Indian DRI Industry Challenges for Sustainable Growth 2 nd World DRI and Pellet Congress th April, 2014 Ritz-Carlton, Abu Dhabi

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1 Indian DRI Industry Challenges for Sustainable Growth 2 nd World DRI and Pellet Congress th April, 2014 Ritz-Carlton, Abu Dhabi Deependra Kashiva Executive Director

2 World Steel and DRI Growth Scenario DRI industry is coming up very fast in the world World steel industry registered growth of 2.7 times in last 43 years from 595 million tonnes in 1950 to 1607 million tonnes in DRI remarkable growth was 95 times in the last 43 years from 0.79 million tonnes to about 75 million tonnes in Modern direct reduction industry is continuing to evolve and industry s view on DRI and methods of producing are changing.

3 Reasons for Development of DRI Industry in India In India, DRI is mainly used as a substitute of steel melting scrap in steel making through DRI- EAF /IF route DRI doesn t require coking coal-imported in huge quantities. DRI-EAF/IF route accounts for 40% of the steel produced in India Gas-based DRI/HBI is cleanest and an environment friendly steel making route (CO2 emission in DRI EAF route is less than half of Blast Furnace - BOF route). Preferred raw material for making alloy and special steels for vital sectors like automobile defence, aviation, space etc. Gap between supply & demand of steel, low investment & low pay back period, high profitability, subsidies & tax holidays in different states, proximity to main raw materials, etc.

4 Genesis of Indian DRI Industry 1980 First 30,000 TPA coal based plant in Andhra Pradesh with UNDP support. First generation technology with focus on high quality equipment, product and environment Government de-licensed the DRI industry well before liberalization and globalization of Indian economy in Gas based DRI industry was declared as SUNRISE INDUSTRY. (As NG was flared). During this time India s second largest import (after crude oil) was steel melting scrap.

5 Genesis of Indian DRI Industry Apart from a few coal based plants, 3 large gas based plants were commissioned. These plants were set up based on Government assurance of long term allocation of NG. COMPANY S NAME CAPACITY (mtpa) Essar Steel 3.6 (1990) Vikram Ispat 0.9 (1993) Ispat Industry 1.6 (1994) Total Capacity 6.1

6 Capacity Building 2005 MTPA Gas-based 6.10 Coal-based Total Capacity MTPA Gas-based 9.20 Coal-based Total Capacity 45.23

7 Major presence of coal based plants are in the states of Odisha, Chhattisgarh, West Bengal, Jharkhand These coal based plants are mainly in the vicinity of mining areas There are about 15 identified clusters comprising essentially of small plants. Some of the major clusters in India are Siltara ( Chhattisgarh), Rengali ( Odisha), Chandil (Jharkhand) & Bellary (Karnataka)

8 Domestic DRI capacity increased by about 280% in eight years during India is the largest DRI producer in the world for the last 11 consecutive years and accounts for 25-30% of world production. This trend is likely to continue. Essar is the largest single location gas based DRI/HBI plant in the world. JSPL is the largest single location coal based DRI plant in the world. No greenfield natural gas based DRI/HBI plant came up after 1994 (20 years). Major growth in coal based sector from to Presently, no small coal based plants (50 PTD, 100 TPD) are allowed by State Governments. Growth of steel in India during could not have happen without the support of DRI industry as the growth of steel-making using DRI is almost 4 times than other routes.

9 Coal & Gas Based DRI Production (CY) in India ( Figures in 00,000 tonnes) Source: SIMA GAS COAL TOTAL

10 Million Tonnes World and Indian DRI Production During Last 10 Years E INDIA WORLD

11 Issues Impacting Indian DRI Industry 1. Current Iron Ore Scenario & it s Impact Haematite & Magnetite Reserves (Figures in Million Tonnes)

12 Haematite Reserve Categorisation (8.09BT) (Figures in Billion Tonnes)

13 Current Iron Ore Scenario & it s Impact Indian iron ore reserves are almost at par with Australia and Brazil. Australia doubled it s production to 600 MT and Brazil to 400 MT and India is at 136 MT. Due to regulatory restrictions & environmental clearance issues, iron ore production and export in India are gradually coming down, infact production has declined by around 11% CAGR from financial year whereas consumption is on the rise. Due to this, the correlation between global and domestic prices has reduced significantly over last three years. Year Production Export Import (million tonnes) (million tonnes) (million tonnes) P P

14 Million Tonnes Production, Export and Import of Iron Ore Produc on Export Import Source : IBM, MMTC and Ministry of Steel

15 Odisha produces 40-45% of iron ore. Maximum was 81MT in Last year it produced 64 MT. A cap of 55 MT may be imposed which will severely effect DRI production in Odisha Like wise production of iron ore in Karnataka has drastically come down from 43 MT in to about 10 MT in There is a cap of 30 MT. 50% coal-based DRI units are closed or are running with reduced capacities for the want of iron ore. Most of the iron ore mining is in the private sector who have no standard pricing mechanism which leads to frequent changing in the iron ore price. Limited availability and frequent change in the iron prices have seriously impacted production and financial performance of Indian DRI producers

16 2. Coal-related Issues Category wise Coal Reserves as on (Figure: Million Tonnes) Type of Coal Proved Indicated inferred Total Coking Coal Non-Coking Coal Tertiary Coal Total Source: Ministry of Coal, Report

17 Non Coking Coal Geological Resources of Coal Proved Indicate Inferred (Figure: Million Tonnes) Source: IBM

18 Coal availability & it s impact P R O D U C T I O N Year Non Coking Coal Coking Coal Import (million tonnes) (million tonnes) (million tonnes) (P) (P)

19 India has 4 th largest reserves of coal but is also the 3 rd largest importer of coal. Coal India Ltd. a public sector enterprise is the main source of non coking coal in India. With fast economic developments, the demand of coal is out pacing the production. Due to fast expansion of thermal power generation, most of the coal is diverted to power plants resulting in inadequate availability of non coking coal for the Indian DRI industry. Total requirement: 32 MTPA Availability from CIL sources: 11 MTPA Imported coal: Too costly to afford Besides restricted coal availability, prices of coal increase frequently. Restricted availability and frequent increase have also impacted growth of Indian coal based DRI industry. This situation is likely to continue for some more time.

20 3. Inadequate Availability of Natural Gas and it s Impact on Indian DRI Industry Total requirement: 7.64 mmscmd Allocation to three existing gas based plants APM gas : RIL KGD6 : 5.36 mmscmd 4.19 mmscmd Present availability: 1.14 mmscmd (about 15%) Imported LNG: 3 times costlier, too costly to afford Contribution of gas-based plants is coming down very fast. In 2013, it has come down to 16.2% compared to 26.2% in This trend is likely to be arrested in 2014.

21 Solutions to Substitute Natural Gas Use of coke oven gas Use of corex gas Use of coal gas Above measures are expected to substantially increased gas based DRI/HBI production in India from

22 4. Environmental Issues with Coal Based DRI Plants India has both coal based and gas based DRI plants. There are 369 coal based plants majority in the capacity range of 30,000 1,00,000 tonnes per annum, apart from 3 gas based plants. Smaller coal based plants have technological and financial limitations. While gas-based DRI process is highly eco-friendly and energy efficient, coal based DRI process is more energy intensive activity and lead to higher carbon load on climate specially by smaller coalbased DRI plants. Some of the State Governments have now restricted them mainly because of environmental issues. Standalone smaller coal-based DRI plants are gradually closing down as they are highly polluting. Such plants have no future. We do not see any adverse impact of their closing down on the over all availability.

23 Role of DRI in Indian Steel Industry India produced 81 million tonnes of steel in As per official projections, India would need to produce 275 million tonnes steel by 2025 to meet their growing steel demand. Additional 194 million tonnes in next 11 years can not be produced entirely from conventional BF-BOF route for high capital intensive and gestational considerations. Additional steel has, therefore, to come from a mix of BF- BOF route, DRI route and other alternate direct smelting reduction technologies like Corex, Finnex, Hismelt, Fastmet etc. Surprisingly, all these technologies pass through the DRI phase. Limited availability of coking coal in India and world wide will encourage Steel production in the country through combination of DRI & BF e.g. DRI-BF-EAF route. We in SIMA are of the opinion that DRI industry is going to play an increasingly important role in augmenting steel production in India.

24 2 nd India International DRI Summit 2014 Date : 1 st August, 2014 Venue : Hotel Le Meridien, New Delhi, India Expected participants : Leading DRI producers, Technology, Equipments and Raw Material suppliers from India, USA, Japan, Austria, Germany, China, Mexico, Saudi Arabia, UAE, Oman, Brazil, South Africa etc. Contact : Deependra Kashiva Executive Director Sponge Iron Manufacturers Association dkashiva11@sima.org.in dkedsima@gmail.com

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