Sub : Strategic Management

STEEL INDUSTRY

Bharat Tailor Roll No : 51

 INTRODUCTION

The Indian iron and steel industry is nearly a century old, with Tata Iron & Steel Co. as
the first integrated steel plant to be set up in 1907. According to the data released by
Department of Industrial Policy and Promotion (DIPP), the Indian metallurgical industries
attracted Foreign Direct Investments (FDI) to the tune of US $10.33 billion in the period
April 2000–March 2017. Indian was the world’s third-largest steel producer in 2016. Real
consumption of steel during FY16 was estimated at 81.25 million tonnes. Consumption
of real steel has grew at CAGR of 5.76% during FY08-FY16. The total finished steel
production in FY17 stood at 83.10 MT while 6.10 million tonnes of finished steel was
imported into India. As of March 2017, the capacity utilization of steel producers is set to
increase with strong export demand and signs of revival in domestic sales. Companies
like JSW and Essar Steel have experienced a sharp increase in steel manufacturing in
the last 2 months.

AN OVERVIEW OF STEEL SECTOR

World Steel Association has projected Indian steel demand to grow by 5% in 2019 while
globally, steel demand has been projected to grow by 3.9% in 2019. Chinese steel use is
projected to show 7.8% growth in 2019.

Vision of Steel Industry

i. To facilitate enhancement of steel production capacity (currently 109 Million tones,

production 90 Million tones(approx.) and growth in Steel Production.
ii. To monitor the capital expenditure and modernization & expansion programs of PSEs
quarterly.
iii. To facilitate adequate availability of raw materials for steel industry from domestic &
overseas sources.
iv. To facilitate and promote R&D in steel sector and monitor the performance parameters
of iron & steel production.
v. To monitor & facilitate the mergers, acquisitions & joint ventures in Steel Ministry PSEs.
vi. To enhance customer/client satisfaction through prompt response or redressal of
customer issues as per service delivery standards of citizens’ charter of the Ministry of
Steel.
Mission of Steel Industry

Self-sufficiency in steel production by providing policy support & guidance to private

manufacturers, MSME steel producers, CPSEs & encourage adequate capacity
additions.

Development of globally competitive steel manufacturing capabilities

Cost-efficient production and domestic availability of iron ore, coking coal and natural gas.

Facilitate investment in overseas asset acquisitions of raw materials.

Enhance domestic steel demand.

Domestic Scenario

The Indian steel industry has entered a new development stage, post de-regulation, riding
high on the resurgent economy and rising demand for steel.

Rapid rise in production has resulted in India becoming the 2nd largest producer of crude
steel during 2018, from its 3rd largest status in 2017. The country is also the largest
producer of Sponge Iron or DRI in the world and the 3rd largest finished steel consumer
in the world after China & USA.

In a de-regulated, liberalized economic/market scenario like India the Government’s role

is that of a facilitator which lays down the policy guidelines and establishes the institutional
mechanism/structure for creating conducive environment for improving efficiency and
performance of the steel sector.

In this role, the Government has released the National Steel Policy 2017, which has laid
down the broad roadmap for encouraging long term growth for the Indian steel industry,
both on demand and supply sides, by 2030-31. The Government has also announced a
policy for providing preference to domestically manufactured Iron & Steel products in
Government procurement.
Production

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

India is currently the 2nd largest producer of crude steel in the world.

In 2018-19, production of total finished steel (alloy/stainless + non alloy) was 101.287
million tonnes (mt). Production of Pig Iron in 2018-19 was 6.414 mt, a growth of 11.9%
over last year.

India is the largest producer of Sponge Iron in the world. The coal based route accounted
for 79% of total Sponge Iron production (34.71 mt) in the country in 2018-19.

Data on production of Pig Iron, Sponge Iron and Total Finished Steel (alloy/stainless +
non-alloy) are given below for last five years and April-December 2019-20 (prov.):

Demand Availability

Industry dynamics including demand – availability of iron and steel in the country are
largely determined by market forces and gaps in demand-availability are met mostly
through imports.

Interface with consumers exists by way of meeting of the Steel Consumers’ Council,
which is conducted on regular basis.

Interface helps in redressing availability problems, complaints related to quality.

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.

As a facilitator, the Government monitors the steel market conditions and adopts fiscal
and other policy measures based on its assessment. Currently, GST of 18% is applicable
on steel and there is no export duty on steel items.
5 Force Model of steel Industry

THREAT OF
NEW
ENTRY

Supplier Competetive
Power Rivalry

Threat of
Buyers Power
Subsitute

Threat Of New Entry – 1) High Capital Requirement 2) -High Economies Of Scale 3) -

Favorable Govt Policy 4) -Low Product Differentiation

Supplier Power -1) Low Differentiation Of Inputs 2)High Volume Required

3) High Cost Of Raw Material High Medium Low

Competitve Rivalry- 1)Slow Industry Growth 2)High Brand Identity 3)High Exit Barrier

Threat Of Substitutes - High Switching Cost And High-Performance Tradeoff Of

Substitutes -Low Buyer Inclination To Substitute.

Buyer’s Power -1) Low Bargaining Leverage 2)High Buyer Concentration

Strengths in the SWOT Analysis of Tata Steel

Market Position: Tata Steel is one of the largest steel manufacturers in the world and
world’s second most geographically diversified steel producer. It has the strong presence
in Asia-pacific and Europe.

Diversified Product Portfolio: Tata Steel has a wide range of products ranging from flat
steel products, agricultural implements, construction products and much more. A
diversified product portfolio ensures revenue flow from different markets around the
world.

Trust of TATA: Tata is one of the most trusted and respected brands not only in India
but all over the world. The association of the name provides immense brand equity to the
company.

Integrated operations in India: The whole process of extraction from mines and ores to
producing finished steel material is integrated in India. The integrated operations save a
lot of time and cost and also maintain the required quality.

Global footprint: Tata Steel has the presence in over 50 countries with operations in
over 26 countries which increase its market penetration and share.

Weaknesses in the SWOT Analysis of Tata Steel :

Mistry fiasco has hurt the image: The fallout between Ratan Tata and Cyrus Mistry has
had an adverse impact on the image of the Tata group which also translates to Tata Steel.

Over dependence on Europe: Over 50 percent of Tata Steel’s business comes from
Europe and thus any economic slowdown in the Europe affects Tata Steel’s revenues.

Disintegrated operations in Europe: Although Tata Steel’s operations in India are

integrated; its operations in Europe are disintegrated and hence are dependent on various
other suppliers. This affects control on quality an increased cost.
Opportunity in the SWOT Analysis of Tata Steel :

Increasing demand for steel in India: The steel market in India is expected to grow in
the next 4 years due to the growth in the construction industry and manufacturing facilities
in India. This will certainly benefit Tata Steel.

Adapt newer technologies: Tata Steel lags behind its competitors in

the technology front and has an opportunity to adopt newer technologies such as the
Cortex process, Hismelt process etc.

Growing manufacturing, construction and automotive industry around the

world: Growth in manufacturing, construction and automotive industry in the future will
drive the growth in the steel industry and Tata Steel is set to benefit from it.

Threat in the SWOT Analysis of Tata Steel :

Intense competition: Tata Steel faces stiff competition from industry giants such as JSW
Steel, Essar Steel, and ArcelorMittal etc. This reduces its market share around the world.

Government and Environmental regulations: Tata Steel is subjected to stringent

governmental and environmental regulations in mining as well as production. This
increases compliance costs for the company.

Decreasing global steel prices: Excess steel production in China meant that it supplied
steel cheaper to the world which forced the process to lower down throughout the world.
PESTAL Analysis of Tata Steel
Diamond Model

Firms
Strategy &
Structure

Factor
Endowment
Diamond Demand
Condition
Theory
Model

Related &
Supplying
Industries
Value Chain in Steel Industry
BCG Matrix
Conclusion