Indian Ferro Alloys Industry - The challenges ahead

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Indian Ferro Alloys Industry - The challenges
ahead Mr P Roy Mr Gautam Kumar Ferro Alloys
Minerals,Tata Steel
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Indian Ferro alloy Industry Status

• Existing Capacity
• No. of Units 105
• Total capacity 1300 MVA 1.64 Million Tonnes
• Working Capacity
• 51 Units
• 1.03 Million Tonnes
• Capacity Utilisation 62
• Product range
• Manganese Alloys(50), Chrome Alloys(35), Ferro
  Silicon(9) and Noble Alloys (6)

as of 2002-03
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Production Trend of Ferro Alloys in India
000 MT
Riding on strong growth for steel demand, Ferro
Alloys sector posted good growth in 2002-03
2003-04 and the trend is expected to continue in
2004-05. The Capacity utilisation has reached
approx. 80 as of now
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Demand Drivers for Ferro Alloys

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

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World Crude Steel Production
Million Tonnes
CAGR 1.6
CAGR 8.8
Source World Steel Dynamics
From 1990-2002, world production growth averaged
1.6 a year without China, it would have not
grown at all
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The Three Growth Phases the Steel
Snake(inverted S-Curve)
Source Macquarie Research.
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Crude Steel Output Forecast
Million Metric Tonnes
CAGR 2003-10 China 6.9 World 3.1
Source WSD
Steel Production to be fuelled by Chinas growth
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Indian Crude Steel Production Forecast
Milllion Metric Tonnes
CAGR 6.2
India not to lag behind in Crude Steel Production
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Global Stainless Steel Production
000 MT
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Indian Mn Alloys Production Exports
000 MT
SourceIFAPA
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Indian Cr Alloys Production Exports
000 MT
SourceIFAPA
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Indian Ferro Alloy Production Trends Contd.
000 MT
SourceIFAPA
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Unit Consumption of Manganese (Kg/t of Steel)
Unit Mn Consumption in Crude Steel to decrease
world-wide
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Mn Alloys Demand Forecast
Thousand MT
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Mn Alloys Consumption Trends Forecast for India
Thousand MT
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Price Trends of Mn Alloys ( US /t)
US Warehouse
Source MBR
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• India is poised to grow in the Ferro Alloys
  production in line with the increased Crude Steel
  production
• Chinese FA Producers to focus on the needs of
  domestic demand
• Export Potential for Indian FA Producers

• However, Indian Ferro Alloys Business has to
  overcome few challenges to grab those
  opportunities fully.

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Indian Ferro Alloy Industry The Challenges

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

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Power Cost

• Power tariff in India is 3-5 times higher than
  that in the competing countries
• Hence, globally Ferro Alloys production is
  situated geographically in cheaper power locations

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Power Tariff India Vs Other Countries
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Power Cost

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

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Raw materials

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

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

• Coke is most widely used reductant in Ferro
  Alloys production. Ferro Alloys consume roughly
  0.6-0.7 tonnes of reductant per tonne of
  production
• Coal Coke of Indian Origin suffers from high
  ash and volatile matter content
• Due to non-availability of Low Ash Low Phos Met.
  Coke, Indian Ferro Alloy Industry depends on
  imports
• Stricter environmental controls in many countries
  have also put merchant coke batteries under
  long-term threat of closure.
• Increase demand for Coke in China and curtailment
  of Coke exports

High and rising coke costs globally
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Reductants Contd.
Price Trend of ULP Coke (FOB US /t China)
Source Resource Net
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Reductants

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

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Logistics Cost

• The industry produces around 1.6 Million Tonnes
  of ferro alloys annually. Nearly 2.5-3 tonnes of
  such raw materials have to be moved by railway
  wagons for one tonne of ferro alloy
• The industry has been experiencing shortage of
  wagons for procuring raw materials
• Freight element is very high, thus reducing the
  competitiveness of the industry
• Poor Infrastructure facilities at Port also
  leading to berthing delays for ships longer
  loading time

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Economies of Scale

• Though labour costs are a small percentage in
  Ferro Alloy cost of production, the impact still
  varies from region to region.

• Indian FA Plants suffer from Economies of scale
  and low automation levels

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Overall Assessment
Scale Lowest 1
Power is available at global tariffs, India can
match the African Countries!
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How to Overcome the Challenges

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

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How to Overcome the Challenges

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

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Indian Ferro Alloy Industry The Way Ahead

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

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Thank You