INDIA AHOY!!!!!

STEEL SECTOR

World Steel Industry – Top Ten Source: IISI S. Korea 53.6 mT 5 6 Italy 30.6 mT 10 Germany 45.8 mT Ukraine 38.6 mT 7 USA 91.4 mT Russia 68.5 mT Brazil 33.7 mT India 58.1 mT 1 China 502 mT Global crude steel Production: million tonnes (mT) Japan mT

Global ranking of Indian steel

Indian Steel Industry

Supply With trade barriers having been lowered over the years, imports play an important role in the domestic markets. Demand The demand is derived from sectors that include infrastructure, consumer durables and automobiles. Barriers to entry High capital costs, technology. Bargaining power of suppliers The governments move on railway freight costs and grid power costs would determine the final price of the metal. Bargaining power of customers High, presence of a large number of suppliers and access to global markets. Competition High, presence of a large number of players in the unorganized sector.

Skilled Human Resources Abundant Iron Ore Government Policy Huge Potential for Demand High GDP growth rate of 7% 1 billion population Low per capita steel consumption of 33kg (World av. 181 kg) Reserves 23 billion tonnes Stable currency Easing of regulations Strong Banking & judicial system Growth factors for India Encouraging trade relations with ASEAN and other countries Infrastructure building Exploring new Energy resources Indian Potential for Steel

Fifth largest producer of steel in the world and second largest producer of crude steel - Press Information Bureau Steel production reached million tonne (MT) in April- September About 50% of the steel produced in India is exported. India accounts for over 7% of the total steel produced globally India accounts for around 5 per cent of the global steel consumption Huge Iron Ore reserves – 23 bn. tonnes Indian Steel Producers are increasingly looking for overseas acquisitions in steel as well as raw materials. Positive overall growth in the production of crude steel Indian Steel Industry – An Overview

Composition of Steel Production -A Value Proposition HR Quantity%age Long Prods % HR % Plates1.8325% CR2.2517% GP % Pipes % Total %

Steel - Products

Indian Steel Industry SWOT Analysis

SWOT ANALYSIS OF INDIAN STEEL INDUSTRY STRENGTHS Abundant resources of iron ore Low cost and efficient labour force Strong managerial capability Strongly globalised industry and emerging global competitiveness Modern new plants & modernised old plants Strong DRI production base Regionally dispersed merchant rolling mills WEAKNESSES High cost of energy Higher duties and taxes Infrastructure Quality of coking coal Labour laws Dependence on imports for steel manufacturing equipments & technology Slow statutory clearances for development of mines

SWOT ANALYSIS OF INDIAN STEEL INDUSTRY OPPORTUNITIES Huge Infrastructure demand Rapid urbanisation Increasing demand for consumer durables Untapped rural demand Increasing interest of foreign steel producers in India THREATS Slow growth in infrastructure development Market fluctuations and Chinas export possibilities Global economic slow down

Michael Porters Five Forces Analysis Buyers Power Increasing Demand for Steel Fragmented Coke Suppliers Suppliers Power High Raw Material Prices Lack of Captive Source Hurting Steel Producers Lack of Transportation Backward Integration Intensity of Competition Competition from Foreign Players Spurt in Merger and Acquisition Activities Threat of New Entrants High Cost of Basic Inputs and Services Threat of Substitutes Use of Aluminum/Plastic

PEST Analysis Political Factors Recommendations on Captive Mines National Steel Policy to Remove Bottlenecks Economic Factors GDP Growth Rate Reduction in Customs Duty Social Factors Rural-Urban Divide Higher Disposable Income Technological Factors Popularity of Steel Portals Application of SML (Steel Markup Language)

Top 10 Players 1st; mmt; ArcelorMittalArcelorMittal 2nd; 37.5 mmt; Nippon SteelNippon Steel 3rd; 35.4 mmt; Baosteel GroupBaosteel Group 4th; 34.7 mmt; POSCOPOSCO 5th; 33.3 mmt; Hebei Steel GroupHebei Steel 6th; 33.0 mmt; JFEJFE 7th; 27.7 mmt; Wuhan Steel GroupWuhan Steel Group 8th; 24.4 mmt; Tata SteelTata Steel 9th; 23.3 mmt; Jiangsu Shagang GroupJiangsuShagang Group 10th; 23.2mmt; U.S. SteelU.S. Steel Source: World Steel Association

ArcelorMittal largest steel company, with 315,867 employees in more than 60 countries. formed in 2006 by the merger of Arcelor and Mittal Steel. ($38.3 billion ) It ranks 28th on the 2009 Fortune Global 500 list. the market leader in steel for use in automotive, construction, household appliances and packaging.automotive constructionhousehold appliances packaging ArcelorMittal is looking to develop positions in the high-growth Indian and Chinese markets.

MAJOR PLAYER - SAIL fully integrated iron and steel maker. GOI - 86% of SAIL's equity However, SAIL, by virtue of its "Navratna" status, enjoys significant operational and financial autonomy. SAIL and TISCO (which enjoy the benfits of captive ore mines) are among the lowest cost producers of steel in the world.

Major units of SAIL are as under:. Integrated Steel Plants Bhilai Steel Plant (BSP) in Chhattisgarh Durgapur Steel Plant (DSP) in West Bengal Rourkela Steel Plant (RSP) in Orissa Bokaro Steel Plant (BSL) in Jharkhand Special Steel Plants Alloy Steels Plants (ASP) in West Bengal Salem Steel Plant (SSP) in Tamil Nadu Visvesvaraya Iron and Steel Plant (VISL) in Karnataka Subsidiaries Indian Iron and Steel Company (IISCO) in West Bengal Maharashtra Elektrosmelt Limited (MEL) in Maharashtra Bhilai Oxygen Limited (BOL) in New Delhi

SAILS GROWTH PLANS Hot Metal Crude Steel Saleable Steel mT - Planned Investments of US$ 7.7 bn. - Includes only growth in existing Units

Other Major steel producers Tisco JSW Essar Steel RINL MECON MOIL MSTC KIOCL NMDC

TATA STEEL LIMITED Tisco country's single largest Integrated steel plant ranks 34th in the world Technical collaboration with Nippon Steel & Arcelor In January 2007 Tata Steel made a successful $11.3 billion offer to buy European steel maker Corus Group PLC.

STEEL SECTOR TRENDS India - worlds largest producer of direct reduced iron (DRI) or sponge iron with nearly 20 million tonnes production in Estimated steel production capacity -124 million tonnes by the year Generate additional employment of around 4 million by 2020 for production of around 295 million tonnes of crude steel by MoUs have been signed with various States for planned capacity of around 276 million tonnes

Steel: Key facts

Performance of PSUs

Production, consumption and growth of steel

Crude steel production

Trends in production, private/public sector

Turnaround in Industrial Activity Services Agriculture Industry Services and Industry contribute to higher GDP growth

Indian Steel Growth -Slowly, Steadily Stagnation Controlled Regime Decontrol Confidence

Proof of the Pudding !

Booming Capital Market Indicators BSE Index as on March Market Capitalisation as on March 31 (US$ bn.) Foreign Institutional Investors Net Purchases in Equity market (US$ bn.) (For Calendar Year)

Other Key Indicators Exports crossed US$100bn. mark in Fourth consecutive year of more than 20% exports growth Imports of Capital goods increasing Moderate inflation rate - within 4-5% Stable Rupee against US dollar Growing corporate sector profits Growing Forex reserves - US$ 160 bn. Business Confidence at all time high

Steel Sector The Back Seat Drivers!

BOOMING STEEL CONSUMING SECTORS Industrial growth led by Manufacturing Capital and Consumer Goods sectors flag bearers of manufacturing sector growth Capital Goods Manufacturing Construction Consumer Durables

INDIAS CRUDE STEEL PRODUCTION (MT) HISTORIC TRENDS * Year indicates FY SLOW GROWTH MODEST GROWTH HIGH GROWTH Enabled by Indias Economic liberalization process India gains independence in mT in mT in mT in mT in 2008

Apparent Finished Steel Consumption (mT) CAGR – 7.0%

National Steel Policy Addressing the Weaknesses & Harnessing the Opportunities Approved by Government of India in September 2005

OBJECTIVE To have modern and efficient steel industry of world standards, catering to diversified steel demand. To achieve global competitiveness in cost, quality, product- mix, efficiency and productivity To attain Finished Steel production of 110 mTpa by ProductionImportsExportsConsumption CAGR (Base – 08-09) 7.3%7.1%13.3%6.9%

STRATEGY Demand Side –Strengthening of delivery chain –Interface between producers, designers of steel intensive products, fabricators and ultimate user –Creating awareness about cost-effective and technically efficient end-use of steel Supply side –Enhanced and easy access to critical inputs – iron ore & coking coal –Expansion and improvement in quality of infrastructure –Well developed financial market –Increased focus on R&D, training of manpower and integrated information services

New Capacities

Tata Steel RINL SAIL Mittal POSCO JSPL Essar Bhushan MMK JSW Ispat Sterlite Proposed state-wise capacity additions upto Jkhand: 34 mtpa W Bengal: 4 mtpa Chgarh: 9 mtpa Orissa : 38 mtpa AP: 3.3 mtpa Karnataka: 9.7 mtpa

Future of Indian Steel Industry You aint seen nothing yet !

Projected per Capita consumption of Finished Steel in India (kg) YearPer Capita Steel Consumption Indias current population is million It is assumed that till 2051, population would be about : 1.4 bn.

Optimistic Case Medium Growth Conservative Fin. Steel Cons. Growth Rate Consum- ption (mTpa) Fin. Steel Cons. Growth Rate Consum- ption (mTpa) Fin. Steel Cons. Growth Rate Consum- ption (mTpa) %1006.9%90 *5.5% %1885.5%1474.5% %3054.0%2173%3% %4984.0%3223%3%212 GROWTH SCENARIOS * - Also projected by National Steel Policy

RESOURCES Abundant Iron Ore reserves Strong Managerial skills in Iron and Steel making Large pool of skilled Man-power Established steel players with strong skills in steel making Pro-active stance of Govt. Encouragement for overseas investments High economic growth driven increasingly by industry Faster Urbanisation Increased Fixed Asset Building Automobiles and component industry growth OPPORTUNITIES POLICY INDIAN STEEL INDUSTRY A BRIGHT FUTURE

Currently with a production of 56 million tones India accounts for over 7% of the total steel produced globally, while it accounts to about 5% of global steel consumption. The steel sector in India grew by 5.3% in May Globally India is the only country to post a positive overall growth in the production of crude steel at 1.01% for the period of January – March in 2009.

Highlights of Crude steel production was at million tonnes, a growth of 1.23% over last year with capacity utilisation at 89% during the year. It grew at more than 9% annually from million tonnes (MT) in The growth was driven by capacity expansion from million tonnes per annum (MTPA) in to MTPA in

Financial Year '09 first half it experienced an extraordinary spurt in demand backed by expansion of key consumer sectors. second half experienced a significant demand contraction on account of the global financial crisis. Thus overall, Indias crude steel production grew by 1.2%YoY to 54.5 MT. The various monetary and fiscal packages announced by the government helped the domestic steel industry to counter the slowdown and thus the demand started reviving upwards from the fourth quarter onwards. Domestic steel prices and international steel prices experienced a divergent trend in FY09. While during the first half, international prices touched an all time high levels backed by robust demand, the second half witnessed more than 50% fall in the prices on account of significant contraction in demand due to the global credit crisis. Raw material prices like iron ore and coking coal also experienced a similar trend. It may be noted that most of the domestic steel players entered into an annual contract for coking coal in June-July 2009 when prices were at their peak. Hence the industry experienced a severe pressure on the margins.