INDIAN STEEL INDUSTRY STRUCTURE • • India is the 5th largest steel producer It is divided into two distinct groups

: o integrated steel producer o small/stand alone plants

FUTURE OUTLOOK • • • • Growth of steel demand will be around 11% annually Produce 110 million tons of steel by 2020 India would become the second biggest producer of steel Upcoming projects

implying a CAGR of 6. Develop an appropriate Institutional Framework for collection of data and dissemination of Information. Similarly targeted consumption is 90 mt by 2019-20 from the 2004-05 level of 36 mt. In addition the policy also addresses challenges arising out of environmental concerns. ports and power. 3. The Government announced the National steel policy in 2005. improve cost. With the abolishing of price regulation of iron and steel in 92. The Trade Policy has also been liberalized and import and export of iron and steel is freely allowed with no quantitative restrictions on import of iron and steel items. The policy targets indigenous production of 110 million tonnes (mt) by 2019-20 from the 2004-05 level of 38 mt at a compounded annual growth of 7.EXTERNAL ANALYSIS PESTLE ANALYSIS POLITICAL Policy regime for the steel sector in India Under the new industrial policy. 2. . Spread awareness about hedging mechanisms available in exchanges like MCX and NCDX and develop appropriate regulatory mechanism to avoid any manipulative Practices.3 percent per annum.90 percent. The policy devises a multi-pronged strategy to achieve these targets with following focus areas -removal of supply constraints especially availability of critical inputs like iron ore. volatile steel prices and the secondary sector The Eleventh plan working group for steel recommends the following for effective development of the steel industry: 1. human resource requirements. 4. Tariffs on various items of iron and steel have drastically come down since 1991-92 levels and the government is committed to bring them down to the international levels. Price and distribution controls have been removed as well as foreign direct investment up to 100% (under automatic route) has been permitted. promote investments by removing procedural delays. Full utilization of the existing policy framework of Public-Private Partnerships (PPPs) in development of infrastructure like railways. iron and steel has been made one of the high priority industries. Set up an R&D Mission in order to provide accelerated thrust on R&D and thereby improve the competitiveness of the industry. R&D. increase exports. competitiveness by expanding and strengthening the infrastructure in roads. railways. the steel prices are market determined. meet the additional capital requirements by mobilizing financial resources.

Proposal to have a dedicated plan fund of Rs. Identification of infrastructural and related facilities required by steel industry 6. Interaction with All India Financial Institutions to expedite clearance of projects. through the setting up of “Institute for Steel Development and Growth (INSDAG) in Kolkata. Regular interactions with entrepreneurs proposing to set up new ventures. 8. noncoking coal etc. Facilitating movement of raw materials other than coal through finalization of wagon requirements and ensure an un-interrupted supply of raw materials to the producers. Similarly. 2. ships for breaking. Efforts are being made to further augment R&D activities in the country. There is an institutional mechanism through which financial assistance is provided from steel Development Fund for this purpose. Role of the Ministry 1. Import duties on several raw materials. Encouraging research & development activities in the steel sector. to review the progress of implementation and assess problems faced. 6. scrap. for new plants and expansion of existing ones. used by the steel industry has been reduced steadily over the past 4-5 years. 5. Rationalizing the classification of coking coal in consultation with the Coal Ministry so as to reduce the impact of royalty payable on this basic raw material.5. rail movement clearance etc. 4. 9. 3. Providing linkage for raw materials. developing and propagating the proper and effective use of steel and increasing intensity of steel usage particularly in the construction sector in rural and semi urban areas. the freight rates adopted by the Railways have been rationalized after inter action with the Railway Board and freight cost on raw material transportation for steel producers is reduced. Interacting with State Governments to provide power at reduced/ concessional tariffs especially to mini steel plants all over the country. A Technology Up gradation Fund Scheme (TUFS) for the Small and Medium Enterprises (SME) sector in steel industry to upgrade the technological profile of the plants in the SME sector. coke. . Promoting. such as. 25 crores for the 11th Five Year Plan in the Ministry of Steel towards grant for development of human resources for iron and steel and for ad campaigns for promotion of steel usage. Consider setting up of a multi-disciplinary organization along the lines of the International iron & Steel Institute (IISI). 7. 7.

the Indian steel sector is all set to grow. The National Steel Policy has forecasted the demand for steel would reach 110 million tons by 2019-2020. India is the only country globally to record a positive overall growth in crude steel production at 1. The flux in the existing society has opened up new channels for the development. It is estimated that India's steel consumption will grow at nearly 16% annually till 2012.ECONOMIC The International Monetary Fund said that Indian economy will grow by 6.75% this fiscal and return to its pre crisis level of 8% in 2011 even if the developed world remains sluggish.01 per cent for the period January -March 2009. 1.second only to China. The Indian Long Product Price Index ILPPI went up by 152 points whereas Indian Flat Product Price Index IFPPI also surge by 65 points.Purchasing Power Parity basis. This change is not only driving the demand for steel but also creating new horizons for innovative stateof-the-art usage of steel. With opportunities galore. The overall Indian Steel Price Index INDSPI up by 110 points. Growing urbanization 10. (IMF) 6. Ranked 4th in the world on GDP . 2. 11th in absolute terms. . Stable social and political environment SOCIAL Promotion of steel is important in India as the per capita consumption is far below the global average. Continuously improving macro economic factors 8. A strong demographic profile : with a large consumer base 9. A recent media report brought to the forefront that 250 farmers from Aska in Orissa have already placed orders for steel bullock carts to transport sugarcanes from the fields to the sugar mills in the region. 4. aspirational 10 % growth looks possible 7. the per capita steel consumption in India is 38 kg against the global average of 150 kg and the developed world average of 350 kg. 3. but the steel industry is trying to offset the negative effect of the recession by focusing on transportation and construction projects which are usually funded by the government. 5. It has to be said that the global recession has affected the Indian steel industry especially stainless steel. > 8% GDP growth targeted in 2006-07 . The increased steel consumption in the rural areas will improvise the quality of life in rural India. According to recent media reports.

. logistics will be an important area of management for steel industry. LEGAL Steel is a deregulated sector and the Government does not directly make investments in the steel industry. Import Duty on iron and non-alloy steel items re-imposed at 5% with effect from 18.00 crore has been provided for promotion of Research and Development (R&D) in the Iron and Steel Sector during the Eleventh Five Year Plan.2008. The discovery of natural gas and prospects of natural gas pipe lines from neighboring countries may open new avenues of energy for steel industry. This phenomenal increase in the capacity on the drawing board of all major steel producers would. This is going to put tremendous pressure on the input and infrastructural resources. The country is blessed with large iron ore reserves but their development and exploitation would require huge resources. The steel industry need to remain competitive by improving efficiencies across the entire value chain in an integrated manner.11. However.TECHNOLOGY Most steel companies have revamped their production and marketing systems to upgrade quality. on the aftermath of global economic slowdown the following economic stimulus measures were initiated by the Government during October 2008 to February 2009: (i) (ii) (iii) Export Duty on steel items (except melting scrap) withdrawn with effect from 31.11. from time to time with an overall view to regulate economy and boost the industry.118.2008. easing transportation to and from ports. on a rough estimate. Long term arrangements have also been worked out by steel producers and consumers to minimize the impact of steel cycles on both sides. However.10. rationalization of inland freight charges and higher road movement facilities. Therefore. coking coal is expected to remain a serious constraint and risk factor for Indian steel plants operating on BF route. The country is not so blessed in terms of energy resources for steel making. will take the current crude steel making capacity of 37 MTpa to about 60 MTpa over the next decade. improve deliveries and enhance customer service. a Gross Budgetary Support (GBS) of Rs. Duty Entitled Pass Book (DEPB) on steel items restored with effect from 14. However. Government implements various fiscal measures in the form of duties and taxes. The issues of environmental impact of exploiting the virgin areas will have to be addressed. This would involve development of ports. leading to higher imports. The Coking coal supplies from the public sector coal companies have been declining over the years.2008.

which shall ensure a continuous improvement in environmental performance in order to increase competitiveness in the future steel market. SNAPSHOT OF STEEL INDUSTRY PORTER’S 5 FORCES (i) (ii) (iii) (iv) (v) Entry barriers Competition Bargaining power of suppliers Threat of substitutes Bargaining power of Consumers . Consequent to evolution of various environment management tools for supporting and improving environmental performance of the industry. The growing pressure from all stakeholders forces steel companies to incorporate the environmental responsibility in all activities. green supply chain. This approach shall allow the steel companies to find and implement profitable and powerful measures that avoid waste generation. This paper deals with an Integrated Approach to Environmental Management of the steel industry. environment performance evaluation. and Countervailing duty (CVD) on Thermo Mechanically Treated (TMT) bars and structurals were reintroduced with effect from 02. Based on the above model. environmental accounting and other environmental management tools to EMS according to ISO 14001 requirements.02. reduce environmental pollution. a business model is being suggested for integration of environment in overall management system. improve consumption of natural resources and go beyond legal compliance. Environment Management Information System (EMIS). In this paper. a framework has been designed for implementation of Integrated Environmental Management Systems (IEMS) in steel industry.01. complex and interconnected that an ad hoc approach to problem solving is no longer considered effective.2009. steel companies have focused their attention towards integration of environmental strategy in their overall management system. ENVIRONMENT Environmental issues in steel industry are so numerous.2009. Life Cycle Assessment (LCA).(iv) (v) Central Value Added Tax (CENVAT) on steel items reduced to 8% with effect from 24. IEMS aims at 'the Greening of the industry' which shall integrate Pollution Prevention (P2).

HIGH • High capital costs . This has resulted in the erosion of the edge they would have otherwise enjoyed due to availability of cheap labour and raw materials. power and inefficiencies (low per employee productivity). Technology • COMPETITION .HIGH • • • • High competition Presence of a large number of players in the unorganised sector Competition from foreign players Spurt in merger and acquisition activities BARGAINING POWER OF SUPPLIERS .Indian steel companies have to bear additional costs pertaining to capital equipment. Increasing demand for steel Fragmented coke suppliers SWOT ANALYSIS OF INDIAN STEEL INDUSTRY STRENGTHS •Abundant resources of iron ore •Low cost and efficient labour force •Strong managerial capability •Strongly globalized industry and emerging global competitiveness •Modern new plants & modernised old plants •Strong DRI production base •Regionally dispersed merchant rolling mills .ENTRY BARRIERS .HIGH • • • • • The government’s move on railway freight costs and grid power costs would determine the final price of the metal High raw material price Lack of transportation Backward integration Lack of captive sourse hurting steel producers THREAT OF SUBSTITUTES – LOW • • High cost of basic input and services Use of aluminium\plastic BARGAINING POWER OF CONSUMERS .MIXED • • • • Presence of a large number of suppliers Access to global markets.

training of manpower and integrated information services RESOURCES • Abundant Iron Ore reserves • Strong Managerial skills in Iron and Steel making • Large pool of skilled Man-power • Established steel players with strong skills in steel making • Pro-active stance of Govt.WEAKNESSES •High cost of energy •Higher duties and taxes •Infrastructure •Quality of coking coal •Labour laws •Dependence on imports for steel manufacturing equipments & technology •Slow statutory clearances for development of mines. designers of steel intensive products. • Encouragement for overseas investments • High economic growth driven increasingly by industry • Faster Urbanisation . OPPORTUNITIES • Huge Infrastructure demand • Rapid urbanisation • Increasing demand for consumer durables • Untapped rural demand • Increasing interest of foreign steel producers in India THREATS • Slow growth in infrastructure development • Market fluctuations and China’s export possibilities • Global economic slow down DEMAND SIDE –Strengthening of delivery chain – Interface between producers. fabricators and ultimate user – Creating awareness about cost-effective and technically efficient end-use of steel SUPPLY SIDE – Enhanced and easy access to critical inputs – iron ore & cooking coal – Expansion and improvement in quality of infrastructure – Well developed financial market – Increased focus on R&D.

the Company has taken several measures to reduce costs in areas such as operations. which has helped in containing SAIL’s cost of production by neutralizing the impact of input cost escalations. by virtue of its `Maharatna’ status.. delivery etc. The Electric Resistance Welded Pipe Plant (ERWPP) at Rourkela which is being modernized will be able to cater to the requirements of the oil and gas sector through supply of higher grades of API Pipes upto API X-70 in wall thickness of 3. grade. Incorporated on January 24. oil & gas sectors are other segments where there is large growth potential as a number of major pipeline projects are on the anvil. Given the substantial investments taking place in infrastructural development in the country in the form of construction of highways. the growing demand from the white goods and automobile segments provide good opportunity forenhanced sales of CR Coils and Sheets.681 crore. Roongta. However. Further. purchases etc. SAIL is the 16th largest steel producer in the world.• • Increased Fixed Asset Building Automobiles and component industry growth POLICY • Pro-active stance of Govt. 48. 1973. size. enjoys significant operational and financial autonomy OPPORTUNITIES & THREATS FOR SAIL OPPORTUNITIES SAIL has four main integrated Steel Plants (ISPs) which have a combined capacity of 10.7 mm. there is sufficient opportunity to increase the production and sales of long products.K. Besides.5 million metric tons. SAIL. three special plants.During last few years. bridges. . and one subsidiary in different parts of the country. In case of flat products. There is therefore scope for substantial increase in domestic steel consumption through better utilization of existing capacity and enhancement of production capacity. With an annual production of 13. seaports and airports etc.910 employees.2 million tonnes of saleable steel with modernized facilities available to meet diverse customized requirements in the terms of quality. With a turnover of Rs. SAIL would continue to supply HR Coils and Plates to meet the requirement of these sectors.The per capita consumption of steel in the country is just about 30 kgs as compared to the world average of about 144 kgs. The water supply. the company is among the top five highest profit earning corporates of the country. And the fact that SAIL’s long products are preferred for their superiors quality. • Encouragement for overseas investments SAIL SAIL is India's largest steel producing company. Cost reduction would continue to remain a thrust area for SAIL as the company strives to further improve its cost-competitiveness. The Government of India owns about 86% of SAIL's equity and retains voting control of the Company. SAIL has more than 131.2 – 12. The company's current chairman is S. SAIL remains a major supplier of HR Coils to the tube making sector while increasing its presence in the cold rolling segment. SAIL has five integrated steel plants.

Also. and also a positive outlook in certain steel consuming sectors of the Indian Economy. Would greatly impact operations at SAIL plants as well. However. the growth in global steel demand. Inadequate availability and higher prices of key raw materials such as coal. Infrastructure development. In respect of HR Coils. there is still an estimated surplus capacity about 3 million tonnes in the country and exports could need to be maintained so long as domestic demand falls short of availability. As and when international prices go down there could be an increase in imports. thus having an impact on the future prospects of Indian steel companies. Further. in due coarse. and also the number of industrial projects taking off would result in increased economic activity which would generate demand and consumption of steel. RISKS AND CONCERNS Given the increasing globalization of the Indian economy. Furthermore. OUTLOOKS The domestic per capita steel consumption in India is still quite low and much below theaverage international level. which is expected to continue in the coming year too. could get reversed when Chinese demand comes down of production capacity of China increases. may not be maintained at the present level and. high volatility of international prices has a direct effect on domestic steel prices.THREATS During the fourth quarter of 2005-2006 custom duties on steel have been reduced from25% to 15% and imports have also been exempted from levy of Special Additional Duty(SAD). particularly in respect of flat products. entry of new producers of rails in the country is a potential source of competition. TATA STRENGTHS The Tata Steel Group has a balanced global presence in over 50 developed European and fast growing Asian countries. any downward trend in international market prices may result in consequential reduction in realization in domestic market. thereby effectively reducing the customs duty by about 50%. which has been powered by the high demand from China. Anti-dumping measures continue to be held in place of USA and the European Union and experts to these countries still remain largely affected. with manufacturing operations in 26 countries and . like wagon availability. While SAIL has upgraded and modernized the Rail Mill at Bhilai Steel Plant. port congestion etc. Ferro alloys etc. mainly to China. The buoyancy in the Indian Steel is a combination of demand for exports. the decline in international prices would lead to lower margins on exports. In the required quality coupled with infrastructural constraints. implementation of steel intensive projects in key sectors of economy would be beneficial to the Indian Steel Industry.

Product mix according to customer requirement 3. in Jharkhand State. energy and infrastructure. Its captive raw material resources and the state-of-the-art 5 MTPA (million tonne per annum) plant at Jamshedpur. Delivery in time. Complaint settlement 5. It is the first integrated steel plant in Asia and the world's second most geographically diversified steel producer. A corporate powerhouse with operations in iron. The management at TATA Steel believes that Customer's satisfaction would happen when the management fulfills the following dimensions. assuming its position as flagship of the reputed Ispat Group. Established in 1907. Tata Steel is among the lowest cost producers of steel in the world and one of the few select steel companies in the world that is EVA+ (Economic Value Added). Ispat Industries Limited (IIL) is one of the leading integrated steel makers and the largest private sector producer of hot rolled coils in India. Culture of customer service. Set up as Nippon Denro Ispat Limited in May 1984 by founding chairman Mr M L Mittal. enhancing quality and thereby achieving better performance benchmarks in all areas. 2. The various initiatives taken in its operations across the world have gradually evolved to become recognised models of improvement and growth. Tata Steel has placed continuous emphasis on improving processes. STRENGTHS • Acquisition Management . And its seamless supply chain management systems further the efficient use of raw materials.various ongoing projects in different parts of the world. India give it a competitive edge. ISPAT INDUSTRIES LTD. Tata Steel is Asia's first and India's largest private sector steel company. ensure the choice of the relevant technology and the ability to produce international quality products at a competitive price. steel. with a view to consistently increasing efficiencies. The company's strengths lie in its integrated process management. while its staff of highly skilled engineers. Flexible pricing policies 4. knowledge management and control systems. IIL has steadily grown into a Rs 9. The other value drivers of the group to successfully exploit the resources are the productivity through the people and liberty and entrepreneurship. 1.400-crore company. mining. technicians and managers with specialised domain knowledge. the Group today figures among the top 20 business houses in the country.

This inhouse mining of chrome ore will reduce the cost of production of high carbon ferro chrome. India’s second largest steelmaker. MS cold rolled coils and sheets. the Group acquired JSW Steel Service Centre (UK) Limited. Incidentally. high. plates and sheets. The Group's power generation is for captive consumption.e.• • • • • • • Low cost of production Mini mills Direct reduced Iron Skilled Manpower advantage of product mix: plates and rails Geographical spread research and development WEAKNESS • • • • • • Cyclical nature of steel industry management of plants post acquisition outdated technologies in few areas employee management energy intensity of industry high legacy cost(pension and medical liabilities) JINDAL STEEL The Group's principal activities are to production and distribution of iron and steel products and power generation. It manufactures hot rolled steel strips. for . MS galvanized plain. low and medium type of chromite ore. corrugated. Power and Other Products. The present production capacity is about 15000 MTPA inclusive of all grades i. colour coated coils and sheets. JSL has taken over 89 hectare in Orissa to source chromite ore in 2001. The Group operates in three segments namely Steel. On 31-Mar2008.Jindal Steel & Power Ltd. JSW Steel Ltd. consists of the most modern. SW Steel Ltd. has received all the three certificates: ISO:9001 for Quality Management System ISO:14001 for Environment Management System OHSAS:18001 for Occupational Health & Safety Management System BACKWARD INTEGRATION CHROME ORE To meet its requirement for production of High Carbon ferro chrome. ecofriendly steel plants with the latest technologies for both upstream & downstream processes. this ferro chrome is supplied to another Jindal company .

TECHNICAL EDGE JSL has a distinction of developing products using technology with a thrust on use of strong inhouse Research & Developments facilities. A similar new project at current prices will cost Rs. Such a huge capacity on a low equity base ensures sustained profits for JSL. The cold rolling facilities produces high value added products with realization going up to Rs.e.800 .2. This plant besides meeting the captive requirements also exports ferro chrome to various developed countries. 600 crore( this being more than 30 times of current equity of JSL i. cold rolled products are also developed for use in railway coaches initially for Metro Rail which may also find use in conventional coaches.91 crore).000 MT per annum in FY02.000 per Ton. a key component in the production of stainless and special steel.000 MT from 30. This will improve operational efficiencies / product yield at cold rolling units. Rs. special steel for coins etc with its own R&D efforts.e.manufacture of high carbon ferro chrome for onward supplies to JSL. is manufactured at Visakhapatnam Division of the company with an an installed capacity of 40000 MTPA. additional facilities i. Its Research & Development Division is not only developing products but also putting in lot of efforts to enhance plant process and technical capabilities which result in quality improvement and cost reduction. Assuming a liberal debt : equity ratio of 2 : 1. Further. JSL has developed cold rolled stainless steel strips for razor/ surgical blades. This plant is equipped with a state of the art testing laboratory to meet stringent quality standards for international markets. HIGH CARBON FERRO CHROME Ferro chrome. The cost of setting up of similar integrated facilities has a minimum gestation period of two years. 75.000 – 85. white goods etc. It has also developed low cost alternate 200 series with low Nickel which received huge success in domestic market and is being launched selectively in overseas market. ENTRY BARRIERS The stainless steel manufacturing facilities are highly capital intensive which act as a deterrent to new entrants. These products are primarily used in utensils. Further . slab heating furnace etc.1.000 cr. Strong inhouse R&D Higher cost and longer gestation time for new Entrants . are being installed to produce 15 MT coils as against 6-8 MT produced presently. 18. FORWARD INTEGRATION COLD ROLLING To shift the product-mix towards value added products. stainless steel for railway coaches. the equity of such a project would be Rs. JSL has increased the capacity of cold rolling mill to 90.

STRENGTHS Largest Integrated Stainless Steel manufacturer in India and ranked amongst top 15 in the world. • Backward and forward integration of facilities • Developed high-value added products • Excellent sales-equity ratio WEAKNESSES • • Highly Leveraged Unproductive investments in subsidiaries .