Indian Steel Industry

Iron and steel, is vital to the Indian economy for economic growth and economic wellbeing. No practical substitutes exist on a large scale for iron and steel because of the relatively
high cost of alternative materials.
Worldwide, there are broadly two major categories of steel playersIntegrated steel
producers (ISPs) and mini-mills/secondary producers, although variations and combinations of
the two exist. The key difference between the two is the type of iron bearing feedstock they
consume. In an integrated mill, this is predominantly iron ore, with a smaller quantity of steel
scrap. A mini-mill produces steel uses mainly steel scrap, or increasingly, other sources of
metallic iron such as directly reduced iron (DRI)/hot briquette iron (HBI).
The iron and steel industry not only directly accounts for about 2% of GDP, it also has a
bearing on how the consumer goods and downstream infrastructure sectors develop. Further,
with a share of approximately 10%, the sector is amongst the largest contributors to the central
excise. India accounted for 3.4% of the estimated world steel production of 1,129 million
tonnes (mt) during 2005. At present, India is the 7th largest crude steel producing country in
the world.
In 2009-10, production of Finished (Carbon) Steel was 57.24 million tonnes (Prov).
Production of Pig Iron in 2009-10 is estimated to be 5.639 Million Tonnes (Prov). The share of
Main Producers (i.e SAIL, RINL and TSL) and secondary producers in the total production of
Finished (Carbon) steel was 35% and 65% respectively during the period of April-December,
2009.

Size of Industry

India is among the top 10 global suppliers of steel in the world.

More than 35 million tonnes of steel is produced in India per annum.

India is also the largest producer of sponge iron in the world.

This sector represents around Rs. 1 trillion of capital investments, and directly provides
employment to around 0.5 million, with the integrated steel plants accounting for a 40%
share.

The iron and steel sector also contributes around 6.2% of Indias manufactured goods
exports and 4.6% of total exports by value.

Structural Characteristics of Indian Steel Industry

The industry is dominated by large integrated players like SAIL and Tata Steel in steel.

The Public sector has a significant presence in this industry; Steel Authority of India Ltd.
(SAIL) has 32% of Indias installed capacity of crude steel.

Tata Steel and Essar Steel are the major private players in the industry.

The industrys fortunes depend on general global economic conditions but it is

particularly sensitive to the performance of the automotive, construction, durable
equipment, and other industrial products industries. The trend in the last few years in
steel prices shows that the steel industry is cyclical.

The global (and Indian) steel industry also suffers from cycles of over capacity and
shortages. This too leads to cyclically falling/rising prices and industry losses/profits.

Integrated steel producers (ISPs)Tata Steel and SAILface high fixed costs, and thus
in a downturn, the percentage profit margins come down significantly. The downturn
phases have witnessed depressed prices at the firm level and widespread operating
losses.

Economic logic differs for mini mills that can vary output more quickly when prices fall.

TATA Steel
Tata Steel is India's largest integrated private sector steel company. Established in 1907, The
Company is backward integrated with owned iron ore mines and collieries. Tata Steel has an
integrated steel plant, with an annual crude steel making capacity of 5 million tonne, located at
Jamshedpur, Jharkhand.

Steel Authority of India Limited (SAIL)

Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a
fully integrated iron and steel maker, producing both basic and special steels for domestic
construction, engineering, power, railway, automotive and defence industries and for sale in
export markets.
The Government of India owns about 86% of SAIL's equity and retains voting control of
the Company. However, SAIL, by virtue of its Navratna status, enjoys significant operational
and financial autonomy.