MCP Report - 2017 PDF

UNNATI INVESTMENT MANAGEMENT AND RESEARCH GROUP
UNNATI
SECTOR
REPORT
METALS, CEMENT & PAPER SECTOR
2017-18
Priyanka Demla | Anant Jain

Metals, Cement & Paper
Sector
Table of Contents
1.0 OVERVIEW OF MINING AND METALS IN INDIA ...........................................................4

1.1 Introduction ........................................................................................................................4
1.2 Investment Policy & Initiatives ..........................................................................................6
2.0 ALUMINIUM ........................................................................................................................ 10
2.1 Introduction ......................................................................................................................10
2.2 Applications of Aluminium Industry ................................................................................11
2.3 Effect of China’s policies on Aluminium Industry ...........................................................12
2.4 Manufacturing Process ......................................................................................................12
2.5 Consumption Pattern .........................................................................................................13
2.6 Indian Aluminium Industry- Demand & Supply ..............................................................14
2.7 Looking forward ...............................................................................................................15
2.8 Market Structure ..............................................................................................................16
2.9 Impact of Budget 2017-18 ...............................................................................................17
3.0 Impact of GST ..................................................................................................................18
3.1 Sector Outlook .................................................................................................................19
3.0 STEEL......................................................................................................................................21
3.1 Introduction .......................................................................................................................21
3.3 Global Scenario .................................................................................................................23
3.4 Indian Steel Industry .........................................................................................................25
3.5 Structure of Indian Steel Industry .....................................................................................26
3.6 Key Drivers of Steel Industry............................................................................................29
3.7 Impact of Union Budget ....................................................................................................31
3.7 Impact of National Steel Policy ........................................................................................31
3.8 Impact of GST ...................................................................................................................33
Unnati Sector Report 2017-18 | 1

Sector
4.0 LEAD .......................................................................................................................................33
4.1 Introduction .......................................................................................................................33
4.2 Refining Process ................................................................................................................33
4.3 Consumption Pattern .........................................................................................................34
4.4 Global Scenario .................................................................................................................34
4.5 Indian Scenario ..................................................................................................................35
5.0 NICKEL ...................................................................................................................................46
5.1 Introduction ........................................................................................................................46
5.2 Production Process .............................................................................................................46
5.3 Global Nickel Industry .......................................................................................................41
5.4 Indian Nickel Industry........................................................................................................45
6.0 COPPER ..................................................................................................................................48
6.1 Introduction ........................................................................................................................48
6.2 Refining Process .................................................................................................................49
6.3 Consumption Pattern ..........................................................................................................50
6.4 Global Scenario ..................................................................................................................51
6.5 Indian Scenario ...................................................................................................................51
7.0 ZINC ........................................................................................................................................55
7.1 Introduction ........................................................................................................................55
7.2 Production and Refining Process .......................................................................................55
7.3 Consumption Pattern ..........................................................................................................56
7.4 Global Scenario ..................................................................................................................57
7.5 Indian Scenario ...................................................................................................................59
8.0 BRIEF PROFILE OF MAJOR SECTOR PLAYERS .............................................................61
8.1 NMDC Ltd. .......................................................................................................................61
8.2 Tata Steel ...........................................................................................................................63
8.3 Vedanta Limited ................................................................................................................65
9.0 CEMENT .............................................................................................................................76

9.1 Introduction .......................................................................................................................76
Sector
9.3 Gradation of Cement .........................................................................................................78
9.4 Cement Sustainability Initiative ........................................................................................80
9.5 Indian Cement Industry .....................................................................................................81
9.6 Cost Drivers.......................................................................................................................88
9.7 Recent Developments........................................................................................................93
9.8 Brief Profile of Major Players ...........................................................................................94
9.9 Ultratech Cement Ltd. . .....................................................................................................94
9.10 Shree Cements .................................................................................................................97
9.11 Ambuja Cement...............................................................................................................99
9.12 ACC Ltd. .......................................................................................................................102
10.0 PAPER .................................................................................................................................105

10.1 Introduction ....................................................................................................................105
10.2 Gradation of Paper .........................................................................................................105
10.3 Global Outlook ...............................................................................................................106
10.4 Manufacturing Process ...................................................................................................107
10.5 Indian Paper Industry .....................................................................................................108
10.6 Drivers ............................................................................................................................111
10.7 Ballarpur Industries Ltd. . ..............................................................................................113
10.8 JK Paper .........................................................................................................................115

Sector
OVERVIEW OF MINING AND METALS IN

INDIA
1.1 Introduction
Mining is a backbone sector for the Indian economy, providing inputs to many manufacturing
industries. The sector’s GVA accounted for some 3.8% of GDP in FY2016, as against 4.5% in the
previous year. Coal, Iron Ore, Manganese, Bauxite, and Chromite are the key minerals produced
in the country. Total value of minerals produced in the country is estimated to be INR 2,830 Bn in
the fiscal year 2017. Fuel minerals form the largest segment, accounting for 68% of total value of
minerals produced in the country while metallic minerals accounted for ~12% and non-metallic &
minor minerals together accounted for rest 20%.
India is endowed with huge resources of many metallic and non-metallic minerals. These include
4 fuel minerals, 23 non-metallic minerals, 10 metallic minerals, 3 atomic minerals, and 55 minor
minerals. Coal and lignite mines form 16% of total operating mines; metallic mineral mines form
18% while non-metallic minerals form rest 66%
The total value of minerals produced in the country is estimated to be INR 2,830 Bn in the fiscal
year 2017.India is self-sufficient in case of 36 minerals and deficient in respect of a number of
minerals. The table below shows the rank of India in world production in some of the major
minerals.

Sector
Mineral India’s Rank in World Production

Coal and Lignite 3rd
Iron ore 4th
Bauxite 4th
Zinc 4th
Copper (refined) 10th
Lead 6th
In India, 80 % of mining is in coal and the balance 20 % is in various metals and other raw materials
such as Iron, Copper, Bauxite, Zinc, Lead, Gold and uranium.
Minerals and mining sector plays an indispensable role in accelerating growth and development
of a nation. Most of the basic manufacturing industries depend on the availability and exploration
of mineral resources. For example, coal and iron are the basic minerals needed for the growth of
iron and steel, power and cement industries. Similarly, minerals like mica, manganese, copper,
lead and zinc are of economic importance with varying degree.
The Indian mining sector grew at a CAGR of 7.3 % in the last decade compared to 22 % in China
for the same period. Despite this scenario, India is in a good starting position to transform its
mining sector. This is due to India’s large reserve base of coal, iron ore, bauxite manganese, etc.,
0and also the push towards progressive policy measures initiated by the Ministry, such as the
MMDR Act, and IBM/GSI reforms. With the new government initiatives the revival of the sector
are already visible. Mining output expanded by 4.2% over the last year to achieve total production
of 639.2 MT.
Mining and metals sectors can play a critical role in the economic development, attracting
investment and employment generation in the country. The demand for various metals and
minerals will grow 4-5 times over the next 15 years (9-11% growth per annum – Source: Ministry
of Mines, Strategic Plan 2013) against a backdrop of globally dwindling and increasingly scarce
resources. India’s per-capita consumption is almost four times less than global levels and there
will be huge demand for the metals in view of the rapid urbanization and growth in the
manufacturing sector in India.
Sector
1.2 Investment Policy & Initiatives
Regulatory Scenario
Indian mining sector is regulated by central as well as state government with the later having a
higher say. State government has the authority to regulate and develop mines within their
boundaries for minor as well as major minerals, except fuel minerals and atomic minerals. In the
case of fuel minerals and atomic minerals prior approval from central government is required
before state grants mining concessions. Major reform measures in mining sector were initiated
after the passage of National Mineral Policy in 1993. This policy was aimed at attracting private
investments both from Indian and foreign investors so as to improve the state of technology used
in mining. Post 1993 several regulations were introduced at periodic intervals all meant to improve
private sector participation. Currently there is no upper limit on foreign equity holding on
companies engaged in mining in the country
Regulatory framework governing mining sector saw disruptive changes in the past few years
culminating in the passage of Mines and Minerals (Development and Regulation) Amendment Bill
2015. This bill sought to address the concerns regarding allotment of mining licenses,
compensation, and rehabilitation of population affected by mining, granting of licenses and
clearances and investment climate.
Illegal Mining, Cancellation of Coal Blocks and Its Impacts.
Indian mining sector was besieged by instances of illegal mining and regulatory uncertainties. Iron
ore and coal mining – two the largest segment – was the most impacted leading to drastic reduction
in output of these two minerals. Iron ore mining in several states was banned as rampant practice
of illegal mining came into light. Key iron ore rich states of Karnataka, Goa, and Odisha were
among the most affected. Iron ore mining was banned in Karnataka in 2011 and in Goa in 2012.
Consequently, iron ore production in India dropped from 208 Mn tonnes in FY 2012 to 137 Mn
tonnes in FY 2014. In Odisha, partial ban on iron ore mining was imposed in 2014 when Supreme
Court issued orders ban on mining in 26 iron ore mines in the state. Although mining ban on
several of mines across all three states was relaxed by 2014 the sector is yet to recover fully. Coal
mining segment was faced with an uncertainty as Supreme Court in 2014 canceled 214 out of 218
coal blocks licenses allocated by the government during the period 1993-2010. Bulk of these
cancelled coal blocks were allotted to private players for captive mining to meet their end use
requirements. Cancellation impacted the mining operations as well as dented the confidence of
private sector to invest in mining sector.
Mines and Minerals (Development and Regulation) Amendment Bill 2015 *

Sector
It was launched to address clarify regulatory uncertainty as well as prevent illegal mining. The
new rule – amended version of the original Mines and Minerals (Development and Regulation)
Act 1957 – did away with discretionary allotment of distributing mining licenses. It was replaced
by competitive bidding and henceforth granting of mining license was solely done through
competitive bidding. Other major policy measures and regulations proposed under the new rule
include
 Extension of mining leases acquired through competitive bidding from 30 years to 50 years.
 Automatic renewal of mining licenses at the end of lease period done away with and replaced
by competitive bidding process.
 Setting up of National Mineral Exploration Trust to promote exploration. The trust found would
be created out of contribution from existing mining lease holders.
 Setting up of District Mineral Foundation to address concerns of population displaced by mining

operations.
 Simplifying mining operations by removing multiple approvals, including prior approval from
central government for granting mining licenses.
To check illegal mining, The Mineral Conservation and Development Rules, 1988 was
strengthened which mandates mining companies to provide periodic reports on production of
mineral production. Amendment in this rule also makes it mandatory for reporting production and
trade of minerals at every level of mining operations, from pit head to traders to stockists to end
users.
*Dun & Bradstreet
Private Participation in the mining sector
The National Mineral Policy was revised in 1994 and as a result, private investment (both domestic
and foreign), has been permitted for the exploration & exploitation of 13 minerals. In 1994, the
MMDR Act, 1957, had accordingly been amended.
The government has also amended MMDR Act, 1957 for allocation of coal and lignite blocks
through competitive bidding and has also put its foot forward by instructing Coal India to adopt a
PPP (Public Private Partnership) model to enhance coal production in India. This step will further
enhance the production of coal reduce dependence on the imported coal.

Sector
Investment Policy
In 1999, the foreign investment policy has been further liberalized to promote Foreign Direct
Investment (FDI) in the mining sector. In a significant relaxation of the general policy governing
process of automatic approval for FDI for the mining sector, the automatic route for FDI and/ or
technology collaboration is also available to those who have or had any previous joint venture or
technology transfer agreement, subject to a declaration being filed that they have no existing joint
venture for the same area and/ or the mineral concerned. As on date, 100% FDI is allowed in:
• Mining and Exploration of metal and non-metal ores, excluding titanium bearing minerals
and its ores
• Coal and Lignite mining though only for captive consumption by power projects, iron &
steel and cement units
Investment Incentives
The government offers a wide range of concessions to investors who are engaged in mining activity
in India. The main concessions offered are:
Direct Taxes:
• Mining in specified backward districts is eligible for a complete tax holiday for a period of
5 years from commencement of production and a 30 % tax holiday for 5 years thereafter.
• Environment protection equipment, pollution control equipment, energy saving equipment
and certain other equipment eligible for 100% depreciation.
• One fifth of the expenditure on prospecting or extracting or production of certain minerals
during five years ending with the first year of commercial production is allowed as a
deduction from the total income.
• Export profits from specified minerals and ores are eligible for certain concessions under
the Income tax Act.
Indirect Taxes:
• Minerals in their finished form exempt from excise duty

• Low customs duty on capital equipment used for minerals; on nickel, tin, pig iron,
unwrought aluminium.
• Capital goods imported for mining under EPCG scheme qualify for concessional customs
duty subject to certain export obligation.
Financial support for Mining:

Sector
Innovative financing schemes like metal loans, mezzanine financing, etc. designed for foreign
firms and JV companies.
Large Area Prospecting:
To boost exploration and detailed prospecting of high value and scarce minerals, the area for
prospecting has been increased from 25 sq.km to 5,000 sq.km for a single licence, and 10,000
sq.km for aerial prospecting.

Sector
Aluminium Industry
2.1 Introduction
Aluminium is the most abundant metal in the earth’s crust. It is the second most widely used metal
in the world after steel. Aluminium has multiple applications across industries owing to its
favorable physical, chemical and mechanical properties, which include light weight, high strength,
moderate melting point, ductility, conductivity, resistance to corrosion and the ability to be recycled
without any loss of original properties.
The metal finds use in a variety of industries such as:
 Construction
 Automobile
 Packaging
 Electrical & Electronics equipments
 Machinery equipments
 Household Items
 Power
Domestic aluminium demand grew at 5-6% in 2016-17, driven largely by demand from the
power sector.

Sector
Applications of Aluminium Industry

Sector
Effect of China’s policies on the aluminium industry
Since China is one of the one of the major consumer and producer of the metal, the economic
conditions of the nation, the smelter capacity production projections and any ramp up or shut down
of plants have a direct bearing on aluminium prices. LME daily publishes inventory levels of
aluminium which has a direct impact on the prices of aluminium and on the stock prices of
aluminium producing companies.
Global aluminium prices had taken fallen sharply in FY 2015-16 (USD 1592/tonne) falling 16%
y-o-y from the prices in FY 2014-15(USD 1889/tonne). Prices of aluminium have shown some
recovery in FY 2016-17. In FY 2016-17 global aluminium prices recovered by 6% (USD
1688/tonne).
The Chinese economy experienced a slowdown due to the change from an investment driven
economy to a consumer driven economy during the years 2013 to 2015. Oversupply of Chinese
aluminium due to overcapacity had caused the prices to fall sharply in FY 2015-16, Q3FY16 the
prices of aluminium globally was the lowest (USD 1494/tonne). The LME prices continued to
remain depressed till the end of 2015.
FY2016-17 there was a pickup in Chinese demand due to stimulus measures, adopted by the
Chinese economy. Post the U.S elections, LME prices in aluminium witnessed a rally due to
expected boost on infrastructure development by the new President.
2.2 Manufacturing Process

The basic operational stages involved in the production of aluminium and its products are:
Smelting to Casting into

Fabrication of
Refining of alumina to ingots, billets,
Metal to
bauxite to Primary slabs, extruded
Bauxite Mining Various Forms
alumina using Aluminum using products,
for Industrial
Bayer process Hall-Heroult sheets, foils and
Uses
Process wire rods
2.3 Consumption Pattern

1. Global
Auto, construction major users of aluminium globally
Globally, the automobile and construction sectors account for about 25% each, of the total
aluminium consumed. The automobile manufacturers globally opt for aluminium as it improves

Sector
fuel efficiency, reduces emission and enhances the vehicle's performance. Aluminium is used in
the real estate sector for window panes and door frames. The power sector accounts for
only 11% of total
aluminium consumed
globally. This is because,
in most developed
economies, power is
transmitted through
underground cables that
largely use copper. Copper
is mainly used in
underground cables
(operating at
higher voltages of 400
kV) because of its higher
thermal and electrical
conductivity which helps
to conserve space,
minimize power loss and
maintain lower cable
temperatures.
2. India
Power sector, major aluminium
consumer in India
In contrast to the global
trend, in India, the
power sector accounts for about 56% of
total aluminium consumption, as the
metal is a cheaper substitute for copper
and also has lower weight. In India,
power is supplied through grids that
comprise transmission towers, in which
the overhead conductors are mainly
made of aluminium. Aluminium is used

Sector
in overhead conductors due to better strength-to-weight ratio, and lower weight and price as
compared to copper.
2.5 Indian Aluminium Industry

Demand and Supply
It is projected that primary aluminium demand will post a healthy 7-8% compound annual growth
rate (CAGR) during 2016-17 to 2021-22, compared with 5.4% during 2011-12 to 2016-17.
Demand is estimated to have grown by 5-6% in 2016-17, largely driven by higher power sector
and consumer durables demand.
The key sectors of power, construction, automobile and consumer-durable sectors, together
accounting for over 80% of domestic aluminium demand, will aid growth:
 The power sector is set to witness steady growth on the back of investments in distribution
and transmission by Power Grid Corporation of India Limited (PGCIL) and state
transmission companies. Government initiatives such as the Ujwal Discom Assurance
Yojna (UDAY) scheme are further expected to support sectoral growth.
 Construction sector demand is set to pick up pace following rising urbanisation coupled
with an acute housing shortage in urban areas.
 Automotive sector demand will continue to rise, as domestic sales of cars and two-wheelers
are expected to increase at a steady pace, led by an improvement in consumer sentiment
amid expectations of faster economic growth. Further, with the Make in India policy,
manufacturers are targeting India as an export hub for automobiles. Commercial vehicle
sales are also expected to improve as a result of a revival in industrial and commercial
activity.
 Consumer durable demand too will see strong growth due to upbeat consumer sentiment.
In the aftermath of demonetization, a 100-200 basis point impact on demand growth for
Automotive, Building & Construction, and Consumer Durables sectors was observed in 2016-17.
As demand arising from power cables and conductors largely emanates from orders by PGCIL or
other govt. bodies (as opposed to retail buyers) this section of demand remained insulated from
the impact of demonetization.
During 2011-12 to 2016-17, primary aluminium demand posted a CAGR of 5.4%, in line with the
aggregate growth recorded by power, construction, and automobile sectors. In 2016-17,
aluminium demand rose ~5-6% to 2.4 million tonnes, after slowing from the 11.6% growth seen
in 2015-16. The slowdown in demand was largely attributed to a decline in demand growth from
the power sector resulting from lower off-take.
Sector
As of 2016-17, the consumption of primary aluminium was dominated by power (56%),
construction (15%) and automotive (9%) sectors.
Looking forward
Electricity
Power sector demand to remain healthy. Higher demand from PGCIL and steady addition of
transmission lines by state companies resulted in a significant improvement of aluminium
demand from the sector (via power conductors and cables) in 2015-16. However, delayed
installations have had a cascading effect on demand in 2016-17, which resulted in a slowdown in
demand growth for the year (relative to last year). Going forward, growth in power conductors
will be led by state discoms’ investments in infrastructure, which is expected to drive demand.
Investments under the centrally-sponsored schemes- Deen Dayal Upadhyay Gram Jyoti Yojana
and Ujwal Discom Assurance Yojana - will drive incremental demand. These schemes are likely
to further boost investments in transmission and distribution over the long term.
Over the next five years, investments totaling Rs ~4 trillion are being planned to expand India's
transmission and distribution network.
Construction
Construction sector demand to maintain mediocre pace. Aluminium is widely used in the
construction sector to make doors, window frames, false ceilings and industry roofing. Increasing
urbanisation coupled with an acute housing shortage in urban areas is expected to drive housing
construction.
While primary aluminium off take from this sector continued to grow at a steady pace in 2015-16,
demonetization had a detrimental impact on demand during 2016-17, slowing growth to 2-3%.
Though the sector’s recovery is expected to be slow in the near term, a slight improvement for
aluminium demand is expected in the subsequent years, driven by increase in intensity of usage
within the sector. As a result, overall aluminium demand from the construction industry is
projected to record a moderate 4-5% CAGR over the next five years.

Sector
Automobile
Auto sector to spur demand in the long term Though demand growth was robust in H1 2016-17,
the impact of demonetization slowed demand growth for the year by 100-200 basis points. The
impact was felt most strongly in the two-wheeler segment, followed by commercial vehicles.
However, demand is likely to improve further up to 2020-21 on an increase in car and two-
wheeler sales and exports, supplemented by a strong revival in the commercial vehicles segment.
Improved consumer sentiment amid expectations of faster economic growth, coupled with an
uptick in commercial activity are expected to drive growth going forward.
(Among automobiles, aluminium intensity, i.e., input per vehicle, is the highest for commercial
vehicles, followed by cars, utility vehicles and two-wheelers.)
Source: CMIE, CRISIL Research
2.6 Market Structure

The Indian aluminium industry is highly concentrated in nature with few companies accounting
for the majority of the country’s production. Following are the major players in the Indian
aluminium industry:
 Hindustan Aluminium Company (HINDALCO)

 National Aluminium Company (NALCO)
 Vedanta Aluminium Limited
• Madras Aluminium Company (MALCO)
• Bharat Aluminium Company (BALCO)
What are the key inputs that affect an aluminium manufacturer's cost
structure and profitability?
Alumina and Power
Alumina (refined from bauxite) and power are the major inputs for an aluminium manufacturer
and form about 30% and 40% of total cost structure of aluminium manufacturers. About 4 tonnes
of bauxite are required to produce 2 tonnes of alumina. About 2 tonnes of alumina are then
electrolytically reduced to produce 1 tonne of aluminium. Electrolysis consumes about 15,000
kWh of power.
Over the past decade, access to captive bauxite and coal (fuel for captive power plants) mines
enabled Indian aluminium manufacturers to control cost and protect operating margin. This

Sector
allowed them to remain competitive. India is a low-cost producer of aluminium, despite lagging in
terms of power cost as compared to the Middle East, which despite no access to captive alumina
is the lowest-cost aluminium producing region as power tariffs in the region are 40-50% lower
than in India.
Indian bauxite production has risen to 25 million tonnes in 2016, an increase of 4% CAGR over
the past decade
Globally, about two-thirds of aluminium smelters purchase power through long-term contracts at fixed
prices, or source it through short-term arrangements from the state grid (like China). In India, aluminium
manufacturers have traditionally had cheaper, captive power plants that ensure uninterrupted supply to
smelters. Most of these plants generate power by using thermal coal. Prior to 2010, the operating
margin of aluminium producers was as high as 28-35%, as their access to captive raw material
protected their margins. However, in 2009-10, the favourable cost structure shifted. While some
Indian aluminium manufacturers had acquired mines for upcoming capacity, a Supreme Court
order de-allocated the mines.
After the de-allocation, the coal ministry identified 101 coal blocks for re-auction. The first two
batches of 23 coal blocks, auctioned during February and March 2015, included operational and
ready-to-produce blocks. Aluminium players won five coal blocks - Hindalco four and Balco one.
Their bids appeared to be steep at the e-auction and coal import price levels. With the cost of
procuring captive coal 20-25% higher than that of imported coal, we believe aggregate profitability
will significantly decline over the next 2-3 years since market fundamentals are unlikely to let
aluminium prices see much upward movement.
LME Prices and Stock Levels

The LME Official price, through its futures and options contracts for aluminium and aluminium
alloy, is considered as a benchmark for aluminium prices in countries across the world. Moreover,
the LME aluminium prices are affected by the aluminium stock levels in various warehouses of
LME.
Impact of Union Budget 2017-18

Key budget proposals
 Investment in rural electrification through Deen Dayal Upadhyaya Gram Jyoti Yojna to
jump 44% on-year to Rs 48 billion in FY18.
 30% export duty on previously exempted ‘other aluminium ores and concentrates,’ and
15% on ‘other aluminium ores, including laterite’.
Sector
Possible Implications
 Higher budget allocation for rural electrification to boost demand for aluminium cables
and conductors, which comprise 56% of primary aluminium consumption.
 Imposition of export duties on ‘other aluminium ores and concentrates’ and ‘other
aluminium ores, including laterite’ to slow down the unprecedented surge in export
volumes and conserve domestic resources. Exports surged from one kilo tonne (KT) in
FY14 to 158 KT in FY16, and further to 177 KT in first half of FY17.
Impact of GST Rate

 No impact of GST rate on aluminium products. Some cushion provided by rate cut on coal.
Existing Rate GST Rate Comments

Aluminium Ingots/Products* 18% ^ 18% No change in effective tax structure
*Aluminium products exclude foils, doors, windows (and their frames) and sanitary-ware and parts
thereof
Încludes Excise duty of 12.5%, VAT of 5.5% and other levies wherever applicable etc.
Inputs Existing Rate GST Rate Comments

Coal 11.7%^^ 5% Power & Fuel is 30-40% of total cost
Bauxite 5%^^^ 5% No change in effective tax structure
^Încludes Excise Duty of 6.18%, VAT of 5%, Entry Tax of 0.5% and other levies wherever
applicable, etc.
^^Încludes VAT of 5.5%, and other levies wherever applicable
Aluminium sector already attracts levies which add up to ~18%, which is equivalent to the GST
rate fixed for most products in this sector. Further, a lower tax on coal will likely help improve
industry profitability given that power and fuel costs account for 30-40% of production costs.

Sector
Sector Outlook
Indian Aluminium Industry Outlook
Domestic aluminium demand grew at 5-6% in 2016-17, driven largely by demand from the power
sector. Demand growth during the year was far slower than the previous year (11.6% in 2015-16),
largely on account of a slowdown in ordering by the power sector, while demand from
other sectors such as building and construction, automotive, and consumer durables is expected to
moderate by 100-200 basis points in the aftermath of demonetization.
India has a high growth potential for the aluminium industry. The forecast for domestic demand is
that it will grow at a 7-8% CAGR from 2016-17 through 2021-22, with demand touching ~3.6
million tonnes in the terminal year of our forecast. Higher ordering by the Power Grid Corporation
of India Limited and steady additions to transmission lines by state transmission companies,
coupled with a rise in state distribution companies' investments in distribution infrastructure of
conductors, will drive demand. Domestic aluminium demand is forecasted to post healthy growth
till 2021-22.
. Key sectors power, construction, automobile and consumer-durable sectors, together accounting
for over 80% of domestic aluminium demand, will aid growth:
 The power sector is set to witness steady growth on the back of investments in distribution
and transmission by Power Grid Corporation of India Limited (PGCIL) and state
transmission companies. Government initiatives such as the Ujwal Discom Assurance
Yojna (UDAY) scheme are further expected to support sectoral growth.
 Construction sector demand is set to pick up pace following rising urbanization coupled
with an acute housing shortage in urban areas
 Automotive sector demand will continue to rise, as sales of cars and two-wheelers are
expected increase at a steady pace, led by an improvement in consumer sentiment amid
expectations for faster economic growth. Commercial vehicle sales are also expected to
improve as a result of a revival in industrial and commercial activity.
 Consumer durable demand too will see strong growth due to upbeat consumer sentiment.

Sector
Global Aluminium Industry Outlook
Aluminium prices, after a downbeat 2015, continued to plunge in H1 2016 on back of demand-
supply surplus in China, coupled with muted demand growth in the Eurozone & Japan. However,
demand driven improvement in H2 2016 limited the overall dip (prices rose 6% y-o-y in H2).
The uptick in prices during H2 2016 was supported by rise in China’s construction demand coupled
with rising coal cost. Additionally, elevated price levels in H2 2016 prompted 2-3 MT of closed
capacities in China to resume production. Consequently, robust alumina demand from China sent
alumina prices soaring, with prices rising ~30% q-o-q in Q4 2016 and remaining at similar levels
in Q1 2017. This rise in alumina prices further supported the elevated aluminium price levels.
Alumina prices have seen a partial pull-back in Q2 2017.
Aluminium prices (including premiums) saw further upward movement in H1 2017 on the back of
environmental impact driven supply disruptions and production cuts in key aluminium smelting
districts in China. The impact of the same is expected to be seen throughout 2017, with premiums
also remaining elevated owing to the partial alleviation of the regional supply-demand surplus.
Through 2018, aluminium prices (including premiums) are expected to hover around the 1,800 –
2,000 $/tonne levels as the global demand-supply balance gradually stabilizes. Any surge in prices
however, would be capped by the existing capacity overhang.
Globally, we foresee demand growth moderating for aluminium over 2016 to 2021 because of
cooling Chinese economy and extended Eurozone crisis. On the other hand domestic demand is
expected to post robust growth on back of investments in the power sector. As the global demand-
supply balance begins to ease, realisations are expected to improve, while reducing input costs are
expected to support an improvement in profitability for domestic producers in the near term.

Sector
STEEL INDUSTRY
3.1 Introduction
Steel is the most common metal alloy in the world. In its simplest form, it consists of iron and
carbon varying between 0.02 % - 1.7 % (by weight). Steel is characterized by high strength, low
weight, durability, flexibility and corrosive resistance. It is widely used in construction, automobile
and consumer durables industries. Steel forms the backbone of all industries, and is one of the
basic ingredients of growth and development of a country. Traditionally, the fortunes of the steel
industry have been linked to the economic cycle of a country. Steel is also the most commonly
traded commodity across the globe.
India will continue to remain a net importer in the near term due to surge in imports and heightened
competition in export market, but in the long term, India is expected to turn into a net exporter of
steel as Indian steelmakers are focusing on producing value-added products, which will ultimately
help substitute imports and increase exports.
In a bid to maintain the optimum utilization levels, Indian steelmakers are diversifying into the
export market and enhancing competencies in niche areas such as automobiles. Besides, cost
competitiveness (India lies in the second quartile of the global steel cost curve) and a weak rupee
would continue to favour export-focused players. The share of Indian steelmakers in the global
export market is expected to inch up to 3 % from 2 %, over the next five years.

Crude Steel
The term crude steel is internationally used to mean the first solid steel product upon solidification
of liquid steel. In other words, it includes Ingots (in conventional mills) and Semis (in modern
mills with continuous casting facility).
According to International Iron & Steel Institute (IISI), for statistical purpose, crude steel also
includes liquid steel which goes into production of steel castings.
There are three popular processes to produce crude steel from raw materials:

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Blast furnace (BF)/ Basic oxygen furnace (BOF)
•In BF/BOF, iron ore and coking coal are fed into a BF to produce hot metal. The BOF
converts the hot metal into crude steel.
•It is the most common process for producing steel
Electric Arc Furnace
•Steel scrap, pig iron or sponge iron is used as raw material in an EAF. The raw
material is melted using heat generated with the aid of an electric arc. The EAF
process generally follows the following pattern Charging, Melting, Oxidising,
Deoxidising or refining
Corex BOF
•Corex technology is emerging as an alternative method in the iron producing stage.

•This process uses non-coking coal (which is domestically available in excess),
instead of metallurgical coal (which is largely imported). Thus, it does not require
the setting up of coke ovens.
•The Corex route also generates surplus heat, which could be used to generate
electricity to be sold to the grid or consumed for the production of direct reduced
iron.
A typical steel making process by BF/BOF Process is shown below:

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Finished Steel
Products obtained on hot rolling/forging of semi-finished steel (blooms/billets/slabs). These
cover two broad categories of products - long products and flat products:
Bars and Rods Source: CRISIL Research
CTDand TMT
Wire Rod
LongProducts AnglesShapesand
Sections
Rails
Wires
FinishedSteel
Bright Bars
Plates
Flat Products Sheets

Wide Strips
Strips
NarrowStrips
3.3 Global scenario of steel industry

Global Production
Global In 2016, the world crude steel production reached 1630 million tonnes (mt) and showed a
growth of 0.6% over 2015. China remained world’s largest crude steel producer in 2016 (808 mt)
followed by Japan (105 mt), India (96 mt) and the USA (79 mt). World Steel Association has
projected Indian steel demand to grow by 6.1% in 2017 and by 7.1% in 2018 while globally,
steel demand has been projected to grow by 1.3% in 2017 and by 0.9% in 2018. Chinese steel
use is projected to show nil growth in 2017 and decline by 2% in 2018. Per capita finished steel

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consumption in 2016 is placed at 208 kg for world and 493 kg for China by World Steel
Association.
■ Over 2016 and early 2017, steel prices rallied due to a combination of high demand from Chinese
steel users restocking the metal, government stimulus measures implemented in the housing
market and positive investor sentiment. Government led consolidation is expected to take place
over 2017, which will gather pace from 2018 onwards, as increasing trade tensions within the
global market due to accusations of Chinese steel dumping, will pressure the Chinese government
to scale back domestic steel production and exports over the coming years. For instance, in August
2016, the European Commission imposed a five-year import duty of 19.7%-22.1% on cold rolled
steel products from China. These products are primarily used in the construction and automotive
sector. Global steel consumption growth will average 0.7% annual growth during 2017-2021,
significantly slower than the 1.2% y-o-y growth during 2012-2017. The decline in Chinese steel
consumption will weigh heavily on global steel consumption, as China will account for 44.3% of
global consumption in 2017. Nevertheless, the slowing consumption growth will still result in
greater consumption than production in absolute terms, resulting in growing deficits over the years.
We expect global consumption to increase from 1,621mnt in 2017 to 1,665mnt by 2021.
Global Steel Utilization Rate

In December 2016, world crude steel production for the 66 countries reporting to the World Steel
Association (worldsteel) was 134 Mt, an increase of 5.5% compared to December 2015. The crude
steel capacity utilisation ratio of the 66 countries in December 2016 was 68.1%. This is 2.8
percentage points higher than December 2015. The average capacity utilisation in 2016 was 69.3%
compared to 69.7% in 2015.

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Going forward, we expect utilization rates in the industry to continue to remain at low levels as
the demand-supply imbalance persists amidst subdued demand growth. China, the largest producer
of steel is expected to cut down production to bring about discipline its supply. In the long run
however we expect utilization rates to pick up moderately with shut down in excess capacities,
muted new capacity additions and demand pick-up.
3.4 Indian Steel Industry
Evolution of steel industry

The Indian steel industry is over 147 years old. The first steel plant was set up by the Iron Work
Company at Kulti, West Bengal in 1870. However, large-scale production commenced in only
1907 when the Tata Iron and Steel Company (currently Tata Steel) set up its steel plant at
Jamshedpur, Jharkhand. The diagram below shows the major steps in the development of steel
industry in India:

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Resources and Reserves of Iron ore

The sixth-largest country in iron ore reserves, India has total crude iron ore reserve of 8,100 million
metric tonnes with iron content of 5,200 million metric tonnes. Odisha has the largest iron reserves
in India, the other states being Karnataka, Chhattisgarh, Goa, Jharkhand and West Bengal. India
has 223 operating iron ore mines and produced 154 million tonnes of iron ore as of 2016-17 (Apr-
Jan). The total recoverable reserves of iron ore in India are about 9,602 million tonnes
of hematite and 3,408 million tonnes of magnetite.
Domestic iron ore miners have resorted to selective mining keeping the cut-off grade as high as
58-60%. The resources and reserves of will almost double if cutoff grade lowered to 45%.
3.4 Structure of Indian Steel Industry

The steel industry in India comprises of the large integrated players who mainly produce flat steel
and small and mid-sized players who mainly produce long steel. The diagram below shows a
snapshot of the structure of the steel industry in India:

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Steel Production
Steel Production in India increased to 8362 Thousand Tonnes in July from 7950 Thousand Tonnes
in June of 2017. Steel Production in India averaged 3036.45 Thousand Tonnes from 1980 until
2017, reaching an all time high of 9000 Thousand Tonnes in March of 2017 and a record low of
713 Thousand Tonnes in September of 1980.
Planned Capacity Additions

Indian steel makers have large capacity addition plans, however ~ 35 Mt of crude steel capacity is
expected to materialize vis-à-vis announcements of over 90mn tonnes 2014-15 to 2018-19. This
translates into approximately 31 million tonnes of finished steel equivalent against an incremental
demand of about 26 million tons over the same period. Many players focusing on setting up
capacities in value added products.

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The summary of capacity addition plans of Indian steel makers is given below:
Source: CRISIL Database
The crude steel capacity utilisation ratio of the 67 countries in June 2017 was 73 per cent. This is
1.4 percentage points higher than June 2016. Compared to May 2017, it is 1.3 percentage points
higher, it said.
Steel consumption pattern

Infrastructure and Industrial construction account for 40% of the steel consumed in India,
followed by automobiles, pipes and tubes and consumer durables at combined 27%. India’s
consumption of finished steel products is expected to grow by 6.1 per cent in calendar year 2017
compared with 2016.
Pattern of steel consumption in India shows tremendous growth potential
 It is seen from the official data that capital goods that comprise of heavy machineries and
equipment have gone down by a whopping 14% during the period.
 A major sub-sector, ship-building and repairs have curtailed its activities by nearly 50% in
February 2017 itself.
 The electrical machinery and apparatus segment has experienced a high negative growth
of around 36% in the total period in spite of growing by more than 17% in February.

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 Consumer durable sector that includes passenger car segment had a sober growth of less
than 5% with 3 wheeler segment along with passenger and goods carrier nosediving by
24.5% during the month and furniture manufacturing going down by 4.2% during the
whole period.
3.5 Key drivers of the Steel Industry

Infrastructure
• The 12th Plan envisages massive investments to the tune of 1 trillion dollars in the
infrastructure sector which augurs well for expansion of the base of steel consumption in
the economy.
• With government initiatives of 100 smart cities and AMRUT for development of
infrastructure across the country, steel demand from infrastructure is likely to increase
Construction
• The average per capita consumption of finished steel in rural India has been assessed at 10
kg in to 2010, which is estimated to rapidly increase to further due to increased rural
penetration.
• There has been a perceptible rise in steel consumption in the rural and retail sector. Projects
like Bharat Nirman, Pradhan Mantri Gram Sadak Yojana, Rajiv Gandhi Awaas Yojana
have led to increasing demand for constructional steel items like TMT Bars, Light and
medium structurals, GP & GC sheets.
• The trend towards higher rates of urbanization will lead to increase in intensity of steel as
per capita consumption of steel of urban India is many times more than in rural India. It is
estimated that India’s urban population will increase to 600 million by 2030 from the
current level of 400 million.
Automobiles
• The Indian automobile sector is the second fastest growing market after China and has
emerged as a prime demand driver for alloy steel.
• The rising middle class population of India, with higher income levels will generate
additional demand for automobiles

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Consumer Durables and Manufacturing

• The Approach Paper for the 12th Plan envisages increasing the growth rate of the
manufacturing sector at 11-12 per cent in the plan period. The anticipated growth in the
end using manufacturing industries will lead to significant increase in steel demand
• The implementation of the National Manufacturing Policy is expected to further strengthen

this trend
Pipes and Tubes

 Oil & gas sector is the major consumer of steel tubes and pipes. The pipe consumption in
oil & gas sector is expected to grow as this sector is set to witness massive capital
investment
 Apart from laying cross-country pipelines, exploration and production activities are also
experiencing strong growth in both international as well as domestic markets
3.6 Recent Initiatives

 Ministry of Steel, Government of India, is setting up a strong research and development
(R&D) mission/center, virtual or otherwise, to step up innovative research and technology
development in the country's steel industry. The focus of the government has been to
provide incentives for value addition in steel and use of state of art technologies to use low
grade iron ore available in India.
 Government has also lowered the export duty on iron ore with 58 per cent iron content,
(the duty for higher grade ore is still 30 per cent) to increase availability of iron ore for
domestic steel companies. The import duty on metallurgical coke is increased to 5% from
2.5%.
 The private sector is also making investments for technology transfer to increase focus on
value enhancement. The recent MoU’s of Essar Steel with Kobe Steel, Bhushan Steel with
Sumitomo and Tata Steel with Nippon Steel are some of the examples.

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Impact of Union Budget 2016-17
A) Import Duty on HRC Used for Tube & Pipe making Reduced: Basic customs duty on MgO
coated cold rolled steel coils [72251990] for use in the manufacturing of CRGO steel, subject to
actual user condition reduced from 10% to 5%; provisional anti-dumping duty exists on this grade.
Also, basic customs duty on HRC (7208) for use in the manufacturing of welded tubes and pipes
falling under heading 7305 or 7306, subject to actual user condition reduced from 12.5% to 10%.
It depicts government’s bid to boost Make in India movement.
B) Indirect Boost to Steel Sector: Flexibility would be given to Railways to implement end to
end integrated transport solutions for select commodities through partnership with 18 logistics
players, who would provide both front and back end connectivity. Also, to improve the Operating
ratio of the Railways, its tariffs would be fixed taking into consideration costs, quality of service,
social obligations and competition from other forms of transport. Thereby, it is expected to help in
lowering the rates for steel and other commodities.
C) The infrastructure push, especially as expenditure for transport sector, is raised to INR 0.64
trillion, taking it up to a total of INR 2.4 trillion. Around INR 1.31 trillion of capital expenditure
is assigned towards Railways. Railway lines of 3,500 kms will be commissioned in 2017-18, as
against 2,800 kms in 2016-17. This will clearly have a large effect on the demand for steel and the
metals. The budget also focuses on housing, which is expected to revive domestic steel demand as
it will push up demand for construction grade steel particularly those for roofing purposes.
The hope for the steel industry in the budget is the infrastructure allocation, which will anchor a
growth trajectory for the industry.Overall, this year’s budget continues to build on the promise of
delivering and a drive for long-term impact on the economy and its citizens, helping India for the
next wave of growth and development, just as the Finance Minister concluded the budget saying,
“Transform, Energize and Cleanse India”.
Impact of National Steel Policy, 2017

The Union Cabinet approved the National Steel Policy (NSP), 2017 on May 3rd. The new NSP is
in step with the government’s long term vision to give thrust to the steel sector. It seeks to enhance
domestic steel consumption, ensure high quality steel production, and create a technologically
advanced and globally competitive steel industry.

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Vision on demand, supply and trade in the NSP

 Increase consumption of steel across major segments of infrastructure, automobiles, and
housing, resulting in a potential rise in per capita steel consumption to 160 kg by 2030 from
~60 kg at present.
 Achieve 300 MT of steel-making capacity by 2030 through additional investments of Rs
10 lakh crore by 2030-31.
 Domestically produce steel for high-end applications - electrical steel (CRGO), special
steel and alloys for power equipment, aerospace, defence, and nuclear applications
 Reduce reliance on imports to nil and export ~24 MT of steel by 2030

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Vision on raw materials access and development of cost effective
advanced technology
 Ensure availability of raw materials such as iron ore, coking coal and non-coking coal,
natural gas, etc., at competitive rates through policy measures, asset acquisitons, etc.
 Raise availability of washed coking coal to reduce import dependence on it to 65% by
2030-31 (from 85% at present)
 Focus on pelletisation, through investment in slurry pipelines and conveyors
 Emphasis on increasing share of Blast Furnace (BF) route to 68% by 2030 (as per draft
steel policy)
 Adoption of energy efficient technologies in the micro, small and medium enterprise steel
sector, to improve overall productivity and reduce energy intensity
 sector, to improve overall productivity and reduce energy intensity
Impact of GST
GST rate to bring no change to Steel Products; however, reduction in coal tax to benefit
steelmakers
Inputs Existing Rate GST Rate Comments

Steel 18%^ 18% No change in tax structure
Products/Intermediaries
Coal 11.7%^^ 5% Coking coal/coke forms 20% of total
cost, also Power & Fuel cost is 10-
15% of total cost
Iron Ore 5.5%^^^ 5% Iron Ore forms 10-15% of cost
Includes Excise duty of 12.5%, VAT of 5.5% and other levies wherever applicable
^^ Includes Excise Duty of 6.18%, VAT of 5%, Entry Tax of 0.5% and other levies wherever
applicable, etc.
^^Încludes VAT of 5.5% and other levies wherever applicable, etc
Credits: CRISIL

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LEAD INDUSTRY
4.1 Introduction
Lead is one of man's most valuable commodities. The metal is mined and processed in some 60
countries. While it has a high economic value, lead is relatively economical to produce. As with
all metals, there are two main production routes. Primary production from mined lead ore is of
course the original source of all lead, but secondary production, where it is recovered from
recycled products or from residues arising from the production process is of enormous importance.
Secondary lead production now accounts for more than half of all lead produced throughout the
world. In the US more than 80% of lead comes from secondary production with Europe reporting
over 60%. These impressive figures are made possible by the fact that most lead is used in readily
recyclable applications. And unlike many recycled materials, the value of lead means that
recycling is economically viable and hence self-sustainable.
Lead is a very corrosion-resistant, dense, ductile, and malleable blue-gray metal which has a
wide range of applications. The largest single use of lead today is in the manufacture of lead acid
storage batteries. Lead is also used in radiation protection, underwater power and
communication cables, vehicle batteries, electric vehicle batteries and in batteries operating
emergency power supplies
4.2 Refining Process

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Consumption Pattern of
4.3 Consumption Pattern Lead- India
2% 3% 4%
The consumption pattern of lead is almost similar
globally as well as in India. Globally and in India 10% Batteries
the main consumer of Lead is the battery Pigments &

industry. Batteries account for 76% of lead 11% Compounds
Rolled & Extruded
consumption globally and 70% of lead Products
consumption in India. Cable Sheathing
70%
The charts alongside show the consumption Alloys
pattern of lead in India. Others
4.4 Global Resources

Identified world lead resources total more than 2 billion tons. In recent years, significant lead resources
have been identified in association with zinc and (or) silver or copper deposits in Australia, China,
Ireland, Mexico, Peru, Portugal, Russia, and the United States (Alaska).
World Mine Production and Reserves: Reserves estimates for China, Peru, and Russia were revised and
estimates for Iran, Kazakhstan, and Macedonia were added based on information from Government and
industry sources.
Source: https://minerals.usgs.gov/minerals/pubs/commodity/lead/mcs-2017-lead.pdf

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Like Copper and Zinc, Lead is also 100% recyclable, if treated properly. About 50% of the lead
production globally comes from recycled material. The high recycling rate for lead is driven
principally by lead-based batteries, more than 95% of which are recycled at the end of life.
Recycling: In 2016, about 1.07 million tons of secondary lead was produced, an amount equivalent
to 69% of apparent domestic consumption. Nearly all secondary lead was recovered from old scrap,
mostly lead-acid batteries.
During the first 9 months of 2016, the average London Metal Exchange (LME) cash price for lead
was $0.81 per pound, slightly less than that in the same period of 2015. The average monthly LME
price ranged between $0.75 and $0.82 per pound during the first half of 2016 and increased through
the third quarter of the year to $0.88 per pound in September. Global LME lead warehouse stocks
were 190,250 tons at the end of September, slightly less than those at yearend 2015.
Substitutes: Substitution of plastics has reduced the use of lead in cable covering and cans. Tin has
replaced lead in solder for potable water systems. The electronics industry has moved toward lead-
free solders and flat-panel displays that do not require lead shielding. Steel and zinc are common
substitutes for lead in wheel weights.
4.5 Indian Scenario
Lead production in India is largely dependent on the zinc production rate as mining of lead is
carried out as a co-product with the mining of zinc so, both of them generally follow a similar
trend. Thus, its lead production rate is quite fluctuating as per the scenario. The total resources of
lead and zinc ores as on 1.4.2010 as per UNFC system, are estimated at 685.59 million tonnes. Of
these, 130 million tonnes fall under 'reserves' category while balance 555.69 million tonnes are
classified as 'remaining resources'. With regard to lead resource, significant addition of zinc-lead
resources occurred as a result of the government initiative; the reserve base of lead metal in India
increased from 7.0 million tonnes in 2005 to 11.55 million tonnes in 2011. In terms of reserves,
2.20 million tonnes of lead metal have been estimated.
Industry Structure
All the primary lead produced in India comes from the state of Rajasthan. The domestic industry
is characterized by the presence of only a few players in the primary segment. Binani Industries
Limited and Hindustan Zinc Ltd. (HZL) are the major players in the domestic lead industry. HZL
is one is one of the top ten lead mining companies by production volume worldwide. HZL is the
only producer of primary lead in the country and has a smelting capacity of 1.85 lakh TPA. HZL
is the only integrated lead and zinc producer in the country. Its operation can be classified into
mining and smelting. It has seven mining operations and three smelting operations. All operations
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are located in Rajasthan. One new mining operation at Kayad in Ajmer district, Rajasthan is in
development stage. For producing secondary lead, Indian Lead Ltd (ILL), a private sector company
has two units, one at Kolkata and other at Thane (Maharashtra), each having 12,000 TPA capacity.
Both the units are based on imported concentrates/scrap. However, no production was reported by
ILL. Indian Lead Limited (ILL) is yet to start production.
Government of India has enacted Battery Management and Handling Rules (BMHR), 2002 to
organize the recycling of lead acid batteries and to make available raw material to the lead
reproducers. This has led to increase in collection of used lead batteries and caused a substantial
increase in secondary lead production from recycling. Enactment of this act has also led to focus
on protecting the environment by collection of used lead batteries and using them for recycling
rather than disposing them.
Factors affecting Lead industry in India
Exchange Rate
India imports some part of its total demand for lead. The weakening currency would increase the
raw material cost for the lead refiners.
LME prices and stock levels
Similar to Zinc and Copper, the LME Official lead price is used as the global reference for physical
contracts of Lead. Another factor which influences LME prices is the LME warehouse stock levels.

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Lead prices in India are fixed on the basis of the rates in the international spot market, and Indian
Rupee and US Dollar exchange rates.
The official 3 month price and cash settlement price based on the warehouse stock levels for July
2017 as forecasted by LME exchange is forecasted as follows
Growth in end use sectors
Traditionally, the automotive sector has been the major consumer of lead/lead acid batteries in
India, in tune with the global practices. About 70% of lead consumed in India goes to the lead
battery sector. As mentioned before, automotive sector in India is expected to see ~ 9% growth till
2038 across all segments which will increase demand for lead.
For a long time, India has been having a perennial shortage of power in different parts of India and
lead-acid battery powered inverter is very common in offices, banks, schools, hospitals, hotels etc.,
The inverter sector witnesses huge growths in summer months especially.
In the telecom sector, with the advent of the mobile phones and the expansion of 3G and 4G
network, there is always a bank of lead acid batteries, at the base of the telecom towers, to provide
a continuous supply of power so that the mobile phones have the signal, non-stop. The mobile
companies are now focusing on smaller cities and rural areas for a greater penetration which will
increase demand for lead. Same is the case for the computer, where there is a lead acid battery –
driven UPS (Uninterrupted Power Supply) source.
Electric vehicles and renewable energy are high thrust areas of the government and once these
areas expand, lead acid battery sector will make significant inroads and accordingly the demand
for lead would increase.

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Sector Outlook
Global lead mine production was expected to decline slightly to about 4.82 million tons in 2016,
partially owing to declines in Australia (one mine closure and reduced production at others) and
the United States. In 2016, the International Lead and Zinc Study Group (ILZSG) forecast global
refined lead production and consumption to be about 11.2 million tons each, slight increases from
those in 2015. 6
 Provisional data reported to the ILZSG indicate that world refined lead metal demand
exceeded supply by 86kt during the first half of 2017. Over the same period total reported
stock levels decreased by 18kt.
 • An 11.7% rise in global lead mine production compared to the first half of 2016 was
primarily due to higher output in China, India and Kazakhstan that more than offset a
reduction in Australia.
 Increases in China, India, the Republic of Korea and the United States were the main
influences on a rise in world refined lead metal production of 7.8%.
 A 10% increase in global lead demand for refined lead metal was principally a
consequence of sharp rises in apparent demand in China and the United States of 13.3%
and 22.8% respectively. Usage in Europe rose by a more modest 2%.
 Imports to China of lead contained in lead concentrates fell by 6.1% to 341kt. Chinese
net imports of refined lead metal totalled 52kt compared to net exports of 12kt during the
first half of 2016.

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Brief Profile of Major Sector Players
8.1 NMDC Ltd.

Company Profile
NMDC Ltd. is engaged in the exploration of minerals and production of primarily iron ore and
other minerals like copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite,
diamond, tin, tungsten, graphite, and beach sands, among others. NMDC is a Navratna
company, which is under the administrative control of the Ministry of Steel, Government of
India. It was incorporated in 1958 as a Government of India fully owned public enterprise. NMDC
generates revenues through two business segments: iron ore and other minerals and services.
NMDC is India’s single largest iron ore producer, presently producing about 30
million tonnes of iron ore from three fully mechanized mines viz Bailadila Deposit-14/11C,
Bailadila Deposit-5, 10/11A (Dantewada, Chhattisgarh), and Donimalai iron ore mines
(Karnataka). It also has a mechanized diamond mine with a capacity of 31,533.39 carats per annum
at Panna, Madhya Pradesh.
NMDC is gearing itself to meet the expected increase in demand by enhancing production
capabilities of existing mines and opening up new mines - Deposit -11B in Bailadila sector and
Kumaraswamy in Donimalai sector. The production capability would increase to around 50 million
tonnes per year in coming years.
NMDC is pursuing gold exploration work in Pahardia-Rungikocha (West Singhbhum District in

Bihar) and Parasi-Kutachauli-Khotadih (Ranchi District in Jharkhand). The company has diamond
exploration operations in Kalyandur area, Anantapur District in Andhra Pradesh, as well as in the
state of Madhya Pradesh. NMDC also has bauxite and dolomite exploration activities in Jharkhand
and Chhattisgarh, respectively.
NMDC is in the process of developing 3 MTPA steel plant at Nagarnar in Chhattisgarh;

beneficiation plant (1.8 MTPA) and a pellet plant (1.2 MTPA) at Donimalai in the state of
Karnataka; and at Bacheli in Chhattisgarh (2 MTPA). NMDC is also in the process of merger of
Sponge Iron India with plan for expansion to produce billets.

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Financial Analysis
Description FY 16-17 FY 15-16 FY 14-15

Operational & Financial Ratios
Earnings Per Share (Rs) 7.22 7.64 16.2
Adjusted EPS (Rs.) 7.22 7.64 16.2
DPS(Rs) 4.11 11 8.55
Book Value (Rs) 71.17 75.94 81.54
Dividend Pay Out Ratio (%) 62.93 144.01 52.79
PBIDTM (%) 51.08 49.33 62.9

EBITM (%) 48.86 70.78 79.01
Pre Tax Margin (%) 48.63 69.77 79.01
PATM (%) 19.3 46.9 51.95
ROA (%) 10.07 7.05 14.96

ROE (%) 10.03 9.7 20.61
ROCE (%) 32.50 14.3 31.35
Asset Turnover(x) 0.34 0.15 0.29
Inventory Turnover(x) 15.19 9.72 18.01
Debtors Turnover(x) 1.036 3.54 7.72
Fixed Asset Turnover (x) 5.10 1.93 4.33
Sales/Working Capital (x) 1.54 0.4 0.56
Receivable days 352.29 103.11 47.25

Inventory Days 40.59 37.56 20.27
Payable days 188.96 36.26 18.51
Net Sales Growth (%) 26.87 -47.75 2.47

EBIT Growth (%) -0.6 -53.21 0.05
PAT Growth (%) 19.01 -52.84 0.01
Total Debt/Equity(x) 0.1414 0.05 0

Current Ratio(x) 3.39 2.44 2.85
Quick Ratio(x) 2.61 2.38 2.79
Interest Cover(x) 230.38 69.85

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8.2 Tata Steel
Company Profile
Tata Steel is a private sector steel group in India. It was established in 1907 as Asia’s first integrated
private steel company. It is one of the world's largest steel companies with crude steel capacity of
over 29 million tons per annum. It is the world's second most geographically diversified steel
producer, with manufacturing operations in 26 countries and commercial presence in o v e r 50
countries. The group operates across Asia, Europe, Africa, North America, and Australia.
Tata Steel generates revenues through two segments: steel, and others. The steel segment of the
company comprises of the subsidiaries, Tata Steel India, Tata Steel Europe, NatSteel Holdings, and
Tata Steel (Thailand) Public Company.
Tata Steel India produces hot metal, crude steel, and saleable steel. In FY2013, it produced 8.86
Mt of hot metal, 8.13 Mt of crude steel, and 7.94 Mt of saleable steel. Tata Metaliks (TML), a
subsidiary of Tata Steel India, is engaged in the business of manufacture and sale of pig iron. It
operates two plants and has an annual total capacity of 650,000 tons. Tata Metaliks' plants are
located at Kharagpur (West Bengal, India) and Redi (Maharashtra, India). Tata Metaliks also has
a joint venture called Tata Metaliks Kubota Pipes (TMKPL) with Kubota Corporation of Japan
for producing ductile iron pipes with an annual capacity of 110,000 tons. In April 2013, Tata
Steel India announced the merger of TML and TMKPL with itself through a composite scheme
of amalgamation which is to be sanctioned through a court approval process.
Tata Steel Europe (formerly Corus), a subsidiary of Tata Steel, is Europe's second largest steel
producer with a crude steel production of 18 MTPA. NatSteel Holdings, a 100% subsidiary of
Tata Steel, has presence in Singapore, China, Vietnam, Australia, Indonesia, Malaysia, the
Philippines, and Thailand. It produces products used in the construction of residential, industrial,
and commercial buildings, as well as infrastructural works.
Tata Steel has 67.9% equity in Tata Steel (Thailand) Public Company, headquartered in
Bangkok, has three main subsidiaries: Siam Iron and Steel Company (SISCO); NTS Steel Group
(NTS); and The Siam Construction Steel Company (SCSC). TSTH manufactures rebar sales, the
wire rods product line, and Seismic rebars; and sells these products in Thailand under the brand
Tata Tiscon.
In 2008, Tata Steel India became the first integrated steel plant in the world, outside Japan, to be
awarded the Deming Application Prize 2008 for excellence in Total Quality Management. In 2012,
Tata Steel became the first integrated steel company in the world, outside Japan, to win the Deming
Grand Prize 2012 instituted by the Japanese Union of Scientists and Engineers

Sector
Financial Analysis
Earnings Per Share (Rs) (44.77) 50.46 66.3
Adjusted EPS (Rs.) (44.77) 50.46 66.3
DPS(Rs) 10 8 8
Book Value (Rs) 406.38 723.89 684.62
Dividend Pay Out Ratio (%) 22 15.85 12.07
Margin Ratios
PBIDTM (%) 14.5 16.89 21.32
EBITM (%) 16.43 17.77 22.51
Pre Tax Margin (%) 5.79 14.35 18.27
PATM (%) 6.47 11.48 13.82
Performance Ratios
ROA (%) 2 4.1 5.67
ROE (%) 2.34 7.17 10.11
ROCE (%) 7.89 7.62 11.15
Asset Turnover(x) 0.73 0.36 0.41
Sales/Working Capital (x) 24.69 -6.4 -9.76
Efficiency Ratios
Receivable days 37 4.81 4.95
Inventory Days 71 64.67 55.05
Payable days 174.95 80.08 80.84
Growth Ratio
Net Sales Growth (%) 24.74 -8.55 0.18
EBIT Growth (%) 89.82 -27.64 -9.1
PAT Growth (%) 225.41 -23.89 0.42
Financial Stability Ratios
Total Debt/Equity(x) 0.70 0.41 0.41
Quick Ratio(x) 0.58 0.35 0.24
Interest Cover(x) 2.66 5.2 5.31

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8.3 Vedanta Ltd.
Company Profile
Vedanta Limited, formerly known as Sesa Sterlite/Sesa Goa Limited, a Vedanta Group company is
one of the world's largest global diversified natural resource majors, with operations across zinc-
lead-silver, oil & gas, iron ore, copper, aluminium and commercial power. The company was
founded in 1954, as Scambi Economici SA Goa. It has grown to be one among the top low-cost
producers of iron ore in the world since then. During 1991-1995, it diversified into the manufacture
of pig iron and metallurgical coke. It has also developed indigenous and environment-friendly
technology for producing high quality metallurgical coke.
It became a majority-owned subsidiary of Vedanta Resources Plc, listed on the London Stock
Exchange in 2007, when Vedanta acquired 51% controlling stake from Mitsui & Co., Ltd. In June
2009, Sesa Goa Limited acquired VS Dempo & Co. Private Limited (now Sesa Resources Limited)
along with its fully owned subsidiary Dempo Mining Corporation (now Vedanta Limited) and 50%
equity in Goa Maritime Private Limited. Sesa acquired 51% stake in Western Cluster Limited,
Liberia in 2011.
The company operates its business through five segments: copper, iron ore, aluminum, power and
other business. Vedanta‘s copper segment consists of the manufacturing of copper cathode,
continuous cast copper rod, anode slime including from purchased concentrate and manufacturing
of precious metal from anode slime, sulfuric acid, phosphoric acid. The company’s iron ore segment
is engaged in the production and exportation of iron ore, and operates mining and processing
facilities in Goa and Karnataka, India. The company’s iron ore mines include Codli Group of Mines,
Sonshi mines, Sesa Resources mines, Narrain mine and other mines. The aluminum segment
consists of manufacturing of alumina and various aluminum products. The company’s power
segment consists of power excluding captive power and including power facilities engaged in
generation and sale of commercial power. SSL‘s other business segment comprises of pig iron and
metallurgical coke.
The company’s operations are located predominantly in Goa and Karnataka, with offices in various
locations across India. Its head office in India in Panaji, Goa, while its Liberia office is
in Monrovia and China office is in Shanghai. The company operates in India, Australia, the
Netherlands, the US, the UAE, Mauritius, Namibia, South Africa, Ireland, the UK, the British
Virgin Islands and Sri Lanka.

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Financial Analysis
Earnings Per Share (Rs) 29.30 18.45 6.5
Adjusted EPS (Rs.) 29.30 18.45 6.5
DPS(Rs) 19.45 3.5 4.1
Book Value (Rs) 168.94 129.67 114.63
Dividend Pay Out Ratio (%) 104.62 18.97 63.08
Margin Ratios
PBIDTM (%) 34.01 12.31 13.49
EBITM (%) 25.76 28.42 16.39
Pre Tax Margin (%) 17.92 17.27 5.73
PATM (%) 12.96 17.24 5.62
Performance Ratios
ROA (%) 9.44 6.27 2.38
ROE (%) 10.61 15.11 5.7
ROCE (%) 25.94 11.83 7.8
Asset Turnover(x) 0.36 0.42
Fixed Asset Turnover (x) 0.91 1.16
Sales/Working Capital (x) -12.58 -2.87 -2.64
Efficiency Ratios
Payable days 383.11 43.67 35.17
Growth Ratio
Net Sales Growth (%) 12.03 -8.28 13.9
EBIT Growth (%) 78.01 60.42 125.54
PAT Growth (%) 155.27 183.93 79.09
Total Debt/Equity(x) 0.56 1.1 1.11
Quick Ratio(x) 1.18 0.42 0.18
Interest Cover(x) 3.43 2.55 1.54

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NICKEL INDUSTRY
5.1 Introduction
Nickel is a naturally occurring, lustrous, silvery-white metal. It is the fifth most common element
on earth and occurs extensively in the earth's crust. However, most of the nickel is inaccessible in
the core of the earth. Some of the key characteristics of nickel are its high melting point, resistance
against corrosion and oxidation, ductility and catalytical properties, ease of deposit by
electroplating and formation of alloys readily. Nickel plays an important role in our daily lives,
making its way in myriad objects around us like food preparation equipment, mobile phones,
medical equipment, transport, buildings, and power generation—the list is almost endless. There
are about 3000 nickel-containing alloys in everyday use. About 65% of the nickel produced is used
to manufacture stainless steel. Another 20% is used in other steel and non-ferrous alloys, often for
highly specialized industrial, aerospace, and military applications. About 9% is used in plating and
6% for other uses, including coins, electronics, batteries for portable equipment, and hybrid cars.
In many of these applications there is no substitute for nickel without impairing performance or
increasing cost. Nickel gets precedence over other metals because it offers better corrosion
resistance, better toughness, and better strength at high and low temperatures; it also provides a
range of special magnetic and electronic properties
5.2 Production Process

There are many different nickel ores and many different ways to extract the nickel and other metals
from those ores. Nickel is found predominantly in two types of ore bodies: sulphides (1% nickel
content) and laterites (4% nickel content). Around 70 per cent of the world’s nickel resources are
contained in laterite ores, yet world’s nickel production predominantly comes from sulphide ores.
This is because nickel sulphides are easier to process and cost less to develop, despite being more
difficult to access because of their depth. Nickel is obtained through extractive metallurgy: it is
extracted from the ore by conventional roasting and reduction processes that yield a metal of
greater than 75% purity. In many stainless-steel applications, 75% pure nickel can be used without
further purification, depending on the impurities.
Traditionally, most sulphide ores have been processed using pyro metallurgical techniques to
produce a matte for further refining. Recent advances in hydrometallurgical techniques resulted in
significantly purer metallic nickel product. Most sulphide deposits have traditionally been
processed by concentration through a froth flotation process followed by pyro metallurgical
extraction. In hydrometallurgical processes, nickel sulphide ores are concentrated with flotation
(differential flotation if Ni/Fe ratio is too low) and then smelted. The nickel matte is further
processed with the Sherith-Gordon process. First, copper is removed by adding hydrogen sulphide,
leaving a concentrate of cobalt and nickel. Then, solvent extraction is used to separate the cobalt
and nickel, with the final nickel content greater than 99%. The purest metal is obtained from nickel
oxide by the Mond process, which achieves a purity of greater than 99.99%. In this process, nickel
is reacted with carbon monoxide in the presence of a sulphur catalyst at around 40–80 °C to form

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nickel carbonyl. Nickel is obtained from nickel carbonyl by one of two processes. It may be passed
through a large chamber at high temperatures in which tens of thousands of nickel spheres, called
pellets, are constantly stirred. The carbonyl decomposes and deposits pure nickel onto the nickel
spheres. In the alternate process, nickel carbonyl is decomposed in a smaller chamber at 230 °C
toflotation if Ni/Fe ratio is too low) and then smelted. The nickel matte is further processed with
the Sherritt-Gordon process. First, copper is removed by adding hydrogen sulphide, leaving a
concentrate of cobalt and nickel. Then, solvent extraction is used to separate the cobalt and nickel,
with the final nickel content greater than 99%. The purest metal is obtained from nickel oxide by
the Mond process, which achieves a purity of greater than 99.99%. In this process, nickel is reacted
with carbon monoxide in the presence of a sulphur catalyst at around 40–80 °C to form nickel
carbonyl. Nickel is obtained from nickel carbonyl by one of two processes. It may be passed
through a large chamber at high temperatures in which tens of thousands of nickel spheres, called
pellets, are constantly stirred. The carbonyl decomposes and deposits pure nickel onto the nickel
spheres. In the alternate process, nickel carbonyl is decomposed in a smaller chamber at 230 °C to
create a fine nickel powder. The highly pure nickel product is known as "carbonyl nickel".
Nickel Production Process
5.3 Global Nickel Industry

Nickel Mining is most prominent in the Philippines, Indonesia, Russia, Australia, Canada, New
Caledonia, Cuba, China, South Africa, Dominican Republic, Botswana, Colombia, Greece and
Brazil. Important nickel refineries also operate in Norway, Finland, France, Japan and the United
Kingdom.
The world reserves of nickel are estimated at 81 million tonnes of metal content. Currently,
Australia has one of the world’s largest reserves at 19 million metric tons. Major producers of
Nickel are Russia, followed by Australia, Canada, New Caledonia and Indonesia, which represents
over 65% of total world production. About 60% of nickel reserves are in laterites and 40% in
sulphide deposits

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5.4 Supply and Demand
Supply
 Nickel market supply/demand has performed better than other base metals over the past 3 years
 Nickel market will need another 400-500kt to meet trend nickel demand by 2021 (and
significantly more if forecasts for batteries come anywhere close to expectations!)
 Equivalent to doubling Chinese NPI industry at its peak
 Very little visibility into future supply - extended period of low prices has resulted in very few
opportunities for new supply and more dependence on future growth from higher political risk
areas
 Underinvestment led to flat to declining production at most large nickel operations
 Old, deep operations take several years and hundreds of millions of dollars to ramp-up
 Nickel supply becoming highly dependent on higher political risk countries (Indonesia,
Philippines)
 Remaining ramp-up from new large HPAL projects uncertain
 Indonesian developments create massive uncertainty for the most active source of new supply
 Project cupboard outside Indonesia largely empty
 Relaxation of Indonesian ban has hurt nickel market in near-term but setting stage for very
robust long-term nickel market outlook
Demand
Usage of nickel has increased over time and is correlated with economic development. World
nickel demand increased from 907 thousand tonnes in 1990 to 1.465 million tonnes in 2010, an
annual average growth rate of 2.3%. Since then the strong growth recorded by the Chinese
economy has further accelerated the increase in nickel demand that recorded in only six years,
from 2010 up to 2015, an annual growth rate of 5.0%. Asia is now by far the largest regional
market for nickel currently representing 71% of total world demand. China alone now accounts
for close to 52% of world nickel demand compared with18% ten years earlier.

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Source: Insg.org
5.5 Nickel Prices and Stocks
The price of nickel has shown considerable volatility over the last forty years. The chart below
shows the historic LME price for nickel in nominal values from 1991 to 2016. In the late 1980s
there was a peak in the price of nickel. In the first half of the 1990s the economic collapse of the
former "Eastern Bloc" countries resulted in a surge of nickel exports that drove nickel prices lower
than the cash costs of production resulting in reduced nickel production in the "West". Until 2003
the nickel cash price remained below US$10,000 per tonne. The price breached
$14,000 per tonne in 2005 and then escalated dramatically through 2006 before peaking at $52,179
per tonne in May 2007. Nickel prices then declined until the end of 2008, when the average cash
price in December hit a low of $9,678. In early 2009, nickel prices began to once again climb and
reached $24,103 by the end of 2010. In 2011 the price continued up and reached the peak in
February, with an average price of $28,247, and has declined since then until the end of 2013 when
it stayed below $14,000. The initial reaction to the implementation of the export ban of
unprocessed ores in Indonesia in January 2014, nickel price climbed to just below $20,000 in July
2014, but since then it has declined almost every month until March 2016 to be traded at around
$8,700. LME stocks of nickel were relatively stable during the period 2001 to 2005 at around
20,000 tonnes. In 2005 stocks increased somewhat and again declined in 2006. During the period
2007 to 2009 stocks rapidly increased to over 158,000 tonnes at the end of the period. In 2010 and
2011 destocking took place with stocks at the end of December 2011 at 91,000 tonnes. Since the
beginning of 2012 to March 2016 a long period of stocking took place, reaching over 470,000
tonnes in June 2015.

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Source: Focus-economics.com
5.6 Indian Nickel Industry

India does not have any history related to the metal nickel. It does not have any resources nor does
it indulge in the mine as well as plant production of the metal. But as one of the fastest developing
nations of the world, Indian demand for stainless steel and consequently nickel has been rising at
a high rate. The only source of producing the metals is with that of lateritic oxides, which is
available in Sukhinda valley, in the state of Orissa. It also occurs in sulphide form along with
copper mineralization in East Singhbhum district, Jharkhand but in small quantities. A rising
demand and no production makes the country a total importer of nickel. The country imports
around 45 to 50000 tons of nickel annually. This demand is expected to rise in future with the
increase in the demand of stainless steel. The government has implied import duties in the import
of the metal @ 15%. Russia is the main supplier of nickel to India and contributes nearly half of
its imports, followed by Canada with 9% and Brazil with 7%
The primary consumer of nickel in India is the stainless-steel sector. The stainless sector revises
its product prices in accordance with the changes in the global nickel prices. Depending on the
user segment, 0.5-4% of nickel is used as an anti-corrosive agent in manufacturing stainless steel.
While the utensils segment uses 0.5 %, high-tensile pipe manufacturers use 4 % nickel. The import
duty on nickel in India is 15%.
5.7 Factors affecting Nickel prices in India
 Domestic nickel prices are linked to the international spot prices and are also affected by the
exchange rate in the market. Another factor which influences LME prices is the LME
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warehouse stock levels. Thus, these factors, in addition with others, determine the nickel
prices.
 The stainless-steel industry, which is the major contributor to nickel consumption in India, has
a direct correlation with the nickel prices. If the demand for stainless steel is high, the nickel
prices will also rise. Conversely, a low demand for stainless steel will translate into a lower
demand and consequently, lower price of nickel.
 Since, India’s nickel needs are met through imports, the policies, regulations and tariffs set by
the government play a major role in driving up or down the nickel prices.
 The nickel prices are also directly linked with the economic growth of the company. The
economic growth of the country has a direct bearing on its industrial growth. As a consequence,
the demand for nickel can be significantly boosted with a higher level of economic and
industrial growth.
 Closure of nickel processing plants, identification of nickel ore mines or any changes
pertaining to the related industries will directly impact the nickel prices.
5.8 Sector Outlook
Indian Nickel Industry Outlook
In India, demand for nickel stands boosted following deregulation of its imports. After growing 16
per cent in 2012, demand slowed slightly in the following years but the demand is expected to
increase on account of improved outlook for the Indian economy. A higher consumer demand in
segments such as kitchenware, infrastructure, consumer durables and automobile is anticipated.
This will lead to an increased consumption of stainless steel, which will directly translate into a
higher demand for nickel in the country. Also, a continued uptick in demand from alloy
manufacturers will lead to higher nickel imports. As Nickel prices in India are fixed on the basis
of the rates that rule on the international spot market, and Indian Rupee and US Dollar exchange
rates, fluctuations in the currency rates will also impact nickel prices in the country.
Global Nickel Industry Outlook
The global nickel market has witnessed strong growth in production as well as consumption
patterns, in the recent years. Although consumption levels increased across the world, China
exhibited one of the largest growth rates. This phenomenal growth has made China, the world's
largest consumer of nickel, and the country is anticipated to account for a larger share in the coming
years as well.
The growing demand from stainless steel producers, a trend that is likely to continue in the near
future as well, will drive the buoyant global nickel market. Our report reveals that global refined
nickel consumption is continuously increasing as it is used in more industrialized products.

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Various industries that have high application of refined nickel, for instance, developed automotive
and aerospace industries are raising the demand for the metal. It is anticipated that the global nickel
consumption will grow at a CAGR of around 11% during 2015-2020.

Sector
Copper industry
6.1 Introduction
Copper is the third most widely used metal in the world after iron ore and aluminium. One of the
earliest metals to be discovered, most of the copper is mined from open pits that contain nearly
0.4% to 1% of copper. On an average continental crust contains about 0.0058 % of copper or 58
parts per million. A typical characteristic of the copper deposits are that they are available in low
concentrations. This thus makes most of the copper mines less economically viable to be
commercially extracted.
Copper is one of the most efficiently recycled materials in the world such that it is 100% recyclable.
Historically, copper has found immense usage in the production of utensils and coins. Of late,
copper has found varied applications across various industries. Known as one of the best
conductors of heat and electricity, copper is largely used in the electrical and instrumentation
industry. It is also widely preferred for wiring in industries and in telecommunications. Also,
copper is heavily used in the plumbing industry and since it is highly biostatic (which means
bacteria will not grow upon it), the metal is hugely used to line ships in order to protect it against
barnacles and mussels. To a lesser extent, copper is also used in the jewellery industry. Some of
the major properties of copper are figuratively described below:
Malleable & Heat

Ductile Transferrer
Corrosion Anti microbial

Resistance & biostatic
Excellent Physical
conductor of Machinable &
electricity & Properties Formable
non-magnetic of Copper

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6.2 Refining Process

Copper is mined in both underground and open pit mines. Large excavations formed by surface
mining are called open-pit mines. Most of the copper ores mined today are oxide or sulphide ores.
From the mines, copper ore is taken to mills, where it is crushed and finely ground in preparation
for refining. The method of refining varies with the type of ore. In the case of copper-oxide ores,
the copper is usually leached (dissolved) from the ore with a solution of sulphuric acid. The copper
can be recovered from the leaching solution through electrolysis. Other refining methods include
passing copper over through scrap iron; wherein a chemical reaction takes places and the impurities
get removed. Also, today a significant proportion of copper is made from copper scrap. Such a
copper is called secondary copper. The diagram below gives a schematic representation of the
broad steps involved in copper refining process:
Copper is extracted from mines and then broken down into smaller pieces
The copper pieces are then concentrated to increase the copper content as the ore
contains other minerals as well
Smelting of the copper ore- decomposing the ore and driving out various gases to
leave behind the base metal
The smelted copper is then subjcted to the process of refining which removes the
various impurities that get formed in due course of the refinement process
The refined copper is finally casted into ingots, casks, billets, rods and wires

Copper’s ability to conduct heat and electricity is one of its major properties. This accounts for a
lion’s share of the consumption pattern related to copper. On a closer analysis, it becomes evident
Sector
that the consumption pattern for copper in India and worldwide is slightly different. While in India
copper is largely used in the electrical and telecom industry, worldwide the building and
construction sector holds the greatest consumption centre for copper. The following charts show
the varied consumption patterns more profusely
6.4 Global Scenario

After growth of almost 6% in 2016, world mine production after adjusting for historical disruption
factors, is expected to decline by 1% in 2017 and remain essentially unchanged in 2018:
 World mine production increased strongly in 2016 benefitting from new and expanded
capacity brought on stream mainly in Mexico and Peru and the low frequency of supply
disruptions due to strikes, accidents or adverse weather conditions.
 Lack of significant output from new projects or expansions, contrary to what happened in 2016,
and reduced output from some SX-EW mines will impact world mine production growth rates
in 2017 and 2018.
 Furthermore, 2017 production growth is also impacted by the significant supply disruptions
that occurred in the 1st quarter of the year notably in Chile, Indonesia and Peru.
 While world concentrate production is expected to remain essentially unchanged in 2017, an
anticipated decline of around 5% in SX-EW output will lead to an overall decline in world
mine production of around 1%.
 Production in Chile and Peru, the world’s biggest copper mine producers, is only expected to
present higher growth in 2018.
6.5 Indian Scenario
India is among top 20 major producers copper globally. But falling prices of copper in international
markets would also benefit India, as it is one of the world’s biggest importers of the metal,
alongside China, Japan, South Korea and Germany. As a consequence, volatility in prices of the
metal on the LME has a significant bearing on Indian copper trading. Typically, over 30 per cent
of India’s copper demand comes from the telecom sector and 26 per cent from the electrical sector
in India. In addition, the building and construction, engineering, transport and consumer durables
sectors are major consumers of copper in India. These sectors stand to benefit the most from lower
prices of copper.
The Indian copper industry grew by nearly 50% in 2011. India has become a net exporter of copper
after being a net importer during the last decade, even as the country is not a major producer of
copper ore, but produces the refined forms of copper. About a decade ago, the Indian copper
industry consisted of a single state-owned company and now the copper industry in India takes up
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about 3% of the global market for copper. In 2011, India’s copper demand is estimated to grow by
at least 7% - following a similar forecast in 2010, fed by the power sector. According to India’s
11th five year plan (2007-2012), the country’s power generation sector is likely to make a huge
investment with 150 power projects for the various stages of installation.
Mines are generally located in the north western region of the country and go on to exist as far as
the central India. During the last few years, India’s switch from net importer to exporter is due to
a rise in production by three companies: Sterlite Industries, Hindalco, and Hindustan Copper. The
state-owned Hindustan Copper is a vertically integrated producer, whereas Hindalco and Sterlite
Industries are mainly custom smelters. Hindalco and Sterlite industries account for more than 80%
of India’s total copper production. Growing trend in the building construction and automobile
sector is expected to keep demand of copper high.
6.6 Factors affecting Copper Industry in India
Exchange Rate
Though India accounts for 2% of world reserves, the total production capacity is not self sufficient
to meet the domestic demands. As such a major share in the copper industry of India is imported
to fill this gap. Thus, the copper industry of India is highly dependent on the volatile exchange
price of the Indian currency. With a recent government devaluation of Chinese Yuan, the Indian
Rupee had come under further pressure and had weakened against the dollar. This had increased
the overall cost of imports.
LME Prices
World over the prices of copper are referenced by the London Metal Exchange (LME) Official
copper price. The weakening demand owing to a weakening Chinese economy has pressured the
worldwide copper prices and they currently stood at $4622/tonne as of 5st September, 2016.
Another factor which influences LME prices is the LME warehouse stock levels. Higher stock
levels reduce prices and reducing stock levels generally lead to increase in prices.

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Zinc Industry
7.1 Introduction
A bluish, white lustrous metal, Zinc is the most widely used metal after iron ore, aluminium and
copper. Normally, it is covered with a white coating on exposure to the atmosphere in the Earth’s
crust. Zinc finds majority of its applications in galvanizing steel, alloys, batteries, rubber, paint,
electroplating metal spraying and several other sectors. Because of its resistance to non-acidic
atmospheric corrosion zinc is instrumental in extending the life of buildings, vehicles, ships and
steel goods and structures of every kind.
Zinc oxide is widely used as a white pigment in paints, and as a catalyst in the manufacture of
rubber. It is also used as a heat disperser for the rubber and acts to protect its polymers from
ultraviolet radiation. Also, it is an ideal material for die casting and is extensively used in making
builders hardware, automotive, electrical and electronic components. Zinc compounds and
powders are used in cosmetics, plastics, ointments, sun screen creams, soaps, paints, inks and
fertilizers. The metal zinc is also an important trace element found in our bodies. The importance
of zinc can be ascertained from the fact that its concentration is second only to iron in the body.
7.2 Production and Refining Process

The separation of metallic zinc from its ores by pyro metallurgy is much more difficult than with
other common metals, such as copper, lead, and iron, because the reduction of zinc oxide by carbon
proceeds spontaneously only above the zinc boiling point of 907° C (1,665° F). To carry out the
production and refining process of zinc, generally three stages are employed:
 Ore Mining
 Roasting and Sintering
 Extraction and Refining
As of today, 80% of the zinc mines are of underground type. The metal once extracted is primarily
manufactured by two ways either through Hydrometallurgical Process wherein the metal is
purified by electrolysis or through Pyrometallurgical Process wherein the metal is smelted in a
specialised chamber with carbon. However, the Pyrometallurgical process is quite costly and hence
the hydrometallurgical process for the production of zinc has taken over. A schematic flowchart
for the production of zinc is as given below:

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The zinc ore is first crushed, ball-milled and then concentrated through the
froth floation process. This removes unwanted impurities such as lead
components
The concentrated iron ore is then roasted with oxygen, i.e., oxidised. This
converts the naturally occuring zinc sulphide into zinc oxide
The zinc oxide is then converted to its sulphate form and finally the compound
is subjected to electrolysis to purify the metal and to obtain it in its purest form

Zinc forms its major share of usage in the galvanization sector along with that in Brass formation,
chemical compounds and die casting. Other major consumer industries are chemical industries,
rolled zinc and other miscellaneous purposes. Thus, on a generic level the major consumers of zinc
include the construction sector, transportation sector, consumer good (including electrical and
electronic appliances) and industrial machinery. On a worldwide level, nearly 13.6 million tonnes
of zinc was consumed. The following chart gives a much-detailed view of the consumption
patterns over the years.
7.4 Global Scenario

Worldwide nearly 11 million tonnes is produced annually, as is evident from the graph above
(although the production capability is increasing given the increase in demand). Overall, 60% of
the zinc is produced from mined ores while 40% of the same is manufactured from recycled zinc
or secondary zinc. For the zinc and steel industries, recycling of zinc-coated steel provides an
important new source of raw material. Historically, the generation of zinc-rich dusts from steel
recycling was a source of loss from the life-cycle (landfill); however, today technologies exist
which provide incentive for steel recyclers to minimize waste. Thus, the recycling loop is endless-
both zinc and steel can be recycled again and again without any loss of their physical or chemical
properties.

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Talking of global zinc resources and reserves in 2015, an estimated 1.9 billion tonnes exist as
resources while 720 million tonnes are in the form of reserves. Australia holds the largest reserves
of zinc followed by China, Peru, Mexico, India and USA.
Global zinc mine production in 2015 was 13.4 million tons, essentially unchanged from that of
2014. According to the International Lead and Zinc Study Group, global refined zinc production
in 2015 increased by 4% to 14.0 million tons, and metal consumption rose slightly to 13.9 million
tons, resulting in a production-to-consumption surplus of about 100,000 tons of refined zinc. In
terms of production capability, China has been the largest producer of Zinc followed by Australia,
Peru and the United States of America.
7.5 Indian Scenario

As per Ministry of Mines, Government of India it is estimated that the country’s total zinc
resources stand at 37 million tonnes as of 1st April 2011. In terms of proven ore resources, the
figure stands at 12.5 million tonnes. Demand for zinc in India is expected to grow from 6 lakh
tones in 2012-13 to 8,80,000 tonnes in 2016-17. Considering continuous supply of 20,000 tonnes
from secondary route and 50,000 tonnes from imports in every year about 9 lakh tonnes of
production are projected with
marginal increase from 2012-13 to 2015-16. However, given the current economic condition with
a uncertain Chinese economy, the confidence in such figures is not too high.
Regionally, the zinc industry in India is highly segmented with a major share of resources being
generated from Rajasthan followed by Andhra Pradesh, Madhya Pradesh, Bihar and Maharashtra.
In India, Hindustan Zinc Limited and Binani Zinc Limited are the major zinc players. Hindustan
Zinc limited is the only integrated producer of primary zinc and lead from its mines in Rajasthan.
The other producer Binani Zinc Limited produces zinc from imported concentrates.
The Indian zinc industry entered its transformation phase with the privatisation of the largest zinc
producers. The domestic zinc industry is now completely under the private sector and is in the
midst of a serious expansion programme. From 2010 onwards India has more or less become self-
sufficient in Zinc.
7.6 Sector Outlook
Global mined zinc production will return to growth in 2017, as increasing zinc prices encourage
ramp ups. Major miners Glencore and Nyrstar's output cuts and the closure of MMG's Century
mine in Australia and VedantaZinc's Linsheen mine in Ireland drove the decline in zinc output in
2016. Glencore, which suspended 500 thousand tonnes (kt) across three countries, reported a 25%
y-o-y decline in zinc output in 2016, to 1.0 million tonnes (mnt). While the exact schedule and
pace of restarts remains a risk to our forecast, we expect Glencore to steadily restart production in

Sector
the second half of 2017 as zinc prices continue to increase. The firm attributes the 90kt increase in
2017 production guidance to higher ore grades expected at the jointly owned Antamina mine in
Peru. We forecast global mined zinc production to increase from 12.2 million tonnes (mnt) in 2017
to 13.4mnt by 2021, averaging 2.4% annual growth.

Sector
CEMENT INDUSTRY
9.1 Introduction
One of the most widely known substances, Cement is a binding agent which is extensively used in
building and construction activities. The latter spans the breadth of nearly the entire human
civilization, thus making cement a quintessential product affecting lives of all and sundry. Widely
used in key segments such as housing, real estate and infrastructure development, the growth of
the cement industry is directly linked with the economic growth of the country.
India has a lot of potential for development in the infrastructure and construction sector and the
cement sector is expected to largely benefit from it. Some of the recent major government
initiatives such as development of 98 smart cities are expected to provide a major boost to the
sector.
9.2 Indian Cement Industry

India is the second largest producer of cement after China. It is an important part of the Indian
economy providing employment to more than a million people. The cement capacity in India is
estimated to be at 420 MT as of March 2017 with production growing at 5-6 per cent per year. The
country's per capita consumption stands at around 225 kg. The industry has developed overtime.
With innovations in manufacturing technology like blended cement, improved energy efficiency,
advanced technology and increased use of alternate fuels played an important role in the
preservation of natural resources too.
With the growth of the cement industry directly proportional to the growth of the economy in
general, the sector started to see structural reforms since 1982. It was during this phase when the
government started to decontrol the sector in essence- although partially. Further liberalization of
the sector realized in due course when the government imposed quota of 66% on existing units
and 50% on new and sick units for sales to the government was removed. This was the year of
1989; two years shy from the historical liberalization era of India. Subsequent happenings shaped
the sector to greater heights.
After showing a strong growth between FY09 and FY13, Indian cement industry witnessed
demand disruption in FY14 due to a slowdown in the infrastructure and construction sector. During
that period, consumption growth was in mid-single digit trajectory, while a massive one- fourth of
the overall capacities were lying unutilized. Besides, the 6.5 percent hike in freights by the Indian
Railways in June 2014 and the country's sluggish economy growth also weighed on cement
demand. India's cement demand remained sluggish for most of FY16, particularly on account of
low demand from the housing segment. There was a slight rise of 2% in the prices of 50kg cement
bags. The average prices across India were about Rs. 333.

Sector
9.3 Industry structure in India

India has a total of 575 operational cement plants which are scattered throughout the country. The
top 5 players account for ~40-45% of the cement industry's capacity as of 2016-17. Total installed
cement capacity in India stood at 430 million tonnes, as of March 2017.
The domestic manufacturers can broadly be bucketed into pan-India, regional and standalone
players. Pan-India players are large players like Holcim Group companies - ACC and Ambuja, and
Aditya Birla Group company - UltraTech Cement (including Samruddhi Cement). Players whose
presence is restricted to one or two regions are categorized as regional players. Key players
included in this segment are Jaiprakash Associates (North and Central), Lafarge (concentrated in
the East and North), India Cement (South, West), Shree Cements (North and East), Binani Cement
(North), Kesoram Industries (South), Chettinad Cement (South), Dalmia Cement (South) and
Ramco Cements (South). Players like Panyam Cement, Penna Cement, etc. are operational in few
states within a region. Owing to their largely local reach, these players are classified as standalone
players.
9.4 Analysis of Cement Industry in India
To obtain a deeper understanding and to get an insight of the industry, the cement sector of India
can be analyzed for its attractiveness and competition level through Porter’s Five Forces model.
The latter hinges upon five key instruments viz. Bargaining Power of Suppliers, Bargaining
Power of Buyers, Threat of new entrants, Threat of Substitutes and Industry Rival. The lesser the
competition after analyzing these five forces, the more attractive the industry is. Since a major
segment of the Indian cement industry is under control by a few players, there exists a sort of
cartelization in the cement sector. The latter is highly responsible for barring the entry of new
players into the industry. Although the cement industry is highly dependent on the railways for

Sector
freight and forwarding purposes, the inherent cartelization is very much responsible for the low
to medium bargaining power of the suppliers.
9.5 Consolidation in Cement Industry
The capacity of 420 million tonnes is produced from 575 operational plants fragmented across
India, and is scattered throughout. 210 large cement plants account for a cumulative installed
capacity of over 350 million tonnes, while over 350 mini cement plants have an estimated
production capacity of nearly 11.10 million tonnes, as of 2016. Of the total 210 large cement
plants in India, 77 are situated in the states of Andhra Pradesh, Rajasthan and Tamil Nadu.
M&A’s that took place throughout 2016: -

Sector
9.6 Demand
In 2016-17, demand remained flattish, growing at 0-1%, lower than 4.2% growth recorded in the
previous year. While the infrastructure segment growth remained healthy on account of higher
construction of NH's, railways, PMGSY roads etc., weakness in housing especially rural dragged
the overall demand growth.
Source: CRISIL
In 2017-18, cement demand is expected to revive to 5-5.5% aided by government’s push on

affordable housing, and increase in outlay for major infrastructure segment viz. roads and railways.
Rural housing demand, badly hit by demonetization in FY18 is expected to witness a revival on

Sector
low base supported by govt. increased spends on rural housing and realization of pent-up demand.
Source: Ministry of Rural Development, MHUPA
Cement Demand Forecast
CRISIL
Further in long term cement demand is expected to grow at 6-7% compound annual growth rate
(CAGR) over 2016-17 to 2021-22,as against 3.2% CAGR during 2011-12 to 2016-17.
Infrastructure segment, which accounts for 15-20% of cement demand is expected to grow at a
fast pace of 10-12% CAGR, as both central and state government increase their focus on
infrastructure projects. As a result, share of infra demand will increase to 20-25% from current
levels of 15-20%.

Sector
9.7 Cement Demand Relative to GDP
The cement industry in India has been growing at 1.2 times of GDP growth in the past two
decades. However, with continued decline in the investment-to-GDP ratio, there has been
significantly lower capital formation in the economy. This, in turn, has reflected in the cement-
to-GDP multiplier being consistently below one. Sustained Capex and increasing construction
investments could help the multiplier to cross one times of GDP.
Cement to GDP multiplier
Source: CRISIL
9.8 End User Segmentation of Demand
The Government of India is strongly focused on infrastructure development to boost economic

growth and is aiming for 100 smart cities. It plans to increase investment in infrastructure to US$
1 trillion in the 12th Five Year Plan (2012–17). The government also intends to expand the
capacity of the railways and the facilities for handling and storage to ease the transportation of
cement and reduce transportation costs. These measures would lead to increased construction
activity thereby boosting cement demand.
The share of housing sector has dropped over the past five years on back of housing sector being
caught in a quagmire of slow economic growth, weak demand, high finance cost and buyer-
unaffordability. Further increased government induced spending in infrastructure sector has
pushed its share upwards. As per the 12th Five Year Plan, production is expected to reach 407
million tonnes by FY17.

Sector
CRISIL
9.9 Cost Drivers

The cement industry is highly capital intensive and thus the cost drivers of the industry are
highly segmented. The power requirement cost varies directly with the total production of the
plant. Also, a major chunk of the expenses comes from procuring limestone, the key element of
cement. Most of the cement production plants are located close to the mines- this means that the
final product entails higher cost of transportation as cement is a low-value, high-volume
commodity. Thus, the freight charges from another major chunk.

Sector
Power and Fuel Charges

Being highly power intensive, the cement industry engages huge amount of power to drive its
production capabilities. This category alone accounts 25-30% of the total cost incurred for a
cement company. Amongst the major sources of power include grid power, coal, pet coke,
lignite, etc. The power requirement of cement plants varies in accordance with the heat treatment
process used viz., dry process or wet process. While the wet process requires 1,300-1,600
kcal/kg of clinker and 110-115 kWh of power to manufacture 1 ton of cement, the dry process
requires 720-990 kcal/kg of clinker and 95-110 kWh of power. Historically, a significant portion
of the industry's power requirement was met through grid power supplied by the state electricity
boards. However, over the past five years, cement companies are increasingly opting for captive
power plants in order to reduce their cost of production and dependence on grid power. This is
evident from the fact that power requirement from the captive production has risen from 48% in
2004-05 to 65-70% in 2015-16. In our country, coal is primarily allocated to power and steel
sectors; the cement industry only gets 3-4% of the country's total production. Therefore, in the
last few years, players have been importing a significant proportion of their coal requirement
from other countries.

Sector
Raw Materials
The procurement cost of raw materials account for nearly 20-25% of the total cost for the cement
industry. Since limestone is bulky and entails high cost of transportation, the cement
manufacturing units are mostly located closely to the limestone quarries. Limestone is primarily
located in 10 clusters viz. Satna, Gulbarga, Chandrapur, Bilaspur, Chanderia, Nalgonda,
Yerraguntla, Saurashtra, Himachal Pradesh and Thiruchirapalli. Other raw materials include fly
ash, slag and gypsum. Slag is a by-product of iron ore production and thus is primarily obtained
from the eastern part of India as a majority of the iron industries are located there. Fly ash is a
fine glass like material which is recovered from gases created by coal-fired power generation
plants. It consists of silica, alumina and Iron. Gypsum is available as a natural product and is also
derived from sea water and chemical plants. It is highly localized in its presence-chiefly
including Rajasthan and Jammu & Kashmir (concentration of around 95%).
Forward & Freight charges

Since the cement production houses are located close to limestone excavation sites, a lot of cost
is incurred in transporting the produced cement to the various points of consumption across the
country. This is another reason why there is a major segmentation of installed capacities across
different regions of North, South, East, West and Central. These selling expenses account for no
less than 20-25% of the total cost. The cement companies mostly use rail and road as the major
means for transporting cement. Rail is the preferred mode of transport for long-distance
transportation owing to lower freight cost. However, the availability of wagons and the extent of
last-mile connectivity need to be taken into consideration. Road transportation is beneficial for
short distances and bulk transportation as it minimizes secondary handling and secondary freight
costs.
Other Expenses
Other expenses include employee cost, administration expenses, repair and maintenance charges,
etc. These account for around 15-20% of the cost of sales.
Price
The prices of the cement industry have recently come under a lot of pressure owing to a low
demand and excess capacity. Broadly speaking, the prices are chiefly governed by the following
factors:

Sector
Demand Supply gap
• As of now, one of the major problems facing the cement industry of

India is the supply glut. With an excess capacity and an increased
production, the supply of cement has exceeded its demand in fair
proportions
Dependence on the monsoon
• Since the cement industry is directly related to the constrution sector,

the latter suffers a downturn during the monsoon. Most of the
construction activities are stopped during the rainy season. This
inadevrtently lowers the demand of cement- thereby leading to a
cross reduction
Region Dependent
• Since the cement industry is located close to the limestone quarries,

the prices of cement depend a lot on the region. This is because of an
increased forwarding and freight charge which gets incorporated
when transporting cement over large distances
Although most of these factors continue to pull down the prices of cement, the industry is hugely
oligopolistic in nature. This has thus led to a subdued cartelization of the major players and a
tacit collusion exists which controls the price of the industry.
9.10 Profitability
Operating margins for cement companies is estimated to have expanded healthily by ~220 bps
in 2016-17 aided by lower power and fuel costs ( especially in H1FY17 ) which is primarily
attributable to increased share of pet coke, as players substituted coal requirements by pet coke,
it being more economical on calorific value especially during H1FY17.
Apart from the power and fuel costs , the improvement was also supported by lower raw
material costs and stable freight costs ( attributed to exemption from busy season surcharge in
Q1FY17 , which offset the higher costs on account of increase in road freight costs ).
We expect the margins to further widen , though by a lesser quantum in FY18 and FY19 largely
on the back of anticipated increase in realizations, with healthy demand growth in
FY18. However, increase in power and fuel costs (on account of higher pet coke prices) and
freight costs is expected to limit the margin expansion.
Power and fuel costs are expected to be higher on a y-o-y basis as pet coke prices are likely to

Sector
remain elevated in H1FY18. With declining trends in H2FY17 in imported coal, pet coke prices
are also likely to fall from H1FY17 levels.
Source: CRISIL
CRISIL Research has classified cement players into large [>8 million tonnes per annum (mtpa)],
mid (2-8 mtpa) and small (<2 mtpa) as per their installed capacity. Over the years, cement
players' profitability has varied in relation to their size, with large players typically earning
higher operating and net margins compared to small players.
During FY17, while large and medium size players are estimated to have improved margins
by 200-250 bps, aided by lower power and fuel costs, small players in contrast were most hit
amid weak demand and witnessed a decline of 350 bps.
9.11 Sector Outlook
With the cement industry of India poised to grow at a rate of 9.7% CAGR from FY11 to FY20,
reaching a capacity of 550 MTPA looks highly encouraging. The cement industry's medium to
long term outlook looks optimistic as demand for cement is likely to get boost from industrial and
commercial segments as well as from mass housing and mid-income housing schemes across the
country. In order to achieve the Government's vision of 'Housing for All' by 2022, where 11 crore
houses have to be constructed at an investment of $ 2 trillion (Rs 13,600 billion), is going to drive
cement consumption in coming year. Progress in infrastructure activities is likely to fuel cement
consumption in short-run on account of massive investment in infra projects like freight corridors
(Western and Eastern), railways, smart cities, metro railways, roads and highways, among others.
The government under its current fiscal year's budget has allocated Rs 3.96 lakh crore for
infrastructure sector, a crucial move to revive investments in the sector with the participation of
the private players. Moreover, the government plans to expand the capacity of the railways and the
facilities for handling and storage to ease the transportation of cement and reduce transportation
costs.
Sector
Going forward, incremental capacity addition is expected to be limited as many cement players
have already commenced their new units, while cement demand is likely to improve, resulting in
higher capacity utilization. Demand from rural market is also expected to rise as better than
expected monsoon as well as strong government push for the rural sector will improve rural
income. The government has also increased its budget allocation for the IAY (Indira Aawas
Yojana), PMGSY (Pradhan Mantri Gram Sadak Yojana) and MNREGA (Mahatma Gandhi
National Rural Employment Guarantee Act) that have the potential to further improve cement
demand.
In terms of pricing, despite healthy growth, Pan-India cement prices are expected to witness
decline as year-end prices were significantly lower in FY16 and only a moderate increase in prices
on sequential basis wouldn’t be enough to pull Pan-India FY17 prices higher than FY16. With
most infrastructural projects expected to pick-up pace in FY18, the prices are expected to see an
improvement of 5-6% in FY18.
9.12 Company Profile

Ultratech Cement Ltd.
A part of the Aditya Birla Group of Industries, Ultratech Cement was incorporated in the year
2010 as Larsen and Toubro. Grasim later acquired Ultratech Cement (UTCEM) and gave it its
current name before being acquired by Aditya Birla Group of Industries. Build around the brand
tagline of “Build Beautiful”, Ultratech Cement has acquired the status of Super brand in six years
since its launch. Today, the company is the leading producer and exporter of cement in the
country with a total production capacity of 69.9 mtpa. The product lines of Ultratech Cement
include Ordinary Portland Cement, Pozzolana Portland Cement, Ready Mix Concrete, Furnace
Slag Cement, White Cement and AAC blocks. In recent times, Ultratech Cement has also
employed Waste Heat Recovery Systems to minimise the cost of operation and has started to
include pet coke for the purpose of fuel. With a lost time injury frequency rate (LTIFR) for
Ultratech Cement improving from 1.57 in 2009 to 0.62 in 2015, the company has emerged as one
of the safest workplace across the industry. consolidation of 21.2 MT cement assets of Jaiprakash
Associates (Jaypee) will take the company’s total capacity to 91.1 MT. This will enable the
company to further strengthen its leadership in India going forward with a market share of over
~22% (post the deal) from 18.0% currently and become 4th largest player globally. The
transaction is subject to various regulatory approvals resulting in a gestation period of 10-12
months. Ultratech is also the face of the Indian cement industry at the Cement Sustainability
Initiative. The company has set an ambitious target of installing 100 mtpa by 2020.

Sector
Financial Ratios
Description Mar 2017 Mar 2016 Mar 2015
Earnings per share (Rs.) 95.72 86.37 73.42
Dividend per share (Rs.) 10 9.50 9
Book Value (Rs.) 871.37 787.33 686.92
Dividend Payout Ratio (%) 10.45 11.00 12.26
Margin Ratios
PBITDM (%) 18.29 17.17 16.14
EBITM (%) 16.00 14.14 13.21
Pre tax Margin (%) 13.90 12.24 11.11
PATM (%) 9.67 8.80 7.75
Performance Ratios
ROA (%) 6.77 6.45 6.20
ROE (%) 11.54 11.72 11.21
ROCE (%) 14.48 13.57 14.14
Asset Turnover (x) 0.70 0.73 0.80
Inventory Turnover (x) 12.07 10.72 10.15
Debtors Turnover (x) 20.19 20.59 20.92
Efficiency Ratios
Fixed Capital/Sales (x) 0.91 1.04 1.10

Sector
Payable days 31.15 29.20 38.07
Growth Ratios
Net Sales Growth (%) 0.77 3.41 13.05
Core EBITDA Growth (%) 10.21 11.83 10.12
EBIT Growth (%) 14.10 10.97 10.95
PAT Growth (%) 10.87 17.64 -6.05
Adj. EPS Growth (%) 10.83 17.63 -6.10
Total Debt/Equity (x) 0.26 0.38 0.39
Current Ratio (x) 1.55 0.86 0.89
Quick Ratio (x) 1.27 0.66 0.58
Interest Cover (x) 7.61 7.45 6.27
9.10 Shree Cement Ltd.

Shree Cements is one of the leading cement producers in North India. The company markets its
products under three different brand names viz. Shree Ultra Junk Rodhak Cement, Bangur
Cement and Tuff Cement. Shree Cements follows a policy of discomfort, i.e., stretching beyond
the comfort levels and outperforming the market. The company is one of the major players in the
northern region with a market share of ~20%. Rajasthan is the highest revenue generator state for
the company followed by Haryana and Punjab. The company has a total capacity of 27.2 MTPA
most of which is located in Rajasthan except capacity of 1.2 MTPA in Roorkee, Uttarakhand, 1.5
MTPA in Panipat, Haryana (acquisition completed on April 27, 2015), 2.6 MT in Chhattisgarh
2.0 MTPA in UP and 3.6 MTPA in Bihar. Shree Cement distributes cement under different brand
names - Shree Ultra, Bangur and Rockstrong. In FY09-16, sales have grown at a CAGR of 11%.
The company is among the first companies in the cement industry to have entered the power
business. It has evolved from a mere captive power producer to a major merchant power player
Sector
and is also a Category I power trading licensee. The company has increased its capacity from
560 MW in FY12 to 612 MW in FY16. The power business contributes more than 10% to total
revenues of the company. Moreover, it is also one of the most efficient users of fuel in the
industry. Captive capacity along with better efficiency results in lower P&F cost per tonne for
the company. It is the first company in the world to utilize 100% pet coke in all its operations for
both cement and power plants.
Shree Cements has created the world record for completing its 1mtpa clinkerisation plant in 330
days against an industry average of 630 days. Its subsidiaries include Katni Industries Pvt. Ltd
and Shree Global Pvt. Ltd.
Financial Ratios
Description March 2017 March 2016 June 2015
Dividend per share (Rs.) 140 24 24
Book Value (Rs.) 2209.57 1964.85 1514.47
Margin Ratios
EBITDA Margin (%) 24.79 22.11 18.29
EBIT Margin (%) 17.38 19.67 7.10
Pre Tax Margin (%) 16.03 18.48 5.46
PAT Margin (%) 14.02 17.96 5.80
Performance Ratios
ROA (%) 13.56 13.53 5.69
ROE (%) 18.42 18.86 8.54
ROCE (%) 19.86 17.99 8.62

Sector
Sales/Fixed Asset (x) 2.25 1.02 0.95
Efficiency Ratios
Fixed Capital/Sales(x) 0.45 0.98 1.06
Payable days 15.77 20.44 14.48
Growth Ratios
Net Sales Growth (%) 49.16 -14.10 10.44
EBITDA Growth (%) 38.25 40.35 -5.91
EBIT Growth (%) 32.60 140.10 -44.78
PAT Growth (%) 17.14 168.13 -45.84
EPS Growth (%) 17.14 168.13 -45.84
Quick Ratio (x) 0.99 0.86 0.91
9.11 Ambuja Cements Ltd.

Ambuja Cements Ltd is a part of the global conglomerate LafargeHolcim and is one of the
leading cement companies in the Indian cement industry. Operating for over 25 years, Ambuja
has proved to be the best cement for construction and the best cement manufacturing company in
Sector
India with its uniquely sustainable development projects. By virtue of its hassle-free customer
support & home building solutions and its unique cement sustainability initiatives such as True
Value and Water Positive, Ambuja’s business has seen a rapid growth in the past decade. The
company has a significant presence across western, eastern and northern markets of India as a
brand for Ordinary Portland Cement (OPC) and Pozzolana Portland Cement (PPC). Ambuja
Cement is the third largest cement manufacturer in India with cement production capacity of ~28
MT. The company has a presence in all regions except south where the issue of overcapacity
persists. Out of total capacity of ~28 MT, highest capacity is in the north region, which is ~11
MT while capacity in west, east and central regions are ~8 MT, ~7 MT and ~2 MT, respectively.
Ambuja Cement has a market share of ~17% in the northern region, ~12% in the eastern region
and ~24% in the western region. Due to the company’s strong focus on the northern region
where demand is continuously rising, Ambuja has been able to maintain higher utilization even
in a difficult business environment. Along with higher utilization level, availability of sea
transport and majority of sale through robust retailers has helped the company to keep healthy
EBITDA margins.
It is the first Indian cement manufacturer to build a captive port with four terminals along the
country’s western coastline to facilitate timely, cost effective and environmentally cleaner
shipments of bulk cement to its customers. Ambuja Cements subsidiaries include Chemical
Limes Mundwa Private Limited, M.G.T. Cements Private Limited, Kakinada Cements Limited,
Dang Cements Industries Private Limited, Nepal and Dirk India Private Limited. The proposed
acquisition of ACC by Ambuja is expected to reduce cost through consolidation of shared
services (like finance, HR and marketing) vendor consolidation and swapping of plants (to
reduce lead distance).
Financial Ratios
Description Dec 2016 Dec 2015 Dec 2014
Dividend per share (Rs.) 2.80 2.80 5.00
Book Value (Rs.) 96.06 66.41 65.13

Sector
Margin Ratios
EBITDA Margin (%) 15.97 14.23 17.16
EBIT Margin (%) 13.37 11.74 16.44
Pre Tax Margin (%) 12.69 10.89 15.87
PAT Margin (%) 9.21 7.50 13.32
Performance Ratios
ROA (%) 5.19 5.76 11.14
ROE (%) 6.60 7.92 15.30
ROCE (%) 9.57 12.35 18.80
Efficiency Ratios
Payable days 37.09 30.04 27.06
Growth Ratios
Net Sales Growth (%) -2.03 -5.23 8.77
EBITDA Growth (%) 19.54 -19.84 15.31
EBIT Growth (%) 11.45 -31.60 17.01

Sector
PAT Growth (%) 20.13 -46.03 15.59
EPS Growth (%) -6.11 -46.11 15.30
Total Debt/Equity (x) 0 0 0
Quick Ratio (x) 0.88 1.75 1.63
Interest Cover (x) 19.71 13.77 28.66

Sector
Paper Industry
10.1 Introduction
Paper is a thin material produced by pressing together moist fibers of cellulose pulp derived from
wood, rags or grasses, and drying them into flexible sheets. It finds usage across various industries in
different capacities and touches he human civilization quite closely. Some of the applications include
writing and printing (W&P), newsprint, packaging and cleaning besides being used as input for
various chemical, industrial and construction processes.
10.2 Gradation of Paper

The paper used across the various industries can be graded on the basis of some of the properties as
enumerated below:
•Relates to the available surface area of paper or its weight

•Surface of the paper is used across all industries- W&P, newsprint or tissue paper
Grammage •Paper is sold on the basis of weight and even a mill's turnover is based on that
(Basis Weight)
•Thickness of the paper is hugely affected by the mositure content in paper

•Thickness unit- caliper is generally expressed as thousandth of an inch
Thickness
(Caliper)
•Calculated by dividing grammage by caliper and expressed in grams per cubic centimeter
•Typical values are in the range of 0.75 (for loosely formed papers) to 1.20 (for bond sheets)
Apparent
denisty
• Paper surface made of hills and valleys- thus varying degrees of smoothness and reference is
made such as smooth or rough texture
• Smoother the paper, stiffer it is and better is the print reproduction
•High levels of smoothness is achived by a process called calendering which might lead to lesser
Smoothness brightness

Sector
Paper pulp can be manufactured via three routes: mechanical, chemical and a combination of the two.
Generally, these three processes use wood as raw material for manufacturing paper. Even for
manufacturing paper with other raw materials, the basic processes remain the same with a few minor
modifications. In nearly all of these processes the wood as a raw material is first chipped, pulped,
bleached, added with additives, removed from water and finally dried to manufacture paper. The
following flow chart gives a more comprehensive idea of the entire manufacturing process of paper.
Wood Preparation Pulping

• Break wood into smaller •Clean and breakdown of
wood
pieces through
•Technique can be
debarking and chipping
mechanical, chemical or
chemical-mechanical
Bleaching Chemical Recovery

• Whiten Pulp •Regenerates spent
chemicals used in kraft
• Remove lignin attached chemical pulping
to wood pulp
•Wood residues provide fuel
and chemicals are seperated
Paper making
•Beating of pulp to make it
flexible
•Consists of forming pressing
and drying paper
•Power intensive
10.4 Global Outlook
Demand to grow at a subdued pace between 2016 and 2021. The rate of growth will be marginally
higher than posted between 2011 and 2016. Paperboard is the only segment that is forecasted to rise
during the period.

Sector
The demand for paper and board (W&P, paperboard and newsprint) globally grew at a muted pace of
~0.4% CAGR during 2011-2016 period to reach ~406 million tonnes. While proliferation of
digitisation led to a decline of 1.5% and 5.4% for W&P and newsprint segments respectively,
a moderate growth in paperboard segment in the range of ~1.8% CAGR provided some respite.
There has been a structural shift in the W&P and newsprint segment owing to digitisation, especially
in the developed nations, thereby impacting volumes within the segments.
Over the next 5 year period, overall demand for paper and board is expected to grow only marginally
by 0.5-1% CAGR, primarily on the back of rising demand from paperboard segment, with demand
for W&P and newsprint segment will continuing to head south.
Price demand trend
Source: CRISIL
Segment wise share

Sector
Source: CRISIL
Global pulp consumption is estimated to have witnessed a marginal growth of 0.8% y-o-y to around
174.4 million tonnes in 2016 with the marginal growth being attributed to steady growth in paperboard
segment coupled with rise in demand from specialty grade segments (majorly tissue paper).
During 2011-2016 period, pulp consumption grew marginally by 0.5% CAGR, largely supported by 1.7%
rise in demand from the paperboard segment. Global pulp consumption will continue to be driven by
Asia which contributes ~50% of global imports, where demand for both paperboard and W&P paper is
relatively higher.
Going ahead global pulp consumption is expected to continue to witness a marginal improvement
despite decline from W&P segment, as incremental rise in paperboard segment and higher growth from
FBB/SBB segment (which requires up to 100% pulp) will keep the demand afloat. The paperboard
segment is expected to witness a steady growth of ~1.5% CAGR during 2016-2021 period. Moreover, the
incremental pulp consumption will also be supported by capacity addition in the specialty-tissue paper
segment.
10.5 Indian paper Industry

The Indian paper industry accounts for about 3% of the world’s production of paper. The estimated
turnover of the industry is Rs 50,000 crore ($8 billion) approximately and its contribution to the

Sector
exchequer is around Rs 4,500 crore. The industry provides employment to more than 0.5 million
people directly and 1.5 million people indirectly. The paper industry also contributes towards
fulfilment of various requirements of the industry as a whole like information dissemination, publicity
etc. which in turn stimulate industrial growth of the country. The paper industry has, thus, a catalytic
role to play not only for the overall growth of the industry but also for the living standards of the
people. The primary products sector include manufacturing pulps from wood and other cellulose
fibres, and from rags; the manufacture of paper and paperboard; and the manufacture of paper and
paperboard into converted products, such as paper coated off the paper machine, paper bags, paper
boxes, and envelopes and other commodity grades of wood pulp, printing and writing papers,
sanitary tissue, industrial-type papers, containerboard, and boxboard.
We expect paper & board demand to grow at 6-7% to touch ~20 million tonnes in 2021-22:
 Demand for paperboard is expected to grow at a healthy 7-8% CAGR over the next 5 years, driven
by packaging of fast-moving consumer goods (FMCG) products, readymade garments,
pharmaceuticals, e-commerce, and household appliances.
 Writing and printing demand is expected to grow at 5-6% CAGR (against 3.4% between FY12-
FY17) on account of a likely pick-up from the corporate and education sector.
 Specialty paper (majorly tissue paper and thermal paper) is expected to continue growing at a
robust 9-10% CAGR
Domestic paper demand posted a 4.5% compound annual growth rate (CAGR) over FY12-FY17,
reaching 14.3 million tonnes. The expansion was on the back of increased industrial activity and
corporate spending on office stationery and advertisements following improving economic growth.
Paper Industry Segmentation

Sector
Writing and printing (W & P) paper

This includes varieties of paper, normally under 120 GSM (grammage per square metre), used
primarily for writing and printing. The various varieties of W&P paper are Creamwove, Maplitho,
Copier and Coated paper. While high-quality paper segments such as copier and coated paper have
been garnering a greater share, low-quality segments such as Creamwove still account for a major
share of the market, given a higher base.
During FY12 and FY17, demand in the W&P segment grew at 3.4% CAGR, rising to 4.3 million tonnes
on back of increased government and corporate spending. Copier was the fastest-growing sub-
segment in the uncoated category at ~9% CAGR, while Creamwove and Maplitho grew 1.3% and
2.1% respectively. Creamwove grew at a slower pace on account of a shift towards better quality
paper requirements from state textbook societies, resulting in cannibalisation for Maplitho papers.
Paperboard
Kraft paper, recycled board and virgin board come under this category. This paper is used for
various industrial purposes and its consumption is closely linked to:
 Growth in the packaging industry

 Industrial production
Sector
 Development in packaging technology and substitution by other materials
Speciality Paper
Paper with specific applications such as tissue paper, decor paper, electrical grade paper, fine
printing paper, business card paper, photo paper and greeting card paper is called speciality paper.
It contributes to a very small percentage of total paper demand. Consumption of speciality papers is
linked to the general standard of living in the country.
Newsprint
Newsprint is mainly used in printing of newspapers and magazines. Although used for printing
purposes, newsprint is considered a separate end-use category because of the difference in its usage
as compared to other W&P varieties. Besides, newsprint is consumed in very large volumes vis-a-vis
other varieties.
Drivers
Growing Indian Economy

The Indian economy is poised to grow at a rate of 6.70% over the next year and is expected to
continue to grow at about 5.70% for the next 5-10 years. This is subsequently going to increase the
demand for paper against the backdrop of construction papers and paper used for various office
and industrial purposes.
Rising levels of education

The Census of 2011 marked the literacy level of education in the country at 74%. For a country
teeming with a huge population, in the range of more than 1.2 billion, the percentage translates into a
huge number. Moreover, with the Central government’s policy thrust on elemental education, the
paper industry is expected to grow by leaps and bounds.
Focus on marketing campaigns

With the Indian economy taking a boost, the business environment is gradually becoming much more
competitive. Subsequently, corporate are spending huge money on advertising and marketing
campaigns. Although, the advent of digital marketing does deter the market for paper industry, yet
the traditional ways of sales and marketing continue, leading to a high demand for the latter.
Growth in hospitality/hygiene sector

With the Indian government moving towards a more inclusive health programme, the usage of paper
in the healthcare sector is going to increase. Tissue paper and other related paper based products find
a great usage pattern in the related industry.

Sector
Source: CRISIL
Brief profiles of major players
10.7 Ballarpur Industries Ltd.

Ballarpur Industries (BILT) is an India-based paper company and the largest manufacturer of
writing and printing paper in India. BILT operates six manufacturing units in India and one in
Malaysia. Its manufacturing units are located in Ballarpur (Maharashtra), Bhigwan
(Maharashtra), Shree Gopal (Haryana), Sewa (Odisha) and Ashti (Maharashtra); and its
Malaysian manufacturing unit is located at Sabah. The rayon grade pulp manufacturing Unit is
located at Kamalapuram (Andhra Pradesh).
The company operates through three segments: paper, paper products and office supplies, and
pulp.
The company manufactures a wide range of papers such as coated wood free, uncoated wood
free, copy paper, packaging, business stationery, industrial grades and speciality and fine paper.

Sector
Recently, BILT has launched a premium category stationery paper under the brand name BILT
Matrix.
Financial Ratios
Description March 2016 March 2015 June 2014
Dividend per share (Rs.) - 0.2 0.2
Book Value (Rs.) 24.83 24.56 24.66
Dividend Payout Ratio (%) - 142.86 37.04
Margin Ratios
EBITDA Margin (%) 21.07 15.32 14.2
EBIT Margin (%) 11.68 5.52 6.69
Pre Tax Margin (%) 2.59 -2.44 1.06
PAT Margin (%) 2.87 1.98 3.69
Performance Ratios
ROA (%) 0.47 0.30 1.21
ROE (%) 1.10 0.55 2.19
ROCE (%) 4.29 1.31 3.27

Sector
Efficiency Ratios
Inventory Days 170.70 230.80 103.59
Payable days 91.21 106.73 52.38
Growth Ratios
Net Sales Growth (%) 30.44 -52.55 -3.47
EBITDA Growth (%) 136.21 -49.19 -7.77
EBIT Growth (%) 271.88 -58.68 -4.48
PAT Growth (%) 98.77 -74.62 6.12
EPS Growth (%) 98.83 -74.62 6.08
Quick Ratio (x) 0.78 0.52 0.50
10.8 JK Paper Ltd.
With a combined capacity of 4,55,000 TPA, JK Paper, a unit of JK Organisation is India’s

largest producer of Branded Papers and a leading player in Coated Papers and High-end
Packaging Boards. The Company began its journey more than half a century ago with 18,000
tons per annum capacity paper plant.

Sector
When Paper industry was content with producing ordinary Cream Wove quality, JK pioneered in
1962 the Surface sized Maplitho Paper (popularly came to be called ‘JK Maplitho’ – a premium
quality printing paper ideally suited for the Litho Printing process.
JK Paper has been constantly creating value in a highly capital intensive and cyclical business,
where volume is traditionally considered as Key profit driver. JK Paper was also among the
earliest to invest in state-of-the-art A4 cutting lines for mass production of these products. JK
Paper is synonymous with premium quality paper, which is reflected in customer’s trust in its
products enjoying the ‘Brand’ status among its competitors.
Financial Ratios
Description March 2017 March 2016 March 2015
Earnings per share (Rs.) - 5.56 -0.93
Dividend per share (Rs.) 1.5 0.5 0
Book Value (Rs.) 84.72 74.20 54.60
Dividend Payout Ratio (%) - 8.99 0
Margin Ratios
EBITDA Margin (%) 17.13 13.43 10.19
EBIT Margin (%) 14.29 9.80 5.75
Pre Tax Margin (%) 8.07 3.06 -2.35
PAT Margin (%) 5.78 2.10 -0.73
Performance Ratios
ROA (%) 4.93 1.78 -0.54
ROE (%) 14.40 6.57 -2.42
ROCE (%) 14.34 9.72 4.96

Sector
Efficiency Ratios
Payable days 35.57 37.72 41.73
Growth Ratios
Net Sales Growth (%) 7.85 12.83 11.25
EBITDA Growth (%) 37.17 50.48 74.25
EBIT Growth (%) 51.81 94.84 1447.45
PAT Growth (%) 187.27 429.75 75.34
EPS Growth (%) 192.57 379.74 75.39
Quick Ratio (x) 0.56 0.35 0.54

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UNNATI INVESTMENT MANAGEMENT AND RESEARCH GROUP

Priyanka Demla | Anant Jain

1.0 OVERVIEW OF MINING AND METALS IN INDIA ...........................................................4

2.8 Market Structure ..............................................................................................................16

2.9 Impact of Budget 2017-18 ...............................................................................................17

3.0 Impact of GST ..................................................................................................................18

3.1 Sector Outlook .................................................................................................................19

3.7 Impact of National Steel Policy ........................................................................................31

3.8 Impact of GST ...................................................................................................................33

Unnati Sector Report 2017-18 | 1

9.0 CEMENT .............................................................................................................................76

10.0 PAPER .................................................................................................................................105

Unnati Sector Report 2017-18 | 3

OVERVIEW OF MINING AND METALS IN

Unnati Sector Report 2017-18 | 4

Mineral India’s Rank in World Production

Iron ore 4th

Copper (refined) 10th

1.2 Investment Policy & Initiatives

Illegal Mining, Cancellation of Coal Blocks and Its Impacts.

Mines and Minerals (Development and Regulation) Amendment Bill 2015 *

Unnati Sector Report 2017-18 | 6

 Setting up of District Mineral Foundation to address concerns of population displaced by mining

*Dun & Bradstreet

Private Participation in the mining sector

Unnati Sector Report 2017-18 | 7

• Minerals in their finished form exempt from excise duty

Financial support for Mining:

Unnati Sector Report 2017-18 | 8

Large Area Prospecting:

Unnati Sector Report 2017-18 | 9

The metal finds use in a variety of industries such as:

Unnati Sector Report 2017-18 | 10

Unnati Sector Report 2017-18 | 11

2.2 Manufacturing Process

Smelting to Casting into

2.3 Consumption Pattern

Unnati Sector Report 2017-18 | 12

Unnati Sector Report 2017-18 | 13

2.5 Indian Aluminium Industry

Unnati Sector Report 2017-18 | 15

Source: CMIE, CRISIL Research

2.6 Market Structure

 Hindustan Aluminium Company (HINDALCO)

Unnati Sector Report 2017-18 | 16

LME Prices and Stock Levels

Impact of Union Budget 2017-18

Impact of GST Rate

Existing Rate GST Rate Comments

Inputs Existing Rate GST Rate Comments

^^^Includes VAT of 5.5%, and other levies wherever applicable

Unnati Sector Report 2017-18 | 18

Unnati Sector Report 2017-18 | 19

Unnati Sector Report 2017-18 | 20

3.2 Manufacturing Process

Unnati Sector Report 2017-18 | 21

Blast furnace (BF)/ Basic oxygen furnace (BOF)

Electric Arc Furnace

•Corex technology is emerging as an alternative method in the iron producing stage.

A typical steel making process by BF/BOF Process is shown below:

Unnati Sector Report 2017-18 | 22

Bars and Rods Source: CRISIL Research

Flat Products Sheets