JOINT INDIA / OECD / IISI WORKSHOP ON STEEL

RAW MATERIALS AND TRANSPORTATION ::

ISSUES AND OUTLOOK

By Mr. A.K.Pandey, General Manager STEEL AUTHORITY OF INDIA LIMITED

17th May2006

PRIMARY FOCUS

1. India: A future growth hub 2. Critical Raw Materials Scenario: Indian Perspective 3. Critical Infrastructure: Indian Perspective 4. Key Issues

World Steel Industry Top Ten

6
Germany 44.5 mT Russia 66.1 mT

7
Ukraine 38.6 mT

1
China 349.4 mT

10
Japan Italy 29.1 mT USA 93.9 mT
India 38.1 mT

2
112.5 mT

S. Korea 47.7 mT

Brazil 31.6 mT

8 9

Global crude steel Production: 1130.0 million tonnes (mT)

Source: IISI 2005

Indian Potential for Steel

Huge Potential for Demand
High GDP growth rate of 7% 1 billion population Low per capita steel consumption of 33kg (World av. 181 kg)

Skilled Human Resources

Growth factors for India Government Policy

Abundant Iron Ore

Reserves 23 billion tonnes

Stable currency Easing of regulations Strong Banking & judicial system

Encouraging trade relations with ASEAN and other countries Infrastructure building Exploring new Energy resources

National Steel Policy-2005

Approved by Government of India in September 2005 Milion Tonnes
Steel Production Imports Exports Consumption

2004-05 2019-20

38 110

2 6

4 26

36 90

Major Emphasis: Critical Input Raw Materials: Iron Ore and Coking Coal Infrastructure facilities like Roads, Railways and Ports. Focus: Human Resources Technology Research and Development Market outlook on prices of steel Environmental Concerns.

Raw Materials Requirement

Critical inputs for Steel Production Iron Ore Coking Coal Projected Requirement of Critical inputs
Iron Ore 2019-20 2004-05 190 54 Coking Coal 70 27

Million Tonnes Non Coking Coal 26 13

New Additions through BF Route (60%), Electric Arc Furnace (33%), others (7%)

Iron Ore - Reserve Availability

Iron Ore Reserves
9000 8897 8000 7000 6000 5000 3985 4014 4000 3254 2651 3000 2000 803 1000 0 Jh Or Ch Ka Ot Go ar he iss ha rn an kh rs a ata tti an sg ka d ar h

Million Tonnes

Total Reserves about 23 BT (P) Haemetite (11.43 BT) and Magnetite (10.68 BT). High grade haemetite (65%) only 14% of total reserves.

Iron Ore Production Scenario

Iron Ore Production
160 140 120 100 80 60 40 20 0 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 120

145 99 75 81 86

(Million Tonnes)

Increase in production driven by export Chhattisgarh, Karnataka, Jharkhand and Orissa major share

Iron Ore Domestic Consumption

Iron Ore Domestic Consumption
60 50 40 30 20 10 0 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05

44

42

41

50

52

54

Million Tonnes

Major consumer SAIL and TISCO - captive mines RINL - NMDC ESSAR, Ispat, Vikram Ispat, JVSL - NMDC & others

Iron Ore Exports

Iron Ore Exports
90 80 70 63 42 48 78

Million Tonnes

60 50 40 30 20 10 0 1999-2000 2000-01 2001-02 33 37

2002-03

2003-04

2004-05

Exports to China has increased due to surge in demand More than 90% of exports comprise of iron ore fines Low demand of iron ore fines in Indian segment

Mine in Operation & Production

700 600 500

638

605

604

474

474

In Numbers

400 300

202
200 100 0 FY 01

221

242

247

247 145

120.6 80.8 86.2 99.1

Lease Granted/Executed Mines in Operation (Nos) Production (In Million Tonnes)

FY 02

FY 03

FY 04

FY 05

Rapid Growth in Productivity per mines at a CAGR of 10%

Source : IBM, Nagpur

Iron Ore Scenario

Present Capacity
ORGANISATION / STATE NMDC Bailadila (11A,11B,11C), Donimalai, Kumarswamy SAIL Kiriburu,Meghahatuburu,Bolani, Barsua,Rajhara,Dalli,Gua,Kalta TISCO Noamundi,Joda GOA Karnataka,Orissa,Jharkhand Total (Million Tonnes) PRODUCTION CAPACITY 22

25

10 30 58 145

Iron ore - Future Perspective

New Capacities by 2011-12
Sl.No. Area Mine Expected Capacity (mT/annum) 7.0 7.0 14.0 10.0 3.0 10.0 7.0 10.0 3.0 71 MT

1. 2. 3. 4. 5. 6. 7. 8. 9.

Chhattisgarh Chhattisgarh Chhattisgarh Jharkhand Orissa Orissa Bellary-Hospet Bellary-Hospet AndhraPradesh Total

Bailadila-10&11A Bailadila-11B Rowghat Chiria Daitari Sundergarh Kumarswami Ramandrug Ongole Magnetite

Total expected capacity in 2011-12 =215MT(approx.)

Iron Ore Future Perspective

2019-20
Domestic requirement Exports 100 mT Total Requirement 290

190 mT mT 200 mT.

Additional modern mining and beneficiation facility

Likely investments

(4.5 B US $)

Rs.20000 cr

Iron Ore Future Perspective

Strategies envisaged
Investments plans for idle mining leases. Speedy renewal of existing mining leases Grant of new mining leases: Environmental & Forestry Clearances in fixed time frame Incentives for Value addition for iron ore fines. Encouragement for scientific and large scale mining

Iron Ore Future Perspective

IRON ORE EXPORTS
Projected iron ore exports (2019-20) 100MT

No appreciable increase in quantum envisaged

Future Policy envisaged

High grade lump to be leveraged for imports of coking coal or for investment in India. Maintain balance between domestic consumption exports and

Iron Ore Key Issues

1. Slow pace of growth of the mineral sector Time taking procedures in grant of RP/PL/ML viz-a-viz other countries like Australia, Canada etc 2. Review of existing granting RP/PL/ML procedures for

Delay in obtaining statutory clearances:

Iron Ore Key Issues

3. Less utilization of iron ore fines in iron and steel industry. 4. Iron ore resources to be further established by more exploration.

Coal
In-situ Reserves of Coal in India 246 billion tonnes at depth of 1200 meters (as on 1.1.2004).

Billion Tonnes

Type of Coal Coking Non-Coking Total

Proved 16.4 75.1 91.5

Indicated 13.5 102.7 116.2

Inferred 2.1 35.8 37.9

Total 32.0 213.6 245.6

Majority of reserves lies in the states of Jharkhand (29%) and Orissa (25%).

Coking Coal Indian Scenario

Proven Coking Coal Reserves (as on 1.1.2004) - 16.4 BT

Category of coking coal Prime Coking Coal Medium Coking Coal Blendable/Semi-Coking Total

Proven Reserves in BT 4.6 11.3 0.5 16.4

Coking Coal Indian Scenario

Coking Coal production
25 21.2 20 19.5 18 18.4 18.3

Metallurgical
15

Non-Metallurgical
11.8 10 1999-2000 2000-01 2001-02 2002-03 2003-04 11.4 11.8 10.7 11.1

Coking Coal declined from 33 MT (99-00) to 29.4 (03-04) Significant proportion of coking coal not suitable for metallurgical purpose. Production of raw coking coal has fallen Washed coal availability would be much lower.

Non Coking Coal Indian Scenario

Proven Non Coking Coal Reserves (as on 1.1.2004) - 75.1 BT Constitutes 82% of the total coal reserves in India.
1000

Non Coking Coal production

271.1

282.8

299.1

311.1

331.8

100 1999-2000 2000-01 2001-02 2002-03 2003-04

Quantitatively, no problem faced by Indian Steel Industry. Qualitatively, require high grade of non-coking coal for sponge iron industry.

Coking Coal Future Perspectives

2019-20 Requirement of coking coal Likely % available from imports 70 MT 85%

Strategies envisaged Allotment of new coal blocks to steel industry Joint Ventures and Equity participation abroad by steel and coal companies. Development and Adaption of technologies in synergy with natural resource base (non-coking coal). Investment in beneficiation of coal.

Non-Coking Coal Future Perspectives

2019-20 Requirement of non coking coal 26 MT Higher grades of non coking coal will be essential
Strategies envisaged Priority for steel industry and sponge iron of higher grades of non-coking coal (below 12% ash). Greater flexibility in -sale of surplus coal. -Re-allocation of existing unused linkages with CIL Joint Ventures of Public Sector and Private Sector for larger investments.

Coking Coal Key Issues

Limited proven coking coal reserves in India. Quality parameters to match to requirements of Indian steel plants. Huge dependence on imports. Beneficiation of low volatile medium coking coal (LVMC) for metallurgical purpose. Promote prospecting and exploration activities to establish further resources at lower depth.

Non-Coking Coal Key Issues

Inferior quality of non-coking coal with high content of ash percentage. Availability of high qrade non -coking coal for sponge iron industry.

Transportation
Modes of transport -Roads -Railways -Ports Facilitate transportation of Raw Materials, Finished Steel and other products. Every tonne of steel production involves transportation of 4 (four) tonnes of material. The envisaged addition of 75 million tonnes of steel production annually implies 300 million tonnes of additional traffic Gain competitive edge both in domestic and overseas market.

Roads: Future Perspective

Traffic handled by Road (MT)
200 100 0
MT

177 34 27 61 100 77
Raw Materials* Finished Steel Total

2004-05
* Excludes traffic due to export of iron ore

2019-20

Traffic for roads, due to steel industry by 2020, would increase by 300%(approx.). The road network needs would be expanded The steel plants and mines to be integrated with the national highway development.

Railways Future perspective

Traffic handled by Railways (MT)
300
MT

230 80 11 2004-05 91 33

263
Raw Materials* Finished Steel Total

200 100 0

2019-20

* Excludes traffic due to export of iron ore

Traffic for railways, for steel industry by 2020, would increase by 300%(approx.).The railway facilities would be expanded substantially Participation by the steel industry in creation of railway infrastructure

Ports - Future Perspective

Port Traffic
Bulks to be handled at ports (MT) 2004-05 Import Raw Material s* Steel Total 19.3 Export 78 Total 97.3 Import 85 2019-20 Export 100 Total 185 4.4% CAGR

2 21.3

4 82

6 103.3

6 91

26 126

32 217

11.8% 5.1%

* Including iron ore Enormous dependency on port infrastructure is foreseen in the near future. Steel producers intervention in development of ports and berth facilities is needed for improving productivity, turn around time, capacity to handle larger vessels and other operational parameters of efficiency.

Transportation - Issues
Roads Inadequate road linkages between mines and steel plants. Railways Limited Rail linkages between mines and steel plants. Need for high capacity wagons for improving carrying capacity. Investments for promoting dedicated rail linkages. Ports Capacity to hold larger size vessels at the ports. Development of associated infrastructure like weighment facilities, coal holding facilities.More draft for handling larger size vessels. Railway network needs to be strengthened for handling high capacity at ports

CONCLUSIONS
India - a dominant economy in 21st century. Government focused approach facilitating fast track growth. and interventions are

Synergy in meeting iron ore and coking coal requirements Iron Ore: Initiatives for simplification of procedures have begun.. Joint Ventures and Equity participation abroad by steel and coal companies for augmenting supplies of coking coal. Investments in beneficiation of non-coking coal as well as establishing Natural Gas as an alternative source for usage in sponge iron industry.

THANK YOU