Metals and Mining Sector Report - April 2019

IBEFIndia 157 views 42 slides May 16, 2019
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About This Presentation

Metals and Mining Sector Report - April 2019


Slide Content

For updated information, please visit www.ibef.org April 2019
METALS AND MINING

Table of Content
Executive Summary……………….….……....3
Advantage India……………….…..….….…....4
Market Overview and Trends……….…….....6
Notable Trends…...………….….…...……....20
Growth Drivers……………………................23
Opportunities…….………........………….….33
Useful Information…………….....…….….....38
Industry Associations...……....…………..…36

For updated information, please visit www.ibef.orgMetals and Mining3
Indiaranks4thgloballyintermsofironoreproduction**.InFY18,productionofironorereached210million
tonnes.
Indiabecametheworld’ssecondlargestcrudesteelproducerin2018withoutputof106.5milliontonnes.
CombinedAluminiumproductioninIndiastoodat1.12MTinFY19*.
Indiahasvastmineralpotentialwithminingleasesgrantedforlongerdurationsof20to30years
Indiaisthe3rdlargestproducerofcoal^.Coalproductioninthecountrystoodat688.8milliontonnesin
FY18.Itstoodat646.59milliontonnesbetweenApr2018-Feb2019.
EXECUTIVE SUMMARY
Third Largest coal
producer
Source:Ministry of Coal, Worldsteel.org, BP, Ernst and Young
Fourth-Largest iron ore
producer
Long duration mining
lease
Note:CAGR -Compound Annual Growth Rate, ^BP Statistical Review of World Energy 2018, **USGS Mineral Commodity Summaries 2018, * up to July 2018
Second largest steel
producer
Aluminium Production

Metals and Mining
ADVANTAGE INDIA

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ADVANTAGE INDIA
Rise in infrastructure development and
automotive production driving growth in the
sector.
Power and cement industries also aiding
growth in the metals and mining sector.
Demand for iron and steel is set to continue,
given the strong growth expectations for the
residential and commercial building industry.
There is significant scope for new mining capacities in iron ore,
bauxite and coal.
Considerable opportunities for future discoveries of sub-
surface deposits.
The Ministry of Steel aims to increase the steel
production capacity to 300 million tonnes by
2030-31 from 134.6 million tonnes in 2017-2018
indicating new opportunities in the sector.
By March 2019, 105 mineral blocks are
expected to be auctioned.
India holds a fair advantage in cost of
production and conversion costs in steel and
alumina
It’s strategic location enables convenient
exports to developed as well as the fast-
developing Asian markets
India produces 95 minerals–4 fuel-related
minerals, 10 metallic minerals, 23 non-metallic
minerals, 3 atomic minerals and 55 minor
minerals (including building and other
minerals).
100 per cent FDI allowed in the mining
sector and exploration of metal and non
metal ores under the Automatic Route.
Approval of MMDR Bill (2011) to provide
better legislative environment for
investment and technology.
National Mineral Policy 2019 launched for
transparency, better regulation and
enforcement, balanced social and
economic growth into the sector.
ADVANTAGE
INDIA
Source:Data Monitor, RBI, Ey, Ministry of Mines
Notes:FDI -Foreign Direct Investment, MMDR Bill -Mines and Mineral (Development and Regulation) Bill

Metals and Mining
MARKET OVERVIEW

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EVOLUTION OF THE INDIAN MINING SECTOR
Source:World Steel Association (WSA), DIPP, DataMonitor
Mining sector received a boost
post independence under the
impact of successive 5 Year
Plans
Mineral Exploration Corporation established
to conduct exploration with focus on coal,
iron ore, limestone, dolomite and manganese
ore
Indian mining sector was opened up to
Foreign Direct Investment in 1993 after the
announcement of the New Mineral Policy
Ministry of Mines notified revised royalty
rates and dead rent in September 2014
and the revised rates came into effect on
September 1, 2014.
Central Government promulgated Industrial
Policy Resolution
The exploration of minerals was intensified and
the Geological Survey of India was strengthened
Indian Bureau of Mines was established to look
after the scientific development of mineral
resources
Mineral Exploration Corporation
established to conduct exploration with
focus on coal, iron ore, limestone,
dolomite and manganese ore
Indian mining sector was opened up to
Foreign Direct Investment in 1993 after
the announcement of the New Mineral
Policy
Total crude steel production in India reached
106.5 million tonnes in 2018 making the
country the 2
nd
largest crude steel producer in
the world .
An airborne geophysical survey of the
Obvious Geological Potential Area was
inaugurated in April 2017 and will cover a 0.2
million sqkm area. It is one of most efficient
and cost effective methods of resource
exploration worldwide.
1947
1956 2012
1972 2014
2018
onwards

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SEGMENTS OF METALS AND MINING INDUSTRY
Metals and mining
Ironandsteelsegmentoffersaproductmixwhichincludeshotrolledparallel
flangebeamsandcolumnsrails,plates,coils,wirerodsandcontinuouslycast
productssuchasbillets,blooms,beam,blank,roundsandslabandmetallicsand
ferroalloy
Coalmarketconsistsofprimarycoal(anthracite,bituminousandlignite)Coal
Iron and steel
Aluminiumsegmentincludesprimaryaluminium,aluminiumextrusions,aluminium
rolledproducts,aluminachemicals
Basemetalmarketconsistsoflead,zinc,copper,nickelandtinBase metals
Aluminium
Preciousmetalsmarketincludesgold,silver,platinum,palladium,rhodiumand
diamond
Precious metals and
minerals
Bauxitesaresub-dividedinto2basictypesbasedontheprocessingmethods-
TropicalbauxiteandEuropeanbauxite
Bauxite

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GVA from Mining and Quarrying (US$ billion)*
54.44
52.50 48.89
50.45
46.02
51.88
56.74
51.31
0.00
10.00
20.00
30.00
40.00
50.00
60.00
FY12 FY13 FY14 FY15 FY16
FY17RE FY18RE
FY19SAE
STRONG GROWTH IN INDIA’S METALS AND MINING
SECTOR OVER THE YEARS
14.10
15.08
14.59
15.55
17.62
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
FY14 FY15 FY16 FY17 FY18E
Source:Ministry of Statistics and Programme Implementation, Ministry of Mines
Indiametalsandminingsectorhaswitnessedstronggrowthoverthepastfewyears.GVAfromMiningandQuarryingreachedUS$51.31billion
inFY19SAE.
MineralproductioninIndiahasalsosurged,achievingaCAGRof5.72percentbetween2013-14and2017-18EtoreachUS$17.62billionin
2017-18.
Thenumberofoperativemines(excludingatomicminerals,petroleum(crude),naturalgas(utilized)andminorminerals)inIndiahaveincreased
toanestimated1,531in2017-18from1,508in2016-17.
AsofDecember2018,18mineralblockshavebeenauctioned.
Notes:CAGR -Compound Annual Growth Rate, RE –Revised estimates,SAE: Second Advance Estimate, ^Excluding atomic and fuel minerals, GVA -Gross Value Added, @ -between
April –September 2018, Mineral production data expected to be update by March 2019 from Ministry of Mines Annual Report FY19
Mineral Production in India (US$ billion)*^
CAGR 5.72%

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COMPOSITION OF INDIA’S METALS AND MINING
SECTOR
Source:Ministry of Mines
Productionofasmanyas95mineralsisundertakeninIndia,including4fuelminerals,10metallicminerals,23non-metallicminerals,3atomic
mineralsand55minorminerals(includingbuildingandothermaterials).
OdishawastheleadingproducerofmineralswithproductionworthinFY19*^,followedbyRajasthan,Karnataka,ChhattisgarhandJharkhand
withproductionofmineralsworthUS$1.03billion,US$0.53billion,US$0.43billion,US$0.39billionandUS$0.12billionrespectively.
ProductionofmetallicmineralsinthecountryhasincreasedfromUS$7.30billionin2011-12toUS$8.23billionin2017-18E.Duringthesame
period,productionofnon-metallicmineralsincreasedfromUS$0.95billiontoUS$1.20billion.
Productionofmetallicmineralsandnon-metallicmineralsinIndiaFY19*respectivelyUS$2.71billionandUS$0.43billion
0.09
1.30
0.53
0.43
0.11
Remaining States
Odisha
Rajasthan
Karnataka
Chhattisgarh
Jharkhand
Madhya Pradesh
Maharashtra
Andhra Pradesh
Gujarat
Notes:MMT-Million Metric Tonnes, E-Estimate, #Constant exchange rate of US$ 1 = Rs64.45, ^ -excluding fuel, atomic and minor minerals, * up to July 2018
Share of states in mineral^ production FY19* (in US$ billion)
7.30
6.70 6.58
5.88
5.22
6.21
8.23
2.71
0.95
1.16 1.17 1.01 1.17 1.15 1.20
0.43
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
FY12 FY13 FY14 FY15 FY16 FY17
FY18E
FY19E*
Metallic MineralsNon-Metallic Minerals
Production of Metallic and Non-Metallic Minerals (US$ billion)
#

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IRON ORE PRODUCTION
187.70
213.25 212.96
218.55
207.16
168.58
136.62
152.18
129.32
158.11
192.08
200.96
65.87
0
50
100
150
200
250
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
FY17P
FY18
FY19*
Source:Business Standard, Ministry of Mines (Annual Report)
Ironoreisakeyinputforproductionofsteelandprimaryiron.
Majority(over85percent)ofironorereservesareofmediumto
high-gradeandaredirectlyusedinblastfurnaceandDirectReduced
Iron(DRI)plantsintheformofsizedlumpsorsintersorpellets
Indiawasestimatedasthefourthlargestproducerofironorein
2017.
Ironoreproductioninthecountryincreasedfrom129.32million
tonnesinFY15to200.96milliontonnesinFY18.Itisforecastedto
growattherateof5percentinFY19.
ProductionofironoreinFY19*is65.87milliontonnes.
Visakhapatnam port traffic(million tonnes)Ironore production (million tonnes)
Notes:CAGR-Compounded Annual Growth Rate, P –Provisional, E –Estimate, * up to July 2018

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RISING STEEL DEMAND DRIVING GROWTH
53.86
58.44
65.84
70.67
74.29
78.42
81.69
88.98 89.79
97.94 103.13
88.24
0
15
30
45
60
75
90
105
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
FY19P*
Source:World Steel Association
WiththeIndianeconomyexpectedtogrowmorethan7percentintheyearstocome,sectorssuchasinfrastructureandautomobileswillreceive
arenewedthrust,whichwouldinturngeneratedemandforsteelinthecountry.
India’scrudesteelproductioncrossed100MMTforthefirsttimeinFY18.Crudesteelproductioninthecountryincreased5.03percentyear-on-
yearto103.13MMTin2017-18.CrudesteelproductionbetweenApril2018-January2019stoodat88.24MMT.
FinishedsteelproductioninIndiastoodat53.90MMTbetweenApril-September2018.Consumptionoffinishedsteelinthecountrystoodat71.86
MMTbetweenApril-December2018.
AccordingtoWorldSteelAssociation,India’ssteeldemandisexpectedtogrow5.5percentin2018to92.0milliontonnesand6.0percentin
2019toreach97.5milliontonnes.
Visakhapatnam port traffic(million tonnes)CrudeSteelproduction (million metrictonnes)
Notes:CAGR -Compound Annual Growth Rate, MMT –Million Metric Tonnes, ^production data is up to September 2018 and consumption data is up to December 2018, * : up to 2019.
56.08 57.16
60.62
68.62
75.70
81.68
87.67
92.16 90.98
101.81
104.98
53.90
52.12
52.4
59.34
66.42
70.92 73.482 74.096
76.994
81.524
84.042
90.708
71.86
0
15
30
45
60
75
90
105
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
FY19^
ProductionConsumption
Visakhapatnam port traffic(million tonnes)
Finishedsteelproduction and consumption
(million metrictonnes)

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RISING DOMESTIC DEMAND PUTS PRESSURE ON
SUPPLY OF IRON AND STEEL … (1/2)
4.52
7.14
8.30
8.09
9.22
8.68
5.49
8.68
11.24
8.83
0
2
4
6
8
10
12
FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19*
In2017-18,India’sironandsteelexportswerevaluedatUS$11.24
billion.DuringFY10-18,India’sexportsofironandsteelincreasedat
aCAGRof12.07percent.DuringApril2018-February2019,exports
ofironandsteelstoodatUS$8.83billion.
GovernmentofIndiaimposes30percentexportdutyonallironore
forms(Exceptthelowgradeironore)and5percentexportdutyis
leviedonironorepellets.
Visakhapatnam port traffic(million tonnes)India’s exports of iron and steel (US$ billion)
^CAGR 12.07%
Source:Ministry of Commerce, DGCIS –Directorate General of Commercial Intelligence and Statistics
Notes:CAGR -Compound Annual Growth Rate, ^CAGR is up to 2017-18, FY19* -up to February 2019

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8.81
11.01
13.65 13.62
9.11
12.34
11.25
8.24
10.43
11.49
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
FY10FY11FY12FY13FY14FY15FY16FY17FY 18FY19*
RISING DOMESTIC DEMAND PUTS PRESSURE ON
SUPPLY OF IRON AND STEEL … (2/2)
Indiahasturnedintoanetimporterofironandsteelduetostrong
growthinthemanufacturingsectorandrisinginfrastructureprojects.
India’stransitionintoanetimporterofsteeldespitethestronggrowth
indomesticsteelproductionshowsthedemandpotentialofthe
sector.
Theimpactofstronggrowthindomesticsteelproductionhasbeen
mostfeltintheironoresector;withsteelfirms’everrisingdemand
fortherawmaterial,India’simportsofironorehasbeengrowing
steadily.IndiaimportedironoreworthUS$350.99millioninFY18.
India’sironandsteelimportsgrewataCAGRof2.13percentto
reachUS$10.43billioninFY18.ImportsduringApril2018-February
2019stoodatUS$11.49billion.
Visakhapatnam port traffic(million tonnes)India’s imports of iron and steel (US$ billion)
Notes:CAGR -Compound Annual Growth Rate, ^CAGR is up to 2017-18, FY19* -up to February 2019
^CAGR 2.13%
Source:Ministry of Commerce, DGCIS –Directorate General of Commercial Intelligence and Statistics

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COAL PRODUCTION GROWING AT A STEADY PACE
457.08
492.76
532.04 532.69
551.55
569.13 574.54
620.78
650.79
671.53
688.78
646.59
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
FY19*
Source:Ministry of Mines
Inthecomingyears,coalproductioninthecountryislikelytoreceive
aboostasthegovernmentplanstoreplacethecountry’scaptive
miningpolicyincoalandironorewithanopenbiddingone
DuringFY2017-18,45.18milliontonnesofcoallinkageshavebeen
auctionedforthenon-regulatedsector.
India’scoalproductiongrewataCAGRof4.19percentbetween
FY08andFY18toreach688.78milliontonnes.Coalproduction
duringApr2018-Feb2019stoodat646.59milliontonnes.
Coal production (million tonnes)
Notes:CAGR -Compound Annual Growth Rate, ^CAGR is up to 2017-18, FY19* -up to February 2019
^CAGR 4.19%

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INDIA’S ROLE IN GLOBAL ALUMINIUM PRODUCTION
55.00%
6.17%
6.17%
4.83%
4.33%
2.67%
1.45%
China Russia
India Canada
United Arab Emirates Australia
Norway Bahrain
Iceland Brazil
United States Other countries
Source:World Bureau of Metal Statistics (WBMS), Aluminium Association of India, Economist Intelligence Unit (EIU), ICRA Management Consulting Services Ltd (IMaCS)
Note:ICRA -Information Credit Rating Agency Ltd.
Indiawasthefourthlargestproducerofaluminiumintheworldwitha
shareofaround5.33percentinglobalaluminiumoutput.
TheprincipalusersegmentinIndiaforaluminiumcontinuestobe
electricalandelectronicssectorfollowedbytheautomotiveand
transportation,building,construction,packaging,consumerdurables,
industrialandotherapplicationsincludingdefence
AccordingtoMinistryofMines,Indiahasthe7thlargestbauxite
reserveswhichwasaround2,908.85milliontonnesinFY17*.
Aluminumproductionincreasedto0.65milliontonnesfrom0.58
milliontonnesatagrowthrateof12.5percentbetweenApril-July
2018.
Overthecourseoflastfouryears,India’saluminiumproduction
capacityhasincreasedto4.1MMTPA,drivenbyinvestmentsworth
Rs1.2lakhcrore(US$18.54billion).
India’s share in global aluminium production (2018E)

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GROWING DOMESTIC DEMAND TO SUPPORT
ALUMINIUM PRODUCTION
1.52
1.63
1.67
1.72 1.73
2.05
2.44
2.90
3.40
1.12
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
FY19*
Source:CARE Ratings, Ministry of Mines, DGCIS, News Articles
Note:CAGR -Compound Annual Growth Rate, F-Forecast, *CAGR is till FY18, FY19* -up to July 2018
Demandforaluminiumisexpectedtopickupasthescenario
improvesforuserindustries,likepower,infrastructureand
transportation
Productionofaluminiumstoodat3.40milliontonnesduring2017-18
andAluminiumproductionFY2019*is1.12milliontonnes.
Aluminiumexportsfromthecountrygrewto1.66milliontonnesin
2017-18from1.22milliontonnesin2016-17.Atthesametime,
importofaluminiumreached0.36milliontonnes.
NationalAluminiumCompany(NALCO),acentralgovernment-
ownedentity,issettojointheclubofmillion-tonneproducersinthe
metalsegmentby2020.NALCOhasreadiedaboutUS$3.72billion
investmentsforincreasingitsalumina,aluminiumandpower
productioncapacities.
Visakhapatnam port traffic(million tonnes)Aluminium production (million tonnes)
*CAGR 10.55%

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STRONGER ECONOMIC GROWTH TO SUPPORT
ALUMINIUM CONSUMPTION
Source:Care Ratings, Indian Bureau of Mines
Note:CAGR -Compound Annual Growth Rate, F –Forecast, *CAGR is till FY18, ^ -till Sep 2018
Aluminiumdemandinthecountryisexpectedtogrow7percentin
2018-19.
ConsumptionofaluminiuminIndiagrewto2.08milliontonnesin
2017-18,andisforecastedtoreachto5.30milliontonnesby2020-
21.
Aluminumconsumptionreached0.98milliontonnesinFY19^.
Visakhapatnam port traffic(million tonnes)Aluminium consumption (million tonnes)
1.38
1.48 1.53
1.64
1.58
1.99 1.97 2.02
0.98
5.30
0.00
1.00
2.00
3.00
4.00
5.00
6.00
FY10 FY11 FY12 FY13 FY14 FY16 FY17 FY18
FY19^ FY21F
*CAGR 5.26%

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MAJOR METALS AND MINING PLAYERS IN THE
COUNTRY
Segment Major player Market share Other players
Iron and Steel NA Sesa Goa, SAIL, Orissa Minerals
Coal 80 per cent
Singareni Collieries Company, Reliance Natural
Resources
Aluminium 60 per cent
National Aluminium Company (NALCO),
Bharat Aluminium Company (BALCO)

Metals and Mining
NOTABLE TRENDS

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InDecember2017,theindexofmineralproductionincreased7.5percentmonth-on-monthto115.5andthe
totalvalueofmineralproductionwasestimatedatUS$3.54billion.
MininggroupundertheIndexofIndustrialProduction(IIP)grew2.3percentin2017-18.Growthofthemining
classificationincreasedfrom-0.4percentinFebruary2018to2.8percentinMarch2018.
ThedemandformetalandmetalproductsisrisinginthedomesticmarketwithIndiabeinganetimporterin
themetalssegment
Insearchofgreatermineralopportunities,anincreasingnumberofIndianminingcompaniesareventuring
overseasinabidtosecurestable,long-termsuppliesofmineralsespeciallyintheareasofcoalandironore
GVKisdevelopingtwocoalminesviz.AlphacoalmineandKevin’sCornercoalminejointlywithHancock
Prospecting.
AdaniEnterprises’CarmichaelcoalplantaimstomakeitsfirstshipmentbyMarch2020.
Inthelastfewyears,Indiahasseenasignificantgrowthinmineralswiththegovernmentgrantingleasesfor
longerdurationsof20to30years
NOTABLE TRENDS IN THE METALS AND MINING
SECTOR (1/2)
Incaptiveminingforcoal,companiesarepermittedtosetupcoalwasheriesandforspecifiedenduses,
includingthesettingupofpowerplants,fertilizersandsteelunits
Aspergovernment,US$271.27millionofrevenuewasgeneratedfrome-auctionof33coalminestillJanuary
2017
Captive mining for coal
Source:ArancaResearch, Mining Global Inc.
Longer duration leases
Outlook of Metal and
Mining
Focus on domestic
market
Overseas ventures

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Playersintheindustryarefocusingonoptimisingtechnologytoincreaseprocessefficiency
CoalIndiaLtdisfocusingonmakingbestuseoftechnology.IthasambitiousplansofusingGPS/GPRS
basedvehicletrackingsystemtoenhanceproductivity.ItalsohasservicessuchasE-Auction,E-
Procurementofgoodsandservices
InJuly2018,UnionMinisterofCoal,Railways,Finance&CorporateAffairslaunchedamobileapplication
‘KhanPrahari’andCoalMineSurveillance&ManagementSystem(CMSMS)developedbyCentralMine
PlanningandDesignInstitute(CMPDI).
MiningIndustryofIndiahasbeendominatedbysurfacemining.However,duetovariouschallenges
presentedbysurfacemining,themovetowardsundergroundminingisconsideredinevitable.Thispresents
anopportunityforplayerstoenterthemarketwithundergroundminingtechnology.
Alliancewithglobalanddomesticplayershelpcompaniestoimprovetheiroperationalperformancethrough
technologicalimprovementandcostoptimisation
NOTABLE TRENDS IN THE METALS AND MINING
SECTOR (2/2)
Playersintheindustryaretryingtominimisecosttogaincompetitiveadvantage
Forexample,SAIListryingtoreducecostby
•EnteringintoMoUforcoalbedmethaneandpropanegastoreducecostofenergy
•Optimisationoftheinputresources,increasingoperatingefficiencyforhandlingtheassetsavailablewith
thecompany,reducingoverheadcostsandstabilisationofnewlyformedoperationunits
Cost optimisation
Source:SAIL Company website, Business Standard, Aranca Research
Focus on technology
Notes:MoU–Memorandum of Understanding, GPS –Global Positioning System, GPRS -General Packet Radio Service
Build strategic alliances

Metals and Mining
GROWTH DRIVERS

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STRONG FUNDAMENTALS AND POLICY SUPPORT
AIDING GROWTH
Source:: ArancaResearch
Expanding research
and development
and distribution
facilities in India
Providing support to
global projects from
India
Higher demand for
metals
Growing
infrastructure
investments
Sustained growth in
India’s automotive
sector
Aluminum and coal
benefiting from
rising power
production
Rising production of
cement increasing
demand for coal
Policy support
Relaxed FDI norms
Allowing private
ownership
Reducedcustoms
duty
Taxand other
incentives
Increasing
investments
Increasing FDI
Increasing private
participation
Use of modern
technology
Innovation
Resulting DrivingInviting
Notes:MandA-Mergers and Acquisitions, FDI -Foreign Direct Investment

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A FAST-EXPANDING CONSTRUCTION SECTOR HAS
AIDED GROWTH ... (1/2)
Indiaiswitnessingasustainedgrowthininfrastructurebuildup.The
constructionindustryhasbeenwitnesstoastronggrowthwave
poweredbylargespendsonhousing,road,ports,watersupply,rail
transportandairportdevelopment.
Freight traffic handled by Indian Railways increased 5.58 per cent
year-on-year during April-December 2018(P) to 894.54 million
tonnes while its gross earnings increased by 4.65 per cent year-on-
year during the same time.
Cargo handled by major Indian ports increased by 3.11 per cent
during April 2018-January 2019. Electricity generation in the country
increased by 4.74 per cent during April-December 2018.
IthasbeenestimatedthatIndiaisgoingtorequireUS$4.5trillion*of
investmentby2040forinfrastructuredevelopment
InUnionBudget2018-19,GovernmentofIndiahasallocatedUS$
92.22billionforinfrastructuresector.
Source:Business Monitor International‘s (BMI) Report on infrastructure industry in India ArancaResearch Estimates
Note:F -Forecasts (by BMI), CAGR –Compounded Annual Growth Rate, *: * 2017-18, **uptoJanuary 2019
Growth in infrastructure related activities during 2017-18
4.74
20.00
5.88
4.65
3.11
0
5
10
15
20
25
Electricity
Generation
National Highway
Construction
Rail freight
traffic Railway earnings
Cargo at
major ports**

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A FAST-EXPANDING CONSTRUCTION SECTOR HAS
AIDED GROWTH ... (2/2)
India’sconstructionindustryisexpectedtogrow6.1percenton
year-on-year(y-o-y)basisin2018.^
GrossValueAdded(GVA)oftheconstructionsectorgrewnearly
8.80percenty-o-ytoRs11.19trillion(US$173.61billion)*in2017-
18.
Ironandsteelbeingacorecomponentoftherealestatesector,
demandforthesemetalsissettocontinuegivenstronggrowth
expectationsfortheresidentialandcommercialbuildingindustry
Source:Business Monitor International‘s (BMI) Report on infrastructure industry in India, ArancaResearch
Note:E -Estimated F -Forecasts (by BMI) CAGR –Compounded Annual Growth Rate, YoY –Year on Year, *Provisional Estimate, ^As per BMI Research
6.52%
6.99%
12.56%
8.78%
7.51% 7.42%
8.53% 8.43%
7.79%
9.50%
8.71%
5.03%
7.88%
0%
2%
4%
6%
8%
10%
12%
14%
Dec-17 Jan-18 Feb-18 Mar-18 Apr-18
May-18
Jun-18
Jul-18
Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
Growth of construction goods classification under Index of
Industrial Production

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POWER AND AUTOMOTIVE PRODUCTION FUELLING
DEMAND
704.47
723.79
768.43
811.14
876.89
912.06
967.15
1048.67
1107.82
1160.14
1206.31
1249.19
0
200
400
600
800
1,000
1,200
1,400
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
P
CAGR 5.35%
Source:Ministry of Power, Central Electricity Authority (CEA), ArancaResearch
Note:TWh-Terawatt-hour, P -provisional, ** power generation from conventional sources
Thepowersectoraccountsforalargeshareoftheconsumptionof
coalinthecountry
InFY18,powergenerationinIndiawas1249.19TWh.Power
generation**inIndiaexpandedataCAGRof5.35percentduring
FY08–19.
CoalbasedpowergenerationisforecastedtogrowataCAGRof6.5
percentduringFY18-FY23.Thisincreaseisexpectedtoboostnon-
cokingcoalconsumptionataCAGRof5.4percentto1,076million
tonnesinFY23from826milliontonnesinFY18.
Around85.97percentoftotalpowergenerationwasdonethrough
thermalpowerplants,whilehydroandnuclearplantscontributed
3.18percentand10.46percentrespectivelyinFY18.
Visakhapatnam port traffic(million tonnes)Power generation in India (in TWh)**

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Aimstobringinmoretransparency,betterregulationandenforcement,balancedsocialandeconomicgrowth
alongwithsustainableminingpractices
Proposestogrant‘industry’statustominingwiththeobjectiveofboostingfinancingofprivatesector
Supportsmergerandacquisitionofminingplayers
FAVOURABLE POLICIES ARE SUPPORTING THE
SECTOR GROWTH
TheMMDRActof1957,witnessedamendmentsin2015forthepromotionanddevelopmentofthemining
industryinIndia,thatincludesmakingauctionsthesolemethodfortheallotmentofmineralconcessionsand
mandatingtheestablishmentofDistrictMineralFoundation(DMF)
The Mines and Minerals
(Development and
Regulation)
Amendment Act, 2015
Source:ArancaResearch
FDIofupto100percentispermittedundertheAutomaticRoutetoexploreandexploitallnon-fuelandnon-
atomicmineralsandprocessallmetalsaswellasformetallurgy
FDIcapsintheminingandexplorationofmetalandnon-metaloreshavebeenincreasedto100percent
undertheautomaticroute.
InMarch2018,thegovernmentallowed100percentFDIincoalmining.
Relaxed FDI norms
Notes:FDI -Foreign Direct Investment
GovernmentofIndiasignificantlyreducedthedutypayableonfinishedsteelproductsandhasstreamlined
theassociatedapprovalprocess
Reduced custom duty
GovernmentofIndiaisencouragingprivateownershipforsteeloperationsandotherhighpriorityindustryAllowing private ownership
ProfitsofcompaniesproducingspecifiedmetalsaregiventaxconcessionundertheIncomeTaxAct
Lowcustomdutyonthecapitalequipmentusedforminerals
Companieswhodomininginbackwarddistrictsareeligibleforcompletetaxholidayforaperiodof5years
fromthecommencementofproductionand30percenttaxholidayfor5yearsthereafter
Investment incentives
Focusesonupgradationoftheskillsetstofosteradaptationofnewstateofarttechnology
Aimstoincreasethecapacityandqualityoftraininginfrastructureandtrainerstoaddresshumanresource
needs
Skill Development Plan for
the Mining Sector (2016-
22)
National Mineral Policy
2019

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ReservationofareasforPSUsremoved
Stategovernmentstosetupspecialcourtstoexpediteprosecutioninillegalmining
StatutoryCoordinationcumEmpoweredCommitteeatcentralandstatelevelstodecideuponstringent
penaltiesforoffences
CentralgovernmenttoestablishNationalMineralFund;respectivestategovernmentstoestablishState
MineralFund(s)
DistrictMineralFoundationwillbesetupbythestategovernmentwhichwillworkfortheinterestandbenefit
ofpersonsorfamiliesaffectedbyminingrelatedoperationinthedistrictandwillbemanagedbyagoverning
council
Theminingtaxcollectedwillbespentwithinthedistrict
TheBasicCustomsDuty(BCD)on
•shipsimportedforbreakingupisbeingreducedfrom5percentto2.5percent
•coal-tarpitchisbeingreducedfrom10percentto5percent
•batterywasteandbatteryscrapisbeingreducedfrom10percentto5percent
•steelgradelimestoneandsteelgradedolomiteisbeingreducedfrom5percentto2.5percent
MMDR ACT
General restrictions
and concessions
Source:ArancaResearch
Process of revenue
collection and usage
Notes:FDI -Foreign Direct Investment
Relaxation on duties

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MINERAL AUCTION RULES, 2015
Miningauctionsconductedundertheambitofstategovernment.
Typesofleasegranted:
•Mininglease-whereevidenceofmineralcontentsisestablished
•Compositelease-combinationofaprospectinglicenceandamininglease
Mining Leases
Forannualaverageproductionupto
•Rs2crore(US$311,090)–networthrequired:Rs50lakh(US$77,773)
•Rs20crore(US$3.11million)-networthrequired:Rs10crore(US$1.56million)
Smallbidderscanincludevalueofunencumberedimmovablepropertyinnetworth
Net Worth Requirements
Auctionsareconductedelectronicallyandbiddingisdoneovertworounds
Thefirstroundrequiresbidderstofurnishtechnicaldetailsandinitialofferwhichhastobeequaltoorhigher
thantheset‘ReservePrice’.
Thehighestbidinthefirstroundactsasthe‘reserveprice’forthesecondroundinwhichonlytechnically
qualifiedbiddersparticipate.
Auction Modalities

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FOREIGN INVESTMENTS FLOWING IN INDIA
11,152.87
2,321.59
1,151.45
27.73
Metallurgical
Industries
Mining
Diamond, Gold
Ornaments
Coal Production
Source:Department of Industrial Policy and Promotion, Aranca Research
FDIupto100percentisallowedinexploration,mining,minerals
processingmetallurgyandexplorationofmetalandnon-metalores
undertheautomaticrouteforallnon-fuelandnon-atomicminerals
includingdiamondsandpreciousstones
DuringApril2000–December2018,FDIinflowsintometallurgical
industriesstoodatUS$11,152.87million.Duringthesameperiod,
FDIinflowsinthemining,diamondandgoldornamentsandcoal
productionsectorsstoodatUS$2,321.59million,US$1,151.45
millionandUS$27.73million,respectively.
Visakhapatnam port traffic(million tonnes)
FDI equity inflows in the sector during April 2000–December
2018 (US$ million)

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MERGER AND ACQUISITIONS
Acquirer Target Acquisition price (US$ billion)
ArcelorMittal Essar Steel 7.13
Tata Steel BhushanSteel 7.04
Balasore Alloys Zimbabwe Alloys US$ 90 million
MrAnil Agarwal Anglo American (Partial stake purchased) 2.0
JSW Energy Ltd Jindal Steel and Power Ltd US$ 976 million
SAIL
Reiterated its interest to acquire majority stake in NeelachalIspat
Nigam Ltd (NINL) in Jajpur, Odisha
-
Joint Venture between Vedanta
Resources and SesaGoa
Merger of SterliteIndustries (Indian subsidiary of Vedanta
Resources ) and SesaGoa
3.90
GVK Power and Infrastructure Ltd Hancock Coal-Queensland Coal 1.26
SesaGoa Ltd Cairn India Ltd 1.18
JFE Steel Corp JSW Steel Ltd 1.03
LancoResources Australia Griffin Coal Mining Co Pty Ltd US$722.7 million
Vedanta Cairn India 1.56
Oil and Natural Gas Corporation
(ONGC)
Gujarat State Petroleum –KG Basin 1.20
Tata Steel Ltd BrahmaniRiver Pellets Ltd US$ 132.35 million
M&A activities (till October 2018)
Source:Thomson Banker, Deal Tracker, ArancaResearch

Metals and Mining
OPPORTUNITIES

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OPPORTUNITIES
India’s per capita steel
consumption was 65.2 kg in
2017 compared with the
global average of 214.5 kg
Rural per capita steel
consumption is likely to
reach around 20 kg from 13
kg currently
An amount equal to US$ 25
billion to US$ 33 billion is
expected to be invested in
steel sector over the next 6-
7 years
Untapped market with strong
growth potential
India has the world’s
seventh largest reserve
base of bauxite and fourth
largest base of iron ore
respectively, and accounts
for about 7 per cent and 11
per cent respectively, of
total world production
Moreover, India has the
world’s fifth largest coal
reserves, standing at
319.02 billion tonnes in
FY18
Scope for new mining
capacities in iron ore,
bauxite and coal
Strong long-term demand
from the steel industry is
expected to further boost
the iron ore industry
Increasing power production
is likely to catapult demand
for coal
Booming construction,
automobiles and packaging
industries are expected to
lend substantial support to
the metals and mining
sector
Rapid growth of user-
industries to drive demand
for metals and minerals
The iron and steel segment
offers a product mix which
includes hot rolled parallel
flange beams and columns
rails, plates, coils, wire rods,
and continuously cast
products such as billets,
blooms, beams, blanks,
rounds and slabs as well as
metallicsand ferroalloy.
Looking at the expected
growth in sector, existing
manufacturers have a huge
opportunity to expand their
product line in new
segments
Expansion of product line by
existing players
Source:WSA, Ernst and Young, ArancaResearch

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OPPORTUNITIES IN THE IRON ORE SECTOR
Source:PwC, ArancaResearch, Ministry of Mines
Odisha: Bonai(Keonjharbelt) and Tomka(Daitariand Umerkoke
belts)
Jharkhand: All major high-grade ore deposits contain low-grade
lateritic ores
Karnataka: Bagalkot, Tumkur, and Chitradurgadistricts
Maharashtra: Sindhudurg, Gadchiroliand Gondia
Chhattisgarh: All 14 deposits of Bailadilarange, Dantewada
district
Andhra Pradesh: Kadapa, Kurnool, Karimnagar, Adilabad, and
Guntur districts
Exploration in proposed exploration zones
Pelletisationcapacity is about 59.30 MTPA*
•Sintering capacity is about 70.05 MTPA *
Scope for domestic and foreign firms in upcoming PPP
opportunities
•Joint Venture or technical participation with midcap players
with lease/license and seeking capital, expertise and
technology
•Through the auction route, players can get access to coal
mines and iron ore reserves
•Introduction of mines and minerals (Development and
Regulation) Amendment Bill, 2015 to encourage investments
and introducing viable mining practices
•As of October 2018, Rs1.81 trillion (US$ 27.00 billion) were
earned from e-auction of 50 mineral blocks.
Scope for new mining capacities in iron ore, bauxite and coal
Notes:MT -Metric Tonnes, MTPA -Metric Tonnes Per Annum, *: As per Indian Minerals Yearbook 2017

Metals and Mining
INDUSTRY
ASSOCIATIONS

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INDUSTRY ASSOCIATIONS
Agency Contact Information
SAIL –Steel Authority of India Ltd.
118, 1st Floor, RamanashreeArcade
18, M. G. Road
Bengaluru, Karnataka-560 001
Phone: 91-80-25582197, 25582757
Fax: 91-80-25594535
E-mail: [email protected]
Federation of Indian Mineral Industries
FIMI House, B-311, OkhlaIndustrial Area
Phase-I, New Delhi-110 020
Phone: 91-11-26814596
Fax: 91-11-26814593
E-mail: [email protected]
Indian Stainless Steel Development Association
L -22/4, DLF Phase–II
Gurgaon, Haryana-122 002
Phone: 91-124 -4375501
Fax: 91-124 -4375509
E-mail: [email protected]

Metals and Mining
USEFUL
INFORMATION

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APPENDIX
BMI’s Mining Business Environment Ratings
•Market structure: It takes into consideration mining output in US$ billion, sector value growth, per cent y-o-y r, mining sector, per cent of GDP
•Country structure: It takes into consideration labour market infrastructure, physical infrastructure r, tax, and scope of state
•Market risks: It considers metals prices, 5-year, forecast average, metals price forecast, average 5-year growth, regulatory framework, legal
framework
•Country risk: It considers, long-term external risk, corruption, bureaucracy, long-term policy continuity
•Mining ratings: It shows the overall scores of the above indicators

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GLOSSARY
CAGR: Compound Annual Growth Rate
FDI: Foreign Direct Investment
FY: Indian Financial Year (April to March)
•So FY10 implies April 2009 to March 2010
GOI: Government of India
IBM: The Indian Bureau of Mines
MoU: Memorandum of Understanding
PPP: It could denote two things (mentioned in the presentation accordingly) –
•Purchasing Power Parity (used in calculating per-capita GDP)
•Public Private Partnership (a type of joint venture between the public and private sectors)
PE: Private Equity
US$ : US Dollar
Wherever applicable, numbers have been rounded off to the nearest whole number

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EXCHANGE RATES
Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)
Year INR Equivalent of one US$
2004–05 44.95
2005–06 44.28
2006–07 45.29
2007–08 40.24
2008–09 45.91
2009–10 47.42
2010–11 45.58
2011–12 47.95
2012–13 54.45
2013–14 60.50
2014-15 61.15
2015-16 65.46
2016-17 67.09
2017-18 64.45
2018-19 69.89
Year INR Equivalent of one US$
2005 44.11
2006 45.33
2007 41.29
2008 43.42
2009 48.35
2010 45.74
2011 46.67
2012 53.49
2013 58.63
2014 61.03
2015 64.15
2016 67.21
2017 65.12
2018 68.36
Source:Reserve Bank of India, Average for the year

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