Future of the coke industry in India

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Future of the Coke Industry in India
13th ANNUAL WORLD METCOKE SUMMIT
2009 PITTSBURG,USA
Dr.Ashwini AHUja Director Global Coke Limited
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Disclaimer

• The views expressed here contain information
  derived from publicly available sources that have
  not been independently verified. No
  representation or warranty is made as to the
  accuracy, completeness or reliability of the
  information. Any forward looking information in
  this presentation has been prepared on the basis
  of a number of assumptions which may prove to be
  incorrect. This presentation should not be relied
  upon as a recommendation or forecast by Global
  Coke Limited.

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• India is the 5th largest steel producer in the
  world
• Slated to overtake Japan and become the second
  largest within the next decade
• Capacity in 2020 estimates vary from above 200
  MMT to close to 300 MMT

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• The National Steel Policy has a target for taking
  steel production up to 110 MT by 201920.
• the Ministry of Steel has projected that India's
  steel capacity is expected to touch 124.06 MT by
  201112.
• Based on the status of MOUs signed by the private
  producers with the various state governments,
  India's steel capacity is likely to be 293 MT by
  2020.

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• Even if 50 of the new capacity take the blast
  furnace route, coke demand will zoom to upward of
  150 MT by the year 2020
• ( I MT of steel requires 0.6 MT of coke)
• demand from foundries, soda ash plants, mini
  steel mills not considered

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Where will this huge quantity come from?
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China

• The largest producer, consumer, exporter is
  moving towards a controlled export regime
• In the last decade, total amount of coke exported
  from China has remained constant
• between 13 to 15 million tons
• Would rather conserve resources for value
  addition in home that export recklessly

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Europe and America

• Plagued by steep transportation costs
• Land locked mines, inaccessibility to ports
• Socio-political concerns
• Ash Content and calorific value concerns
• Pollution related issues

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Africa emerging destinations

• Unproven mines
• Unreliable Resource mapping
• Unavailability of hard data
• Lack of proper Infrastructure railways, ports
  etc.
• Best case scenario is at least a decade away

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Australia

• Resource rich with a scarce population
• Rich Legacy of mining
• Shared commonwealth traditions
• Thriving mining industry
• Proactive, business friendly government

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The Indian coke market scenario

• Integrated steel plants are the biggest
  consumers, accounting for about 70 of the market
• Among the secondary steel producers, only Sesa
  Kembla had captive coke plant in 2004 (0.28 mtpa)
• Today more than ten have gone in for captive coke
  plants (capacity gt 4 mtpa)
• There is a distinct move towards captive coke
  plants among the secondary steel producers

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In the merchant coke making domain

• Gujarat NRE Coke is the largest listed player
  with captive mines in Australia and plants in
  Gujarat and Karnataka
• Ennore coke is on the expansion mode and has
  announced plans to acquire coking coal assets in
  Australia
• Saurashtra Fuels has two Met Coke Plants, one
  at Porbandar having current installed capacity of
  140, 000 MTPA and the other at Mundra having
  current installed capacity of 900,000 MTPA,
  making the total capacity of the company more
  than 1 million tons per annum.
• BLA Industries is also a key player in the
  domain with a capacity of about 168,000 MTPA
• Others are in the unorganised sector with small
  capacities located in clusters around Jamshedpur
  and Orissa.

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It is in this space that we want to foray

• Global Coke Limited

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Back to India

• China and India are where all the action will be
  in the near future
• Democratic compulsions robs India of Chinas
  agility. The same also accords it with unique
  advantages, providing it with sure footed
  movement
• India is the only country world over to post a
  positive overall growth in crude steel production
  at 1.01 per cent for the January-March period of
  2009.
• The recovery in steel production has been aided
  by the improved sales performance of steel
  companies. The steel sector grew by 5.3 per cent
  in May 2009.

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• A Credit Suisse Group study states that India's
  steel consumption will continue to grow by 16 per
  cent annually till 2012, fuelled by demand for
  construction projects worth US 1 trillion.
• The World Steel Association has forecast a 2 per
  cent growth in the country's steel consumption in
  2009, making it the only major economy to post an
  increase in a year that will see global
  consumption of the metal fall by around 15 per
  cent. India is expected to consume 53.5 MT of
  steel in 2009.
• The scope for raising the total consumption of
  steel is huge, given that per capita steel
  consumption is only 35 kg compared to 150 kg
  across the world and 250 kg in China.

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• A host of steel companies have lined up major
  investment proposals. Furthermore, with an
  expanding consumer market, the Indian steel
  industry is likely to receive huge domestic and
  foreign investments.
• According to the Investment Commission of India
  investments of over US 30 billion in steel are
  in the pipeline over the next 5 years.
• Arcelor-Mittal, the largest steel maker of the
  world, is planning to set up a captive port near
  Paradip in Orissa. The port be used to serve two
  mega integrated steel plants of the company
  proposed in Orissa and Jharkhand.
• Tata Steel has raised US 500 million by issuing
  'global depository receipts' (GDRs) aiming at
  expansion of its Jamshedpur plant and overseas
  mining projects.
• Japanese steel major, Kobe Steel, has decided set
  up a subsidiary in Kolkata to market its steel
  production machinery in India.
• Steel companies have committed US 122.50 million
  for setting up sponge iron units in Koppal and
  Bellary in Karnataka.
• SAIL will invest US 724.12 million to set up a
  4-million ton per annum steel mill at its Bhilai
  Steel Plant.

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All these factors point at one direction

• The looming coke criticality in India a
  situation that will need to be addressed and it
  is this emerging scenario in which Global Coke
  is positioning itself the emerge as a key player.

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Global Meltdown

• What begun as a banking sector crisis in the
  United States, soon engulfed the world as one
  economy fell after the other

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CHINDIA

• While the bottom fell off China and India
  continued to remain resilient
• Both economies bucked the trend
• Both talked of increased spending in the core
  sectors
• To boost demand leading to a recovery.

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• The Asian Development Bank on 22/09/09 raised
  its forecast for China's economic growth in 2009
  to 8.2 percent, from its previous forecast of 7.0
  percent contained the Asian Development Outlook
  2009 released in March.
• Unveiling the Asian Development Outlook 2009
  Update in Hong Kong, Asian Development Bank (ADB)
  Chief Economist Jong-Wha Lee said the bank also
  lifted the growth forecast for developing Asia's
  largest economy in 2010 to 8.9 percent from 8.0
  percent.
• "The 8 percent growth target for 2009 set by the
  (Chinese) government at the start of year now
  looks within reach ... and, in 2010, it will be
  in sight of the country's long-run sustainable
  growth range of about nine percent," Lee told
  reporters.
• The surge in bank lending and fixed asset
  investments pushed the growth forecast for China
  in 2009 by 1.2 percentage points, Lee said.
• The Chinese economy grew by 7.1 percent in the
  first half of 2009, driven by investment and
  consumption, which contributed 6.2 and 3.8
  percentage points of the growth, respectively.
  These were offset by a 2.9 percentage points
  decline contributed by net exports, according the
  report.

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• The World Bank on 23/09/09 approved four projects
  worth US4.3 billion to India, designed to
  support the Governments infrastructure agenda
  and bolster its economic stimulus program.
• After a period of high economic growth which
  reached 9.7 percent in 2006-07 the onset of the
  global financial crisis in 2008 saw Indias
  growth rate fall to about 5-6 percent in the
  fourth quarter of 2008-09. Although there is
  uncertainty about the pace of the economic
  recovery, current trends suggest that a growth
  rate of between 5.5 and 6.5 percent for 2009-10
  is realistic.
• The US2 billion Banking Sector Support Loan will
  provide budgetary support to the Government of
  India, helping it maintain its broad economic
  stimulus program by enhancing the capital of
  select public sector banks. As a result of the
  global financial crisis, private and foreign
  banks have slowed their lending and deposit
  taking, increasing demand on public sector banks.
  This loan will help maintain credit growth
  levels, support social banking and employment
  growth, and help strengthen the economic recovery
  ahead.

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• Sustaining high growth and making it more
  inclusive is one of Indias most formidable
  challenges. Central to this is the need to
  improve its physical infrastructure. Indias
  roads, railways, ports, airports, communication,
  and above all, power supply, are urgently in need
  of investment. The US1.2 billion loan to the
  India Infrastructure Finance Company Ltd. (IIFCL)
  is designed to support its role to catalyze
  private financing for public-private partnerships
  in (PPPs) in infrastructure and stimulate the
  development of a long-term local currency debt
  financing market.

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The key is in the core sector
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• While China will focus on her interiors for
  example
• China has issued 30 bln yuan bond to finance
  railway expansion (September 23,2009 )
• China's Ministry of Railways (MOR) has begun to
  raise 30 billion yuan (4.41 billion U.S. dollars)
  to support railway construction through floating
  the first batch of bonds this year on the
  inter-bank bond market.
• The bond issue comprised 20 billion yuan of
  10-year bonds and 10 billion yuan of 15-year
  bonds, with a bidding yield rate range of 4.8
  percent to 5 percent, said the MOR Tuesday.
• Proceeds would be used to construct 32 new rail
  lines including a passenger line linking the two
  northeastern cities of Dalian and Harbin, which
  will boast a speed of 350 kilometers an hour,
  said the MOR.
• China plans to extend its rail network to 100,000
  km by 2020 from 76,600 km in 2006, at an
  estimated 2 trillion yuan cost.

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India

• Will have to ramp up steel production and
  consumption way beyond the current levels.
• Massive Infrastructure spending will in its wake,
  create demand for more and more steel

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• India's economy will continue to improve in the
  2009/10 fiscal year (April-March) as stimulus
  packages have helped spur demand, but a full
  economic revovery will still take time - finance
  minister
• Growth for the fiscal year would exceed 6
  percent, Pranab Mukherjee told a conference,
  despite a poor monsoon.
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• India, Asia's third-largest economy, grew 6.7
  percent in 2008/09, slowing from rates of 9
  percent or higher in the previous three years as
  the global downturn hit harder than expected.
•  
• "If the present trend continues, second quarter
  GDP would be better than the first quarter,"
  Mukherjee said.
•  
• The economy grew 6.1 percent in the April-June
  quarter from a year earlier, picking up from an
  annual rate of 5.8 percent in the previous
  quarter.

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Steel Times India

• Contrary to popular belief, progress in some of
  the major plants in the pipeline have stalled.
• The reasons are many
• Economic downturn had forced a rethink
• Land acquisition being the major drawback
• The sluggishness has been a boon in disguise

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Indian Companies have used the downturn

• To refocus on the resource side and re-organise
• Acquisition of sick units and amalgamation has
  been a key happening (Case Study Global Coke)
• Direct mine acquisition / strategic overseas
  investments / move into new markets (Mongolia,
  Mozambique) / investment in development of
  infrastructure have taken precedence all with
  one goal

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Supply Security

• Of quality coking coal

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Another important factor

• Has been the elimination of middlemen
• As producers are now in direct contact with mine
  owners
• This moving away from the spot market
• Will ultimately be beneficial as long term
  associations will eliminate the steep
  fluctuations in pricing bringing stability in its
  wake

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Global Coke Limited- timeline

• March 1999 incorporated as a private limited
  company in Kolkata. West Bengal
• October 2007 acquired a sick unit in Jamnagar
  Gujarat with a 144,000 mtpa coke oven plant
• 2007 2009 made heavy investments, made the
  plant operational and achieved a turn around
• March 2008 sales TO of Rs 37.88 crores
  achieved
• March 2009 sales TO up 545 to Rs 206.40
  crores
• August 2009 converted into a public limited
  company with the main object of doing business in
  coal and coke

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Plants Capacities

• Jamnagar
• Existing capacity 144,000
• Expansion 156,000
• Total 300,000
• Power From
• waste heat 12 MW
• March 2010
• March 2011

• Goa
• Existing 144,000
• Expansion 156,000
• Total 300,000
• Power From
• Waste Heat 24 MW
• October 2009
• March 2011

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Consistent quality, above board dealings
participative management have ensured repeat
orders by satisfied customers steady business
relationships

• Hindusthan Zinc
• Ispat Industries
• Birla Copper (Hindalco) Ltd.
• Jindal Stainless Ltd.
• Rock Wool (India) Ltd
• Tata Chemicals Limited
• Nirma Limited
• SAL Industries
• United Phosphorous

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• Professionally managed by an independent Board
  of Directors that include ex bankers, bureaucrats
  and professionals

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• Unique customer base which provides a cushion
  during the down turn in the steel cycle.
• Nearness to port provides logistical advantage
• Major customers within a small radius
• Long term relationship with Australian
  Suppliers
• Second Unit acquired in Goa Expansion completed
  in the first unit
• Plants for co generation of power being set up
• providing supply security

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• CONSISTENTLY
• DIVIDEND PAYING
• SINCE INCEPTION

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Future plans

• Setting up of co generation plants to produce
  power
• Foray into shipping and logistics
• Singapore operations to provide better grasp over
  emerging opportunities
• Acquisition of overseas coal blocks

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Mine to Market integration

• To enter into the public domain and enlisting
• Integrate forward into steel making and or ferro
  alloys
• Integrate backward into mining
• Use co generated power for further creation of
  wealth for all stakeholders

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Or Mission

• To be a premier resource company that is a
  socially conscious corporate citizen in the
  business of wealth creation in an ethically moral
  way. An eco friendly entity, an equal opportunity
  employer and a proud contributor to Indias steel
  dreams.

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Global Coke Limitedan ISO 9001 2008 Certified
Company
Registered Corporate Office 204, Elgin
Chambers,1 A, Ashutosh Mukherjee Road, Kolkata
700 020, West Bengal,INDIA Phone [phone]
6039/40 Fax [phone] E-mail
info_at_globalcoke.in Website www.globalcoke.in Jam
nagar Administrative Office Prasham Building, K.
R. Gandhi Marg, Rajkot 360 001, Gujarat,
INDIA Phone [phone]
Fax[phone] Goa Administrative
office 2G,Seshaghor, 20EDC Complex, Patto, Panaji
403001,Goa. Phone [phone]
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Thank You