Indian metal sector-_futuristic_perspective

Presentation by Ram Prasad Presentation by Ram Prasad 01/08/2007

ramprasad2020@yahoo.com

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Indian Metals Market- Overview� Key sector – vital to Indian Economy meets wide range of

industries- Engineering, Infrastructure, Electrical and Automobile …

� Metal Industry can be classified under- Ferrous/ Non-� Metal Industry can be classified under- Ferrous/ Non-Ferrous Metals.

� Ferrous Metals – mainly consists of – Iron/ Steel – Indian Steel Industry Story is much of the global headlines- eg: Mittal’s acquisition of Arecelor, France….

� Steel Industry accounts for close to 2% Indian GDP and brings in excess of 10% of revenues through- Excise Duty and employs more than 1 million directly and indirectly.

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Indian Metals Market- Overview� Non- Ferrous Metals- Copper/Aluminium / Zinc/

Lead/ Tin/ used for making alloys, castings, forgings & extrusions …

� Non Ferrous Metals – used widely in agriculture/ � Non Ferrous Metals – used widely in agriculture/ infrastructure/ power plants/ railways/ telecommunications/ core sector…

� Industry is highly fragmented- organized/ unorganized across ferrous and non- ferrous groups.

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Industry Dynamics� Indian Ferrous industry- comprises of- Miners &

Producers- engaged in mining & extracting activities� Indian iron ore mines are seen across- Jharkhand/ Orissa/

West Bengal/ Karnataka/Chattisgarh� Producers – are classified - Integrated Steel Producers ( � Producers – are classified - Integrated Steel Producers (

ISS)and Secondary Producers. Integrated Steel Producers-Tata Steel/ SAIL/

� ISS occupies close to two thirds of Indian Crude Steel Producing…

� Secondary Producers- forms the other one- third of the steel production, but they are under both organized and un organized segments.

� Greater fragmentation, greater the competition.

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Drivers & Trends� Steel Sector� Significance- India’s steel industry is significant, even

by global standards. With an installed capacity of 36.12 million tones, India is the eighth largest steel producer million tones, India is the eighth largest steel producer in the world.

� The industry has presence across all sectors – ore miners, integrated producers and other producers

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Drivers & Trends� Ore Miners- Mining companies are engaged in mining

iron ore , key players – NMDC/ KIOSL/ Sesa Goa� Main Producers- can be classified based on – Production

Process/ Types of Products manufactured by the producers.producers.

� Production Process- producers use three types of processes for converting iron ore into steel to coke oven- BF/ BOF route/ electric arc furnace ( EAF rout.e) or corex process

� Product based Manufacturing- Products-Long Products / Flat Products

� Long Products- bars, structural products, wire rods, angles, rounds – Mainly used in Construction/ Infrastructure industry.

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Drivers & Trends� Flat Products- includes the famous- HRC Coils ( Hot

Rolled Coil Sheets)/ CRC- Cold Rolled Coil Sheets…� Long Products Players- RINL SAIL/ Tata Steel/� Flat Products- Ispat/ Jindal / Bhushan Steel- widely � Flat Products- Ispat/ Jindal / Bhushan Steel- widely

used in white goods/ automobile sector/ fabrications/ ducts / roofing/

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Drivers & Trends Drivers & Trends-Metals- Aluminium� Aluminium – India accounts for nearly 10 per cent of the

world’s bauxite reserves. � Domestic Demand is expected to grow annually – CAGR 8-

10 per cent in 2005- 06 and by 2020, India is expected to have an installed aluminium capacity of 1.7 to 2 million have an installed aluminium capacity of 1.7 to 2 million tones per annum.

� The primary market for aluminium in India is the power sector,which consumes about 35 per cent of the domestic

production.� Key Drivers- The ongoing reforms in the power sector and

focus on improving power infrastructure, is expected to further boost the aluminium sector in India.

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Drivers & Trends- Metals- Copper� Copper- One of the key sector impacting the Indian

economy.� Utilities- Telecom/ Power/ Construction/

Engineering/ Consumer Durables.Engineering/ Consumer Durables.� According to Ministry of Steels, GOI, the installed

capacity in 2003-4 is 477,500 vs. domestic demand about 290,000 tones. Nearly 40% of copper is exported.

� Potential for Huge Demand- across ASEAN regions/ South Asia/ SL etc

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Drivers & Trends- Metals- Copper� Major Players- Sterlite/ Hindustan Copper Limited/

Hindalco/ � Three major players control more than 85% of market

share, while the rest is controlled by small scale industries who are primarily converting scrap into ingots. who are primarily converting scrap into ingots.

� Products- Copper bars/ rods/ wires…� Correlation Effect- Highly dependent on- Telecom/ Power

sector � Growth- CAGR of 5-6% is growth witnessed for last 20

years, with Indian economy peaking around 7-8% GDP for most of 2004-7, the outlook for copper is positive.

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Drivers & Trends- Metals- Zinc� Key Players- Hindustan Zinc Ltd, part of Sterlite

Group.� Domestic Demand- 400,000 tones per annum, annual

CAGR of 5-6% on Y- Y basis. CAGR of 5-6% on Y- Y basis. � Domestic Markets- Zinc is predominantly used in

Steel Industry for galvanizing, die-casting, guard rails used in railways

� Key Driver- Continuing demands from Construction industry- creates multiplier effects for steel& zinc products…

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Drivers & Trends- Exports� India – net exporter of steel around $3.3 billion, in 2006-07. � Major areas of export-

China- 24% US- 8%US- 8%UAE- 5%Thailand- 5%Italy – 4%Iran – 4%

Indian exports consists mainly carbon steel which accounts for 95% of steel exports, rest being the pig iron.

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Drivers & Trends- Imports� Major steel import destinations are- BRICS /

Germany/ Korea/ � In non-ferrous metals, India is net exporter of

copper and net importer of zinccopper and net importer of zinc� Opportunity- Given the surplus production of metals

and requirements in other markets gives greater opportunity for growth in exports for Indian metals

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Business Confidence – Metal Sector� FDI continued to get attracted in metallurgical sector

since, 1991. � During the phase of 1991-2005 phase- FDI in

metallurgical sector accounted to - $4.5bnmetallurgical sector accounted to - $4.5bn

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Competitive Index� Indian competitive index is illustrated by Michael

Porter’s Competitive Analysis:

India’s cheaper workforce and skilled workforce is

advantageous to create low-cost production bases for both local & international

markets

• Liberal policy regime• Foreign equity is allowed

100% in FDI under automatic conditions

• India’s cheaper labor market backed with skilled workforce are advantages for setting up- low cost production domestic bases for local and international markets.

Firm strategy/ structure

Factor Conditions

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• Users- constructions/ automobile/ engineering/

• Highly demanding consumers

• Demand and industry growth high correlation

• Matured industry

Demand Conditions

Related & Supporting Industries

Michael PorterCompetitive Index� India growth oriented market � Favorable conditions for production� Support from allied industries

Government- Policy enabling climate for Metal � Government- Policy enabling climate for Metal industry.

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Key Players � Hindustan Copper Ltd- PSU- Exploration – Mining-

Smelting- Plants at- Rajasthan/ Jharkhand� Ispat Industries- sponge iron- HCR- Plants at-

KalmeshwarKalmeshwar� SAIL- manufactures steel for domestic consumption,

Plants- Salem/ Badravathi/ Rourkela

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Future Perfect� Future outlook - Metals sector in India is shining bright� Indian Economy poised to grow at 8-10%GDP for next 20

years, the demand is very clearly defined- increased infrastructure- construction- engineering – automobile infrastructure- construction- engineering – automobile sector headed for bullish phase- young demographics-higher potential to spend and consumption

� Greater shortages in worldwide copper supplies are expected to continue due to production cuts by leading producers in Mexico and Chile.

� Opportunity Management- Utilizing the demand and production cuts in Mexico/ Chile, augurs well for Indian Metal industry in the near and long term.

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Thank You� Ram PrasadF 21 Meenakshi ResidencyArekere, Baneerghata RoadBangalore 560076Bangalore 560076ramprasad2020@yahoo.com

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