transport & Highways

.....thought process to bring success for Indian steel industry is on. as ..for every day there is a tomorrow & tomorrow never dies ..so is the thought process.