India, although has a history of producing high quality steel perhaps as early as 300 BC and certainly by AD 200, through what is now called the crucible technique, was left far behind and the first pig iron making plant was established in 1874 know as Bengal Iron Works at Kulti in West Bengal, which started producing steel in 1939. TATA Steel also setup a plant in 1907 at Jamshedpur.

After independence, successive governments placed great emphasis on the development of an Indian steel industry and after 45 years there were 6 major steel plants, out of which five were state owned, producing 10 million tonnes of steel and the balance 4.7 million tonnes came from 180 small plants mostly in the private sector. Then, Indian government decided to remove controls from steel sector, resulting in a flurry of investments by private sector, which faced severe crisis during the global down cycle in 1999 to 2001.

With the change of fortunes of global steel industry due to Chinese economic explosion resulting in unprecedented steel price levels, the Indian steel industry also started looking up and over last 5 years, has not only wiped out losses but has accumulated huge cash reserves. High growth in domestic demand, coupled with, the increase in energy prices and raw material costs especially with 19%, 71.5% and 19% hike in iron ore prices during 2004 to 2006, put India back on the global map of investments due to untapped high grade iron ore resources.

The Indian crude steel production so far has been witnessing not very high growth and commands a very small share of global production, but is likely to gain momentum in the next 5 to 7 years by when a large quantum of new capacities will coming on stream

Volume is in million tonnes
Share is with respect to global production
Source is IISI

In the meanwhile, propelled by mushrooming of small DRI making unit, India has crossed 30% share of global DRI production in 2006.

Volume is in million tonnes
Share is with respect to global production
Source is IISI

India has large resources of good quality iron ore. The in-situ reserves are estimated at about 18 billion tonnes. Haematite accounts for 12.3 billion tonnes and magnetite 5.4 billion tonnes. Besides, conditional reserves of both haematite and magnetite are assessed at 5.5 billion tonnes taking total Indian iron ore reserves beyond 23 billion tonnes. (Estimation of resources takes into account +55% Fe content and if grades below +55% are taken into account, the resource position gets increased substantially)

The iron ore reserves are spread mostly in South and South Eastern part of India and are divided in 5 zones. Almost 4% of the hematite is of medium to high grade with Fe content of 62% to 65% and the amount of 65% grade is limited to about 15%

The values are in billion tonnes

Indias Iron ore production presently falls into 3 categories, but Indian government is about to finalize the mining policy, wherein it is likely that iron ore mines would be allocated to companies setting up steel mills. State owned companies operate about 41 mines accounting for 47% production of iron ore. Private sector is operating more than 200 mines accounting for 53% of the production. 22% of the iron ore production is from captive mines and balance is from non captive mines.

In terms of total reserves, India is far behind China, Russia, Ukraine, Australia, USA, Brazil and even Kazakhstan, but has attained third spot in sea borne iron ore trade over last few years. With limited steel making capacity in India, the production of iron ore has been much more than the domestic consumption and due to low sea transportation costs to China, propelled by surge in realization, export of India iron ore has surged in last 5 years

A glimpse of production and exports and exports is as under

All values in million tonnes

The trend clearly displays increase in exports from 2003-04, when the Chinese pushed up the prices of iron ore due to their insatiable hunger. Indian miners in organized sector started ramping up their production in a limited way, but due to improved realization, hundreds of small mines in unorganized sector opened up in India. Majority of Indian iron ore is not sold on long term arrangements and India is the biggest spot market of Iron ore today. This resulted in decrease of exports to traditional buyers in Japan from 38% in 2001-02 to less than 12% in 2005-06. On the other hand, share of exports to China increased from 46% in 2001-02 to almost 80% in 2005-06.

Due to these untapped iron ore reserves, India has become the hot destination for setting up steel mills not only by Indian players but some of the global majors and so far announcements have been made to set up steel mills totaling more than 200 million tonnes. The iron ore rich states Orissa and Jharkhand have been on spree of signing MoUs for setting up steel mills in return of iron ore deposit linkages, which so far have not materialized in a big way. A big debate is going on formulation of Indian Mining Policy to decide who gets the rights to these deposits. Issues relating to land acquisition, rehabilitation and resettlement also are pushing back the investments.

One can not deny now, that India has emerged as the favorite steel related investments destination and is now being compared to China, off course on a smaller scale, in terms of growth of steel. India like Russia, Latin American countries and China has the distinct advantage of cheap labor and not very strict norms of pollution control, but it is availability of iron ore driven by the desire of iron ore rich states to corner investments and securing iron ore linkages by the steelmakers.

It is well known in the industry circles that most of these announced capacities would never see the light of the day, but the question remains that how many would and what effect would they have on steel availability from India in years to comemore so if we see a start of global down cycle in 2007 due to overcapacity in China.

We hope that the year 2006 was a great success for you as it was for the www.steelguru.com web site. Steel Trade Today was launched in June 2005 and, with it, a new era began for us. 18 months later STT has more than 20000 readers spread across 138 countries and 16000 news articles in database. In addition, on an average, more than 1000 readers visit the web site everyday to browse the days news as well as the archives. In brief, we are a young project with a strong team having firm determination to satisfy our readers.

STT team collects the important news from across the industry and around the globe every day, edits them for easy reading and sends them, so that you, our dear reader, remain up to date with key industry developments. We have also used STT as a platform to inform our readers about some of the important industry related conferences during the year, which helped many of our interested readers in attending them.

We remain committed to our philosophy of maintaining a worldwide platform for industry and plan to unveil many new features during 2007, starting with content oriented web site in the first quarter, pricing information, specific industry reports and many other features.

We would like to thank you for your support and will be glad to receive any feedback, suggestions or comments form you. Your support in suggesting STT to your friends and associates is requested.

Once again, Happy New Year!
May all your New Year wishes come true!
May the world be a peaceful place!

Editor

World crude steel production in 2006 for the 62 countries reporting to the International Iron and Steel Institute is estimated to be 1.216 billion tonnes as co up by 9.4% as compared to 1.111 billion tonnes in 2005. (The estimation has been made by assuming the level of crude steel out put in December 2006 at levels similar to that of November 2006)

As per estimates, Asia, EU(25), North America and CIS(6) would increase crude steel production substantially by 13.8%, 5.8%, 4.9% and 5.2% respectively. Whereas South America, Middle East and Oceania would register marginal increase and only Africa would post reduction in crude steel output.

Volume is in million tonnes
Source is IISI

But the growth in crude steel production is true only for Asia, which had substantial YoY growth in 2005 also and recovery for EU(25), North America and CIS(6) which had registered negative YoY growth of 3.3%, 5.2% and 0.2% respectively in 2005.

Source is IISI

The share of Asias crude steel production in 2006 is estimated to reach 53.3% as against 51.2% in 2005, resulting in reduction in share for all other regions.

Volume is in million tonnes
Source is IISI

World crude steel production in 2006 for the 61 countries reporting to the International Iron and Steel Institute is estimated to be 1.216 billion tonnes, with almost 80% coming from top 11 countries and balance 20% from 50 countries. (The estimation has been made by assuming the level of crude steel out put in December 2006 at levels similar to that of November 2006)

The estimated crude steel production for 2006 for these countries and YoY change is given below.

Volume is in million tonnes
Source is IISI

Among the top 11 countries, contributing to almost 80% of the global crude steel output, the YoY change in crude steel output in 2005 and 2006 together shows that the real growth in 2006 has taken place for China, India and Italy, although slowed down substantially for China and to some extant India. The growth in crude steel production registered by other 8 countries is nominal after taking YoY change in 2005 into account.

Source is IISI

During 2005, top 80 steelmakers produced 774.4 million tonnes of crude steel accounting for 69% of global crude steel production of 1119.7 million tonnes.

The list for top steelmakers of 2006 is yet to come, but is going to have a big difference, as Arcelor Mittal would take the first spot with more than 109.7 million tonnes or may be bit more with a gap of about 80 million tonnes with number 2 Nippon Steel.

As the quantum jump in crude steel production in 2006 has taken place in China, mainly coming from smaller sized steelmakers, the share of top 80 steelmakers out of total global production is likely to go down.

The 2005 list for top 20 steelmakers, which account for almost 40% of global crude steel production, is given below as reference

* 50% of HKM included in ThyssenKrupp
Volume is in million tonnes
Source is IISI

Global metals markets have witnessed unprecedented rise in prices of almost all metals. Nickel and zinc, used in stainless steel making and galvanizing have climbed up by more than 100% over last 12 months.

Monthly average London Metal Exchange prices for cash mean showing climb between January and December are given below

Prices are in USD
Source LME

Monthly average LME prices for cash mean for 12 months indicate a pause in the month of June but a surge in July again.

Prices are in USD

The cause for this volatility in metal prices over the last 12 months lies in the depleting inventory stocks on LME. The depletion in stocks, especially for nickel and zinc, happened mainly due to their demand growth being much more that the growth in supply.

This situation has arisen due to very heavy growth in consumption of these metals predominantly in China, labor disputes at some of the major mines resulting in lower production or delay in start up of some major projects. Taking advantage of the situation, hedge funds also have been a big contributor to the price rally by taking heavy positions and creating an artificial scarcity.

In addition, there has been not enough investment into mining over the last few years for exploration & capacity enhancement and as mining is capital intensive with large gestation period, investment being made now will result in increased output only in years to come.

Steel Guru, as official media partner, is proud to present you some of the conferences and events scheduled in January to March quarter of 2007.

Gulf Iron & Steel Conference
29th to 30th January 2007
Sharjah in UAE
Organized by Steelworld
Web Link

12th CIS Metals Summit 2007
12th to 14th February 2007
Moscow in Russia
Organized by Adam Smith Conferences
Web Link

3rd Steel & Steelmaking Raw Materials Conference
14th to 16th February 2007
New Delhi in India
Organized by Metal Bulletin & Metaljunction
Web Link

13th Bauxite & Alumina Seminar
5th to 7th March 2007
Athens in Greece
Organized by Metal Bulletin
Web Link

5th Pacific Rim Steel Framing Conference 2007
14th to 17th March 2007
Honolulu in Hawaii
Organized by Hawaii Steel Alliance

2nd Made in Steel
22nd to 24th March 2007
Brescia in Italy
Organized by Siderweb SpA
Web Link

You are welcome to send a mail at editor@steelguru.com for more information and concerned person would get in touch with you.