Deal type. No of deals. Deal value (US$ million). Inbound. 3. 51.3. Outbound .... Fax: 91-124 - 4375509 ... any specific
METALS AND MINING November 2010
METALS AND MINING
November 2010
Contents Advantage India Market overview Industry infrastructure Investments Policy and regulatory framework
Opportunities Industry associations
2
ADVANTAGE INDIA Metals and Mining November 2010
Advantage India •
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.
•
Advantage India
India has untapped metal reserves worth 82 billion tonnes.
•
The country is strategically located, with its proximity to developed European markets and fast-developing Asian markets, to export steel and aluminium.
•
Source: Ministry of Mines, GoI, Annual Report 2009–2010; Ministry of Coal, GoI, Annual Report 2009–2010
3
•
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 offers among the lowest labour and conversion costs worldwide for the production of steel and alumina.
METALS AND MINING
November 2010
Contents Advantage India Market overview Industry infrastructure Investments Policy and regulatory framework
Opportunities Industry associations
4
MARKET OVERVIEW Metals and Mining November 2010
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*.
Size of metals and mining sector 92.4
100.0
US$ billion
80.0 60.0
83.6
65.8 50.8
54.6
2005
2006
40.0 20.0 0.0 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
5
MARKET OVERVIEW Metals and Mining November 2010
Market segments 100%
Iron and steel •
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 tonnes during 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 tonnes during 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 tonnes during April 2009–December 2009*.
•
50%
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*.
40%
Coal
90% 80%
Percentage—market share
70% 71.3% 60%
•
30%
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*.
20% 23.9%
Others — base metals, precious metals and minerals
10% •
4.8%
0%
2009 Others
Coal
•
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.
Iron and steel
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
6
MARKET OVERVIEW Metals and Mining November 2010
Overview of operational mines across states •
•
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.
State
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.
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
7
MARKET OVERVIEW Metals and Mining November 2010
Exports Ores and minerals export (value in US$ billion) 25
22.7 19.8
20 15
16.6
16.9
2006
2007
14.7
10 5 0 2005
•
2008
2009*
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. Source: Ministry of Mines, GoI, Annual Report 2009–2010 *Provisional value
8
MARKET OVERVIEW Metals and Mining November 2010
Domestic demand — iron and steel … (1/4) •
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 fourthlargest 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. Crude steel — capacity and production (million tonnes) 80 60
48.0
51.2 43.4
56.8 46.5
59.8 50.8
72.8
66.3 53.9
58.4 45.8
40 20 0 2004–05
2005–06
2006–07 Capacity
2007–08 Production
Source: Ministry of Steel, GoI, Annual Report 2009–2010 *Provisional figures
9
2008–09
Apr–Dec 09*
MARKET OVERVIEW Metals and Mining November 2010
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). Finished steel — production and consumption (million tonnes) 60 50 40
56.1
52.5 46.6
43.5 36.4
41.4
46.8
52.1
56.4
51.9 43.9
41.0
30 20 10 0 2004–05
2005–06
2006–07 Production
2007–08 Consumption
Source: Ministry of Steel, GoI, Annual Report 2009–2010 *Provisional figures
10
2008–09
Apr–Dec 09*
MARKET OVERVIEW Metals and Mining November 2010
Domestic demand — iron and steel … (3/4) •
•
•
The public sector produced about 27 per cent of the total crude steel, while large and small scale private manufacturers produced 73 per cent.
Sector-wise consumption of finished steel (2009–2010) Construction and infrastructure Capital goods
12% 3% 5%
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.
Automobiles
8% 11%
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.
Packaging 61% Consumer durables Others
Sources: Ministry of Steel, GoI, Annual Report 2009–2010; JSW Steel, Annual Report 2009–2010
11
MARKET OVERVIEW Metals and Mining November 2010
Domestic demand — iron and steel … (4/4) Long product consumption (2007–08)
Flat product consumption (2007–08)
Construction and infrastructure
17% 5%
Construction and infrastructure
21%
Manufacturing
39%
Manufacturing
7% Automobile
Automobile
20%
74% Others
20%
Sources: Ministry of Steel, GoI, Annual Report 2008–09; JSW Steel, Annual Report 2007–08
12
Others
MARKET OVERVIEW Metals and Mining November 2010
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).
Production of aluminium in India (million tonnes) 1.60 1.35
1.40 1.15
1.20
India was the world’s sixth largest producer of bauxite in 2008.
1.00
1.23
1.00 0.88
0.80 0.60
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.
0.40 0.20 0.00
•
2004-05
The primary aluminium industry* is currently concentrated between Nalco, Hindalco and Vedanta.
2005-06
2006-07
2007-08
2008-09
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.
13
MARKET OVERVIEW Metals and Mining November 2010
Domestic demand — aluminium … (2/2) •
•
•
Power, transportation and infrastructure account for almost three-quarters of domestic aluminium consumption, with power being the largest consumer.
Sector-wise consumption of aluminium in India (2009-2010) Power
17%
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.
Transport 7%
48%
13%
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.
Industrial 15%
Source: Hindalco, Investor Meet, July 2010
14
Construction
Others
MARKET OVERVIEW Metals and Mining November 2010
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
Production of raw coal in India (million tonnes) 600.0 500.0
The country’s production of coal accounts for about 7.5 per cent of the total world production.
400.0 300.0 200.0
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
492.9
416.5
100.0 0.0 2004–05 2005–06 2006–07 2007–08 2008–09 Apr–Dec 09* Source: Ministry of Coal, GoI, Annual Report 2009–2010; *Provisional
15
MARKET OVERVIEW Metals and Mining November 2010
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’s estimates, India can expect a shortfall of 83 million tonnes by the end of the Eleventh Plan (2007–2012).
•
Sector-wise consumption of coal (2007–08)
3% 5%
10% Power Steel
8%
Cement
Sponge iron
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.
74%
Others
Source: ―Provisional Coal Statistics 2008–09‖, Ministry of Coal, GoI
16
MARKET OVERVIEW Metals and Mining November 2010
Growth drivers … (1/2) Power •
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).
•
•
Infrastructure and real-estate
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. 17
•
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.
MARKET OVERVIEW Metals and Mining November 2010
Growth drivers … (2/2) Automotive
Cement
•
Sustained growth in India’s automotive sector is driving the demand for both steel and aluminium.
•
India is the world’s second-largest producer of cement, which due to its energy-intensive nature is a major consumer of coal.
•
India is the world’s second-largest manufacturer of two wheelers and the fifthlargest 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.
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.
•
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.
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
18
MARKET OVERVIEW Metals and Mining November 2010
Key trends … (1/2) R&D and upgrading of technology
Capacity additions and expansions to meet growth in domestic demand
•
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.
•
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.
Sources: Ministry of Steel, GoI, Annual Report 2009-2010
19
MARKET OVERVIEW Metals and Mining November 2010
Key trends … (2/2)
Captive mining for coal
Focus on domestic market
•
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.
•
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.
Sources: JSW Steel, Annual Report 2008–09; ―NTPC to delve into contract mining‖, The Economic Times, 23 April, 2009
20
MARKET OVERVIEW Metals and Mining November 2010
Key players — iron and steel Sales (2009–2010) US$ billion (INR billion)
Products
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 Ltd
1.61 (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
Company Tata Steel Ltd
Source: Prowess accessed November 2010, Centre for Monitoring Indian Economy *Sales in 2008-09
21
MARKET OVERVIEW Metals and Mining November 2010
Key players — non-ferrous metals Company
Sales (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
0.009 (0.5)
Aluminium and aluminium products
Man Aluminium Ltd
Source: Prowess accessed November 2010, Centre for Monitoring Indian Economy
22
MARKET OVERVIEW Metals and Mining November 2010
Key players — coal … (1/2) •
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: Player-wise coal production (2008–09) • Central Mine Planning & Design Institute Ltd • Bharat Coking Coal Ltd • Central Coalfields Ltd 9% • Eastern Coalfields Ltd Coal India Ltd. 9% • Western Coalfields Ltd • South Eastern Coalfields Ltd Singareni Colleries Company Ltd. • Northern Coalfields Ltd • Mahanadi Coalfields Ltd Others 82%
Sources: Ministry of Coal, GoI, Annual Report 2009-2010
23
MARKET OVERVIEW Metals and Mining November 2010
Key players — coal … (2/2) 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
Company
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
24
METALS AND MINING
November 2010
Contents Advantage India Market overview Industry infrastructure Investments Policy and regulatory framework
Opportunities Industry associations
25
INDUSTRY INFRASTRUCTURE Metals and Mining November 2010
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
26
METALS AND MINING
November 2010
Contents Advantage India Market overview Industry infrastructure Investments Policy and regulatory framework
Opportunities Industry associations
27
INVESTMENTS Metals and Mining
November 2010
Investments •
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 Cumulative FDI inflows into metals and mining
M&A scenario — details 2009 Deal type
Period: April 2000 to September 2010 No of deals
Deal value (US$ million)
Inbound
3
51.3
Outbound
1
-
Domestic
1
367.6
Sector
2010 (January–November 2010) Deal type
No of deals
Deal value (US$ million)
Inbound
1
1029.1
Outbound
1
-
Domestic
2
17.2
US$ million
Metallurgical industries
4038.7
Mining
767.7
Diamond and gold ornaments
292.3
Coal production
15.6
Total
5114.3
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
28
METALS AND MINING
November 2010
Contents Advantage India Market overview Industry infrastructure Investments Policy and regulatory framework
Opportunities Industry associations
29
POLICY AND REGULATORY FRAMEWORK Metals and Mining November 2010
Policy and regulatory framework … (1/3) •
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.
•
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).
30
POLICY AND REGULATORY FRAMEWORK Metals and Mining November 2010
Policy and regulatory framework … (2/3) •
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.
31
POLICY AND REGULATORY FRAMEWORK Metals and Mining November 2010
Policy and regulatory framework … (3/3) •
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)
32
METALS AND MINING
November 2010
Contents Advantage India Market overview Industry infrastructure Investments Policy and regulatory framework
Opportunities Industry associations
33
OPPORTUNITIES Metals and Mining November 2010
Opportunities … (1/2) Huge potential for demand growth, given the high potential to increase per capita consumption of steel and aluminium
Large scope for new mining capacities in iron ore, bauxite, coal and gold
•
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 greenfield capacity 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.
•
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.
Sources: US Geological Survey, USGS website http://www.usgs.gov/
34
OPPORTUNITIES Metals and Mining November 2010
Opportunities … (2/2)
Rapid growth of user-industries to drive demand for metals and minerals
•
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.
Sources: US Geological Survey, USGS website http://www.usgs.gov/
35
METALS AND MINING
November 2010
Contents Advantage India Market overview Industry infrastructure Investments Policy and regulatory framework
Opportunities Industry associations
36
INDUSTRY ASSOCIATIONS Metals and Mining November 2010
Industry associations Aluminium Association of India
Indian Stainless Steel Development Association
118, 1st Floor, Ramanashree Arcade
L -22/4, DLF Phase–II
18, M. G. Road
Gurgaon, Haryana-122 002
Bengaluru, Karnataka-560 001
Phone: 91-124 - 4375501
Phone: 91- 80-25582197, 25582757
Fax: 91-124 - 4375509
Fax: 91-80-25594535
E-mail:
[email protected]
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 E-mail:
[email protected]
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NOTE Metals and Mining
November 2010
Note Wherever applicable, numbers in the report have been rounded off to the nearest whole number. Conversion rate used: US$ 1= INR 48
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METALS AND MINING
November 2010
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