Steel In India : Issues in Perspective

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Steel In India Issues in Perspective

• Dr. A.S.Firoz
• Chief Economist
• ERU, Ministry of Steel, India

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Indias Steel Vision

• Industry plans capacity addition of 150-180
  million tonnes Is the future overbooked ?
• Government Plan 110 million tonnes by 2020.
• What has created this euphoria?
• Domestic demand growth potential
• The global market
• Competitive Advantage iron ore, labour,
  Knowledge

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Growth Trends(CAGR )
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What Can Lead Steel Demand Growth?

• Economic growth 7 annual benchmark?
• Driver of growth
• (a) industry driven economic growth
  (b) urbanisation
• (C) steel intensive products demand
• Technology change in user industry
• Steel Price Relative, if favourable

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Steel Demand Growth in India( a realistic
assessment)(Million tonnes of finished steel)
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Future Concerns

• Smaller players, fragmented industry, poor
  economies of scale.
• Future growth technology and size
• Limited consolidation possibilities
• Logistics and infrastructure deficits
• Human resource shortage amidst plenty
• Higher capital costs
• Raw materials and energy

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What Drives Steel Prospects in India?

• Perception of raw materials as the key to
  competitive strength
• Low costs of iron ore ( .. For all?)
• Highly fragmented industry future supply costs
  may rise
• Low cost but reasonably efficient labour force
• Strong managerial capability and improving labour
  productivity
• History in steelmaking and acquired skill
• Strongly globalised Industry and emerging global
  competitiveness

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Raw Materials and Resources of Importance

• Energy shortage currently, future looks OK
• Water does not flow well for all. Moderately in
  shortage, a problem to remain
• Land shortages acquisition troubles
• Natural Gas shortage, future uncertain

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The Coal Problem

• The Coal Problem
• Coking Coal quality issues and supply
  potential
• Import dependence and long term
  uncertainty
• Import logistics and infrastructure
• Environmental and societal issues

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The Gas Problems

• The Gas Problem
• Bright future(?), weak and uncertain present
• gas price and economics for steel
• Poor supply has hit the plants on the West hard

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Iron Ore Issues

• Abundant ?
• Infrastructure railways, roads, etc.
• Environment and societal issues
• Investment will largely depend on government
  policy
• Scale of fragmentation and consolidation
  potential
• Policy issues end use locations, external
  trade etc.
• Captive mines or captive to miners ?

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Final Thoughts

• A big industry for the home market?
• A very big industry for home and the world?
• A medium size industry for a big market with lots
  of imports?

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Final Thoughts

• Steel industry relocation back to old days
• Will the steel markets shift to steel plants
  states?
• Climatic change in steel plants states?

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Concluding Remark

• So much is happening and so much to talk about,
  but .
• ( Views presented here are personal )