1. Indian Ferro Alloys Industry - The challenges ahead
Mr P Roy
Mr Gautam Kumar
Ferro Alloys & Minerals,Tata Steel

2. Indian Ferro alloy Industry Status*
Existing Capacity
No. of Units : 105
Total capacity ~ 1300 MVA & 1.64 Million Tonnes
Working Capacity
51 Units
1.03 Million Tonnes
Capacity Utilisation : ~ 62%
Product range
Manganese Alloys(50%), Chrome Alloys(35%), Ferro Silicon(9%) and Noble Alloys (6%)
* as of

3. Production Trend of Ferro Alloys in India
‘000 MT
Product
Mn Alloys
357.5
369.0
446.0
442.3
540.9
Cr Alloys
305.3
313.8
381.9
302.1
396.7
FeSi
57.2
56.3
67.3
76.2
81.9
Noble FA
1.03
2.5
6.5
7.2
12.7
Riding on strong growth for steel demand, Ferro Alloys sector posted good growth in & and the trend is expected to continue in The Capacity utilisation has reached approx. 80% as of now

4. Demand Drivers for Ferro Alloys
Ferro Alloys are used primarily in Steel making as deoxidant and alloying agent. Depending upon the process of steel making and the product quality envisaged, the requirement of ferro alloys varies widely
Demand driver of Ferro Alloys :
Steel Production ( Crude Steel & Alloy Steels)
Unit Consumption trends

5. World Crude Steel Production
Million Tonnes
CAGR: 1.6%
CAGR: 8.8%
Source: World Steel Dynamics
From , world production growth averaged 1.6% a year; without China, it would have not grown at all

6. The Three Growth Phases – the Steel “Snake”(inverted S-Curve)
Source: Macquarie Research.

7. Crude Steel Output Forecast
Million Metric Tonnes
CAGR
China: 6.9%
World :3.1%
Source: WSD
Steel Production to be fuelled by China’s growth

8. Indian Crude Steel Production Forecast
Milllion Metric Tonnes
CAGR : 6.2%
India not to lag behind in Crude Steel Production

9. Global Stainless Steel Production
‘000 MT

10. Indian Mn Alloys Production & Exports
‘000 MT
Source:IFAPA

11. Indian Cr Alloys Production & Exports
‘000 MT
Source:IFAPA

12. Indian Ferro Alloy Production Trends Contd.
‘000 MT
Source:IFAPA

13. Unit Consumption of Manganese (Kg/t of Steel)
Unit Mn Consumption in Crude Steel to decrease world-wide

14. Mn Alloys Demand Forecast
Thousand MT

15. Mn Alloys Consumption Trends & Forecast for India
Thousand MT

16. Price Trends of Mn Alloys ( US $/t)
US Warehouse
Source: MBR

17. India is poised to grow in the Ferro Alloys production in line with the increased Crude Steel production
Chinese FA Producers to focus on the needs of domestic demand
Export Potential for Indian FA Producers
However, Indian Ferro Alloys Business has to overcome few challenges to grab those opportunities fully.

18. Indian Ferro Alloy Industry – The Challenges
High Power Cost
High & Rising Reductant cost coupled with the low availability of Reductant
High Freight costs on account of low priority for the raw materials requirement of Ferro Alloys by Railways
Low Economies of Scale
No Import duty, CVD & Sales Tax for FA imports from neighboring countries like Nepal & Bhutan

19. Power Cost
FeSi
SiMn
FeMn
FeCr
Sp. Power Consumption (KWH/MT)
8000
4000
2900
3800
% of Power in total cost 65 50 45
Power tariff in India is 3-5 times higher than that in the competing countries
Hence, globally Ferro Alloys production is situated geographically in cheaper power locations

20. Power Tariff India Vs Other Countries
Country
Power Tariff (INR/KWH)
India
2.0 – 4.0
Norway
0.85
South Africa
1.09
Canada
0.63
USA
1.14
Brazil
1.26
Venezuela
0.87

21. Power Cost
Though generation cost is not so high in India, tariff borne by the industry is very high because of cross- subsidisation of agriculture sector, low plant load factor and sizable T&D losses
Electricity Duty, which varies widely from state to state also creates additional burden for Ferro Alloys industry
Though Power Reforms are on (with the introduction of Electricity Act, 2003 in India), the impact of this development on long-term prices generally - and specifically for intensive power consumer such as ferroalloys producers – is difficult to assess, since the electricity “market” still seems to be in a state of flux.

22. Raw materials
Raw materials viz. Mn Ore , Cr Ore Quartz, Fluxes are available in India.
However, Indian Mn Ore is predominantly low grade(~45%)

23. Mn Ore Production World & India
Thousand MT
1997
2003 Proj.
Globally, Ferro Alloys is being controlled by few integrated producers from South Africa & Australia

24. High and rising coke costs globally
Reductants
Coke is most widely used reductant in Ferro Alloys production. Ferro Alloys consume roughly tonnes of reductant per tonne of production
Coal & Coke of Indian Origin suffers from high ash and volatile matter content
Due to non-availability of Low Ash Low Phos Met. Coke, Indian Ferro Alloy Industry depends on imports
Stricter environmental controls in many countries have also put merchant coke batteries under long-term threat of closure.
Increase demand for Coke in China and curtailment of Coke exports
High and rising coke costs globally

25. Reductants Contd. Price Trend of ULP Coke (FOB US $/t China)
Source: Resource Net

26. Reductants
Locally available Reductants following the same price trends, affecting the input costs of Ferro Alloys
Indian FA Industry is further burdened by
High level of Import duty on Coke (15%)
Anti Dumping Duty on low Phos Met coke

27. Logistics Cost
The industry produces around 1.6 Million Tonnes of ferro alloys annually. Nearly tonnes of such raw materials have to be moved by railway wagons for one tonne of ferro alloy
The industry has been experiencing shortage of wagons for procuring raw materials
Freight element is very high, thus reducing the competitiveness of the industry
Poor Infrastructure facilities at Port also leading to berthing delays for ships & longer loading time

28. Labour Productivity MT/Man
Economies of Scale
Though labour costs are a small percentage in Ferro Alloy cost of production, the impact still varies from region to region.
Plant
Capacity ‘000 tpy
Labour Productivity MT/Man
Tornio
260
1477
Rustenburg
415
576
Indian Plant Typical
50000
278
Indian FA Plants suffer from Economies of scale and low automation levels

29. Overall Assessment Ore Power Reductant Freight Labour Overall China 14 3 2 11
India 10
Africa 13
Scandinavia
CIS
Scale :
Lowest : 1
Power is available at global tariffs, India can match the African Countries!

30. How to Overcome the Challenges
Power Cost
Power be made available at internationally comparable tariff to give a level playing field to Indian FA Industry with International players
The Power tariff should be of Long-term arrangement
Cross subsidies to other industries must be removed and Ferro Alloy Industry should be treated separately and a separate tariff should be fixed

31. How to Overcome the Challenges
Raw materials
To increase exploration efforts for evaluation of minerals reserves
To step up R&D activity to develop techno-commercially feasible techniques of low grade Ore beneficiation
By waiving Customs duty, Addl. Duty on Ores used in production of Noble Ferro Alloys
By Reducing Customs Duty on Coke from 15% to 5%
By removing ADD on low ash low phos Met. Coke imports

32. Indian Ferro Alloy Industry – The Way Ahead
Further
Ferro Alloy Industry should be given special status, and priority should be accorded for raw material movement
To reduce the rail freight on movement of raw materials for Ferro Alloys by classifying them as low freight category
To impose counter veiling duty on Ferro Alloys imported from neighboring countries like Bhutan, Nepal etc.,

33. Thank You