a review of developments in global & indian steel industry...12 hariharpur lem bicha block i...
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A Review of developments in
Global & Indian Steel Industry
Bi-monthly edition
Issue II
January 2016 (for the period November– December 2015)
Strictly for internal circulation
Our eight Full Members are:
• Steel Authority of India Ltd.
• Tata Steel Ltd.
• JSW Steel Ltd.
• Rashtriya Ispat Nigam Ltd.
• Essar Steel Ltd.
• Jindal Steel & Power Ltd.
• Bhushan Power & Steel Ltd.
• Bhushan Steel & Strips Ltd.
Our six Affiliate Members are, Monnet
Steel, INSDAG (Institute for Steel
Development and Growth), KISMA
(Karnataka Iron and Steel
Manufacturer’s Association), Gerdau
Steel, Visa Steel & Jindal Stainless.
About Indian Steel Association
Slide No.
CONTENTS
RAW MATERIAL 4
PRODUCTION 11
CONSUMPTION 15
TRADE 18
SHIPPING & RAILWAYS 22
COUNTRY REPORTAGE 25
PRICE & FORECASTS 33
SIGNIFICANT ECONOMIC PARAMETERS 36
RAW MATERIAL
Source: International Energy Agency; Secondary Research; *MTCE - Million Tons of Coal Equivalent
Coal related Outlook
5
• International Energy Agency (IEA) in its “Medium-Term Coal Market Report 2015
[Market Analysis & Forecasts]” has stated:
“We revise our global demand forecast downward by over 500 million tonnes
of coal-equivalent (Mtce). Coal demand will grow to 5814 Mtce through 2020,
which is 0.8% per year on average. Half of the growth, 149 Mtce, will occur in India.”
• Cleveland-based Institute for Energy Economics and Financial Analysis (IEEFA), in its
report titled 'Carpe Diem: Eight Signs That Now is the Time to Invest in the Global
Energy Market Transformation' has stated that the global demand for coal has peaked
in 2014 [1,113 metric tons] and it will decline 30 percent by 2021 [762 metric tons].
• In November 2015, UBS has updated its commodity forecasts whereby thermal coal,
has been trimmed to USD 56 per tonne from USD 59 and coking coal, from USD 104
to USD 91.
• In November 2015, KPMG released the third edition of its report “The Rising Sun:
Disruption on the horizon” specific to India, wherein it has stated that by 2020, solar
power prices could be up to 10 percent lower than coal power prices and “post 2022,
coal prices will begin to chase solar prices and not vice versa as we see today”.
Source: Ministry of Coal
Auction of 8 Coal Mines for
Non-Regulated Sector in the 4th Tranche
6
Name of
Mine/Coal
Block
State
Whether
Regionally
Explored or
explored in
detail)
Geological
reserves
(in MT)
Peak rated
Capacity
(MTPA)
Total
Brahampuri Madhya PradeshExplored
102.49 0.361
Bundu Jharkhand Explored 102.27 1.00 1
Gondkhari Maharashtra Explored 98.72 1.00 1
Gondulpara Jharkhand Explored 176.33 4.00 1
Jaganathpur A West Bengal Explored 267.33 0.60 1
Jaganathpur B West Bengal Explored 169.57 0.60 1
Khappa & Extn. Maharashtra Explored 84.72 0.30 1
Suliyari Madhya Pradesh Partially Explored 142.00 5.00 1
Grand Total 1143.42 12.86 8
While the tender process for the above blocks was initiated vide notice inviting tender dated 20.11.2015 by the Nominating
Authority, Ministry of Coal; it stood cancelled vide notice dated 30.12.2015, on account of fewer number of bids.
Source: Organization of the Petroleum Exporting Countries (OPEC); *mb/d - Million Barrels per day
Crude Oil related Outlook
7
• The OPEC 2015 World Oil Outlook (WOO) report has presented two outlooks viz. a
medium term outlook to 2020 and a long term outlook to 2040.
o Medium-term oil demand is revised upward, compared to the WOO 2014, rising
above 97 million barrels a day (mb/d) by 2020.
o Oil demand is projected to be at 110 mb/d by 2040.
o Long-term demand is dominated by the developing Asia region, which accounts for
70% of the increase by 2040.
o Both OPEC and Non-OPEC crude is expected to decline in 2016. However, while
Non-OPEC crude starts a slow recovery in 2017, OPEC crude will not start their
recovery until 2019.
Medium-term liquids supply outlook (mb/d) Long-term liquids supply outlook (mb/d)
2015 2016 2017 2018 2019 2020 2025 2030 2035 2040
Non-OPECCrude
43.2 43.1 43.3 43.7 44.1 44.3 44.4 43.3 41.4 39.5
OPECCrude
31.0 30.9 30.8 30.7 30.6 30.7 32.1 34.7 37.9 40.7
Report released on December 23, 2015
Source: News reports
Iron Ore Forecasts
8
• Australia’s Department of Industry, Innovation & Science in its quarterly outlook of
December 2015 has forecasted that iron ore prices will average USD 41.30 a tonne in
2016. [Price projections refer to spot ore with 62 per cent content free-on-board Australia].
• Investment Banker Goldman Sachs has lowered the price outlook on iron ore to USD
38 a metric tonne in 2016 and USD 35 in both 2017 and 2018.
• According to Axiom Capital Management Inc., iron ore’s price collapse will extend into
the USD 20 a metric ton range by 2017.
• Deutsche Bank has also reduced its iron ore price forecasts for 2016 and 2017. It has
stated that USD 36 per ton is the floor for Australian producers and that USD 26 per
ton is the absolute floor.
• According to BIS Shrapnel’s report titled “Mining in Australia 2015 to 2030”, Australia’s
mining industry is likely to see up to 20,000 jobs fade by the end of 2018 with a 58
percent fall in investments in the sector over the next three years.
Source: MSTC e-commerce
Auction of Mining Blocks (Iron Ore & Limestone)
Under Mineral (Auction) Rules, MMDR Act, 1957
9
Name of the Block Mineral Ore Type of Lease/ Licence
Chhattisgarh
1 Karhi Chandi Limestone Block Limestone Mining Lease
2 Kesla Limestone Block Limestone Mining Lease
3 Mangsa-Pauni-Khauna Limestone
Block
Limestone Mining Lease
4 Mohra East Limestone Block Limestone Mining Lease
Gujarat
5 Mudhvay Sub-block A Limestone Mining Lease
6 Mudhvay Sub-block B Limestone Mining Lease
7 Mudhvay Sub-block C Limestone Mining Lease
8 Mudhvay Sub-block D Limestone Mining Lease
9 Goyla Block Limestone Mining Lease
Detailed Notice Inviting Tenders (NITs) have been issued by State Governments for the above mentioned blocks,
can be accessed on MSTC e-commerce website.
Source: MSTC e-commerce
Auction of Mining Blocks (Iron Ore & Limestone)
Under Mineral (Auction) Rules, MMDR Act, 1957
10
Name of the Block District Type of Lease/ Licence
Maharashtra
10 Nandgaon-Ekodi Limestone Mining Lease
11 Degve-Banda Iron Ore Mining Lease
Jharkhand
12 Hariharpur Lem Bicha Block I Limestone Composite Licence
13 Hariharpur Lem Bicha Block II Limestone Composite Licence
Rajasthan
14 Sindwari-Rama Khera – Satkhanda Block A Limestone Mining Lease
15 Sindwari-Rama Khera – Satkhanda Block B Limestone Mining Lease
16 Harima-Pithasar- 3D Limestone Mining Lease
Odisha
17 Ghorhaburhani-Sagasahi Iron Ore Mining Lease
Detailed Notice Inviting Tenders (NITs) have been issued by State Governments for the above mentioned blocks,
can be accessed on MSTC e-commerce website.
PRODUCTION
Source: World Steel Association
Crude Steel Output touched 127 MT in Nov’15,
States World Steel Association
According to World Steel Association, the world crude steel output by 66 countries
reporting to the Association in November 2015 declined by 4.1% when compared with
November 2014.
Output of the top 10 countries in Nov’15 is given below:
Rank Nation Output (in ‘000 tonnes)
1 China 63,320
2 Japan 8,745
3 India 7,140
4 United States 6,089
5 South Korea 5,890
6 Russia 5,715
7 Germany 3,482
8 Turkey 2,599
9 Brazil 2,548
10 Ukraine 1,884
12
Source: World Steel Association
Crude Steel Output by Asian Region
Declines in Nov 2015
13
Country 11 months (2015) 11 months (2014) % Change
China 738,380 754,990 -2.2
India 82,092 79,825 +2.8
Japan 96,564 101,667 -5.0
South Korea 63,833 65,767 -2.9
Pakistan 2,611 2,189 +19.3
Taiwan 19,833 21,069 -5.9
Thailand 3,451 3,749 -8.0
China 738,380 754,990 -2.2
India 82,092 79,825 +2.8
Output in ‘000 tonnes
According to World Steel Association, the crude steel production by Asia dropped by 2.3
percent during the month of November 2015 year-on-year.
Source: World Steel Association
Crude Steel Output by CIS Region
Declines in Nov 2015
14
Country 11 months (2015) 11 months (2014) % Change
Byelorussia 2,415 2,289 +5.5
Kazakhstan 3,274 3,404 -3.8
Moldova 400 323 +23.9
Russia 65,164 65,309 -0.2
Ukraine 21,033 25,267 -16.8
Uzbekistan 597 682 -12.5
Output in ‘000 tonnes
According to World Steel Association, crude steel production by Commonwealth of
Independent States (CIS) dropped marginally by 1.7 percent during the month of
November year-on-year.
CONSUMPTION
Source: Joint Plant Committee, Ministry of Steel; Moody’s Investors Service
Outlook on Demand & Consumption
16
• India’s finished steel consumption during April-November 2015-16 increased 5.3
percent to 52.246 MT compared to the same period in the previous financial year, as
per Joint Plant Committee, Ministry of Steel.
• In November 2015, Moody’s Investors Service released its report titled “Steel -Asia
2016 Outlook” wherein it has stated the following:
• Although Indian steelmakers will also see their profitability fall in 2016, their profitability
will remain higher than that of other Asian steelmakers, owing to the country's rising
demand and captive iron ore mines.
• Its negative outlook for Asian steel companies reflects its expectation that profitability for
the steelmakers will continue to decline, as oversupply and weakening demand in China
will further weaken prices.
• The profitability for most of the steel companies in Asia will exceed the regional average,
because they are market leaders in their home countries, sell high-margin products, and
benefit from business integration and diversification.
Source: News reports; Ernst & Young; *Published in July 2015
Outlook on Demand & Consumption
17
• In December 2015, Commodity pricing agency Platts surveyed industry participants in
India and as an outcome of the survey, stated that it expects steel demand to rise 4-5
percent in 2015-16 to 80 MT in the country.
• Platts stated that analysts believe that a proper implementation of Prime Minister
Narendra Modi's 'Make in India', coupled with aligned infrastructure development,
will boost steel demand growth by 10-12 percent during 2018-2019 to 2024-
2025, reaching 160-180 MT by 2024-25.
• As per a report titled “Globalize or customize: finding the right balance [Global steel
2015–2016]*” by Ernst &Young,
• After increasing by only 2 percent in FY15, apparent steel consumption in India is
expected to rise by about 7 percent in FY16 as economic activity increases.
TRADE
Source: Joint Plant Committee, Ministry of Steel
Status of India’s Steel Trade
19
Total Finished Steel
(Alloy + Non Alloy)April – November 2015-16
Qty (in MT) % Change
Import 7.446 +34.4
Export 2.520 -31.2
• India’s steel imports fell in November 2015 for the first time in eight months
of 2015-16.
• For November 2015, Inbound shipment fell 6.9% to 0.76 MT from 0.82 MT a
year earlier.
Source: U.S. Department of Commerce, Enforcement and Compliance; American Iron & Steel Institute (AISI)
Status of United States’ Steel Imports
20
Year-Month Quantity (in tons)
14-Oct 4,029,058
14-Nov 3,351,280
14-Dec 3,299,945
15-Jan 3,985,719
15-Feb 3,367,057
15-Mar 3,280,348
15-Apr 3,176,363
15-May 3,082,841
15-Jun 2,812,685
15-Jul 2,980,650
15-Aug 2,777,241
15-Sep 2,571,182
15-Oct 2,758,482
15-Nov* 2,132,741
• Steel import permit applications for the
month of November total 2,647,000 net tons
(NT).
• This was a 24 percent decrease from the
3,473,000 permit tons recorded in October
2015 and a 13 percent decrease from the
October final imports total of 3,041,000 NT.
• In November, 2015 the largest finished steel
import permit applications for offshore
countries were for South Korea (330,000 NT,
down 7% from October final), Japan (213,000
NT up 56%), Turkey (201,000 NT, down 32%),
China (112,000 NT, up 63%) and Germany
(106,000, up 14%).
*Preliminary Census data compiled through November 2015
Source: Japan Iron & Steel Federation
Japan Exports Iron & Steel
products to the tune of 3.23 MT in Nov’15
21
Nov 2015
(in tons)
Nov/Oct15
(%)
Pig iron 2,360 391.5
Ferroalloy 22,713 100.2
Ingots 6,827 255.9
Semi-finished products 372,940 91.5
Ordinary steel products - Total 2,169,899 95.6
Stainless steel 68,364 79.8
Other specialty steel 516,069 92.1
Specialty steel products - Total 584,433 90.5
Steel wire 17,820 84.6
Other secondary products 33,562 86.6
Secondary steel products - Total 51,382 85.9
Others * 20,606 117.8
Total iron and steel products 3,236,702 94.3
"Others" consist of clad plate and cast-iron pipes.
SHIPPING & RAILWAYS
Source: Press Information Bureau, Government of India
New Initiatives by Ministry of Shipping, GoI
23
• The Government has undertaken an exercise to amend the Major Port Trusts Act,
1963 with a view to secure greater operational freedom to the Board of Trustees of
Major Ports in tune with present day requirements and also giving flexibility in fixation
of user charges to service providers in Major Port Trusts.
• Shipping Corporation of India had started fortnightly India-Myanmar cargo service in
October 2014 linking the South and East coasts of India, which reaches Yangon via
Krishnapatnam.
• Inland Waterways Authority of India (IWAI) is executing Jal Marg Vikas Project to
enable plying of about 1500 DWT commercial vessels on Haldia-Allahabad stretch of
National Waterways-1 (NW-1) with technical and financial support of World Bank.
• IWAI, additionally, proposes to guide and support Rajasthan government for
building an Inland Shipping Port at Jalore, Rajasthan.
• In November 2015, India and Bangladesh signed the Standard Operating Procedure
(SOP) in New Delhi today, to operationalize the “Agreement on Coastal Shipping”
which was signed between the two countries in June, 2015.
Source: Morgan Stanley
Highlights of Morgan Stanley Report on Railways
Nov’2015
Report released on November 25, 2015; Points highlighted above in italics have been reproduced verbatim
24
Morgan Stanley’s report titled “The Next India: Industrials – The Return of theTransportation Behemoth” states the following:
• The World Bank estimates that India's logistics costs are 2-3X the best practice benchmarkcosts, hurting India's manufacturing competitiveness. We believe that the key reason for this isthe underinvestment in Indian Railways – with budget allocation vs. roads significantly lowerthan global standards.
• Rail is a significantly cheaper mode of transport than roads, yet the share of roads in Indianfreight movement is >1.5X that of the railways, owing to the congestion on the rail networkand poor policies.
• Estimated that India will spend USD 95 bn on the Indian Railways over the next 5 years,which along with the railways multiplier will result in 12% of the growth in GDP betweenF2015-19e being driven just by the investment.
• Spending on railways would of course result in significant demand creation, particularly forcommodity sectors such as iron and steel (and to a lesser extent, cement) and also for raillinked service sectors (like engineering).
COUNTRY REPORTAGE
Source: American Iron & Steel Institute (AISI); *AISI release dated 11.12.2015
Developments in America
26
Against granting of Market Economy status to China
• The American Iron and Steel Institute (AISI), the Steel Manufacturers Association, the
Canadian Steel Producers Association, CANACERO (the Mexican steel association),
Alacero (the Latin American steel association), EUROFER (the European steel
association), Instituto AcoBrasil (the Brazilian Steel Institute), the Turkish Steel
Producers Association and the Committee on Pipe and Tube Imports conducted an
educational briefing for government officials in Paris on December 1, 2015, where they
presented a unified position on the negative impact of granting Market Economy Status
(MES) to China in December 2016.
Custom Reauthorization Bill to pass ENFORCE ACT in United States*
• Forty members of a Congressional Steel Caucus of the United States, sent a letter to
the leaders of the House Ways and Means Committee [which has jurisdiction over
trade issues] to emphasize the importance to the steel industry of overdue legislation
(The Customs Reauthorization Bill, to pass the Trade Facilitation and Trade
Enforcement Act) to address the evasion of trade remedy orders.
• The American Iron & Steel Institute applauded the efforts of the Steel Caucus
Source: China Iron & Steel Association; *Portions in italics have been reproduced verbatim from CISA release dated 25.11.2015
Developments in China
27
CISA’s response to Joint Statement issued by Nine European & American
Steel Associations*
• Chinese steel industry, as a victim of trade protectionism, opposes to using the excuse of steel
trade to deny China’s market economy status.
o Since 2011, China has actively eliminated obsolete capacities, and reinforced energy
saving and environmental protection.
o 77.8 MT of crude steel capacities have been eliminated and more efforts will be made
to reduce capacities.
o From January to October 2015, Chinese crude steel output has declined by 2.23 percent
y-o-y, a reduction of more than 15 MT. It must be admitted that resolving overcapacity is
a long-term process.
o We have noted that the increasing Chinese steel exports this year have brought about
some impacts on some countries and regions, and we have tried to make some
adjustments.
o However, it cannot be denied that the increasing exports are mainly due to the market
forces and competitiveness and Chinese steel products are popular in the export
destinations, bringing about benefits for many consumers.
Source: Secondary Research; *23.12.2015; # Issued by Central Committee of Communist Party of China on 29.10.2015
Developments in China
28
Setting National Standards for GHG emissions*
• National Development and Reform Commission (NDRC) issued national standards for
industrial firms to report their greenhouse gas emissions as part of the country's plan
to launch a national carbon market in 2017.
• China aims to cut its carbon intensity, or carbon emission for generating each unit of
economic output, by 60-65 per cent by 2030 from the 2005 level.
• The reporting rules cover 10 industries including power generation, grids, magnesium
and aluminium smelting, steel and iron, civil aviation, glass, cement, ceramic, chemicals
production.
Proposal on Formulating the Thirteenth Five-Year Plan (2016-2020) on
National Economic and Social Development (13th FYP Proposal)#
• The Proposal calls for “medium to high” growth, with President Xi stating that China’s
annual GDP growth rate should be no less than 6.5 percent over the next five years.
• The Proposal calls for the government to play a smaller role in commodities and
services pricing, and for full convertibility of China’s currency, the yuan, on the capital
account by 2020.
Source: Presentation made by EUROFER at OECD’s 79th Session of the Steel Committee, Paris, November-December 2015
Developments in European Union
29
Sustained Recovery in the EU region
• GDP growth rate of EU economy stood at 1.5 percent in 2015 and on track for broad-based
economic upturn around 2 percent in 2016
• Steel demand steadily edging higher (+1.5 percent in 2015; +2 percent in 2016)
• Amongst EU steel-using sectors, automotive remains best performing sector, while tubes
remains weakest
Risk focus moving from Greece to China
• Earlier than expected Chinese steel demand decrease pushing massive excess steel
production in the international markets
• EU finished steel import increased by +26 percent 2015YTD (+17% 2014)
• Chinese finished steel imports into the EU surged by +60 percent 2015 YTD representing 30
percent of total EU imports
• EU steel mills do not gain from rising domestic demand
• Surging EU imports capturing the additional steel demand practicing extremely low prices
(below cost) depressing EU domestic prices
Points highlighted above in italics have been reproduced verbatim; YTD –Year To Date
Source: Presentation made by Russian Steel Organization at OECD’s 79th Session of the Steel Committee, Paris, November-December 2015
Developments in Russia
30
Resilience in Steel Demand expected
• Russian economy started falling into recession in 2014; Recovery is expected from 2016
onwards
• Steel demand in 2016 is to stabilize following a major drop in 2015
Inflation of Costs (Capex & Opex) for Russian Steel
• Gas and electricity tariffs have continued to steadily grow
• Costs of funding increased by at least 2X by Jan 2015 (current CB rate is 11 percent)
• Banks set extremely tight conditions
• Ruble appreciation increases costs in USD, weighing negatively on profitability
• A number of projects (incl. downstream expansion) cancelled or postponed due to the lack of
funding or low attractiveness as prices fall and costs rise
Decline in exports from Russia
• Due to stiff competition from China and other CIS countries, pressure on export prices
persisted (down by 50 percent since 2014)
• Demand in key importing regions declined or shifted to Chinese imports
Points highlighted above in italics have been reproduced verbatim; CB – Central Bank
Source: Presentation made by Korea Iron & Steel Association at OECD’s 79th Session of the Steel Committee, Paris, November-December 2015
Developments in S. Korea
31
Concerns over low profitability of the Korean steel industry
• The Korean steel industry is confronted with low profitability due to a contraction in domestic
demand and a worldwide excess overcapacity as well as surging low-priced imports.
• Accordingly, Korean steelmakers are now taking the active, voluntary and painful restructuring
processes through the closure of steelworks, suspension of operation and M&A in order to
overcome the current crisis.
• During the period of 2014 and to date 2015, a total of 2.6 MT of EAF facilities has been
closed and additional volumes of suspension of operation in EAF facilities amounted to 5 MT
amongst major crude steel making facilities.
Concerns over surge in low-priced imports
• Korea’s steel imports increased by 17.3 percent in 2014, however, they turned into the
negative growth of 1.7 percent for the first nine months of 2015 due to a downturn in
domestic demand.
• Chinese imports have continued to flood into the Korean steel market while Japanese imports
have decreased in recent years.
Points highlighted above in italics have been reproduced verbatim; EAF – Electric Arc Furnace
Source: South East Asia Iron & Steel Institute (SEAISI); *Address of Chairman (SEAISI) at ASEAN Iron and Steel Sustainability Forum in Dec’15
Developments in South East Asia
32
Influx of low priced steel products in ASEAN region*
• It is imperative for the ASEAN steel manufacturers to find ways to differentiate and add value
to their products as they still enjoy the advantage of local relationships and proximity to their
customers.
• Steel players in the region should not loose sight of the bigger and more serious problem of
climate change. In this regard, SEAISI has completed the ASEAN Steel Industry Energy and
Green House Gas (GHG) Intensity Benchmarking project.
Healthy growth rate in demand exhibited by ASEAN
• ASEAN steel demand registered a healthy growth rate of 8.9% y-o-y in the first half of 2015.
o This was contributed largely by a significant surge in steel demand in Vietnam, from 6.35
MT in the first half of 2014 to 8.38 MT in the corresponding period of 2015.
o Singapore also registered a strong growth of 37.8% y-o-y in steel demand to 2.2 MT.
o Philippines’ steel demand also picked up by 8.9% y-o-y to 3.8 MT.
o Malaysia maintained its modest growth momentum with steel demand increasing 2.6%
y-o-y to register 5.1 MT in the same period.
o Thailand’s steel demand stagnated at 8.3 MT in the first half of 2015.
o Indonesia was the only country in the region that experienced a decline of 2.6% y-o-y in
steel consumption to 7.3 MT.
PRICE & FORECASTS
Source: SEAISI
Steel Price Report – China
December 2015
as of December 17, 2015
34
Unit: yuan / ton
Product Spec Beijing Tianjin Shenyang Shanghai JinanZhengz
houWuhan Guangzhou Chengdu Kunming Xi'an
Wire Rod
HPB300Φ6.5mm 1800 1810 1770 1920 1940 1980 1900 2060 2200 2470 2000
Rebar
HRB400Φ16mm 1640 1650 1730 1740 1700 1850 1850 2150 2140 2390 1940
Angle Bar
Q2355# 2000 2000 1980 2030 2060 1950 2040 2200 2380 2500 2270
Plate Q235 20mm 1780 1730 1840 1770 1750 1750 1840 2000 1940 2170 1760
HRC Q235 3.0mm 1740 1740 1800 1900 1890 1850 1900 1970 2080 2320 1830
CRS SPCC 1.0mm 2530 2530 2550 2280 2530 2370 2190 2550 2450 2580 2370
Source: The Economist Intelligence Unit, Global Forecasting Service
Individual Commodity Price Forecasts
December 2015
2015 2016 2017 2018 2019 2020
Coal
(US$/tonne,;Australian, thermal, Newcastle/Port
Kembla)
57.6 58.4 63.6 66.0 66.0 65.0
Iron ore
(US$/dry metric tonne unit)56.0 50.0 54.0 57.0 57.0 56.0
Natural gas
(US$/mmBtu, US; averages)2.7 3.0 3.7 3.8 3.7 3.7
Oil: Brent
(US$/barrel; spot price)53.0 53.2 67.0 73.6 72.8 71.4
Steel
(US$/tonne; fob Western EU export, HR coil)412.5 362.5 395.0 430.0 425.0 420.0
35
As of December 11, 2015;
The details on demand and supply dynamics for commodities are available on the website of the Economist Intelligence Unit
SIGNIFICANT
ECONOMIC PARAMETERS
Source: The Economist Intelligence Unit, Global Forecasting Service
Economic Forecasts
December 2015
As of December 11, 2015;
The assumptions for forecasts are available on the website of the Economist Intelligence Unit
In % 2015 2016 2017 2018 2019 2020
IndiaReal GDP Growth 7.3 7.4 7.3 7.4 7.3 7.1
Inflation 4.8 5.3 5.8 5.5 5.5 5.8
ChinaReal GDP Growth 6.9 6.5 6.0 5.6 4.9 4.7
Inflation 1.5 2.1 2.4 2.2 1.9 2.3
U.S.AReal GDP Growth 2.5 2.4 2.4 2.5 1.4 2.2
Inflation 0.1 1.6 2.3 2.5 1.7 1.9
JapanReal GDP Growth 0.7 1.2 0.7 1.3 0.8 1.3
Inflation 0.9 1.3 2.2 1.9 1.6 1.7
Euro AreaReal GDP Growth 1.6 1.7 1.6 1.6 1.5 1.5
Consumer Price Inflation 0.0 0.9 1.5 1.6 1.6 1.6
37
Source: Ministry of Finance, GoI
Highlights of Mid-Year Economic Analysis
2015-2016
Report released on December 18, 2015; Points highlighted above in italics have been reproduced verbatim
38
• The decrease in growth rate of eight core infrastructure supportive industries during April-September, 2015 can be attributed to lower growth in electricity, coal and cement sectors andnegative growth in steel and natural gas sectors.
• Capital goods and consumer goods sectors performed comparatively better, intermediategoods, basic goods and non-durables segment of consumer goods registered lower growthduring April-September 2015-16 as compared to the corresponding period of the previousyear.o The growth in the intermediate goods segment slowed down to 2.0 percent in the first
half of the current financial year as compared to 2.3 percent in the correspondingperiod of previous year.
o The slow growth in intermediate segment can be mainly attributed to the lower growthin cotton yarn, steel structures and negative growth in fasteners (High Tensile)/Bolts &Nuts, synthetic yarn, furnace oil and bearings (Ball/Roller).
• While the overall index of industrial production (IIP) has grown marginally faster in the first sixmonths this year than the last, there is considerable variation in performance across sectors.o In terms of production, power, fertilizers, and cars have been surging.o In contrast, commodities such as steel, iron, aluminium, and cement are doing less well.
Source: Reserve Bank of India
Highlights of Financial Stability Report
of RBI dated Dec’15
Report released on December 29, 2015; Points highlighted above in italics have been reproduced verbatim;
SCBs – Scheduled Commercial Banks; PSBs – Public Sector Banks;
* during 2005-2014
39
• Presently the PSBs with a predominantly high share in infrastructure financing are observed tobe facing the highest amount of stress in their asset quality and profitability.
• While capital expenditure (capex) in the private sector is a desirable proposition for a fastgrowing economy like India, it is observed that the capex which had gone up sharply* hasbeen coming down despite rising debt.
• A risk profile of select industries at end September 2015 showed that iron and steel,construction and power industries had relatively high leverage as well as interest burden.
• Between March and September 2015, the gross non-performing advances ratio for SCBsincreased, whereas restructured standard advances ratio declined.
• Five sub-sectors viz. mining, iron & steel, textiles, infrastructure and aviation, which togetherconstituted 24.2 per cent of the total advances of SCBs as of June 2015, contributed to 53.0percent of the total stressed advances.
• Stressed advances of the infrastructure sector increased to 24.0 percent in June 2015 from22.9 percent in March 2015.
Source: Ministry of Finance
Highlights of Report on GST by CEA
dated Dec’15
Report titled “Report on the Revenue Neutral Rate and Structure of Rates for the Goods & Services Tax”, released on Dec 4, 2015;
All rates are sum of rates at centre & states;
Revenue Neutral Rate – Refers to that single rate, which preserves revenue at desired (current) levels;
Standard Rate – Refers to that rate in the GST regime which is applied to all goods & services whose taxation is not explicitly specified
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A Committee headed by the Chief Economic Adviser Dr. Arvind Subramanian, submittedits report on the possible Tax rates under Goods & Services Tax (GST).
• In order to ensure that the standard rate is kept close to the revenue neutral rate, themaximum possible tax base should be taxed at the standard rate.
• The Committee recommended that lower rates be kept around 12 percent (centreplus states) with standard rates varying between 17-18 percent.
Summary of Recommended Rate Options (in %)
Revenue Neutral Rate
Rate on precious metals
“Low” rate (goods)
“Standard” rate (goods & services)
“High/Demerit” rate or Non GST
Excise (goods)
Preferred 15 6 12 16.9 40
4 17.3
2 17.7
Alternate 15.5 6 12 18.0 40
4 18.4
2 18.9
Source: Reserve Bank of India
Rates at Reserve Bank of India
December 2015
CRR – Cash Reserve Ratio; SLR - Statutory Liquidity Ratio
CurrencyDate
December 31, 2015
I USD 66.3260
1 EUR 72.5010
1 GBP 98.3482
100 YEN 55.0900
Policy Repo Rate : 6.75%
Reverse Repo Rate : 5.75%
Marginal Standing Facility Rate : 7.75%
Bank Rate : 7.75%
Reference Rates
Policy Rates Reserve Ratios
CRR : 4%
SLR : 21.5%
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Lending/ Deposit Rates
Base Rate : 9.30% - 9.70%
Savings Deposit Rate : 4.00%
Term Deposit Rate > 1 year : 7.00% - 7.90%
THANK YOU
On behalf of Indian Steel Association,Ms. Ashima Tyagi
DISCLAIMER
The material in this presentation has been prepared by Indian Steel Association (ISA) and is a general background information reviewing the status of the
developments in the global and Indian steel industry as at the date of this presentation. This presentation is strictly for internal use of all the member
companies of ISA, whose names have been stated in the presentation.
Information is given in summary form and does not purport to be complete or all inclusive. The information has been sourced from independent third party
databases, knowledge sources and news reports, and the authenticity of the same has not been independently verified by ISA.
Additionally, any third party forecasts on financial or economic parameters, projections or estimates should not be construed as an investment advice or a
recommendation to any ISA member. Recipients of this presentation from member companies of the ISA should each make their own evaluation of the
contents and adequacy of the information contained in the presentation.
ISA does not undertake any obligation to publicly release any changes to any revisions, modifications or forward looking statements in the subsequent
editions of this bi-monthly presentation. Unless otherwise specified, all information is for the period November 2015 – December 2015.