metals and mining - india brand equity foundation, ibef, business

METALS AND MININGNovember 2010

2

Advantage India

Market overview

Industry infrastructure

Investments

Policy and regulatory framework

Opportunities

Industry associations

Contents

METALS AND MINING November 2010

3

Advantage India

• Under the automatic route for mining of metal ores, including precious metals and minerals, the government permits 100 per cent foreign direct investment (FDI).

• The government is promoting investments to manufacture value-added metals and explore minerals.

• India is rich in mineral resources and has large reserves of primary metal ores such as iron ore, bauxite, chromium, manganese and titanium.

• Bauxite and iron ore deposits in India rank among the best in the world in terms of their quality and mineability.

• India has untapped metal reserves worth 82 billion tonnes.

Source: Ministry of Mines, GoI, Annual Report 2009–2010; Ministry of Coal, GoI, Annual Report 2009–2010

Metals and Mining November 2010ADVANTAGE INDIA

• India offers among the lowest labour and conversion costs worldwide for the production of steel and alumina.

Advantage

India

• The country is strategically located, with its proximity to developed European markets and fast-developing Asian markets, to export steel and aluminium.

4

Advantage India

Market overview


Investments


Opportunities


Contents


5

Market overview

The growth in the metals and mining sector** was

recorded at a compound annual growth rate

(CAGR) of 13.2 per cent between 2005* and

2009*, and was valued at US$ 83.6 billion (INR

4,084.3 billion) in 2009*.50.8 54.6

65.8

92.483.6

0.0

20.0

40.0

60.0

80.0

100.0

2005 2006 2007 2008 2009

Source: Metals & Mining in India, August 2010, Datamonitor

**For the purpose of this report, the metals and mining sector comprises the aluminium segment (only production of primary aluminum is

considered), the base metals segment (consisting of lead, zinc, copper, nickel and tin), the coal segment (consisting of primary coal —

anthracite, bituminous and lignite), the iron and steel segment (consisting of production of crude steel, pig iron and direct reduced iron), and

the precious metals and minerals segment (consisting of gold, silver, platinum, palladium, rhodium, and industrial and gem-quality diamonds).

*Calendar year

MARKET OVERVIEW

Size of metals and mining sector

US$

bill

ion

Metals and Mining November 2010

6

Market segments

Sources: Metals & Mining in India, August 2010, Datamonitor; Ministry of Steel, GoI, Annual Report 2009–2010; Ministry of Coal, GoI, Annual

Report 2009–2010; Ministry of Mines, GoI, Annual Report 2009–2010; *Provisional figures

4.8%

23.9%

71.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009

Others Coal Iron and steel

Iron and steel

Coal

Others — base metals, precious metals and minerals

• Since 2005, sponge iron production increased at a CAGR of 14 per cent to reach 21 million tonnes in 2009. Sponge iron production stood at 15.5 million tonnesduring April 2009–December 2009*.

• Pig iron production increased at a CAGR of 18 per cent during 2005–2009, to reach 6.2 million tonnes in 2009. Pig iron production stood at 4.3 million tonnesduring April 2009–December 2009*.

• Crude steel production increased at a CAGR of 8 per cent during 2005–2009, to 58.4 million tonnes in 2009. Crude steel production stood at 45.8 million tonnesduring April 2009–December 2009*.

• Finished steel production increased at a CAGR of 7 per cent during 2005–2009 to 57.2 million tonnes in 2009, and stood at 43.8 million tonnes during April 2009–December 2009*.

• Coal production increased at a CAGR of 7 per cent during 2005–2009, to reach

497 million tonnes. Coal production stood at 416.5 million tonnes during April

2009–January 2010*.

• The production of bauxite, copper, lead and zinc was estimated at 13.5 million tonnes, 124,000 tonnes,127,000 tonnes and 1.3 million tonnes, respectively, in 2009–2010.

• Gold production was estimated at 1,788 kg in 2009–2010.

MARKET OVERVIEW

Perc

enta

ge—

mar

ket

shar

e


7

Overview of operational mines across states

State Number of reporting mines*

(2009–2010)

Andhra Pradesh 404

Gujarat 398

Jharkhand 284

Madhya Pradesh 250

Rajasthan 236

Orissa 220

Karnataka 209

Maharashtra 145

Tamil Nadu 138

Chhattisgarh 126

West Bengal 111

Source: Ministry of Mines, GoI, Annual Report 2009–2010

• India’s mining industry comprises a large number of small operational mines, which are primarily involved in the mining of iron ore, coal and bauxite.

• The number of mines that reported mineral production (excluding minor minerals, petroleum, natural gas and atomic minerals) in India was 2,729 in 2009–2010, as compared to 2,964 mines in the previous year.

MARKET OVERVIEW


8

Source: Ministry of Mines, GoI, Annual Report 2009–2010

*Provisional value

• The value of the total ores and minerals exported from India was estimated to increase by 14.5 per cent

y-o-y in 2009, led (in order of highest value) by cut diamonds, alumina and chromite.

Exports

14.716.6 16.9

19.8

22.7

0

5

10

15

20

25

2005 2006 2007 2008 2009*

MARKET OVERVIEW

Ores and minerals export (value in US$ billion)


9

Domestic demand — iron and steel … (1/4)

48.0 51.256.8 59.8

66.372.8

43.4 46.550.8 53.9

58.4

45.8

0

20

40

60

80

2004–05 2005–06 2006–07 2007–08 2008–09 Apr–Dec 09*

Capacity Production

• India has abundant iron ore reserves of 24 billion tonnes — the fifth-largest reserve base in the world.

• India’s iron ore production represents about 10 per cent of total world production, making it the fourth-largest iron ore producer in world. Therefore, the country has more than sufficient supplies of the key steel making input.

• During April 2009–December 2009, India’s installed capacity of crude steel grew to an estimated 72.8 million tonnes, with the sector operating at an 84 per cent capacity utilisation.

Source: Ministry of Steel, GoI, Annual Report 2009–2010

*Provisional figures

MARKET OVERVIEW

Crude steel — capacity and production

(million tonnes)


10

Domestic demand — iron and steel … (2/4)• Finished steel consumption grew at a CAGR of 9.3 per cent between 2004–05 and 2008–09, as

compared to a production CAGR of 6.7 per cent during the same period.

• India’s per capita steel consumption stood at 49 kg in 2008.

• The domestic demand for steel is estimated to rise at an annual average rate of more than10 per cent in the next five years (by 2014–15).

43.546.6

52.556.1 56.4

43.9

36.441.4

46.852.1 51.9

41.0

0

10

20

30

40

50

60

2004–05 2005–06 2006–07 2007–08 2008–09 Apr–Dec 09*

Production Consumption

Source: Ministry of Steel, GoI, Annual Report 2009–2010

*Provisional figures

MARKET OVERVIEW

Finished steel — production and consumption

(million tonnes)


11


61%11%

8%

5%

3%

12%

Construction and infrastructure

Capital goods

Automobiles

Packaging

Consumer durables

Others

• The public sector produced about 27 per cent of the total crude steel, while large and small scale private manufacturers produced 73 per cent.

• India is the world’s fifth-largest producer of steel and is expected to become the second largest by 2015, due to the ongoing capacity additions in the sector.

• Long products accounted for 57 per cent of the total finished steel consumption and the remaining 43 per cent comprised flat products in 2007–08.

Sources: Ministry of Steel, GoI, Annual Report 2009–2010; JSW Steel,

Annual Report 2009–2010

MARKET OVERVIEW

Sector-wise consumption of finished steel (2009–2010)


12


Sources: Ministry of Steel, GoI, Annual Report 2008–09; JSW Steel, Annual Report 2007–08

74%

7%

5%

17%Construction and infrastructure

Manufacturing

Automobile

Others

39%

20%

20%

21%Construction and infrastructure

Manufacturing

Automobile

Others

MARKET OVERVIEW

Long product consumption (2007–08) Flat product consumption (2007–08)


13

Domestic demand — aluminium … (1/2)

• India’s rich bauxite reserves are estimated at 2.4 billion tonnes — the fourth-largest global reserve base (approximately 6.8 per cent of the world’s reserves).

• India was the world’s sixth largest producer of bauxite in 2008.

• Since 2005, the production of aluminium in India increased at a CAGR of 11.3 per cent, to reach 1.35 million tonnes in 2009.

• The primary aluminium industry* is currently concentrated between Nalco, Hindalco and Vedanta.

Source: Ministry of Mines, GoI, Annual Report 2009–2010; World Mineral Production 2004–2008, British Geological Survey

*Primary aluminium production involves the refining of bauxite into alumina, and further, the smelting of alumina to aluminium metal.

MARKET OVERVIEW

Production of aluminium in India

(million tonnes)

0.881.00

1.151.23

1.35

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

2004-05 2005-06 2006-07 2007-08 2008-09


14

Domestic demand — aluminium … (2/2)

• Power, transportation and infrastructure account for almost three-quarters of domestic aluminium consumption, with power being the largest consumer.

• India’s aluminium demand is expected to double to nearly 3 million tonnes by 2015, driven by the GoI’s increasing focus on infrastructure development.

• India’s low per capita aluminium consumption of 1.15 kg (against the global average of 11.2 kg) reflects the potential for high demand, in light of the rapid urbanisation and consumerism in the country.

Source: Hindalco, Investor Meet, July 2010

48%

15%

13%

7%

17%Power

Transport

Construction

Industrial

Others

MARKET OVERVIEW

Sector-wise consumption of aluminium in India

(2009-2010)


15

Domestic demand — coal … (1/2)

• India has nearly 13 per cent of the world’s recoverable reserves of coal, which stand at an estimated 267.2 billion tonnes

• The country’s production of coal accounts for about 7.5 per cent of the total world production.

• Total raw coal production grew at a CAGR of 6.5 per cent from 2004–05 to 2008–09. Production stood at 416.5 million tonnes during April–December 2009

• Non-coking coal production comprises approximately 93.2 per cent of total raw coal production in the country, as India has limited reserves of coking coal (key input for steel making).

• Open cast mining accounts for 81 per cent of the total domestic production of coal in India.

382.6 407.0 430.8 457.1 492.9416.5

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2004–05 2005–06 2006–07 2007–08 2008–09 Apr–Dec 09*

Source: Ministry of Coal, GoI, Annual Report 2009–2010; *Provisional

MARKET OVERVIEW

Production of raw coal in India

(million tonnes)


16

Domestic demand — coal … (2/2)

• India’s demand for coal is estimated at 720 million tonnes.

• Coal accounts for about 12 per cent of India’s mineral imports and according to GoI’sestimates, India can expect a shortfall of 83 million tonnes by the end of the Eleventh Plan (2007–2012).

• The power segment is the largest consumer of coal, and the trend is expected to continue, with the sustained rise in the demand for power, driven by the GoI’s thrust on the developing the power sector. Source: ―Provisional Coal Statistics 2008–09‖, Ministry of Coal, GoI

MARKET OVERVIEW

Sector-wise consumption of coal (2007–08)

74%

8%

5%

3%10%

Power

Steel

Cement

Sponge iron

Others


17

Growth drivers … (1/2)

MARKET OVERVIEW

• The power sector accounts for a large share of the consumption of aluminium and coal in the country.

• In the Eleventh Plan, India is expected to add around 60,000 MW of generation capacity, at an investment of US$ 11.5 billion. Of the total capital expenditure earmarked for 2012–2017, approximately US$ 6.3 billion will be invested in power projects over the next two years (2011 and 2012).

• Furthermore, the GoI plans to double its capital expenditure in the power sector to US$ 25 billion in the Twelfth Five Year plan (2012–2017), to target further capacity addition of100,000 MW during the plan period.

• The restructuring of state electricity boards (SEBs), a strong focus on transmission and distribution (T&D) and the opening up of the power sector to the private sector are expected to significantly increase power generation, translating into increased demand and higher consumption of input material such as coal and aluminium.

Power

• The GoI is strongly focusing on infrastructure development to boost economic growth. In order to achieve a GDP growth rate of 9 per cent, the GoI plans to double its investment in infrastructure to US$ 1 trillion in the Twelfth Five Year Plan (2012–2017)

• Key infrastructure projects such as bridges and urban construction, power projects, railways, airport modernisation and real estate development continue to attract huge domestic and foreign investments.. These provide lucrative business opportunities for steel, zinc and aluminium producers.

• According to the Eleventh Five Year Plan (2007–2012), housing demand is estimated to increase from around 24 million units in 2007 to over 26 million units at the end of the plan period.

• The demand for commercial real estate (CRE) segments, comprising retail space, office space and hotels, as well as civic facilities including hospitals, multiplexes and schools, has also been on the rise due to growth in economy.

Infrastructure and real-estate


18

Growth drivers … (2/2)

MARKET OVERVIEW

• Sustained growth in India’s automotive sector is driving the demand for both steel and aluminium.

• India is the world’s second-largest manufacturer of two wheelers and the fifth-largest manufacturer of commercial vehicles.

• The Indian automobile industry was valued at INR 1,635 billion (approx. US$ 45 billion) in 2009 – the year India emerged as Asia’s fourth-largest exporter of automobiles.

• India is expected to become the world’s seventh-largest automobile market by 2016 and the third largest by 2030.

• Total sales are expected to reach US$ 120–160 billion by 2016 , with a total investment requirement estimated at US$ 35–40 billion.

Automotive

• India is the world’s second-largest producer of cement, which due to its energy-intensive nature is a major consumer of coal.

• Installed capacity for the production of cement increased at a CAGR of 8.8 per cent between 2004–05 and 2009–2010, to 236 million tonnes.

• By 2012-13, the sector is expected to add additional capacity of 92.3 million tonnes.

• The consumption of cement is expected to continue rising in India, as a result of the growing number of housing and infrastructure projects, as well as the emerging trend of increased cement use in highways and road construction.

Cement

Sources: ACC Limited website, http://www.acclimited.com/newsite/index.asp accessed November 2010; ―Aam Aadmi Awaas‖, National Housing

Bank website, www.nhb.org.in, accessed January 2010; SIAM website, http://www.siamindia.com/default.aspx, accessed November 2010


19

Key trends … (1/2)

Capacity

additions and

expansions to

meet growth in

domestic

demand

R&D and

upgrading of

technology

• Indian state governments have signed as many as 222 memorandums of understandings

(MoUs) with Indian and foreign steel producers. The total planned capacity expected from

the MoUs is around 276 million tonnes by 2019–2020. To support this expansion, steel

manufacturers are backward integrating to produce their own iron ore and coal to ensure

raw material security.

• The Indian primary aluminum sector’s current installed capacity of 1.7 million tonnes is

expected to nearly double to 4.3 million tonnes by 2014, due to the ongoing capacity

expansions by Nalco, Hindalco and Vedanta.

• Metal manufacturers are increasing their R&D expenditure and focusing on technology-driven

processes to improve their productivity and reduce costs.

• These technologies include conversion of waste to usable resources and fuel rate reduction.

Sources: Ministry of Steel, GoI, Annual Report 2009-2010

MARKET OVERVIEW


20

Key trends … (2/2)

Focus on

domestic

market

• The demand for metal and metal products is rising in the domestic market, with India being a

net importer in the metals segment.

• Domestic and foreign companies are increasingly focused on tapping the domestic market to

meet this rising demand.

Captive mining

for coal

• Captive mining for coal is permitted to set up coal washeries and for specified end uses,

including the setting up of power plants, fertilisers and steel units.

• The government has allocated 198 coal blocks, with geological reserves of about 42 billion

tonnes, under the captive route, to various public and private sector companies.

Sources: JSW Steel, Annual Report 2008–09; ―NTPC to delve into contract mining‖, The Economic Times, 23 April, 2009

MARKET OVERVIEW


21

Key players — iron and steel

CompanySales (2009–2010)

US$ billion (INR billion)Products

Tata Steel Ltd 21.99 (1,043)Finished steel

(non-alloy steel)

Steel Authority Of India Ltd 9.31 (441)Finished steel

(non-alloy steel)

J S W Steel Ltd 4.25 (202) Hot rolled coils, strips, sheets

Jindal Steel & Power Ltd 2.45 (116) Iron and steel

Ispat Industries Ltd 1.98 (95)* Hot rolled coils, strips, sheets

Welspun-Gujarat Stahl

Rohren Ltd1.61 (76) Tubes and pipes

J S L Stainless Ltd 1.37 (65) Flat products

Bhushan Steel Ltd 1.26 (60) Cold rolled coils, strips, sheets

Uttam Galva Steels Ltd 0.99 (47) Flat products

K E C International Ltd 0.83 (40) Heavy structurals

Source: Prowess accessed November 2010, Centre for Monitoring Indian Economy

*Sales in 2008-09

MARKET OVERVIEW


22

Key players — non-ferrous metals

CompanySales (2009–2010)

US$ billion (INR billion)Products

Hindalco Industries Ltd 13.03 (618) Aluminium and aluminium products

Sterlite Industries (India) Ltd 5.42 (257) Copper and copper products

Binani Industries Ltd 0.63 (30) Other non-ferrous metals

Ess Dee Aluminium Ltd 0.13 (6) Aluminium and aluminium products

Man Aluminium Ltd 0.009 (0.5) Aluminium and aluminium products

Source: Prowess accessed November 2010, Centre for Monitoring Indian Economy

MARKET OVERVIEW


23

Key players — coal … (1/2)

82%

9%

9%

Coal India Ltd.

Singareni Colleries Company Ltd.

Others

• Major players in India’s coal industry include state-owned companies, and private sector participation is limited to captive mining.

• Coal India Ltd (CIL) is the largest domestic player, with eight wholly owned subsidiary companies that have mining operations in eight states, accounting for 82 per cent of the country’s total coal production. The subsidiaries are:

• Central Mine Planning & Design Institute Ltd

• Bharat Coking Coal Ltd

• Central Coalfields Ltd

• Eastern Coalfields Ltd

• Western Coalfields Ltd

• South Eastern Coalfields Ltd

• Northern Coalfields Ltd

• Mahanadi Coalfields Ltd

MARKET OVERVIEW

Player-wise coal production (2008–09)

Sources: Ministry of Coal, GoI, Annual Report 2009-2010


24

Key players — coal … (2/2)

Sources: Coal India Ltd, Annual Report 2009–2010; Ministry of Coal, GoI, Annual Report 2009–10; Singareni Colleries

Company Ltd website http://scclmines.com/finperf2004.asp accessed November 2010

Company Sales (2009–2010)

US$ billion (INR billion)

Production (2009–2010)

(million tonnes)

Coal India Ltd 9.41 (446.2) 431.26

Singareni Colleries Company Ltd 1.58 (74.9) 41.03

MARKET OVERVIEW


25

Advantage India

Market overview


Investments


Opportunities


Contents


26

Industry infrastructure — Special Economic Zones (SEZs)

Developers Location Product

Viraj Profiles Ltd Thane, Maharashtra Steel

Jindal Stainless Ltd Kalinga Nagar, Orissa Steel

SAIL Salem SEZ Private Ltd Salem, Tamil Nadu Steel

JSW Bengal Steel Ltd West Medinipur, West Bengal Steel

Anrak Aluminium Ltd Visakhapatnam, Andhra Pradesh Aluminium

JSW Aluminium Ltd Visakhapatnam, Andhra Pradesh Aluminium

Maharashtra Industrial Development Corporation Aurangabad, Maharashtra Aluminium

Vedanta Alumina Ltd Jharsuguda, Orissa Aluminium

Hindalco Industries Ltd Sambalpur, Orissa Aluminium

Madhya Pradesh Audyogik Kendra Vikas (Jabalpur) Ltd Jabalpur, Madhya Pradesh Minerals

Saraf Agencies Private Ltd Ganjam, Orissa Minerals

Source: ―Formal approvals granted in the Board of Approvals after coming into force of SEZ Rules as on 15 January, 2009‖, SEZIndia website,

www.sezindia.nic.in, accessed November 2010

INDUSTRY INFRASTRUCTURE


27

Advantage India

Market overview


Investments


Opportunities


Contents


28

• Metallurgical industries and mining attracted US$ 4 billion and US$ 767.7 million, respectively, in cumulative inflows from April 2000 to September 2010.

• The metals and mining sector accounted for 4 per cent of the total FDI inflow in the country between April 2000 and September 2010.

• On the M&A front, the largest inbound deal announced, in 2010, was JFE Steel Corp’s acquisition of JSW Steel Ltd for US$ 1.03 billion

M&A scenario — details

2009

Deal type No of deals Deal value (US$ million)

Inbound 3 51.3

Outbound 1 -

Domestic 1 367.6

2010 (January–November 2010)

Deal type No of deals Deal value (US$ million)

Inbound 1 1029.1

Outbound 1 -

Domestic 2 17.2

Sources: “Transactions‖, Bloomberg, accessed 4 December, 2009; 2. ―M&A Transactions,‖ ThomsonOne Banker, accessed November 2010;

―Fact Sheet On Foreign Direct Investment (FDI),‖ Department of Industrial Policy and Promotion website, www.dipp.nic.in, accessed in

November 2010

Investments

Cumulative FDI inflows into metals and mining

Period: April 2000 to September 2010

Sector US$ million

Metallurgical industries 4038.7

Mining 767.7

Diamond and gold

ornaments 292.3

Coal production 15.6

Total 5114.3

INVESTMENTS


29

Advantage India

Market overview


Investments


Opportunities


Contents


30

Policy and regulatory framework … (1/3)

• In India, mining is regulated by the Mines and Minerals (Regulation and Development) Act (MMRDA), 1957, which is applicable to all minerals.

• These two set of rules were framed under the act to deal with major minerals (state governments are free to deal with mineral concessions related to minor minerals) and enable the Indian Bureau of Mines (IBM) to monitor and regulate the mining activity in the country, respectively.

• These rules are the Mineral Concession Rules, 1960 (MCR) and Mineral Conservation and Development Rules, 1988 (MCDR).

POLICY AND REGULATORY FRAMEWORK

• FDI up to 100 per cent is permitted under the automatic route to explore and exploit all non-fuel and non-atomic minerals in India.

• FDI up to 100 per cent is permitted under the automatic route to process all metals as well as for metallurgy.


31


• State governments grant mineral concessions, such as a Reconnaissance Permit (RP), Prospecting Licence (PL) and Mining Lease (ML), for all minerals located within the boundary of the state, under the terms of the Mines and Minerals Development and Regulation Act, 1957 (MMDR Act).

• An RP is granted for the preliminary prospecting of a mineral through regional, aerial, geophysical or geochemical surveys and geological mapping. An RP is granted for a maximum period of three years.

• A PL is granted to undertake operations to explore , locate or prove mineral deposits. A PL for any mineral or prescribed group of associated minerals is granted for a maximum period of three years.

• An ML is granted for undertaking operations to mine any mineral. An ML for any mineral or prescribed group of associated minerals is granted for a minimum period of 20 years and a maximum period of 30 years. MLs can be renewed for periods not exceeding 20 years. The prior approval of the Central Government is mandatory in respect of any mineral specified in the first schedule to the MMDR Act, 1957.



32


• The GoI has also set up a high-level panel, The Hoda Committee, to formulate a National Mineral Policy, in a move to better regulate the sector.

• The recommendations of the Hoda Committee and the National Mineral Policy are in the process of getting implemented. The government is finalising a draft act to replace existing legislations in order to effectively implement the recommendations.

• The Hoda committee has came up with the following recommendations for the new mineral policy:

• ―Open sky‖ policy at the initial stages, i.e., at the stage of RP, thereby removing exclusivity

• Seamless transition from RP to PL without any discretion by government bodies

• Flexibility in interim tenures

• Increase in concession area at each stage

• Security of tenure to be ensured rather than preferential treatment

• Timely clearance of mineral concessions

• Value addition requirement to be given preference, but not an absolute requirement

• Changes in royalty structure to ad valorem

• Simplification of environmental clearance requirement

• Setting up mineral development fund (MDF)



33

Advantage India

Market overview


Investments


Opportunities


Contents


34

Opportunities … (1/2)

• India’s per capita steel consumption is 49 kg as compared to the global average of 198 kg in 2008. Similarly, India’s per capita aluminium consumption of aluminium is 0.8 kg compared with 25 kg in the US, 19 kg in Japan and 10 kg in Europe. This presents an attractive opportunity for brownfield and greenfieldcapacity expansions in both sectors.

• Furthermore, India’s National Steel Policy aspires to double the rural per capita steel consumption to 4 kg per person in the next few years (nearly 70 per cent of India’s population is rural).

• Moreover, the working group on the steel industry (set up by the Planning Commission for the Eleventh Plan) projected a total demand of 70.3 million tonnes for finished steel and a total production of 80.2 million tonnes of crude steel by 2011–12. According to the estimates of the Ministry of Steel, these targets are likely to be surpassed, translating to opportunities to expand production capacity.

OPPORTUNITIES

Huge potential

for demand

growth, given the

high potential to

increase per

capita

consumption of

steel and

aluminium

• India has the world’s fifth-largest reserve base of bauxite and accounts for about 7per cent of total world production.

• India has the world’s fourth-largest reserve base of iron ore, and accounts for about10 per cent of total world production.

• India also has the fourth-largest global reserve base of coal, and accounts for 7.5 per cent of the total world production.

• India has 14,000 tonnes of gold reserves, and mines three tonnes, per annum of the precious metal. This highlights the lucrative opportunity of investing in the world’s largest market for gold.

Large scope for

new mining

capacities in iron

ore, bauxite, coal

and gold

Sources: US Geological Survey, USGS website http://www.usgs.gov/


35

Opportunities … (2/2)

• Strong long-term demand from the steel industry is expected to further boost the iron ore industry, while positive trends in the power sector are likely to catapult demand for coal.

• The key drivers for both short-and long-term growth, include the booming construction, automobiles, power and packaging industries, which are expected to lend substantial support to the sector.

• The fast-growing power sector is opening up the market for aluminium wire rods and cables, as it is the primary consumer of this product group.

• Driven by India’s burgeoning middle class, car sales are forecasted to grow by nearly five-fold over the next ten years (by 2019-20), from 1.95 million units at present. The automotive sector is a major consumer of steel, aluminium and zinc. The growth in India’s automotive sales reflects the growing consumerism and urbanisation in the country.

• The rise in India’s consumerism and urbanisation is also reflected by changing customer preferences, as the use of products such as personal care products, pharmaceuticals and processed foods rises. These products are packaged in the form of tubes, containers, cans, bottle caps and foils, which extensively use aluminium. As such, the Indian packaging industry is expected to register a growth rate of 10–11 per cent in the next few years.

• The rapid growth of India’s construction sector is resulting in higher demand for structural steel and the increasing use of aluminium in doorframes, roofing, partitions, ceilings and building hardware.

OPPORTUNITIES

Rapid growth of

user-industries to

drive demand for

metals and minerals

Sources: US Geological Survey, USGS website http://www.usgs.gov/


36

Advantage India

Market overview


Investments


Opportunities


Contents


37


Aluminium Association of India

118, 1st Floor, Ramanashree Arcade

18, M. G. Road

Bengaluru, Karnataka-560 001

Phone: 91- 80-25582197, 25582757

Fax: 91-80-25594535

E-mail: [email protected]

Federation of Indian Mineral Industries

FIMI House, B-311, Okhla Industrial Area

Phase-I, New Delhi-110 020

Phone: 91-11- 26814596

Fax: 91-11- 26814593


Indian Stainless Steel Development Association

L -22/4, DLF Phase–II

Gurgaon, Haryana-122 002

Phone: 91-124 - 4375501

Fax: 91-124 - 4375509


INDUSTRY ASSOCIATIONS


38

Note

Wherever applicable, numbers in the report have been rounded off to the nearest whole number.

Conversion rate used: US$ 1= INR 48

NOTE


39

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