Indian Chrome Ore and Ferro Chrome Industry

Transcription

1 Indian Chrome Ore and Ferro Chrome Industry Koushik Bhadra General Manager Tata Steel Asia (Hong Kong) Limited 15 th Asian Ferro Alloy Conference Hong Kong, 3 rd April,

2 DISCLAIMER : The presentation is an amalgamation of thoughts. author s own views and Tata Steel does not necessarily subscribe to the views and thoughts expressed in the presentation and should not be held responsible for the same. Publishing of the presentation by any media need to have written consent by the presenter.

3 Agenda Introduction to Tata Steel and FAMD Stainless Steel Outlook Chrome Ore Outlook Chrome Alloys Outlook

4 Tata Group is India's largest business group India's largest business group with businesses in seven sectors and operations in over 100 countries; with products and services available in over 150 countries, and over 540,000 employees. Group revenues of $ bn; 63% in geographies other than India

5 Tata Steel a flagship, global company of the Group Truly a global steel player Production facilities Raw material assets Profile: World's 12th largest steel company FY13 revenue: US$ 25 bn Employee strength ~ 80,000 Operating Beliefs & Accolades Corporate Citizenship Trust & Transparency Systems & Processes Deming Grand Prize winner 2012 Vision To be global steel benchmark for value creation and corporate citizenship.

6 Tata Steel s Ferro Alloys & Minerals Division (FAMD) ranks 5 th in the world Chrome Alloys Production in KT (2013) Largest FeCr/ ChCr producers Xstrata 1,556 ENRC 1,005 Samancor 851 Outokumpu 428 Tata Steel 270 "FAMD is uniquely positioned through their production facilities in SA & India to ensure consistent supply of ferrochrome to all its key customers" China 4,000 Others 1,603 Total 9,713 Source: CRU and FAMD data

7 Agenda Introduction to Tata Steel and FAMD Stainless Steel Outlook Chrome Ore Outlook Chrome Alloys Outlook

8 India is expected to see 6% demand growth of SS, driven by 300, 400 series CAGR Grade Wise SS Demand in India (KTPA) 3, ,257 6% ,506 1,922 FY13 FY18 200S 300S 400S Higher Gr 9% 10% 8% 5% Customer Wise Demand of Ferro Chrome (KTPA) 600 Others 182 Synergy SAIL Salem Viraj AIA 30 Rimjhim 288 JSL 180 FY13 FY18 Higher Quality requirements may lead to Consolidation. Increase in prod of SS to increased capacity utilization from organized players only Except Jindal & Rohit, SS producers do not have a backward linkage of mines and FeCr prod 8

9 With 1.8 kg per capita Stainless Steel consumption, India has huge potential for growth Year > 2.2 MT Stainless Steel Demand CAGR 6% Year > 3.0 MT Kitchen Utensils 1,630 5% Kitchen Utensils 2,100 Process and Engineering 263 7% Process and Engineering 362 ART % ART 421 ABC 45 10% ABC 79 Consumer Durables 20 18% Consumer Durables 51 Other 35 9% Other 59 Shift from 200 series to 300/400 series : Consumption mix shifting towards premium grades - Construction, transport & industrial applications to drive future growth Low base effect only 4% of global chrome alloys demand to come from India Will continue to be a net exporter in the near term 9

10 Agenda Introduction to Tata Steel and FAMD Stainless Steel Outlook Chrome Ore Outlook Chrome Alloys Outlook

11 GLOBAL CHROME ORE SCENARIO India is one of the select countries possessing chrome ore Chrome Ore Production (KT) Proven reserve: 7,600 Mn MT 22,173 +2% 24,164 +5% 31,424 13,667 SA to dominate particularly with increased UG2 New Geographies of Supply becoming significant: Turkey, Oman, Pakistan South Africa Kazak India Turkey ROW 8,720 3,687 3,320 1,679 4,767 9,219 4,014 3,152 2,170 5,609 4,455 3,144 3,032 7,126 Turkey has shown a strong growth ~ CAGR 5 % in period, likely to >7% in next 5 years Security driving value chain integration by buying/investing stake in Cr Ore assets Source: MBR, CRU

12 China will continue to dominate imports of chrome, while Indian share of exports shall reduce Chrome Ore Traded Volume in 2013: 13.3 Mn T Others Iran Australia 3% 11% Pakistan 4% Oman 6% 3% Turkey 16% Exporters South Africa 57% China Others 9% 91% Importers China Imports projected to rise (MnT) Exports of Chrome Ore from India on downward trend (KMT) In Chrome Ore, new sources such as Albania, Pakistan, Oman to increase supply India 10,778 4% 10,772 3% 13,309 1% 100% Availability of UG2 shall continue to increase ROW 96% 97% 99% Consumption by China

13 India has good quality chrome ore reserves; However quality and cost dynamics may undergo a change % volume, 18.3% Indian Chrome Ore Quality % volume, 12.5% % volume, 18.0% 51.2% Lumpy Ore & Fines (40 to 52%) Lumpy Ore & Fines (< 40%) Concentrate Lumpy Ore & Fines (> 52%) Cost of mining is increasing (Opencast to Underground) and quality is reducing (High to Medium Grade) Ore quality - Stratiform, Friable, Open Cast Reserves + Resources : 213 million MT 3.15 million MT production in 2012; (13% of world prod ) 8 players have chrome ore mines; most have downstream Ferro Chrome production facilities Higher refractoriness in Indian ore; leading to chrome ore imports Source : Indian Minerals Handbook

14 Many Indian Chrome ore producers have forward integration and produce Ferro Chrome Chrome Ore Production by various Indian companies (3.15 mill MT, 2012) OMC is the largest player in open market for selling Cr Ore 52% Source : CRU 14% 34% State Enterprises Tata Steel Other Private Players 7 Private players use Cr ore for their own captive consumption (FeCr prod) Tata Steel also does not sell any ore it sells limited quantities of high grade Chrome Concentrate

15 However, we expect higher growth of non-integrated Ferro Chrome production FeCr Domestic Production Fig in Kt Cr Ore/Conc Free Market Size Non - Integrated % 1,003 1, , Imports 1, % 1,156 1, ,320 Integrated Domestic Purchase FY12 FY13 FY14 FY15 FY12 FY13 FY14 FY15 Increase in non-integrated FeCr production leading to surge in imports - likely to increase in coming years due to availability issues of Chrome Ore in India

16 More and more Chrome Ore is expected to be utilized within the country Exports controlled by Govt, Quantity ceiling and Levy of 30% export duty Gap between domestic and export price of Chrome Ore & Concentrate Less and less quantities are being exported Growth of un-integrated Fe Cr players mining restrictions can lead to more and more chrome ore imports into India

17 Agenda Introduction to Tata Steel and FAMD Stainless Steel Outlook Chrome Ore Outlook Chrome Alloys Outlook

18 Global FeCr Outlook in 2014 : Supply expected to outstrip demand All fig in Mn MTPA ( ): Fig % Capacity Utilization % (68 ) (68 ) +8% Demand More stringent quality requirement Increasing use of NPI in China shifting preference from ChCr to FeCr Supply China to retain its numero uno position backed by UG2 advantage India FeCr production growth ~ 6% y- o-y; non-integrated producers losing competitiveness Demand China EU Japan Demand Korea India US Others Global SA 2014 Supply Kazak Finland Supply Source : CRU Market Outlook SA, plagued with power issues reducing production Capacity addition by Xstrata, Outokumpu Weak rand and rupee will affect prices 18

19 In India, FeCr production base is fragmented and majority suppliers driven by spot opportunities IDCOL Metkore VISA JSPL VISA Bao JSL + Andhra 1,013 10% 16% 11% 3% 9% 20% 4% 2% 1% 3% 1% 17% 0% Production 1% FY14 data % 21% 16% 10% 9% 7% 7% 5% 1% 2% Sales in India 100% Balasore Tata Steel Rohit + SVIL FACOR Gr IMFA Others 0% 0% India FeCr producers > 20 Majority suppliers continuously optimise between export & domestic markets spot tendency Prices are volatile driven by supply Ceiling in domestic market prices smaller players unable to pay due to dire financial condition Thus, unreliable supply of FeCr for domestic SS producers Source: Team Analysis

20 India exports 50% of its production volume with China, Korea and Japan accounting for 90% of total exports Ferro Chrome Exports (KT) Ferro Chrome Imports (KT) Source: ICDA

21 Chrome ore availability and cheap power are key determinants of cost competitiveness of Chrome Alloy producers FeCr Prod Costs Others 11% Labour 7% 35% Ore Producers 2013FeCr Prod (Mn TPA) 2013 Ore Prod (Mn TPA) Power Tariff (USC/Kwh) China South Africa Reductant 19% India Kazak % Power Finland Turkey Oman Ore availability limited to select countries; Albania, Oman and Philippines are new entrants Power tariffs have been increasing exponentially in major Chrome Alloy producing nations. SA is grappling with poor power availability leading to power buyback programs by Eskom, causing China to overtake it as leading Chrome Alloys producer in 2013 China is the only exception largest producer 21

22 India s competitive advantage in FeCr is lesser than SA and Kazakh but higher than China Key Success Factor SA Kazakh China India Power Chrome ore reserves / Mining Issues Availability of Chrome ore Reductants (Coke/Char/Anthracite) Proximity to markets Basic infrastructure (ports/ Rail/road) Government Support Overall Competitive Advantage

23 India would continue to be one of the top 4 Fe Cr producing nations - production levels 2.0x of local demand Indian 2013 production share 11% of global market... Driven by growth in ambitions of local players +6% 11,850 7, ,297 8, ,003 3,104 1, ,090 4,720 Others Finland India China Non - Integrated % 1,003 1, , ,487 1,005 2,891 1,193 3,360 Kazakh SA Integrated FY12 FY13 FY14 FY15 Source: CRU

24 ADVANTAGE INDIA: Ferro Chrome Strong Growth in Demand Backward linkage Stainless Steel production in India is projected to 6% in the next few years including potential for increasing exports of Stainless Steel from India. This will lead to a sustained demand of FeCr in line with the Stainless Steel production. Indigenous Chrome ore available of High grade quality. Power cost Commissioning of many new power plants including captive ones(cpp)- may help reduce the gap in cost of power compared to SA, China Proximity to market Freight advantage in SS markets such as China, Korea & Japan compared to Kazakh, South Africa Short sailing time.

25 Acknowledgements Metal Bulletin Research CRU Monitor IFAPA Tex Report ICDA Roskill Marketing Research Group of Tata Steel

26 THANK YOU