Fimi Paper Manganese Alloy Industry In India Gokarn Km

Manganese Alloy Industry in India
- Opportunities and Challenges

Prabhash Gokarn
Tata Steel, Kolkata

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Mn-Cr Ores & Ferroalloys Buyer/Seller Interface Puducherry, 13-
Puducherry, 13-14 May 2010

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Disclaimer

The presentation is an amalgamation of author’s own
views and thoughts.

Tata Steel does not necessarily subscribe to the views
and thoughts expressed in the presentation and
should not be held responsible for the same.

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Presentation Outline

A. Manganese Market Flow

B. Demand Drivers

C. Manganese Alloy Industry

D. Decreasing Global Presence of China

E. Opportunity For Indian Manganese Alloy Industry

F. Key Success Factors for the Indian Manganese Alloy Industry

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A. Manganese Market Flow

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1. Manganese Market Flow

Manganese ore

90% 10%
Batteries 6%
Feedstock for
Others
15% Ferroalloys
85% Chemical 4%
Slag Ferroalloys

90% 10%

Crude steel Others
35%
35% 56%
56% 9%

HC FeMn SiMn Refined FeMn 70%
Foundry
85% Integrated 25% Integrated 70% Integrated
30%
15% Mini-
Mini-mills 75% Mini-
Mini-mills 30% Speciality steel Welding

Carbon Steel – Flat Stainless steel
Products Carbon Steel –
200 S Cr-Mn
Cr- Long Products High Strength Low
Stainless Steel Alloy steel

Source : Roskill

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2. Manganese Uses

Steelmaking

 Strong sulphide former
 Reduces undesirable amount of sulphur and oxygen in steel
 Deoxidant
 Improves the response of steel to quenching
 Weak carbide former
 Enhances mechanical properties of steel by increasing hardenability rate
 Alloying element 90%
Carbon Construction Stainless Steel High Strength Stainless Steel Hadfield
Mn content Steel Steel (other series) Low Alloy Steel (series 200) Steel
0.5% 1.0% 1.0% 1.5% 12% 13%

Non-
Non-ferrous alloys
 Deoxidant  Enhances corrosion resistance of Al alloys
 Alloying element  Improves copper alloys castability and strength
 Can replace part of the Nickel in Ni-Al alloys
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Other uses 10%

 Depolarizer  Used in dry-cell batteries in the manganese dioxide form
dry-
 Bactericidal  Used in purifying drinking water, treating waste water and odour control
 Fungicidal  Used for controlling crop and cereal diseases

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3. Manganese Ferro Alloys In Steel Making

Ferroalloys are produced by reducing metal

Coke
Flux
Ore
oxides with a reductant such as coke or coal,
ususlly in an Electric Arc Furnace.
Furnace
Low ash metallurgical coke is the preferred
FeMn,
FeMn, SiMn Production Process
reductant.
reductant. Electric power is used in the
smelting process and is another important
element of cost.
Crusher
Alloy casting Unit consumption per
HC FeMn SiMn
tonne of alloy
HC FeMn Ref FeMn SiMn
3.34 kg 0.93 kg 5.44 kg Energy (kWhrs)
(kWhrs) 2,600 4,200

FeMn & Refined FeMn SiMn used as a
deoxidizer & Ore1 (tonne)
tonne) 2.3 2.2
used as an alloying
additive to Carbon & Cr-
Cr- alloying additive Slag
Mn Stainless Steel to Carbon Steel Coke1 (tonne)
tonne) 0.6 0.5
High MnO Slag 1 Manganese ore of 44% Mn,
Mn,
produced in
Avg 9.71 kg of Manganese making FeMn
Alloys used per MT Steel used in making
SiMn
Source : Roskill

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B. Manganese Demand Drivers

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4. Demand Driver – Steel Production (1)

Global Steel Production
Index : Peak Scaled to 100

Global Manganese Alloy Production closely related to Steel Production
In the long run, Mn alloy demand should grow higher than Steel demand
due to higher growth of “Mn intensive steels” (e.g. HSLA, 200S SS, alloy steel)
(e. 200S

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Apparent steel demand 2009 – 2010 in mill MT, (Y/Y % chg) Effective crude
CIS steel capacity in
-31% 8% 2008
NAFTA EU - 27
-33% 12%
-36% 17% China +19% +5%
181 137
122
145
2008 2009 e 2010 f
China
250
158 12% -5%
India +8%
677
C & S America Rest of Asia
Rest of Asia
10% -24% 14%
-24%
70

62 268
Apparent Steel Demand in 2010 : growth in all regions after slowdown
High Growth in China & India : significant Mn Alloy market opportunity
Source: WSA, SRO_Oct09
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India

China , at “j” curve around 2000, likely to show tapering growth (2012-15).
(2012-
India has reached the “j” curve, a will grow at double digits (2012-15).
(2012-
India & China will remain high growth markets for Mn Alloys
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C. Manganese Alloy Industry

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4. Global Manganese Alloy Industry

World’s largest manganese alloys producers
Share in the
Capacity,
Company Country world
`000 mt
market
USA, Romania, Poland, Georgia,
Privat Group 2,556 20%
Ukraine, Russia
Eramet USA, France, Italy, China, Norway 1,130 9%
BHP Billiton Australia, South Africa 900 7%
Vale (CVRD) Brazil, Norway, France 620 5%
Nippon
Japan, China 483 4%
Denko
Tinfos Norway 420 3%

Highly consolidated, with 6 players controlling almost 50% of total production

Source: Metal Expert, CY 2009

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5. Indian Manganese Alloy Industry

NBFA, 77 Shyam, 70
MEL, 68
Hira, 65
Srinivasa,
62
Others,
792 Sharda,
60
Tata, 22
Highly fragmented, top 7 players contribute to just ~30% of total production.

~ 70 players in Mn alloy business : large swing capacities.

150 Furnace with size range from 4 MVA to 33 MVA

Almost 15-20% of the idle capacity unlikely to revive.
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Price dependent on local demand-supply but a strong correlation with world trends
demand-

Source: Metal Expert

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6. Indian Manganese Alloy Production

1,200 In ‘000 MT

995
845*
859
1,000

738
800

565
467
600

405
380

378

371
281
256
400

251
232

200
0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2010-10
* Global recession
HC Ferro Manganese Silico Manganese

Production of Ferro Manganese has grown @ CAGR of 10%

Production of Silico Manganese has grown @ CAGR of 17%

Around 25% -30% is exported – is there a potential to increase this ?

Source : IFAPA

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D. Decreasing Chinese Presence

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7. Chinese Manganese Alloy Industry

China is the world’s largest Mn Ore producer by volume and by Mn
Content producing 35% of the world’s total production.
China has traditionally been a large exporter of Mn Alloys.
The Change In 2009 :
Mn Alloy Supply (World, without China)
China became a net importer of Mn alloys for
the first time in August 2009.

China has become a net importer of SiMn,
SiMn,
ironically, in past years SiMn was the Mn
alloy commodity that China
exported the highest volume of.

China continued to export more FeMn than it
imported, (both Ref FeMn and HC FeMn).
FeMn).

CY 2008
Source : ERAMET, Metals Expert

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7. Decreasing Competitiveness of China

Power Tariff Increases
(6.25-7.5 c/kWh)
6.25- c/kWh)

Regional & Seasonal Increased Environmental
Power Shortages Costs
North in Winter,
Decreased
East/South in Summer
Competitiveness
of China in Mn
Alloys

Cost Increases : Freight, Increased Proportion of
Labour & Regulatory Imported Mn Ore
Costs

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(6.25-7.5 c/kWh)
6.25- c/kWh)

North in Winter,
East/South in Summer Decreased Competitiveness
of China in Mn
Alloys

Increased Proportion of
Cost Increases : Freight, Imported Mn Ore
Labour & Regulatory Costs

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Positive Impact On Indian Ferro Alloy Producers of Power
Crisis In China

China biggest electricity producer & consumer in the world
China has been facing regional power shortages since 2002 (Liaoning,
Jiangsu, Zhejiang, Guangdong provinces in particular)
Lack of long-distance power transmission capacity – no national grid, 6
long-
regional grids
China needs to add new annual capacity of 48GW in a steady state growth
model
High dependence of China on Hydro-Power(30%)
Hydro-
Northern areas experience shortages in winter due to increased heating
demand & problems with coal deliveries.
Eastern & southern areas are prone to shortages in late spring/early summer
as temperatures & air-conditioning demand rise, while reservoir levels &
air-
hydro-
hydro-electric output falls.
China power tariff increases – competitiveness of India increases.

Opportunity of India to export ferro alloys in markets where China is till now
dominant.

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Electricity fee in China has risen by 5% from November of 2009 ( having
resulted in new fee of CNY0.52 ( = 7.6 US-Cents ) per 1 KWH on average as
CNY0 US-
the whole country of China ) and, accordingly, this rise of electricity fee has
put an impact on the cost for production of silico-manganese in China.
silico- China.

Incidentally, preferential fees of electricity applied to west-south and west-
west- west-
north districts of China were abolished from the beginning of 2010 and this
abolishment has caused to increase the production cost in these districts

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(6.25-7.5 c/kWh)
6.25- c/kWh)

North in Winter, East/South in
Summer Decreased
Competitiveness
of China in Mn
Alloys

Increased Proportion of
Cost Increases : Freight,
Imported Mn Ore
Labour & Regulatory Costs

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7. Increased Proportion of Imported Mn Ore in China

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Major manganese mines have risen their price of manganese ore for shipment to
China in June of 2010 by 10% compared to that for shipment in May, the cost to
produce manganese ferro-alloys in China is thought to be inevitable to increase.
ferro-

It seems to be certain that the cost to produce silico-manganese in China will rise
silico-
by more than US$100 per ton. This increase of the production cost is anticipated to
put an actual impact on negotiations to export Chinese silico-manganese for
silico-
shipments in July - August.

The price of manganese ore for China has already risen by 4.7% for May shipment
and, by adding a further rise for June shipment, the ore price for China has risen by
more than 15% in total for shipments in the two months of May and June.

Major manganese mines have aimed to rise price of medium grade lumpy
manganese ore (with Mn 44% ) for China to a level of US$10 per Mn 1% CIF in the
course of 2010.

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The price of coke in domestic market of China is CNY1,950 -
1,980 per ton, having remained unchanged without a
substantial movement.

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Apart from the increased
(6.25-7.5 c/kWh)
6.25- c/kWh)
internal demand for Mn Alloys
Regional & Seasonal Increased due to the rapid increase in
Power Shortages Environmental steel production, which is
North in Winter, Decreased Costs limiting Chinese exports,
East/South in Summer Competitiveness Decreased Chinese
of China in Mn
Competitiveness has resulted
Alloys
in sharp reduction in bulk Mn
Cost Increases : Freight, Increased Proportion of alloy exports from China
Labour & Regulatory Imported Mn Ore (specially SiMn)
SiMn)
Costs

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8. Chinese Manganese Alloy Exports

China has practically retreated from the export market due to high
internal demand & decreased competitiveness in alloy making.
making.

93%
drop

This presents an opportunity for India to consolidate its
position as a Ferro Alloy exporter.

Source : ERAMET,

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E. Opportunity for India

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9. Opportunity For India ?

Mn Alloy Supply (World, without China) Mn Alloy Supply (World, without China)

2008 2010
Opportunity for India to :
a) Replace China in the international Silico Manganese trade.
b) Explore market opportunities in Manganese Alloys in China.
This is apart from the opportunity presented by the steel growth in India

Source : ERAMET,

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10. Advantage India

* Large Capacity for Ferro Alloys
Ability to
* Industry currently operating at 60% of rated capacity
immediately
* New capacities coming up. Capacities coming up near ports
scale up
(Vizag, Haldia).

Location near •Freight advantage in markets such as China, Korea & Japan
high growth compared to Ukraine or South Africa
regions • No seasonal effects
•Short sailing time, freight advantage

* Domestically sourced LG & MG Mn Ore available for
blending with imported HG Mn Ore. Higher indigenous ore
Cost Advantage
availability compared to Chinese producers.
over China
* Comparable power, labour & inland freight costs to
China.

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F. Key Success Factors

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10. Key Success Factors For Indian Ferro Alloy Industry(1)

Action Required / Changes Taking
Key Issues Description
Place
* India has limited availability of * Continue to allow free import of
Availability of Medium to Low Grade Mn Ores HG Manganese Ore
High Grade Mn * Indigenous Manganese Ore * Indian Ore, sweetened with HG
Ore grade & quantity better than Mn Ore suitable for SiMn
with China production.
* Import of low ash coking coal for
Coking Coal & Ferro Alloy & BF Coke making in
* Indian coal has high ash
LAM Coke India
* Exposure to availability &
availability & * Blending indigenous cokes with
price of LAM coke from China
cost imported LAM coke for economic
considerations
* Indian average power tariff at
* Power Sector reforms in place -
Power similar level to China.
allowing for Captive Power Plants &
Availability & * Power shortages in summer in
Power Wheeling.
Power Cost Eastern India (hub of Ferro Alloy
* Increase grid power generation.
production)

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10. Key Success Factors For Indian Ferro Alloy Industry(2)

Action Required / Changes Taking
Key Issues Description
Place
* Consolidation taking place with
•Furnaces sizes start from 4MVA
significant capacity expansion by
Small capacities, * Almost 15%-20% capacity
key players.
inefficient unlikely to revive.
* Increasingly, capacities with
operations •Global furnaces moving to
Captive Power Plants, Coal and ore
higher sizes.
linkages.
* Inadequate roads, railway * Encourage FDI for rapid
Infrastructural network capacity & ports for infrastructure development; Special
Bottlenecks handling large scale ore imports Economic Zones
& ferro alloy exports * Special Freight Corridors

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Can We Do It ?

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Backups

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Coincidentally, one day before,
the following article appeared in
the Tex Report

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Vol.42, No. 9964 THE TEX REPORT Wednesday, May 12, 2010
Cost To Produce Silico-Manganese In China Moves To Rise By US$100 / Ton =
Silico-
Owing To A Rise Of 10% For Price Of Manganese Ore To Be Imported By China
In consequence of that major manganese mines have risen their price of
manganese ore for shipment to China in June of 2010 by 10% compared to that
for shipment in May, the cost to produce manganese ferro-alloys in China is
ferro-
thought to be inevitable to increase. It seems to be certain that the cost to produce
silico-
silico-manganese in China will rise by more than US$100 per ton. This increase of
the production cost is anticipated to put an actual impact on negotiations to
export Chinese silico-manganese for shipments in July - August.
silico-
The price of manganese ore for China has already risen by 4.7% for May shipment
and, by adding a further rise for June shipment, the ore price for China has risen
by more than 15% in total for shipments in the two months of May and June. The
direct cost to produce silico-manganese at plants in China is presumed to total to
silico-
US$1,407 per metric ton, comprising three main factors of manganese ore as raw
material, coke as a reducing agent and electricity fee.
The price of coke in domestic market of China is CNY1,950 - 1,980 per ton, having
remained unchanged without a substantial movement.

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Also, electricity fee in China has risen by 5% from November of 2009 ( having
resulted in new fee of CNY0.52 ( = 7.6 US-Cents ) per 1 KWH on average as the
CNY0 US-
whole country of China ) and, accordingly, this rise of electricity fee has put an
impact on the cost for production of silico-manganese in China.
silico- China.
Incidentally, preferential fees of electricity applied to west-south and west-north
west- west-
districts of China were abolished from the beginning of 2010 and this
abolishment has caused to increase the production cost in these districts.
districts.
While price of Chinese silico-manganese for export has risen from April, in view
silico-
of an instability of the foreign exchange caused by a crisis of the financial market
in Greece, the price of Chinese silico-manganese to import into Japan has had a
silico-
hesitation.
hesitation.
Because of high prices of raw materials, a possibility to reduce price of Chinese
silico-
silico-manganese for Japan is unlikely to arise but an atmosphere to rise price of
Chinese product for export has been not felt.felt.

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The negotiations with electric furnace mills in Japan on Yen price of silico- silico-
manganese for shipments in July – September quarter will be taken place in due
course of time and, therefore, the trading companies concerned have taken an
attitude to watch carefully about further movements of the market.
market.
By taking into account of the clear factors to raise the production cost, Chinese
shippers have targeted to export silico-manganese at a high price of US$1,700
silico- US$
per metric ton CIF Japan but Indian silico-manganese is now being offered at
silico-
US$
US$1,580 - 1,630 per metric ton CIF Japan on a center of US$1,600 CIF and,
US$
accordingly, a high price of Chinese silico-manganese as mentioned above is
silico-
thought to be difficult to work on the market in Japan.
Japan.
It was informed that major manganese mines have aimed to rise price of medium
grade lumpy manganese ore (with Mn 44% ) for China to a level of US$10 per Mn
44% US$
1% CIF in the course of 2010. Therefore, there is a view in the market that prices
2010.
of manganese ores in the second half of 2010 will still maintain a firm tone.
tone.

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Fimi Paper Manganese Alloy Industry In India Gokarn Km

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