1. POTENTIAL OF FERRO ALLOYS
- INDIA
Presentation Made To
The Ferro Alloys Panel
CAPXEIL
(formerly The Chemical & Allied Product
Export Council)
February 2012
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

2. Presentation Structure
 Introduction To Ferro Alloys
 Ferro Alloy Capacity – India
 Ferro Alloy Demand Drivers
 China Factor In Ferro Alloys
 India Powerhouse In Ferro Alloys
 Power Situation Globally
 Advantage India
 Key Success Factors For India As A Power
House In Ferro Alloys
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

3. INTRODUCTION TO FERRO
ALLOYS
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

4. INTRODUCTION TO FERRO
ALLOYS
 Principal Functions of Alloying :
 Increases Corrosion / Oxidation Resistance,
 Increases Hardenability, Tensile Strength Wear & Abrasion
Resistance
 Increases High Temperature Strength, Creep, Strength, etc.
 Ferro Alloy Industry :
 Part of Core Sector under Ministry of Steel
 Supplying Crucial Intermediates to Steel Industry
 Completed Five Decades
 Bulk & Noble Ferroalloys used in Steel Production as
 De-Oxidant
 Alloying Agent
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

5. DEMAND DRIVERS OF FERRO
ALLOYS
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

6. DEMAND DRIVERS OF 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 Drivers of Ferro Alloys:
 Crude Steel Production
 Alloy Steel Production
 Stainless Steel Production
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

7. FERRO ALLOY CAPACITY -
INDIA
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

8. INDIA CAPACITIES
32%
Capacity (in Million Tonnes)
5%
1%
Manganese Alloys 2.50
62% Ferro Silicon 0.20
Chrome Alloys 1.30
Noble Ferro Alloys 0.04
FeSi Mn Alloys Noble Fe Alloys FeCr TOTAL 4.04
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9. REGION-WISE CAPACITIES
BULK FERRO ALLOYS – CAPACITY in MVA
EAST WEST CENTRAL NORTH SOUTH INDIA
 MANGANESE ALLOYS 875 150 317 7 225 1574
 FERRO SILICON 119 - - 6 71 196
 CHROME ALLOYS 695 24 42 13 106 880
 TOTAL 1689 174 359 26 402 2650
64% 7% 14% 1% 15%
 Ferro Alloy Industry is concemtrated in Eastern India :
 Near major resources – Mn Ore & Chrome Ore
 Near major Steel Plants
 Near areas of cheap, available power
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

10. FERRO ALLOY DEMAND
DRIVERS
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

11. BRICS – WILL DRIVE GROWTH IN
STEEL & FERRO ALLOYS
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

12. Demand Driver – Steel Production
India
China , at “j” curve around 2000, likely to show tapering growth (2012-15).
India has reached the “j” curve, a will grow at double digits (2012-15).
India & China will remain high growth markets for Ferro Alloys
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

13. CHINA FACTOR IN FERRO
ALLOYS
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

14. China – Manganese Alloys
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

15. 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 sInce 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, 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).
CY 2010
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

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

17. Opportunity For India ?
Mn Alloy Supply (World, without China) Mn Alloy Supply (World, without China)
2009 2011
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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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

18. China – Chrome Alloys
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

19. The Changing Chrome Relationship Between
India and China
Till 2000 2001 to 2004 2005 to current The possible future
Stainless Steel China reaching half Emergence of China as Dominance of China in Increased Dominance of
million MT production player of significance global Stainless Steel China, Emergence of India
in global Stainless Steel production : high growth in Stainless
Steel production
Increased production of
Ferro Chrome No Ferro Chrome import by China starts importing Ferro Chrome in China and Higher production
China Ferro Chrome : 1st time India. consumption & export of
import rom India Quantum jump in India’s Ferro Chrome in India.
share in China’s import
China secures Chrome Ore
Chrome Ore India’s production reached Restriction of Ore supply supplies through equity
India’s production reaches stakes in Zimbabwe, South
2 million MT 3 million MT with one third from India . China shifted to
exported to China supply from other countries Africa etc. Further
consolidation : Cr Ore -
FeCr - Stainless Steel
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

20. INDIA POWERHOUSE
IN FERRO ALLOYS
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

21. CHROME - The Big 3 : SA, Kazakh, India
 SA and Kazakh with the world’s biggest reserves of chrome ore is
struggling to maintain its supremacy in FeCr production. FeCr
production in SA is clearly affected by the problems of power. Despite
producing almost half the world’s Ferro chrome, its real growth has only
been 12% during the current decade
 Kazakhstan is probably feeling threatened because it exports almost
40% of its material to China. Hence it is trying to invest into South
African reserves and grow in strength
 Indian story has been quite significant in this context. With government
support by way of restriction of chrome ore exports and captive power
plants to reduce its dependence on power, the Indian ferro-chrome
production has increased by a huge 98% during the current decade.
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

22. India-A FeCr Production Power-house?
 Significant rise in its GDP growth and increased
prosperity
 The SS production has increased keeping in step with
the growing demand and need for SS products in India.
 Asia- the nerve centre for SS production. India well-
placed to grab this advantage.
 Indian govt’s policy of restricting exports of chrome ore
has provided the right business environment for FeCr
producers.
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

23. Ferro Chrome : India catching up with China
1,6001,576
1,600 1,5001,476
1,450 1,450
1,500 1,406
1,350
1,400
1,300
1,156
'000 MT
1,200
1,041
1,100
1,000
900
800
2009 2010 2011 2012 2013
China India
China turned a net importer of HC Ferro Chrome from India since
2002, with a quantum jump in HC FeCr imports in last 2 years.
Significant increase in FeCr production within India forecast, India will
catch up with China by 2013.
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

24. Indian Manganese Alloy Production
995
1,200 In ‘000
845*
859
1,000 MT
738
565
800
467
405
380
378
371
600
281
256
251
232
400
200
0
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 ?
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

25. POWER SITUATION
GLOBALLY
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

26. Overall Cost Of Power Increasing -
Power Differentials falling
 Power is the 2nd most important requirement
for FeCr production.
 India is still at a disadvantage compared to
the power cost in SA and Kazakhstan.
 However, the gap between cost of power in
SA and India has clearly reduced bridging the
gap between production costs and making
FeCr production in India very much
sustainable.
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

27. POWER
Low Power Generation Cost in India -
Comparable to the World
High Power Tariff due to :
- Low Plant Load Factor – inefficient generation
-High Transmission & Distribution Losses -
inefficient transmission
-Cross Subsidies to Agriculture
State wise variation in Electricity :
availability, power tariff, power quality
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

28. POWER
Positive Impact of On-going Power Reforms :
- Captive Power Plants – advantage of an alternate
revenue stream.
- Power Wheeling
- - New Generation Capacities being set up
- - Alternative Energy Sources apart from thermal : gas
based, wind, nuclear
CAPACITY ADDITIONS IN NEXT TWO YEARS
(ESTIMATED)
 CAPTIVE POWER PLANTS (13 UNITS) 1000 MW
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

29. POWER CRISIS IN CHINA
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
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%)
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 &
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
dominent.
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

30. – SOUTH AFRICA
POWER the State owned utility of South Africa, ESKOM.
Electricity supply dominated by
ESKOM has a capacity of 35 200 MW from 20 power plants.
ESKOM generates around 2/3rd of the electricity produced in the whole of Africa
Eskom provides about 95% of South Africa's electrical power
Generation primarily coal-fired, One nuclear power station at Koeberg, Two gas turbine
facilities, Two conventional hydroelectric plants, and Two hydroelectric pumped-storage
stations.
In 2008 South African electricity demand exceeded supply capacity.
Eskom increased tariff by about 30% and 20% recently, More importantly, all industries face
power restrictions – including ferroalloy industry; limiting ability of South Africans to expand
market share temporarily.
Opportunity of India to consolidate position in global ferro alloys
trade & seize the value-buildup opportunity!!
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

31. ADVANTAGE INDIA
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

32. 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
scale up
ports (Vizag, Haldia).
Location near •Freight advantage in markets such as China, Korea &
high growth Japan compared to Ukraine or South Africa
regions • No seasonal effects
•Short sailing time, freight advantage
* Domestically sourced LG & MG Mn Ore available for
Cost blending with imported HG Mn Ore. Higher indigenous
Advantage ore availability compared to Chinese producers.
over China * Comparable power, labour & inland freight costs to
China.
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33. KEY SUCCESS FACTORS FOR
INDIA AS A POWER HOUSE IN
FERRO ALLOYS
Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

34. Key Success Factors For Indian Ferro Alloy Industry
Action Required / Changes Taking
Key Issues Description
Place
• India has limited availability
• Continue to allow free import of
of Medium to Low Grade Mn
Availability of HG Manganese Ore
Ores
High Grade Mn • Indian Ore, sweetened with HG
• Indigenous Manganese Ore
Ore Mn Ore suitable for SiMn
grade & quantity better than
production.
with China
• 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
& Power Wheeling.
Power Cost in Eastern India (hub of Ferro
• Increase grid power generation.
Alloy production)
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

35. Key Success Factors For Indian Ferro Alloy Industry
Action Required / Changes Taking
Key Issues Description
Place
• Furnaces sizes start from • Consolidation taking place with
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
higher sizes. ore linkages.
• Inadequate roads, railway • Encourage FDI for rapid
Infrastructural network capacity & ports for infrastructure development;
Bottlenecks handling large scale ore Special Economic Zones
imports & ferro alloy exports • Special Freight Corridors
How Can CAPXEIL Help ?
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Prabhash Gokarn Presentation to CAPXEIL Ferro Alloy Panel

36. Can We Do It ?