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index

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1.1

1.2
1.3
1.4
1.5
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2.1
2.2

2.3

2.4
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3.1

3.2
3.3

3.4
3.5
3.6

Contents
Introduction
steel industry in India
1.1.1 List of Major Iron and Steel producing companies in
India
1.1.2 List of major Iron and Steel units of SAIL
1.1.3 Types of existing Iron & Steel Plants in India
History of steel
objective of the study
Scope & limitation of reason of price
Methodologies
Growth and Evolution
Product Profile
2.1.1 Growth
Innovation Potential
2.2.1 Indian steel potential
2.2.2 Industrial production and GDP are recovering.
2.2.3 Technological innovation
Economic
2.3.1 Global scenario
2.3.2 Domestic scenario
2.3.3 Production
Industrial Trade Policy
2.4.1 The new industry Policy
2.4.2 The growth profile
Demand analysis
Demand determination
3.1.1 Demand - Availability Projection
3.1.2 Raw Materials:
3.1.3 Infrastructure
3.1.4 Investments
Steel Prices
Income
3.3.1 Estimates at current price
3.3.1.1 Gross Domestic Product
3.3.1.2 National Income
3.3.1.3 Per Capita Income
Penetration
Replacement demand
Products

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3.6.1 steel pipes

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3.6.2 steel fasteners

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3.8
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4.2
4.3
4.4
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4.6
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5.2

3.6.3 steel tubes


3.6.4 steel pipe fittings
3.6.5 steel alloys
Technology
life cycle stage
Marketing strategy /Analysis
Market Size
Investments
Steel Sector Analysis Report
Trends
Promotion
segmentation of Indian steel industry
Quality
Technology
Customer service
Promotion

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Pricing of steel industry

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4.11.1 Steel Prices


4.11.2 Domestic Price Trends for the past year of Hot Rolled,
Cold Rolled
and Galvanized Products
4.11.3 Increase in Finished Steel Production
Distribution channel

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Major players in India

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Market share

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Logistic demand

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4.15.1 .Raw material requirement


4.15.2. Logistic in steel industries
4.15.3.Logistic challenges for Indian steel industry
number of companies

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Financial Analysis
Profit Margin Analysis
5.1.1 Gross Profit margin Analysis
5.1.2 Net Profit Margin
Leverage Analysis
5.2.1 Total Debt ratio
5.2.2 Debt equity ratio
5.2.3 Capital equity ratio

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5.3
5.4
5.5
5.6
5.7
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6.2

6.3
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Profitability Analysis
5.3.1 Operating margin
5.3.2 Return on net worth
Du Pont Analysis
ROE
EPS
DPS (dividend per share)
Strategic analysis of steel industries
SWOT Analysis Of The Steel Industry
6.1.1 Strengths
6.1.2 Weaknesses
6.1.3 Opportunities
6.1.4 Threats/Challenges
PESTEL Analysis Of The Steel Industry
6.2.1 Political analysis
6.2.2 Economical analysis
6.2.3 Socio Culture analysis
6.2.4 Technical analysis
6.2.5 Environmental analysis
6.2.6 legal analysis
Porters five force model
Futuristic scenario of the industry
Conclusion
Bibliography

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Chapter 1
Introduction

1. Introduction
1.1. Steel Industry in India
Steel is traditionally considered the backbone of national economic
development. It is a major input into sectors which support economic growth
such as infrastructure, machinery, power and railways, as well as being
important for fast growing sectors, in particular automobiles and consumer
durables.
The steel industry in India is currently at an inflexion point brought about by
ambitious capacity expansion plans, entry of new players and increased

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competition on one hand and consistently rising and shifting demand


patterns on the other.
This rise in demand is expected to be driven by the construction, automobile
and consumer durables sectors (OECD 2011). In the construction sector,
Government spending in infrastructure is expected to surge during the
twelfth plan period, thus driving up demand for steel used in construction.
Similarly, rising incomes coupled with rapid urbanization have contributed to
the increasing demand for automobiles and consumer durables.
With respect to supply, the Compound Annual Growth Rate (CAGR) of crude
steel production has doubled from 3% for the period 2000-04 to 6% in 200509. As a result, India has risen from being the seventh largest producer of
steel in the world in 2005 to the third largest in 2009 (Spark Steel and the
Economy Research Centre 2010).
Most steel producers are planning major capacity expansions through both
Greenfield and Brownfield expansions. This, coupled with the entry of new
players such as the Pohang Iron and Steel Company (POSCO) and Arcellor
Mittal, will result in a significant rise in steel production over the next ten
years. There is also an increased emphasis among steel players on the
production of special steels that were until now being imported.

1.1.1 List of Major Iron and Steel producing companies in


India
1. Tata Steel (ranked 11th in the world in terms of production of steel)
2. Steel Authority of India (SAIL) ranked 29th in the world.
3. JSW Steel Limited ranked 31 in the world.
4. Essar Steel

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5. Jindal Steel and Power


6. Mahindra Ugine Steel

List of major Iron and Steel units of SAIL:

Indian Iron & Steel Company Limited (IISCO steel plant)

Bhilai Steel Plant

Rourkela Steel Plant

Bokaro Steel Plant

Durgapur Steel Plant

Types of existing Iron & Steel Plants in India


There are three types of Iron and Steel Plants in India:
1. Integrated Iron and Steel Plants
like in Bhilai, Bokaro, Jamshedpur, Rourkela, Vishakhapatnam, Durgapur and
Kulti-Burnpur. The plants are called integrated because, in an integrated or
cohesive manner there are different factories producing coking coal, blast
furnaces producing pig iron, steel ingot, finished steel etc. at the same time.
2. Alloy Steel Plants
Bhadravati, Salem and Durgapur. They are located near the Integrated Steel
Plants. There are some other steel plants for Defense purposes like the Mixed
Metals Corporation at Hyderabad. In the plants along with steel, manganese,
nickel, tungsten and other metals are missed to produce alloy steel and
other special steels. Japan, Germany, Britain, France, Italy etc. produce
thousands of varieties of steel with highly developed technologies, thus their
products are of such good quality. Their technological gap with India is great.
3. Small Steel Plants
include Mini Steel Plant and Sponge Iron Plant etc. They are run by Electric
Arc Furnace, producing 15 20 metric tons of steel. There are over 216 such
steel plants but at present only 177 such plants carry on production.At
present in India there are large mumber of Integrated Iron and Steel Plants,
and Alloy Steel Plants (producing stainless steel, nickel-steel, chromiumsteel, etc.)

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1.2 HISTORY OF STEEL


Steel was discovered by the Chinese under the reign of Han dynasty in 202
BC till 220 AD. Prior to steel, iron was a very popular metal and it was used
all over the globe. Even the time period of around 2 to 3 thousand years
before Christ is termed as Iron Age as iron was vastly used in that period in
each and every part of life. But, with the change in time and technology,
people were able to find an even stronger and harder material than iron that
was steel. Using iron had some disadvantages but this alloy of iron and
carbon fulfilled all that iron couldnt do. The Chinese people invented steel as
it was harder than iron and it could serve better if it is used in making
weapons. One legend says that the sword of the first Han emperor was made
of steel only. From China, the process of making steel from iron spread to its
south and reached India. High quality steel was being produced in southern
India in as early as 300 BC. Most of the steel then was exported from Asia
only. Around 9th century AD, the smiths in the Middle East developed
techniques to produce sharp and flexible steel 26 blades. In the 17th
century, smiths in Europe came to know about a new process of cementation
to produce steel. Also, other new and improved technologies were gradually
developed and steel soon became the key factor on which most of the
economies of the world started depending.

1.3 objective of the study

To study the growth & evolution of the steel industry.


To study the Indian steel industry with global perspective.
To study the major players and their contribution.
To study the industry structure and demand supply scenario.
To conduct the strategic analysis of the industry.
To analyze the present and future prospects using SWOT analysis and
porters five force analysis of steel industry.

1.4 scope & limitation of study


The study conducted is limited for the academic purpose only and any
investment decision, acquisitions; etc. pertaining to the industry

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cannot be carried out solely on the basis of this report. This report
conducts the overall macro view of the Indian steel industry and any
products or subsidiary industries or related issues are not considered.
Report covers the Indian steel industry with global perspective but the
dynamics of global steel industry ls out of the scope of the study.

1.5methodologies
The following methodology was adopted
Literature survey
Market analysis in India with use of specific secondary data and
relevant comparison to the world developments
Development of strategy for batter distribution of electricity

Literature survey
For formulating marketing strategy, it is imperative to understand the
concepts of marketing management with specific reference to industrial
product. It is also necessary to steel production can be considered as
industrial product.it is also necessary to understand the concepts of strategic
management with particular reference to marketing strategy. Also it is an
essential requirement, to understand the concepts of strategic management
with particular reference to marketing strategy. The literature survey was
carried out by reviewing the books and articles of renowned authors to build
up the framework for formulation of marketing strategy for providing turnkey
solutions for steel production.
Market analysis
The analysis involved
The study of environment
Estimation of plan investment and likely impact in terms of products
and services
Data collection from secondary sources.
Secondary data collection has been done by referring steel authority of
India figures and compilation of Notice information Tenders (NITs)
published in last six months.
In order to understand the actual requirement of the customer, data
collection has been linked with the objective of the study in each step.

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Development of strategy for steel industry


Recommendations have been formulated based on the above literature
survey and market analysis, highlighting the key issues & concerns as well as
actions to be initiated and means required for improving business.

Chapter : 2
Growth and Evolution

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2: Growth and Evolution


2.1 Product profile:
A product profile is a collection of settings that are shared by multiple
products. This is a convenience feature that allows you to broadly apply
product defaults to a group of products without having to specify these
settings on each individual product.
2.1.1 Growth:
Indias finished steel production growth decelerated to 4.1 per cent in 201314 vis-a-vis 7.9 per cent in 2012-13 and 14.7 per cent in 2011-12. The
deceleration was led by poor growth in demand from the user industries and
constrained availability of the key raw material, iron.
We expect the growth in finished steel production to advance to 5.6 per cent
in 2014-15.
Indias real consumption of finished steel grew by just 0.6 per cent in 201314, according to Joint Plant Committee (JPC). Driven by rising infrastructure
development and increasing demand from the automotive industry, demand
for steel is expected to improve in 2014-15. We expect steel consumption in
India to grow by 5.5 per cent to about 78 mt in 2014-15.
The industrys current installed steel manufacturing capacity is more than
sufficient to meet the projected demand. Besides, an additional 25.6 million
tones of capacity is lined up for commissioning during 2014-15. Hence, the
industry is expected to operate without any capacity constraint.

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India largely imports its coking coal requirement from Australia. As per the
Bureau of Resources and Energy Economics, Australia, worlds metallurgical
coal prices are expected to decline by 5.5 per cent to average at USD 150
per tone for the year 2014. Production from a number of new and expanded
mines that have been commissioned recently, such as BMAs Daunia and Rio
Tinto and Mitsuis Kestrel mines in Australia, are expected to increase the
countrys coking coal output.
India is estimated to have turned net exporter of steel in 2013-14. It is likely
to maintain the momentum in 2014-15 as producers are contemplating
increasing exports against the backdrop of huge capacity additions and
moderate growth in consumption. Indias steel exports are expected to be
around 9.3 mt in 2014-15, as against imports of 6.5 mt.

2.2 Innovation potential:


2.2.1 Indian steel update
India is currently the fourth-largest producer of steel after China, Japan and
the US. Rising domestic demand by sectors such as infrastructure, real
estate and automobiles has put the Indian steel industry on the world map.
Growth in the private sector is expected to be boosted by new policies on
Make in India, import of foreign technology and foreign direct investment.
The Government has mooted a perspective plan to boost domestic steel
capacity to 300mt per annum by 2025. In tandem, with a strong economic
outlook and plans to expand steel production, it is likely that India will be on
a fast track growth path in steel production to be the second-large steel
producer within a few years .Indian steel companies have made investments
of US$35.4billion over the last seven years, 7 and after inordinate delay son
account of regulatory constraints; the worst in the Indian steel sector
appears to be over. We should see the rate of project execution and
commissioning pickup, aided by new policy measures and a supportive
regulatory environment. Comparing Indias growth to China in terms of per
capita steel.Consumption and GDP per capita PPP, Indian steel production
could pick up significantly in the near future. Steel demand in India is
showing signs of rebounding after the slowdown of the last two years.
Cyclicality might be at work, But key demand trends are looking
encouraging:
Automotive sales growth has rebounded strongly in 2014
Inflation has moderated, giving comfort that interest rate cuts are
around the corner.

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2.2.2 Industrial production and GDP are recovering.


In 2014, Indias steel consumption is forecast to grow 5% to83mt and by
another 4.8% to 87mt in 2015. Government investment in public
infrastructure projects, including dedicated freight networks and ongoing
rapid urbanization, Will underpin this growth. To cater to this rising demand,
Indian steel players have made heavy investments over the last two to three
years. Indian steel capacity is, therefore, expected to rise from 99mt in2013
to about 125mt in 2016, registering a CAGR growth of 8.8%. Simultaneously,
production and consumption of steel is expected to increase by a CAGR of
5.2% and 5.6%, respectively, over 201316E. The less-than-proportionate
rise in domestic demand may lead to deterioration of capacity utilization
rates intermittently.8 The recent Supreme Court decision to de-allocate the
coal blocks has created disruption in the coal supply chain for captive power
and coking coal. However, following the judgment, the Government is
moving quickly on allocation of mines on a competitive bidding basis. There
has been an increase in exports from China to India. Annualizing the current
imports per month, India will be importing about 4mt in Y15E, making up
about 5% of total steel production in the country. Since there is no strict
antidumping policy, these imports have the potential to impact domestic
pricing and plant utilization rates significantly.

2.2.3 Technological innovation


As the global steel sector remains fragmented, with the top global
companies accounting for only 17% of all crude steel production in 2013,
steel operators are always vulnerable to new market entrants. As a result,
operators are seeking to use innovation as a tool for differentiation and
extension of their competitive position.

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2.3 Economic conditions of steel industry:


2.3.1 Global Scenario:
In 2014, the world crude steel production reached 1665 million tons (mt)
and showed a growth of 1% over 2013.
China remained the worlds largest crude steel producer in 2014 (823 mt)
followed by Japan (110.7 mt), the USA (88.2 mt) and India (86.5 mt) at the 4 th
position.
WSA has projected Indian steel demand to grow by 6.2% in 2015 and by
7.3% in 2016 as compared to global steel use growth of 0.5% and 1.4%
respectively. Chinese steel use is projected to decline in both these years by
0.5%.
Per capita finished steel consumption in 2014 is estimated at 217 kg for
world and 510 kg for China by WSA.

2.3.2 Domestic Scenario

The Indian steel industry has entered into a new development stage
from 2007-08, riding high on the resurgent economy and rising
demand for steel.

Rapid rise in production has resulted in India becoming the 3 rd largest


producer of crude steel in 2015 and the country continues to be the
largest producer of sponge iron or DRI in the world.

As per the report of the Working Group on Steel for the 12 th Five Year
Plan, there exist many factors which carry the potential of raising the
per capita steel consumption in the country. These include among
others, an estimated infrastructure investment of nearly a trillion
dollars, a projected growth of manufacturing from current 8% to 1112%, increase in urban population to 600 million by 2030 from the
current level of 400 million, emergence of the rural market for steel
currently consuming around 10 kg per annum buoyed by projects like
Bharat Nirman, Pradhan Mantri Gram Sadak Yojana, Rajiv Gandhi
Awaas Yojana among others.

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At the time of its release, the National Steel Policy 2005 had envisaged
steel production to reach 110 million tonnes (mt) by 2019-20.
However, based on the assessment of the current ongoing projects,
both in Greenfield and Brownfield, the Working Group on Steel for the
12th Five Year Plan has projected that domestic crude steel capacity in
the county is likely to be 140mt by 2016-17 and has the potential to
reach 14mt if all requirements are adequately met.

The National Steel Policy 2005 is currently being reviewed keeping in


mind the rapid developments in the domestic steel industry (both on
the supply and demand sides) as well as the stable growth of the
Indian economy since the release of the Policy in 2005.

2.3.3 Production

Steel industry was de-licensed and de-controlled in 1991 & 1992


respectively.

Today, India is the 3 rd largest producer of crude steel in the world.

In 2014-15, production for sale of total finished steel (alloy + non alloy)
was 91.46mt, a growth of 4.3% over 2013-14.

Production for sale of Pig Iron in 2014-15 was 9.7mt, a growth of 22%
over 2013-14.

India is the largest producer of sponge iron in the world with the coal
based route accounting for 90% of total sponge iron production in the
country.

Sources: steel.gov.in

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2.4 Industrial Trade Policy:


2.4.1 The New Industrial Policy Regime:
The New Industrial policy opened up the Indian iron and steel industry for
private investment by (a) removing it from the list of industries reserved for
public sector and (b) exempting it from compulsory licensing. Imports of
foreign technology as well as foreign direct investment are now freely
permitted up to certain limits under an automatic route. Ministry of Steel
plays the role of a facilitator, providing broad directions and assistance to
new and existing steel plants, in the liberalized scenario.
2.4.2 The Growth Profile:
(I) Steel: The liberalization of industrial policy and other initiatives taken by
the Government have given a definite impetus for entry, participation and
growth of the private sector in the steel industry. While the existing units are
being modernized/expanded, a large number of new steel plants have also
come up in different parts of the country based on modern, cost effective,
state of-the-art technologies. In the last few years, the rapid and stable
growth of the demand side has also prompted domestic entrepreneurs to set
up fresh Greenfield projects in different states of the country.
Crude steel capacity was 109.85 mt in 2014-15 and India, which emerged as
the 3rd largest producer of crude steel in the world in 2015 as per ranking
released by the WSA, has to its credit, the capability to produce a variety of
grades and that too, of international quality standards. The country is
expected to become the 2nd largest producer of crude steel in the world soon,
provided all requirements for creation of fresh capacity are adequately met.

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(ii) Pig Iron:


India is also an important producer of pig iron. Postliberalization, with setting up several units in the private sector, not only
imports have drastically reduced but also India has turned out to be a net
exporter of pig iron. The private sector accounted for 91% of total production
for sale of pig iron in the country in 2014-15. The production for sale of pig
iron has increased from 1.6 mt in 1991-92 to 9.7 mt in 2014-15.
(iii) Sponge Iron: India is the worlds largest producer of sponge iron with a
host of coal based units, located in the mineral-rich states of the country.
Over the years, the coal based route has emerged as a key contributor and
accounted for 90% of total sponge iron production in the country. Capacity in
sponge iron making too has increased over the years and stood at 46.23 mt
in 2014-15.

Chapter: 3
Demand Analysis

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Ch 3 Demand Analysis:
3.1 Demand determination:
3.1.1 Demand - Availability Projection

Demand availability of iron and steel in the country is projected by


Ministry of Steel in its Five Yearly Plan documents.

Gaps in availability are met mostly through imports.

Interface with consumers by way of a Steel Consumers Council exists,


which is conducted on regular basis.

Interface helps in redressing availability problems, complaints related


to quality.

Outlook for Steel Demand and Supply

(a) Domestic Demand


The demand for steel has been worked out on the basis of observed
relationship between steel consumption and selected macro economic
variables under four scenarios of GDP growth (i.e. of 8%, 8.5%, 9% and
9.5%) by 2016-17. The Draft Approach paper of the Twelfth Five Year
Plan envisages a GDP growth of 9% per annum. In the Most likely
growth scenario i.e. 9% GDP growth, the demand for steel works out to

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be 113.3 million tonnes by 2016-17. Therefore, it is likely that in the


next five years, demand will grow at a considerably higher annual
average rate of 10.3% as compared to around 8.1% growth achieved
during the last two decades. (1991-92 to 2010-11)
(b) Export Demand.
India has enormous potential and necessary resources, capabilities to
become a global supplier of quality steel. Also there exists ample
market opportunities in the neighboring regions of Asia, Africa and the
Middle East. The policy framework while according top priority to meet
domestic Demand should also take into account the large export
possibilities.

Explanation:
(i) In a deregulated environment, it is difficult to forecast capacity creation,
especially in the private sector. Further, capacity creation is sensitive to

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unfurling market conditions domestic as well as global. Based on information


furnished by the existing and prospective investors, the estimated crude
steel supply works out to more than 128.1 million tons in 2016-17. These
estimates have been worked out based on historical trends as well as an
objective assessment of the following factors.
Actual extent of land already acquired for the new units;
Availability of investible funds with the respective enterprises to
support the planned increase in existing capacity;
Availability of infrastructural network at the project site; and
Availability of key raw material linkages.
(ii) The National Steel Policy had set a production target 110 million tones to
be achieved by 2019-20. The Indian steel industry may achieve double digit
growth in consumption and surpass this production target by 2016-17 well
ahead of the target date.
(iii) In the last 20 years (i.e. 1991-92 to 2010-11) import of steel as a
percentage of total consumption in India has varied between a high of over
13% in 2007-08 and a low of 4.8% in 1998-99 and 2001-02. Import of steel
during Twelfth plan is expected to be around 5 million tons per annum.
(iv)A strong steel industry can emerge only if it can take on international
competition and develop overseas markets. Keeping this in view, net exports
of 2 million tones has been assumed in 12 thplan. Accordingly assessment of
finished steel of production has been worked out at 115.3 million tons in
2016-17. 16
(c) Requirement of Raw Materials, Infrastructure and Investments to
ensure Additional Production
i) Estimates of total and additional requirement of raw materials have been
worked out Based on the projected production of crude steel according to
Process routes and average norms of consumption. However, in view of the
fact that there exists large scope of improvement in operational efficiencies
and also due to the fact that there are possibilities of changes In technology.
Indicative:

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3.1.2 Raw Materials:


India is endowed with abundant Iron ore resources, the basic input for steel
making. Of late, large scale exports of iron ore have raised concerns about
future availability of iron ore resources to meet the fast rising domestic steel
demand. Large quantities of iron ore fines are exported due to mismatch
between domestic production and consumption and also lack of adequate
sintering facilities for steel making. Steel industry confronts the problem of
depletion of high grade ore deposits and lack of domestic technological
capabilities to process low grade iron ores. In the larger national interest of
conservation of natural resources and environment, efforts are being made
to preserve and utilize the precious Iron ore fines for domestic production of
steel and at the same time the Ministry has taken measures to discourage
export by imposing higher tariffs and special levies etc. The domestic
availability of Coking coal, a critical raw material required by steel industry is
limited and therefore the Indian Steel industry has to depend heavily on
imported coking coal to meet its needs. Currently, domestic steel makers
meet 70% of their coking coal requirement through imports. The quantum of
imports may go up significantly in the 12 thplan as steel production in a large
number of new projects is likely to be through the BF-BOF route. To ensure
raw material security and minimize the impact of volatility in coal prices, it is
desirable to acquire overseas coking coal assets. International Coal Ventures
Limited (ICVL), a Joint Venture company promoted by SAIL in 2008-09 and

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consisting of RINL, NMDC, CIL and NTPC to achieve the above objective has
not made much progress so far but it is imperative to make this venture
more effective.17In view of the limited availability of coking coal in the global
market and the fact that its supply is controlled by a few large companies, it
will be extremely important to increase the domestic production of coking
coal and upgrade its quality to meet the requirements of steel making.
Technologies which require less of coking coal and lower grades of it will
need to be encouraged. Non-coking coal used for production of sponge iron
is also increasingly becoming scarce in the country. With the demand for
non-coking coal from priority sectors like power, Fertilizers etc. going up
further, its availability for steel making is likely to be limited during the
12thplan. While sponge iron producers may opt for import of coal, the
economic viability of this sector may be under pressure due to higher prices
of imported coal. Moreover, the gas based DRI units face restricted supply of
CNG, largely due to priority allocation of gas to power and fertilizer sectors.
Supply of CNG to this sector is a major concern for its growth and these units
may have to depend more on imported source of fuel supply. Many existing
and new producers propose to create additional capacity manifold under gas
based route in Twelfth plan period.

3.1.3 Infrastructure:
Development and growth of Infrastructure sector is critical for rapid growth
of domestic steel industry in the country. Steel industry is a major user of
infrastructural facilities especially of Railways, roads, power, and ports.
Besides, the competitiveness of domestic steel industry depends heavily on
the expansion and provision of efficient infrastructural facilities. As per the
working group projections, the steel production in the country will nearly
double within the next five years. This requires rapid growth of railways,
roads, ports and power facilities. The existing infrastructural facilities are not
adequate. The domestic steel industry meets 70% of its coking coal
requirement from imported sources and if the same trend is maintained,
nearly 50 million tones of coking coal will have to be imported by 2016-17.
There is urgent need for expansion of port capacity to handle the raw
materials and finished goods of steel sector. The steel plants which are likely
to come on stream in Twelfth plan period will need to transport 85 to 90

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million tons of iron ore from the mines and also deliver 45 to 50 million tones
of finished steel from steel plants to distribution centers. Therefore, there is
immediate need for substantial up gradation of infrastructural facilities to
meet the increasing steel requirements of the steel industry. Investments to
the tune of US $ 1 Trillion are proposed in the infrastructure sector in the
12thplan. An investment of this scale and size is likely to generate higher
domestic demand for steel and at the same time help build necessary
infrastructure required for the steel industry. Large investments of this nature
suffer from gestation lags, constraints in mobilization of financial resources,
land acquisition issues and hurdles in obtaining statutory clearances in case
of mega infrastructural projects. These need to be sorted out since the
development of infrastructure sector has strong forward and backward
linkages and contributes significantly to overall growth and development of
the economy.
3.1.4 Investment:
Requirement of financial resources to support an additional capacity creation
of about 60 million will be approximately 2.5 lakh crores during the 12 thPlan
and securing such large investible funds at reasonable cost will be a
challenging task. FDI in the steel sector has been lagging behind, despite
massive investment intentions by some major global steel majors. In order to
ensure sufficient availability of financial resources for the growth of Indian
steel industry, it is imperative to review steel related sectorial caps of the
banking sector. Government may also consider easing of norms connected
with external borrowings (ECBs). Special purpose long term financing facility
may be created to finance huge investment in new steel plants.

3.2 Steel Prices

Price regulation of iron & steel was abolished on 16.1.1992. Since then
steel prices are determined by the interplay of market forces.

Domestic steel prices are influenced by trends in raw material prices,


demand supply conditions in the market, international price trends
among others.

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An Inter-Ministerial Group (IMG) is functioning in the Ministry of Steel,


under the Chairmanship of Secretary (Steel) to monitor and coordinate
major steel investments in the country.

As a facilitator, the Government monitors the steel market conditions


and adopts fiscal and other policy measures based on its assessment.
Currently, basic excise duty for steel is set at 12.5% and there is no
export duty on steel items. The government has also imposed export
duty of 30% on all forms of iron ore except low grades which carry a
duty of 10% while iron ore pellets have an export duty of 5% in order
to control ad-hoc exports of the items and conserve them for long term
requirement of the domestic steel industry. It has also raised import
duty on most steel imports by 2.5%, taking the import duty on carbon
steel flat products to 10% and that on long products to 7.5%.

For ensuring quality of steel several items have been brought under a
quality control order issued by the Government.

Further, a Steel Price Monitoring Committee has been constituted by


the Government with the aim to monitor price rationalization, analyse
price fluctuations and advise all concerned regarding any irrational
price behaviour of steel commodity.

Causes for price fluctuation:


The steel industry as a whole is cyclical and, at times, pricing and availability
of steel can be volatile due to numerous factors beyond our control, including
general domestic and international economic conditions, labor costs, sales
levels, competition, levels of inventory held by other steel service centers,
consolidation of steel producers, higher raw material costs for the producers
of steel, import duties and tariffs and currency exchange rates. This volatility
can significantly affect the availability and cost of raw materials for us.

We, like many other steel service centers, maintain substantial inventories of
steel to accommodate the short lead times and just-in-time delivery
requirements of our customers. Accordingly, we purchase steel in an effort to
maintain our inventory at levels that we believe to be appropriate to satisfy
the anticipated needs of our customers based upon historic buying practices,
contracts with customers and market conditions. Our commitments to
purchase steel are generally at prevailing market prices in effect at the time
we place our orders. We have no long-term, fixed-price steel purchase

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contracts. When steel prices increase, competitive conditions will influence


how much of the price increase we can pass on to our customers. To the
extent we are unable to pass on future price increases in our raw materials
to our customers, the net sales and profitability of our business could be
adversely affected. When steel prices decline, as they did in the fourth
quarter of 2008, customer demands for lower prices and our competitors
responses to those demands could result in lower sale prices and,
consequently, lower margins as we use existing steel inventory. Steel prices
are expected to continue to decline in 2009 and further declines in steel
prices or further reductions in sales volumes could adversely impact our
ability to remain in compliance with certain financial covenants in our
revolving credit facility as well as result in us incurring inventory or goodwill
impairment charges. Changing steel prices therefore could significantly
impact our net sales, gross margins, operating income and net income.

Price of steel from 2000 to 2014:

Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

China
Price
81
81.6
81
81.9
85.1
86.6
87.9
92.1
97.5
96.8
100
105.4

Japan
Price
102.7
101.9
100.5
100.7
100.7
100.4
100.7
100.7
102.1
100.7
100
99.7

Usa
Price
79
81.2
82.5
84.5
86.6
89.6
92.4
95.1
98.7
98.4
100
103.2

2012
2013
2014

108.2
111.1
113.3

99.7
100
102.8

105.3
106.8
108.6

Sources:

India
Price
54.2
56.2
58.6
60.9
63.1
65.8
69.9
74.3
80.5
89.3
100
108.0
9
119
132
140.4

http://data.worldbank.org/indicator/FP.CPI.TOTL

3.3 Income:
3.3.1 ESTIMATES AT CURRENT PRICES
3.3.1.1 Gross Domestic Product

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GDP at current prices in the year 2014-15 is likely to attain a level of `126.54
lakh crore, showing a growth rate of 11.5 per cent over the year 2013-14
of `113.45 lakh crore (First revised estimate with the growth rate of 13.6
percent).
3.3.1.2 National Income
The nominal Net National Income (NNI), also known as national income (at
current prices) is likely to be `112.18 lakh crore during 2014-15, as
against `100.56lakh crore for the year 2013-14. In terms of growth rates, the
national income registered a growth rate of 11.5per cent in 2014-15 as
against the previous years growth rate of 13.7 per cent.
3.3.1.3 Per Capita Income
The per capita net national income during 2014-15 is estimated to
be `88,538 showing a rise of 10.1 percent as compared to `80,388 during
2013-14 with the growth rate of 12.3 percent.
3.4 Penetration:
The degree to which a product has been accepted by the marketplace. The
output of the market planning process. The market plan includes the current
market position, opportunity and issue analysis, marketing objectives and
strategies, action plans, programs, projects, budgets, and pro forma profit
and loss statement and management controls. Syn: brand plan, product plan.
The process of developing market plans for products and services. This
process is composed of the following phases-identification; research and
analysis of market opportunities; selection of target markets; development of
marketing strategies; development of the marketing plans, programs, and
projects; and management, execution, and control of the market plans,
programs, and projects.

Demand growth will have to be identified. It is possible that any economic


transformation with rapid growth in manufacturing will trigger steel demand
growth much more than estimated so far. If that does not happen and the
economy moves along the well trod path so far with for well known reasons
including inadequate resources to overcome current challenges, the outlook
for steel will be remain passive. The fear is that as the process of
transformation is delayed, in the global context, the prospects of industrial
development in the country will reduce in a relative sense. This will not only
lead to loss of opportunities in the world market but also expose the
domestic market to stronger and wider foreign competition. With continuous
drop in the share of manufacturing in the overall economy over the years,

Page 26 of 91

the reversal of the trend will be an increasingly stronger challenge and the
resources required to bring in the change will also be significant. Whether
the steel industry can see that happen quickly is a matter to be analyzed.
Indian Steel industry has shown the second highest growth rate for steel
production in Asia after China in 2006. With a GDP growth of around 8% in
2005-06, Indian economy as well as the industrial development got a boost
and this helped to shape the increasing steel demand and production in
India. The report "Opportunities in Indian Steel Industry by RNCOS
undertakes a detailed analysis of the forces that have shaped the Indian
steel industry in order to predict the future trends and prospects.
3.5 Replacement demand:
A demand representing replacement of items consumed or worn out.
Replacement demand is an important component of the future demand for
manpower often neglected in manpower demand forecasts. In particular, for
characterizing the prospects for newcomers on the labor market, the
manpower requirements method is not adequate as it merely focuses on
employment mutations.
3.6 products:
3.6.1 steel pipes:

Steel pipes are long, hollow tubes that are used for a variety of purposes.
They are produced by two distinct methods which result in either
a welded or seamless pipe. In both methods, raw steel is first cast into a
more workable starting form. It is then made into a pipe by stretching the
steel out into a seamless tube or forcing the edges together and sealing
them with a weld. The first methods for producing steel pipe were introduced

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in the early 1800s, and they have steadily evolved into the modern
processes we use today. Each year, millions of tons of steel pipe are
produced. Its versatility makes it the most often used product produced by
the steel industry.
Steel pipes are found in a variety of places. Since they are strong, they are
used underground for transporting water and gas throughout cities and
towns. They are also employed in construction to protect electrical wires.
While steel pipes are strong, they can also be lightweight. This makes them
perfect for use in bicycle frame manufacture. Other places they find utility is
in automobiles, refrigeration units, heating and plumbing systems, flagpoles,
street lamps, and medicine to name a few.

3.6.2 steel fasteners:

SSF are the leading manufacturer of high integrity special fasteners (e.g.
bolts, set screws, stud-bolts, nuts and washers), meeting clients exacting
demands for critical applications in hostile environments. Whether for
offshore (buoyancy and petrochemical), seawater, pump, valve or nuclear,
the demands for an exceptional service and supply is never ending. We
believe manufacturing bolting in exotic materials is an art form and it is
something we have perfected atSSF

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3.6.3 steel tubes:

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Stainless steel tubes are often used in applications that require rigid
materials for potable water conveyance. Steel tubes can also be used for
structural support in buildings and vehicles. The terms tube and pipe are
generally interchangeable, although technically, tube implies heightened
engineering qualities. Tubes are generally manufactured based on
standardized
sizes.

3.6.4 steel pipe fittings:

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Pipe fitting is the occupation of installing or repairing piping or tubing


systems that convey liquid, gas, and occasionally solid materials. This work
involves selecting and preparing pipe or tubing, joining it together by various
means, and the location and repair of leaks.
Pipe fitting work is done in many different settings: HVAC, manufacturing,
hydraulics, refineries, nuclear-powered Super carriers and Fast Attack
Submarines computer chip fab plants, power plant construction and other
steam systems.

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3.6.5 steel alloys:

Alloy steel is steel that is alloyed with a variety of elements in total amounts
between 1.0% and 50% by weight to improve its mechanical properties. Alloy
steels are broken down into two groups: low-alloy steels and high-alloy
steels. The difference between the two is somewhat arbitrary: Smith and
Hashemi define the difference at 4.0%, while Degarmo, et al., define it at
8.0%.[1][2] Most commonly, the phrase "alloy steel" refers to low-alloy
steels.
3.6.6 steel flanges:

A flange is a method of connecting pipes, valves, pumps and other


equipment to form a piping system. It also provides easy access for cleaning,
inspection or modification. Flanges are usually welded or screwed. Flanged
joints are made by bolting together two flanges with a gasket between them
to provide a seal.

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3.7 Technology:
A cursory examination of the present status of Performance Indices shows
that the technological performance of Indian Steel Plants in terms of specific
consumption of raw material / consumables, specific energy / power
consumption, environmental and pollution norms is significantly lower than
those in the advanced countries. The poor performance standards of the
domestic industry are primarily attributable to poor quality of raw materials /
inputs, prevalence of obsolete technology and lack of R&D to overcome the
technological gaps. Major areas where focus /attention of Industry and
Government are required in the 12thPlan are as follows:
i) Iron ore quality in terms of high alumina content and high alumina to silica
ratio is a serious concern.
ii) There is a need to reduce the coal ash substantially to make our coals
suitable for coke making and iron making operations.
iii) It is suggested that the improvement in raw materials be achieved
through
Selection of appropriate beneficiation process and improvement
operational practices of ore beneficiation / coal washing circuit.

in

iv) Above 20% of the ROM (run of mine) which is known as slime has low
percentage of iron (less than 55%). The size of slimes is lower than 150
micron and further beneficiation is difficult and not economical. There is an
immediate need to find out solutions for the realization of iron value from
slimes. Alternative iron making process such as FASTMELT or ITmk3 may be
useful to realize the iron value efficiently.
v) Use of mine wastes such as Jhama coal in Iron and Steel production will be
helpful to increase the mine life. Coal gasification of non coking coals and
recovery & utilization of CBM are some of the steps to address issues such as
coal / coke shortage and CO2 emissions.
vi) Large size Blast Furnaces with the state of the facilities have done well in
terms of productivity, consumption norms and hot metal quality. With
installation of such furnaces in future, the need for agglomerated burden
(sinter + pellet) is likely to increase. The improvement in burden quality will

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facilitate higher injection of coal fines and thereby reduction in metallurgical


coke requirement and overall fuel rate.
vii) The units that have adopted DRI HM EAF and DRI IF routes for iron
making are suffering due to non availability of hard iron ore lump, high cost
of natural Gas, non availability of good quality coal, absence of good scrap
and rising prices of raw material inputs for BF. To alleviate the shortages of
iron ore lump, there is a need to put up pellet plants. Coal gasification is
believed 19to be a good option to replace natural gas for the production of
synthesis gas (reducing gas in shaft kiln process).
viii) Large quantity of slag is produced in BOF / EAF. It is not easy to dispose
of the steel making slag due to the presence of free lime and high
percentage of iron oxide. Technologies have been developed (ORP, MURC) in
Japan to reduce the generation of slag and reduce the Phosphorous level
below 0.010%. Some of the technologies for reuse in the form of brick for
pavement / construction of dykes, flux / iron bearing material in cupola and
construction material after sufficient aging can be adopted to gainfully utilize
the slag. There is also a possibility to recover the iron values through
smelting reduction.
ix) DRI EIF route suffers from lack of refining capacities. The steel melted
by the process has higher percentages of Phosphorus and Nitrogen. Rotary
kiln DRI-EIF route needs to improve its technology substantially to avoid
obsolescence, market acceptability due to poor quality and to reduce its
adverse impact on the environment. There is a dire need for Technology Up
gradation in Secondary Steel Sector in general and the EIF sector in
particular to make them competitive in terms of Productivity, Quality and
Environment friendliness. .
x) Dynamic soft reduction and near net shape casting will result in quality
improvement and energy saving respectively and these emerging
technologies are likely to be adopted in the coming years by the Steel
Industry.
xi) Due to increasing demand for High Strength Steel, current BAF (Batch
Annealing Furnace) technology may get replaced with Continuous Annealing
Technology.
xii) Environmental concerns would be a major criterion for the selection /
adoption of new technology in near future. Therefore the steel industry may
have to carry out research in the areas of carbon foot print, CO2 absorption
and sequestration.

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xiii) There is a need to develop sound indigenous capacity to develop


technologies to :
a) Suit indigenous raw materials
b)Improve energy input norms through energy-efficient technologies and
c) Meet national norms for emission per ton of products and comply with
global responsibilities for carbon foot print.
xiv) The Research and Development systems should also match the
composite structure of the steel industry in the country. While some large
corporate houses which could afford in-house R&D and acquire plants
overseas could adopt global approaches for developing and acquiring
technologies, R&D and technology needs of several small units engaged in
manufacturing remain unaddressed. Small enterprises are not able to
leverage the benefits of improved technologies and this explains their poor
performance standards when compared to national and international
benchmarks.

xv) Pre-competitive research in steel related technologies for:


a) energy-efficiency
b) Emission control
c) Solid waste minimization
d) More efficient use of Indian coal resources and
e) Value addition to indigenous raw materials in public and private sector
Research and development would need to be promoted through a Challenge
Award Scheme. International Science & Technology cooperation in the area
of steel making technologies would be necessary considering that the
number of Indian experts engaged in R&D in steel making is significantly low.
Synergies within the country and through international cooperation may
need to be developed for growing industry-relevant R&D activities.

3.8 life cycle stage:

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Many everyday products, such as cars, cans and washing machines, are
made of steel. Once these products reach the end of their useful lives, the
steel is recycled. Recycling reduces the consumption of raw materials and
energy and is therefore good for the environment.
To understand the environmental performance of a product, its entire life
cycle needs to be taken into consideration. A life cycle assessment (LCA) of a
steel product looks at resources, energy and emissions, from the steel
production stage to its end-of-life stage, including recycling. Steel can be
recycled over and over again, indefinitely, without any loss of its inherent
properties.

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3.8.1 Life cycle assessment:


Goals

The goals of the study well defined.


Scope

Is the function and functional unit clearly stated?

Are comparative systems functionally equivalent?

Is the system boundary clear (cradle-to-grave or -gate etc)?

Is the scope of data and impact categories consistent with the study
goals?
Quality of life cycle inventory (LCI) data

Are the data based on achieved and measured performance? If not, are
the assumptions realistic?
Are the data relevant in terms of time, location and technology?

Energy

Is the high or low calorific value used in calculations and uniformly


applied?

Is primary energy (i.e., extracted from the earth) used and are the
different energy sources clearly defined?

In particular, are renewable and non-renewable sources identified?

What assumptions are made for electric power generation?

Are they relevant to the goals?

Are the production, delivery, fuel and feedstock energies included?


Allocation for co-products

Are the rules for allocation stated and has the stepwise procedure been
applied?

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Where allocation could not be avoided (e.g., by system expansion) are


the methods based on physical relationships? Has partitioning by economic
value been avoided whenever possible?

Are allocation procedures consistent across the study scope?

Is the distinction between waste and co-products clear?


Transport

Have significant transport steps been included?

Are the means of transport and distances realistic?

Recycling

Does the study take account of recycling and is the methodology for
credits appropriate?

Are the recycling process stages included?

Are recycling rates derived from actual data?

If not are the assumptions realistic?


Life cycle impact assessment

What impact categories are considered and is the LCI scope consistent
with this?

Are the impact


internationally accepted?

assessment

methods

technically

valid

and

Have value choices (e.g., weightings) been used and on what basis?
Are weighting methods avoided where comparative assertions will be
available to the public?
Interpretation

Have the results of the LCI/LCA study been evaluated in terms of


completeness, consistency and sensitivity to data uncertainties, allocation
rules and value-choices?

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Are the conclusions consistent with the requirements of the goal and
scope of the study?

Are the recommendations based on the final conclusions of the study?


Reporting

Is a methodology report available to third parties?

Is the report transparent and clear regarding the methods and data
used?

Are the LCI results also available where impact assessment is applied?
Critical review

Has a critical review been carried out?

Are the critical reviewers independent and knowledgeable?

Is the critical review report included in its entirety in the study report?

Page 39 of 91

Chapter 4
MARKETING RESEARCH

Page 40 of 91

4.1 Market Size


Steel production capacity of the country expanded from about 75 million
tonnes per annum (MTPA) in 2009-10 to about 101.02 million tonnes (MT) in
2013-14, when output was 81.7 MT.
India produced 7.07 MT of steel in January 2015 reporting the fourth highest
production level globally which was 1.7 per cent higher than the country's
steel production in the same month last year.
The steel sector in India contributes nearly two per cent of the countrys
gross domestic product (GDP) and employs over 600,000 people. The per
capita consumption of total finished steel in the country has risen from 51 Kg
in 2009-10 to about 60 Kg in 2013-14.

4.2 Investments
Steel industry and its associated mining and metallurgy sectors have seen a
number of major investments and developments in the recent past.
According to the data released by Department of Industrial Policy and
Promotion (DIPP), the Indian mining and metallurgical industries attracted
foreign direct investments (FDI) to the tune of US$ 1,669.49 million and US$
8,527.34 million, respectively, in the period April 2000February 2015.
Some of the major investments in the Indian steel industry are as follows:

JSW Steel has announced to add capacity to make its plant in


Karnataka the largest at 20 MT by 2022.
Tata Steel has planned to commission 3 MT of capacity in its Odisha
plant and plans to add another 3 MT at the plant in near future.
Iran has evinced interest in strengthening ties with India in the steel
and mines sector, said ambassador of the Islamic Republic of Iran, Mr
Gholamreza Ansari in his conversation with Minister of Steel and Mines Mr
Narendra Singh Tomar.

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4.3 Steel Sector Analysis Report

The Indian steel industry continued to showcase trends of higher


consumption of finished steel. Currently, the steel consumption
in India is second only to China. However, with the steel
consumption in China expected to moderate at around 3%, India
is likely to emerge as the fastest growing steel consuming
nation. Further, India's current per capita finished steel
consumption at 52 kg is well below the world average of 203 kg.
With rising income levels expected to make steel increasingly
affordable, there is vast scope for increasing per capita
consumption of steel.

Being a core sector, steel industry tracks the overall economic


growth in the long term. Also, steel demand, being derived from
other sectors like automobiles, consumer durables and
infrastructure, its fortune is dependent on the growth of these
user industries. The Indian steel sector enjoys advantages of
domestic availability of raw materials and cheap labour. Iron ore
is also available in abundant quantities. This provides major cost
advantage to the domestic steel industry.

The Indian steel industry is largely iron-based through the blast


furnace (BF) or the direct reduced iron (DRI) route. Indian steel
industry is highly consolidated. About 60% of the crude steel
capacity is resident with integrated steel producers (ISP). But
the changing ratio of hot metal to crude steel production
indicates the increasing presence of secondary steel producers
(non integrated steel producers) manufacturing steel through
scrap route, enhancing their dependence on imported raw
material.

Key

Page 42 of 91

Points

Supply

With trade barriers having been lowered over


the years, imports play an important role in
the domestic markets.

Demand

The demand is derived from sectors that


include infrastructure, consumer durables and
automobiles.

Barriers
entry

High capital costs, technology, economies of


scale, government policy.

Bargaining
power
suppliers

Low for fully integrated players who have


their own mines for raw materials. High, for
non integrated players who have to depend
on outside suppliers for sourcing raw
materials?

High, presence of a large number of suppliers


and access to global markets.

High, presence of a large number of players


in the unorganized sector.

to

of

Bargaining
power
of
customers
Competition

Financia
l
Year
'14

The world Gross Domestic Product (GDP) is expected to grow by


3.4% in 2014. With advanced economies expected to do well in
2015, the global growth projection for 2015 is 5%. (Source:- IMF &
SAIL annual report) This is despite the fact that there was a
noticeable slowdown in the emerging market and developing
economies during 2013, a reflection of the sharp deceleration in
demand from key advanced economies. As such, we reckon that
while global prospects have improved but the road to recovery in the
advanced economies is still uncertain and volatile.

World crude steel production grew at 3% reaching 1,606 MT in 2013,

Page 43 of 91

as per World Steel Association (WSA). The growth in production is


coming mainly from Asia, as the crude steel production in all other
regions (except Africa) declined in 2013. China's crude steel
production increased 6.6% YoY to 779 MT in 2013. However, the EU
recorded a negative growth of 1.8% compared to 2012.

Prospect
s

The Indian metals and mining sector is currently facing a multitude of


challenges like weak macro environment, leveraged balance sheets
and heightened regulatory risks. The sector has suffered valuation
de-rating since FY12 due to various factors like environmental and
regulatory concerns, cost increases, delayed projects and high
interest rates.

Government delays in allocating coal blocks for captive consumption


by steel manufacturers seriously hurt the competitive edge of the
Indian steel sector. Same was the story with iron ore. There are
delays in allocating iron ore mines as well as approval for mining
licenses. As a result, no new investment in the steel sector is
happening to add new steel capacities.

There are trends of demand recovery in the property sector and the
demand for infrastructure has also been strong since the Modi
government came to power. However, underlying demand in the EU
is not expected to improve much in 2014. Overall, steel demand is
expected to remain weak due to the continuing economic crisis in
the developed countries and the structural shift in the Chinese
economy. Moreover the world is reeling under the pressure of large
surplus capacity which will remain a serious cause of concern,
especially in times of subdued global demand.

GDP growth in India stood in the region of sub 5% in FY14 on account


of stalled investment against the backdrop of tightening policies,
widening trade and fiscal deficit, high inflation and weak FDI inflows.
Further, FY14 was also a year of subdued activity for steel using
sectors in particular the auto segment. It is expected that the next
fiscal will continue to remain a challenging year for the automotive
sector if interest rates remain high. However, decline in fuel

Page 44 of 91

expenses (which has been the case recently) may help a bit.

Steel demand in India has remained sluggish so far in 2014 amidst


weak activity and poor sentiment; however, activity is expected to
accelerate modestly in the coming years. Strengthening domestic
consumption and improving external conditions will help underpin
the growth of steel using sectors.

4.4 Trends:
Growing investment:
Toenhancecapacityby488.66milliontonnes,301MOUshavebeensignedwithstat
es
PotentialsteeladditioncapacitywouldattractaninvestmentofUSD83toUSD166b
illion
Indiaisexpectedtobecomethesecondlargestcrudesteelproducergloballyby201
5-16
Mostofthecompaniesintheindustryareundertakingmodernisationandexpansio
nofplantstobemorecostefficient.E.g.SAILhasundertakenmodernisationandexp
ansionforitssixplants
TheproductioncapacityofSAILisexpectedtoincreasefrom13MTPAto50MATPAin
2025withthetotalinvestmentofUSD24.88Billion
Strategic alliance:
InternationalCoalVenturesPvtLtd,comprisingSAIL,RINL,CIL,NTPCandNMDC,
hasbeensetupforacquisitionofcoalminesoverseas
TheconsortiumofSAILandNationalFertiliserLimited
hasbeennominatedforrevivalofSindriUnitoftheFertiliserCorporationofIndiaLimit
ed
RINL,
VishakhapatnamSteelPlantandthePowerGridCorporationofIndiaLtd
(POWERGRID)
signedanMoUtosetupajointventurecompanytomanufacturetransmissionlineto
wersandtowerpartsincludingR&Dofnewhigh-endproducts.
Entry of international companies:
AttractedbythegrowthpotentialoftheIndiansteelindustry,
severalglobalsteelplayershavebeenplanningtoenterthemarket
NationalMineralDevelopmentCorporation
hassignedanMoUwithRussiasthird-largeststeelmaker,
foragreenfieldsteelplantinKarnataka

(NMDC)
Severstal,

A new steel policy will be aimed to ease the faster growth of the domestic
steel sector by ensuring faster capacity addition, as realized by the
government. The Steel Ministry-constituted panel is scheduled to finalize the

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draft within two months and there are expectations that it will be prepared in
another three-four months. The government conceived of taking country's
capacity to 145 MT by 2015-16. The new policy assumes importance as it is
coming up against the backdrop of huge delays in the multi-billion dollar
ventures including those of ArcelorMittal and POSCO which were delayed due
to the hurdles of regulatory and land acquisition.
ArcelorMittal, which has proposed projects worth Rs 1.3 lakh cr. in Jharkhand,
Orissa and Chhattisgarh, is facing land acquisition problems. POSCO, which
has proposed a project in Orissa worth Rs 54,000 cr., is also battling
regulatory hurdles for several years.

4.5 Promotion:
Some domestic Steel Manufacturers and other stake holders have
represented against surge in imports of steel. The same has been
examined by Government and the following steps taken:(i)

To ensure that only quality steel is imported, Government has


notified Steel and Steel Product (Quality Control) Order dated
12.03.12 as last amended on 04.12.14.

(ii)

Imposed anti-dumping duty on hot rolled flat stainless steel


imports from China, Malaysia and South Korea on 05.06.2015.

(iii)

Raised the basic Customs Duty on various categories of steel


vide Notification No.39 dated 16.06.2015.

(iv)

Notified Coal Mines (Special Provisions) Amendment Act, 2015 on


30.03.2015 and auctioned Coal Mines.

(v)

Notified Mines and Minerals (Development and Regulations


Amendment) Act, 2015 on 27.03.2015.

(vi)

Imposed Export Duty at the rate of 30% ad valorem on all


varieties of iron ore with effect from 30.12.2011 and 5% ad
valorem on iron ore pellets with effect from 27.01.2014. Further
Export Duty at the rate of 10% has been levied on iron ore
containing less than 58% Fe content with effect from 30.04.2015.

4.6 segmentation of Indian steel industry

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Sources:Datamonitor

4.7 Quality:
A new steel policy will be aimed to ease the faster growth of the domestic
steel sector by ensuring faster capacity addition, as realized by the
government. The Steel Ministry-constituted panel is scheduled to finalize the
draft within two months and there are expectations that it will be prepared in
another three-four months. The government conceived of taking country's
capacity to 145 MT by 2015-16. The new policy assumes importance as it is

Page 48 of 91

coming up against the backdrop of huge delays in the multi-billion dollar


ventures including those of ArcelorMittal and POSCO which were delayed due
to the hurdles of regulatory and land acquisition.
ArcelorMittal, which has proposed projects worth Rs 1.3 lakh cr. in Jharkhand,
Orissa and Chhattisgarh, is facing land acquisition problems. POSCO, which
has proposed a project in Orissa worth Rs 54,000 cr., is also battling
regulatory hurdles for several years.

4.8 Technology:
A cursory examination of the present status of Performance Indices shows
that the technological performance of Indian Steel Plants in terms of specific
consumption of raw material / consumables, specific energy / power
consumption, environmental and pollution norms is significantly lower than
those in the advanced countries. The poor performance standards of the
domestic industry are primarily attributable to poor quality of raw materials /
inputs, prevalence of obsolete technology and lack of R&D to overcome the
technological gaps. Major areas where focus /attention of Industry and
Government are required in the 12thPlan are as follows:
i) Iron ore quality in terms of high alumina content and high alumina to silica
ratio is a serious concern.
ii) There is a need to reduce the coal ash substantially to make our coals
suitable for coke making and iron making operations.
iii) It is suggested that the improvement in raw materials be achieved
through
Selection of appropriate beneficiation process and improvement
operational practices of ore beneficiation / coal washing circuit.

in

iv) Above 20% of the ROM (run of mine) which is known as slime has low
percentage of iron (less than 55%). The size of slimes is lower than 150
micron and further beneficiation is difficult and not economical. There is an
immediate need to find out solutions for the realization of iron value from
slimes. Alternative iron making process such as FASTMELT or ITmk3 may be
useful to realize the iron value efficiently.
v) Use of mine wastes such as Jhama coal in Iron and Steel production will be
helpful to increase the mine life. Coal gasification of non coking coals and
recovery & utilization of CBM are some of the steps to address issues such as
coal / coke shortage and CO2 emissions.

Page 49 of 91

vi) Large size Blast Furnaces with the state of the facilities have done well in
terms of productivity, consumption norms and hot metal quality. With
installation of such furnaces in future, the need for agglomerated burden
(sinter + pellet) is likely to increase. The improvement in burden quality will
facilitate higher injection of coal fines and thereby reduction in metallurgical
coke requirement and overall fuel rate.
vii) The units that have adopted DRI HM EAF and DRI IF routes for iron
making are suffering due to non availability of hard iron ore lump, high cost
of natural Gas, non availability of good quality coal, absence of good scrap
and rising prices of raw material inputs for BF. To alleviate the shortages of
iron ore lump, there is a need to put up pellet plants. Coal gasification is
believed 19to be a good option to replace natural gas for the production of
synthesis gas (reducing gas in shaft kiln process).
viii) Large quantity of slag is produced in BOF / EAF. It is not easy to dispose
of the steel making slag due to the presence of free lime and high
percentage of iron oxide. Technologies have been developed (ORP, MURC) in
Japan to reduce the generation of slag and reduce the Phosphorous level
below 0.010%. Some of the technologies for reuse in the form of brick for
pavement / construction of dykes, flux / iron bearing material in cupola and
construction material after sufficient aging can be adopted to gainfully utilize
the slag. There is also a possibility to recover the iron values through
smelting reduction.
ix) DRI EIF route suffers from lack of refining capacities. The steel melted
by the process has higher percentages of Phosphorus and Nitrogen. Rotary
kiln DRI-EIF route needs to improve its technology substantially to avoid
obsolescence, market acceptability due to poor quality and to reduce its
adverse impact on the environment. There is a dire need for Technology Up
gradation in Secondary Steel Sector in general and the EIF sector in
particular to make them competitive in terms of Productivity, Quality and
Environment friendliness. .
x) Dynamic soft reduction and near net shape casting will result in quality
improvement and energy saving respectively and these emerging
technologies are likely to be adopted in the coming years by the Steel
Industry.
xi) Due to increasing demand for High Strength Steel, current BAF (Batch
Annealing Furnace) technology may get replaced with Continuous Annealing
Technology.

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xii) Environmental concerns would be a major criterion for the selection /


adoption of new technology in near future. Therefore the steel industry may
have to carry out research in the areas of carbon foot print, CO2 absorption
and sequestration.
xiii) There is a need to develop sound indigenous capacity to develop
technologies to :
a) Suit indigenous raw materials
b)Improve energy input norms through energy-efficient technologies and
c) Meet national norms for emission per ton of products and comply with
global responsibilities for carbon foot print.
xiv) The Research and Development systems should also match the
composite structure of the steel industry in the country. While some large
corporate houses which could afford in-house R&D and acquire plants
overseas could adopt global approaches for developing and acquiring
technologies, R&D and technology needs of several small units engaged in
manufacturing remain unaddressed. Small enterprises are not able to
leverage the benefits of improved technologies and this explains their poor
performance standards when compared to national and international
benchmarks.
xv) Pre-competitive research in steel related technologies for:
a) energy-efficiency
b) Emission control
c) Solid waste minimization
d) More efficient use of Indian coal resources and
e) Value addition to indigenous raw materials in public and private sector
Research and development would need to be promoted through a Challenge
Award Scheme. International Science & Technology cooperation in the area
of steel making technologies would be necessary considering that the
number of Indian experts engaged in R&D in steel making is significantly low.
Synergies within the country and through international cooperation may
need to be developed for growing industry-relevant R&D activities.

4.9 Customer service

Page 51 of 91

Over the years, with the increasing competition of the marketplace, the
distinction between manufacturing and service industries is getting blurred.
The core, manufactured products today are so entwined with services, that
they have become indistinguishable. Moreover, these services are expected
by the customer as an integral part of the product. Slowly all business is
tending to be serviceoriented, aimed at satisfying customer needs. The
Indian steel industry has been liberalised, after decades of protection and the
competition is fierce. Capacities are being added at a furious pace, newer
technologies are being introduced and cheaper imports are being dumped. In
such a scenario, the answer to gaining competitive advantage lies in
providing superior value to the customer, by providing customer service with
the product at a lower delivery cost. Using customer service to retain and
acquire customers could provide a new strategic advantage for steel makers.
This paper explores the key issues, and possibilities and presents a strategy
for achieving strategic advantage through customer service, in the context of
the Indian steel industry. The concept can be extrapolated for any developing
economy.

4.10 Promotion:
Some domestic Steel Manufacturers and other stake holders have
represented against surge in imports of steel. The same has been
examined by Government and the following steps taken:(i)

To ensure that only quality steel is imported, Government has


notified Steel and Steel Product (Quality Control) Order dated
12.03.12 as last amended on 04.12.14.

(ii)

Imposed anti-dumping duty on hot rolled flat stainless steel


imports from China, Malaysia and South Korea on 05.06.2015.

(iii)

Raised the basic Customs Duty on various categories of steel


vide Notification No.39 dated 16.06.2015.

(iv)

Notified Coal Mines (Special Provisions) Amendment Act, 2015 on


30.03.2015 and auctioned Coal Mines.

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(v)

Notified Mines and Minerals (Development and Regulations


Amendment) Act, 2015 on 27.03.2015.

(vi)

Imposed Export Duty at the rate of 30% ad valorem on all


varieties of iron ore with effect from 30.12.2011 and 5% ad
valorem on iron ore pellets with effect from 27.01.2014. Further
Export Duty at the rate of 10% has been levied on iron ore
containing less than 58% Fe content with effect from 30.04.2015.

4.11 PRICING OF STEEL INDUSTRY

4.11.1 Steel Prices

Price regulation of iron & steel was abolished on 16.1.1992. Since then
steel prices are determined by the interplay of market forces.

Domestic steel prices are influenced by trends in raw material prices,


demand supply conditions in the market, international price trends
among others.

An Inter-Ministerial Group (IMG) is functioning in the Ministry of Steel,


under the Chairmanship of Secretary (Steel) to monitor and coordinate
major steel investments in the country.

As a facilitator, the Government monitors the steel market conditions


and adopts fiscal and other policy measures based on its assessment.
Currently, basic excise duty for steel is set at 12.5% and there is no export
duty on steel items. The government has also imposed export duty of 30%
on all forms of iron ore except low grades which carry a duty of 10% while
iron ore pellets have a export duty of 5% in order to control ad-hoc exports
of the items and conserve them for long term requirement of the domestic
steel industry. It has also raised import duty on most steel imports by
2.5%, taking the import duty on carbon steel flat products to 10% and that
on long products to 7.5%.

Page 53 of 91

For ensuring quality of steel several items have been brought under a
quality control order issued by the Government.

Further, a Steel Price Monitoring Committee has been constituted by


the Government with the aim to monitor price rationalization, analyze
price fluctuations and advise all concerned regarding any irrational price
behaviour of steel commodity.
Imports

Iron & steel are freely importable as per the extant policy.

Data on import of total finished steel (alloy + non alloy) is given below
for last five years:
Indian steel industry : Imports (in million tonnes)

Category

2010-

2011-

2012-

2013-

2014-

11

12

13

14

15

Total Finished Steel (alloy + non


alloy)

9.32
6.66

6.86

7.93

5.45

Source: Joint Plant Committee

Exports

Iron & steel are freely exportable.

Data on export of total finished steel (alloy + non alloy) is given below
for last five years:
Indian steel industry : Exports (in million tonnes)

Page 54 of 91

Category

2010-

2011-

2012-

2013-

2014-

11

12

13

14

15

Total Finished Steel (alloy + non


alloy)

5.59
3.64

4.59

5.37

5.98

Source: Joint Plant Committee

4.11.2 Domestic Price Trends for the past year of Hot Rolled, Cold
Rolled and Galvanized Products

With the firming up of steel prices the world over India should restructure its
steel industry but it is not all that easy. In developed countries the labour
costs are 35% of the total cost of steel production whereas it is only 15% in
India inspite of overmanned steel plants. This cost advantage is wiped out
since the productivity in India is only 90t/person as against 150t/person in
developed countries. It is clear that we have to formulate some strategies so
that Indian steel industry can be made more productive and efficient. Some
of these strategies can be: -

4.11.3 Increase in Finished Steel Production:

The demand for steel is derived from sectors like automobiles, white goods
and construction/infrastructure. Now, these manufacturers of automobiles
and white goods use finished steel hence the higher the production the
higher will be the revenues of the company. As the chart below shows that
this production is growing steadily but efforts should be made so that this

Page 55 of 91

production is increased through new capacity installation. Also the forecast


for demand of finished steel in the future is also bound to increase as shown
in the table given below. In order to maintain this demand the Industry has to
look for new expansions and installations.

4.12 Distribution channel :

Distribution channel in India is now more smooth after 1991. Distribution


maybe the best characterize through alarming consolidation. This
consolidation is usually, predictable, also understandable as competitors in
industry, which are in same business or substitute, additionally set their
niches or produce bigger in a hunt for economies of scale.

Page 56 of 91

Distribution channel having their own alteration according to their


convenience . for clearing the idea about it , the distribution channel of
Indian steel industry are given as below . Traditionally, sales have playing an
important role in each stage of the steel industry supply chain. sales people
are remunerated through sales reward typically makes around 2 % of the
product MRP . In the model shown in Figure 1, 16 % of the charge in the
channel is associated to sales salaries as well as commissions.
As the industry have moved from a home market to a global market,
competition has greater than before they face, which help them to earn more
profits.
To protect profits, or for competing , the channel has upgrade their
production technology . several clients begin to analyze sales calls through
salespeople as an interruption in their day. A fine proportion of businesses
entered in annual contracts with a companies, negotiated price as well as
preset, scheduled material releases salary, or through salarwithcommission,
although others draw directly .

4.13 .major playrs in india


1.In the list of top 10 steel companies of India, first place is grab
by Rashtriya Ispat Nigam Limited. RINL, also known as Vizag Steel, is a
Navratna, Goverment of India undertaking company. Established in the
year 1982, RINL is Indias largest steel producer with an annual production of
more than 3 lakh tonnes of steel. They have state of the art steel producing
facility at Visakhapatnam. They were the first Indian steel infrastructure to be
certified for ISO 9001:2008 and OHSAS 18001:2007. RINL is among most
profitable Government of India enterprise and have won several awards at
national and international level.

Establishment 1982
Headquarters - Visakhapatnam, India
Website www.vizagsteel.com

2.Second in the list is Tata Steel. Established in the year 1907, Tata Steel is
worlds 11th largest and Indias second largest steel producer.
Headquartered in Mumbai, they have their manufacturing facilities spread in
26 countries. In India, they have largest state of the art manufacturing unit
at Jamshedpur. They give employment to more than 80,000 people around
the world. They offer range of steel products such as Tata Shaktee, Tata
Wiron etc which are the backbone of leading infrastructure in country.

Page 57 of 91

Head Quarter Mumbai, Maharashtra


Establishment 1907
Founder - Dorabji Tata
Parent Comapny - Tata Group
Employees - 80,534
Website www.tatasteel.com

3.Third place is acquire by JSW Steel. JSW steel is a subsidiary of JSW


Group founded in the year 1982. Today, they are leading private sector steel
producing company of nation with installed annual capacity of 14.3 MTPA.
They have six steel plants located at Vijayanagar - Karnataka, Salem - Tamil
Nadu, and Vasind, Kalmeshwar, Tarapur and Dolvi in Maharashtra. They have
been pioneer in innovative products and technology with the help of their inhouse ultra modern R&D facility.
Head office Mumbai, Maharashtra
Establishment 1982
Website www.jsw.in

4. At fourth place we have places Steel Authority of India Limited.SAIL is


a Maharatna company, which is among largest producer of steel in country
with an annual turnover of Rs. 50,627 crore. It was founded in the year 1954
with a vision of producing quality steel. They have 9 integrated steel plants
spread across at different locations in country. They have nationwide
distribution network with 2700+ dealers, 37branch sales offices and 24
departmental warehouses. SAIL manufactures complete range of steel
products that includes Cold Rolled Stainless Steel, Hot Rolled Carbon &
Stainless Steel , Blooms, Billets, Joists, Narrow Slabs, Channels, Angles etc.
Type - Public
Head office New Delhi, India
Establishment 1954
Employees - 99360 (2013)
Website www.sail.co.in

5. Fifth place is hold by VISA Steel. This steel company is Flagship Company
of giant VISA group. With its corporate office at Kolkata, they have three
manufacturing plants, two branch offices and PAN India network of dealers
and distributors. Their manufacturing plants are located strategically nearer
to raw material producing belt of country. Their two plants are located at
Odissha and one at Chattisgarh. They are planning to setup one more steel
plant of 1.25 million TPA at Madhya-Pradesh.
Type - Private
Head office Kolkata, West Bengal
Establishment 2003
Website www.visasteel.com

Page 58 of 91

6.Bhushan Steel is placed at sixth position. Bhushan Steel was founded in


the year 1987 with its manufacturing plant at Sahibabad. They are Indias
3rd largest secondary steel producer. Headquartered in Delhi, they have their
factories at UP, Odisha and Maharashtra which are equipped with modern
machineries and skilled workforce. They have strong focus on R&D
department and constantly strive for newer and better products. They have
Indias prestigious industrial group as their clients such as Maruti, Godrej, LG
Electronics, Mahindra & Mahindra, Eicher Tractors, Ashok Leyland, Hitachi
ACs and many more.
Type - Private
Head office New Delhi, India
Establishment 1987
Website www.bhushan-group.org

7.Essar Steel is placed at seventh position. Essar Steel founded in the year
1998, this ESSAR Group Company is leading name in steel industry in India
and abroad. They have their steel manufacturing operations in four countries
India, Canada, USA and Indonesia. In India, they have manufacturing
factories located at Hazira Bailadilla, Dabuna, , Pune, Paradip and
Visakhapatnam. All of their facilities have various quality certifications such
as ISO: 9001:2000, OHSAS 18001:1999, ISO 9002, etc.
Type - Public company
Head office Mumbai, Maharashtra
Establishment 1998
Website www.essar.com

8. Eighth in the list is The Ferro Alloys Corporation Limited. The Ferro
Alloys Corporation Limited was established in 1955 and has head office in
Nagpur. It is ISO 9001:2000 certified company that works to delivery best in
quality steel. Presently company has more than 18000 employees that work
passionately for the success of company.
Head office Nagpur, Maharashtra
Establishment 1955
Type - Public
Employees - 18,000
Website www.facorgroup.in
9.Mahindra Ugine Steel is a leading steel production company of India.
Founded in the year 1962 at Mumbai, MUSCO is a part of Mahindra Group.
They are known for manufacturing of rings, specialty steel and stampings.
They were the first Indian steel company to get ISO certification. They have
been awarded several recognitions and awards by various national and
international bodies. They have setup residential colonies for their workers in
41.94 hectares with play area and school facilities.

Page 59 of 91

Corporate office Mumbai, Maharashtra


Establishment 1962
Website www.muscoindia.com
10. Last in the list is Welspun Corp Ltd. WCL is leading name in pipe and
plates industry with global footprints in countries like UK, Middle East and
USA. Headquartered in Mumbai, their plants are located at Gujarat and
Karnataka. The company has 24000 working force around the world. Their
products have won many prestigious international awards.
Type - Public
Employees - 24,000
Head office Mumbai, Maharashtra
Establishment 1995
11. Ahmedabad Steelcraft Ltd is counted among the famous steel
producing companies of India that was started in 1972 and has net profit was
Rs. 18.10732 Million by March 2014.Company has presence including
countries like US, Canada, UK, Europe, Australia, New Zealand, South East
Asia, Caribbean countries, Mauritius, Israel and Guyana.
Establishment : 1972 | Revenue : 1.97312 ( USD in Millions ) | Market Cap:
168.795 ( Rs. in Millions ) | Website : www.steelcraft.co.in
Address : 401, 4th Floor, 637 Complex,Panchvati 2nd Lane,Gulbai
TekraAhmedabad-380006, Gujarat
12. Akashna Global Steel Ltd was started in 1985 and has becoming a
prominent player of steel industry. Company has annual income of Rs Rs.
1.149166 Million by 2012.
Establishment : 1985 | Revenue : 0.0109825 ( USD in Millions )
Corporate Address : C-98, Flat No.6,8 - Southern Avenue,Maharani Bagh New
Delhi-110065, Delhi
13. Anil Special Steel Inds. Ltd was started in 1968 and has market
capitalization of Rs 94.35989772 Million. Company is ISO 9001:2000 certified
and has more than 9 branches across PAN India. Company manufacture
products like Cold Rolled and Spheriodized Annealed Steel Strips Hardened
and Tempered steel strips.
Establishment : 1968 |Revenue : 50.8327 ( USD in Millions ) | Market Cap:
94.35989772 ( Rs. in Millions ) | Total Income : Rs. 3149.493433 Million | Net
Profit - Rs. 49.090863 Million | Website : www.anilspecialsteel.com
Corporate Address : Kanakpura ,P O Meenawala, Jaipur-302012, Rajasthan
14. Ashirwad Steels & Inds. Ltd was started in 1986 and has more than
28 years of experience of steel industry. Company was achieved remarkable
achievements under the leadership of Puranmal Agarwal. It has Total Income
- Rs. 179.111864 Million & Net Profit of Rs. 3.722874 Million

Page 60 of 91

Establishment : 1986 | Revenue : 2.80356 ( USD in Millions ) | Market Cap :


62.625 ( Rs. in Millions ) | Website: www.ashirwadsteels.com
Corporate Address: 6 , Waterloo Street,,5th Floor,Suite No. 506Kolkata700069, West Bengal
15.Bajaj Steel Inds. Ltd is a famous steel manufacturing company that
was established in 1961 and has been in the industry from last 50 years.
Company launched its IPO in 1985 and has market capitalization of Rs 500
millions. Company has huge production units across India that manufacture
high quality steels like Cotton Baling Press, Double Roller
Co.Establishment: 1961 | Revenue: 74.6733 ( USD in Millions ) | Market Cap:
500.08 ( Rs. in Millions ) | Website : www.bajajngp.com
Address: Imambada Road,Plot No . C - 108 , Hingna M I D C Area,G -108 ,
Butibor I, M I D C Area Nagpur-440018, Maharashtra

16.Banga Laxmi Steel Trading Company Ltd. is a famous steel


manufacturing company based out in west bengal. Company was setup in
1973 and has been growing at incredible rate.
Establishment : 1973 | Address : Room No 1, Ground Floor,57 Raja Basant
Roy Road, Kolkata-700029, West Bengal
17.Bellary Steels & Alloys Ltd was started in 1984 to high quality produce
steel and iron. Company has integrated steel plants with production capacity
for more than 500000 TPA to 2 MTPA.Other one is Thermal Power Plant that
use coal & furnance oil. This Plant is production capacity of 12 MW and
equipped with all safety measures.
Establishment : 1984 | Revenue : 7.87269 ( USD in Millions ) | Market Cap :
1397.03512 ( Rs. in Millions ) | Website: www.bsal.in
Address : S-10/11,Anantapur Road,Bellary-583101, Karnataka
18.Bengal Steel Industries Ltd was started in 1947 and has been
producing quality steel from last 60 years. It is ISO-9001-2000 certified
company and follows quality guidelines as per ISO standards. It has two
production units that are equipped with modern machines and has excellent
team of professionals.
Started:1947 | Revenue :0.0944172 ( USD in Millions ) | Market Cap: ( Rs. in
Millions ) | Total Income - Rs. 4.827439 Million ( year ending Mar 2012) | Net
Profit - Rs. 7.409549 Million ( year ending Mar 2012)
19. Facor Steel Limited Facor Steel is leading steel and alloy
manufacturing company backed by Facor Group. They produce wide variety
of products such as Stainless Steel, Alloy Steel, Valve Steel, Free Cutting

Page 61 of 91

Steel, Semi Free Cutting Steel, Carbon Steel etc. Their steel products are
extensively used by Automobile companies, Construction companies, Sugar
Industry, Railway springs, engineering components, Valve industry and tools
industry.

4.14 Market share:

Sources:indiammarket.in
4.15 . Logistic demand:
Steel sector: Indian scenario
Steel production in Indian in 2015 was 121.534
The averaged per capita consumption of finish steel in rural India is.
Raw material required for one tone steel:
3 tonnes of raw material
3 tonnes of water
3 tonnes of air
4.15.1 .Raw material requirement:
For the target of 300mtpa steel production by 2025, the requirement of iron
ore would be around 450 mtpa, coking coal would be 300 mtpa, non coking
coal of 100mtpa, and other fluxes would be around 50mtpa.
4.15.2. Logistic in steel industries:

Page 62 of 91

Logistic management of steel, therefore, is not confined to finished products.


The logistic would involve raw material, utilities, by product with a wide array
of internal material movements too. Movements of raw material requires
special attention as extraction of mineral resources is largely confined to
remote and relatively in accessible areas in eastern and southern region of
India . Mining areas therefore in general are characterised by poor transport
and logistics network.
4.15.3.Logistic challenges for Indian steel industry:
Logistic of raw material and finished product play a critical role in
determining the operational efficiency & cost structure of steel producers.
According to industry estimates, logistic costs account for over 15 % of the
total costs if Indian procedures of steel .a typical logistics framework consist
of physical supply, internal operation and physical distribution of goods and
services.

4.16 number of compnies


In millions of tonnes (Tg)
Ranking
(2014)

2014[ 2013 2012 2011[ 2010[ 2009 2008 2007


1]

[2]

[3]

4]

4]

[4]

[4]

98.1

96.1

93.6

97.2

98.2

77.5

103.3 116.4 ArcelorMittal

49.3

50.1

47.9

33.4[5] 35.0[5]

47.1

45.8

42.8

44.4

52.9[6]

43.3

43.9

42.7

43.3

41.4

38.4

39.9

35.3

35.1

34.3

[4]

Company

Headquarters

Luxembourg

26.5[5 37.5[5 35.7[5 Nippon Steel & Sumitomo


Japan
]
]
]
Metal
40.2[7
]

33.3

31.1

Hebei Iron and Steel

China

37.0

31.3

35.4

28.6

Baosteel Group

China

39.1

35.4

31.1

34.7

31.1

POSCO

South Korea

32.3

31.9

30.1[6]

23.3

22.9

Jiangsu Shagang

China

33.7

30.2

29.8

22.1

20.1

16.0

16.2

Ansteel

China

33.1

39.3

36.4

37.7

36.6[6] 30.3

27.7

20.2

Wuhan Iron and Steel

China

31.4

31.2

30.4

29.9

31.1

33.0

34.0

JFE

Japan

10

30.8

31.5

31.4

30.0

25.8[6]

12.2

12.9

Shougang

China

26.4[6

25.8
17.3[6
]

Page 63 of 91

In millions of tonnes (Tg)


Ranking
(2014)

2014[ 2013 2012 2011[ 2010[ 2009 2008 2007


1]

[2]

[3]

4]

4]

11

26.2

25.3

23.0

23.8

23.5[6]

12

23.3

22.8

23.0

24.0

23.2[6]

13

21.4

20.2

20.1

19.9

14

20.6

17.2

17.1

15

19.7

20.4

16

19.0

17

[4]

21.9[6
]

[4]

[4]

Company

Headquarters

24.4

26.5

Tata Steel

India

26.4[7 21.8[8
]

23.8

Shandong
Group

18.3

14.0

20.4

20.0

Nucor Corporation

United States

16.3

12.9

8.4

9.9

10.0

Hyundai Steel

South Korea

21.4

22.0

22.3

15.2

23.2

21.5

United
States
Corporation

19.0

19.8

20.5

21.6

14.2

20.4

18.6

Gerdau

18.9

18.8

17.3

16.7

15.4[6]

18

18.5

19.3

19

16.3

20

17.3[9 19.2[1 17.5[1

14.8[7 15.0[7

Iron

and

Steel

Steel

China

United States
Brazil

14.2

Maanshan
Company

Iron

and

Bohai
Iron
Group (zh)[11]

15.9

17.0

ThyssenKrupp

Germany

and

Steel

Steel

China

China

0]

0]

15.9

15.1

17.9

16.7[6] 11.0

16.3

16.8

15.1

16.5

22.1[6] 9.1[6] 7.4[7] 7.6

Benxi Steel

China

21

16.1

15.5

14.9

12.1

11.9

10.9

11.3

9.7

Novolipetsk Steel

Russia

22

15.5

16.1

15.9

16.8

16.3

15.3

17.7

16.2

Evraz

Russia

23

15.4

14.3

12.7

14.0

12.7

8.9

11.0

10.9

China Steel

Taiwan

24

15.4

15.0

14.1

15.9

15.1[6]

11.1

Valin Steel Group

China

25

15.2

14.3

13.8

12.4

8.8[6]

8.4[6] 6.5

7.8

Jianlong Steel

China

26

14.4

14.3

13.6

12.6

11.4

10.6

10.0

10.1

IMIDRO

Iran

27

14.2

15.7

15.1

15.3

14.7[6] 16.7

19.2

17.3

Severstal

Russia

28

13.6

13.2

Fangda Steel[12]

China

29

13.6

13.5

13.5

13.5

13.6

13.5

13.7

13.9

Steel Authority
Limited

30

13.0

11.9

13.0

12.2

11.4

9.6

12.0

13.3

Magnitogorsk Iron and Steel


Russia
Works

31

12.7

11.8

8.5

N/A

6.4

5.5

3.8

3.0

JSW Steel Ltd

India

32

11.4

12.7

13.2

11.2

9.8[6]

9.9[6] 7.5

6.2

Rizhao Steel (zh)

China

11.8[7 11.3[7
]

of

India

India

Page 64 of 91

In millions of tonnes (Tg)


Ranking
(2014)

2014[ 2013 2012 2011[ 2010[ 2009 2008 2007


1]

[2]

[3]

4]

4]

33

11.2

14.3

12.5

14.4

34

10.9

10.3

7.7

35

10.7

10.0

36

10.7

37

Company

Headquarters

13.8[6] 7.0[6] 8.2[7] 9.1

Metinvest

Ukraine

9.4

10.0[6] 8.5[6] 9.0[7]

Anyang Steel

China

10.1

9.9

9.6[6]

9.3

Taiyuan Iron and Steel (zh)

China

10.7

10.2

10.2

10.1[6]

10.5

9.7

7.3

5.8

38

10.3

11.2

10.1

39

10.3

10.2

9.1

World total

1,637
1,607 1,548 1,490 1,413 1,219 1,329 1,351 +

[4]

[4]

9.5[6] 9.2
10.1[6

[4]

8.8

9.8

Baotou Steel

China

N/A

N/A

N/A

N/A

Hebei Jingye Iron and Steel

China

10.2

8.6[6]

7.6[6] 6.9

7.4

Jiuquan Steel (zh)

China

8.6

N/A

N/A

N/A

Handan Zongheng Iron and


China
Steel

N/A

Source:IBEF.in

Page 65 of 91

Chapter 5
Financial analysis

Page 66 of 91

Financial Analysis
1. Profit Margin Analysis
A) Gross Profit margin Analysis
Gross Profit margin Analysis=

COGS
Sales

The gross profit margin reflects the efficiency with which management
produces each unit of product. This ratio indicates the average spread
between the cost of goods sold and sales revenue. it indicate the relation
between cost and selling price. high gross profit indicates that the firm is
able to produce at relatively lower cost.
Gross margin ratios of three industries are below
Name of the March201
company
1

March 2012 March 2013 March 2014

March2015

1.SAIL(%)

12.88

9.6

7.2

4.71

6.3

2.tata
steel(%)
3. Jindal (%)

35.16

30.6

24.83

26.1

19.17

30.23

23.96

19.32

17.44

14.33

Page 67 of 91

40
35
30
25
20

1.SAIL(%)

15

2.tata steel(%)

10

3. Jindal (%)

5
0

Interpretation:
-In SAIL gross margin Ratios are continuously decreases from 12.88 to 6.3
which are not good for the Company. It shows the company produces product
in High cost.
- In Same TATA STEEL and JIndal gross margin ratios are Declining from 35.16
to 19.17 and 30.23 to 14.33 which are not good for the company.
B) Net Profit Margin
Net profit ratio is measured by dividing profit after tax by sales. it
establish relation between net profit and sales. this ratio is over all measure
of the firms ability to turn each rupee sales into net profit. the ratio is
indicated the firms capacity to with stand adverse economic conditions. high
margin is good for the company.
formula:
Net profit ratio= profit after tax
Sales
Net profit margin ratios are below of three industries
Name of the March201
company
1
1.SAIL(%)
11.5.

March
2012
7.94

March
2013
4.86

March
2014
5.6

March2015

2.tata
steel(%)

19.73

13.25

15.37

15.47

23.35

4.57

Page 68 of 91

3. Jindal (%)

21.55

15.82

10.64

8.88

-2.32

25
20
15
1.SAIL(%)
10

2.tata steel(%)
3. Jindal (%)

5
0
40603

40969

41334

41699

42064

-5

Interpretation:Net profit of SAIL is 11.5% in 2011 and 7.94 % in 2012 ,4.86% in


2013 which shows that companys net profit is decreases which is not
good for the company. Net profit of TATA STEEL is 23.35% in 2011,
19.73% in 2012 ,13.25% in 2013 and 15.37 in 2014 which shows that
companys profit is decreases in 2 years and after that its improved
which is good for the company. Net profit of jindal is continuously
deacreses from 21.5% to -2.32% which is not good for the company.
2. Leverage Analysis
Leverage Analysis include three ratios which are explain below
1) total Debt ratio
2) Debt equity ratio
3) capital ratio
A) Total Debt ratio
MEANING
The debt ratio is defined as the ratio of total long-term and shortterm debt to total assets, expressed as a decimal or percentage. It
can be interpreted as the proportion of a companys assets that are
financed by debt.

Page 69 of 91

Name of the March201


company
1

March 2012 March 2013 March 2014

March2015

1.SAIL(%)

64.79

71.2

65.61

63.74

60.65

2.tata
steel(%)
3. Jindal (%)

64.13

68.95

68.05

70.06

71.77

43.16

43

38.77

36.56

32.39

80
70
60
50
40
30
20

1.SAIL(%)
2.tata steel(%)
3. Jindal (%)

10
0

Interpretation:
debt ratio is about lender have provide debt to company. In Sail debt Ratio is
64.79% and its increases in 2012 by 71.2% which is good for the company.
Its decreases in 2013 by 65.61% and 63.74 %i 2014 which is not be good for
the company but over all said that company have Lander which is good for
the company. Debt Ratio of TATYA STEEL is continuously increases which
shows finance provider are more in the company which is good for the
company.jindal has also Lander of financed but not more than Tata and SAIL.
B) Debt equity ratio
Meaning
Debt/Equity Ratio is a debt ratio used to measure a company's financial
leverage, calculated by dividing a companys total liabilities by its

Page 70 of 91

stockholders' equity. The D/E ratio indicates how much debt a company is
using to finance its assets relative to the amount of value represented in
shareholders equity. A high debt/equity ratio generally means that a
company has been aggressive in financing its growth with debt.
The formula for calculating D/E ratios can be represented in the following
way:
Debt - Equity Ratio = Total Liabilities / Shareholders' Equity
Name of the March201 March 2012 March 2013 March 2014 March2015
company
1
1.SAIL(%)

0.54

0.4

0.52

0.56

0.64

2.tata
steel(%)
3. Jindal (%)

0.55

0.45

0.46

0.42

0.39

1.32

1.33

1.58

1.74.

2.9

3.5
3
2.5
2
1.5
1

1.SAIL(%)
2.tata steel(%)
3. Jindal (%)

0.5
0

Interpretation:
Debt equity ratio is about the lenders contribution in company in respect of
each RS of owners. In SAIL debt equity ratio is 0.54 times in 2011 and its
decreases in 2012 by 0.4% after than its increased by 0.52% and0.56% in
2015 which is good for the company. Debt equity ratio is continuously
decreases in TATA STEEL by 0.55% to 0.39% which shows that owners
investment is more. it is increases in JINDAL from 2011 to 2015 which shows
that company has more debt for running business and its shows growth of
the company.

Page 71 of 91

C) Capital equity ratio:


This ratio is expressing the basic relationship between Debt and equity.
Its high ratio is good for the company.
Formula:

Capital employed or net assets


Net worth

Name of the March201


company
1

March 2012 March 2013 March 2014

March2015

1.SAIL(%)

0.79

0.81

0.75

0.72

0.65

2.tata
steel(%)
3. Jindal (%)

0.43

0.45

0.48

0.49

0.46

0.54

0.58

0.52

0.43

0.36

0.9
0.8
0.7
0.6
0.5
0.4

1.SAIL(%)

0.3

2.tata steel(%)

0.2

3. Jindal (%)

0.1
0

Interpretation: this ratios are high in SAIL so its good for the
company. In JINDAL this ratios are continually decreases which are
not
good
for
the
company.

3. Profitability Analysis
A) Operating margin

Page 72 of 91

Meaning
Operating margin is a measurement of what proportion of a company's
revenue is left over after paying for variable costs of production such as
wages, raw materials, etc. It can be calculated by dividing a companys
operating income (also known as "operating profit") during a given period by
its net sales during the same period. Operating margin is a margin ratio used
to measure a company's pricing strategy and operating efficiency. Formula
for calculating operating margisn can be represented in the following way:

Name of the March201


company
1

March 2012 March 2013 March 2014

March2015

1.SAIL(%)

16.37

13.04

10.34

8.39

10.89

2.tata
steel(%)
3. Jindal (%)

39.06

33.99

29.12

30.72

23.95

37.41

30.46

26.33

25.84

27.67

45
40
35
30
25
20

1.SAIL(%)

15

2.tata steel(%)

10

3. Jindal (%)

5
0

Page 73 of 91

Interpretation:-operating margin ratio of Tata steel is continuously


decrease in five year which is not good for the company. And also decreases
in SAIL and JindalL which is shows less profitability of the company.

B) Return on net worth


Meaning
Return on Net worth (RONW) is used in finance as a measure of a companys
profitability. It reveals how much profit a company generates with the money
that the equity shareholders have invested. This ratio is useful for comparing
the profitability of a company to that of other firms in the same industry.
Name of the March201
company
1

March 2012 March 2013 March 2014

March2015

1.SAIL(%)

13.23

9.24

5.29

6.13

4.81

2.tata
steel(%)
3. Jindal (%)

14.68

12.72

9.17

10.48

9.65

23.75

19.46

12.89

9.88

-2.48

30
25
20
15
10
5

1.SAIL(%)
2.tata steel(%)
3. Jindal (%)

0
-5

Interpretation:-return on net worth of SAIL, TATA STEEL and JINDAL are


continuously depresses since five years which is not good for the company.
4. Du Pont Analysis

Page 74 of 91

Meaning
A method of performance measurement that was started by the DuPont
Corporation in the 1920s. With this method, assets are measured at their
gross book value rather than at net book value in order to produce a higher
return on equity (ROE). It is also known as "DuPont identity".
DuPont analysis tells us that ROE is affected by three things:
-Operating
efficiency,
which
is
measured
by
profit
margin
-Asset use efficiency, which is measured by total asset turnover
- Financial leverage, which is measured by the equity multiplier
ROE = Profit Margin (Profit/Sales) * Total
(Sales/Assets) * Equity Multiplier (Assets/Equity)

Asset

Turnover

Name of the March201


company
1

March 2012 March 2013 March 2014

March2015

1. SAIL(%)

13.3

8.9

5.6

6.1

4.9

2.tata
steel(%)
3. Jindal (%)

24.2

12.6

-20.7

8.9

-12.5

26.6

21.9

13.7

8.4

-6.1

30
20
10
1. SAIL(%)
0

2.tata steel(%)
3. Jindal (%)

-10
-20
-30

Interpretation:- du Pont Ratio of SAIL is 13.3% in 2011 which is decreases


in 2012 by 8.9 % and also decreases in 2013 and 2015 which shows that
company profitability is decreases which is not good for investor as well as
company. In TATA steel it is decreases in minus which is not good for the

Page 75 of 91

company. ROE of Jindal also decreases in minus in 2015 which shows that
profitability of company is decreases.

5. EPS
Meaning
EPS is calculated by dividing the profit after tax by total no of ordinary shares
outstanding EPS simply shows the profitability of the firm.
Name of the March201
company
1

March 2012 March 2013 March 2014

March2015

1.SAIL(%)

11.87

8.91

5.25

6.33

5.07

2.tata
steel(%)
3. Jindal (%)

71.58

68.95

52.13

66.02

66.3

22.09

22.58

17.04

14.12

-3.4

Page 76 of 91

80
70
60
50
40

1.SAIL(%)

30

2.tata steel(%)

20

3. Jindal (%)

10
0
-10

Interpretation:-EPS of SAIL is 11.87 in 2011 its decreases continuously in


further year which is not be good for the company and its shows that
companys profitability is decreases. EPS of TATA STEEL is 71.8 in 2011. It is
decreases in 2012 by Rs 68.95 and also decreases in 2013 by RS 52.13 But
its increases in 2015 by RS 66.3. which shows that companys profitability is
improved. EPS of jindal is continuously decreases and its decreases in minus
in 2015 which shows companys profitability is decreases or its face the loss.

6. DPS (dividend per share)


Meaning:- Dividend per share (DPS) is the total dividends paid out over
an entire year (including interim dividends but not including special
dividends) divided by the number of outstanding ordinary shares issued.
Formula

dividend
No of ordinary shares

Name of the March201


company
1

March 2012 March 2013 March 2014

March2015

Page 77 of 91

1.SAIL(%)

2.4

2.tata
steel(%)
3. Jindal (%)

12

12

10

1.5

1.6

1.6

1.5

14
12
10
8
6
4

1.SAIL(%)
2.tata steel(%)
3. Jindal (%)

2
0

Interpretation
DPS of SAIL is 2.4 in 2011 after it is Rs 2 which is constant for the other
year. higher DPS is good for the company. TATA STEEL is providing DPS to its
shareholder first 2yers Rs 12 after 2yers declining by RS 8 and RS 10 which
shows the companys profit is decline. Jindal is paid DPS Rs 1.5 in 2011 which
is declining in 2015 by RS 0. Only tata steel is paid more dividend to its
shareholder.

Page 78 of 91

Chapter 6
STRATEGIC ANALYSIS OF
THE STEEL INDUSTRY

6.1 SWOT AnalysisOf The Steel Industry


Indian steel industry has been blessed with a number of inherent advantages
but at the same time it also faces some crucial constraints.
The sectors main strengths, weaknesses,
threats/challenges are as summarized below:

opportunities

as

well

as

6.1,1 Strengths

Availability of quality iron ore and processed inputs like sponge iron
Low wage level
Skilled manpower and managerial capabilities
A regionally dispersed secondary steel sector to cater to local demand

Page 79 of 91

6.1.2 Weaknesses
High cost of energy/power
Poor infrastructure linkages for movement of both raw material and
finished products
Inferior quality of indigenously available coking coal
Relatively high cost of capital specially for smaller producers
Low labor productivity as well as rigid labour laws
Dependence on imported technology and equipment including for
maintenance operations
Multiple statutory clearances required for mining and steel making
investments
Issues linked to land acquisition and rehabilitation

6.1.3 Opportunities
Potentially huge domestic demand from steel intensive investments
like infrastructure building, real estate, automobile/ auto components,
communications, ship building, defence, and medical equipment,
consumer durables etc.
A largely untapped rural market
Huge potential for productive foreign collaboration particularly in
specialized steel making products and equipment

6.1.4 Threats/Challenges

Slow growth of infrastructure development


Potential competition from countries like China
Unstable/Adverse global market trends
Dwindling raw material reserves specially iron ore through exports

6.2 PESTEL Analysis Of The Steel Industry


Indian steel is doing well from many years. Steel industry is contributing near
about 1.2% in the total GDP. Because of the industrial growth and other
important developments happening all over the world the so rapid rise in
demand of the steel is observed in this sector. The major players in the steel
industry are SAIL (Steel Authority of India.) TATA STEEL and ESSAR STEEL.
Indian steel mainly contributes in the finished steels, semi-finished steel, pig
iron and stainless steel. Private sector plays very important role in the Indian
steel industry. The private sector in the steel industry contributes
approximately 2/3rd of the total market of the steel. With the growing
position steel industry is supporting in the continuous growth in the
economic.

Page 80 of 91

Asian countries are in the lead with the production of the steel, china is the
top producer among the Asian countries which are contributing high a supply
of the steel in the international market.419million ton of the steel is
produced only in the china. In past 6 years there are many acquisitions and
mergers are happening in the steel industry. May be this could be the one of
the reasons behind this tremendous growth globally. After the china country,
Japan, India, and South Korea. India is contributing total of the 53million ton
steel in global market. The japan is producing only 9% of the steel which is
contributed to the global steel market. India is also one of the major counties
in the production of the steel. The east, south, and west regions are
important for the steel industry in India. The rapid expansion is expected in
the east region, Orissa because the availability of the superior raw material.
In India because the vast availability of resources and major industry players
India is enjoying the boom in this sector which are responsible of the growth
in the GDP according to the survey which is done by the DEUTSHE BANK
where the analysis is done with detailed survey of 34 economies in nation. It
is observed that India will enjoy the average growth of 5.5% in between the
year 2006 to year 2010. The average is observed for the, where as 5.4% to
the Malaysia. The opening up the economies in the global market is
responsible for the high investment in the industry sector where lots of
acquisitions and mergers are happening in the industry. The PESTEL
ANALYSIS of the industry is divided into five parts which can be discussed as
follows

P- Political analysis
E-economic analysis
S- socio -culture analysis
T-technological analysis
E-environmental analysis
L-legal analysis.

6.2.1 POLITICAL ANALYSIS:


Political analysis includes the factors which can influence the business. It is
included the political factor which includes the policy offered by the
government to the specific sector. Here for this sector government

Page 81 of 91

introduces the National Steel Policy. The main aim for the introduction of this
policy is to fill the gap between the demand and supply of the steel. To
maximize the production is also main activity is designed under this policy. To
increase the production up to million ton is also the main objective of the
policy.
Under this policy the special incentives are designed for the steel sector.
Incentives like the cut in the duty, zero duty on imports, provision of the land
and other infrastructural facilities are the facilities provided for the steel
sector. Under this policy the government is encourage to the use the full
opportunities available in the PUBLIC AND PRIVATE PATNERSHIP (PPP). With
the growing industry the government is increased the sales tax from the
15%to 20% where as 75% FDI (foreign direct investment) is allowed in the
industry this scheme also provides the various concessions in the custom
duties. Though there is a rise in the infrastructure facilities in the country but
considering the steel industry the present condition of the infrastructure is
not sufficient in the nature .because of the lack in infrastructure steel
industry is facing many problems

6.2.2 ECONOMICAL ANALYSIS:


STEEL industry is concern to be a very booming industry from past decades.
Opening up with the various economies the foreign direct investment is the
happened in this sector the various foreign players are interested to invest in
the country. Under the various economies schemes there is permission in
advance licensing scheme which allows the duty free imports of raw material
for exports. But, with the boom in the industry GDP is rising at very slow rate.
The steel industry is also facing the problem of the subprime crisis occurs in
the united states before 15 months. Because of the subprime crisis there is ill
effect occurs in the automobile industry, infrastructure and other business
which are related with the steel industry. There is huge gap between the
demand and the supply of the steel in the society.

6.2.3 SOCIO- CULTURE:


The socio culture is one of the important aspect in the analysis of the
industry it describes the impact of the particular industry on the society.
Likewise the steel industry also give the encouragement to the permanent
employment to the people but on the other hand it divides the area in to the
rural and urban sector because the industry is only in the particular area only
which leads to the particular development of that area only and not overall
the development .because of the working conditions the people which are
employed in the steel industry faced many health problems which are
incurable in the nature and many industries are not paying the attention on
the health of the employees. Any kind of the allowances are not given to the
employees. Steel industry is also responsible for the development in the rural
sector which leads to the rise in the standard of the living of the people.

Page 82 of 91

6.2.4 TECHNICAL:
The traditional technologies are being used from many years in the industry.
There is no innovation in the use of the technique in the production process.
The Tata steel is developing the same technique is by which the
encouragement is given to the trading of the steel. Tata and sail introduces
the online trading of the steel. Only the electric furnace is being used now
days in the production process but because of the fluctuations in the energy
there is wastage in the raw material. The basic technologies are used in the
production process are basic arc, induction furnace and electric furnace
which are outdated in the nature. Sail the one of the leading steel industry
India is planning to set up a plan with PASCO for using the latest technology
named âFINEXâ.

6.2.5 ENVIRONMENTAL:
Though the steel industry is encouraging the many sectors and the
encouraging the development it is creating the unfavorable environment in
the nature. The all leading industries are following the environmental acts
which are declared by the governments, though it is creating very bad
impact on the environment. Many industries are using the pollution control
equipment and energy saving equipment but that is not sufficient in the
nature. The least importance is given to the environmental aspect. But the
Tata steel is encouraging the ecofriendly system, to reduce the emission the
co2 gas during the production process. Tata is developing the Ultra-Low
Carbon steel making where there will be reduction in the environmental loss.

6.2.6LEGAL:
Government is introducing the various rules and regulations of this particular
industry. The government is about to paying the more attention in the health
policies of the employees which are working with the steel industry. Special
health incentives and rules are introduced in the steel industry

Page 83 of 91

6.3 PORTERS FIVE FORCE MODEL

Page 84 of 91

INTER FIRM RIVALRY


Attainment of cost leadership is the key to be globally competitive like
tisco&baosteel .

Bargaining power of buyers low


With few players controlling majority of market share.
mechanism determines the steel prices.

Free market

Threat of substitutes
Increased use of fibers and polymers in household and automobile.
Aluminum & copper has also created the threat for use of steel
product.

Bargaining power of suppliers-high


Concentrated deposits of natural resources.Volatile global raw material
markets.Government restriction& policy changes has given the higher
bargaining power to suppliers.

Barriers to entry-high
Huge capital requirement, economies of scale, huge manpower
requirement.Technological sophistication for cost leadership.

Page 85 of 91

Chapter 7
FUTURISTIC
SCENARIO
OF THE STEEL INDUSTRY

Notwithstanding poor growth in steel demand this year, the


state-owned SAIL believes the future of the industry is bright as

Page 86 of 91

Indias per capita consumption is low and the government is


planning to increase infrastructure spending.
Indias steel demand grew by just 0.5 per cent to 53.78 million
tonnes during the April-December period of the current fiscal,
impacted by economic slowdown.
Though Indias per capita consumption has increased from 29 kg
in 2000 to 59 Kg in 2012-13, in rural areas, home to around 70
per cent of the population, per capita consumption is
approximately one-fifth of the national average at 12 kg.
This is miles apart from the world average (216.9 kg) and it is
where the opportunity lurks, SAIL Chairman, C S Verma said.
The future of the Indian steel industry is indeed very bright and
there are several enablers which indicate this and includes low
per capita consumption and governments plan to hike
infrastructure spending, he said.
Stating that government plans to increase infrastructure spending
from the current 5 per cent of GDP to 10 per cent by 2017, he
said India is committed to investing $one trillion in infrastructure
during XIIth Five Year plan.
Taking 15 per cent as steel component in the total investment,
then it can generate additional demand worth $75 billion of steel
in the next few years or $15 billion worth of additional demand a
year or in terms of quantity, an additional demand of 18.75
million tonnes per annum, he said.
Besides, the National Manufacturing Policy envisages the share of
manufacturing in GDP to increase from 14 per cent in 2012-13 to
25 per cent by 2025 with manifold increase in steel intensity
translating into finished-steel consumption of 230-255 MTPA by
2025, Verma said, adding all these augur well for the steel
industry.
The Indian steel industry has also grown at a handsome pace
from less than 22 million tonnes (MT) in 2000 to about 81MT in
2012-13 at a CAGR of 11 per cent. While it achieved the first 27
MT of production capacity in 50 years between 1951-52 to 1999-

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2000, the next 27 MT came production in next 10 years from


2000-01 to 2009-10.
The country proposes to achieve 300 MTPA capacities by 2025.

Chapter 8
CONCLUSIONS

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Indian steel sector has witnessed the rate of 14-25 per cent
production growth for steel in the first two quarter of 2016-2017.
Indian steel industry appears to be heading for good times with
strong domestic demand and the surging demand from china. The
factor driving the demand for steel would be booming
construction activity. Construction industry would be a big
beneficiary for the ongoing national highway development
program (NHDP) and focus on infrastructure sector would
strengthen demand.
The growth in domestic demand for automobile and increasing
trend of outsourcing of auto components by global OEMS (original
equipment manufacturers) from India would provide an impetus
to the steel industry. The white goods segment, another key
consumer of steel is likely to have health demand growth.

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Chapter 9
bibliography

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Books & magazines


o I.M Panday financial management 8th edition, published by vikas
publishing house pvt.ltd
o Lewis, W.A, The theory of economic growth.
o Kotler Philip, marketing management, 14th edition, published by
pearson education pvt.ltd.

Websites
www.steel.nic.in
www.indinfoline.com
www.worldsteel.com
www.abnormal.com
www.network.magezine.com

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