Steel Industry (11/8/2017)

Transcription

1 Steel Industry (11/8/2017)

2 Major Terms: HOT METAL: It is the hot, liquid, metallic iron product obtained upon reduction of iron ore. Hot metal is the primary input for production of steel in the Integrated Steel Plants. PIG IRON: A product in solid (lumpy) form obtained upon solidification of Hot Metal in Pig Casting Machine. Direct Reduced Iron (DRI)/Sponge iron: Solid metallic iron product obtained upon Direct Reduction of high grade iron ore in solid state itself without being converted into liquid form like that in Blast Furnace. STEEL MAKING: Steel making is the process of selective oxidation of impurities present in the charge material (Hot metal/scrap/dri) in the presence of suitable fluxes in the Steel Melting Shops (SMS). LIQUID STEEL: The immediate hot molten steel product from Steel Melting Shop.It is further cast into ingots/semis. The by-product from SMS is called SMS slag.

3 Major Terms: LONG PRODUCTS :Finished steel products produced normally by hot rolling/ forging of Bloom/billets/pencil ingots into useable shape/sizes. These are normally supplied in straight length/ cut length except Wire rods which are supplied in irregularly wound coils. FLAT PRODUCTS (FLAT ROLLED PRODUCTS) :Finished steel flat products are produced from slabs/thin slabs in rolling mills using flat rolls. These are supplied in Hot Rolled (HR), Cold Rolled (CR) or in Coated condition depending upon the requirement. HOT ROLLED (HR) FLAT PRODUCTS : HR are produced by re-rolling of slabs/thin slabs at high temperature (above 1000 Degree C) in Plate Mills (which produce plates) or in Hot Strip Mills (which produce strips). Hot Rolled Strips are cut into straight length to produce HR Sheets or Thin Plates. COLD ROLLED (CR) STRIPS: CR are produced by cold rolling of HR Strips in Cold Rolling Mills (normally at room temperature). CR Strips are cut to produce CR sheet. CR Strips/sheets are characterised by lower thickness, better/bright finish, closer dimensional tolerance and specific mechanical/metallurgical properties..

4 Major Terms: COKING COAL: Coking coals are those varieties of coal which on heating in the absence of air (process known as Carbonisation) undergo transformation into plastic state, swell and then resolidify to give a Cake. On quenching the cake results in a strong and porous mass called coke. COKING TIME: Coking time is defined as the time required for conversion of coal to coke in the coke oven which varies in the range of 1520 hrs. ALLOY STEEL :Steel which is produced with intended amount of one or more alloying elements in specified proportions to impart specific physical, mechanical, metallurgical and electrical properties. CRUDE STEEL: The term is internationally used to mean the 1st solid steel product upon solidification of liquid steel. In other words, it includes Ingots (in conventional mills) and Semis (in modern mills with continuous casting facility).

5 Raw Materials: Iron Ore India continues to import iron ore despite having the 5th largest iron ore deposits. Pig iron/ sponge iron industry are barred from auctioning of captive iron ore 98% of mined iron ore is used to make steel. Coking Coal These constitutes 80% of the production cost through DRI route. Costs are not in control of secondary players. the ores must be converted, or reduced, using carbon. The primary source of this carbon is coking coal. About 30% of coal can be saved by injecting fine coal particles into the blast furnace, a technology called Pulverised Coal Injection (PCI). Around 1.2 billion tonnes of coal are used in global steel production, which is around 15% of total coal consumption worldwide At current production levels, proven coal reserves are estimated to last at least 120 years Limestone, Mangenese, nickel, zinc

6 Prices of Raw Materials And Hor Rolled Steel FY12 FY13 FY14 FY15 FY16 FY17 FY18P FY19P iron ore (Rs/tonne) % -14% 30% -41% -13% 6% -7% coking coal($/tonne) in rupee term % -15% -18% -16% 31% 28% -12% international prices($/tonne) in rupee term % 4% -1% -32% 9% 17% -4% domestic prices(rs/tonne) % 4% -2% -16% 17% 9% 0% rupee/usd

7 Standard estimate Global Steel Industry(2015) 1600Kg Iron ore 450 Kg Coke 2 bntn Iron Ore 1 bntn Met Coal 0.52bntn Scrap steel 1000Kg Pig Iron 1.6 bntn Crude Steel

8 Types of steel Players Integrated steel producers Tata Steel, JSW Steel Primary steel producers Secondary steel producers-mini Mills 57% of steel produced 65% of long steel produced EAFs & MBFs DRI/Sponge iron

9 History Key Events 1907*: Tata Iron and Steel Company set up. 1913: Production of steel begins in India. 1918: The Indian Iron & Steel Co. set up by Burn & Co. to compete with Tata Iron and Steel Co. 1923*: Mysore Iron and Steel Company set up 1939*: Steel Corporation of Bengal set up 1948: A new Industrial Policy Statement states that new ventures in the iron and steel industry are to be undertaken only by the central government. 1954: Hindustan Steel is created to oversee the Rourkela plant. 1959: Hindustan Steel is responsible for two more plants in Bhilai and Durgapur. 1964: Bokaro Steel Ltd. is created. 1973: The Steel Authority of India Ltd. (SAIL) is created as a holding company to oversee most of India's iron and steel production. 1989: SAIL acquired Vivesvata Iron and Steel Ltd. 1993: India sets plans in motion to partially privatize SAIL.

10 Steel Making Process

11 Flow chart Of Steel Making Process Coal Iron Ore Baking coal Basic oxygen Furnace Blast Furnace Hot Rolling DRI Sintering EAF/IAF Cold rolling

12 Ratio of Input & Output from BF and EAF Based on the blast furnace (BF) and basic oxygen furnace (BOF), which uses raw materials including iron ore, coal, limestone and recycled steel. On average, this route uses 1,400 kg of iron ore, 800 kg of coal, 300 kg of limestone, and 120 kg of recycled steel to produce 1,000 kg of crude steel The electric arc furnace (EAF) route uses primarily recycled steels and direct reduced iron (DRI) or hot metal and electricity. On average, the recycled steel-eaf route uses 880 kg of recycled steel combined with varying amounts of other sources (DRI, hot metal, and granulated iron), 16 kg of coal and 64 kg of limestone, to produce 1,000 kg of crude steel.

13 Types of steel Types Of Steel

14 Uses of by-product from Steel making process

15 Source: CRISIL

16 Source: CRISIL

17 Global Steel Industry Global Steel Industry

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19 Source: CRISIL

20 Top steel using countries and steel producing companies RANK COMPANY TONNAGE ArcelorMittal China Baowu Group ¹ HBIS Group ² NSSMC Group ³ POSCO Shagang Group Ansteel Group JFE Steel Corporation Shougang Group Tata Steel Group Shandong Steel Group Nucor Corporation Hyundai Steel Company Maanshan Steel thyssenkrupp NLMK Jianlong Group Gerdau China Steel Corporation Valin Group JSW Steel Limited Benxi Steel SAIL U.S. Steel Corporation IMIDRO 14.02

21 Global Steel Industry Outlook In 2016, the world crude steel production reached 1630 million tonnes (mt) and showed a growth of 0.6% over China remained world s largest crude steel producer in 2016 (808 mt) followed by Japan (105 mt), India (96 mt) and the USA (79 mt). As on 2017 Global steel demand was 1.52 bntn Crude steel production was 1.63 bntn China produced 0.8 bntn and export of 0.1 bntn Chinese government intends to reduce production capacity by mntn by 2020 and has also announced merger of two major chinese steel producer Raw materials remained volatile Outlook As per WSA, global steel demand is expected to at 2.2% to 1.55 bntn in Russia, brazil and India to aid demand growth Low level of capacity reduction then target and over supply of iron ore might bring prices down EU looks positive with increasing private consumption and investment plus goverment taking measure to counter cheap imports

22 Steel industry of India Contributes approx 2% of GDP & employs 5 lakh people directly and 20 lakh people indirectly India is a third largest steel producer with the capacity of 128MT and production of 99 MT. India has low per capita consumption of 61 kg as compare to world average of 208kg BF/BOF route has a capacity of around 50MT at utilisation level of 82% Electric Induction furnace has capacity of 36.49MT with capacity utilisation of 75% EAF contributes 25% of total steel produced Huge secondary producer market 57% share of total steel produced Limited availability of raw material, especially coking coal After privatisation, India became the net exporter. Indian steel industry saw crude production at a CAGR of 8.3% since As per WSA, India;s steel demand is expected to grow at 6-7% per annum for two years compared to 4% in 2016 During FY17, steel sector was affected by increase production and imports at predatory pricing. India steel demand -78Mntn

23 Particular Crude Steel capacity 22MT MT Pig iron 1.6MT 9.39MT DRI 24 Mt(2016) Particular FY13 FY14 FY15 FY16 FY17 Crude Production (MT) Public Sector Private Sector Steel Consumption(MT)

24 Million tonnes Production for Sale Finished steel Sponge Iron Pig Iron India was the largest producer of sponge iron in the world during the period and was the 2nd largest producer in 2016 (after Iran). The coal based route accounted for 79% of total sponge iron production in the country in (prov).

25 Crude Steel Capacity Crude Steel Production

26 Finished steel Finished Steel consumption

27 14 12 Finished steel Export Import

28 Uses of Steel Globally

29 National Steel Policy 2017 NSP 2017 is an effort to steer the industry to achieve its full potential, enhance steel production with focus on high end value added steel while being globally competitive. 300MT steel capacity till 2030 It is expected that at the current rate of GDP growth, the steel demand will grow threefold in next 15 years to reach a demand of MT by Significant capital investment of about Rs. 10 lakh Crore by and will also generate significant employment in the range of 36 Lakhs by Demand for pig in the electric arc or induction furnaces, is forecast to increase to 23 MT by Establishment of steel plants along the coast under the aegis of Sagarmala project will be undertaken Exports to reach 24 MT by 2030(10% of production)

30 National Steel Policy 2017 Will promote gas based steel plants, electric/induction furnace Emphasis on BF/BOF technology-60-65% of steel produced Reduce import dependence on coking coal to 65% from 70% by Implement Jharia Action plan Additional land requirement of approx acres The power required by the industry is estimated to increase to 27,717 MW by 2030 by 2030 DRI demand to be 80MT & Capacity at 114 MT Ministry od steel will fascilitate mechanism of SPVs Iron Ore Will promote use of low grade fines lying at mining sites Focus on pelletisation and installation of slurry pipelines and conveyors

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32 Future Outlook Increased allocation for infrastructure development at Rs 4 trillion. A steel industry is set to grow at 6-6.5% CAGR acc to CRISIL. For 2018, WSA projects steel demand to reach 94.9 MT. Rise in renewable energy industry. World Steel Association has projected Indian steel demand to grow by 6.1% in 2017 and by 7.1% in 2018 while globally, steel demand has been projected to grow by 1.3% in 2017 and by 0.9% in Chinese steel use is projected to show nil growth in 2017 and decline by 2% in 2018

33 As on September 2017 WSA reports that global crude steel production totaled million tonnes (Mt) at a capacity utilization rate, (CUR) of 72.2% in August. On a year on year, (y/y) comparison, the capacity utilization rate was up 3.7 percentage points, a significant increase. For the seven months ending August total worldwide raw steel production totaled 1,122.4 Mt, up Mt year to date y/y or 5.4%.

34 Duties & Taxes As a facilitator, the Government monitors the steel market conditions and adopts fiscal and other policy measures based on its assessment. Currently, GST of 18% is applicable on steel and there is no export duty on steel items. The government has also imposed export duty of 30% on all forms of iron ore except low grade (below Fe 58%) iron ore lump & fines and iron ore pellets both of which have nil export duty. the Government had earlier raised import duty on most steel items twice, each time by 2.5% and imposed a gamut of measures including anti-dumping and safeguard duties on a host of applicable iron and steel items Again, in February 2016, the Indian Government had imposed the Minimum Import Price (MIP) condition on 173 steel products. The MIP was extended thrice and ceased to be effective in February Currently, a mix of anti-dumping /safeguard and other measures are in place on a range of steel items to control the inflow of cheap steel GST would lead to high working capital requirement-increase by bp

35 Companies Under Study Tata Steel JSW Steel

36 Tata Steel Tata Steel is currently the world s second-most geographically diversified steel producer. It is one of the few steel operations that is fully integrated from mining to the manufacturing and marketing of finished products. Possess and operate captive mines that help us maintain cost-competitiveness and production efficiencies through an uninterrupted supply of raw material. This is how they ensure that they remain the lowest cost producer of steel in Asia.

37 Increase in production since inception of Tata Steel

38 JSW Steel From humble beginnings with a single plant in 1982, they are now India's leading manufacturer of value-added and high-end steels Value added steel sales-5.06 MnTn Got reserve in Karnataka of 111mntn -20% of Vijaynager requirement Capex program of cr 23 mtpa capacity by mtpa flat Coastal shipment of iron ore & coal-3.89 mnt

39 Comparative Analysis as on March 2017 Particulars UoM Tata Steel (India) JSW Steel Crude Steel Production MnTPA Location Raw Material MnTPA 33 Capex (FY17) Cr 3173 Jamshedpur-10 Kalinganagar-3 Capacity MnTPA Saleable steel sales MnTPA Vijayanagar-12 Dolvi-5 Flat MnTPA /10.97 long MnTPA 3 5.5/3.06

40 Comparative Financial Analysis Particulars Tata Steel JSW Steel Revenue EBIDTA EBIDTA % 22 23% PAT PAT % 6.4% 7% RoE % RoCE % Market cap D/E EPS P/E

41 Comparative Analysis As on FY16

42 Sources _Adv.pdf NAL&docLanguage=En Annual report of Tata steel Annual report of JSW Steel Magazine-India steel market watch CRISIL Webinar on steel Industry

43 Thank you