Metals & Minerals ? India Sector Report Metals & Minerals Industry India Produced by: Sudipto Sen, Senior Trade & Investment Adviser, British Deputy High Commission, Kolkata Last revised October 2009 Whereas every effort has been made to ensure that the information given herein is accurate, UK Trade & Investment or its sponsoring Departments, the Department of Business, Innovation and Skills, and Foreign & Commonwealth Office, accept no responsibility for any errors, omissions or misleading statements in that information and no warranty is given or responsibility is accepted as to the standing of any firm, company or individual mentioned. Published October 2009 by UK Trade & Investment. Crown Copyright © www.uktradeinvest.gov.uk Metals & Minerals Industry ? India Table of Contents OVERVIEW 3 OPPORTUNITIES CHARACTERISTICS OF MARKET 4 KEY METHODS OF DOING BUSINESS 8 MORE DETAILED SECTOR REPORTS PUBLICATIONS 9 EVENTS 10 CONTACT LISTS 11 www.uktradeinvest.gov.uk Page 2 of 11 Metals & Minerals Industry ? India OVERVIEW The global downturn adversely impacted the steel industry worldwide, which experienced huge swings in its fortunes last year. The demand as well as international prices of steel and raw materials reached a historic high during the first half of 2008, followed by a sharp dip in steel prices from October 2008 onwards, as demand shrunk under the impact of global slowdown. The steel industry in India reflected the global trends. Prices that had firmed up in the first half of 2008-09 dropped sharply from October 2008. There was a sharp drop in the off take of steel as end user industries deferred purchases in anticipation of lower prices, and some of the large infrastructure projects were progressing slowly. Despite this falling demand, the Indian steel industry ended the year 2008-09 on a positive note with crude steel production at 55.2 million tonnes (up from 53.1 million tonnes in 2007-08) and per capita consumption at 44.3 kg (up from 42.4kg). Indian Steel Industry has entered into a new development stage from 2005-06, and India is th currently the 5 largest producer of steel globally. As reported by World Steel Dynamics, the Indian steel industry has entered a period of massive growth not only in steel demand but also in steel making capacities. According to the World Steel Association, global crude steel production reached 106.5 million metric tons in August 2009 which is 5.5 percent lower than August 2008. However, production has been steadily increasing since April 2009 when 89 million metric tons were produced. As per the recent report from Barclays Capital, China and India will provide the impetus for steel demand in the next few years and with significant excess capacity in the global steel industry during 2009, there is a threat of dumping cheap steel to India. This Sector Report focuses on the Metals and Minerals sector. You will find reports on the other key areas of the Indian engineering industries, Machine Tools and Mining industries at the India country page on the UKTI website. OPPORTUNITIES In the steel sector, with a number of greenfield projects and brownfield expansions coming up, there will be opportunities for supply of equipment and technology in all areas of the steel value chain: iron ore mining, mineral processing and beneficiation, blast furnace ? design, capacity enhancements and retrofitting, steel making and continuous casting (slab/billet) facilities, and other hot and cold rolling operations. Aside core iron and steel making technologies, there is an increasing demand for advanced process control and automation systems, energy optimising processes, high quality refractory materials, and environment management technologies. On the raw material side, there is a growing demand for low ash metallurgical coal (as India does not have adequate metallurgical coal reserves) and various grades of steel scrap such as HMS1 & 2 and shredded scarp (mostly for secondary steel producers). India will continue to import large quantities of specialised finished steel products e.g. razor blade strips, high-tensile and special alloy steel rolled sections and plates, tool steels, cold-rolled grain-oriented and non-grain oriented (CRGO/CRNO) steels, high-pressure seamless-steel pipes for oil and gas industries, and corrosion-resistant steel sections for off-shore drilling rigs. www.uktradeinvest.gov.uk Page 3 of 11 Metals & Minerals Industry ? India In the aluminium sector, major opportunities exist in the areas of mining (equipment), smelting and refining operations (furnace technologies, refractory materials and instrumentation & process control), and power plant operations (coal mining and washing, retrofitting of boilers and turbines, ash handling and utilisation). Many UK exporters are active in the Indian metals and minerals sector. Siemens VAI (UK) has recently won a number of large contracts to supply engineering and design services, and a range of critical equipment for blast furnaces to a number of large steel projects. UKTI publishes international business opportunities gathered by our network of British Embassies, High Commissions and Consulates worldwide. These opportunities appear in the Opportunities portlet on the relevant sector and country pages on the UKTI website. By setting up a profile you can be alerted by email when relevant new opportunities are published. New or updated alert profiles can be set in My Account on the website. CHARACTERISTICS OF MARKET Steel Brief Overview India accounts for a little over 7 per cent of the world?s steel production and is the only country in the world to show positive growth during the period January - March 2009. The steel sector grew by 5.3 per cent in May 2009 due to the demand from sectors like infrastructure, construction, automotive, power, steel tubes and pipes, consumer durables and packaging. Specialised steel are increasingly used in hi tech engineering industries like power generation, petrochemicals and fertilisers. The new airports and metro railway projects are also expected to create a large demand for stainless steel. India being already an international hub for auto components, production of value added products like auto grade steel, ductile iron pipes, API Grade steels for oil and gas sectors, have increased immensely. According to an estimate, with the growing need for oil and gas transportation infrastructure, £60 billion worth of opportunity is to be tapped by steel manufacturers in the coming five years. Special quality plates and hot rolled coils used for making pipes top the list of imports. The scope for raising the total consumption of steel in India is huge, as the per capita steel consumption is only 44 kgs compared to 150 kg in the world and 250 kg in China. The current FY is witnessing healthy revival of steel demand. Since April 2009, the demand for steel in India is growing at 6.6 per cent while the production is growing at 2.7 per cent. The industry experts feel that with the prospects of GDP growth bouncing back to about 9 per cent within the next few years, the steel demand is likely to start growing at around 10 per cent. To meet the growing demand, India will have to achieve steel production capacity of 124 million tonnes by 2012 and about 150 million tonnes by 2015. The substantial part of the new capacity would come from existing players through brownfield expansion while the rest would be from greenfield projects, scheduled to come up by 2014-15. The capacity expansion plans by major steel makers in India have created a range of opportunities for equipment suppliers, technology transfer, potential investors and consulting companies. Raw Materials The National Mineral Policy 2008 talks about mining legislation for streamlining and simplifying the procedures for grant of mineral concessions to reduce delays, strengthening the infrastructure for mining activities and other recommendations for improving the environment www.uktradeinvest.gov.uk Page 4 of 11 Metals & Minerals Industry ? India for investment in the mining sector. This also contains provision of clearance of proposal to shift royalty rates of iron ore from the present specific duty to ad valorem rates at 10 per cent of the sale price, which will directly effect an increase in production cost. The price of iron ore and coking coal two key inputs for steel industry came down significantly in the latter part of 2008.The annual benchmarking rates in 2009 for iron ore and coking coal are expected to be settled at a significantly lower level. The Indian Steel Ministry (www.steel.nic.in) has proposed ad valorem export duty on chrome ore fearing fast depletion due to phenomenal rise in exports. The government has abolished import duties on metallurgical coke and ferro alloys from 5 per cent earlier. With regard to coking coal, Indian steel manufacturers are dependent on external sources where prices are expected to go up higher. Hence, newer technologies are being sought to make the indigenous coal suitable for use in steel mills will reduce the dependence on imported coking coal. To address the situation owing to limited availability of coking coal, India?s two major steel producers, Steel Authority of India Limited (SAIL) & Tata Steel have signed an agreement to establish a 50:50 JV company for coal mining in India. The JVC would identify, acquire and develop coal blocks in India. The agreement would facilitate the expansion plans drawn by both. Expansion Plans of Indian Steel Producers All major steel companies have planned phase wise expansion of their capacities. Steel Authority of India Limited (SAIL) (www.sail.co.in) will increase its total installed capacity from 14.6 million tonnes to 24 million tonnes by 2011-12, and to 60 million tonnes by 2020 with an investment of approximately £ 6.5 Billion. Tata Steel (www.tatasteel.com), the world's sixth largest steel maker in terms of actual crude steel production, plans to double its capacity by 2015, by adding another 35 MT capacity both in greenfield and brownfield projects. Non-ferrous metals giant Vedanta Resources (www.vedantaresources.com) is reportedly planning to enter the Indian steel sector with a 5 million tonne plant at an investment of about in Orissa. Mineral rich states of Eastern India like Orissa, Jharkhand, Chhattisgarh have already signed MOU?s with prominent Indian steel producers including Jindal Steel & Power, Jindal Stainless, Jindal South West, Essar Steel, and Bhushan Steel who are planning to invest in steel making facilities in these states. Entry of Overseas Steel Producers A number of overseas steel producers have planned large investments in the Indian steel sector. Both Areclor-Mittal and Posco have large investment plans in the steel sector in India. Posco is planning to set up a 12 million tonnes steel plant in Paradip in Orissa at an estimated investment of $12bn. Arcelor-Mittal announced plans to set up two integrated steel plants, 12 million tonnes each in Orissa and Jharkhand. UK-based speciality steel and engineering group, Caparo's new facilities are coming up in Chennai, Pitampur, Bawal, Noida and Gurgaon. Japan?s fourth largest steel producer, Kobe Steel is reportedly, in discussion with the Chowgule Group in Goa to set up an ?iron nugget? plant in India. Iron nuggets are produced from iron ore www.uktradeinvest.gov.uk Page 5 of 11 Metals & Minerals Industry ? India fines and pulverised coal through a process, patented by Kobe Steel, and can be used as a raw material in electric arc furnaces to produce steel. They have also set up a subsidiary in Kolkata to market its steel production machinery in India. Acerinox SA, the world?s second largest stainless steel manufacturer is reportedly joining hands with Nisshin Steel, Japan to build a steel plant in India. Sinosteel, a Chinese mineral trading company, reportedly, plans to invest $4bn to build a steel plant in Jharkhand. China?s Xindia Steels is reportedly investing in an iron ore pellet plant in Karnataka. Kolkata based Visa Steel Ltd, an emerging integrated special and stainless steel player has entered into a JV with Baosteel of China to set up a 1,00,000 tonnes per annum ferro chrome plant in Orissa. A substantial part of the production is likely to be exported to China, where Baosteel is the largest steel company with annual capacity of 24 Million tonnes. UK Based world?s largest independent steel trader Stemcor is building a 4 million tonne iron ore pellet plant in Orissa. Overseas Acquisitions by Indian companies Tata Steel has made a number of acquisitions in the last five years. After acquiring Nat Steel in Singapore (2 million tonnes per annum) and Millennium Steel Company (now Tata Steel Thailand, 1.7 million tonnes per year), Tata Steel took over the Anglo-Dutch steel major, Corus in February 2007. The US$12.9 billion acquisition of Corus makes Tata Steel the world's sixth largest steel maker, adding 19 million tonnes of steel making capacity. Tata Steel aims to become the second largest steel producer in the world by 2012, by achieving a total capacity of over 50 million tonnes per annum. Tata Steel is also planning to work with Vietnam Steel Corporation for developing a 4.5 million tonnes steel project in Vietnam. The country's fourth largest steel maker, Essar Steel (www.essar.com) will partner two state run Vietnamese companies to build a US$ 527 million plant in Vietnam. The company has a 0.4 million tonnes production facility in Indonesia, apart from the 4.6 million tonnes plant in India. The Essar Group acquired Canada?s Algoma Steel and US-based Minnesota Steel in the past. Jindal Stainless (www.jindalstainless.com) acquired a stainless rolling plant from PT Mapison Stainless Steel Indonesia in 2004. Reportedly, they are close to picking up a stake in Thailand's one of large stainless steel producing companies. JSW Steel (www.jsw.in), India?s third largest steel producer acquired Argent Independent Steel, UK in April 2007, and has further plans to acquire service centres across Europe, where value added products will be processed to customer needs. JSW Steel has acquired Jindal United Steel Corporation, Saw Pipes USA and Jindal Enterprises LLC at Baytown, Texas, for US$ 940 million. Usha Martin manufacturer of wire and wire ropes acquired a Netherlands based distribution company to expand in Europe. The company?s wholly owned subsidiary in the UK-Usha Martin International ? has acquired the business of De Ruiter Staalkabel a firm incorporated in the Netherlands. The company has also planned to double its production capacity of steel from 3,50,000 tonnes to 7,00,000 tonnes by 2009-10. Besides steel producing facilities, Indian companies are also acquiring overseas mines and mining companies to ensure long-term raw material supply. Tata Steel signed a Joint venture with Riversdale in November 2007 to acquire 35% of Riversdale?s Benga and Tete Licenses for Australian $ 100 Million to develop a hard coking coal and thermal coal project at key coal www.uktradeinvest.gov.uk Page 6 of 11 Metals & Minerals Industry ? India tenements held by Riversdale in Mozambique. In 2008, Tata Steel entered into a joint venture with Al Bahja Group in the Sultanate of Oman for development of Uyun Limestone at Salalah .The company plans to invest around £ 75 Million for development of mines. Jindal Steel & Power Ltd (www.jspl.com) entered into an agreement with the Bolivian Government to develop the El Mutun iron-ore deposit in Bolivia, at an investment of US$2.1 billion. The deal will give JSPL rights to exploit half of the reserve for 40 years, and the company plans to export about 10 million tonnes of iron ore from Bolivia on completion of this mine development project. Besides the iron ore mine, JSPL will set up steel making facility and a 450 MW gas fired power plant in Bolivia. Aluminium Brief Overview Following six years of strong growth in aluminium, led by a strong Chinese demand, the growth in demand for aluminium in 2008 was barely positive. Global aluminium consumption was 38.2 million tonnes in 2008, and is expected to decrease 3.4 per cent to 36.9 million tonnes in 2009. India has the fifth largest bauxite reserves in the world, with deposits of about 3 billion tonnes or nearly 5 per cent of the world deposits of bauxite. India produces about 0.88 million tonnes of aluminium per year, constituting about 3 per cent of the world aluminium production. By 2020, India is expected to have an installed aluminium capacity of 1.7-2 million tonnes per annum. India's annual consumption of aluminium is approximately 800,000 tonne. This is expected to grow at 10 per cent per annum in the next 3-4 years. India?s per capita consumption of aluminium is approximately 1kg compared to 3-4 kg in developed countries. India's annual export of aluminium is about 82,000 tonne, which makes it a net exporter of aluminium. The main growth drivers for the aluminium industry in India are the automotive, consumer durables, construction and power sectors. The ongoing reforms in the power sector and focus on improving power infrastructure, is expected to further boost the aluminium sector in India. Following a consolidation, the Indian aluminium industry has three major players: Hindalco Industries (www.hindalco.com) belonging to the Aditya Birla Group, Sterlite Industries (www.sterlite-industries.com) (mainly comprising Bharat Aluminium Company Limited (BALCO) and the Madras Aluminium Company Limited) of the Vedanta Group, and the Government owned, National Aluminium Company Limited (NALCO) (www.nalcoindia.com) Entry of New Players and Expansion Plans of Indian Companies The Indian aluminium sector is witnessing entry of some new Indian and foreign players. Larsen & Toubro,(www.larsentoubro.com) a leading engineering company, has entered into an understanding with Dubai Aluminium Company to set up an integrated bauxite mining and alumina refinery project in Orissa in a $1billion project. Jindal South West Steel Ltd (JSW) (www.jsw.in ), part of the OP Jindal group, plans to set up a major aluminium project involving a refinery and smelter plant near Visakhapatnam in Andhra Pradesh. JSW entered into a MoU with the Andhra Pradesh Government to this effect in July 2005. The production capacity would be 1.5 million tonnes per year for the refinery and 0.25 million tonnes a year for the smelter. The raw material, bauxite ore would be sourced from www.uktradeinvest.gov.uk Page 7 of 11 Metals & Minerals Industry ? India Andhra Pradesh Mineral Development Corporation (APMDC), which would mine the bauxite independently. To meet the growing domestic demand Bharat aluminium company (BALCO) a unit of the Vedanta Group is building a new smelter at their existing facility in Korba, Chhattisgarh. Hindalco Industries, the flagship company of the Aditya Birla group has bought Alcan?s stake in Utkal Alumina. Utkal Alumina was established in 1992 for the development of a new bauxite mine and alumina refinery in Orissa. This acquisition gives Hindalco complete ownership of high-grade alumina, which could be used to feed the group?s forthcoming aluminium projects. Overseas Plans of Indian Companies Hindalco Industries acquired Atlanta based, US aluminium company, Novelis at £3 billion in February 2007. This acquisition has helped Hindalco access the US market and cater to leading large customers such as Coca-Cola, Ford and General Motors. This is also a good strategic fit for both companies as Hindalco has strong presence in upstream and mining business, and Novelis is a world leader in the downstream business. National Aluminium Company is planning to invest £ 3.75 billion over the next 5 years to build a smelter and power plant in Indonesia. The plant would be set up in two phases of 0.25 Million tonne each. The alumina required for the smelter would be sourced from India. KEY METHODS OF DOING BUSINESS Foreign companies follow a variety of routes to enter the market: direct export; indirect export through commission agents, stockists and distributors; manufacturing under licence, joint venture manufacturing facilities and wholly owned subsidiaries. The entry strategy will obviously depend on market attractiveness for a particular product range, degree of competition, availability of raw materials and skilled workforce and the long term objectives of companies. Those considering doing business in India should bear the following in mind: ? be pro-active and aggressive in pursuing business opportunities; ? take a strategic, long term view; ? carry out basic research and systematically gain information on doing business in India; ? seek specialist advice from the relevant trade associations and authorities; ? appoint a carefully selected, reputable agent in India; ? ensure all necessary Indian government and other approvals have been obtained; ? investigate in detail the availability of local raw materials. Other background information on doing business in India can be found on UKTI?s website. Simply go to the India country page where you will find information on: ? Economic background and geography ? Customs & regulations ? Selling & communications ? Contacts & setting up ? Visiting and social hints and tips MORE DETAILED SECTOR REPORTS Research is critical when considering new markets. UKTI provides market research services which can help UK companies doing business overseas including: ? Overseas Market Introduction Service (OMIS). Bespoke research into potential markets, and support during your visits overseas www.uktradeinvest.gov.uk Page 8 of 11 Metals & Minerals Industry ? India ? Export Marketing Research Scheme. In-depth and subsidised service administered by the British chambers of Commerce on behalf of UKTI Contact your local International Trade Advisor if you are interested in accessing these services, or for general advice in developing your export strategy. Many Indian market research companies and consulting firms sell syndicated sectoral reports and also undertake specific marketing researches. A useful contact list of market research firms, lawyers and other relevant professional bodies as well as further information on the sector in India are available from the UK Trade & Investment Teams in India and the UK. For further details, please contact: In India Sudipto Sen Senior Trade & Investment Adviser British Deputy High Commission 1A Ho Chi Minh Sarani Kolkata 700 071, India Tel: +91 33 2288 5172-76 Fax: +91 33 2288 3435 Email: Sudipto.Sen@fco.gov.uk Website: www.ukinindia.com Subhabrata Mukherjee Trade & Investment Adviser British Deputy High Commission 1A Ho Chi Minh Sarani Kolkata 700 071, India Tel: +91 33 2288 5172-76 Fax: +91 33 2288 3435 Email: Subhabrata.Mukherjee@fco.gov.uk Website: www.ukinindia.com PUBLICATIONS Journal of Mines, Metals & Fuels: A bi-monthly journal on the Indian mining industry; published by Books & Journals Private Limited, 6/2 Madan Street, Kolkata 700072, Tel: 91 33 2237 1711, Fax: 91 33 2215 5867, Email: books@satyam.net.in Iron & Steel review (www.isrpublications.com) Steel World (www.steelworld.com) Indian Foundry Journal (www.indianfoundry.com) Metaljunction Services (www.metaljunction.com) Indian business dailies are good sources of information on the Indian market. These also offer advertising and promotional opportunities. Some leading business newspapers are: The Economic Times (www.economictimes.com) Business Standard (www.business-standard.com) The Financial Express (www.financialexpress.com) Hindu Business Line (www.thehindubusinessline.com) Some useful sources of information on the Indian industry and economy are as follows: www.uktradeinvest.gov.uk Page 9 of 11 Metals & Minerals Industry ? India India Brand Equity Foundation (www.ibef.org) Reserve Bank of India (www.rbi.org.in) The Automotive Component Manufacturers Association of India (www.acmainfo.com) Society of Indian Automobile Manufacturers (www.siamindia.com) EVENTS Dates Event Details & Location Focus Sector/Sub-Sectors Organisers November 2009 14-17 Metals Minerals Kolkata Metals, Minerals and November 2009 Manufacturing Expo 2009 Metallurgy th 22-24 12 World Stainless Steel Mumbai Iron & Steel November Conference (http://crugroup.com/Event s/CRUEvents/WorldStainles sSteel/Pages/worldstainless steel.aspx) December 2009 nd 16-19 2 Biz Bridge- Engineering Kolkata Engineering December and Manufacturing expo organised by Confederation of Indian Industry (http://www.biztradeshow s.com/biz-bridge/) January 2010 22-25 January IME 2010-International Kolkata Mining Mining, Mineral Processing and Machinery exhibition (www.miningonlineexpo.co m) February 2010 25-27 February Aluminium India Mumbai Aluminium 2010(www.aluminium- india.com) UK Trade & Investment?s Tradeshow Access Programme (TAP) can help eligible UK businesses take part in overseas exhibitions. Attendance at TAP events offers significant benefits: ? possibilities for business opportunities both at the show and in the future ? a chance to assess new markets and develop useful contacts ? grants are available if you meet the criteria ? UKTI staff overseas will be available to assist delegates Find out if you are eligible to apply to attend this event, and more about the support UKTI can offer, on the UKTI Market Entry web page. Details of TAP events can be found in the Events portlet on the India page. www.uktradeinvest.gov.uk Page 10 of 11 Metals & Minerals Industry ? India Other Market Visit Support may be available via your local International Trade Advisor. CONTACT LISTS Steel Steel Authority of India Limited Ispat Bhawan Lodhi Road New Delhi ? 110 003 India Tel: 91 11 2436 7481-86/2436 7313/2436 7886 Fax: 91 11 2436 7015 Website: www.sail.co.in Tata Steel Jamshedpur 831001 Jharkhand India Tel: 91 657 2426083 Fax: 91 657 2424071 Website: www.tatasteel.com Jindal Steel & Power Limited Jindal Centre 12 Bhikaji Cama Place New Delhi 110 066 India Tel: 91 11 2618 8340-50 Fax: 91 11 2616 1271 Email: marketing@jindalsteel.com Website: www.jindalsteelpower.com Rashtriya Ispat Nigam Limited Visakhapatnam Steel Plant Main Administrative Building, Visakhapatnam - 530 031 Andhra Pradesh India Tel: 91 891 2886396 Fax: 91 891 2518316 Website: www.vizagsteel.com Essar Steel Limited Essar House 11 Keshavrao Khadye Marg Mahalakshmi Mumbai 400 034 Tel: +91 22 2495 0606/5660 1100 Fax: +91 22 5600 1809 Website: www.essar.com/steel.htm Aluminium www.uktradeinvest.gov.uk Page 11 of 11 Metals & Minerals Industry ? India Bharat Aluminium Company Limited Aluminium Sadan rd 3 Floor Core 6, Scope Office Complex 7 Lodhi Road New Delhi 110 003 Tel: 91 11 2436 0091, Fax: 91 11 2436 0035 Factory: Korba 495684 Chhattisgarh India Tel: 91 7759 242 254 / 242 017 Fax: 91 7759 242 083/ 241 011 Website: http://www.balcoindia.com National Aluminium Company Limited Nalco Bhavan P/1 Nayapalli Bhubaneswar 751 013 Orissa India Tel: 91 674 2300 850 Fax: 91 674 2300 550 Website: http://www.nalcoindia.com Hindalco Industries Ltd Century Bhavan, 3rd floor, Dr. Annie Besant Road Worli, Mumbai 400 030 Tel: 91 22 5662 6666 Fax: 91 22 2436 2516 / 2422 7586 Factory: Renukoot P.O. Renukoot - 231 217 Distt.Sonbhadra Uttar Pradesh India. Tel: 91 5446 252077 - 79 Fax: 91 5446 252107/52427 Email: hindalco.rkt@adityabirla.com UKTI?s International Trade Advisers can provide you with essential and impartial advice on all aspects of international trade. Every UK region also has dedicated sector specialists who can provide advice tailored to your industry. You can trace your nearest advisor by entering your postcode into the Local Office Database on the homepage of our website. For new and inexperienced exporters, our Passport to Export process will take you through the mechanics of exporting. An International Trade Adviser will provide professional advice on a range of services, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, translating marketing material, e-commerce, subsidised export training and market research. www.uktradeinvest.gov.uk Page 12 of 11 Metals & Minerals Industry ? India www.uktradeinvest.gov.uk Page 13 of 11