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1 INDIAN STEEL OUTLOOK IISI-OECD CONFERENCE Date: 16 th May, 2006
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  • INDIAN STEEL OUTLOOKIISI-OECD CONFERENCEDate: 16th May, 2006

  • CONTENTS

    MACRO ECONOMIC ENVIRONMENT

    STEEL : DEMAND ANALYSIS

    STEEL : SUPPLY ANALYSIS

    SUMMARY

  • MACRO ECONOMIC ENVIRONMENT- INDIAIISI-OECD CONFERENCE

  • ECONOMIC PARAMETERS ARE FAVOURABLEFUTURE OUTLOOKCURRENT PERFORMANCEBADGOODGOODPERFORMANCE PARAMETERSFiscal DeficitFDI InflowsEconomic reformsinflationNew InvestmentFinancial ReformsOverall GDPExternal DebtCurrent AccountSavingsIndustrial GrowthSource : Citigroup estimatesForex ReserveAgricultural GrowthInternal DebtService sector Growth

  • Source: Tata SteelAUTOMOBILECAPITAL GOODSCONSUMER DURABLESCONSTRUCTION& SECTOR WISE GROWTH IS LIKELY TO BE ROBUST...

  • INDIAN ECONOMY IS EXPECTED TO SURPASS JAPAN BY 2032

  • IN SUMMARY THE FUTURE IS UPBEATRanked 4th in the world on GDP - Purchasing Power Parity basis, 11th in absolute terms. (IMF)> 8% GDP growth targeted in 2006-07 - second only to China; aspirational 10 % growth looks possibleContinuously improving macro economic factorsA strong demographic profile : with a large consumer baseGrowing urbanization Stable social and political environment

  • STEEL : DEMAND ANALYSIS, INDIAIISI-OECD CONFERENCE

  • INDIA HAS A POTENTIAL FOR EXPONENTIAL GROWTH IN STEEL CONSUMPTIONIndiaChinaSingaporeJapanEUUSAPeak PointIndia will be a part of The new Steel world 2000-06Per capita in KG

  • CONSTRUCTION & AUTOMOTIVE ARE THE KEY SEGMENTS TO WATCHAll fig in million tonnes; Tata Steel EstimatesFY06: 34.1 million tonnesConstruction : 21Cap Goods : 3.7Auto : 2.7Othrs: 4.0Packaging : 1.7Cons Dur : 1.0

  • GROWTH IN CONSTRUCTION IS LEAD BY RAPID GROWTH IN HOUSING SECTOR & A growth of 24% expected till FY 07, with an expenditure of Rs 1,400 bnHousing shortage of 41 million units estimated as per 10th five year (02-07) There is a need to invest over Rs.4,000 bn over 10 yearsEstimated that every INR 1 invested in housing / construction adds 78 paise to the GDPHome Loan Disbursement (Rs bn)Source: National Housing Bank, HDFC, Cris-Infac, www.dwge.com38 %2415CAGR in %

  • .. INVESTMENT IN INFRASTRUCTURE SEGMENTIndia has potential to absorb US $ 150 billion in next five years in the infrastructure sector alone.The tenth plan investment in infrastructure has been revised to Rs. 11,088 Billion from earlier 10,894 Billion during mid term appraisal.PROJECTED INVESTMENT Till 2012 by Committee on Infrastructure

    RS BillionFY 03FY 04FY 05FY 06FY 07 FPlanned Exp in next 5 yearsAirports2015152425400Irrigation1511392082222521300Ports7551020500Power2323123403503462000Railways121135153146140750Roads2061901992122131700Telecom13312689116116800Urban Infra.1621741842202501400

  • WHILE AUTOMOTIVE WOULD REGISTER THE HIGHEST GROWTH Government focus on infrastructure & Roads Availability of consumer finance at low interest rates Excise Duty reduction & Tax SOPs by government to boost demand Higher disposable income Double working households on the rise CAGR 7 %CAGR 15 %PV Passenger VehicleCV Commercial Vehicle

  • Source : Tata Steel EstimatesTHE OVERALL GROWTH IN DEMAND OF STEEL IS THEREFORE HEALTHYFY-12CAGR in %6.7912All fig in million tonnes

  • STEEL : SUPPLY ANALYSIS, INDIAIISI-OECD CONFERENCE

  • STEEL PRODUCTION HAS JUMPED SINCE THE ECONOMIC LIBERALIZATION CRUDE STEEL PRODUCTION IN INDIA (million tonnes)All fig in million tonnes

  • LONGFLATSource : JPC, Team AnalysisSAIL + IISCOTSL 4.6RINL 3.0ESSAR 2.6ISPAT 2.1JSW 2.2Others 12.36 MAJOR PRODUCERS ACCOUNT FOR 66% OF TOTAL FINISHED PRODUCTIONFLAT PRODUCT IS MORE CONSOLIDATED WHEREAS LONG PRODUCT IS HIGHLY FRAGMENTED.All fig in million tonnes9.2

  • CAPACITY UTILIZATION ARE STRETCHED..Source : JPC, Tata Steel est.All fig in million tonnes

    SECTORNo. of UnitsTotal CapacityWorking CapacityCRUDE STEELBF/BOF Steel 102121EAF38137Indn. Fce7501612.4Corex 11.61.6TOTAL42.0

  • THUS SIGNIFICANT CAPACITIES ARE EXPECTED IN THE MEDIUM TERMBoth by Capacity Expansion by existing players * . . . .New Entrants with the Greenfield projectsandCapacity Addition projected : ~ 50 Mill T in next decade.* Incl their Greenfield Projects

  • THIS MAY LEAD TO EXCESS SUPPLY SITUATION IN THE COUNTRY (by FY-12)GAP: ~ 20-25 mn TDEMAND SIDESUPPLY SIDE6590All fig in million tonnes

  • BEING INHERENTLY COMPETITIVE.COST OF PRODN OF HRB (USD/MT)Abundant Natural resourcesHuman ResourcesStrategic Location

  • INDIA WOULD EMERGE AS A GLOBAL HUBIndia to play the Key role in Steel Market dynamics

  • IN SUMMARY..IISI-OECD CONFERENCE

  • IN SUMMARY.. Indian steel industry exudes optimismInvestment in infrastructure is crucial to step up demand for steel.Supply may have to be rationalized in line with the demand (Dom + exports)Integrated Mills would hold the key in future growth of Indian Steel supplies.New technologies to use indigenous natural resources would have to be developed. The economic indicators are all favorable for Growth.

  • THANK YOU

  • BackupIndia will become the fastest growing economy out of 34 developed and emerging markets and 3rd larget economy by 2020.Current GDP per capita is USD 2500 and expected to be USD 5000 in 2020.Poverty ratio dropped from 50% of population in 1950 to 26% in 2005.Economic growth rose from 3.7% in 50s & 60s to +6% in 1980s.Current population growth rate of 1.5% to decrease to 1.3% in 2020.

  • BackupHousehold savings rate to increase to 30% from current 23%.About 100,000 MW new capacity (90% of present) will be added in power sector in next 7 years. This should also act as strong driver of steel growth.The Fiscal Responsibility and Budget Management Act, 2002 binds fiscal managers to specific deficit targets each year with a goal to bring down the total deficit and revenue deficit to 3% and 0% of the GDP by 2008-09.

  • BackupLiteracy standards in 1951 was 18% and currently it is 65%.FDI inflow is 0.5% of GDP (USD 3 bn) in recent years as compared to 4% of GDP for China (USD 45 bn)One of the lowest electricity consumption at 365 units per capita as compared to 893 in China and 1729 in Brazil.

  • The Global Economic Forecast: Asia poised to be the emerging power house of growth In 2020, the US and China will still be the two largest economies in the world (in PPP) India leaves Japan behind and moves up to 3rd place India, Malaysia and China will post the highest GDP growth rates (above 5%) over 2006-20 Ireland, the US and Spain are the rich countries expected to grow the most

  • Steel Consumption Vs. GDPChinaS.KoreaTaiwanUSOther AfricaIndiaJapanBubble size represents the populationThe growth in BRIC will double the steel demand by 2050Source: internal analysis

  • UAE 1252 World Avg. 170 India 33 > 150 MT, The present gap Only awaiting the right trigger.Apparent Steel consumption of countriesKey Sectors driving growth Infrastructure development Housing and urban development High degree of urbanizations High demand in the auto sector Capacity building in steel makingGrowth in key sectors will drive the steel demand

    Chart1

    1252105498564560345443834928019833

    UAE

    Taiwan

    South Korea

    Hong Kong

    Japan

    Germany

    Australia

    USA

    France

    China

    India

    Kgs per Capita

    Sheet1

    Apparent Consumption per capita (kilograms crude steel) 2003

    UAETaiwanSouth KoreaHong KongJapanGermanyAustraliaUSAFranceChinaIndia

    1252105498564560345443834928019833

    Source : IISI Steel Statistical Yearbook 2004

    UAE1252

    Taiwan1054

    South Korea985

    Hong Kong645

    Japan603

    Germany454

    Australia438

    USA349

    France280

    China198

    India33

    Sheet1

    1252105498564560345443834928019833

    UAE

    Taiwan

    South Korea

    Hong Kong

    Japan

    Germany

    Australia

    USA

    France

    China

    India

  • Global Steel Demand Is Expected To Grow At ~3% Till 2015Global steel demand

  • Raw Material demand in India to increase by 13% to meet the rise in steel demandImperatives for 8% GDP Growth Manufacturing must grow at 11% This means a growth of 13% for Mining Industry if it has to contribute 5% to GDP by 2010 instead of 2.5% at present. 13% growth in mining has to be driven by few lead minerals such as coal, iron ore, supported by other minerals.

  • Robust growth in infrastructure, power, construction and steel sectors will drive the Steel DemandExpenditure on InfrastructureIn addition there will be investment for additional 25 mt capacity in steel itself by 2010. Potential for steel - 25-30% of the investment cost.Source: SSKISept05 issueConstruction sector will grow at CAGR of 15%.Incremental Steel demand for Power Sector

  • Chart1

    21.6946.3531.96

    22.0545.0232.93

    22.9342.934.17

    22.1743.9933.84

    22.2842.8234.9

    21.844.3533.85

    23.4141.2735.32

    23.2842.2534.47

    23.7440.9735.29

    24.2737.738.03

    23.739.7136.59

    24.1539.4636.39

    24.2938.0237.69

    24.3838.6936.93

    24.7237.6337.65

    24.836.338.9

    25.434.5740.03

    26.0932.8541.06

    25.7934.3339.88

    26.6732.6540.68

    27.2232.240.58

    26.7231.341.98

    26.4331.542.07

    26.2630.9742.77

    26.9730.3242.71

    28.052843.95

    27.8628.4643.68

    27.7226.545.78

    2726.4246.58

    26.6824.9948.33

    27.2323.9248.85

    26.6224.0849.3

    27.2521.9550.8

    26.8622.1251.02

    Share Industry

    Share Agri.

    Share Services

    Year : 1971-2004

    % of GDP

    Sectoral Share in GDP

    Sheet1

    At Constant PricesAt Constant PricesAt Constant PricesAt Constant PricesAt Constant Prices

    YearGDP (factor cost)GDP (market price)GNP (market price)Pvt. Final Cons. Exp. (PFCE)Govt. Final Cons. Exp. (GFCE)Gross Capital Formation (GCF)Industry Rs. Crore% change% share in GDPManufacturing Rs. Crore% change% share in GDPConstruction Rs. Crore% change% share in GDPAgriculture Rs. Crore% change% share in GDP

    1970-712962783269253245802508803045364638642581.0021.69373892.3512.6218107-0.226.111373207.0946.35

    1971-722992693325163299352557613366366704659822.6822.05386113.2712.90181860.446.08134742-1.8845.02

    1972-732983163305943280302574753376165287684183.6922.93401253.9213.45186132.356.24127980-5.0242.90

    1973-743118943410503391062637933337277055691541.0822.17419104.4513.4417404-6.505.581371977.2043.99

    1974-753155143451013440962635943186268650702951.6522.28431322.9213.6716850-3.185.34135107-1.5242.82

    1975-763439243767313759802785633517071655749606.6421.80440412.1112.811925214.265.6015252212.8944.35

    1976-773482233831633824702841183787380238815058.7323.41479038.7713.76211359.786.07143709-5.7841.27

    1977-783742354108734101023072853901190648871056.8723.28508856.2313.602327410.126.2215813210.0442.25

    1978-7939482843443743394432606641862105080937147.5923.745717012.3514.4822755-2.235.761617732.3040.97

    1979-80374291411663412012318753444829289590830-3.0824.2755328-3.2214.7821554-5.285.76141107-12.7737.70

    1980-814011284392014400433474434658199719950824.6823.70554360.2013.822439513.186.0815929312.8939.71

    1981-82425073467139467234362552486751004251026477.9624.15598818.0214.09257315.486.051677235.2939.46

    1982-83438079484217482715366178532801002721064183.6724.29638596.6414.5823924-7.025.46166577-0.6838.02

    1983-84471742518491516042394599556051037841150028.0724.387030610.1014.90252165.405.351824989.5638.69

    1984-85492077539874537003405973596201125671216415.7724.72749236.5715.23260893.465.301851861.4737.63

    1985-86513990570267567337422916662551231131274724.7924.80778713.9315.15275665.665.361865700.7536.30

    1986-87536257597850593614436262728021235521362246.8725.40832906.9615.53282252.395.26185363-0.6534.57

    1987-88556778623371618002451215786981421521452536.6326.09893747.3016.05298435.735.36182899-1.3332.85

    1988-89615098684832676941479378827751607621586499.2225.79972638.8315.81319417.035.1921118415.4634.33

    1989-906563317289527207295031678665917204717505310.3426.6710870311.7616.56341887.035.212143151.4832.65

    1990-91692871771295762094525641896011956501886017.7427.221152826.0516.643821811.795.522231144.1132.20

    1991-9270186377828976756953698089008171553187560-0.5526.72111075-3.6515.83390052.065.56219660-1.5531.30

    1992-93737792819318807901550828917951874781949943.9626.431156694.1415.68403633.485.472323865.7931.50

    1993-94781345859220847140574772977251984122051625.2126.261254938.4916.06405930.575.202419674.1230.97

    1994-958380319244569112416014819893524388222605110.1826.9714049111.9516.76428305.515.112540905.0130.32

    1995-9689956399394698134463893810688127101525235911.6428.0516142414.917.94454966.225.06251892-0.8728.00

    1996-97970083106744510567226895661116402684352702187.0827.861770139.6618.25464522.104.792760919.6128.46

    1997-981016594111524711045987072851239782890582817884.2827.721796891.5117.685120810.245.04269383-2.4326.50

    1998-991082748118202111700477524401399632909712923473.7527.001845792.7217.05543896.215.022860946.2026.42

    1999-001148368126628412551027976531584323516243063364.7926.681919263.9816.71587408.005.122869830.3124.99

    2000-011198592131620113046008196371591943539953263916.5527.232061897.4317.20626516.665.23286666-0.1123.92

    2001-021267833138401113760078667361640373469073374803.4026.622136813.6316.85645623.055.093052636.4924.08

    2002-031318321144759514360858972431690693733993592166.4427.252270356.2517.22692737.305.25289386-5.2021.95

    2003-0414267013831776.6726.862436057.3017.07735586.195.163156359.0722.12

    0

    Share IndustryShare Agri.Share Services

    1970-7121.6946.3531.96

    1971-7222.0545.0232.93

    1972-7322.9342.9034.17

    1973-7422.1743.9933.84

    1974-7522.2842.8234.9

    1975-7621.8044.3533.85

    1976-7723.4141.2735.32

    1977-7823.2842.2534.47

    1978-7923.7440.9735.29

    1979-8024.2737.7038.03

    1980-8123.7039.7136.59

    1981-8224.1539.4636.39

    1982-8324.2938.0237.69

    1983-8424.3838.6936.93

    1984-8524.7237.6337.65

    1985-8624.8036.3038.9

    1986-8725.4034.5740.03

    1987-8826.0932.8541.06

    1988-8925.7934.3339.88

    1989-9026.6732.6540.68

    1990-9127.2232.2040.58

    1991-9226.7231.3041.98

    1992-9326.4331.5042.07

    1993-9426.2630.9742.77

    1994-9526.9730.3242.71

    1995-9628.0528.0043.95

    1996-9727.8628.4643.68

    1997-9827.7226.5045.78

    1998-9927.0026.4246.58

    1999-0026.6824.9948.33

    2000-0127.2323.9248.85

    2001-0226.6224.0849.3

    2002-0327.2521.9550.8

    2003-0426.8622.1251.02

    Sheet1

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    &A

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    Share Industry

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    Year : 1971-2004

    % of GDP

    Sectoral Share in GDP

    Sheet2

    Sheet3

  • Global steel demand poised for robust growth

    Make 2 slides. Sctorial growth. Pie chartGet the estimated figs from the papers.