Sushim Banerjee, Director General. Institute for Steel Development & Growth 52/1A Ballygunge Circular Road, Kolkata

Transcription

1 Sushim Banerjee, Director General Institute for Steel Development & Growth 52/1A Ballygunge Circular Road, Kolkata

2 Contents 300 MT Capacity Augmentation Market Outlook Sectoral Behaviour and Trend, Aggregative Approach Demand Break-up and Need for Value Added Products Economic Parameters to Support Steel Growth India s Status Green Shoots Positives Challenges Supply Perspective Conclusion

3 300 MT Capacity Augmentation Market Outlook

4 Economic Growth and Steel Consumption Capacity creation in steel linked with market growth Steel market growth determined by movement of economic indicators GDP growth and movement of other economic parameters Share of industry Share of manufacturing Share of investment Share of Gross Saving Current Account Deficit Inflation

5 Sectoral Behaviour and Trend, Aggregative Approach

6 Consumption of Finished Steel (million tonnes) Consumption of Finished Steel (Million tonnes) (P)

7 Growth Rate in Apparent Steel Consumption (%) Growth Rate in Apparent Steel Consumption (%)

8 Segment Infrastructure and Construction Engineering & Fabrication Comprising of All Projects Construction, Residential/Non-residential Buildings, Urban Infrastructure, Water, Oil & Gas, Transportation, T&D Capital & Consumer Goods, Yellow Goods, Genl. Engineering, Cold Reducing / Tube Making, Genl. Fabrication, Agri. Implements Automobile Cars, Commercial Vehicles, 2- Wheelers, Tractors, Bus, Auto Components Share of Steel Consumption (%) (Revised) Other Transport Rail Tracks, Shipbuilding, Containers, Cycle 3 Packaging Petroleum/Non-petroleum, Grain Bins, LPG Cylinders 3 Total 100 Source : Indian Steel Vision 2020, WSA Sectoral Break-up of Steel Consumption in India (Marginally revised based on current trend)

9 Sectoral Model Projection for En-using Segments (1) (2) (3) (4) (5) (6) Infrastructure and Construction Current wt. in Steel Consumption (%) Estimated Consumpti on (MT) in Past CAGR (%) ( ) Projected CAGR (%) to ) Projected Consumption (MT) in Engineering and Fabrication Automotive Other Transport Packaging Total Source : Industry Sources

10 Elasticity of Steel Demand with respect to major Macro Variables (Based on Time Series Data from to ) Estimates of Elasticity of Explanatory Variables Steel Demand with respect to Explanatory Variables Explanatory Variables with respect to GDP GDP 1.1 GFCF IIP IIP Mfg (w.r.t. IIP) Source : CSO Based on GDP Elasticity Projected Steel Consumption in a) 242 MT 7.0% b) 263 MT 7.5% c) 282 MT 8.0%)

11 Demand Break-up and Need for Value Added Products

12 Demand Break-up of Finished Steel (% wise) (April Dec 14) Long (TMT, Wire Rod, Rounds, Structurals, Rly. Materials) Flat (HRC/Sheet, Plate, CRC/ Sheet, Coated, ESS, TP & Large dia pipes) Total Demand Construction and infrastructure sectors to predominate in next decade 2. Share of flats specifically, share of CR/Coated products to rise in line with growing demand from automobile, light engineering & consumer durable sectors along with shipbuilding, machinery & equipments sectors

13 Requirement of Special Steel Some of the specific steel requirements that will help raising demand and replacing imports are : 1. Higher usage of galvanealed to replace CR in order to have better anti rust performance resulting in favourable LCA. 2. Increased availability of thin sections of HR i.e. 1.2/1.4/1.6 mm in lieu of CR in ordertobecosteffective. 3. Requirement of wider CR width > 1650 mm. 4. More CR and galvanealed to be made available in : High Strength Steel (HSS) for weight reduction Bake Hardening steel and conventional HSS 440 MPa. Advanced High Strength Steel (AHSS) for weight reduction and crash safety enhancement DP, TRIP 590 ~ 980 MPa and Hot stamped steel ~ 1500 MPa 5. Close dimensions tolerance and consistency in surface quality for skin panel application. 6. Use of Electro galvanized steel (limited to fuel tank in two wheelers). 7. Emergence of Auto, Railways & Transport (ART), Architecture, Building & Construction (ABC), Power, Process Industry, Oil & Gas in SS Consumption (300 & 400 series) leading to more demand for higher width (> 1250 m), Duplex variety, seamless stainless / alloyed tubes

14 Economic Parameters to Support Steel Growth India s Status

15 Decades / Year Sectoral Share (% share) in GDP Primary Sector Secondary Sector Tertiary Sector Real GDP Growth Rate (%) (13.8) (14.8) (15.3) (15.9) (15.8) * (18.0) * (17.9) Source : CSO ( ) Share of manufacturing in GDP * Based on prices Less material intensive approach to economic growth led to low share of industrial segment and near stagnant share of manufacturing resulting in poor steel consumption

16 Countrywise Share of Industry and Manufacturing in GDP Country Share of Industry in GDP (%) Share of Manufacturing in GDP (%) Steel Consumption in 2013 (MT) India China S. Korea Turkey Russia Source : World Bank, CSO China invests 48% of GDP and a significant proportion goes for steel-intensive sectors, India s investment at 32% of GDP is much less for steel-intensive industries

17 Tardy Growth of Steel Intensity Steel Intensity in Construction increased from in to in Steel GDP Ratio increased from 1.11 in to 1.29 in

18 Green Shoots Positives

19 Smart Cities Positives for Steel Demand India draws the blueprint for future urban development with 100 new Smart Cities. Each Smart City requires : Rs.1000 Cr. Central investment over next 10 years To be developed through PPP to improve transport, infrastructure, housing and communication 80 85% investment by private sector, balance by Central / State / Urban local bodies By March end, policy announcement by Urban Development Ministry

20 Positives for Steel Demand New Infrastructure Under National Industrial Corridor Development Authority (NICDA), development of Delhi Mumbai I C and 5 Smart cities at Dholera, Shendra Bidkin, Greater Noida, Ujjain and Gurgaon Chennai Bangalugu I C East Coast Economic Corridor Amritsar Kolkata I C NE Region to be linked with Industrial Corridors 17 National Investment and Manufacturing Zones approved Advanced practices in Manufacturing to be promoted I C with peripheral development (Power, Water Supply, Real Estate and other Infrastructure)

21 Positives for Steel Demand FDI cap raised in Defence sector from 26% to 49% Portfolio investment in Defence sector permitted upto 24% under automatic route 100% FDI in Communication and single brand retail 100% FDI under automatic route in Construction as well as in specified Rail infrastructure such as Subarban Corridor projects through PPP High Speed train projects DFC Rolling stock of loco / coaches Industrial Park with respect to Railway lines

22 Positives for Steel Demand Manufacturing to achieve 12 14% growth per annum To raise share in GDP from the current 18% to 25% by 2022 To create 100 million jobs by 2022 To enhance global competitiveness of Indian Manufacturing Capital goods industries like Machine Tools, Heavy Electrical Equipment, Heavy Transport, Earthmoving and Mining Equipments, Defence Equipments, Small and Medium Enterprises and Public Sector Enterprises to become focus segments 17 NIMZ identified

23 Positives for Steel Demand An estimated urban housing shortage of 18.8 million dwelling units and rural housing shortage of 47.4 million dwelling units in % FDI through automatic route in townships, housing, build up infrastructure India : World s 2 nd largest road network fast track expansion plans World s 3 rd largest rail network fast track expansion plans 96 trillion cubic feet of Shale gas and 47 trillion cubic feet of natural gas reserves 87 new ports (major and minor) identified for development 6 million plus vehicles to be sold annually by 2020 Leading Auto parts maker in the world

24 Issues to address for High Manufacturing Growth Exports of manufactured consumer goods doubled during , imports increasedby 215% Value addition in total manufacturing output dropped from around 25% in mid 1990s to 18% in implying rising import intensity of manufacturing output Maximum decline in Gross Value Added observed in steel intensive segments like Furniture & Other manufacturing Machinery & Equipments Basic Metals

25 Issues to address for High Manufacturing Growth Chinese share in India s import of manufacturing products rose by 588% during Processed industrial supplies comprised of 80% of total imports of industrial supplies in 2012 Specific measurers to enhance competitiveness of Indian manufacturing industries (domestic and exports) increasing productivity easier access to finance labour reforms more presence of organized sector in manufacturing

26 Challenges

27 Import led Consumption Facts & Strategies Year Real Steel Consumption ( 000 t) Finished Steel Total Imports ( 000 t) Share (%) of Imports Share (%) of China in Total Imports Share (%) of Japan / S Korea (under CEPA) total Imports (April Jan 15) (+3.5%) (+63%) Note Share of imports rising in steel consumption Cheap imports from China (HRC, Coated Sheets, SS and TMT / Wire Rods) substantial in volume and affect market share and realization of domestic producers Duty concession under CEPA make imports (HR/CR) much cheaper from Japan & S. Korea Strategy Cost Competitiveness and more value added products Anti dumping and safeguard duty mechanism Relook and Review of FTAs

28 Requirement of Finance for capacity augmentation : $ 200 bn (including ongoing Brownfield expansion) [PSUs, FDI (POSCO, Arcelor Mittal, JFE, Nippon, Private Entrepreneurs] Raw Material Security : Allocation of Coal mines via e-auction Allocation of iron ore mines leases / extension via e-auction Availability of non-coking coal & iron ore for SMEs Water availability for new capacities : 1100 million m 3 Land acquisition Requirement : 1,26000 Acres (approx.) Logistics Transportation of 490 MT of iron ore, 170 MTs of coking coal 140 MT of non-coking coal, 110 MT of Limestone & Dolomite and handling of cargo at ports (300 MT cargo) Massive expansion in Rail (800 MT cargo), road and Port network

29 Supply Perspectives

30 Crude Steel Capacity Utilization (%) Crude Steel Capacity Utilization (%)

31 Projected capacity addition by expansion of existing steel plants Producers Production (in million tonnes) Brownfield steel plants SAIL Plants Vizag Steel Plant (RINL) Sub total (A) Tata Steel, Jamshedpur JSW, Vijayanagar Essar Steel, Hazira JSPL, Raigarh BPSL, Rengali BSSL, Meramandali Sub total (B) Total (A+B) Secondary producers Total Source: MECON

32 Total projected steel production by brownfield and greenfield expansion by various steel companies in Steel sector Brown field expansion Green field steel plant Public sector Private sector 59 97* Secondary producers * Total Total steel production by Mt Source: MECON *60 Mt capacity has been assumed to be added mainly by private sector and secondary producers in equal proportion.

33 Conclusion

34 Conclusion Capacity augmentation a function of demand and market realization Political stability and steady progress in economic reforms form the base of a sustainable Business Scenario as uncertainty throttles investment Growth of steel-intensive manufacturing and mining sector and reversal of declining share of Gross Fixed Capital Formation in GDP (Capital Fundamentalism) the two critical caveats for steel consumption growth Promote more use of steel in construction by innovative design of steel concrete composite design Create awareness in steel use in construction of low cost/ affordable housing, train rural entrepreneurs as steel fabricators to make steel based household items for the vest untapped rural market Indian Steel must become globally competitive (cost & quality)

35 Thank You

36 Projected capacity addition by upcoming green field steel plants Producers Production (in million tonnes) Greenfield steel plants Public Sector SAIL Sindri, NMDC Nagarnar, NMDC, Karnataka JV of BSL POSCO Private Sector Arcelor Mittal, Karnataka TATA Steel, Kalinganagar, Odisha JSPL, Angul, Odisha JSPL,Patratu, Jharkhand JSPL, Asanboni, Jharkhand POSCO, Odisha BPSL, Potka, Jharkhand JSW, West Bengal JSW, Odisha JSW, Jharkhand Capacity addition 81.0 Source: MECON

37 Annual Requirement of Inputs & Infrastructure in Inputs Unit Annual Qty. Iron ore Mt 490 Coking coal Mt 170 Non coking coal for DRI / PCI Mt 140 Steel scrap (for IF based units) Mt 20 Limestone & Dolomite Mt 110 Infrastructure Requirement for Unit Qty. Additional Steel Capacity by Land Acre 1,26,000 Water Million m 3 1,100 Power MW 22,000 Steel related Railway Traffic Mtpa 800 Steel related Port Handling Mtpa 300 Source: MECON