Developments in the Indian Coke and Steel Marketplace - Australian Hard Coking Coal from an Indian Perspective Arun Kumar Jagatramka Vice Chairman & Managing Director Gujarat NRE Coke Ltd (NSE: GUJNRECOKE) Chairman Gujarat NRE Minerals Limited (ASX: GNM)
Disclaimer The views expressed here contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by Gujarat NRE
Vision 2020 India on Steroids 100 million tons of steel (since scaled up to 200 million tons) and already talking about 300 million tons “How do you project your steel production – you are already in 2010 according to earlier estimates !”
An important point to note “In order to produce 100 million tons of steel, India will need to consume 100 million tons of steel – which will come first is the million tons question”
“Though India is a low-cost producer, it is going to have a problem because of the fact that when you want to graduate from 35-40 million tons to 150-250 million tons — that is what the growth rate is going to take us to another 10-15 years — you require lot of new innovations, lot of new thinking, you require a vision.” - B. Muthuraman, MD, TATA STEEL
The New Era of steel making dawned in 1947 India had three units Two of them in the Private Sector (TISCO & IISCO) Total Capacity 1 million tons
China too had almost similar capacities … (one million ton in 1949)
It took China 47 years to commission its first 100 million tons of steel capacity 5 years to commission the next 100 million tons And A mere two years to score its triple hundred. The rest is history!
India • Today, India is the 5 th. largest crude steel producer in the world. • In 2007-08 (Apri-Feb''08), production of Finished Steel was 46.9 million (annualised 51.1 million tons) as against 44.4 million tons in 2005/06 • Steel Production target revised to 110 mt by 2011-12, to 300 mt by 2020
300 million tons of steel Year 2020
Additional Crude Steel Capacity being planned in India million tons SAIL 12.0 TATA STEEL 30.0 VIZAG 6.5 MITTAL 12.0 POSCO 12.0 ESSAR 11.0 JINDAL 20.6 BHUSHAN 3.1 OTHER (MISC) 7.0 Total 114.2
The world’s who’s who of steel making are waiting : • Arcelor Mittal , the world's largest steelmaker, plans to set up two greenfield steel projects in India each with a capacity of 12 million tonne per annum (mtpa). • Acerinox SA , the world's second-biggest stainless steelmaker, is joining hands with Japan's Nisshin Steel to build a steel plant in India. • Tata Steel , the world's fifth largest steel maker, plans to double its capacity by 2015, by adding another 35 mt capacity. • India's largest steel manufacturer SAIL is planning to increase its annual production of 12 mtpa to 24.98 mtpa by 2011-12. • Sinosteel Corp , China's second- biggest iron ore trader, plans to invest US$ 4 billion to build a 5 mt greenfield steel plant • Posco which has already started work in Orissa.
Ports All resources can be mobilised in the medium term Vessels Material handling facilities Roads Railways Road – rail linkages Ancillaries Trained manpower, including skilled labour
Except Coking Coal
1 MT of steel will require 0.6 MT of met coke 60 MT of coke requirement for 100 MT Or 100 MT Coking Coal required
Demand from Foundries, Soda Ash plants, Chemical Units Other Sectors not considered.
Potential sources : Established : Emerging : Australia Mozambique Canada Indonesia USA South African Nations China
But Except Australia Need to consider *ash content, *calorific values, *land locked mines, *transport bottle necks, *freight costs, *law & order problems
India centric issues Peculiarities of Indian psyche Tendency to buy in the spot market Dependence on China Herd mentality Lack of foresight leading to Inability of ensuring supply security
In 2004 among the Indian Secondary Steel Producers only Sesa Goa had captive coke plant (0.28mtpa) By 2007 more than 10 producers have gone in for captive plants ( 4 mtpa)
Captive Coke Plants in Secondary Steel Sector (million TPA) 2003/04 2006/07 Sesa Kembla Coke 0.28 0.28 Sathvahana Ispat 0.12 Jindal Vijaynagar 0.80 Lanco Ferro 0.12 Electrosteel Castings 0.12 Jindal Saw 0.15 JSPL 0.80 VISA 0.40 Neelachal 0.80 Jayaswal Neco 0.20 Total 0.28 3.79 JV tie ups: Kalyani Steel with Gujarat NRE 0.32
Which means Distinct move away from Chinese dependence : (Coking coal import preferred over coke import as Chinese prices move defying logic) India to emerge as the second largest coke producer after China Coking Coal criticality to continue
Expected Indian Coke Consumption & Coking Coal Demand Projections (Conservatively based on additional 50 million tons of steel by 2012 and further 100 million tons by 2020) (million tons) year 2005 2007 2012 2020 Coke 21 25 60 120 Consumption Coking coal reqd. 28 35 84 170 Indian coal 8 8 9 12 Nett import demand 21 27 75 158 (equivalent coal)
Australia : Quality mines ready and rolling are hard to come by Ports are already congested Stiff Mining / Environmental legislation
Mozambique, Botswana, other African sources Mainly in the prospecting license stage Reserves have to identified and established Huge investment in infrastructure required Before mining can actually commence Note as opposed to a steel plant being set up in 2-4 years time, setting up a mine will require 6 – 8 years which means, 10 years to get the coal flow)
Coal Criticality
Coal Videsh (scouting for the last decade) Gujarat NRE Coke (2 mines in Australia, stake in NZ mine, other prospecting Co’s) Tata Steel (Mozambique) Others
Gujarat NRE Coke Limited India’s largest independent coke producer (Current capacity – 1 MTPA By Dec’08 - 1.25 MTPA)
GUJARAT NRE COKE LIMITED Growth @ speed of thought A Snapshot � GNCL is the largest independent producer of Metallurgical Coke in India and the only listed company in this sector with more than 60,000 shareholders � Apr’08 Market Cap US$ 1 billion plus � Profit earning and dividend paying company with strong financials and credit rating � Met Coke capacity 1 million tons & being increased to 1.25 Million MTPA � The only Indian company to have acquired captive coking coal mines outside India – NRE No. 1 Colliery and NRE Wongawilli Colliery near Wollongong, NSW, (combined resources more than 550 million tonnes of Hard Coking Coal) � NRE NO 1 IPO for AU $15 million oversubscribed. Currently listed with a market cap of AU $1 billion – (Gujarat NRE Minerals Ltd – ASX Code:GNM) � Recently acquired Elouera Colliery from BHP Billiton and consolidated with NRE Avondale. Since renamed as NRE Wongawilli Colliery
GUJARAT NRE COKE LIMITED A Snapshot Contd… Growth @ speed of thought � NZ $20 Million invested in Pike River for 400 KTPA of Ultra Low Ash Coal (a much sought after sweetener for blending with NSW Coal) � Environment friendly Non – recovery Coke batteries with heat recovery and Stamp Charging facility having ISO 9001:2000 certification � Group has the potential to generate power from waste heat at Re. 0.50 / Unit � Setting up waste heat recovery power plants of 30 MW Capacity by 2009 and further 30MW by 2010. � Setting up Captive Jetty at Bellikeri, Karnataka and Railway Siding at Dharwad which would improve logistics and reduce cost � Acquiring Six new dry bulk carriers on long term time charters with an option to buy. To be put in service progressively from 2010 onwards. � Bagged several awards as Super performer, Highest wealth creator, Best Performing Mid sized company, environment & safety awards by various media houses
GUJARAT NRE COKE LIMITED Growth @ speed of thought • Listed on BSE & NSE Shareholding Pattern • Ticker Code: GUJNRECOKE BSE: 512579 Jagatramka Family 41% • Face Value : Rs. 10 per share Mutual Funds & FIIs 41% Indian Public (60,000) 18% ---------- 100% • Shares on Issue - As on 31/3/2007 244 million - On Conversion of warrants 14 million - On Conversion of 1 st FCCB issue 48 million - On Conversion of 2 nd FCCB issue 25 million Total as on 31/3/1008 331 million Returns to Shareholders • Current Market Price Rs. 153 Investment of Rs. 1 million 1994 • Fully diluted Market Cap US $1 Billion + equals Rs 0.3 billion in March, 2008 Which translates to more than 49% YOY growth
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