Global Steel 2011

Global steel 2011
Paving the boulevard of the great Indian steel dream
January 2011
Foreword
The year 2010 turned out to be surprisingly better for the global economy compared to forecasts a year ago. Consumer and
business confidence is rising in most parts of the world with policy support from governments. Performance of the global economy
in coming years, however, will depend upon performance of three economic groupings — big emerging markets, America and the
Euro Zone. These three groups reflect different growth prospects and divergent policy responses. Emerging markets, such as
China and India, are by far the biggest contributors to global growth.
The steel industry is the backbone of modern industrialization. As a key basic industry, steel underpins growth across several
downstream industries and the services sector. Among the emerging markets, the structure of Indian economy, market size,
strong resource base and relative cost of production is expected to drive relatively higher growth for the steel sector in India over
the next decade. In addition, reforms to meet some of the challenges in the investment environment will create an opportunity
that will be leveraged by several global sector players, making India a prime investment destination of choice. The global
stakeholders’ dream is to access global mega markets and they should find a footprint in India to make it a dream worth pursuing.
It is in this context that this report examines the hypothesis that India will be the next landmark on the global steel landscape. The
report also studies the challenges that hinder this dream and provides recommendations that may help achieve this dream.
Ernst & Young, India, working with key stakeholders in the mining and metals sector, has developed deep insights and
competencies. The firm provides approaches for a spectrum of sector issues — strategic risk management, mergers and
acquisitions, bid advisory, business process improvement, capital raising, financial modeling and feasibility studies, performance
management, supply chain, tax and regulatory, technology and talent.
We hope this report provides you with insights on the shifting dynamics in the steel sector in India and globally. Our aim is to
equip our readers to effectively address key challenges of the sector and seize the emerging opportunities. We express our deep
appreciation to the organizers of Global Steel 2011 for giving us the opportunity to present this report at the conference.
Anjani K. Agrawal
Partner and Sector leader mining & metals,
Ernst & Young, India
The global steel industry has been experiencing ups and downs for the last three years: a low in 2007, a high in early 2008
followed by lows at the end of 2008 and in early 2009. The latter half of 2009 and early 2010 have been quite encouraging.
Amidst this turmoil, China and India were the two countries who could withstand the turbulence and yet deliver positive growth
figures. In fact, in its latest report, the Asian Development Bank has accepted the growing influence of Asian economies on the
world at large.
The production of steel worldwide is dominated by Asian countries, and India, with one of the fastest-growing steel industries, is
increasingly being considered as a potential steel hub. It is a booming industry with ever-growing demand, fueled by continuous
growth in the automobile, infrastructure and real estate sectors. In fact, it is the Indian Government’s aim to raise steel production
capacity to 300 million tonnes by the end of 2020.
Hence, the theme chosen for Global Steel 2011: “Paving the boulevard of the great Indian steel dream” seeks to attain the
2020 goal. The Global Steel 2011 forum will therefore aim to debate and deliberate the best strategies needed to discuss this
opportunity and achieve this dream.
This report focuses on the current status and future trends of the global iron and steel industry: the raw materials scenario,
supply-and-demand dynamics, and the outlook on key elements like coal, met coke and iron ore. We also identify the major
bottlenecks and the key recommendations for ensuring sustainable development of the steel sector in the future.
We do hope that the stakeholders will immensely benefit from this report.
Arun Kumar Jagatramka Neil J Bristow

Conference Co-Chairman Conference Co-Chairman
Global Steel 2011 and Global Steel 2011 and
Chairman and Managing Director Chief Consultant
Gujarat NRE Coke Ltd. H&W Worldwide Consulting Ltd.
Contents
Executive summary............................................................................ 3
Introduction........................................................................................ 7
1. Global steel industry..................................................................... 9
Recovery in global steel demand — largely driven by
emerging markets....................................................................... 11
Outlook for 2011 — cautiously optimistic for the global
steel sector................................................................................. 14
BRIC (Brazil, Russia, India and China) demand
and production............................................................................ 15
China.......................................................................................... 16
Brazil.......................................................................................... 17
Russia......................................................................................... 19
Raw materials............................................................................. 21
Other challenges for steel manufacturers...................................... 23
2. Indian steel industry................................................................... 25
Why India will be the next landmark on global steel landscape........ 25
The competitive landscape........................................................... 28
Strong domestic demand drivers.................................................. 29
Raw material availability — sufficient in iron ore but deficient
in coking coal.............................................................................. 35
Outlook for the Indian steel industry............................................. 36
Challenges and issues.................................................................. 37
Strategic accelerants................................................................... 41
Executive
summary
Global steel — a steady recovery, but sustainability will be BRIC countries — the biggest contributor to global
tested as the stimulus package effects fade away steel growth
The year 2010 appears to have been a stable year for the Demand from BRIC countries, particularly China, has been
global steel industry compared to the volatility in steel and a key driver in growth over the last decade. The World Steel
raw material prices experienced during the financial crisis. Association recorded Chinese crude steel production of
Consumption and utilization rates have picked up in most major 568 million tonnes in 2009, an increase of 13.4% year on
economies, with consumption surpassing its pre-crisis highs in year, with an increase of around 11% expected in 2010.
some countries. The production and consumption levels have India has also registered strong demand in the last five
improved across the globe, but excess supply has prevented years. However, there has not been a significant increase in
steel prices from rising in tandem with raw material prices. Indian steel production in the last few years due to stringent
mining and land allotment laws, making the country a net
The timely support by the governments of major economies
importer of steel. Brazil and Russia also recovered strongly
through stimulus packages provided the base for global
from the economic crisis and offer an avenue for higher steel
recovery of the steel sector. But sustainability for the sector
production in the medium term. Apart from China, per capita
remains unclear as it is dependent on the global steel industry’s
steel consumption in the BRIC nations is significantly below
reaction when the effects of stimulus packages fade away.
the world average, but projected economic growth in these
countries indicate a strong demand for steel going forward.
3 Global steel 2011 Paving the boulevard of the great Indian steel dream
A new era for raw material contracts has begun material is increasing in line with growth in steel production,
There has been a paradigm shift in iron ore negotiation in but there is a constraint on the supply side of raw material
2010, with annual contracts being replaced by quarterly because of the lack of adequate infrastructure and increasingly
contracts. The move to quarterly contracts was driven by the stringent environmental laws and regulations. Raw material
present tight supply of iron ore, which gave miners increased prices in 2011 will likely remain stable with an upside bias due
negotiating power. This has not only led to volatility in earnings to this supply side tightness.
for the companies, but has also created a scenario where India — the next landmark on the global steel landscape
integrated players will have an advantage over non-integrated
Beyond China, there are few other countries with the steel
players in boosting their profits or managing their risks.
production growth capacity of India, which is why it is
strategically placed to be the next landmark on the global
Outlook for global steel — cautiously optimistic
steel landscape. Sufficient iron ore reserves, low per capita
The global steel outlook for 2011 is cautiously optimistic as steel consumption and strong demand for steel due to strong
the possibility of a double-dip recession has eased. Growth in economic growth gives India the competitive edge over other
developing economies will remain strong and continue to boost emerging economies. During the recent financial crisis, the
total global steel demand. However, the modest recovery in Indian steel sector remained resilient due to strong domestic
more advanced economies persists on the back of ongoing demand emerging from end users in the country. Therefore, in
financial uncertainty and sovereign risk. Demand for raw 2009, when the global steel consumption witnessed an 8.5%
Global steel 2011 Paving the boulevard of the great Indian steel dream 4
decline year on year, steel consumption in India remained 110 million tonnes. India, on the other hand, is a net importer
flat. India has been a net importer of steel since 2007, and of coking coal. It imported 23 million tonnes of coking
the widening difference between demand and supply will coal in FY10 to meet its total requirement of around
encourage the new capacities to come on stream. 40 million tonnes. The consumption of coking coal is estimated
to increase at a CAGR of 11.6% between 2009 and 2014,
Infrastructure and automobile sectors to drive the steel whereas the production is estimated to remain relatively flat
growth in the region during the same period.
Construction and infrastructure remain key steel consuming
sectors in India, with a share of 61% in total consumption of The platform is ready — Indian steel will witness
steel during 2008–09. With approximately US$1 trillion of unprecedented growth in the coming decade
expected investments in these sectors in the 2012–17 period, India, which was the fifth largest producer of crude steel in
there will be a corresponding increase in steel demand. The the world in 2009, is expected to become the second-largest
automobile sector, which grew by 27% during 2009 and 2010, producer by 2015–16. Major capacities, which are expected
is estimated to see double digit growth in the short term, as the to be operational in the next three years, include projects by
launch of low-cost passenger cars will likely expand the market Tata Steel (India), JSW Steel and SAIL. Total crude capacity in
and hence the demand. In line with economic growth, India will India is expected to be around 112 million tonnes by 2015,
register a strong demand across sectors and, accordingly, the registering a CAGR growth of 9%. The growth potential of
domestic steel demand is expected to grow by around the steel industry in the country has attracted many global
10%–12% annually over the next two years. steel players to India, with some entering into strategic
partnerships with Indian steel majors as they feel that
Sufficient iron ore to feed upcoming capacities but greenfield projects will take longer to become profitable and
challenge on coking coal established companies already have an existing customer base
To meet expected steel demand, India has sufficient iron ore in the region. The industry will be further supported by the
reserves as the world’s fourth-largest producer of iron ore Government, with policy changes planned in iron ore mining
behind China, Australia and Brazil. India contributed 9.9% to towards competitive bidding and transparent allocation of
the world’s production in 2009. The country consumed close to mineral licenses. The beneficiaries of this policy change will be
100 million tonnes and exported approximately both Indian organizations as well as global stakeholders.
Some challenges remain
Besides the coking coal shortfall, other bottlenecks for the
growth of the industry include inadequate infrastructure
in railways, roads and ports. This leads to delays in rake
movement, congestion and pile up of inventory at ports. Other
challenges include land acquisition delays and environmental
clearances which need focus for the accelerated growth of
Indian steel industry.
Strategic accelerants to achieve Indian steel dream

The Indian Government needs to support this strategically
important industry by increasing the exploration of raw
materials and developing the enabling infrastructure.
Companies should increase their focus on new technologies
to increase productivity, reduce the raw material costs and
expand their product footprint. Consensus must evolve around
socioeconomic and environmental challenges, keeping in mind
the windows of opportunity for growth. The successful model
of Ultra Mega Power Projects in India can be replicated in the
steel sector through the formation of special purpose vehicles
for implementing selected greenfield projects. The Indian
steel industry, therefore, requires some structural and policy
changes to achieve its strong growth potential in the
coming decade.
Introduction
A significant change to raw material contracts — from annual

“The revolution started by the end of the to quarterly pricing — has also provided challenges such as
annual raw material pricing negotiation in the regular need to renegotiate contracts and the additional
2010 is still a relatively new phenomenon, earnings’ volatility. Raw material suppliers threaten to increase
which the steelmakers are still adapting to, the amplitude and to shorten cycles: hence, cyclicality and
and incorporating in their business model to volatility are back. This trend may challenge the revenue
manage the implications of this new paradigm. With any model of steel producers: How to transpose the volatility of raw
period of dramatic industry change, opportunities eventually material into the pricing mechanisms for steel products without
arise but it takes time to assess its full impact.” compromising steel customers?
Michel Nestour The increase in raw material prices has also led to the speeding
Director of Transactions Mining & metals, up of backward integration strategies — through either the full
Ernst & Young, UK acquisition of captive iron ore and coal mines or the taking of
minority participation in exchange for off-take agreements to
allow the steel producers to hedge the risk of additional margin
The 2009 global downturn and the subsequent recovery have
squeeze, as well as, innovation in both energy efficiency and
accentuated the importance of China and to a lesser extent
new products. Financial risk management in the steel industry
India to the world steel industry. In 2010, recovery in steel
demand was far from even and steelmakers have had
to work hard at managing their working capital through
planning their capacity utilization and production to meet
fluctuating demand.
with the emergence of steel swaps in addition to the existing Most importantly, the future of the developed and the
OTC contracts is also intensifying. This trend is likely to developing world will be governed by different sets of factors.
continue to intensify in the future with the end of the annual The emerging markets of China and India will continue to
benchmarking negotiation. witness their steel industry growing on the back of robust
demand from industrial production of steel consuming sectors,
In 2011, global steelmakers are hoping for a more stable
such as construction and civil engineering, automotive and
rate of recovery in demand. This will largely be dependent
mechanical engineering. On the other hand, the growth of
on whether the transition from government fiscal stimuli to
developed markets will be more dependent on supply-side
increased consumer spending and business investment occurs
response and innovative product offerings and substitutions
seamlessly. Due to the sovereign debt crisis of many developed
focused on resource and energy efficiency to decouple
countries, there is a shift from stimuli to austerity measures to
economic growth from resource and energy use. Further,
mark a slowdown in growth for 2011. Global trade is estimated
operating expenses and capital expenditure management will
to grow by 5.7% in 2011, a significant softening from 2010,
continue to remain the key driving factor for profitability of all
when global restocking fuelled an 11.5 % increase1.
steel players.
1
Eurometal, 2010
1. Global steel
industry
Recovery in global steel demand — largely driven by Some of this recovery can be attributed to the timely
emerging markets intervention of the governments of major economies, which
The global steel industry has been on a roller coaster since provided stimulus packages to arrest the economic crisis and
2007. The booming market of 2004–07 rapidly declined effectively brought forward future steel demand.
during the global financial crisis. As a result, aggregate global Despite this stimulus, steel consumption in developed
demand from the key steel end-user markets — infrastructure, countries, such as European countries and the US, has
construction, and automotive — contracted by 7.4% year on not recovered to pre-crisis levels and the majority of the
year2 in 2009. The extreme lows of 2009 were followed by a improvement in crude steel consumption emanates from
steady recovery in demand and associated production as well emerging markets such as China and India. Demand for crude
as a re-stocking period. Indeed, during 2010, global demand steel in Europe and the US is still 28% below what it was in
for crude steel has rebounded to 2008 levels as investment 2008 and 33% and 43% lower respectively than in 20063.
in infrastructure and other steel-intensive projects increased.
2
Steel statistical yearbook, World Steel Association, 2010
3
World Steel Outlook, ABARE, September quarter 2010
Figure 1. Global crude steel consumption trends
1,600 15
Consumption (million tonnes)
1,400
10
1,200
1,000 5
Growth (%)
800
600 0
400
-5
200
0 -10
2003 2004 2005 2006 2007 2008 2009 2010F 2011F*
Global crude steel consumption

Growth
Source: ABARE — June quarter 2010, World Steel Association (World Steel), Ernst & Young analysis, 2010
* F: Forecasted
On the other hand, crude steel consumption in China has economy. Others think it is just as likely that the Chinese
grown considerably. In 2009, when consumption in every Government will keep its 8% GDP growth target in the medium
other country declined, China’s consumption still grew by term, which will mean that both investment in infrastructure
15% and has increased by a significant 48% since 2006. India, projects and private spending will continue.
Brazil, and Korea have all seen crude steel demand increase
substantially since 2006 — India and Brazil have both seen
crude steel consumption increase by 24% and Korea by 12%. Recovery in global steel production:
Economic uncertainty, however, remains a spectre in the largely driven by China
industry — particularly in both European and the US markets.
As a result, steel distributors and traders in these markets Figure 3. Global crude steel production trends
are running very lean, avoiding the big orders of the years
1,600 15
preceding the global financial crisis, which could have a
Production (million tonnes)
1,400
positive effect when regional demand recovers. 10
1,200
Growth (%)
The World Steel Association estimates that global steel 1,000 5
consumption will grow by 5.3% in 2011. There is some 800
600 0
debate between steel market analysts as to the extent of
demand growth from China. Some foresee slower growth as 400
-5
200
the Chinese Government tries to moderate its overheating
0 -10
2003 2004 2005 2006 2007 2008 20092010F2011F
Figure 2. Developed versus emerging countries apparent Global crude steel production Growth
steel usage
1,600 30 Source: ABARE — June quarter 2010, World Steel Association (World Steel),
Ernst & Young analysis
1,400
Usage (million tonnes)
20
1,200
10 In the five years preceding the financial crisis, global steel
Growth (%)
1,000 production enjoyed a robust CAGR of 7% to reach

0
800 1,329 million tonnes in 2008. Steelmakers responded quickly
-10 to falling demand at the end of 2008 by cutting production.
600
-20 Global capacity utilization was cut from 86% in July 2008 to
400
58% by December 2008. For the first half of 2009, capacity
200 -30 utilization remained around 65% before getting back up to
0 -40 between 70%–80% in the second half of 20094. In 2009, the
2009 2010F 2011F US and the European Union suffered the sharpest drop in steel
production of 44% and 37%, respectively5.
Emerging economies % growth (developed economies)
Developed economies % growth (emerging economies) The steady rise in steel demand in 2010 means capacity
utilization levels were back at around 77%. Steelmakers are
Source: World Steel Association (World Steel), Ernst & Young analysis, 2010 predicting a more stable recovery of demand in 2011 and it
is likely that global capacity utilization rates may inch back
towards the highs of 2007 and early 2008.
4
JP Morgan estimates
5
ABARE, September 2010
Figure 4. Global capacity utilization trends Figure 5. Global monthly crude steel production growth
2,000 100 20
1,800 90 15
1,600 80 10
Growth (%)
1,400 70
5
Utilization (%)
Mmillion tonnes
1,200 60
1,000 50 0
800 40 -5
600 30 -10
400 20
-15
200 10
Jan–10
Feb–10
Mar–10
Apr–10
May–10
Jun–10
Jul–10
Aug–10
Sep–10
0 0
2003 2004 2005 2006 2007 2008 2009 2010F
Crude steel capacity World ex BRIC China India

Capacity utilization
Brazil Russia
Source: Time to steel ahead, Ernst & Young, 2010
Source: World steel association, Ernst & Young, 2010
Regional production
“The future growth in steel relies upon
sustainable steel solutions that will reduce the A large proportion of global growth in crude steel production is
carbon footprint of steel consuming industries from China. The World Steel Association recorded
through material and energy efficiency in Chinese crude steel production of 568 million tonnes in 2009,
order to decouple economic growth from resource and a rise of 13.4% year on year. China is estimated to produce
energy consumption.“ 630 million tonnes in 2010, a rise of around 11% year on
year. In early 2010, there were major concerns that as China’s
Pierre Mangers steel production is growing so rapidly, it would put pressure
Executive Director, Ernst & Young, Luxemburg on international steel markets. However, the corresponding
growth in Chinese domestic demand has alleviated some
Steel production recovered in 2010 and crude steel of that tension. In addition, the gap between international
production was estimated to reach a record high of steel prices and Chinese prices has narrowed, reducing the
1.4 billion tonnes. It has not, however, been an even upward attractiveness of importing Chinese steel. Chinese production
trend throughout the year (see figure 5). Some of this can was cut in the second half of 2010 to ensure the attainment
be attributed to the usual seasonal cycles experienced by the of energy-efficiency targets under the Eleventh Five-year Plan
steel industry, although the financial instability of the world and as the Government promotes consolidation in the sector.
economy has been a factor in disrupting the evenness
of demand.
Figure 6. Global crude steel production trends by regions
1,600,000
1,400,000
1,200,000
Million tonnes
1,000,000
800,000
600,000
400,000
200,000
0
1980A
1981A
1982A
1983A
1984A
1985A
1986A
1987A
1988A
1989A
1990A
1991A
1992A
1993A
1994A
1995A
1996A
1997A
1998A
1999A
2000A
2001A
2002A
2003A
2004A
2005A
2006A
2007A
2008A
2009A
2010F
RoW China EU–15 India Japan USA
Source: World Steel Association (1980-2009A), Ernst & Young estimates
Steelmaker’s response — what have they been doing in 2010?
1. Restructuring their businesses: To ensure efficiencies, reduce costs and maintain margins.
2. Becoming more adept at idling and restarting blast furnaces (BFs) to meet fluctuating demand: ArcelorMittal
changed its hot metal capacity management and has developed procedures to take BFs out of service, cool them
and then bring them back on line without permanent damage.
3. Renegotiating contracts to match the change to quarterly raw material pricing contracts: Steelmakers have,
where possible, been renegotiating sales contracts to include either an index-based raw material surcharge or to
reduce the term of the contract to allow for increased pricing volatility. The top five steelmakers do not have a
significant enough market share, which reduces their bargaining power both with raw material suppliers and
steel customers.
4. Securing raw materials: As volatility in raw material pricing has increased, steelmakers are acquiring mining
operations to secure these supplies. In the first 11 months of 2010, 16 of the 68 steel transactions have been to
secure iron ore and coal.
5. Improving product mix: The companies are increasing their focus on the downstream applications and solutions-
driven products for their higher value add. In some instances, these products can be competing with their existing
customer base.
Steel industry margins under pressure to approximately US$214/tonnes (JFY) and iron ore prices
Prices for steel products are driven by demand, inventory rose from US$60/tonnes to approximately US$118/tonnes
levels at distributors and manufacturers, imports, raw material (Australia JFY), respectively during 2009-107.
costs and availability. The steel industry has been characterized
by excess world supply, which restricts the ability of the
industry to raise prices during periods of economic growth and
Outlook for 2011 — cautiously
resist price decreases during periods of economic contraction. optimistic for the global steel sector
After a dramatic slump, from US$873 per tonnes to US$547
The outlook for 2011 is cautiously optimistic, as the likelihood
per tonnes from 2008 to 2009, the global average hot rolled
of a double-dip recession has declined. According to Global
coil (HRC) price has increased by 56% from January 2009 to
Insight8, consumer spending and business investment are likely
September 2010. This price increase was partly the result of
to become key drivers of economic growth, as support from
the decrease in production by the majority of the developed
inventory cycles and fiscal stimuli diminish. Strong growth in
country producers, thus avoiding the risk of rapidly declining
emerging economies is likely to pull global recovery along in
prices. However, HRC prices have not returned to pre-financial
the short term. In many emerging economies, it seems that
crisis levels and are not expected to do so until 20126.
the recovery has entered a self-sustaining phase, relying on
In addition, during 2010, raw materials contracts moved from consumption and fixed investment rather than restocking.
yearly to quarterly intervals. The rise in raw material prices The modest recovery in more advanced economies remains
has been quite substantial in creating a significant amount vulnerable to ongoing volatility, sovereign risk and financial
of margin and working capital squeeze for steel producers uncertainty. It is, however, predicted that much of this volatility
as the increase in raw material was not fully passed on to and uncertainty will ease at the beginning of 2011 and there
the steel end users due to the low level of real steel demand. should be an increase in industrial growth by the second half
For example, coking coal prices rose from US$125/tonnes of the year. Overall, the International Monetary Fund (IMF) is
predicting growth of 4.2% in the world’s real GDP in 20119.
Figure 7. Global monthly steel production and price trends

140 800
Production (million tonnes)
120 700 HRC price (US$ per tonne)

100 600
500
80
400
60
300
40 200
20 100
0 -
Jan–09
Feb–09
Mar–09
Apr–09
May–09
Jun–09
Jul–09
Aug–09
Sep–09
Oct–09
Nov–09
Dec–09
Jan–10
Feb–10
Mar–10
Apr–10
May–10
Jun–10
Jul–10
Aug–10
Sep–10
-
Crude steel production HRC price
Source: CRISIL Research, World Steel Organization, Ernst & Young analysis, 2010
6
Industry focus: metals and mining, VTB Capital, 8 November 2010, via Thomson Research
7
China Basic Materials Monthly - August 2010 - Stagnant Order, Credit Suisse, 26 August 2010, via Thomson Research
8
Global executive summary - The global outlook is a little brighter, Global Insight, November 2010, via Thomson Research
9
World economic outlook: recovery, risk and rebalancing, International Monetary Fund, October 2010
Steelmakers are more positive than they were a year ago but BRIC (Brazil, Russia, India and
acknowledged that the recovery is likely to be slow. There is
hope that the demand for steel will recover more evenly over China) demand and production
the next year and as a result global crude steel production is Demand in the BRIC countries, particularly China, has been
forecast to increase by 7% in 2011. a key driver of growth during the last decade, with crude
steel production in these countries as a percentage of global
Figure 8. Outlook for steel production and consumption production increasing from 28.4% in 1999 to 58.3% in 2009,
to 2015 at a CAGR of 12.7%. Steel demand remains strong in China and
India and the trend is expected to continue in 2011, propping
1,200
up the global industry. Although all BRIC regions have shown
1,000 growth over the last decade, it is China that is really the engine
Million tonnes
800 behind the growth in both steel production and demand.
600
400
200
0
2010F 2011F 2012F 2013F 2014F 2015F
World steel production (ex China)

World steel consumption (ex China)
Chinese production
Chinese consumption
Source: ABARE, Ernst & Young analysis, September 2010
Figure 9. Steel production by country
1999 2009
China, 16%
India, 3%
Rest of Russia, 7%
the world, 71% Rest of China, 46%
Brazil, 3% the world, 42%
Brazil, 2% Russia, 5% India, 5%
Source: World Steel Association, Ernst & Young analysis
China By implementing this policy on emissions, furnace sizes,
energy efficiency and output capacity, the Chinese
Government is aiming to close down many of the smaller
“China remains the engine for the global
steelmakers in the sector, many of which have older-style
steel industry.”
plants, that are emissions-intensive. In another move to reduce
the volume of exports from the country, in particular by the
smaller steelmakers, the Chinese Government also removed a
Peter Markey 9% export rebate on HRC, sections and narrow cold-rolled coil
Mining & metals leader, Ernst & Young, China products and hot dipped galvanized products on 15 July 2010.
China is also seeking to consolidate its steel industry —

China is presently the largest steel consuming and producing currently the top ten steel producers in China account for 44%
country in the world, accounting for 46% of world steel of the total steel production.
production in 2009. The country, which was producing Resource security remains a major concern for China,
151 million tonnes in 2001 and became the largest regional especially as it is the largest importer of iron ore in the world
producer in 2002 with 182 million tonnes, is estimated to and needed to import 36 million tonnes of coking coal in 2009,
produce around 630 million tonnes in 201010, growing at a up almost fivefold from 200812.
CAGR of more than 15%. China’s steel production, which was
almost flat in 2008 on a year on year basis, picked up strongly
to register a growth of around 13.4% in 2009, boosted by the
demand arising from the US$586 billion stimulus package,
Figure 10. Steel production and consumption in China
targeted mainly toward the infrastructure development in
the region. 700 35
Monthly crude steel production growth in China saw a 600 30

peak in May 2010, before hitting a low for the year of
Million tonnes
500 25
47.9 million tonnes in September. The decline was primarily due
Growth (%)
to a fall in steel prices, leading to production cuts by some mills 400 20
in the region. It is estimated that 30% of the small and medium- 300 15
sized mills in Hebei Province stopped production during that
200 10
time11. The decline of 17% in steel prices from April to July, with
a lag in iron ore prices, put pressure on margins. 100 5
The Chinese Government has, however, made a decision to 0 0

2010F
2001
2002
2003
2004
2005
2006
2007
2008
2009
consolidate the highly fragmented steel industry and thereby

rein in steel production and attain energy efficiency targets.
To this end, the Ministry of Industry & Information Technology Production
released a new policy that measures steel mills according to Consumption
four parameters: Consumption growth
Production growth
1. Emission of sulfur dioxide, dust and waste water
2. Energy efficiency standards Source: China Steel - Release from the iron maiden, J P Morgan,
10 August 2010, via Thomson Research, Ernst & Young analysis
3. Furnace sizes
4. Output capacity
10
ABARE, September 2010
11
China Steel - Release from the iron maiden, J P Morgan, 10 August 2010, via Thomson Research
12
Nikhil Kumar, “Around the world, miners scramble for coal,” The Independent, 7 December 2010, via Dow Jones Factiva, © 2010 Independent & Media PLC
Figure 11. China steel industry capacity and utilization rate Figure 13. Chinese steel end-market demand forecast
800 95 40%
34
35%
700 30
Capacitry (million tonnes)
90 30%
600
Utilization (%) 25%
85
500 20% 18
400 80 15%
10 10 11
9 9
300 10%
75
200 5%
70 0%
100
Automotive Home Mechanical Infrastructure
0 65 appliances equipment
2002
2003
2004
2005
2006
2007
2008
2009
2010
Year on year change FY09/FY08

Year on year change FY10F/FY09
Capacity Utilization rate
Source: China Steel - Release from the iron maiden, J P Morgan,
Source: China Steel - Release from the iron maiden, J P Morgan,
Brazil
Domestic demand for steel is largely underpinned by
the construction, machinery, automotive and household “As a major steel and iron ore exporter, Brazil’s
appliances sectors. Construction is showing signs of slowing production growth continues to climb.”
mainly due to monetary policy tightening in a bid to cool the
over-priced property market. The impact of high interest rates
will impact key automotive and household appliances sectors Carlos Assis
and is expected to result in slower growth in 2010 and 2011, South American Mining & metals leader,
leading to possible moderation of growth in Chinese Ernst & Young, Brazil
steel production.
Brazil is the largest steel producer in Latin America and the
second-largest steel producer on the American continent after
Figure 12. China steel demand breakdown (by million tonnes) the US. Brazil produced 26.5 million tonnes of steel in 2009
and is estimated to register significant growth of 26.7% to
Others, 13% approximately 33.6 million tonnes in 2010, almost equivalent
Oil & Gas, 2% to production in 2007.
Shipbuilding, 3%
Prices in Brazil were expected to remain high in 2010 as the
economy appeared to be recovering in the aftermath of the
Home appliance, 2%
global economic crisis of 2008–09. However, lower prices in
Automobile, 6% other steel producing countries and a strong Real led to an
Construction, 55%
influx of steel imports into Brazil. Steel imports reached a high
in the third quarter of 2010 and at times there was up to a 30%
difference between the price of imported steel and Brazilian
Machinery, 19%
steel. As a result national producers had to adjust their prices
to be able to compete. It is forecast that steel imports will
Source: : Steel - China/ Taiwan - selectively positive, Nomura, decline over the coming months.
20 September 2010, via Thomson Research
The steel industry in Brazil has important competitive and energy generation as a way to hedge costs, to forward
advantages including big iron ore mines with high iron content integration into logistics and cold lines (mills) to be closer to
and modern and competitive steelmaking capabilities. clients, while retaining the hot lines (blast furnace to slab).
The steelmakers are also offering value-added service with
Brazil plays a major role in iron ore production as the world’s
products, e.g., just-in-time deliveries and technical assistance.
third-largest producer after China and Australia. Its domestic
consumption remains fairly low in comparison to its production,
making it the second-largest iron ore exporter after Australia. Figure 14. Steel production and consumption trends in Brazil
It presently holds 27% of the market share in iron ore exports. 40
This is expected to grow with producers, such as Vale, investing 35
Million tonnes
in the world’s largest iron ore carriers (400,000 tonnes) or so 30

called “Chinamax carrier.” Delivery of the first of more than 25
30 such carriers is expected in the first half of 2011. The 20
15
expectation is that these ships will halve the shipping premium
10
from Brazil, when compared to their Australians competitors,
5
from US$15 to US$7 per tonne 13. 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F
When compared with other countries, Brazil’s steel industry
is one of the most efficient with good productivity indicators Production Consumption
(steel tonnes per man-hour). Moreover, production equipment
and environment control methods are state-of-art in the main Source: ABARE, World Steel Association, September quarter 2010
steel plants.
The logistics configuration (plant-railway-port integration) The Brazilian steel industry has significant growth potential as
also gives Brazil a competitive advantage, as it facilitates it has low per capita consumption of steel of 103kg in 2009
important access to consumers of finished products in Latin versus the global average of 190kg. Brazil’s steel production
America and semi-finished products in the US. There are, has grown at a CAGR of only 1.8% between 2001 and 2010.
however, some weaknesses in the Brazilian market. There is a However, production in 2009–10 increased by around 20%
significant amount of idle capacity — in 2009 there was year on year, while consumption increased by more than 30%
26.5 million tonnes of production versus 40 million tonnes of during the same period, due to the smaller base in 2009.
capacity. The exchange rate also impacted unit cost indicators
(US$ per tonne) which diminished competitiveness to a certain
degree. Moreover, the industry deals with some traditional
Brazilian business constraints. Brazil has one of the highest tax Figure 15. Net trade of Brazil
rates in the world, as well as logistics bottlenecks in a domestic 14,000
Thousand tonnes
market where costs are increasing. As a result, Brazilian 12,000

steelmakers are struggling to stay competitive with lower 10,000
cost steel imports. The Brazilian steel industry is investing in 8,000
increasing its competitiveness by implementing programs to 6,000
4,000
increase innovation and reduce costs. In the long term it is
2,000
expected that these measures will help companies achieve a 0
greater level of profitability. 2001 2002 2003 2004 2005 2006 2007 2008 2009
The industry is also investing in all the stages of production and
Source: World Steel Association, 2010
the supply chain. This includes backward integration into mines
13
“Vale’s mega ships to stall maritime recovery for years,” Reuters News, 10 December 2010, via Dow Jones Factiva, © 2010 Reuters Limited
Brazil exported 33% of its total steel production in 2009, with coal, Novolipetsk Steel (NLMK) is 100% self-sufficient in iron
major export destinations being Asia (48.1%), Latin America ore and 80% self-sufficient in steel scrap and Evraz is 91% and
(25.2%) and North America (9.1%).14 84% self-sufficient in iron and coking coal respectively16.
Outlook for Brazil Figure 16. Steel production and consumption trends
Brazil’s steel industry should achieve strong growth in the in Russia
next few years due to the rise in demand from the domestic 80
economy as well as the low cost of production of steel due to 70
strong raw material linkages of the local steel players. Steel
Million tonnes
60
sales in Brazil recovered rapidly following the recession due 50
to the robust real estate sector, and increases in vehicle sales 40
and consumer durables. The macroeconomic factors are 30
positive and hence the demand from these end-user sectors 20
should sustain in the short term. The imports meet 20% of the 10
0
apparent steel usage and are expected to increase in line with
2010F
2001
2002
2003
2004
2005
2006
2007
2008
2009
economic growth of the country.
Production Consumption
Russia
Source: World Steel Association, ABARE, September quarter 2010
“Post-crisis recovery and expected WTO Russia is a major exporter of steel and it is estimated that
accession boost domestic and export demand for 47% of the country’s total output in 2010 was destined for
Russian steel.” international markets. In 2010, there has been a steady
recovery in steel production but it still remains below its all
time high. Consumer spending is expected to increase in the
Evgeni Khrustalev
country, in line with the expected economic growth, which
CIS Mining & metals leader, Ernst & Young, Russia
should, in turn, increase the domestic demand for
steel products.
Russia is the fourth-largest steel producer in the world, Future mid-term growth is well supported by export appetites
producing 60 million tonnes in 2009, and the second-largest of the Russian oil and gas industry. Gazprom and Transneft
exporter of semi-finished and finished steel products during megaprojects assume investing US$25 billion in the
the same period. Following the global financial crisis, Russia’s construction of new pipelines connecting Eastern Siberian
steel sector is now recovering aided by the Government’s deposits with Asian markets. Additional Russian steelmaking
support of steel-intensive industries, such as automotive, capacities will be utilized as a result of an expected boost in
manufacturing, machine building, oil and gas, and energy. This exports after Russia accesses the World Trade Organization
has created higher steel demand in the domestic market and (WTO). According to Russian Government officials the
Russia should surpass pre-crisis production levels in 2011. accession to the WTO is expected to occur during 2011 that
Steel producing companies in Russia are better placed for raw will bring gradual removal of antidumping tariffs imposed by 28
material integration compared to their global peers. Companies countries on Russian steel.
such as Severstal is 100% self-sufficient in iron ore and coking
14
Steel — 2009, Brazil Steel Institute, 2009
15
World Steel Association, 2009
16
Russian steelmakers, Aton LLC, 25 October 2010, via Thomson Research
Domestic future demand for steel will also be supported Figure 17. Steel production and exports
by an anticipated increase in industrial construction and 120
infrastructure development mainly in the Russian Far East,
100
Eastern Siberia and Polar Urals as a result of foreign direct
investment improvement after Russia’s accession to the WTO. 80 43.84
55.11 54.30 53.06
This is accompanied with over US$100 billion investments in
60
expansion and modernization of metallurgical sector assumed
by Russian Ministry of Industry and Trade in its strategy 40
until 2020. 44.89 45.70
56.16 46.94
20
0
2007 2008 2009 2010F
Domestic sales (% of total output) Exports (% of total output)
Source: Russian steel, ING, October 2010, via Thomson Research
Different approaches for different markets
As steelmakers operate in many different markets, the difference in outlook for a developed economy and an emerging
economy will mean that steelmakers will have to take into account different considerations depending on where their
production facilities are based. Some of these include:
Table 1: Strategies for different markets
Developed markets Emerging markets

Estimating future end user demand, sizing the business Continuing to take advantage of demand growth and matching
correctly and taking into consideration the right product mix: production capability to the growing local market demand.
long versus flat, semis and tubes.
Protecting the top line by moving away from production-led Harnessing the technological know-how of the producers from
companies to new customer-centric companies by reorganizing developed countries to maximize production, step into value-
the commercial function and gaining a better understanding added product spectrum and increase energy-efficiency.
of what customers want and value. It is also possible to either
move distribution centers or service centers to emerging
markets or make acquisitions to gain market share where
demand is growing or for vertical integration.
Hedging increasing power costs. Managing increasing power needs which also compete with
other growing industries.
Steelmakers in both developed and emerging countries will need to seek cross-border opportunities to manage the
input costs of iron ore and coking coal. Strong balance sheets are required to make acquisitions so steelmakers
may need to look for less obvious targets or smaller deposits in which they can either partially or fully participate.
Steelmakers will also have to apply discipline to increase their management of working capital needs and hedging the
new paradigm of indexed raw material pricing.
Raw materials There was a structural change in the pricing of iron ore in early
2010, with steelmakers agreeing to the demand of mining
Iron ore and coking coal are the most important raw materials majors to exchange the annual benchmark negotiations with
needed in Basic Oxygen Furnace (BOF) route of steel making. quarterly contracts. The quarterly prices are determined such
Iron ore that upcoming quarterly prices are the average spot price for
the previous quarter. Going forward, this volatility in quarterly
In 2009, 1.7 billion tonnes of iron ore were produced. Almost pricing of raw materials might lead to convergence of quarterly
80% of this production came from only four countries; contracts to monthly contracts, which ultimately finally lead to
Australia, China, Brazil and India. In terms of exports, Australia, spot pricing of iron ore.
India and Brazil contribute approximately 80% of total global
exports in the industry. On the other hand, China is the world’s The move to quarterly contracts was driven by the current
largest importer, importing a substantial 628 million tonnes in chronically tight supply of iron ore, which gave miners
2009, over 65% of all global imports. increased negotiating power. For March 2011, contract
prices for 62% iron ore content (Free on Board, Australia)
The emergence of China as a major commodity producer, as are estimated to be approximately US$137 per tonne, which
well as consumer, has lead to paradigm shifts in the iron ore converts to an average price of US$132 per tonne in Japanese
markets. Although China has around 20 billion tonnes of iron Fiscal Year 2010 (JFY), registering a rise of 119% year on year.
ore reserves, the quality of the ore is poor (20%–30% iron
content). The country has used up almost all of its iron ore This iron ore shortage and resultant high prices has led steel
reserves with more than 50% iron content, making it dependant producers to increasingly seek captive iron ore supply to boost
on Australia and Brazil to meet its requirements. Australia, their self-sufficiency and remove this volatility from their
which boasts of large quality iron ore reserves, is presently the business. In the first 11 months of 2010, 16 of the 68 steel
dominant player in the global iron ore market, and its access to transactions were to secure iron ore and coal supplies. Over
ports gives it the required edge over other exporting countries. the next 5–10 years, ArcelorMittal, Usiminas and Gerdau plan
In contrast, both Russia and Brazil struggle with the lack of to be self-sufficient and not rely on third-party iron ore.
sufficient infrastructure to get increasing amount of iron ore
to market. Last year, more than 90% of the Brazilian exports
exited through the ports owned by Vale and CSN, with small
iron companies struggling due to a lack of infrastructure to
support their exports.
Figure 18. 2008–09 iron ore production and reserves
450 16,000
Mine production (million tonnes)
400 14,000
Reserves (million tonnes)
350 12,000
300
10,000
250
8,000
200
6,000
150
100 4,000
50 2,000
0 0
Austraila China Brazil India Russia Ukraine South Africa Canada United States Iran
2008 production 2009 production Reserves (iron content)
Source: U.S. Geological Survey, Mineral Commodities Survey, Raw Materials Group, Stockholm, www.rmg.se, January 2010
Outlook iron ore The price for high-quality hard coking coal for December 2010
Based on current scenario for 2011, prices are likely to remain quarter was settled at US$209/tonne, a 7% decline on the
stable with an upward bias, while supply will still be tight. previous quarter. Further growth in demand from Asian steel
Beyond 2011, the market is expected to remain relatively companies is expected to underpin a tight market for the next
tight and prices are likely to ease only in 2013 and 2014 when few years. Australia will remain the largest exporter of coking
significant new production is due to come on stream. coal, accounting for more than 60% of forecast world trade in
201117. However, there are new countries appearing on the
Coking coal world coal map with large ambitions such as Mozambique
and Mongolia.
Coking coal, which forms a major part of raw material costs
in the steel value chain, may remain in deficit due to supply China’s import demand for coking coal is sensitive to changes
side infrastructure constraints. Japan remained the biggest in domestic production. China’s emergence as a net coking coal
importer of coking coal and China the second-largest net importer in 2009 has changed the demand-supply scenario
importer in 2009, with the coking coal market expected to of the coking coal industry. China, which imported only
tighten further. The main reason being that steel production 7 million tonnes in 2008, imported 36 million tonnes in 2009,
growth during the year was higher than coking coal, with its driven by rapid steel production growth. There are a number of
quality continuing to deteriorate as a result of the depletion of factors affecting China’s import demand, including the relative
high-quality coking coal reserves. Besides Japan and China, production costs of overseas and domestically produced
the European Union and India remain the major importers coal, the relative costs of international freight and domestic
of coking coal. Imports from India are expected to increase transport, and infrastructure support in China.
further as some of the sector’s largest companies need to
Outlook for coking coal
source coking coal to fulfil their requirements, with their needs
expected to increase further in the near future. On the supply Prices of coking coal will remain firm on the back of strong
front, Australia remains the biggest exporter of coking coal, demand from China and India. However, India, which
whose exports may not rise in line with the global coking coal historically did not produce coking coal domestically, will see
demand due to the lack of infrastructure to support growth. brownfield expansions becoming operational within a year,
Australia and Queensland, in particular, supplies more than thereby increasing supply to some extent. While the World
60% of global metallurgical coal needs. Although many ongoing Steel Association predicts a slowdown in steel production
projects will expand capacity, it may not be sufficient to growth in China during 2011, in absolute terms, China
support increasing global demand. will remain the world’s leading steel producer. To feed this
production, China will need to import around 45 million tonnes
of coking coal per year18.
17
ABARE, September quarter 2010
18
The New World Economy & the Global Met Coal Market, Massey Energy Company, 2010
Table 2: Coking coal trade
Coking coal imports ( million tonnes) 2008 2009 2010F
Europe 73 41 46
Japan 66 66 73
China 7 36 45
Korea 20 16 18
India 24 23 27
Brazil 16 13 14
Others 28 26 29
Total imports 234 221 252
Coking coal exports ( million tonnes) 2008 2009 2010F
Australia 137 131 148
Canada 26 22 22
US 39 34 47
Russia 13 11 17
Others 19 23 18
Total exports 234 221 252
Source: The New World Economy & the Global Met Coal Market, Massey Energy Company, 2010
Other challenges for steel manufacturers Among BRIC countries, where the future of the steel industry
lies, Russia has abundant resources but its facilities are too
Infrastructure
far from ports to make the export profitable. India, which
Iron ore and coking coal, which were regional plays a couple exports more than 100 million tonnes of iron ore, may not be
of years ago, are now major export objects in the seaborne able to increase it much further due to infrastructure issues
trade. Over the last decade, mining countries with reserves in and, moreover, the raw material demand in the country is
coastal areas and proximity to China have gained significantly. expected to remain high enough to consume any increase in
However, infrastructure remains the key concern for further production. The North American region, one of the largest
growth. Although Australia is arguably in the best position to untapped reserves in the world, will require higher iron ore and
export its raw material, it lacks the infrastructure to increase its coal prices to make it viable enough to extract the minerals and
exports. Brazil has also not been able to increase its production export them. The lower increase in steel prices as compared to
over the last couple of years due to logistic bottlenecks, despite the rise in raw material prices has put pressure on the margins
having one of the best mining resources in the world. However, of steel players. Raw material prices are expected to remain
recent investments, such as Vale’s Chinamax carrier, may help firm due to infrastructure supply constraints whereas steel
in improving the logistical bottleneck in Brazil. prices may not rise much on account of oversupply in the China
region, leading to margin squeeze of steel players, especially
the non-integrated producer19.
19
Global Metals and Mining Sector - Infrastructure is the key, Deutsche Bank, October 2010, via Thomson Research
Regulatory environments and mining laws may curtail the growth plans of mining companies and also
During 2010, the Australian Government was working towards deter further foreign investment into the mining sector in India.
the imposition of a resource rent tax on iron ore and coal
The price recovery
miners. This is in line with many other countries imposing
similar resource taxes or increasing royalty burdens on Global steel output reached its highest monthly production
mining companies. The higher tax or higher royalty payments of 125 million tonnes in May 2010. Since then, output has
burden on companies has resulted in a further slowdown declined mainly due to a slowdown in Chinese production to
in investment in mining assets, which may in turn push up reach 114 million tonnes in November 2010. However, the
prices of iron ore and coking coal. Moreover, environmental average global capacity utilization remains below 80%, giving
clearance has become a key challenge for the expansion of a view that the world has an installed capacity to produce
mining companies, especially in India. The Indian Government around 150 million tonnes of steel per month. This excess
has come up with a proposal that the mining companies should capacity could pose a risk to the recovery in steel prices in
share 26% of their profit with the local residents, displaced certain markets/products categories. Any recovery in prices
or affected. This law, if passed, along with the new provisions will tempt the steel producers to restart idle capacity, and again
of Forests Rights Act (FRA), will constrain the growth of the affect the supply-and-demand balance, provided the increase
mining industry in the country. Although FRA provides a legal in production is purely on account of price dynamics and not on
recognition of the rights of traditional forest communities, it the basis of a rise in demand.
2. Indian steel
industry
industries, the steel industry triggers growth across several

“India will be the next landmark on the global downstream industries and the services sector.
steel landscape. The Indian steel dream is one
shared by global stakeholders – with leading
producers, investors and suppliers keen
Why India will be the next landmark
to participate.” on global steel landscape
Anjani K Agrawal The global steel outlook is optimistic, with 7% growth expected
Partner and Sector leader mining & metals, in 2011. The BRIC countries are tipped to drive the majority
Ernst & Young, India of the growth in the sector. Of the emerging markets, the
structure of the Indian economy, its stage of evolution, market
size, growth rate, cost base and potential resource base should
We expect India to be a dominant player in the global steel drive unprecedented growth in the Indian steel sector over the
sector. With its large steel industry and robust economy, it has next decade. Reforms made to the investment environment
the strong foundation to become a leading force in the global should attract several global players, thus making India a prime
arena. India is expected to register a sustained GDP growth destination for investment in steel.
of 8%–9% for years to come which would make it a significant The Indian steel industry has witnessed robust growth during
contributor to incremental growth of the global economy. 2005–10, with production (crude steel) and consumption
(finished steel) registering a Compound Annual Growth Rate
In a growing global economy, the steel industry is the backbone (CAGR) of 7.05% and 8.50%, respectively. India was the world’s
of modern industrialization. As key amongst the basic
fifth largest producer of crude steel in 2009. This growth has Figure 19: Finished steel consumption (2005–2010)20
been driven by capacity expansion and improved capacity 60 16
utilization. Even in 2010, the steel sector witnessed steady
14
growth and has exceeded the pre-crisis level. As per World 50
12
Million tonnes
Steel Association, the monthly average production of crude

40
Growth (%)
steel up to November 2010 stood at 5.5 million tonnes which, 10

when annualized, gives a production of 66 million tonnes 30 8
for 2010. 6
20
Over the past few years, consumption has been primarily 4
10
driven by the continuous increase in infrastructure-related 2
investment, leading to higher demand for steel. During 0 0
the recent financial crisis, the Indian steel sector remained FY05 FY06 FY07 FY08 FY09 FY10F
resilient due to strong domestic demand from Indian end
Consumption Growth
users. Consequently, in 2009, when global steel consumption
witnessed a year on year decline of 8.5%, steel consumption Source: Annual report 2009–10, Ministry of Steel, Government of India
in India remained flat. However, the country’s per capita
*Data annualized untill December 2009
consumption is still one of the lowest in the world, presently
standing at around 60kg per capita versus 430kg for China and
a global average of approximately 190kg.
20
In India, the financial year (FY) runs from 1 April to 31 March
Capacity additions not keeping pace with rising demand India imports steel as supply lags demand
The Indian steel industry faces a supply deficiency as capacity India has been a net importer of steel since 2007 and the
increases have lagged increases in consumption. Large demand/supply gap is expected to widen over the next five
greenfield projects have not been set up in India over the years. India imported 2.1 million tonnes of steel during the
past few years due to regulatory, social and infrastructure April-June 2010 period, giving an indication that imports
bottlenecks. Capacity additions in the short term are primarily during 2010 may be higher than the last year. Over the next
brownfield projects by existing players. three years, around 20 million tonnes of brownfield expansions
are expected to become operational, which may reduce steel
Figure 20. Capacity, production and utilization numbers imports in the medium term. In the long term, due to the
(2005–2010) for crude steel difference between demand and supply, India may still remain
80 92
a net importer of steel as most of the planned greenfield
expansions have been delayed due to land allotment laws and
70
90 environmental clearances issues.
Capacity Utilization (%)
60
Million tonnes
88
50
40 86 Figure 21. Net export/import for finished steel
30 3,000
84
20 2,000
Thousand tonnes
82
10 1,000
0 80 0
FY05 FY06 FY07 FY08 FY09 FY10F
-1,000
Capacity (in million tonnes) — LHS
-2,000
Production (in million tonnes) — LHS
-3,000
Capacity utilization (in %) — RHS
-4,000
FY05 FY06 FY07 FY08 FY09 FY10F
Source: Annual report 2009–10, Ministry of Steel, Government of India.
* Data annualized untill December 2009 Source: Annual report 2009–10, Ministry of Steel, Government of India
* Data provisional for April—December 2009
The competitive landscape
The resilience of the Indian steel industry and its competitive position is summarized in the following five forces analysis:
Figure 22. The state of India’s competitive steel environment
New entrants—low to moderate
► Limited number of new players as

industry is capital-intensive
► Global players keen to gain foothold
Suppliers—moderate to high Internal competition—low Customers—low to moderate
► The coking coal suppliers have ► Currently the competition among players ► Demand is high and currently
considerable power is low because it is a supplier’s market. outpaces supply.
► Sufficient iron ore is available ► Entry of global players will intensify ► Price adjustments barely
but price is set according to competitive landscape. reflecting cost increase
international benchmark
Substitutes—low
► Steel industry faces a threat from

aluminium and plastic industry
Source: Ernst & Young analysis
Low to moderate threats from new entrants competition for resources, talent and market share, which will
The steel industry is capital-intensive, and hence the first reinvigorate competition.
barrier for new entrants is the financial outlay involved in
Minimal threats from steel substitutes
setting up a steel plant. The set-up period in India is also
extended due to the challenges of land acquisition and other A number of innovations have given aluminum and plastic
regulatory procedures. These issues have been a barrier to properties that are comparable to steel. Materials such as
entry for many global steel producers in the past, and many are carbon fiber, plastic and aluminum alloys have replaced steel in
now undertaking joint ventures with established Indian groups. the automobile industry. However, usage of these substitutes
is not cost-effective and lacks some of the inherent qualities of
Low degree of internal competition steel. It seems unlikely that these substitutes will replace steel
Industry competition is minimal as the Indian steel sector is a in some key end-user segments in the short to medium term.
supplier’s market. About 47% of crude steel production can be
Vertical integration
attributed to four major players: Tata Steel, JSW Steel, SAIL
and RINL. These companies are expected to contribute to the The major players in the industry, such as Tata Steel and SAIL,
majority of new capacity through their brownfield projects. have vertically integrated to secure raw materials. For example,
Demand in the sector outpaces supply, and this excess demand Tata Steel is self-sufficient in iron ore and coking coal supply,
is met by imports. However, several multinational and SAIL is self-sufficient in iron ore but imports most of its
steel companies are keen to enter the Indian steel market. coking coal requirement. The rest of the players in the Indian
Once they set up their operations, there will be greater steel industry have varying degrees of self-sufficiency and
depend on raw material suppliers to meet their requirements. Infrastructure: the key driver of steel consumption in India
Iron ore miners, such as NMDC and Sesa Goa, represent
The construction and infrastructure sector is the largest
around 35% of the iron ore production in India. Though iron ore
consumer of steel in India, accounting for 61% of total steel
production exceeds domestic demand, its pricing is impacted
consumption in 2008–09. According to Planning Commission
by influential global majors. On the other hand, coking coal
projections, total investment in the infrastructure sector in the
suppliers have considerable influence on the steel industry as
Eleventh Five-year Plan (2007–12) is around US$450 billion
India has a shortfall of coking coal and imports more than 70%
and the Twelfth Five-year Plan (2012–17) expects investment
of its requirement.
of approximately US$1 trillion, indicating that demand for steel
The cyclical and volatile nature of prices for both commodities from the sector will remain strong. In FY10, an expenditure
is a major risk to non-integrated steel players. of around 7.2% of GDP was spent on infrastructure and the
Government aims to increase this to around 9% of GDP
Fragmented customer base drives pricing by 2014.
Demand for steel depends on the needs of end-user industries. Figure 24. Investment in infrastructure
Currently, supply cannot keep up with industry demand
and India is importing cheaper steel from China and special 90 82 83.5
steel from South Korea and Japan. The construction and 80
69
infrastructure sector constitutes more than 60% of the demand 70
60 55
for steel in India. The supply side being more consolidated than
47
the end user segments generally have a greater influence on 50
39
the pricing decision. 40 32
30 24 26
20
Strong domestic demand drivers 10
The key variables for steel consumption in any country are 0
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10F
the growth rates of sectors such as manufacturing, consumer
durables, construction, capital goods and services. The
demand drivers in India continue to be strong and indicate far Investment (in US$ billion)
higher consumption of steel in coming years.
Source: Neha Kapur, Indian Economy: Update, August 2010, Ernst & Young
Figure 23. Steel consumption

Figure 25. Investment in infrastructure (percent of GDP)
Others, 12%
11.0
Packaging, 5% 10.7
10.0
10.3
9.9
9.0 9.5
9.0
Consumer 8.0 8.4
durables, 3% 7.9
Construction and 7.0 7.2
infrastructure, 61%
Capital goods, 11% 6.0 6.5
6.0 6.0
5.0
Auto, 8%
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Source: Steel products annual review, CRISIL Research, July 2009 Investment as % of GDP
Source: Juggernaut is starting to roll...with a few links missing, India:

Construction: Infrastructure, Goldman Sachs via Thomson Research,
11 October 2010
Primary demand is expected to come from ports, oil and gas, capacity additions of 100,000MW by 2012 and launched
power and construction in the near future. Mega investments several initiatives including the Ultra Mega Power Projects
in infrastructure by China have been a prime driver of steel to address the chronic power shortages. However, capacity
consumption for several years, and India’s huge investment in additions during the Eleventh Five-year Plan have fallen behind
infrastructure should further fuel this demand. In addition, it this target, leaving a widening gap to be bridged during the
is expected that urbanization will further increase the demand next plan period.
for steel.
Demand for steel is also expected to come from the huge
The current power deficit will drive capacity additions in India. network of pipelines to be laid over the next few years for
During the Tenth Five-year Plan (2002–2006), demand for oil and gas transportation. It is estimated that the pipeline
power increased at a CAGR of 6.2% and availability by 5.8%, network for liquid fuel transportation is likely to grow from the
thus widening the deficit. The Government of India envisaged present 16,800km to 22,000km in 2014.
Table 3. Opportunities across the infrastructure sector

Sector Key opportunities
Power Government targets adding 100,000MW capacity by 2012
Both generation and transmission capacities being enhanced significantly

Oil and gas Pipeline network, city gas distribution, refinery infrastructure installation and upgrading
Roads and highways National Highway Development Program (NHDP)
Plans to construct and upgrade more than 50,000km of national highway by December 2015
Railways Dedicated Rail Freight Corridor (DRFC) network expansion lagging freight growth; this will need to
be expedite
Ports Port traffic is estimated to increase by a CAGR of about 12% during 2010–2012
Water and waste management The Jawaharlal Nehru National Urban Renewal Mission is expected to increase steel consumption
Other major steel consumers in India are the automobile and value-added steel segment will also see immense growth. The
capital goods sectors. Demand from both these sectors has auto component industry grew by 20% year on year between
grown significantly over the last few years. 2009 and 2010 to reach a turnover of US$22 billion, and is
estimated to grow by 18% year on year between 2010 and
Automotive: the next manufacturing hub in India 2011 to reach US$26 billion.
The automobile sector grew by 27% year on year in 2008–09
Capital goods sector to accelerate demand for steel
and is estimated to continue to increase in double digits as the
launch of low cost passenger cars is likely to expand the market The capital goods sector currently accounts for 11% of steel
and demand. consumption, and has the potential to significantly increase
in tonnage and market share. China’s steel consumption of
Production of two wheelers grew by 15%, while cars, more than 100 million tonnes for machinery production is a
commercial and utility vehicles grew by 26% in 2009–10, and strong indicator of consumption in this sector. With the return
double digit growth is expected in the medium term. With many of business confidence, burgeoning internal cash accruals and
automobile manufacturers increasing capacity by establishing greater capital availability, corporate India’s capital expenditure
manufacturing operations in India, not only is the demand for plans should remain on a growth trajectory and generate
automotive steel expected to be robust, but the high-quality, greater demand for steel.
The shipbuilding industry is likely to undergo a fast-growth
cycle due to increasing seaborne trade and coastal shipping
trends, which will further push up demand for steel.
Outlook for domestic steel demand

Domestic demand for steel is anticipated to grow by around
10%-12% annually in the next two years on the back of forecast
strong GDP growth.
Over the past few years, the demand for long steel has
increased at a faster rate than for flat steel as a result of the
Government’s focus on developing infrastructure. However,
during 2009-10, the demand for flat steel also picked up
strongly. The short-term demand forecast for both long and
flat steel is positive with growth of about 10%-12% and 9%-10%
respectively over the next two years21.
Figure 26. Estimated growth in steel demand
35
30%
30 26%
25
Growth (%)
20%
20 16% 16% 16%
14%
15 12%
10%
10
5
0
Cars and utility Commercial Infrastructure
vehicles vehciles
2009–10F 2010–11F 2011–12F
Source: Steel Products update, CRISIL Research, June 2010
21
Steel Products update, CRISIL Research, June 2010
31 Global steel 2011 Paving the Boulevard of the Great Indian Steel Dream
Will India be able to replicate the China’s reforms began 13 years before India’s. Even at
the commencement of the reform process, China was a
growth in China’s steel industry? more industrialized economy - “industry and construction”
Over the last decade, China witnessed exponential growth in its constituted 48% of its GDP, in comparison to 27% for India
steel industry, registering a CAGR of 17.2% in production and when it initiated its reforms in 1991. China has continued
14.3% in consumption. In absolute terms, China is expected to to focus on infrastructure. Its share of investment in GDP
produce 630 million tonnes of steel in 2010 — around 47% of expenditure accelerated from 38% to 48% during the reform
global steel production versus 151 million tonnes in 2001. journey, while India’s grew from 25% to 32%.
The ongoing debate is whether India should aspire to grow to In 1991, China produced 71 million tonnes of steel, which
such levels and, if required, whether it can replicate China’s grew to 127 million tonnes by 2000. In the same period,
growth model in the sector. The following indicators provide India grew its steel production from 17 million tonnes to
vital clues. 26 million tonnes. In China, when steel production picked
up pace after 2000 and grew exponentially to around
Table 4. China—India comparison 630 million tonnes in 2010, this was not surprising as almost
52% of China’s incremental GDP over the past five years has
Parameters China to India ratio India’s lag in years
gone into investment. Although India registered significant
GDP 3.8 11.0
growth during this decade, in absolute terms, China’s steel
Industrial output 8.0 18.0 production is 12.3 times that of India’s.
Steel production 12.3 18.0
Car sales 5.0 6.0 Figure 27. China and India - crude steel production and
Bank loans 9.2 16.0
GDP growth
Source: Sizing up India and China, IIFL, 1 November 2010, via 20

Thomson Research 18
16
Elements China India
Growth (%)
14
Reforms started 1978 1991
12
GDP composition – industry and 48% 27%
10
construction – at the start of reforms
8
Share of investments in GDP 38% 25%
expenditure at the start of reforms 6
Share of investments in GDP 48% 32% 4
expenditure (2009) 2
Share of investments in incremental 52% 38% 0
GDP over five years 2006 2007 2008 2009 2010 2011F
Share of consumption in incremental 31% 56%
Real GDP growth of China
GDP over five years
Crude steel production growth of China
Source: Sizing up India and China, IIFL, 1 November 2010, via Thomson Research Real GDP growth of India
*Note: All figures are for 2009 or end of 2009 unless otherwise stated. For India, Crude steel production growth of India
data is for the 12 month period ending in March of the subsequent year. Source: IHS, Global Insights, ABARE, World Steel Association
China has invested heavily in infrastructure development to Figure 29. Lending to infrastructure as a percent of
sustain high economic growth during the period. Investment total lending
in infrastructure development increased significantly after 35
the country’s GDP crossed the US$1 trillion mark. This in turn 29.5
Lending (% of total lending)

30
fueled the growth in China’s steel industry. 25.2 25.7
25 23.6
India is currently following a similar trend. The country’s GDP 21 21.5 22.3
crossed the US$1 trillion mark in 2009 and investment in 20
infrastructure accounted for 7.5% of GDP, one of the highest
15 13.1
globally. Infrastructure investments are expected to be close to 10.4
9.9% of GDP during the Twelfth Five-Year Plan (2012–17). 10 8.0 9.2
7.9 8.0
4.9
5
Figure 28. Infrastructure spend 0

FY04 FY05 FY06 FY07 FY08 FY09 FY10F
11 10 10 10
9 9 India China
10 9
Spending (% of GDP)
9 Source: Juggernaut is starting to roll...with a few links missing,

7.2 Goldman Sachs via Thomson Research, 11 October 2010
8
6.4
7 5.7
5.3
6 4.5 4.7 India’s GDP data for the past few years indicates that the
5 economy is on a strong growth path. Steel consumption, which
4 is positively correlated to GDP, is anticipated to grow in the
3 coming years in line with the expectation that GDP growth will
2 continue in the 8%-plus range. Like China, Indian steel sector
FY04 FY05 FY06 FY07 FY08 FY09
growth will also be infrastructure-driven.
India China
In summary, India does not need to emulate the volume
Source: Juggernaut is starting to roll...with a few links missing,
Goldman Sachs via Thomson Research, 11 October 2010 achieved by China. However, the production must accelerate
to meet the robust demand growth. The extent of increase in
production growth rates will depend upon how the challenges
The difference between the two economies has been the level are addressed by stakeholders.
of lending to the infrastructure sector. On an average, lending
to infrastructure as a percentage of total lending in China was
around 28% and in India it was around 10% between FY04 and
FY10. However, in India lending to infrastructure also grew to
13% in 2010 versus 7.9% in FY05, to support increased
project activity.
Raw material availability — Coking coal deficiencies
sufficient in iron ore but deficient India is deficient in coking coal. A significant percentage of
Indian steel production is carried out using blast furnaces,
in coking coal with coking coal used as a reducing agent. India has the fourth
Sufficient iron ore reserves largest proven coal reserves in the world but these are low
quality and 83% of the total reserve is non-coking coal.
India is the world’s fourth largest producer of iron ore after
China, Australia and Brazil, and contributed 9.9% of Over the last several years, the domestic supply of coking
global production in 2009. The country consumed close coal has lagged rising domestic demand, and as a result India
to 100 million tonnes and exported approximately imports a large quantity of coking coal, particularly from
110 million tonnes. Iron ore production grew at a CAGR of 10% Australia. Coking coal constitutes around 34%22 of total
between 2005 and 2009 and reached 226 million tonnes coal imports. India imported 23 million tonnes of coking
in 2009. coal in FY10 to meet the total requirement of around
40 million tonnes.
India has about 25 billion tonnes of iron ore resources — with
a reserves base of 9.8 billion. Though India currently has The demand for coking coal is only going to increase as new
sufficient iron ore, it must consider the estimated rise in steel capacities come online in the next few years, with India’s
domestic steel production in the near future and work towards coking coal requirement expected to reach 90 million tonnes by
increasing its reserve base. FY2023. Going forward, the scarcity of coking coal is expected
to have a huge impact on the margins of steel manufacturers.
Iron ore exports grew at a CAGR of 6.8% between 2005 and The Indian coke industry is dominated by integrated steel
2009, with China taking approximately 90% of these exports. players (ISP) as these facilities operate captive coke capacities.
The debate of rationalizing iron ore exports in favor of The ISPs produce around 40% of total coke in India annually.
domestic use continues, while the Government has followed a Secondary steel producers (SSP), which require around
mixed policy of increasing the duty on iron ore exports. 10 million tonnes of coking coal per annum, rely mostly on
imported coke as they do not possess captive coking
coal facilities.
Figure 30. Production of iron ore Figure 31. Export of iron ore
120 60%
Export (% of total production)
240 226.0 54%

51% 108.5
214.0 110 50% 50%
220 49%
206.9
Million tonnes
100
91.4 40%
Million tonnes
200
180.9 90 84 32%
78.1 30%
180 80
68.5 20%
160 70
142.7
60 10%
140
50 0%
120 FY05 FY06 FY07 FY08 FY09
100 Exports (LHS) % of total production (RHS)
2005 2006 2007 2008 2009
Source: Federation of Indian Mineral Industries, Ernst & Young analysis Source: Federation of Indian Mineral Industries, Ernst & Young analysis
22
Manoj Chauhan, “Coal India Ltd. company profile,” Ernst & Young, December 2010
23
Coal Sector - The Impending Coal Crisis in India, Credit Suisse, 10 August 2010, via Thomson Research
Figure 32. Growing coking coal demand
70 65.0
58.7
60 52.8
Million tonnes
50 45.6
41.0
37.6
40
30 23.0 22.7 22.4 22.2 21.9 21.7
20
10
0
2008–09
2009–10
2010–-11F
2011–12F
2012–13F
2013–14F
–
Demand of coking coal Production
Source: Coal industry annual review, CRISIL Research, November 2009
The consumption of coking coal is estimated to increase at Great potential ahead due to rising demand
a CAGR of 11.6% between 2009 and 2014, whereas the The Indian steel industry has made significant progress in
production is estimated to remain almost the same during that recent years backed by strong fundamentals. Even during the
period. This is likely to result in further widening of supply and economic slowdown, the industry succeeded in sustaining
demand in the domestic coke market. To meet this gap, the positive growth, driven by strong domestic demand from
captive mining and import of coking coal is expected to grow at the construction, automobile and infrastructure sectors.
a CAGR of around 15% between 2009 and 2014. The progress made by private sector players in brownfield
expansions is significant. There is much upside in per capita
consumption of steel in the country from its low base of around
Outlook for the Indian steel industry 60kg, with the increasing demand expected to lift per capita
consumption to far higher levels.
The Indian steel industry is expected to experience robust
growth, as long-term positive indicators (such as strong Capacity additions by major steel producers to meet
demand from key end-use sectors and iron ore availability) increasing demand
exceed challenges (such as land allotment issues, shortage
of coking coal and environmental clearances). The goals India was the world’s fifth largest producer of crude steel in
set by the Indian Government to grow the steel sector are 2009 and is expected to become the world’s second largest
encouraging and are reflected in the number of Memorandum producer by 2015–16 if all planned capacity expansion
of Understandings (MOUs) the central and state governments projects become operational. Projects which are expected to
have signed for greenfield projects. Steel growth has a direct be operational in the next three years include those by Tata
correlation with the GDP growth of a country and as a basic Steel, JSW Steel, SAIL and Essar. Based on collated data and
industry it propels downstream industrialization as well estimated project completions, total crude steel capacity in
and hence it is expected to remain in the key sector for India is expected to be around 112 million tonnes by 2015, a
the Government. growth rate of 9%.
Table 5. Expected capacity additions
Crude steel capacity 2007 2008 2009 2010 2013F 2015F

(million tonnes) year-ending 31 March
Tata Steel (India) 5.0 5.0 6.8 6.8 9.7 12.7
Essar Steel (India) 4.6 4.6 4.6 4.6 9.2 9.2
Ispat 3.6 3.6 3.6 3.6 3.6 3.6
JSW Steel 3.8 3.8 3.8 7.8 11.0 11.0
RINL 3.5 3.5 3.5 3.5 6.3 6.3
JSPL 2.9 2.9 2.9 2.9 6.9 6.9
SAIL 13.8 13.8 13.8 13.8 18.0 24.7
Bhushan Steel 0.3 0.3 0.3 0.3 2.2 5.1
Bhushan Power & Steel 1.4 1.4 1.4 1.4 1.4 1.4
Others 17.9 20.9 25.6 28.1 29.2 31.6
Total crude steel capacity 56.8 59.8 66.3 72.8 97.4 112.5
Source: India Steel Sector: India An outperformer in steel, BNP Paribas Securities, via Thomson Research, 19 October 2010
International steel majors are expanding their Challenges and issues

Indian presence
The Indian Government’s plan of reaching 200 million tonnes
Attracted by the growth potential of the Indian steel industry,
in steel production by 2020 may appear ambitious against
several global steel players have been planning to enter the
the progress made so far. However, relative to what China has
market or have announced expansion plans for their Indian
achieved over the last 10 years, this target can be achieved.
businesses. For instance, Arcelor Mittal and POSCO have
Keeping in mind that India aims to be the world’s second
planned mega greenfield projects at various locations in India.
largest producer of steel, there are several constraints and
Some global players have entered strategic partnerships issues that need to be addressed. Many of the risks and
or joint ventures with Indian steel majors as they feel that challenges are the same the world over — below are those
greenfield projects may take longer to become profitable, while relevant to India.
established companies already have their existing customer
base in the region. For instance, Arcelor Mittal has acquired Scarcity of coking coal
a significant stake in Uttam Galva, while Sumitomo Metal has As previously discussed, the availability of coking coal is a key
partnered with Bhushan Steel for technological and marketing issue for the Indian steel industry because of the scarcity of the
collaboration, which may be extended to equity participation resource in the country which will have a huge impact on the
in future greenfield projects. JFE has also joined JSW Steel as production target. The industry also would have to address the
a strategic partner, with a 15% equity share. SAIL has entered issue of volatility in coke prices, which erodes margins for
a joint venture with POSCO to have FINEX technology at its steel producers.
Bokaro plant. And more strategic alliances and joint ventures
are in the pipeline.
Raw material price volatility While such challenges are generic to large projects in several
During 2010, there has been a significant rise in global spot parts of the world, India has the following specific issues:
prices for raw materials such as iron ore and coking coal, • Land required for large projects comes into conflict
due to a surge in demand from China. However, global steel with social set up — almost 70% of land is covered by
prices have not increased significantly as demand in the agriculture and forests further accentuating the lower land
Western world is still below pre-crisis levels. During the year, — population ratio.
quarterly coking coal contracts were priced at US$200/tonne
• Certain inadequacies in the land acquisition regulations
and iron ore contracts were priced at US$130/tonne. Steel
(e.g., definition of public purpose, compensation
prices traded in the range of US$575-US$600/tonne. This
benchmarking, coverage of displaced persons).
means cost pressures are inevitable for non-integrated steel
companies in India. However, the extent of the pressure would • Divergence between states’ and central legislation
depend on the level of vertical integration. and procedures.
The level of vertical integration for the three largest steel Of late, some projects in the mining and metals sector have
companies has the following impact: been stalled under the Forest Right Act (FRA), which is
to safeguard the social rights of the forest-dwelling tribal
• Steel Authority of India, the largest public sector steel population residing in that area. The Act allows the players
producer, has full integration of iron ore and sells more to acquire the land only after the consent of the residents in
than 95% of its steel production in India, making it more
the area or the people dependent on that area. Most mining
resilient to changes in global price volatility. However,
resources lie in the tribal belt of the resources rich states of
dependence on coking coal has squeezed margins
Orissa, Chhattisgarh and Jharkhand, which have recently seen
in 2010.
local community uprisings.
• Tata Steel (India), one of the world’s low-cost steel
producers, enjoys healthy margins in its domestic
operations as it has full captive sources of iron ore and
substantially for coking coal.
“Demand for steel in India is growing at the
• JSW Steel lacks full integration within India in iron ore rate of 12%–15%. We expect demand to grow
and coking coal, so it is more exposed to changes in raw exponentially over the next few years. On the
material prices. flipside, the severe shortage of roads, rail and
All the major steel producers in India are trying to secure raw ports will limit the natural evolution of steel consumption
material for their future needs by acquiring mines or entering and will debilitate the creation of steel supply.”
into joint ventures. However, strict land acquisition laws can Mr. R. K. Miglani, Chairman
slow the process. Uttam Galva Steels Limited
Complicated regulatory regime

There are many green-field projects being planned in India by
steel majors. However, the execution and implementation of
these projects is presently a gray area in India’s steel growth
story. Cases in point are the greenfield projects of Arcelor
Mittal and POSCO, which did not progress even after five
years of their announcements. The major issues faced by
the companies are related to land acquisition, mining lease
securitization, forest clearances, and relief and rehabilitation
(R&R) policies.
The Government is cognizant of the situation and seeks to To help Indian railways gain a bigger share of the freight
work out solutions keeping with its inclusive growth agenda. market, in 2005 the Indian Government offered licenses to
The draft mining bill addresses some of these issues. The private players to start container operations in the country.
issues are complex and need sustained efforts towards building However, the rail container sector still accounts for only about
consensus. The industry is also consciously moving to obtain 1% of the cargo handling market.
this social license to operate by partaking in development of
communities and is well advised to address the longer-term Congested ports
sustainability issues. About 70% of the total port traffic in India is handled by the
western ports of Jawaharlal Nehru Port Trust (JNPT), Mundra,
Inadequate infrastructure Kandla and Pipavav. Port traffic is estimated to increase at rate
The major impediment to growth in the Indian steel sector of approximately 12% between 2010 and 2012.
is inadequate infrastructure. A robust transport framework
is required to support and facilitate the volumes of steel Figure 34. Growth in port traffic
production planned. The lack of availability of quality
infrastructure and logistics will have cost and supply 1,100 12%
R~ 989
chain implications. Huge investments are required in key 1,000 CAG
882
Million tonnes
infrastructure areas such as railways, roads and ports. 900

799
800 718 719
Constrained railway haulage capacity
700 636
The Indian railway network was more advanced than that
600
of China’s until 1995. Now, it is constraining the growth of
500
the mining and metals sector due to inadequate investment. FY07 FY08 FY09 FY10 FY11F FY12F
Over the last 15 years, there has only been a 3% growth in
Source: India Transportation: Sea and Land Cargo-Let the rough, Nomura
the railway network. The railway network only has a 30% International ( Hongkong) Ltd., 18 February 2009, via Thomson Research
transportation market share, despite being a cheaper and
faster mode of freight movement than road.
The port development plan established by the Indian
Government in FY06 predicted port traffic of
Figure 33. Breakup of freight handled in India
1,009 million tonnes with planned capacity of major
3,500 ports to be 1,002 million tonnes by FY12. However, actual
3,000 capacity additions are lagging24.
Million tonnes
2,500
2,000
Currently, Indian ports face issues such as low productivity,
high costs and large vessel turnaround periods. With
1,500
dependence on low ash coking coal and export/import of
1,000
steel set to increase in the future, the importance of port
500 infrastructure to the steel industry cannot be underestimated.
0
FY06 FY07 FY08 FY09
Air Sea Road Railways
Source: Logistics: Container Rail-Thrive (al) of the fittest, IDFC Securities,

1 December 2009, via Thomson Research
24
India Transportation: Sea and Land Cargo - Let the rough, Nomura International ( Hongkong) Ltd., 18 February 2009, via Thomson Research
25
Railways: Uncertain today clear tomorrow, IDBI Capital, via Thomson Research, 8 October 2010
Inadequate road infrastructure which clearly indicates the stress suffered by the existing
Roads carry 57%25 of the freight traffic in India. The flexibility road infrastructure. The steel production target will require
and “last mile connectivity” that road transporters offer have increased haulage via the road network, thus the road network
increased their share of road haulage, even though road must be expanded and upgraded.
transport is relatively more expensive than rail. India’s huge appetite for steel consumption and its steel
Out of the total road length of 3.3 million kilometers, national production plans appear to be in line with expected demand
highways and state highways comprise merely 6%, with almost over the next few years. However, the country and all
no expressways. National highways comprise only 2% of the stakeholders need to work on resolving the challenges to
total road length but carry about 40% of the total road traffic, enable these ambitious plans for the sector to be met.
Strategic accelerants It will help fast-forward capacity addition at most logical
locations, address all socio-economic and environmental
The Indian steel sector is in a strong position to expand needs, and ensure competition. The premium from the bidding
its production, driven by higher demand from domestic can be partially used to develop local communities and create
consumers and good reserves of iron ore. Ongoing exploration enabling infrastructure. As these steel hubs will be identified
for coal and coking coal reserves in India as well as the policy and planned well, the stakeholders (e.g., government, railways,
changes on land acquisitions will aid rapid developments. ports, mining companies, steel producers) can work out a plan
to create the infrastructure more effectively and efficiently.
Further to the steelmakers’ responses during 2010 (page 13),
the following approaches can be considered by stakeholders to Expand rural demand
accelerate the sector growth in India.
The per capita steel consumption in rural India is around
2-3kg, compared to the national average of around 60kg,
Develop Special Purpose Vehicles (SPVs) for steel hubs
indicating a huge potential market. To capture latent demand,
The Ultra Mega Power Project model for adding capacity the steel industry can innovate products/applications to cater
in power generation is achieving success in India. The to the needs of rural customers. For example, the industry
Government can adopt a similar initiative to develop a model can partner with communities and local bodies to provide
in the mining and metals sector. The major issues faced by lightweight, prefabricated structures to build centers for
steel companies in India are land acquisition, forest and education and health care. Partnerships can be explored with
environmental clearances, and allocation of raw material Panchayat Raj institutions, non-government organizations and
resources. A nodal agency, in coordination with state and microfinance institutions, to finance the initial expenditure.
central governments, can create a SPV for each major project Eventually, the higher volumes may help in pricing products
hub, obtain all necessary clearances and link resources before appropriately for the market.
inviting globally competitive bids to undertake the project.
Improve logistics and supply chain management
“In addition to productivity improvements and
Every tonne of steel produced requires the movement of
securitization of resource needs, the Indian
four tonnes of material. Inadequate infrastructure and the
steel industry should focus on developing
immaturity of the logistics sector have significantly impacted
products that meet customers’ needs, many of
the steel industry, with serious cost implications. The steel
whom are becoming more sophisticated.”
industry should evaluate and pursue the following four
initiatives to address the issues: Mr. Malay Mukherjee
Chief Executive Officer, Essar Group
1) Transform the network structure – ensuring that material
Steel Business
is moving on the most optimal network and mode (around
60% of tonne kilometers is covered through costly road
transportation). Investing in creating the nodes at the right
location and if required, teaming with integrated logistics
service providers (3PL/4PL) to help build the most optimal
infrastructure is likely to yield long-term results for the
steel industry. Enhanced usage of inland container depot
(ICDs), logistics parks, Free Trade Warehousing Zones (FTWZ),
etc., is also expected to help create a more robust and
economic network.
2) Improve the utilization of logistics assets – steel However, in the short term, India is a surplus producer of
companies should leverage existing assets for better iron ore and exports mainly comprise of fines, which are not
throughput. Improvements in maintenance and planning used much at present by the Indian steel industry. With the
typically result in better utilization. installation of pellet and sinter plants, Indian players can
look forward to adding more value domestically as pellets
3) Improve the efficiency of logistics operations – lower
and sinters bring significant premiums compared to fines.
turnaround times in the network lead to poor operational
Moreover, the conversion of iron ore fines at the mine head
efficiency, resulting in demurrages and detentions. Higher
arrests environmental pollution and waste.
visibility of information along the supply chain, improved
planning, and collaboration between various service providers
Sector-level strategy for sourcing raw materials
would improve the efficiency of logistics operations. Most of
the additional costs currently incurred by the steel industry can Indian players can attempt to develop sector-level alliances to
be attributed to inefficiency in logistics operations. increase buying power and exchange knowledge for mutual
benefit. China Iron & Steel Association (CISA), on behalf of
4) Optimize the logistics configurations between mines, China’s steel industry, has been negotiating raw material prices
plants, railways and ports – to achieve economies of scale, with global mining majors. India, which imports a large amount
mining and steel companies can work together to build of coking coal, can have a sector-level strategy in place for its
infrastructure assets. sourcing. Similarly, the consolidation of iron ore resources can
make sourcing easier and may bring down production costs.
Iron ore — assess, process and value-add
Although there has been considerable debate on iron ore New technologies offer cost reduction avenues
export versus retention for value-add, no policy framework The productivity of Indian steel majors has been low compared
has been developed for the long term. The Government and to global peers. New technologies may not only increase the
other stakeholders should conduct a comprehensive economic productivity of Indian companies, but they could help to reduce
impact assessment of ore exports versus steel production. raw material costs or even address constraints. For instance,
A strategic long-term view on the subject has to be formed, SAIL has entered into a joint venture with POSCO to use the
keeping in mind the relatively lower Reserve—to—Production FINEX technology at its Bokaro facility. In FINEX, molten iron
ratio of iron ore.
is produced directly using iron ore fines and non-coking coal, Increase in exploration and development activity
rather than processing through sintering and coke making, India has abundant natural resources but has not been able to
which is essential to traditional blast furnace methods. fully leverage these resources. With the future growth of the
The construction of a FINEX plant costs less than a blast steel industry dependent on the secure supply of resources,
furnace facility of the same scale. Furthermore, reduction in survey and exploration are important activities in the value
production costs is expected through cheaper raw materials chain. Exploration and survey activities in India are very
and lower facility costs, pollutant exhaustion, maintenance limited. The annual budget of the Geological Survey of India,
staff and production time. In addition, it is eco-friendly in that which is responsible for geological mapping and resource
it produces less pollutants such as sulphur dioxide, nitrogen assessment, was US$87 million. This is substantially lower
dioxide and carbon dioxide than the traditional methods of compared to other major steel-producing countries. Scientific
producing steel. exploration can help discover new reserves and mining
organizations can jointly work on mega projects to consolidate
Special steel production
mining areas for greater efficiency, reduced wastage and
The present product spectrum of major Indian steel producers risk minimization.
is tilted towards commodity steel but that is changing. The
value-added steel not only commands higher margins, Strategic focus on risk
but its demand is growing fast due to global automobile The steel sector is undergoing significant structural changes,
players aggressively expanding their presence in India. e.g., vertical integration by players, shifts in value creation
Indian steel majors are collaborating with foreign players to toward resources, cost curve changes. These changes
access advanced technologies in specialized steel. Several increase the need for agility, risk-reward ratios and rebalanced
partnerships are being announced between Japanese and expectations of return on capital expenditure. Steel
South Korean companies and Indian players. companies would be well advised to continuously refresh their
understanding of strategic risks and evaluate related
mitigation plans.
Business risks in mining and metals

These papers summarize the top mining and
metals business risks. In 2010, mining and metals
companies faced issues such as capital allocation,
skills shortage, cost management, resource
nationalism and maintaining a social license to
operate. To read more about the risks both above
and below the radar as well as other insights, you
can access them at ey.com/mining.
References
Global steel industry

• China Basic Materials Monthly - August 2010 - Stagnant Order, Credit Suisse, 11 August 2010, via Thomson Research
• Steel products update, CRISIL Research, October 2010
• Australian commodities, ABARE, September Quarter 2010
• Australian commodities, ABARE, June Quarter 2010
• China Steel - Release From The Iron Maiden, J P Morgan, 10 August 2010, via Thomson Research
• Nikhil Kumar, “Around the world, miners scramble for coal,” The Independent, 7 December 2010, via Dow Jones Factiva, © 2010 Independent &
Media PLC
• Steel - China/Taiwan - selectively positive, Nomura, 20 September 2010, via Thomson Research
• Russian steelmakers, Aton LLC, 25 October 2010, via Thomson Research
• “Vale’s mega ships to stall maritime recovery for years,” Reuters News, 10 December 2010, via Dow Jones Factiva, © 2010 Reuters Limited
• Steel - In winsome weather, ICICI Securities, 5 March 2010, via Thomson Research
• U.S. Geological Survey, Mineral Commodities Survey, Raw Materials Group, Stockholm, www.rmg.se, January 2010
• Sizing up India and China, IIFL, 1 November 2010, via Thomson Research
• “Worldsteel short range outlook,” World Steel Association website, http://www.worldsteel.org, accessed 5 December 2010
• “Steel Statistical Yearbook 2010,” World Steel Association website, http://www.worldsteel.org, accessed 5 December 2010
• “Crude Steel Statistics,” World Steel Association website, http://www.worldsteel.org, accessed 5 December 2010
• “Statistics archive,” World Steel Association website, http://www.worldsteel.org, accessed 5 December 2010
• World economic outlook: recovery, risk and rebalancing, International Monetary Fund, October 2010
• Global Metals and Mining Sector - Infrastructure is the key, Deutsche Bank, October 2010, via Thomson Research
• Millet Enriquez, “China expected to raise rates to fight inflation,” TODAY, 13 December 2010, via Dow Jones Factiva, © 2010. MediaCorp
Press Ltd.
• China Basic Materials Sector - 2010 Outlook - Moderating Growth, Credit Suisse, 05 January 2010, via Thomson Research
• “China sets 8% target for 2010 economic growth,” China Internet Information Center website, http://www.china.org.cn/2009-09/28/
content_18620394.htm, accessed 01 December 2010
• China Basic Materials Monthly - August 2010 - Stagnant Order, Credit Suisse, 26 August 2010, via Thomson Research
• Brazilian Steel Sector - Bitter Medicine: Downgrading USIMAS, Deutsche Bank, 06 October 2010, via Thomson Research
• Integration the lynchpin - Steel sector Report, PINC Research, 19 March 2010, via Thomson Research
• Gerdau, CSN & Usiminas - Steel Brazil, Espirito Santo Research Brazil, 31 August 2010, via Thomson Research
• Fabian Lugarini, Brazilian Steel And Iron Sector, EPSILON S.A, 24 December 2009, via Thomson Research
• “Brazilian Steel Industry,” Brazil Steel Institute website, http://www.acobrasil.org.br/site/english/biblioteca/publicacoes.asp, accessed
1 December 2010
• China Steel Report, No. 62,September 13–19, 2010, Metallurgical Industry Information Center, via ISI Emerging Markets, accessed
15 November 2010
• Industry profile - Metals & Mining in India, Datamonitor, October 2010, via Thomson Research
• Business risks facing mining and metals, Ernst & Young, 2010
• India Steel Sector - India - An outperformer in Steel, BNP Paribas Securities, 19 October 2010, via Thomson Research
• India Steel Update - Global Steel Capacity Utilization Rate, Deutsche Securities Asia Ltd., 21 September 2010, via Thomson Research
• Global Metals and Mining Sector - Infrastructure is the key, Deutsche Bank, October 2010, via Thomson Research
• Time to steel ahead, Ernst & Young, 2010
Indian steel industry
• ABARE Commodity statistics, September quarter 2010
• “Steel Statistical Yearbook 2010,” World Steel Association website, http://www.worldsteel.org, accessed 5 December 2010
• “Annual report 2009–10,” Ministry of Steel (Government of India) website, http://steel.nic.in/Annual%20Report%20(2009-10)/English/Annual%20
Report%20(2009-10).pdf, accessed on 5 December 2010
• Neha Kapur, Indian Economy: Update, August 2010, Ernst & Young
• Steel products annual review, CRISIL Research, July 2009
• Juggernaut is starting to roll...with a few links missing, India: Construction: Infrastructure, Goldman Sachs, 11 October 2010 via
Thomson Research
• India Steel Sector – India - An outperformer in Steel, BNP Paribas Securities, 19 October 2010, via Thomson Research
• India Equity Research - Metals, Avendus, 01 September 2010, via Thomson Research
• Logistics: Container Rail Thrive(al) of the fittest, SSKI India, December 2009, via Thomson Research
• Steel - India - At the crossroads, Nomura International (Hong Kong)Ltd, 05 October 2010, via Thomson Research
• Shipping Industry Report, ICICI Direct, 30 September 2010, via Thomson Research
• India Transportation: Sea And Land Cargo - Let The Rough, Nomura International (Hong Kong) Ltd, 18 February 2009, via Thomson Research
• India Steel Sector - India - An outperformer in Steel, BNP Paribas Securities, 19 October 2010, via Thomson Research
• Steel products update, CRISIL Research, June 2010
• Tata Steel 2010 annual report
• JSW Steel 2010 annual report
• “Performance Highlights for H1FY11 and Q2FY11,” Steel Authority of India Ltd. website, http://www.sail.co.in/pdf/H1%20FY2011.pdf, accessed
10 December 2010
• “Report of the Working Group on Steel Industry for the Eleventh Five - Year Plan (2007–2012),” Planning commission website, www.
planningcommission.gov.in/aboutus/committee/wrkgrp11/wg11_steel.pdf, Government of India, 04 December 2010
• Indian Steel Industry - Fy13e Opportunity/Dilemma, Even As, JP Morgan, 15 January 2010, via Thomson Research
• India Steel - More Positives Than Negatives, Morgan Stanley, 13 January 2010, via Thomson Research
• Chapter 12, Development of Infrastructure, Eleventh Five-Year plan, Planning Commission, Government of India
• Coal industry annual review, CRISIL Research, November 2009
• Sun rises in the East, Ernst & Young, 2010
• ‘Red herring prospectus - Coal India,” SEBI website, http://www.sebi.gov.in/, accessed 02 December, 2010
• Sector: Metal & Mining Food For Thought - FRA to hamper capacity expansion, First Global Stockbroking Pvt Ltd, 17 August 2010, via
Thomson Research
More ways to stay connected
to Ernst & Young
Services for you ... Assurance, Tax, Transactions,

Advisory
Through these services, we can help you retain the
confidence of investors, manage your risk,
strengthen your controls and achieve your potential.
Read more on www.ey.com/services
Sector knowledge ... Center of excellence for key sectors

We have experienced teams that bring sector
knowledge to you.
Read more on www.ey.com/industries
Subscribe to our ... Publications — easy to use

subscription form
www.ey.com/subscription-form
Webcasts and podcasts

http://webcast.ey.com/thoughtcenter/
The choice is yours!

Go to www.ey.com/india
Have questions about a specific Ernst & Young service?

Whatever your inquiry, we’ll help direct you to the right place.
www.ey.com
Notes
Ernst & Young Ernst & Young’s Global Mining & Metals Center
Assurance | Tax | Transactions | Advisory With a strong outlook in the sector, the global mining
and metals industry is focused on future growth
through expanded production, without losing sight
About Ernst & Young of operational efficiency and cost optimization. The
sector is also faced with the increased challenge of
Ernst & Young is a global leader in assurance, tax,
changing expectations in the maintenance of its
transaction and advisory services. Worldwide, our
social license to operate and meeting government
141,000 people are united by our shared values
revenue expectations.
and an unwavering commitment to quality. We
make a difference by helping our people, our clients Ernst & Young’s Global Mining & Metals Center brings
and our wider communities achieve their potential. together a worldwide team of professionals to help you
Ernst & Young refers to the global organization of achieve your potential – a team with deep technical
member firms of Ernst & Young Global Limited, experience in providing assurance, tax, transactions
each of which is a separate legal entity. and advisory services to the mining and metals sector.
Ernst & Young Global Limited, a UK company The Center is where people and ideas come together
limited by guarantee, does not provide services to help mining and metals companies meet the issues
to clients. For more information about our of today and anticipate those of tomorrow. Ultimately
organization, please visit www.ey.com. it enables us to help you meet your goals and
compete more effectively. It’s how Ernst & Young
© 2011 EYGM Limited. makes a difference.
All Rights Reserved.
EYG No. ER0021

In line with Ernst & Young’s commitment to minimize
50% its impact on the environment, this document has been
printed on paper with a high recycled content.
This publication contains information in summary form and is

therefore intended for general guidance only. It is not intended to
be a substitute for detailed research or the exercise of professional
judgment. Neither EYGM Limited nor any other member of the global
Ernst & Young organization can accept any responsibility for loss
occasioned to any person acting or refraining from action as a result
of any material in this publication. On any specific matter, reference
should be made to the appropriate advisor.
The views of third parties set out in this publication are not
necessarily the views of the global Ernst & Young organization or its
member firms. Moreover, the views should be seen in the context of
the time they were expressed.
www.ey.com/miningmetals
Artwork by Jayanta Ghosh
Global Mining & Metals Leader Europe, Middle East, India India Argentina
Mike Elliott and Africa Leader Anjani Agrawal Pablo Decundo
Ernst & Young, Australia Michael Lynch-Bell Ernst & Young, India Ernst & Young, Argentina
Tel: +61 2 9248 4588 Ernst & Young, UK Tel: +91 982 061 4141 Tel: +54 11 4515 2684
michael.elliott@au.ey.com Tel: +44 20 7951 3064 anjani.agrawal@in.ey.com pablo.decundo@ar.ey.com
mlynchbell@uk.ey.com
Oceania Americas and US Leader Colombia
Scott Grimley Africa Andy Miller Joss McGregor
Ernst & Young, Australia Adrian Macartney Ernst & Young, US Ernst & Young, Colombia
Tel: +61 8 9429 2265 Ernst & Young, South Africa Tel: +1 314 290 1205 Tel: +57 1 484 7120
scott.grimley@au.ey.com Tel: +27 11 772 3052 andy.miller@ey.com joss.mcgregor@co.ey.com
adrian.macartney@za.ey.com
China Canada Chile
Peter Markey Commonwealth of Tom Whelan Alicia Dominguez
Ernst & Young, China Independent States Ernst & Young, Canada Ernst & Young, Chile
Tel: +86 21 2228 2616 Evgeni Khrustalev Tel: +1 604 891 8381 Tel: +56 2 676 1207
peter.markey@cn.ey.com Ernst & Young, Russia tom.s.whelan@ca.ey.com alicia.dominguez@cl.ey.com
Tel: +7 495 648 9624
Japan evgeni.khrustalev@ru.ey.com South America and Brazil Leader Mexico
Kentaro Nakamichi Carlos Assis Mario Arregoytia García
Ernst & Young, Japan France and Luxemburg Ernst & Young, Brazil Ernst & Young, Mexico
Tel: + 81 3 5401 6407 Christian Mion Tel: +55 21 2109 1606 Tel: + +52 55 1101 6451
kentaro.nakamichi@jp.ey.com Ernst & Young, France carlos.assis@br.ey.com mario.arregoytia@mx.ey.com
Tel: +224 30 41 21 82
christian.mion@fr.ey.com Peru
Marco Antonio Zaldivar
Ernst & Young, Peru
Tel: +5711 411 4450
marco-antonio.zaldivar@pe.ey.com

Global Steel 2011

Загружено:

Сведения о документе

Исходное описание:

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Global Steel 2011

Загружено:

Авторское право:

Доступные форматы

Global steel 2011

Paving the boulevard of the great Indian steel dream

Arun Kumar Jagatramka Neil J Bristow

Strategic accelerants to achieve Indian steel dream

A significant change to raw material contracts — from annual

Global crude steel consumption

1,000 production enjoyed a robust CAGR of 7% to reach

Crude steel capacity World ex BRIC China India

Source: World Steel Association (1980-2009A), Ernst & Young estimates

Steelmaker’s response — what have they been doing in 2010?

Figure 7. Global monthly steel production and price trends

120 700 HRC price (US$ per tonne)

Crude steel production HRC price

800 behind the growth in both steel production and demand.

World steel production (ex China)

Source: ABARE, Ernst & Young analysis, September 2010

Figure 9. Steel production by country

Brazil, 2% Russia, 5% India, 5%

Source: World Steel Association, Ernst & Young analysis

China is also seeking to consolidate its steel industry —

Monthly crude steel production growth in China saw a 600 30

The Chinese Government has, however, made a decision to 0 0

consolidate the highly fragmented steel industry and thereby

Year on year change FY09/FY08

in the world’s largest iron ore carriers (400,000 tonnes) or so 30

market where costs are increasing. As a result, Brazilian 12,000

Domestic sales (% of total output) Exports (% of total output)

Source: Russian steel, ING, October 2010, via Thomson Research

Different approaches for different markets

Table 1: Strategies for different markets

Developed markets Emerging markets

Figure 18. 2008–09 iron ore production and reserves

industries, the steel industry triggers growth across several

Steel Association, the monthly average production of crude

steel up to November 2010 stood at 5.5 million tonnes which, 10

Figure 22. The state of India’s competitive steel environment

New entrants—low to moderate

► Limited number of new players as

Suppliers—moderate to high Internal competition—low Customers—low to moderate

► Steel industry faces a threat from

Source: Ernst & Young analysis

Figure 23. Steel consumption

Source: Juggernaut is starting to roll...with a few links missing, India:

Table 3. Opportunities across the infrastructure sector

Both generation and transmission capacities being enhanced significantly

Outlook for domestic steel demand

Figure 26. Estimated growth in steel demand

2009–10F 2010–11F 2011–12F

Source: Steel Products update, CRISIL Research, June 2010

Source: Sizing up India and China, IIFL, 1 November 2010, via 20

Lending (% of total lending)

Figure 28. Infrastructure spend 0

9 Source: Juggernaut is starting to roll...with a few links missing,

240 226.0 54%

Demand of coking coal Production

Source: Coal industry annual review, CRISIL Research, November 2009

Crude steel capacity 2007 2008 2009 2010 2013F 2015F

International steel majors are expanding their Challenges and issues

Complicated regulatory regime

infrastructure areas such as railways, roads and ports. 900

Air Sea Road Railways

Source: Logistics: Container Rail-Thrive (al) of the ﬁttest, IDFC Securities,

Business risks in mining and metals