Breaking The Commodity Cycle

1
Breaking The Commodity Cycle
Press Conference by B. Muthuraman Managing
Director, Tata Steel Kolkata, April 3, 2003
2
What Characterised FY03 ?
3
FY 03
Global Scenario

• Growth in China at 8
• Developing countries like India and Malaysia
  growing at 5 6
• Growth in Europe Slow
• WTO
• Lower tariffs, quotas
• High import penetration
• Privatisation of steel

4
FY 03
Global Scenario Steel Industry

• Chinese demand growing _at_ 21
• Crude steel ADC in China at 210 million tonnes
• Protectionism led by US
• HR prices boiling
• Shortage of coke supply from china
• Tightened metallic supply

5
FY 03
Domestic Steel Industry

• Buoyant prices
• Debt recast by Financial Institutions for Essar,
  Ispat and JVSL
• Exports upsurge
• At 3.7 million tonnes in FY03 against 2.6 mt in
  FY02
• WTO Tariffs
• Customs duty further lowered in this years
  budget to 25 for HR, CR, Wire Rods, Bars,
  Structural and Semis
• India becomes largest manufacturer of Sponge Iron
  at 6.53 million tonnes in 2002

6
FY 03
Indian Steel Industry Growth In Production
7
How Did Tata Steel Fare in FY03 ?
8
Markets
Volume (000 MT)
CR Galvanised Sales
FP Sales

HR CR (Auto)
CR (OE)
9
CRCA Hi-End (Auto) The Supply Dashboard
Telco
Mahindra Mahindra
Ford
Hyundai

Hindustan Motors
Honda
LML
Bajaj Auto
TVS
Other Auto
Ashok Leyland
Bajaj Tempo
Volume (000 MT)
10
CR OEM Market Shares At 1 Position
Market Share
CRCA (Auto Ancilliaries)
CRCA (Auto Direct)

CR (Low End)
CR (Appliances)
11
Gaining Market Share In Focus Segments
HR for Auto Segment
Volume (000 MT)
Market Share ()
Sales

Galvanised for Construction
Market Share ()
Sales
12
Gaining Market Share In Focus Segments
HC Wire Rods
Volume (000 MT)
Market Share ()
Sales

LC Wire Rods
Market Share ()
Sales
13
Gaining Market Share In Focus Segments

Tiscon
Volume (000 MT)
Market Share ()
Sales
14
Branding of Products

• Branded Cold Rolled Strips for the Distribution
  Market (TATA STEELIUM launched in February 03)
• Embossed Tata Tiscon on our branded TMT Rebars
  (April02)
• Brand Protection Group set up in April02
• Started Relationship building with channel
  members for Tata Shaktee GC Sheets
• Launched Tata Shaktee Parivaar in Dec02
• Training of our Distributors / Dealers Salesmen
  on how to manage our brands

15
Branding
16
Branding in Long Flat Products
Volume (000 MT)
Tata Shaktee GC Tata Steelium CR
Branded Sales ()
Branded Sales
Tata Tiscon
Branded Sales ()
Branded Sales
17
Branding of Products Overall
Long Products Flat Products
Volume (000 MT)
Branded Sales
Branded Sales ()
18
New Initiatives

• Customer Value Management
• Large OE Customers
• Work jointly with Key Customer Accounts in
  Automotive, Appliances and Furniture Industry
• Retail Value Management
• Retail customers through distribution channels
• Initiatives taken to cover all distributors of
  Tata Tiscon and Tata Shaktee
• Initiatives taken to extend the program to Tata
  Tubes and Tata Steelium CR coils

19
New Products Developed

Hot Rolled Products

• API 5 LX 52 / 60 - High Pressure line pipes for
  China.
• API 5 LX 65 - Line Pipe for Jindal Saw Pipes.
• DP Steel - Wheel Disc for Wheels India
• SAPH 440 - For Hyundai

Cold Rolled Products

• BH 180 / 220 - Drawn Components for Hindustan
  Motor
• CRCA YS 250 Mpa - Almirah and Office Furniture
  for Godrej Boyce.
• Tata Elect 6 / 7 - Electrical Lamination of Low
  Capacity Motor for Orient and GE.

20
New Products Developed

Galvanized Products

• IFHS Zero spangle - Grade for Auto Sector
• HSLA Zero spangle - for STEMCOR and CARGILL
  International for Decking and Construction
  Application.
• Boron Treated (ASTM A 622 , Modified) Zero
  Spangle - for Roba Metals , Belgium and South
  East China for Appliance and auto Internals.
• One side chromated GI / GA - Developed for LML ,
  Bajaj Auto , Hero Honda , TVS Suzuki , Eicher
  Motor
• Zero Spangle 60 GSM - Fuel Tank for Two Wheelers.
  

21
Raw Material Production (In Million Tonnes)
West Bokaro
Jharia

Iron Ore
22
Iron Making Production (In Million Tonnes)

Sinter
Coke
Hot Metal
23
Steel Production (In Million Tonnes)

Crude Steel
Finished Steel
Saleable Steel
24
Hot Metal Production (In Million Tonnes)

25
Raw Material Consumption (T / T of Saleable Steel)

26
Crude Steel Production (In Million Tonnes)

27
Rightsizing

28
Labour Productivity (TCS / Man Year)

29
Saleable Steel Production (In Million Tonnes)

30
Gross Working Capital ( In Number of Days )
31
Operating Income and HRC Price Fluctuations
FY 01
Till Q3 FY 03
FY 00
FY 02
FY 97
FY 96
FY 98
FY 99
Prices Metal Bulletin
Operating Income Gross Revenue Manufacturing
Other Expenses Depreciation Expenses
transferred to Capital
32
PBT and HRC Price Fluctuations
Till Q3 FY 03
FY 01
FY 96
FY 00
FY 97
FY 98
FY 99
FY 02
Prices Metal Bulletin
33
Raw Material Iron Making

• First time sale of Clean Coal from West Bokaro
  worth Rs 23 Crores
• 16 ash coal production in West Bokaro
• Consistent Productivity of 40 t/m2/d (gross) at
  SP 2 in all months
• 100 replacement of Dunite by Pyroxenite

34
Raw Material Iron Making

• Highest ever Productivity at A-F Blast Furnaces
  at 1.74 t/m3/d
• Having been upgraded for 1 mtpa, F Fce running at
  1.3 mtpa consistently
• Use of Sponge Iron in A-F Blast Furnaces has
  enabled
• To achieve best ever Hot Metal production at 4.44
  million tonnes
• Reduction in Raw Material Consumption to 3.194 t
  / tss

35
Steel Plant Operations

• Best ever Vessel life of 2105 heats
• CRM crossed the 1 mt mark to produce 1.1 million
  tonnes
• Best ever Productions at Wire Rod Mill and
  Merchant Mill
• Closure of Bar Mill and Ingot Route
• Plant specific energy consumption at 6.977 Gcal /
  tcs

36
Aspire

• TOP Initiative in Marketing
• Customer Value Management
• Retail Value Management
• Customer Product Optimization to enrich the
  Product-Customer Mix
• TPM at WRM, HSM and Tubes
• Debottlenecking of capacities and enhanced
  outputs
• Knowledge Management
• Finalists of the MAKE (Most Admired Knowledge
  Enterprise) Award
• EVA drive for enhancing business performance
  through Vision 2007 and followed up with Stern
  Stewarts Study

37
Strategic Outsourcing

• Launched in line with our Vision
• Finalising a JV with Vivendi of UK to look after
  water services at Jamshedpur
• Engaged specialists in education area to run some
  of our schools in the township
• Continuing this initiative, it is proposed to
  further identify some of the processes, which are
  amenable to outsource

38
Tubes SBU

• Best ever total sales at 0.19 million tonnes
• Extension of Relationship building exercise -
  Gold Club Distributor after Tata Pipe
  Parivaar
• Best ever collection at Rs 620 Crores
• Savings of Rs 8 Crores through CLAP Initiatives
  (Cost Leadership Aspirational Plan)
• Lowest ever Works variable cost (23 lower than
  the previous best of last year)
• Highest ever labour productivity at 117 tonnes /
  employee / annum

39
Ferro Alloys Minerals Division

• Chrome Ore Production at 11.41 L Mt (86 higher
  than previous best)
• Despatch from Sukinda at 50 higher than the
  previous best at 13.58 L Mt
• Optimisation of Product / Market / Mix
• FeCr and FeMn Exports Vs Domestic Sales
• Leveraging Partnership with conversion agents to
  corner additional production capacities in an
  ascending market
• Aggressive marketing of Chrome Ore / Concentrate
  in International / Domestic market to counter
  challenges from competitors

40
Other Profit Centres

• Bearings conferred the Quality Rank No- 1 by
  Toyota Kirloskar Motors Ltd
• Bearings sales increased by 11 over previous
  year
• TGS procured external orders worth Rs 113 Crores
• Rings Production and Sales crossed its previous
  best figures of 1995-96
• Power Business Division set up
• To manage distribution to Industrial, Domestic
  and Commercial consumers of Jamshedpur
• To co-ordinate with Utilities, Govt. agencies for
  Power
• Control of all Power Purchase agreements
• Maintenance of electrical installation of Town
  division and employees houses

41
How Do We See FY04 ?
42
Global Scenario

• Continued growth in Chinese economy
• Steel supply deficiency
• Tariff free quotas from 24th may
• War will lead to high energy costs
• Will boost inflation and cut into economic growth
• Govts may impose inspection regimes on trade
  flows
• Global logistics cost likely to go up
• Impact on TISCO minimal
• Metallics and coke in short supply
• Increased steel prices to be sustained till H1
  FY04 and then stabilize
• Stagnating economies of America, Europe and Japan
• Consolidation and privatisation will gain momentum

43
Domestic Scenario

• Exports expected to decline
• Attributed to subdued global growth and trade
  protectionism in developed countries
• To promote steel exports govt has increased DEPB
  benefits
• Demand for steel to rise
• Promising budget for infrastructure
• Tax relief in steel end-use sectors like auto and
  white goods
• Prices are expected to follow international trends

44
So, What Are Our Plans ?
45
Hot Metal Production (In Million Tonnes)

46
Crude Steel Production (In Million Tonnes)

47
Saleable Steel Production (In Million Tonnes)

48
Plans For FY04
Revitalize the core Business for a sustainable
future

• Improved Product Mix and narrowing focus to
  select products
• HR CR Galvanized 51 3414 against 53 36
  11 in FY03
• LCWR Tiscon HCWR 8 48 22 against 10 44
  17 in FY03
• Closure of Bar Mill
• Customer / Product Mix Enrichment for High
  Realizations
• Focus on HCWR and increase market share from 45
  to 55
• Dominate and achieve strategic supplier status
  and partnership with major customers in CR for
  Auto / White goods
• Increase CR for Auto Market hare from 30 to 39,
  and CR for White Goods from 13 to 40
• To create a market for high end coated products
  in India

49
Plans For FY04
Flat Products ( of Sales)
HR
CR
Galvanised
50
Plans For FY04
Long Products ( of Sales)
LCWR
HCWR
TISCON
51
Plans For FY04
Revitalize the core business for a sustainable
future

• Branding by Decommoditizing Steel
• 100 of Flat products to be sold through the
  distribution channel to be branded
• Branded Products to increase from 14 to 28 in
  FY04
• Strengthen Tata Tiscon and Tata Shaktee Brands in
  Rebar and GC Sheet markets
• Extensive Market Research and Channel management
  to ensure effective branding
• Successfully manage EPAs to perpetuate the Tata
  Agrico brand

52
Plans For FY04
Revitalize the core Business for a sustainable
future

• Efforts towards remaining the lowest cost
  producer of Steel
• Improved quality and volume of captive raw
  materials
• Robust Planning for G Fce Up-gradation and
  Rebuilding
• Increased manpower productivity from to 245 to
  277 Cr. St. T / Mn Yr
• Improved efficiencies in consumptions of raw
  material, energy, power, and refractories
• Outsourcing non-core jobs
• Initiatives like Six Sigma, TPM, VE, CIPs, QCs,
  TOP to improve Operational efficiency

53
Plans For FY04
Revitalize the core Business for a sustainable
future

• Balancing facilities for 1 million MT increased
  production
• G Furnace upgrade
• New Sinter plant
• Facilities in Steel making shops
• New Wire Rod mill
• Additional 0.5 million mtpa of Flats and Longs

54
Plans For FY04
Venture into New Businesses that will own a share
of our future

• Iron Ore Business
• Plans to utilise existing leases to expand
  volumes taking advantage of low cost mining
  operations
• To serve markets in India, China, Korea and Japan
• First Phase Production 5 mtpa
• Higher production envisaged in the subsequent
  phase

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THANK YOU