Prabhash Gokarn, Tata Steel, India

Chrome Alloy Scenario In India

May 2010

May 2010

This presentation is an amalgamation of the author’s own views.

Tata Steel does not necessarily subscribe to the views expressed in the presentation and the views should not be taken as company policy.

Chrome DiscoveryChrome Discovery• Nicolas-Louis Vauquelin in 1797 • Chromium-iron spinel now known as chromite (FeOCr2O3). • Colorful salts : name derived from “khrôma” Greek word for colour. • In 1798-99, Lowitz & Klaproth independently discovered chromium from the Beresof Mines

South-Eastern France.

Stainless SteelStainless Steel

• Corrosion resistance of iron-chromium alloys first recognized in 1821 by the French metallurgist Pierre Berthier

• 1890s – 1915 : various patents for different iron – chromium stainless alloys . Harry Brearley usually credited with first patent for Martensitic stainless steel in 1915, & Dr Hatfield with invention of 18/8 type Austenitic Stainless Steel.

May 2010

Industrial uses & Intermediate Products - Chromite

Refractory Chemical Metallurgical Foundry SandsCement kiln Chrome Plating Ferrous Alloys

Fiberglass furnace Corrosion control -Cast IronGlass tank regenerator Metal finishing -Steel :

Mag-chrome refractories Pigments alloyOthers Tanning Chemicals stainless

(Chromates, Non ferrous alloysDi-chromates) Aluminium

Others CopperNickelOthers

Metallurgical94%

Foundry Sands

3%

Chemical2%

Refractory1%

May 2010

Chrome : Usage

Source : ICDA, USGSSource : ICDA, USGS

94%

94% of total chrome 94% of total chrome used in metallurgical used in metallurgical applications - prime applications - prime

demand driverdemand driver

Chromite - UsesChromite - Uses

70% of chrome used in 70% of chrome used in metallurgical applications - is metallurgical applications - is

for making stainless steelfor making stainless steel

18% is for making alloy steel 18% is for making alloy steel

3%

2%

1%

May 2010

S Africa, 74%

Zimb, 12%

Khazak, 8%

India, 1% Other, 5%

Global Chrome ReservesGlobal Chrome Reserves

India in The Global Chrome Market (1)

S Africa, 35%

China, 25%

Khazak, 17%

India, 11%

Russia, 5%

Others, 7%

Global Chrome Alloy Production CY09Global Chrome Alloy Production CY09

India has a total chrome ore reserve of 213 million MT (proved 31mill MT, probable 35 mill MT, recoverable 66 mill MT).98% in state of Orissa

India has a total chrome alloy production capacity of 876 MVA,Prodn in 2009 : 6,05,000 MT 70% in state of OrissaChinese LAM Coke preferredPower cost & availability concerns

May 2010

India in The Global Chrome Market (2)

60%80% 50%

32%

60%< 10%

Chrome Ore/Concentrate Ferro Chrome

India has moved from mainly a supplier of Chrome Ore/Concentrate to a global supplier of Ferro India has moved from mainly a supplier of Chrome Ore/Concentrate to a global supplier of Ferro Chrome. Today, most chrome ores are used within India.Chrome. Today, most chrome ores are used within India.

Domestic consumption of ferro chrome has remained more or less stagnant, due to slow growth Domestic consumption of ferro chrome has remained more or less stagnant, due to slow growth of the SS & Alloy steel industry. Share of FeCr used within the country has dropped to one-third.of the SS & Alloy steel industry. Share of FeCr used within the country has dropped to one-third.

May 2010

India in The Global Chrome Market (3)

Production capacity 2.5 mil MT.Production capacity 2.5 mil MT.

Product mix- 75% Flat :25% Long. 76% output in 200 Product mix- 75% Flat :25% Long. 76% output in 200 series. series. 10% in 400 series fast growing10% in 400 series fast growing

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

In 2009 SS production expected : little over 2 mill MT In 2009 SS production expected : little over 2 mill MT

SS Exports 0.5 million MT, mainly Bright Bars, Utensils.SS Exports 0.5 million MT, mainly Bright Bars, Utensils.

May 2010

China in The Global Chrome Market (1)

Chrome OreInsignificant Chrome Ore Reserves compared to IndiaChrome ore production < 3 lakh MT, mainly used for refractory & chemical applications.

Imports Chrome Ore from mainly S Africa, Oman. Imports from India have reduced sharply.

Ferro ChromeTurned a net importer of HC Ferro Chrome from 2002.

Significant imports from India. Quantum jump in HC FeCr imports in last 2 years.

Significant producer of Silico Chrome & LC FeCr

May 2010

2,686

4,5056,290 6,940

6,000

3,024

4,325

6,0916,449 4,979

854 1,043 1,296

1,506

750233 440

1,348

1,094

1,660

02000400060008000

2005 2006 2007 2008 2009 Till Sept

Quan

tity(

'000 M

T)

SS production Import of Chrome Ore & Conc

Production of Ferro Chrome Import of Ferro Chrome

China in The Global Chrome Market (2)

Total production capacity 13 million MT; one-third of global capacityFlats : 7 million MT - State Owned Joint enterprises Longs : 6 million MT – mostly private enterprises SS production expected 8 mill MT, capacity utilisation of 62%. Significant exports. China now the world’s largest SS Player.

SS Production In China grew at a CAGR of @22% (2005-2009)

May 2010

China in The Global Chrome Market (2) – India FactorChina’s dependence on India in Chrome Ore or Chrome AlloysChina’s dependence on India in Chrome Ore or Chrome Alloys

India’s spend share as supplier of Chrome Ore & Concentrate to China India’s spend share as supplier of Chrome Ore & Concentrate to China 2005 : 32%, 2007 : 16%, 2009 : 7%2005 : 32%, 2007 : 16%, 2009 : 7%India’s spend share as supplier of Ferro Chrome to China- India’s spend share as supplier of Ferro Chrome to China- 2005 : 28%, 2007 : 14%, 2009 : 17%2005 : 28%, 2007 : 14%, 2009 : 17%Share of India’s Ferro Chrome export to China as part of India’s total production increased to a Share of India’s Ferro Chrome export to China as part of India’s total production increased to a level of 60%level of 60%China prefers Indian Ferro Chrome :China prefers Indian Ferro Chrome :

- High grade High grade - Short Sailing TimeShort Sailing Time- No Seasonal EffectNo Seasonal Effect-Time zone advantageTime zone advantage

Domestic FerroChrome DemandDomestic FerroChrome DemandDemand in India for ferro chrome has not grown significantly as yet : growing from 1.7 mill MTPA Demand in India for ferro chrome has not grown significantly as yet : growing from 1.7 mill MTPA to 2.5 mill MTPA (2000-2009)to 2.5 mill MTPA (2000-2009)

May 2010

¿ Quo Vadis ?¿ Quo Vadis ?

May 2010

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

2009 2010 2011 2012 2013

1,4501,350

1,4501,500 1,600

1,0411,156

1,4061,476

1,576

'000

MT

China India

Ferro Chrome : India catching up with China

China turned a net importer of HC Ferro Chrome from India since 2002, with a quantum jump in HC FeCr imports in last 2 years. Significant increase in FeCr production within India forecast, India will catch up with China by 2013.

Stainless Steel : Stainless Steel : •China SS growth to slow to 6-8% CAGR between 2010 – 2015

•Significant opportunity for India to emulate growth of China during 2005-2009 (@22). •However, most optimistic projections for Stainless Steel by ISSDA @12% CAGR

May 2010

8,4009,100

9,76010,690 11,070

0

3,000

6,000

9,000

12,000

2010 2011 2012 2013 2014

'00

0 M

T

YearYear FlatFlat LongLong TotalTotal

20052005 10011001 153153 11541154

20102010 16851685 373373 20582058

20152015 31853185 900900 40854085

Source ISSDA

Projected Stainless Steel GrowthChinaChina India India

May 2010

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.

The Changing Chrome Relationship Between India and China

May 2010

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

• An opportunity exists for India to grow like China did in the global An opportunity exists for India to grow like China did in the global Stainless Steel arena, and emerge as a big global producer, consumer Stainless Steel arena, and emerge as a big global producer, consumer and exporter of stainless steel.and exporter of stainless steel.

May 2010

THANK YOU THANK YOU