Ferro Alloy Industry in India – Challenges & Opportunities Steel Furnace Association of India Subodh Pandey Chief of Marketing & Sales Ferro Alloys & Minerals Division, Tata Steel India

DISCLAIMER: The presentation is an amalgamation of author’s own views and thoughts. Tata Steel does not necessarily subscribe to the views and thoughts expressed in the presentation and should not be held responsible for the same.

CONTENTS CHROME ALLOYS INDUSTRY IN INDIA MANGANESE ALLOYS INDUSTRY IN INDIA

Ferro Chrome Demand in India (‘000MT) STAINLESS STEEL DEMAND: SHIFT IN USAGE PATTERN All figs in million MT Consumption mix shifting towards premium grades: 300S+400S likely to become 40% of total demand Construction, transport & industrial applications to drive future growth 7% 7% Ferro Chrome Demand in India (‘000MT) 2005 2010 2015 300 350 500 End use application: 300S: Rail, Construction, Process Equipment & Transport 400S: Electronics & Transport 200S: Tubular Products, Kitchenware

INDIA FERRO CHROME PRODUCTION fig in ‘000 MT India has been a net exporter of value added Ferro Chrome to the world Further capacity additions are also planned in the next 5 yrs While the demand of Ferro Chrome in India would increase, still India will continue to be a net exporter of Ferro Chrome. 60% production by 6 players while the balance is fragmented 7% 10% India’s position in the Ferro Chrome market is primarily because of the Chrome Ore availability in Orissa belt Source: IFAPA

3.5 million MT production in 2010 Proven reserve: 213 million MT CHROMITE RESERVES IN INDIA SUKINDA VALLEY: The Chrome Capital 8 players are having Cr ore mines with most of them having downstream Ferro Chrome production facilities U/G mines likely to be explored in next five years with higher grade of Cr Ore. Higher refractoriness in Indian ore 3.5 million MT production in 2010 (12% of world in 2010) Proven reserve: 213 million MT Cr Ore Reserve Source: IBM Source: IBM

ADVANTAGE INDIA: Stainless Steel production in India is projected to grow @ ~7-8% in the next five 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. Strong Growth in Demand Backward linkage 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.

HOWEVER, COMPETITIVE ADVANTAGES OF INDIA IS A CONCERN COMPARED TO OTHER PRODUCING REGIONS Key Success Factor SA Kazakh China India Power + +++ - Chrome ore reserves ++ Availability of Chrome ore Reductants (Coke/Char/Anthracite) Proximity to markets Basic infrastructure (ports/ Rail/road) Government Support Overall Competitive Advantage +++ : Strongly positive

CONTENTS CHROME ALLOYS INDUSTRY IN INDIA MANGANESE ALLOYS INDUSTRY IN INDIA

CARBON STEEL OUTLOOK IN INDIA Projected Indian Carbon Steel Growth (Mn MT) PMT of FP FeMn : ~3.5 kg SiMn : ~ 2kg PMT of LP: FeMn : ~2 kg SiMn : ~12kg Source MBR, CRU

SiMn Demand – Domestic (kT) SILICO MANGANESE DEMAND IN INDIA SiMn Demand – Domestic (kT) Indian LP Steel production at CARG of 9% based on expected infrastructure lead demand in the 5 year period.

FeMn Demand – Domestic (kT) MANGANESE ALLOY DEMAND IN INDIA FeMn Demand – Domestic (kT) Indian Steel & Stainless Steel (200S) production at CARG of 9% in the 5 year period.

MANGANESE ALLOY PRODUCERS IN INDIA 449 Key concern: Availability of High Grade Mn Ore in India Increase in power cost across India SiMn Production in 2010 FeMn Production in 2010 Many Producers (~ 50) with wide range of furnaces : 4 to 33 MVA Export led production growth (50% exports) of Mn Alloys based on imported ore Capacity addition of ~ 954 kt in next 5 yrs in SiMn and ~ 223 kT in Fe Mn

DEPENDENCE ON Mn ORE ON GLOBAL ORE MARKET in million MT Mn content SA, Gabon, Brazil & Australia have high grade ore reserve( >44% Mn content). China has primarily low grade ore reserves(<30% Mn Content) India Produces ~ 3MnT of Mn Ore mainly Medium Grade

MAJOR MN ORE PRODUCERS (INDIA) MOIL is the largest player in open market for HG Mn

ADVANTAGE INDIA Large Capacity for Ferro Alloys Ability to immediately Industry currently operating at 60% of rated capacity New capacities coming up. Capacities coming up near ports (Vizag, Haldia). Ability to immediately scale up Freight advantage in markets such as China, Korea & Japan compared to Ukraine or South Africa Short sailing time, freight advantage Location near high growth regions Domestically sourced LG & MG Mn Ore available for blending with imported HG Mn Ore. Comparable power, labour & inland freight costs to China. Cost Advantage over China Import of Mn Ore has increased from ~ 0.3 MnT in FY07 to 1.3 MnT in FY11

IN SUMMARY… India has grown rapidly in Ferro Alloy Production and is a significant producer with more than 50 % getting exported Robust growth in domestic consumption of both Ferro Chrome & Ferro Manganese alloys due to strong growth in both Crude & Stainless Steel Apart from domestic demand, proximity to fast growing developing & developed economies provides exciting export opportunity Likely future growth of Ferro Alloys in India augurs well for demand of furnaces. However… Impending power crisis – availability and prices of coal is a cause of concern Infrastructure issues – bottleneck in road, rail transport, port etc may impede export driven growth as well imports of higher grade Mn Ore Investments in existing & new mines needs to be expedited to augment mineral resources Technological investments: Usage of low grade mineral resources; increase efficiency of furnaces for cost reduction / productivity enhancement

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FeCr / Ch Cr producing countries POWER TARIFF IN INDIA CY11 (c/kwh) FeCr / Ch Cr producing countries CY12 (F) (c/kwh) 8 China 9 7.6 SA – Winter Season 9.5 5.4 SA – Normal 6.8 4 Kazakh 4.5 10.3 India - Orissa 10.9 5.9 India – Andhra 9.6 CY12 rates considered at same exchange rate as in CY11 for all currencies Likely increase in power tariff in India/China due to escalation in raw material and input cost South African tariff continue to be on rise during winter season ~ 40%. Normal tariff in SA also to increase by 25% Indian power tariff to increase further due to unavailability and high sourcing cost of imported thermal coal Source : Own resources, info in public domain