Overview on Imported Coking Coal Security
For
Sustainable Growth Of Indian Steel Sector
Harsh Sachdev
Managing Director, S&T Mining (A SAIL-TATA Steel JV Co.)
Coal Market in India-2013, New Delhi
27th Aug, 2013
S & T Mining – August 27,2013 - New Delhi
Index
1.
Steel – The Global Scenario & Emerging Trends
2.
Raw Material & Coking coal Availability .
3.
Steel – The Indian current & emerging Scenario .
4.
Indian Raw Materials & Coking Coal Scenario
5.
Coking Coal – Domestic Issues – Emerging Legislation
6.
Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
The Global Economic Status
Difficult global business scenario prevailing
•
Global Economy:
–
–
A marked downturn over the past two years (Global
GDP to remain sluggish 2.8% in 2013 compared to
3.9% and 3.2% in 2011 & 2012 respectively)
Most regions likely to see a moderate pick-up, but
growth to be below potential
•
•
•
•
•
•
•
–
•
Country ---Real GDP(2013)
US --–-----------1.5%
Canada --------1.7%
UK---------------1.0%
Germany ------0.3%
China------------7.3%
India ------------5.5%
Brazil ------------2.5%
Employment gains to remain weak at best.
Financial uncertainty & Crises
– (Reduced liquidity in the market- higher cost of
borrowing)
Source :Scotia Bank
S & T Mining – August 27,2013 - New Delhi
Newport Mining Outlook
Report 2013-14
Global Steel Trends
• Global Steel Production in 2012 at 1.5 Bn. Mt was a growth of
0.7% over the PY. This has been slowest rate of growth since the
economic downturn of 2008. EU was a decrease of 4.7 %,
Germany a decrease of 3.7 %, North Amercia an increase of 2.5 %.
• In the top 10 Steel producing nations , China, U.S., India , Russia ,
South Korea & Turkey grew in 2012.
• Modest steel demand pickup expected in 2013.
• China was 46.3 % of the world Steel Production in 2012 & is
expected to continue to dominate Global Steel making till 2020.
S & T Mining – August 27,2013 - New Delhi
Steel:
Global Scenario & Emerging Trends
Apparent demand for finished steel products
- 2030 (Mill. T)
GLOBAL STEEL PRODUCTION POST 2000
(Mill. T.)
1490
1600
1351
1400
1251
2214
2065
1219
850
904
72
53
55
56
49
81
67
46
600
27
29
142
141
142
172
144
142
142
178
236
1306
153
141
144
1000
33
141
74
32
200
151
182
222
2001
2002
2003
280
356
423
490
567
500
627
683
141
186
77
1500
187
1611
970
66.8
187
1881
2000
1069
800
400
2500
1329
1145
1200
1000
1510
1414
87
131
473
584
706
835
799
364
254
709
500
589
720
817
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
2010
Others
India
US
Russia
Japan
China
Total
Europe
2015
North America
2020
Developed Asia
Expected Steel Demand Growth in 2014
–
–
–
–
–
–
China: 2.5%
India: 7.0%
Japan: -0.6%
US: 2.9%
Central & South America: 43%
EU 27: 3.3%
S & T Mining – August 27,2013 - New Delhi
2030
ROW
China
TOTAL
Source: McKinsey & Co.
Source: World steel Association
•
2025
India
Future demand Growth Driver: Further economical
development rather than recovery in developed world.
China to remain dominant steel producer & consumer
Indian steel demand to grow faster
Steel:
Global Scenario & Emerging Trends
• Crude Steel production (2.1# Bill. T.) is
expected to marginally exceed the global
demand (2.09* Bill. T.) in 2020 .
• China to witness addition of more capacities
along with consolidation of marginal players.
• India too to add more capacities in current
decade
– Addition of more than 100 Mill. T. capacity by 2020.
S & T Mining – August 27,2013 - New Delhi
# Source: Deutsche Research,
Impact On Raw Materials
•
Over 70 % of Steel made is through the
BF route & is hence impacted by the costs
& availability of raw materials, specially
coking coal.
Cost Break Up- Crude Steel
• Major volumes of Iron Ore & coking Coal
are required.
Others
27%
– 1.6 tonne of Iron –ore and 0.9 tonne of coking
coal for 1 tonne of Crude Steel
•
RM cost as a proportion of total cost of
steel companies is a very significant & is
a key driver of total steel cost .
– Iron Ore comprises: 30% of Cost
– Coking Coal: 26% of Cost
S & T Mining – August 27,2013 - New Delhi
Iron ore
30%
Coking Coal
26%
Scrap+Ferro
alloys+Fluxe
s
17%
Source; Steelonthenet
Index
1.
Steel – The Global Scenario & Emerging Trends
2.
Raw Material & Coking coal Availability .
3.
Steel – The Indian current & emerging Scenario .
4.
Indian Raw Materials & Coking Coal Scenario
5.
Coking Coal – Domestic Issues – Emerging Legislation
6.
Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Global Iron Ore
Total Reserves of Iron Ore: 800 Bill. T.
•
•
•
About 800 Bill. T. of Iron ore reserve with
230 Bill. T. of Iron Content have been proved
World iron ore export dominated by –Brazil
& Australia
Key iron ore consumers: China, Japan, US,
India and Russia
S & T Mining – August 27,2013 - New Delhi
Global Coking Coal Production:
1400
1255
1141
1200
195
954
1000
170
139
715
800
12
21
53
1995
624
535
1990
456
555
400
200
PCI
91
509
1060
556
971
567
815
600
2015
2020
Coking Coal
Total
2010-2020
Slow down of global demand
growth, still driven mainly by
China, India and South
America
0
2000
2005
2010
Source: McKinsey & Co.
Globally Coking Coal Reserve: 246 Bill.T.
Coking Coal demand to grow at ~3% per annum during current decade
Coking Coal Production to shadow Steel Growth Globally
S & T Mining – August 27,2013 - New Delhi
Global Coking Coal Import & Export:
Present & Future
Australia to remain a dominant exporter though there will be emergence of new sources like
Mozambique …
China to overtake Japan as leading coking coal importer.
Global Coking Coal export (2008-2015F)
2013 :
Australian Met coal export expected to grow by 11%
US to decrease by 5% y-o-y to 54 Mill. T.
Canada to increase 3% y-o-y to 31 Mill. T.
Mozambique 4-4.5 Mill.T. from Maotize mine, Vale
Mongolia not likely to grow in 2013
S & T Mining – August 27,2013 - New
Delhi KPMG Qtrly, March 2013
Source:
Global Coking Coal import (2010-2025F)
China’s import to increase by 18% in 2013 y-o-y to
58 Mill. T. – due to restocking of steel
India import to increase to 36 Mn in 2013
Imports by EU to remain flat at around 46 Mill. T.
Index
1.
Steel – The Global Scenario & Emerging Trends
2.
Raw Material & Coking coal Availability .
3.
Steel – The Indian current & emerging Scenario .
4.
Indian Raw Materials & Coking Coal Scenario
5.
Coking Coal – Domestic Issues – Emerging Legislation
6.
Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Steel Indian Scenario - Current
Indian Production - Mn tonnes Crude Steel
 India’s Steel Production
has risen steadily over the
Last decade. At 77 Mn. T
India is the 4th largest Steel
Producer Globally.
 In 2012 it was a nett
importer of Steel , mainly
special grades.
90
80
70
60
45.8
50
40
30
27.3
28.8
31.8
49.5
53.5
57.8
63.5
68.3
73.5
77.6
32.6
20
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Production Mn tonnes
Crude Steel
Apparent Steel Use Kgs Per Capita - 2012
1200
1000
1,114
 The per capita consumption of
Steel in India remains low .
A high potential for growth.
800
600
506
477
400
200
306
279
293
257
57
217
0
India
China
USA
EU (27)
S & T Mining – August 27,2013 - New Delhi
Russia
Japan
S Korea Aust. & World
N. Z. Average
Steel Indian Scenario - Emerging
200
Domestic Steel Production Forecast
(Mill. T.)
180
180
Yr 2020: India to witness
emergence of 5-6 players
controlling 65~70% of total prodn
160
140
120
BF-BOF (Mill. T.)
107
100
120
77
180
80
DRI & Others
60
60
40
BF-BOF (Mill. T.)
20
69
0
2012
2015
2020
107
DRI & Others
38
With 77 Mill. T. of Crude Steel production in 2012, India is behind China ,
Japan & the USA .
By 2016, India is expected to become world’s 2nd largest crude steel producer
Fast
urbanisation to drive India’s steel Industry growth
S & T Mining – August 27,2013 - New Delhi
2020: India to emerge as net exporter……
Steel Export moving to China , India & South Amercia
S & T Mining – August 27,2013 - New Delhi
Index
1.
Steel – The Global Scenario & Emerging Trends
2.
Raw Material & Coking coal Availability .
3.
Steel – The Indian current & emerging Scenario .
4.
Indian Raw Materials & Coking Coal Scenario
5.
Coking Coal – Domestic Issues – Emerging Legislation
6.
Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Iron Ore – The Domestic Scenario
• With 18 Billion Tonnes (approx) of Haemetite and 11 Billion
Tonnes (approx) of Magnetite resource, India is self
sufficient to fulfill its Steel Industry requirement.
• With a ban on illegal mining in Goa & Karnataka – Iron Ore
output fell to 167 Mn. Tonnes in FY 13. Imports started.
• The government of India, is taking various measures,
including approaching the supreme court to correct the
situation.
• In 2020, India to consume ~300 Mill. T. of Iron Ore for
producing 180 Mill. T. of crude steel.
S & T Mining – August 27,2013 - New Delhi
Coking coal sources for India: 2012
Coking Coal Sources (2012
Coking coal
Import
32 Mill. T
Total
43 Mill. T
Indigenous
coking coal
7* Mill. T.
Imported
PCI
4 Mill. T.
Country
Qty
(approx)
(Mill. T.)
%age
Australia
27
85%
Indonesia
3
10%
New
Zealand
1
3.5%
Others
1
1.5%
TOTAL
32
100%
Increased dependency on overseas coking coal mining countries
Australia to remain a dominant coking coal exporter to India
*Indigenous
coal at 17% avg ash, while imported met coal ash ~10%
S & T Mining – August 27,2013 - New
Delhi
Met Coal Consumption Forecast….
Sources of Met Coal
Mill. T.
Coking Coal Requirement (Mill. T.)
Hot Metal/Pig Iron Production -BOF
145.0
120
108
10
100
LV PCI Import
(Mill. T.)
120
115.0
63
108
5
60
85.0
69
55.0
40
36
1
20
27
63
37
25.0
Imported
Coking Coal
(Mill. T.)
80
36
2010
2015
2020
0
83
Domestic
Supply (Mill. T.)
45
8
13
15
2010
2015
2020
Coking Coal
Requirement
(Mill. T.)
2020: India is expected to import whopping 83 mill. T. of coking coal (apart from 10
mill. T. of PCI) equalling forex outgo of atleast USD14* Bill. Per year.
Total 93 Mill. T. of metallurgical coal import implies that 86 % of India’s BOF steel
production to depend on imports – High risk exposure
S & T Mining – August 27,2013 - New Delhi
* At USD 170/t of coking coal price; conversion 1USD = Rs 54
Index
1.
Steel – The Global Scenario & Emerging Trends
2.
Raw Material & Coking coal Availability .
3.
Steel – The Indian current & emerging Scenario .
4.
Indian Raw Materials & Coking Coal Scenario
5.
Coking Coal – Domestic Issues – Emerging Legislation
6.
Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Coking Coal - Domestic Issues

A need to separate “Coking Coal” from Coal . At present Coking Coal also being used to
meet India’s Power requirements . An opportunity for washing low grade of Coking
Coals , to enhance valuations.

An increase in the infrastructure to evacuate coal from Pit heads to the point of
consumption. Adequate Railway sidings & rakes.

Implementation of the Jharia Action Plan in the prime coking belt of India. Jharia has 5.3
Bn. tonnes of prime coking coal & 6.1 Bn. tonnes of medium coking coal , which has been
on fire .

A concept of a “Single window Clearance” wherein all clearances which are sought are
applied for, in one place, within the various Government departments.

Mining is a “Site Specific Activity “ and hence the same cannot be shifted to an alternate
location. The Government needs to play a role a major facilitator in acquisition of land
for critical coal projects .

Upgrading of efficiency levels by use Mass Production Technologies – Larger sizes of
Heavy Earth moving Equipments in Opencast Mines & mechanization in underground
mines .- Average output of underground mines is well behind global output at approx.
0.2 MTPA.
Some of these issues are under active consideration .
S & T Mining – August 27,2013 - New Delhi
Domestic Legislative Environment

Time taken in getting statutory clearances impact coking coal projects execution
timeline.

A process of defined time frames for clearances , / default clearances in case of delay’s
needs to be examined .

Emerging legislation making coal mining more complex & expensive , will increase lead
time to starting coal production.
 LARR
 Consent of 80% Project Affected People (this might delay projects)
 4 times land price in rural and 2 times land price in urban area for
compensation along with other compensation
 MMDR bill
 26% of profit to be given to District Mineral foundation plus other taxes leads
to overall tax of 61% for Indian coal Mining (against 30-40% in other
countries).

Auction by competitive Bidding of Coal Mines Rules 2012 - Implemented for PSUs –
Implementation for Private companies awaited .
Legislation to ensure inclusive growth & welfare of local communities.
Degree of complexity of Domestic Mining to increase .
S & T Mining – August 27,2013 - New Delhi
Index
1.
Steel – The Global Scenario & Emerging Trends
2.
Raw Material & Coking coal Availability .
3.
Steel – The Indian current & emerging Scenario .
4.
Indian Raw Materials & Coking Coal Scenario
5.
Coking Coal – Domestic Issues – Emerging Legislation
6.
Imperatives & issues
S & T Mining – August 27,2013 - New Delhi
Country Rating
Investment options in Mining Countries
S & T Mining – August 27,2013 - New Delhi
Country Comparison
Mining Investment
Countries
Australia
Indonesia
Mozambique
S. Africa
Reserves
77 Bill.T
5.5 Bill. T.
16 Bill. T.
30 Bill. T.
Country wise
mining rights
processing time
High
Moderate
Moderate
Moderate
Country
High
High.
Upgradation
Required
Low.
Needs huge
Investments
Moderate.
Inadequate
Rail Infra
Time to
process
rights
(Months)
Colombia
1
South
Australia
<2
Brazil
2
Chile
7
South
Africa
>12
India
48
(Thermal+Coking)
Mining Costs
Infra
Tax Regime
Proximity to
Indian Ports
Frequent
Favourable to No specific
Transparent
Changes in
foreign
mine policy.
introduction
mine laws. investors with Encourages
of MRRT &
Favours no such issues
local
Carbon Tax –
domestic
of local
ownership of
Extra Burden
players
ownership
mines
Takes ~18
Takes ~12
Takes ~12
days to
Takes ~10
days to west
days to west
India’s west
days to west
coast; 9
coast; 14
coast; 14
coast; 12 days
days to east
days to east
days to east
to east coast
coast
coast
coast
S & T Mining – August 27,2013 - New Delhi
Source: Infraline
Source: Mckinsey & Co
Country rating for Mining
(Behr Dolbear – 2012)
Parameter
Rank 1
Rank 2
Rank 3
Rank 4
Rank 5
Economic
System
Australia
Canada
Chile
US
Brazil
Mexico
Colombia
Peru
Mongolia
China
India
Indonesia
Political
system
Canada
Chile
Australia
Brazil
US
Mexico
Colombia
Peru
India
Indonesia
Mongolia
Social Issues
Australia
Chile
Colombia
Brazil
Mongolia
Canada
Indonesia
Permitting
Delays
Australia
Mexico
Chile
Colombia
Brazil
Mongolia
China
South Africa
Canada
Corruption
Australia
Canada
US
Chile
Brazil
Comobia
S & T Mining – August 27,2013 - New Delhi
26
Country rating for Mining
(Behr Dolbear – 2012)
Parameter
Rank 1
Rank 2
Rank 3
Rank 4
Rank 5
Currency
Stability
Australia
Canada
Brazil
Chile
US
China
South Africa
India
Mongolia
Tax Regime
Canada
Mexico
Brazil
Australia
Russia
China
Chile
US
Colombia
Mongolia
India
Overall
Australia
Canada
Chile
Brazil
Mexico
Australia and Canada are two most favourable countries for mining;
Australia more favourable: Canadian coal has cost disadvantage
compared to Australia in terms of freight
S & T Mining – August 27,2013 - New Delhi
27
Investment by Indian Companies
Since import is an imperative a number of Indian companies have already coal
assets abroad……
S & T Mining – August 27,2013 - New Delhi
Suggestions towards securing coking
coal import
•
Inter-Governmental level of agreement for developing and operating
overseas coking coal mines.
•
Using sovereign fund for developing infrastructures in emerging coking coal
sources like Mozambique.
•
Mining companies should form consortium with Infrastructure & Logistics
companies to invest in infrastructure in new geographies
.
•
Priority clearances at Indian ports .
•
Construct a dedicated rail corridor in the country for faster movement of
coal from ports to end user plants.
S & T Mining – August 27,2013 - New Delhi
THANK YOU
S & T Mining – August 27,2013 - New Delhi