Global business project 2 (GBP)

A final report on the steel industry

Submitted by :
T.Sujan ( 16bsuhh010335)
Shaashwat ganeriwal (16bsuhh010288)
Ch.Srikanth (16bsuhh010363)

Project segmentation:
T.Sujan – Industry information, market information and pestle analysis
Shaashwat ganeriwal – Introduction, History
Ch.Srikanth – swot analysis, porter’s forces and recent developments
T.sujan and Shaashwat ganeriwal – Ratio analysis
 PREFACE

As a part of our curriculum and in order to gain knowledge in the

business and industry we are required to make a research and report on
our given topic (steel industry) . The basic objective of the report is to
gain knowledge and able to analyze various aspects of the industry.

In this report we included the history , market information ,company

information and also did pestle analysis ,swot analysis and also porter’s
five forces .
In the course of this project we understood and gained lot of knowledge
about the indian and global steel industry and the factors that effect
industry . We also learnt about the current market trends and ratio
analysis of the industry.
We would like to thank our faculty for gbp-2 NITYANAND TRIPATHI sir
for providing us this oppurtunity to to learn so much in this course and
project.
CONTENTS: PG.NO:
1.Introduction 04
2.History. 05
3.Industry information. 06
A.size of the industry 06
B.Seasonality of industry. 06
C.Economic fluctuations. 07
D.Scope and Growth. 07
E.Competition in the market. 08
F.Structure. 09

4.Market information. 09
A.products offered. 09
B.product differentiation. 09
C.potential for economies. 11
D.Regulatory environment 12
E.Growth. 13
F.Market segmentation. 13
G.Market price trend. 14

5.Company information. 16
A.major players. 16
B.Ratio analysis. 17

6.Pestle analysis. 20
7.Swot analysis. 22
8.porter’s forces. 24
9.Recent developments. 27
1.INTRODUCTION:
The iron and steel industry is one of the most important industries in India. During
2014 through 2015, 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. 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.
There are more than 50 iron and steel industries in India. Their locations are given
below in the following table:

Name Location Owner

Jindal Steel and Power Limited Raigarh, Angul,Odisha Jindal Group

Tata Steel Limited formerly Tata Iron

Jamshedpur, Jharkhand Tata Steel
and Steel Company Limited (TISCO)

Tata Steel Limited kalinganagar, odisha Tata Steel

Visvesvaraya Iron and Steel Plant Bhadravati, Karnataka SAIL

Bhilai Steel Plant Chhattisgarh SAIL

Durgapur Steel Plant Durgapur, West Bengal SAIL

Bokaro Steel Plant Jharkhand SAIL

Chandrapur Ferro Alloy Plant Chandrapur, Maharashtra SAIL

IISCO Steel Plant Asansol, West Bengal SAIL

Salem Steel Plant Tamil Nadu SAIL

Rourkela Steel Plant Odisha SAIL

JSW Steel Hospet, Bellary, Karnataka JSW Steel

Visakhapatnam, Andhra Rashtriya Ispat

Visakhapatnam Steel Plant
Pradesh Nigam Limited

Bhushan steel
Bhushan Steel Limit Angul, Odisha
limited

Yogesh
Rimjhim Ispat Limited Kanpur, Uttar Pradesh
Agrawal

2. HISTORY:
Modern steel making in India began with the setting of first blast furnace of India at
Kulti in 1870 and production began in 1874, which was set up by Bengal Iron Works.
Tata Iron and Steel Company (TISCO) was established by Dorabji Tata in 1907, as part
of his father's conglomerate. By 1939 it operated the largest steel plant in the British
Empire. The company launched a major modernisation and expansion program in
1951.

Prime Minister Jawaharlal Nehru, a believer in socialism, decided that the

technological revolution in India needed maximisation of steel production. He,
therefore, formed a government owned company, Hindustan Steel Limited (HSL) and
set up three steel plants in the 1950s.

The Indian steel industry began expanding into Europe in the 21st century. In January
2007 India's Tata Steel made a successful $11.3 billion offer to buy European steel
maker Corus Group. In 2006 Mittal Steel Company (based in London but with Indian
management) acquired Arcelor for $34.3 billion to become the world's biggest steel
maker, ArcelorMittal, with 10% of the world's output.
3.INDUSTRY INFORMATION:
A.size of the industry

Steel industry was de-licensed and de-controlled in 1991 & 1992 respectively. India is
currently the 3rd largest producer of crude steel in the world. In 2016-17 (prov.),
production for sale of total finished steel (alloy + non alloy) was 00.74 mt, a growth of
10.7% over 2015-16. Production for sale of Pig Iron in 2016-17 (prov.) was 9.39 mt, a
growth of 1.8% over 2015-16. India was the largest producer of sponge iron in the
world during the period 2003-2015 and was the 2nd largest producer in 2016 (after
Iran) . The coal based route accounted for 79% of total sponge iron production in the
country in 2016-17 (prove). Data on production / production for sale of pig iron,
sponge iron and total finished steel

B. Is the industry seasonal ?

Yes, the industry is seasonal in nature.Downstream industry of steel
structure mainly for building, road construction and other transportation
industries, due to low temperature affecting construction in winter, holidays
and other reasons, building construction, road transportation and other
industries is relatively small business in the first quarter, which led to the
upstream steel structure industry procurement needs decline over the same
period, in most regions the steel industry presents a off-season in the first
quarter, relatively high seasonal characteristics in the second, third and fourth
quarter, especially the second half of year is better than the first half.

C.Economic fluctuations

Steel industry observes lot of economic fluctuations because of its vulnerability both
economy wise and nature wise.

Steel, in the country is a de-regulated sector. Accordingly, prices of various

steel products are decided by individual producers based on market
conditions including demand – supply scenario, trend of international steel
prices, cost of raw materials and other inputs etc. Government has no direct
role in fixation of steel prices. However, Government intervenes through fiscal
measures, as and when need arises to maintain steady supply position and to
boost steel production in the country
D.scope and growth
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 126.33 mt in 2016-17 (prov.), up by 3.6% over 2015-16 and
India, which emerged as the 3rd largest producer of crude steel in the world in 2016
as per provisional ranking released by the World Steel Association, 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.

E.Competitors in market

Currently, there are three main integrated producers of steel;Steel Authority of

India Limited (SAIL), Tata Iron and Steel Co Ltd (TISCO) and Rashtriya Isp
at NigamLimited (RINL). Of the three, SAIL is the largest owing to its large ste
el production capacity plant size. After liberalization, on the account of active p
articipation of private sector in the steel industry, publicsector share in the total
production started dwindling. In 200304, share of public sector in the finisheds
teel production (alloy & nonalloy) was 28 percent, which was reduced to 3 perc
ent in 200607.Secondary producers use steel scrap or sponge iron/direct iron
(DRI) or hot briquetted iron(HBI). It comprises mainly of Electric Arc Furnace (
EAF) and Induction Furnace (IF) units, apart fromother manufacturing units lik
e the independent hot and cold rolling units, rerolling units, galvanizing andtin
plating units, sponge iron producers, pig iron producers, etc. Secondary produ
cers include Essar Steel. ISPAT Industries Ltd., and JSW Steel Ltd. There are
120 sponge iron producers; 650 mini blastfurnaces, electric arc furnaces, indu
ction furnaces and energy optimizing furnaces; and 1200 re rollers in India.
F. Structure
Vertical integration is when a company is involved in multiple parts of the
same business. For steel makers, that means things like owning steel mills,
iron ore operations, and coal mines. The goal is to be able to remove the
middle men, and added costs, from the process of making steel. It's a road
that several of the industry's biggest players have been going down.

4.MARKET INFORAMTION :
A. Products offered in the industry
The products made by the steel industry share the designation of finished steel
products. This means that they are tradable products, i.e. they have acquired a
form tailored for the steel industry’s customers e.g. the engineering and
construction industries.
Steel is to be found everywhere. Often it is not visible since it is hidden by
other materials e.g. paint, plastic, concrete or other metals. Here are some
examples of steel products:
 Buildings: metal roofing, steel beams, reinforcing steel and mounting
brackets.
 Vehicles: private cars, trucks, trains and cycles.
 Infrastructure: Bridges, steel safety barriers for roads, lighting and high
voltage pylons, railings and railways.
 Art and design: sculptures and jewellery.
 Machines and tools: press tools, cylinder blocks, lathes, saws and drills.
 Industry: rollers, pipes, machines, cranes, overhead cranes, rushers and
drills.
 Medicine: scalpels (lancets), hip implants, suture needles and surgical pins.
 Everyday use: paper clips, scissors, kitchen sink units, radiators, cutlery,
saucepans emergency stairways, domestic appliances, sporting equipment
and computers.

B. Product differentiation
Steel has very low barriers in terms of product differentiation as it doesn't fall
into the luxury or specialty goods and thus does not have any substantial price
difference. However, certain companies like Tata Steel still enjoy a premium
for their products because of its quality and its brand value created more than
100 years back. Bargaining power of buyers: Unlike
the FMCG or retail sectors, the buyers have a low bargaining power. However,
the government may curb or put a ceiling on prices if it feels the need to do so.
The steel companies either sell the steel directly to the user industries or
through their own distribution networks. Some companies also do exports.
For example tata steel and jindal steel produces the following products
Tatasteel Jindal steel
Tata Agrico Rails
Galvano parallel flange beams
Bearings. Wire rods
Precision tubes. Angles and channels
And pipes. Plates and coils
So there is product differentiation between the competitors but steel industry
has very less variety to offer in terms of product differentiation
JINDAL TMT prices in feb 2018

C.Potential for economies of sale:

Economies of scale is the cost advantages that steel obtains due to size. The
greater the volume, the greater the advantages. “Economies of Scale” has a
significant impact, so an analyst should put more weight into it. "Economies of
Scale " will have a long-term positive impact on the this entity, which adds to its
value. This statements will have a short-term positive impact on this entity,
which adds to its value.
steel industry is going through a technological revolution. Compared to the
changes that took place a decade
or two ago, the current technological changes are taking place fast. This is due
to the competition and globalization
of the steel industry. The technology drivers that influence the future
steelmaking technologies that make the steel

plants as profitable business are:

* Capital cost;
* Raw materials demand;
* Environmental impacts; and
* Customer requirements.6
All the above drivers are influenced by energy efficiency either directly or
indirectly. Generally, the technology
that reduces or eliminates energy intensive steps like coke making and blast
furnaces also reduces the capital cost.
Shortages of raw materials like coking coal and high quality scrap will lead
researches in the direction of energy
efficient and fewer processing steps. The efforts to combine the AISI-DOE
smelting process with the Hoogovens
Cyclone Furnace is an excellent example of reseinarch towards energy
efficiency. It is well known that energy efficiency has a direct impact on the
environment.
A number of alternative-iron processes such as Romell, Corex and Cyclone
furnace have built-in systems for waste
energy utilization. The 1994 Canadian Metals Industry study on present and
future use of energy in the Canadian
steel industry indicates a reduction of about 48 percent in energy consumption
for integrated mills and 61 percent for mini plants.

D. Regulatory environment:
E.Growth:
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 126.33 mt in 2016-17 (prov.), up by 3.6% over 2015-
16 and India, which emerged as the 3rd largest producer of crude steel in the
world in 2016 as per provisional ranking released by the World Steel
Association, has to its credit, the capability to produce a variety of grades and
that too, of international quality standards

F.Market segmentation:
Agriculture:
the agriculture and forestry equipment sectors, equipment and machinery need
to cater to specific requirements in reliability, durability and efficiency. Steel
recognises the critical role played by wear-resistant steel in these specific steel
applications and manufactures a wide array of purpose-built machinery forthese
segments superior quality agricultural implements and also manufacture hoes,
shovels, sickles, crowbars, pickaxes, hammers and garden tools. A range of files,
pliers, spanners, wrenches, screwdrivers and other tools are also being
manufactured

Construction:
Construction can be segmented according to their primary function – the
structural frame (sections, tubes), infrastructure, building solutions (roof and
wall products) and internal fit out applications (HVAC).

Automotive:

Steel continues to be a material of choice for Auto makers with steel contributing
to ~60-65% of the total raw material content in the average Indian vehicles.
Recognizing the emerging need of automotive manufacturer, Steel industry has
heavily invested in new facilities, capabilities and infrastructure (upstream &
downstream). It has taken the lead in development of specialized products for the
automotive segments such as micro-alloyed high strength steels, Interstitial Free
(IF) steel and Galva Annealed for two-wheeler fuel tanks. We have been the first
domestic integrated supplier of Hot Rolled high-strength steels and outer body
panels for passenger vehicles. With the commissioning of JCAPCPL (a joint
venture of TSL and NSSMC) and Kalinganagar plant, we are targeting to bring the
next generation of advanced high strength steels (AHSS) to India

These are the main companies which use steel for manufacturing in India.

Energy and power:

High performance steels, backed by dedicated support and expert advice, fulfill a
whole range of applications in the energy market. Steel’s product portfolio for
this sector includes wide ranging energy applications as well as quality base steel
products like high quality pipeline systems, structural products, light fabricated
systems and steel components for drilling and power generation. Additional
processing options are also available including coating, profiling and welding.

G.Market price trend:

Steel plants which were shut by the Chinese government, in the wake of
increasing air pollution, is one of the reasons behind the rising steel prices in
the country. Steel import from China has decreased, so the local
manufacturers are charging at their own will.
The second reason behind the increasing prices is that the steel manufacturers
have started importing steel to China, creating scarcity in the local market and
thus leading to high prices.
Levy of the Goods and Services Tax is yet another reason behind the increase
in the prices from Rs 1,000 to 1,500 per metric tonne.

5. Company Information:
a) major players:
 TATA STEEL
 STEEL AUTHORITY OF INDIA L.T.D.
 JSW STEEL

b) Ratio Analysis:
 CURRENT ASSETS
400000
350000
300000
250000
200000
150000
100000
50000
0
1 2 3 4 5 6 7 8
YEAR

Tata Steel Ltd. Steel Authority Of India Ltd. Industry Average

PAT
80000

60000

40000

20000

0
1 2 3 4 5 6 7 8
-20000

-40000

-60000
YEAR

Series1 Series2 Series3

RESERVS & SURPLUS

700000
600000
500000
400000
300000
200000
100000
0
1 2 3 4 5 6 7 8
YEAR

Series1 Series2 Series3

 SALES
600000
500000
400000
300000
200000
100000
0
1 2 3 4 5 6 7 8
YEAR

Series1 Series2 Series3

CURRENT RATIO
4
3.5
3
2.5
2
1.5
1
0.5
0
1 2 3 4 5 6 7 8
YEAR

industry CR TATA CR SAIL CR

QUICK RATIO
3

2.5

1.5

0.5

0
1 2 3 4 5 6 7 8
YEAR

Industry Quick Ratio Tata QR SAIL QR

 Profit Margin
0.25
0.2
0.15
0.1
0.05
0
-0.05 1 2 3 4 5 6 7 8
-0.1
-0.15
YEAR

Industry Profit Margin on Sales Tata Profit Margin on Sales SAIL Profit Margin on Sales

DEBT EQUITY RATIO

40
35
30
25
20
15
10
5
0
1 2 3 4 5 6 7 8
YEAR

Industry DE Ratio TATA Steel DE Ratio SAIL DE Ratio

INVENTORY TURNOVER
10

0
1 2 3 4 5 6 7 8
YEAR

Industry Inventroy Turnover Ratio Tata ITR SAIL ITR

6.PESTLE ANALYSIS:

Political:
The role of the government is crucial, both as a supplier and as a customer,
and also as the supra environment for business, creating the rules for
competition. It creates boundaries within which the steel industry must
operate. In the case of the Indian steel industry, the government directly or
indirectly controls the finance and many of 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 spurs 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:

The analysis shows that the Indian steel industry suffers from low productivity
of labour but high capital, energy and transportation cost. The steps needed to
enhance competitiveness of the Indian steel to industry include investment
towards technology up gradation. There is also a vast scope for quality up
gradation. Quality monitoring. Inspection and control measure have also to be
introduced at all stages of operation as well as technical discipline. Automation
in process routes, optimum capacity utilization, improved maintenance
practices, extensive mechanization in all possible areas as well as pollution
control measures need to be implemented. The Indian steel industry is at
crossroad. It needs to step up values-addition to ensure that the wide
fluctuations in HR prices are moderated with greater share of value-added
products. Further, it has to modernize itself to bring down production costs.
China makes strong impact in Indian economy. Various steel majors are
planning to exports in millions of tones to china this year. So Overall there is a
good and grooming economy for indian steel industry.
Social:

Steel Industry (company) shall constantly strive to improve the quality of life of
the communities it serves through excellence in all facets of its activities. They
are committed to create value for all their stakeholders by continually
improving their systems and processes through innovation. The policy will be
reviewed to align with business direction and to comply with all the
requirements of the Quality Management Standard.
In this tight competitive environment Steel companies recognize that its people
are the primary source of its competitiveness. It is committed to equal
employment opportunities for attracting the best available talent and ensuring
a cosmopolitan workforce. It will pursue management practices designed to
enrich the quality of life of its employees, develop their potential and maximize
industry.

Technology:

Technological changes can alter the balance of the five forces and may force
changes in the industry structure. For example, with the advent of Midrex and
Corex processes of iron making, which use non-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.

Legal:

Mines and Minerals (Regulation and Development and Regulation) Bill, 2010,
requires mining companies to share 26% of its profit with local inhabitants. The
new charges could account for nine per cent of their total expenditure and cost
them 5-6 per cent of their operating profits.steel industry ensures the EHS
(Environmental health and safety) under which each and every employee’s
activity is managed by the EHS framework.
Environment:

In overall Steel Industry companies are commitment to minimize the adverse

impact of its operations on the environment. Towards this end, it shall
endeavor to:

1.Set sound environmental objectives and targets, and integrate a process of

review, as essential elements of corporate management.

2. Install, maintain and operate facilities to comply with applicable

Environmental Laws, statutes and other regulations.

3. Conserve natural resources and energy by constantly seeking to reduce

consumption and wastage.

4. Minimize process waste, and promote the recovery and recycling of

materials.

5. Phase out pollution-prone processes and install state-of-the-ar1 technology

for

pollution prevention, and continual improvement, in environmental

performance.

6. Develop and rehabilitate waste dumps through a forestation and

landscaping.

7.SWOT ANALYSIS

Strengths:
India has rich mineral resources. It has abundance of iron ore, coal and many other
raw materials required for iron and steel making. It has the fourth largest iron ore
reserves (10.3 billion tonnes) after Russia, Brazil, and Australia. Therefore, many raw
materials are available at comparatively lower costs. It has the third largest pool of
technical manpower, next to United States and the erstwhile USSR, capable of
understanding and assimilating new technologies. Considering quality of workforce,
Indian steel industry has low unit labour cost, commensurate with skill. This gets
reflected in the lower production cost of steel in India compared to many advanced
countries. With such strength of resources, along with vast domestic untapped
market, Indian steel industry has the potential to face challenges successfully. The
major strengths can be summarized as:
 Abundant resources of iron ore
 Low cost and efficient labour force
 Strong managerial capability
 Strongly globalised industry and emerging global competitiveness
 Modern new plants & modernized old plants
 Strong DRI production base
 Regionally dispersed merchant rolling mills.

Weaknesses :
This are inherent in the quality and availability of some of the essential raw materials
available in India, e.g., high ash content of indigenous coking coal adversely affecting
the productive efficiency of iron-making and is generally imported. Also, Steel is a
capital intensive industry; steel companies in India are charged an interest rate of
around 14% on capital as compared to 2.4% in Japan and 6.4% in USA. In India the
advantages of cheap labour get offset by low labour productivity; e.g., at comparable
capacities labour productivity of SAIL and TISCO is 75 t/man year and 100 t/man
years, for POSCO, Korea and NIPPON, Japan the values are 1345 t/man year and 980
t/man year. High administered price of essential inputs like electricity puts Indian
steel industry at a disadvantage; about 45% of the input costs can be attributed to
the administered costs of coal, fuel and electricity. The major weaknesses can be
summarized as:

 High cost of energy Higher duties and taxes

 High cost of capital
 Quality of coking coal
 Labour laws
 Dependence on imports for steel manufacturing equipments & technology
 Slow statutory clearances for development of mines.

Opportunities :
The biggest opportunity before Indian steel sector is that there is enormous scope for
increasing consumption of steel in almost all sectors in India. The Indian rural sector
remains fairly unexposed to their Multi-faceted use of steel. The usage of steel in cost
Effective manner is possible in the area of housing, fencing, structures and other
possible applications where steel can substitute other materials which not only could
bring about Advantages to users but is also desirable for conservation of forest
resources. Excellent potential exist for enhancing steel consumption in other sectors
such as automobiles, packaging, engineering industries, irrigation and water supply in
India. The key areas of opportunities can be summarized as:

 Huge Infrastructure demand

 Rapid urbanization
 Increasing demand for consumer durables
 Untapped rural demand
 Increasing interest of foreign steel producers in India

Threats :
The linkage between the economic growth of a country and the growth of its steel
industry is strong. The growth of the domestic steel industry between 1970 and 1990
was similar to the growth of the economy, which as a whole was sluggish. This strong
relation in today's environment where the growth of the industry has become
stagnant owing to the overall slowdown has resulted in enhanced rivalry among
existing firms. As the industry is not growing the only other way to grow is by
increasing one's market share. The Indian steel industry has witnessed spurts of price
wars and heavy trade discounts, which has impacted the Indian Steel Industry.

 Slow growth in infrastructure development

 Market fluctuations and China's export possibilities
 Global economic slow down

8.Porter’s 5 Forces Competitive Strategy for Industry Analysis:

Five forces model was created by M. Porter in 1979 to understand how five key
competitive forces are affecting an industry. The five forces identified are:
  These forces determine an industry structure and the level of competition in
that industry. The stronger competitive forces in the industry are the less
profitable it is. An industry with low barriers to enter, having few buyers and
suppliers but many substitute products and competitors will be seen as very
competitive and thus, not so attractive due to its low profitability.
 It is every strategist’s job to evaluate company’s competitive position in the
industry and to identify what strengths or weakness can be exploited to
strengthen that position. The tool is very useful in formulating firm’s strategy
as it reveals how powerful each of the five key forces is in a particular industry.

Rivalry Level Among Existing Firms:

This force is the major determinant on how competitive and profitable an industry is.
In competitive industry, firms have to compete aggressively for a market share,
which results in low profits. Rivalry among competitors is intense when:

 There are many competitors

 Exit barriers are high
 Industry of growth is slow or negative
 Products are not differentiated and can be easily substituted
 Competitors are of equal size
  Low customer loyalty.

Threat of New Entrants:

This force determines how easy (or not) it is to enter a particular industry. If an
industry is profitable and there are few barriers to enter, rivalry soon intensifies.
When more organizations compete for the same market share, profits start to fall. It
is essential for existing organizations to create high barriers to enter to deter new
entrants. Threat of new entrants is high when:

 Low amount of capital is required to enter a market

 Existing companies can do little to retaliate
 Existing firms do not possess patents, trademarks or do not have established
brand reputation
 There is no government regulation
 Customer switching costs are low (it doesn’t cost a lot of money for a firm to
switch to other industries)
 There is low customer loyalty
 Products are nearly identical
 Economies of scale can be easily achieved.

Buyers’ Bargaining Power:

Buyers have the power to demand lower price or higher product quality from
industry producers when their bargaining power is strong. Lower price means lower
revenues for the producer, while higher quality products usually raise production
costs. Both scenarios result in lower profits for producers. Buyers exert strong
bargaining power when:

 Buying in large quantities or control many access points to the final customer
 Only few buyers exist
 Switching costs to other supplier are low
 They threaten to backward integrate
 There are many substitutes
 Buyers are price sensitive.
Sellers’ Bargaining Power:

Strong bargaining power allows suppliers to sell higher priced or low quality raw
materials to their buyers. This directly affects the buying firms’ profits because it has
to pay more for materials. Suppliers have strong bargaining power when:

 There are few suppliers but many buyers

 Suppliers are large and threaten to forward integrate
 Few substitute raw materials exist
 Suppliers hold scarce resources
 Cost of switching raw materials is especially high.

Threat of Substitute Products:

This force is especially threatening when buyers can easily find substitute products
with attractive prices or better quality and when buyers can switch from one product
or service to another with little cost. For example, to switch from coffee to tea
doesn’t cost anything, unlike switching from car to bicycle.

Although, Porter originally introduced five forces affecting an industry, scholars have
suggested including the sixth force:

complements. Complements increase the demand of the primary product with which
they are used, thus, increasing firm’s and industry’s profit potential. For example,
iTunes was created to complement iPod and added value for both products. As a
result, both iTunes and iPod sales increased, increasing Apple’s profits.

9.Recent Developments of Iron and Steel Industry:

Just before independence, total production capacity of iron and steel industry
in India was only 1.3 million tonnes-1 million tonnes of TISCO and 0.3 million
tonnes from Indian Iron and Steel Co. (IISCO). After independence various
steps were taken under the economic planning, to develop public sector steel
plants in India.

The new industrial policy, 1956 placed the iron and steel industries in schedule
A where only public sector units can be established, keeping the chances
open for the expansion of existing iron and steel industries in the private
sector.
Accordingly, the decision to establish first public sector plant was taken in
1954 for establishing Rourkela Steel Plant. In 1955 another agreement was
signed between India and U.S.S.R. to establish the second public sector plant
at Bhilai. Then in 1956, another agreement was signed with British consortium
for establishing their public sector plant at Durgapur.

Thus, with the development of three public sector units in subsequent years
the total production of crude steel ingots has gradually increased from 1.47
million tonnes in 1950-51 to 6.14 million tonnes in 1970-71 and then to 64.9
million tonnes in 2009-10.

Total production of finished steel also rose from 1.04 million tonnes in 1950-51
to 4.64 million tonnes in 1970-71 and then to 14.3 million tonnes in 1991-92
and is expected to be 87.67 million tonnes in 2013-14.

During the first two plans, development of steel industry was quite rapid with
the establishment of three public sector plants. During the Third Plan the
production capacity of the previous three plants were doubled and a new plant
was established at Bokaro.

Later on, since the introduction of Fourth Plan steps was also taken for the
development of three more steel plants one each at Salem, Bijoynagar and
Visakhapatnam.

In 1974, the Steel Authority of India Limited (SAIL) was created for the
development of steel industry, for supplying major inputs to the industry and
also to bring a coordinated and synchronized development of all the major
industrial units under its control.

These major units were: Hindustan Steel Limited, Salem Steel Limited,
Hindustan Steel Works Construction Limited, Bharat Coking Coal Limited and
National Mineral Development Corporation Limited.

The management of TISCO is also undertaken by SAIL. The SAIL is at

present an integrated steel company with five public sector steel plants. At
present about 70 per cent of domestic steel requirement is only met by SAIL.
With commissioning of the Vishakhapatnam Steel Plant by 1994-95, the
project would raise the production capacity by another 2.17 million tonnes.

The steel industry is providing direct employment to about 2.5 lakh workers.
The Seventh Plan fixed the target to increase the production capacity in
saleable steel to 15 MT and also to raise the volume of total production to 13
million tonnes. At the end of the plan, the target was fulfilled.

10.Conclusion:
India is the 3rd largest steel producer in the world presently and is expected to
become 2ndby the end of 2018. The demand for steel is expected to grow at
5.4% in the coming three years.

Affordability , sustainability ,environmental change and upgradation of

technology are the current issues of indian steel industry.The government is
taking many steps to overcome these issues and is expected to overcome
these in the coming 5 to 7 years.

India is expected to overtake Japan to become the world's second largest

steel producer soon, and aims to achieve 300 million tonnes of annual steel
production by 2025-30.

Based on increased capacity addition in anticipation of upcoming demand, and

the new steel policy, that has been approved by the Union Cabinet in May
2017, is expected to boost India's steel production.* Huge scope for growth is
offered by India’s comparatively low per capita steel consumption and the
expected rise in consumption due to increased infrastructure construction and
the thriving automobile and railways sectors.