A Research Project on Study of

STEEL AND MINING SECTOR IN INDIA

STEEL AUTHORITY OF INDIA
Mentor: Meena Barot

SHREYA SINHA
17-19PGIB1788
International Business
Institute for Technology and Management
Navi Mumbai - 410210

Table of content Page no.

Introduction 02
Present scenario 02
Global scenario 02
Market analysis 03
Steel authority of india 03
History and evolution 04
Organisational structure 05
Major units 06
Sales growth rate 06-08
Swot analysis 08
Pest analysis 08-09
Porter’s 5 force model 10

INTRODUCTION

The steel and mining industry is one of the most important industries in India. It is on an
upswing because of the strong global and domestic demand. India’s rapid economic growth
and soaring demand by sectors like infrastructure, real estate, and automobiles at home and
abroad, has put Indian steel industry on the global map.

According to INTERNATIONAL IRON AND STEEL INSTITUTE, India is the largest steel
producer in the world.

The Indian Ministry of Steel is concerned with: the coordination and planning of the growth
and development of the iron and steel industry in the country, both in the public and private
sectors; formulation of policies with respect to production, pricing, distribution, import and
export of iron and steel, ferro alloys and refractories; and the development of input industries
relating to iron ore, manganese ore, chrome ore and refractories etc., required mainly by the
steel industry.

Present scenario

During 2014, India was the third largest producer of raw steel and the largest producer of
sponge iron in the world. The industry produced 91.46 million tons of total finished steel and
9.7 million tons of pig iron. Most iron and steel in India is produced from iron ore.
 Global Scenario

In 2016, the world crude steel production reached 1630 million tonnes (mt) and showed a
growth of 0.6% over 2015.

China remained world’s largest crude steel producer in 2016 (808 mt) followed by Japan (105
mt), India (96 mt) and the USA (79 mt).

World Steel Association has projected Indian steel demand to grow by 6.1% in 2017 and by
7.1% in 2018 while globally, steel demand has been projected to grow by 1.3% in 2017 and
by 0.9% in 2018.

Chinese steel use is projected to show nil growth in 2017 and decline by 2% in 2018.

Per capita finished steel consumption in 2016 is placed at 208 kg for world and 493 kg for
China by World Steel Association.

Market analysis

India’s crude steel output grew 10.7% to 25.76 million tonnes during January-march
2017.india’s crude steel output during April 2017 grew by 5.4%to 8.107%.

India’s finished steel exports rose 102.1%to 8.24 million tonnes while import fell by 36.6%
to 7.42 million tonnes. India’s steel export rose to 142%in april 2017 to 747,000 tonnes over
2016.total finished steel grew by 3.4% at 6.015 million in 2017.

Steel Authority of India

Steel Authority of India Limited (SAIL) is one of the largest state-owned steel
making company based in New Delhi, India and one of the top steel makers in world, headed
by Shri P K Singh . With an annual turnover of ₹44,452.41 Crores (FY 2016-17). It is a
public sector undertaking which trades publicly in the market is largely owned by
Government of India and acts like an operating company. Incorporated on 24 January 1973,
SAIL has 78,333 employees. With an annual production of 13.9 million metric tons, SAIL is
the 24th largest steel producer in the world. The Hot Metal capacity of the Company will
further increase and is expected to reach a level of 23.5 million tonnes per annum by the end
of the Financial Year 2015-16. Shri P.K Singh is the current Chairman of SAIL.

SAIL operates and owns 5 integrated steel plants at Bhilai, Rourkela, Durgapur, Bokaro and
Burnpur(Asansol) and 3 special steel plants at Salem, Durgapur and Bhadravathi. It also
owns a Ferro Alloy plant at Chandrapur. As a p

art of its global ambition, the company is undergoing a massive expansion and modernisation
programme involving upgrading and building new facilities with emphasis on state of the art
green technology. SAIL is a public sector company, owned and operated by the Government
of India. According to a recent survey, SAIL is one of India's fastest growing Public Sector
Units. Besides, it has R&D centre for Iron & Steel (RDCIS), Centre for Engineering and
Technology (CET), Management Training Institute (MTI) and SAIL Safety Organisation
(SSO) located at Ranchi capital of Jharkhand.

History and evolution

SAIL traces its origin to the Hindustan Steel Limited (HSL) which was set up on 19 January
1954. HSL was initially designed to manage only one plant that was coming up at Rourkela.

For Bhilai and Durgapur Steel Plants, the preliminary work was done by the Iron and Steel
Ministry. From April 1957, the supervision and control of these two steel plants were also
transferred to Hindustan Steel. The registered office was originally in New Delhi. It moved to
Calcutta in July 1956, and ultimately to Ranchi in December 1959.

A new steel company, Bokaro Steel Limited (Bokaro Steel Plant), was incorporated on 29
January 1964 to construct and operate the steel plant at Bokaro. The 1 MT phases of Bhilai
and Rourkela Steel Plants were completed by the end of December 1961. The 1 MT phase of
Durgapur Steel Plant was completed in January 1962 after commissioning of the Wheel and
Axle plant. The crude steel production of HSL went up from 1.58 MT (1959–60) to 1.6 MT.
The second phase of Bhilai Steel Plant was completed in September 1967 after
commissioning of the Wire Rod Mill. The last unit of the 1.8 MT phase of Rourkela – the
Tandem Mill – was commissioned in February 1968, and the 1.6 MT stage of Durgapur Steel
Plant was completed in August 1969 after commissioning of the Furnace in SMS. Thus, with
the completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and 1.6 MT at Durgapur,
the total crude steel production capacity of HSL was raised to 3.7 MT in 1968–69 and
subsequently to 4 MT in 1972–73. IISCO was taken over as a subsidiary in 1978 and later
merged in 2006.

The Ministry of Steel and Mines drafted a policy statement to evolve a new model for
managing industry. The policy statement was presented to the Parliament on 2 December
1972. On this basis the concept of creating a holding company to manage inputs and outputs
under one roof was mooted. This led to the formation of The Steel Authority of India Ltd.
The company, incorporated on 24 January 1973 with an authorised capital of ₹2,000 crore
(US$310 million), was made responsible for managing five integrated steel plants at Bhilai,
Bokaro, Durgapur, Rourkela and Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In
1978 SAIL was restructured as an operating company.
Organisational structure
 Major units

 Salem Steel Plant (SSP), Tamil Nadu.

 Visvesvaraya Iron and Steel Limited (VISL), at SAIL Integrated Steel Plants.
 Durgapur Steel plant.
 Rourkela Steel Plant (RSP) in Odisha set up with German collaboration.
 Bhilai Steel Plant (BSP) in Chhattisgarh set up with Soviet collaboration (1959).
 Durgapur Steel Plant (DSP) at Durgapur, West Bengal set up with British
collaboration (1965).
 Bokaro Steel Plant (BSL) in Jharkhand (1965) set up with Soviet collaboration.
 IISCO Steel Plant (ISP) at Burnpur in Asansol, West Bengal.
 Alloy Steel Plant (ASP), Durgapur, West BengalBhadravathi, Karnataka.
 Ferro Alloy Plant.
 Chandrapur Ferro Alloy Plant (CFP) in Maharashtra.
 Refractory Plants - SAIL Refractory Unit (SRU).
 SAIL Refractory Unit, Bhandaridah in Jharkhand.
 SAIL Refractory Unit, Bhilai in Chhattisgarh.
 SAIL Refractory Unit, IFICO, Ramgarh in Jharkhand.
 SAIL Refractory Unit, Ranchi Road in Jharkhand.
 Sales growth rate for five years

Mar'17 Mar'16 Mar'15 Mar'14 Mar'13

INCOME

Net Sales Turnover 44452.41 39051.88 45710.78 46698.41 44598.26

Other Income 535.61 594.67 983.74 833.80 933.74

Total Income 44988.02 39646.55 46694.52 47532.21 45532.00

EXPENSES

Stock Adjustments 120.63 540.61 -1408.12 894.63 -2016.09

Raw Material Consumed 21125.70 17155.23 18522.90 19271.16 21198.48

Employee Expenses 8947.83 9714.97 9736.33 9578.51 8637.20

Other Expenses 14220.21 14540.44 8833.46 7896.11 7261.35

TOTAL EXPENSES 44414.37 41951.25 41108.10 42582.56 39911.38

Operating Profit 38.04 -2899.37 4602.68 4115.85 4686.88

EBITDA 573.65 -2304.70 5586.42 4949.65 5620.62

Depreciation 2679.95 2402.35 1773.28 1716.69 1402.98

EBIT -2106.30 -4707.05 3813.14 3232.96 4217.64

Interest 2527.82 2300.45 1454.23 967.64 747.66

EBT -4634.12 -7007.50 2358.91 2265.32 3469.98

Taxes -2017.62 -2986.06 266.23 495.12 1070.31

Profit and Loss for the Year -2616.50 -4021.44 2092.68 1770.20 2399.67

Reported PAT -2833.24 -4021.44 2092.68 2616.48 2170.35

Swot analysis

Strengths:
 Abundant resources of iron ore.
 Low cost and efficient labour.
 Strong managerial capability.
 Strong dri production base.
 Modern plans.
Weaknesses:
 High cost of energy.
 Higher duties and taxes.
 Quality of coking coal.
 Infrastructure.
 Labour laws.

Opportunities:
 Huge infrastructure demand.
 Rapid urbanisation.
 Untapped rural demand.
 Increasing demand for consumer
durables.
Threats:
 Slow growth.
 Market fluctuations.
 China’s export possibilities.
 Global economic slow down.

Pest analysis
 Political Factor
The role of the government is crucial, both as a supplier and as a customer, and also as the
environment for business, creating the rules for competition. It creates boundaries within
which the steel industry must operate. In the case o f the Indian steel industry, the
government directly or indirectly controls the finance and many o f the inputs - both raw
material and services. The government has opened the field for private power plants. This is,
in the long run, expected to improve the power situation in the country, to the benefit of the
steel industry.The government as a buyer is very important for the steel industry. The
government investments in infrastructure such as rail, highways, dams, power plants and
ports are critical prime movers for steel demand. In fact, government spending on
infrastructure the demand for long products, which is followed, with a time lag, by a demand
for flat products.

The demand for long products tapers off with a saturation of infrastructure development.
This is expected to provide the necessary fillip to the stagnant steel demand.

Economic Factor

Steel industry is affected by current economic crisis. The steel companies also provided
losses o f Rs. 1424 crores on account of currency fluctuation. INDIA'S steel exports
registered impressive growth in 2002-03. Provisional figures suggest that exports stood at
highest level, against last five years. The steel industry was finally showing signs of recovery.
Major producers started to export to capitalize on rising international prices and to boost
bottom lines that had rusted in 1998-99. However, yet again, 40 the good times comes for
steel players. Indian economy become the strongest than it is comparing since last many
years, it is absolutely good time for Indian steel industry. The analysis s how’s that the India
n steel industry suffers from low productivity of labour but high capital, energy and
transportation cost.

Social factor

In Social point of view, the responsibility of various steel companies towards society and for
the community is required to be analyzed.
 Technological Factor

Technological changes can alter the balance of the five forces and may force changes
in the industry structure. For example, with the advent o f Midrex and Corex processes of
iron making, which use no n-coking coal, the requirement for coking coal will drop
drastically, as non-coking coal is abundant in India. This will diminish the bargaining power
of coal suppliers. With the introduction of continuous strip processing (CSP) the cost of
production of cold rolled sheet will reduce significantly, due to elimination of intermediate
steps and improvement of yield and price performance ratio. These and many upcoming
technologies will shift the balance of power away from the integrated manufacturers and
reduce the entry barrier.

The convergence of IT with steel may change the marketing of steel fundamentally.
For the steel producers, e-commerce may help reduce direct and indirect sales costs, keep
control over the sales channel and enhance reach. In India, two steel majors, Tata steel
and SAIL along with kalyani Steel have participated in the formation of a steel portal.

PORTER’S 5 Forces model

Forces Favorable Adverse Variables

Acting on Variables
Industry
Degree of • Concentration and balance • Low industry growth
Rivalry • High fixed cost/value
added
• Absence of product
differentiation
• High corporate stakes
• Low brand identity
• Exit barriers
Threat of • High economies of scale • Lack of product
Entry for differentiation & low
integrated steel plants brand identity
• High capital requirement • Low switching cost
• Access to distribution
channels.
Threat of • Switching cost • Better
Substitutes price/performance of
substitutes.

Buyer Power • Buyer's inability to • High bargaining

integrate leverage of buyer
backward • High-to-medium buyer
• High economies of scale for Concentration.
integrated steel plants • High buyer volume
• High price sensitivity
• Little impact on
quality performance in
low end-use segments
Supplier • Lack of significant High supplier concentration
Power differentiation
of inputs
• Importance of volume to
supplier
• Threat of forward
integration by
supplier relative to threat of
backward integration by steel
Producers negligible.