Chrome Business Chrome Business India – China India – China

Yesterday, Today Yesterday, Today &&

TomorrowTomorrow

Presented at “Chromium 2009” Presented at “Chromium 2009”

Conference of the International Chromium Development InstituteConference of the International Chromium Development Institute

This presentation is an amalgamation of This presentation is an amalgamation of authors’ own views and thoughts.authors’ own views and thoughts.

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

Presentation outlinePresentation outline

• Chrome Industry in India & ChinaChrome Industry in India & China

• India China Chrome Trade – the evolutionIndia China Chrome Trade – the evolution

• Historical trade flow and Key Historical trade flow and Key ObservationsObservations

• Analysis of market dynamics Analysis of market dynamics

• Future scenario and ConclusionFuture scenario and Conclusion

Chrome Industry – Chrome Industry – India & ChinaIndia & China

The Indian Chrome IndustryThe Indian Chrome Industry

• Total reserves (incl Resources) of Chrome Ore - 213 Total reserves (incl Resources) of Chrome Ore - 213 Million MT Proved -31 Million MT, Probable -35 Million MT Proved -31 Million MT, Probable -35 Million MT, Recoverable- 66 Million MTMillion MT, Recoverable- 66 Million MT

98% occurrence is in the state of Orissa.98% occurrence is in the state of Orissa.

• Chrome Ore is Stratiform in nature and mining is Chrome Ore is Stratiform in nature and mining is opencast. Output mainly Metallurgical ; Chemical opencast. Output mainly Metallurgical ; Chemical and Refractory grades are also produced.and Refractory grades are also produced.

• 3rd biggest producer of Chrome ore in the world. 3rd biggest producer of Chrome ore in the world. Two main producers -Tata Steel & Orissa Mining Two main producers -Tata Steel & Orissa Mining

Corporation.Corporation.

• Chrome Ore export is canalised with system of Chrome Ore export is canalised with system of quantity allocation and periodic floor price fixation quantity allocation and periodic floor price fixation by Govt. Current export duty – Rs 3000/MT (USD 65 by Govt. Current export duty – Rs 3000/MT (USD 65 at Rs 46-1 USD exchange rate).at Rs 46-1 USD exchange rate).

Chromite mines in IndiaChromite mines in India

The Indian Chrome Industry The Indian Chrome Industry contd.contd.

• Total Manufacturing capacity of Ferro chrome Total Manufacturing capacity of Ferro chrome 876 MVA. 70% capacity is in the state of 876 MVA. 70% capacity is in the state of Orissa . Orissa .

• Highly fragmented production base with Highly fragmented production base with existence of high level of idle capacity and existence of high level of idle capacity and swing production. Only a few producers are swing production. Only a few producers are integrated with captive production of mines.integrated with captive production of mines.

• High power cost adversely affect cost of High power cost adversely affect cost of production. Imported Chinese coke is production. Imported Chinese coke is preferred reductant. preferred reductant.

NBFA, Dhenkanal

FACOR, Garividi

TBAPL,Raigarh

Production Unit

FACOR, RandiaFAP, Bamnipal

FeCr Production in IndiaFeCr Production in India

RawmetJindal Stainless

Sri Vasavi Steel

Rohit Ferro Tech

Balasore Alloys

IMFA

Visa Steel, KalingaNagar

India –Stainless steel highlightsIndia –Stainless steel highlights

• Total production capacity 2 million MT.Total production capacity 2 million MT.

• Product mix- 75% Flat and balance Long. Product mix- 75% Flat and balance Long. More than 70% output in 200 series More than 70% output in 200 series

• Majority from Private enterprises which Majority from Private enterprises which mainly produce Flat products. 5% production mainly produce Flat products. 5% production from Govt enterprises who are mostly in from Govt enterprises who are mostly in Long productsLong products

• In 2009 SS production expected 1.7 mill MT. In 2009 SS production expected 1.7 mill MT. Export 0.5 million MT.Export 0.5 million MT.

Ambika Steel

Rathi Steel & Power

Rimjhim Steel

Jindal Stainless

Shah Alloys

Chandan Steel

Viraj Alloys

Mukand Ltd

Panchmahal Steel

Stainless Steel Production in IndiaStainless Steel Production in India

China – Chrome IndustryChina – Chrome Industry

Chrome ore :Chrome ore :

• Small reserve; deposits both in Podiform and Small reserve; deposits both in Podiform and Stratiform. Output Metallurgical and Stratiform. Output Metallurgical and Refractory.Refractory.

• Significant usage in Chemical and Refractory Significant usage in Chemical and Refractory application. application.

• 2008 production 300,000 MT. Output 2008 production 300,000 MT. Output insufficient to meet huge domestic demand.insufficient to meet huge domestic demand.

China – Chrome Industry China – Chrome Industry contdcontd

• Ferro chrome :Ferro chrome :

• Extremely fragmented production base with Extremely fragmented production base with existence of idle capacity. Industry plagued with existence of idle capacity. Industry plagued with inefficient energy consumption, high power cost and inefficient energy consumption, high power cost and over-reliance on imported ore.over-reliance on imported ore.

• Net importer of High Carbon Ferro Chrome from Net importer of High Carbon Ferro Chrome from 2002 . Import volume went for quantum jump in last 2002 . Import volume went for quantum jump in last two years.two years.

• Significant production of Silico Chrome and Low Significant production of Silico Chrome and Low Carbon Ferro Chrome.Carbon Ferro Chrome.

Production bases of Chrome Ore and High Carbon Ferro Chrome in China

Chrome OreChrome Ore

Ferro Chrome

China –Stainless steel Industry China –Stainless steel Industry highlightshighlights

• Total production capacity 13 million MT; one-third of global Total production capacity 13 million MT; one-third of global capacitycapacity

• 7 million MT from State Owned Joint enterprises which 7 million MT from State Owned Joint enterprises which mainly produce Flat productsmainly produce Flat products

• 6 million MT from private enterprises mostly in Long 6 million MT from private enterprises mostly in Long productsproducts

• In 2009 SS production expected 8 mill MT with capacity In 2009 SS production expected 8 mill MT with capacity utilisation of 62%. utilisation of 62%.

• 2009H1- 2009H1- Production -4.06 million MTProduction -4.06 million MT Import - 0.59 million MT 11% low YOYImport - 0.59 million MT 11% low YOY Export -0.25 million MT 54% low YOYExport -0.25 million MT 54% low YOY

•Tsingshan (Qingshan) Iron & Steel Co.• Baosteel• Youyi Special Steel• Rouyi Steel•Huaye steel•Hangzhou Iron & Steel

•Qingyuan Tsingshan (Qingshan)SS• LISCO•Huaye

• Tsingshan (Qingshan) Jinhui SS•Henan Wanhe

• Dongbei Gp – a) Dalian Iron & Steel b) Fushun Special Steel c) Beiman Special Steel

•Wuhang SS

• TISCO•Shanxi Yida

• ZPSS• Nantong

HuayeSteel

JISCO

Taishan

SouthEast Special

Steel

• Juxing• Jiangpu

SS Mills

India China Chrome India China Chrome Trade – The EvolutionTrade – The Evolution

Chrome Equation in ChinaChrome Equation in China

2,686

1,296750

233 440

6,0006,940

6,290

4,505 4,9796,449

6,091

4,3253,024

1,5061,043854

1,660

1,094

1,348

0

2000

4000

6000

8000

2005 2006 2007 2008 2009 Till Sept

Quan

tity(

'000

MT)

SS production Import of Chrome Ore & ConcProduction of Ferro Chrome Import of Ferro Chrome

570570 23602360 69406940SS SS ProdnProdn

20002000 20042004 20082008

114114 448448 12491249Cr Cr UnitsUnits

‘‘000 000 MTPAMTPA

‘‘000 000 MTPAMTPA

Net Net ExpoExporterrter

171171 582582156156 277277 667667

Domestic Domestic ImportImport Domestic Domestic ImportImport Domestic Domestic ImportImport

00 2222 5555India’s India’s

ContributioContribution Cr Unitsn Cr Units

‘‘000 000 MTPAMTPA

242242 254254 188188

Cr Unit Cr Unit from from FeCrFeCr

Cr Ore Cr Ore FeCrFeCr Cr Ore Cr Ore FeCrFeCr Cr Ore Cr Ore FeCrFeCr

Chrome Unit Balance - China & India Chrome Unit Balance - China & India TradeTrade

Historical trade flow Historical trade flow and and Key Observations Key Observations

China’s dependence on India in Chrome Ore or Chrome China’s dependence on India in Chrome Ore or Chrome AlloysAlloys

1,947

1,678

2,699

2,210

2,949

377

267 312

469 527 707 804

896 1,086

743

300 262 231 423

532

0

500

1,000

1,500

2,000

2,500

3,000

2000 2001 2002 2003 2004

'00

0 M

T

INDIA'S CHROME ORE PRODUCTION INDIA'S FERRO CHROME PRODUCTION

CHINA'S CHROME ORE IMPORT FROM INDIA CHINA'S FERRO CHROME PRODUCTION

China started China started FeCr import FeCr import from India in from India in

2004: 37,325 MT2004: 37,325 MT

China started China started FeCr import FeCr import from India in from India in

2004: 37,325 MT2004: 37,325 MT

EXPORTING COUNTRIES

SA : 1st

Oman: 3rd

Turkey: 2nd

India : 4th

CHROME ORE: Import Trade Flow of CHROME ORE: Import Trade Flow of ChinaChina

Import: 6.44 m MT in 2008

SA : 1st

Kazak: 2nd

India : 3rd

High Carbon Ferro Chrome/Charge Chrome: High Carbon Ferro Chrome/Charge Chrome: Import Trade Flow of China Import Trade Flow of China

EXPORTING COUNTRIES

Import: 1 m MT in 2008

China :

1stJapan:

2nd

Cr Conc Export: 0.63 m

MT in 2008

Export Trade Flow of India: Chrome Export Trade Flow of India: Chrome ConcentrateConcentrate

Europe: 4th

FeCr Export: 0.45 m MT in

2008

China 3 rd

Korea : 1 st

Japan: 2 nd

Export Trade Flow of India: Ferro Export Trade Flow of India: Ferro ChromeChrome

China’s Import of Chrome Ore & China’s Import of Chrome Ore & ConcentrateConcentrate

0

2000000

4000000

6000000

8000000

2005 2006 2007 2008 2009 TillSept

Total Import(in MT) Import from India (in MT)

India's Cr Ore/Concentrate Trade India's Cr Ore/Concentrate Trade BalanceBalance

3,200,000

3,600,0003,300,000

3,900,000

2,250,000

1,035,989

1,432,719 1,104,756

630,412 400,000

975,333

1,339,597

984,159

550,532348,516

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

2005 2006 2007 2008 2009 Till Sept

Qu

an

tity

(MT

)

Production Total Export Export to China

China’s Import of High Carbon Ferro /Charge China’s Import of High Carbon Ferro /Charge ChromeChrome

0

700000

1400000

2100000

2005 2006 2007 2008 2009 Till Sept

Total Import(in MT) Import from India (in MT)

India's FeCr Trade BalanceIndia's FeCr Trade Balance

611,373 634,200

820,000

750,000

450,000

264,294 295,646

377,045

453,221

330,000

64,39991,816

181,990

92,907

282,276

0

250,000

500,000

750,000

1,000,000

2005 2006 2007 2008 2009 Till Sept

Qu

an

tity

(MT

)

Production Total Export Export to China

Key Observations• India’s spend share as India’s spend share as

supplier of Chrome Ore supplier of Chrome Ore & Conc to China- 2005 : & Conc to China- 2005 : 32%, 2007 : 16%, 32%, 2007 : 16%, 2009(till Sept): 7%2009(till Sept): 7%

• Absolute volume of Absolute volume of

India’s Chrome Ore & India’s Chrome Ore & Conc export to China Conc export to China went for a gradual went for a gradual decrease over last four decrease over last four years. However China years. However China remained the main remained the main export destination.export destination.

• Share of India’s Share of India’s Chrome Conc total Chrome Conc total export as part of export as part of India’s total production India’s total production falling gradually falling gradually

• India’s spend share as supplier India’s spend share as supplier of Ferro Chrome to China- of Ferro Chrome to China-

2005 : 28% , 2007 : 14%, 2005 : 28% , 2007 : 14%, 2009(till Sept): 17%2009(till Sept): 17%

• Barring 2008, absolute volume Barring 2008, absolute volume

of India’s Ferro Chrome export of India’s Ferro Chrome export to China went for a gradual to China went for a gradual increase over last four years. increase over last four years.

• Share of India’s Ferro Chrome Share of India’s Ferro Chrome export to China as part of export to China as part of India’s total production India’s total production increased to a level of 60%.increased to a level of 60%.

• India’s import of Ferro Chrome India’s import of Ferro Chrome from China which comprises from China which comprises mainly Low Carbon Ferro mainly Low Carbon Ferro Chrome is marginal but having Chrome is marginal but having an increasing trend.an increasing trend.

Analysis of market Analysis of market dynamics dynamics

• GDP growth & Domestic demand GDP growth & Domestic demand

• Per capita SS consumptionPer capita SS consumption

• SS product mixSS product mix

• Usage of scrapUsage of scrap

• Labour CostLabour Cost

• Power CostPower Cost

Factors affecting Sino-India Chrome Factors affecting Sino-India Chrome IndustryIndustry

Factors affecting Sino-India Chrome Factors affecting Sino-India Chrome Trade Trade • Indian Export of Chrome Ore & Concentrate-Indian Export of Chrome Ore & Concentrate- Govt quota allocation and Floor price Govt quota allocation and Floor price

• Correlation between Chrome Ore and Ferro Correlation between Chrome Ore and Ferro Chrome import volume and price in China.Chrome import volume and price in China.

• Indian and Chinese producers’ relative Indian and Chinese producers’ relative competitive strength of Cost of production competitive strength of Cost of production of Ferro Chrome.of Ferro Chrome.

• Nature of market and buying behaviour Nature of market and buying behaviour

Comparison of China's imported cargo Comparison of China's imported cargo priceprice

191

346

610

287

162 236

377

187

18

47

62

53

31

16

8 7

0

10

20

30

40

50

60

70

0

100

200

300

400

500

600

700

2006 2007 2008 2009 Till June

(%)

Price

(USD

/MT)

Cr Ore -Indian Cr Ore-Others Price Premium% India Share in Total Imports

731

1,049

1,773

858731

903

1,302

770

0

16

36

11

21

14

8

17

0

5

10

15

20

25

30

35

40

0

300

600

900

1,200

1,500

1,800

2006 2007 2008 2009 Till June

(%)

Price

(USD

/MT)

FeCr -Indian FeCr- Others Price Premium % India Share in Import

Chrome OreChrome Ore Ferro Ferro ChromeChrome

China’s preference for Indian Chrome Ore China’s preference for Indian Chrome Ore & Conc& Conc

• Quality – Quality – - As stand alone or as a good blending grade for - As stand alone or as a good blending grade for

High Carbon Ferro Chrome High Carbon Ferro Chrome -Ultra high Cr2O3 and Cr:Fe cargo for Low Carbon -Ultra high Cr2O3 and Cr:Fe cargo for Low Carbon

Ferro chromeFerro chrome - Ultra high Cr2O3 with Ultra Low Silica for - Ultra high Cr2O3 with Ultra Low Silica for

Refractory end-useRefractory end-use - Low Alumina & SiO2 for Chrome Chemical- Low Alumina & SiO2 for Chrome Chemical

• Short sailing timeShort sailing time

• No seasonal effect.No seasonal effect.

• Time Zone advantageTime Zone advantage

The Situation – An Analytical LookThe Situation – An Analytical Look

• Only certain volume of Chrome Ore & Only certain volume of Chrome Ore & Concentrate can be imported in China at Concentrate can be imported in China at economical cost to sustain competitive economical cost to sustain competitive smelting. smelting.

• Simple economics prevails in China’s Simple economics prevails in China’s showing preference for Ferro Chrome showing preference for Ferro Chrome between imported and domestic cargo. between imported and domestic cargo.

• Indian Chrome Ore shifts to domestic Indian Chrome Ore shifts to domestic

value adding route.value adding route.

Future scenario and Future scenario and Conclusion Conclusion

Forecast of SS production in Forecast of SS production in ChinaChina

8,4009,100

9,760

10,69011,070

0

3,000

6,000

9,000

12,000

2010 2011 2012 2013 2014

'00

0 M

T

Govt stimulus package started in end 2008 is in Govt stimulus package started in end 2008 is in full force.full force.Govt stimulus package started in end 2008 is in Govt stimulus package started in end 2008 is in full force.full force.

Projected SS demand in IndiaProjected SS demand in India

YearYear FlatFlat LongLong TotalTotal

20052005 10011001 153153 11541154

20102010 16851685 373373 20582058

20152015 31853185 900900 40854085

Figs in ‘000 MTSource ISSDA

Growth of Ferro Chrome capacity of India and Growth of Ferro Chrome capacity of India and ChinaChina

1,450

1,041

1,350

1,156

1,4501,406

1,5001,476

1,6001,576

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

'000

MT

2009 2010 2011 2012 2013

China India

Future issues to ponderFuture issues to ponder

• Scenario change in Chrome supply to China for origins Scenario change in Chrome supply to China for origins other than India.other than India.

• Future offer of Indian Chrome Ore – Cost (Opencast to Future offer of Indian Chrome Ore – Cost (Opencast to underground) and Product mix (High to Medium Grade) underground) and Product mix (High to Medium Grade)

• Future competitiveness of Indian Ferro Chrome Future competitiveness of Indian Ferro Chrome ( Relative advantage of Power Cost)( Relative advantage of Power Cost)

• Backward integration by China SS mills and Ferro Backward integration by China SS mills and Ferro Chrome producers.Chrome producers.

• Forward integration by Indian Ferro Chrome producersForward integration by Indian Ferro Chrome producers

Scenario Shift in Chrome Alloys : India - Scenario Shift in Chrome Alloys : India - ChinaChina

Till 2000 2001 to 2004 2005 to current The possible future

Stainless Steel

Ferro Chrome

Chrome Ore

China reaching half million MT production

Emergence of China as player of significance

in global Stainless Steel

Dominance of China in global Stainless Steel

production

Increased Dominance of China, Emergence of India : high growth in Stainless

Steel production

No Ferro Chrome import by China

China starts importing Ferro Chrome : 1st time

import rom India

Increased production of Ferro Chrome in China and

India. Quantum jump in India’s share in China’s import

China secures Chrome Ore supplies through equity

stakes in Zimbabwe, South Africa etc. Further

consolidation : Cr Ore -FeCr - Stainless Steel

India’s production reaches 2 million MT

India’s production reached 3 million MT with one third

exported to China

Restriction of Ore supply from India . China shifted to supply from other countries

Higher production consumption & export of

Ferro Chrome in India.

Conclusions Conclusions

• China will remain the preferred export China will remain the preferred export destination for Indian producers of Chrome destination for Indian producers of Chrome Ore & Ferro Chrome . Ore & Ferro Chrome .

• Survival matrix for Chinese endusers as Survival matrix for Chinese endusers as well as value adding option of Indian well as value adding option of Indian producers will decide the fate of Indian producers will decide the fate of Indian Chrome Ore to be used for High Carbon Chrome Ore to be used for High Carbon Ferro Chrome production in China. Ferro Chrome production in China.

• In other segments (Chemical, Low Carbon In other segments (Chemical, Low Carbon

Ferro Chrome) Indian chrome ore / Ferro Chrome) Indian chrome ore / concentrate will be a preferred choice in concentrate will be a preferred choice in China.China.

Conclusions Conclusions contd..contd..

• Rapid increase in Ferro chrome demand in Rapid increase in Ferro chrome demand in China and India will boost Ferro Chrome China and India will boost Ferro Chrome production in India in a big way.production in India in a big way.

• Indian Ferro Chrome producers (mainly Indian Ferro Chrome producers (mainly integrated ) going for Stainless Steel integrated ) going for Stainless Steel production will see India -China maturing production will see India -China maturing from a supplier- customer relationship to from a supplier- customer relationship to twin movers of Stainless Steel in Asia.twin movers of Stainless Steel in Asia.

Yin & YangYin & Yang

China & India Chrome EquationChina & India Chrome Equation

The End The End

Thank Thank You You

Authors:Authors:

Mr T S SundaresanMr T S Sundaresan Secretary GeneralSecretary General IFAPAIFAPA

Mr Prabhash GokarnMr Prabhash Gokarn Head (Marketing & Business Development)Head (Marketing & Business Development) Ferro Alloys & Minerals Division, Ferro Alloys & Minerals Division, Tata SteelTata Steel Mr Rajarshi PalitMr Rajarshi Palit Deputy General Manager, Deputy General Manager, Tata Steel Asia (Hong Kong) LtdTata Steel Asia (Hong Kong) Ltd

AcknowledgmentsAcknowledgments

Chrome Market SpotlightChrome Market Spotlight

CRU MonitorCRU Monitor

Ryan’s NotesRyan’s Notes

Metal Bulletin ResearchMetal Bulletin Research

Tex ReportTex Report

ICDAICDA

RoskillRoskill

Marketing Research Group of Marketing Research Group of Tata SteelTata Steel