A Blueprint of Indian Steel Industry

Wootz Steel ( A.D.) “Wootz was the first High Quality Steel made anywhere in the world. According to travelers to the East, the Damascus Swords were made by forging small cakes of Steel that were manufactured in South India. This Steel was called “Wootz”. It was a 1000 years before Steel as good was made anywhere in the West. “

Indian Steel Industry - An Overview

India – A Few Statistics  World’s Biggest Democracy  Population – Billion  Area Million Sq Kms (7 th Largest)  GDP - $512 Billion  Became independent on Aug 15, 1947

Recent Past of Steel- Controlled Regime- Till Integrated Producers with full “control” by Government Secondary Steel producers only in long products. Controlled Imports with restrictions on end use, duty of upto 150% Continuous situation of shortage for the last 35 years In 1992, SAIL only manufacturer of HR Coils. Total Steel Capacity 14 Million MT

Recent Past – Decontrol & Growth  In , Indian Economy was Liberalized, & all Manufacturing (Incl Steel) was de-licensed  4 New Steel Plants Total Capacity increased 6 Million Tons  Customs Duties reduced from 150% to 15%(Currently5%)  Imports were freely allowed  Downstream Activities increased Galvanized Coils & Cold Rolling-Approx 10 Plants Pipes-Apprx 15 Plants  Metallics – Only 4 DRI Plants Total Steel Capacity 25 Million MT

Recent Past - Stagnation  The World Market Collapsed  Demand for all commodities, including Steel Collapsed  The Far East & Russian Currencies Collapsed  These led to Over Capacities in Steel, in World Market  Customs Duties being Low, India was not Insulated  New Capacities continued to be added, based on Old Projected Growth  India Starts Exporting Steel  Prices reached all time LOW Total Steel Capacity 27 Million MT

Today – A New Confidence 2002 onwards  The ‘New Boom’ triggered by the US announcement of Sec 201, placed India in a strong position in the USA Market  Quality a Gainer, since the Quantities were guaranteed  Cautious approach to Growth, after the depression of last 5 years  India emerges as a World Force in Value added Steels, for example Thin Gauge GP. Large Dia API Pipes Total Steel Capacity 36 Million MT

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

Upstream & Metallics - India’s Potential  Iron ore Reserves of Billion MT (131 Years)  Current Mining of 102 Million MT  Exports of Iron ore 48 Million MT  Pelletisation-Currently 3 Plants, & 3 more plants being implemented  DRI –India #1 in the world- Nearly 11 Million MT in 2005, & Capacity of 2 Million being added  5 Mini Blast Furnaces upto 550 M3 are also being setup

Downstream Capacities -Value, Not Volume  Pre Painted & Galvanized Coils 1.60 Mill MT New Cap in Galvanized has been Planned, increase of 35% 0.24 Million MT Capacity in Prepainted has been Planned, increase of 300% This includes Required Cold Rolled Capacities also Total Galvanized Capacity will become 6.39 Million MT by 2006  Pipes DSAW, Spiral welded API Pipes Capacity Addition is already taken place - Capacity is now 2.12 Million MT, from 324,000MT in 2000 ERW Pipe growth is steady, at 10-12% Per Annum, & currently it is 1.49 Million MT DI & CI Pipes – Capacities being added

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

Pipe Production  For ERW Pipes from ½” – 16” Capacity 3.16 Million Tons Per Annum Capacity utilization 70-75% Percentage of Black to Galvanized 60 – 40 % Export Quantity 0.45 Million Tons per annum.  For DSAW/SW Pipes 18” – 36” Capacity 2.12 Million Tons Per Annum Capacity utilization % 75 – 80 Export Quantity 0.5 Million Tons per annum

Indian Steel Industry - A Future Giant?

India - A Future Giant? Objectives of the National Steel Policy: To increase steel making capacity From 35 million tons in 2004 to 60 million tones in 2012 to 100 million tons in 2020

India - A Future Giant?  Strengths Iron Ore reserves of Trained Manpower Stable & Vibrant Democracy Market – A strong Middle Class Overall economical Growth is sustainable Global Location for Exports Indians already making 120 Million MT  Weaknesses Capital Availability Lack of Proper Infrastructure Resources Like Coke, Coal Plant & Machinery Availability Government Policies Vacillation Inconsistent Growth Rates Manpower Shortage since Indians already make 120 million MT

Immediate New Capacities Planned  Greenfield and Brownfield Capacity addition plan announced 6 Plants of 2 Million Tons & Up (Flat & Long Products) 87 Plants of 100,000 to 200,000 (all Long) All existing plants enhancing their Capacities, by 10-15%  Global majors like POSCO & Mittal Group have shown in putting up Integrated steel mills in India.  It is estimated that if all the plans fructify, Indian Steel capacity will be 60 million MT by 2012, which needs an investment of over USD 17 Billion  To reach 100 million MT by 2020, total required investment will be USD 37 Billion

Demand Indicators  Automobiles HCV’s/LCV’s- Growth 25% last 2 years, per Annum Passenger Cars & 2 Wheelers-Growth 21% last 2 years, per Annum  Exports of 800,000 Passenger vehicles projected by 2008  Housing Growth of 19% in organized sector Growth in Rural sector & Unorganized sector is not measured. GDP Growth is currently 6.2%, from high of 8.5% last year  Manufacturing Sector Growth is 9.0% current year  Capital Goods Industry Growth is 14.4%

Apparent Steel Consumption in India during Productio n ImportTotal AvailabilityExportApp Cons/capita The total domestic Consumption is 32.7 million tons Export at 5.15 Million Tons is 14.3% of Production

Can India Sustain 100 Million MT Consumption? Year Population (Millions) Growth over Previous decade (actual) and forecasted growth rates (beyond 2001) Apparent Steel Consumption (Million MT) Estimated Per Capita Steel consumptio n (KG) % % % % % Projected Growth Rates in Per Capita Steel Consumption

GLOBAL EXPERIENCE -Benchmarking CountryCurrent Per Capita Consumption (KG) South Korea917 Japan562 Germany407 USA309 Malaysia307 China163 World Average144 India29

CHALLENGES – AN OVERVIEW  A sustained growth of GDP at 6% and steel consumption at 7% for the next 16 years  Financing Greenfield Projects for the Long Term- An Investment of $37 Billion  Reaching Per Capita Growth of 138 Kgs, against Historical Consumption of 30 Kgs, & Lesser  Exporting 5 Million Tons till 2012 if consumption grow at 6% per annum and 8 Million Tons by 2020.

GLOBAL EXPERIENCE -Benchmarking  Developed countries like USA, Russia, Japan went through a manufacturing led growth, with thrust on value added steel production.  Chinese experience was building capacities slowly to match higher domestic demand.  Being highly Populated, a healthy Mix of Both strategies will be followed by India

Introduction to Lloyds -A Quick Sales Spiel

Lloyds Group in Steel  One of the top 100 Companies in India  One of the top 10 steel producers in India  5 Manufacturing Units  Totally Integrated Operations- From DRI to Value Added Steels API HR Coils, Commodity HR Coils Galvanized Coils Galvanized Pipes, & API Pipes  Exported 120,000 MT of Galvanized Coils & Pipes to the USA between Mar 2002 & Dec 2004  Total Employees Currently – 2761  Total Sales Mar ‘2005 Apprx $383 Million

Lloyds Group in Steel  5 DRI Kilns-Capacity 225,000 MTPA Currently 150,000  Scrap Trading Company-300,000MTPA  2 EAF’s, 60MT Capacity  2 Slab Casters #2 will be commissioned by Dec 2005  One 4 Hi-Steckle Mill, Allied Facilities  2 Cold Rolling Mills, Allied Facilities  2 Galvanizing Lines #2 will be commissioned by April 2005  3 ERW Pipe Mills From ½ “ to 14” 2 Galvanizing Lines

Lloyds Group in Steel -Value Added Product Range  Hot Rolled Coils & Plates Coils from 2mm (0.08”) to 16mm (0.63”) Plates Upto 60mm (2.36”) Structural Grades, Pipe Grades, Cold Rolling Grades Special Steels like API (Upto X-70), HSLA, High Tensile, Hi Manganese, Boiler Quality  Galvanized Coils 0.23mm (0.009”) to 1.50mm(0.059”)  ERW Pipes ½” to 14” Galvanized, Black (Gr A, GrB, API)

Lloyds Group in Steel Lloyds In Steel 225,000 MT DRI (5 Kilns LMEL) 225,000 MT Purchased DRI & Pig Iron 240,000 MT Galvanized Coils 100,000 MT HR Coils (Commodity) 200,000 MT HR Special Coils & Plates 60,000 MT Galvanized & Black Pipes 200,000 Scrap

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