FINAL PROJECT REPORT ON “STUDY ON PRICE DISCRIMINATION IN STEEL INDUSTURY” A report submitted to IIMT, Greater Noida in the partial

fulfillment of full time Postgraduate Diploma in International business Management.

Submitted To: DIRECTOR ACADEMICS IIMT, G.NOIDA

Submitted By: ABHISHEK SHHARMA IBR-1048 BATCH-13th

ISHAN INSTITUTE OF MANAGEMENT & TECHNOLOGY 1, KNOWLEDGE PARK-1, GREATER NOIDA, DISTT. G.B.NAGAR (U.P) Website:www.ishanfamily.com ,Email:ishan_corporate@yahoo.com

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CERTIFICATE

This is to certify that the project work done on“STUDY ON PRICE DISCRIMINATION IN STEEL INDUSTURY” submitted to Ishan Institute of Management and Technology, Greater Noida by (ABHISHEK SHARMA) in partial fulfillment of the requirement for the award of degree of Post Graduate Diploma in Management (International Business) is a bonafide work carried out by them under my supervision and guidance. This project work is the original one has not been submitted anywhere else for any other degree/diploma.

Date: Place: Name of the guide: Mr. shailesh sharma

Seal/Stamp of Guide

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PREFACE
As a student of management, apart from theoretical studies we need to get a deeper insight into the practical aspects of those theories by working on various projects. So these projects have high importance in management studies to enhance the knowledge and skills. Management in India is heading towards a better profession as compared to other professions. The demand for professional managers is increasing day by day. Working on this project has been an enriching experience. This project will help me a lot in the professional growth. It has given me the confidence to prepare for ourselves as fully fledged international marketing professional in the eminent future. A comprehensive understanding of the principle will increases the decision-making ability and sharpens the tools for this purpose. Practical Knowledge is an important suffix to theoretical Knowledge. One cannot merely depend upon the theoretical Knowledge. Classroom lectures make the fundamental concept of Management clear. They also facilitate the learning of practical Things. However, Classroom lectures must be correlated with the practical training situations. It is in the sense that practical Training in a company has a significant role to play in the subject of business management. The demand for professional managers is increasing day By day. To achieve profession competence, manager ought to be fully occupied with theory and practical exposure of management. A comprehensive Understanding of the principle will increases their Decision making ability and sharpening their tools for this purpose. The scope of the work under taken by us includes introduction to basic & major things about the Impact of e-banking on the customer and also their own future aspects.

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K.Verma and all the staff members of the PGDM department for making available all the facilities in fulfilling the requirements for this reasonable work. experience & knowledge for completion of this project.ACKNOWLEDGEMENT No research can blossom from single person’s mind without proper guidance.K. I take an opportunity to express our sincere thanks to Dr. Our project was given its present shape by assistance of many people whom we are greatly indebted to. constructive and valuable suggestions that helped us in this endeavour. I thank my parents for their moral support and financial help.Garg (Chairman. D. assistance and inspiration from various quarters. I owe deep intellectual debt to the numerous people who through their rich and various contributions have greatly improved our understanding of various concepts of my project. I would like to thank all those people who graciously helped me by sharing their valuable time. M. IIMT). Shailesh sharma for his stimulate discussion. I express my sincere thanks to hon’ble Mr. Abhishek Sharma IBR-1048 BATCH:-13th 4 . Dean Sir Prof. Finally.

DATE: PLACE ABHISHEK SHARMA IBR-1048 5 . This project is my original work and no part of this project has been ever submitted by me for any other purpose or published earlier. Ministry of HRD. Greater Noida (Recognized by AICTE. of India) do hereby declare that the project report entitled “STUDY ON PRICE DISCRIMINATION IN STEEL INDUSTURY” of employees in the organization that has been submitted by me as a requirement for the award of degree of Post Graduate Diploma in INTERNATIONAL BUSINESS MANAGEMENT .DECLARATION I am ABHISHEK SHARMA a student of 13th batch of Ishan Institute Of Management And Technology. I also certify that the work has been carried out of the best of my knowledge and belief.This report is the property of the institute and any use of this project without prior permission is prohibited and be treated as an offence. Govt.

INDEX TABLE OF CONTENT EXECUTIVE SUMMARY CHAPTER-1 • INTRODUCTION • • 9-16 HISTORY OF STEEL INDUSTURY PRESENT MAJOR PLAYER 17-46 CHAPTER-2 • PAST PERFORMANCE OF STEEL SECTOR • • • • • • GROWTH PATTERN OF STEEL SECTOR EXPORT PERFORMANCE QUALITATIVE ANALYSIS OF PRODUCTION AND SALES PIGRIM ALLOY STEELS HOT ROLLED SHEET MAKING COLD ROLLED STEEL MAKING 47-85 CHAPTER-3 • MANUFACTURING PROCESS • • • IRON ORE TO PIGIRM ALLOY STEELS HOT ROLLED SHEET MAKING 6 .

& ITS IMPACT ON PERFORMANCE OF STEEL INDUSTURY INSPITE OF PRICE INDUSTURY INDIA’S ADVANTAGE OVER AFTER GLOBAL PLAYERS QUALITY & DIPOSIT OF ORE 7 .• • • COLD ROLLED SHEET MAKING SPONGE IRON A BOON FOR STEEL MAKING QUALITY CONTROL TECHNIQUES TO MEET CHALLENGES CHAPTER-4 • • • PRICING AND CONSUMPTION IN STEEL SECTOR PRICING STRATEGY POTENTIAL OF MARKET 86-95 CHAPTER-5 • MARKET TREND • • INDIGENOUS MARKET EXPORT MARKET 96-103 CHAPTER-6 • SUPPLY AND DEMAND OF STEEL IN INDIA CHAPTER-7 • PRICE DISTRIBUTION AND IT’S IMPACT • • • • • 104-115 116-134 GOVT IMPOSING EXPORT RESTRICTION IT’S EFFECT ON STEEL PRICE STEEL PRICE INTERFERENCE BY GOVT.

• • • ROLE OF SPONGE IRON IN ADDING CHEAPNESS IN STEEL INDUSTURY MAKING TECHNOLOGY AS AN ADVANTAGE MNC’S BEING ATTRACTED BY INDIAN INDUSTURY CHAPTER-8 • • • • 135-154 GOVERNMENT POLICY ON STEEL SECTOR REDUCING ORE EXPORT PRODUCING QUALITY(VALUE ADDED)PRODUCT EXPORT IN154CENTIVES TAX HOLIDAYS AND OTHER TAX POLICEY • CHAPTER-9 • CASE STUDY 155-156 CHAPTER-10 • TREND ANALYSIS AND FUTURE SCOPE 157-158 • BIBLOGRAPHY 159 • WORD OF THANKS 160 8 .

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a foreigner. did not rust so far -----an engineering marvel that baffles the scientists even today. However. As such. But as ill luck would have it. India’s prosperity gave way to poverty after the advent of the foreign rule. Yet another engineering feat is the famous Sun Temple at Konark in Orissa. built between 350 and 380 AD. PRESENT AND FUTURE The history of steel-making in India can be traced back to 400 BC when the Greek emperors used to recruit Indian archers for their army who used arrows tipped with steel. Heath produced in his plant pig iron at the rate of forty tonnes a week. The BIW made considerable improvement in the process of iron and steel making.CHAPTER-1 INTRODUCTION HISTORY OF STEEL INDUSTURY IRON AND STEEL INDUSTRY IN INDIA . forty-four years before that. Steel Role plays a vital role in the development of any modern economy. The per capita consumption of steel is generally accepted as a yardstick to measure the level of socio-economic development and living standards of the people.PAST. It used coke as the fuel instead 10 . These were the halcyon days when India flourished in all directions and when its prosperity was a matter of envy for the foreigners. Archaeological finds in Mesopotamia and Egypt testify to the fact that use of iron and steel was known to mankind for more than six thousand years and that some of the best products were made in India. built around 1200 AD. named Joshua Marshall Heath. India’s indigenous industry languished because of a deliberate policy of the colonial rulers to make the country only a supplier of raw materials. His method of iron-making needed approximately four tonnes of charcoal to produce one tonne of low quality pig iron which proved to be too expensive for Heath to carry on in the face of stiff competition from the British steel industry. Many more evidences are there of Indians’ perfect knowledge of steel-making long before the advent of Christ. near Asansol in West Bengal. no developing country can afford to ignore the steel industry. in 1830 to be precise. Among the widely-known relics is the Iron Pillar near Qutab Minar in Delhi. where steel structurals were used for the first time in the world. had set up a small plant at Porto Novo on Madras Coast. Beginnings The first notable attempt to revive steel industry in India was made in 1874 when the Bengal Iron Works (BIW) came into being at Kulti. The pillar.

as Gandhiji said. ferro alloys and tool steel were covered by the third category and the rest of the industries by the fourth. represented the "spirit of adventure" and Jamsetji Tata. The fifth public sector steel plant was set up at Visakhapatnam in andhra Pradesh. Prime Minister Nehru firmly believed that "no country can be jpolitically and economically independent unless it is highly industrialised and has developed its resources to the utmost". Durgapur was followed by a steel plant at Bokaro in Bihar. iron and steel. among others. started pig iron production in December 1908 and rolled out its first steel the following year. The Tatas. The onward march of Indian steel did not stop at Bokaro. the government committed itself to the development of basic steel industry while the private sector was to benefit through the establishment of downstream units which would use pig iron. As 11 . coal. The resolution officially accepted the principle of mixed economy. Meanwhile. Later in 1953. In the first category were strategic industries which were made the monopoly of the Government. While IISCO started producing pig iron at Burnpur in 1922. Nehru’s ideas about India’s development were broadly incorporated in free India’s first Industrial Policy Resolution adopted by the Contituent Assembly in 1948. Its childhood was precarious but the war of 1914-18 gave it a fillip. SCOB merged with IISCO. In 1918. started making steel in its Asansol plant. in the words of Jawaharlal Nehru. 1907 was a red-letter day when the Tata Iron and Steel Company (TISCO) was formed as a Swadeshi venture to produce 120. The TISCO plant at Sakchi (renamed Jamshedpur) in Bihar.000 tonnes of pig iron in 1900 and continued to produce the metal until it was taken over by Indian Iron and Steel Company (IISCO) in 1936. The then Mysore government also decided to start an iron works at Bhadravati. But nationalist pressure saved it.of charcoal. It was decided that new units would be started exclusively by the government in the public sector without disturbing the existing ones in the private sector. For modern India’s iron and steel industry August 27. TISCO had expanded its production capacity to one million tonnes ingot by the time the country achieved freedom. the Bengal Iron Works went into liquidation and merged with IISCO. In the second category were six industries which included. It was taken over by the Bengal Government and was rechristened as Barakar Iron Works. In sum. The second came up at Bhilai in Madhya Pradesh. It was followed by a third at Durgapur in West Bengal. Industries were divided into four categories. It produced 40. billets. soon after the war. the Mysore Iron and Steel Works took about 18 years to start its plant. Eighteen industries. Again it languished and was in danger of passing into the hands of British debenture holders.000 tonnes of pig iron. But the plant fell sick as the source of funds dried up. Each of these three plants had an initial production capacity of one million tonne ingot. Indian Iron and Steel Company (IISCO) was formed. The first such plant was set up at Rourkela in Orissa." laid the foundation of heavy industries in India". The British rulers disfavoured this and other attempts to start indigenous industry. The Steel Corporation of Bengal (SCOB) formed in 1937. In 1889 the Bengal Iron and Steel Company acquired the plant and by the turn of the century the Kulti plant became a success story. In keeping with the spirit of the resolution the Government decided to start a chain of steel plants all over the country in the public sector. It was chiefly with the help of American experts that the Tatas started their industry. including heavy castings and forings of iron and steel. blooms and flat products to be made by the public sector steel plants.

to the cutbacks and restructuring of the 1980s and 1990s.a matter of fact. was included in the list of industries reserved for the public sector and exempted from the provision of compulsory licensing. like Alloy Steel Plant. 1992 iron and steel industry was included in the list of ‘high priority’ industry for automatic approval for foreign equity upto 51% (now 74%). Kalinga Iron Works. Malavika Steel Ltd. Salem Steel Plant..1 million tonnes in 1951 to 23. With effect from May 24. 12 . providing adequate surplus for meeting the projected export potential of nine million tonnes. to the enormous productivity of the 1880–1970 period. triumphant technological innovations. Reduction of cost on these accounts will make Indian steel more competitive in the world market. Indian steel can reasonably expect a good market in the neighbouring countries now that the Asian economy is looking up.01 tonnes is almost adequate to meet the domestic demand along with export of six million tonnes. to name only a few. Even if the domestic demand grows up from 34. there is hardly any scope for complacence over the fact that India continues to be the 10th largest steel producer in the world. and partial recovery of the productive capacity of the nation's industrial sector. In the new industrial policy announced in 1991 iron and steel industry. This history has been marked by dramatic events. In 1997 India’s per capita steel consumption was only 22 kg which was much below the world average of about 126 kgs. Jindal Vijaynagar Steel Ltd. The Government’s Industrial Policy had undergone changes once in 1956 and then in 1991. the final year of the tenth plan. by 2006-07. The finished steel pdroduction in India has gone up from mere 1..68 million tonnes and the projected availability of 38. the country was dotted with steel and steel-related plants in public and private sectors. it can be said with a certain measure of confidence that India’s iron and steel industry which had a glorious past and has an uncertain present may now look forward to a bright future. though it was not harsher towards the private enterprise. Iron and Steel Industry. among others. fall. According to World Steel Dynamics. About the same time TISCO launched its two-million-tonne expansion programme.37 million tonnes in 1997-98 despite overall economic slow-down in the country.5 million tonnes to 100 million tonnes in 2025 the industry is unlikely to catch up with the production in the developed countries. In conclusion. The redeeming feature is the cost competitiveness of Indian steel in the global market. from its origins in the Colonial Era. However. the total cost of steel production in the USA is $510 per metric tonne while in Japan it is $550. in Germany $557.80 million tonnes. This is because of high material cost due to high excise and import duties. Similarly. in Canada $493 and in India it is $497. The new policy has already borne fruit. The history of iron‐ and steelmaking in the United States reflects the rise. The freight equalisation scheme was withdrawn removing freight disadvantage to States located near steel plants. and well‐known entrepreneurs. the demand for finished steel would be around 48. The resolution modified in 1956 brought changes in the category pattern and listed more industries for the public sector than did the earlier one. Export-import regime for iron and steel has also undergone major liberalisation. It has been estimated that the demand for finished steel in 2001-02 would touch 38.

egg‐ shaped “converter. the direct heir of Carnegie's empire. when international competition. the three essential stages in the production of finished metal. the American steel industry staged a renaissance by the 1990s and succeeded in producing quality products in efficient and profitable mills. higher production and labor costs.Through the early 1800s. and questionable managerial decisions led to the collapse of the U. Henry Bessemer. When the Civil War began. others belonging to smaller competitors 13 . The result was a new. Carnegie's mills required less and cheaper labor than had been necessary in the days of puddling. named for its English inventor. Fortunately for the ironmasters. Carnegie's initiatives essentially eliminated trade unionism in the steel industry until the 1930s. Steel Corporation. sheets. Before the iron could be used. Bessemer steel. underlay a second industrial revolution that transformed the United States into the world's premier industrial and military power. highly skilled workers refined and shaped the smelted metal. These workers. became available in the postwar years. intermediate material. and information technologies to rebuild its economic base. In the mid–nineteenth century. typically conducted in small rural ironworks. This region.” workers combined molten pig iron and a blast of air that produced an explosion so powerful that virtually all the impurities were removed. however. a much‐demanded product. At his mammoth mills near Pittsburgh. the open‐hearth method. which melted iron ore into a raw. and shaping.S. The United States retained its premier position in metal‐making until the 1970s. a new technology. Throughout the twentieth century.S. was forced to look to service industries. and thousands of workers were displaced by the innovations that swept the metals industry in the late nineteenth century. Andrew Carnegie was the first to see in the Bessemer process new possibilities for industrial organization. In a large. industrial relations in steelmaking were often marked by acrimony and. the effects were devastating. Pennsylvania. In Pittsburgh and other locales in the Northeast. it had to be rolled through grooved cylinders. hard metal. refining. Significantly. which had profited so handsomely in the Age of Steel. as in the nineteenth century. or tools and other objects. which molded the metal into rails. The Bessemer process and its successor. This process bypassed puddlers by mechanizing the refining process. U. education. The new process sparked mechanical improvements throughout the industry. many of them recent immigrants. These integrated mills employed thousands of workers. beams. prompting steelmasters to integrate all stages of the production process. consisted of smelting. Skilled rollers then controlled the production of small amounts of finished iron. mills output only one million tons per year through a slow and costly process that produced a wrought iron too weak to be made into rails. In other venues. and made three thousand tons of steel per day. when the Steel Workers Organizing Committee succeeded in creating an industry‐wide union open to workers of all skill levels. occasionally by violence. produced high‐quality wrought iron through a demanding and expensive process. ideal for rail‐making. called puddlers. some large. he streamlined and automated production. however. which imparted properties such as hardness or malleability.

appliances. Steel with increased carbon content can be made harder and stronger than iron. tools. and construction materials. Modern steel is generally identified by various grades of steel defined by various standards organizations. infrastructure. talk about "the iron and steel industry" as if it were a single entity. Shanghai Baosteel Group Corporation and Shagang Group. but various other alloying elements are used such as manganese. A typical appliance is about 75% steel by weight and automobiles are about 65% steel and iron. and 55 kilograms of limestone. machines. in 2007.[45] In 2008. world steel demand increased by 6%. there is often very little waste produced during construction. preventing dislocations in the iron atom crystal lattice from sliding past one another. automobiles. steel started to be traded as a commodity in the London Metal Exchange. The economic boom in China and India has caused a massive increase in the demand for steel in recent years. Steel does not lose any of its inherent physical properties during the recycling process. because of the critical role played by steel in infrastructural and overall economic development. and tungsten. Steel is also distinguished from wrought iron. ductility. This steel is stronger than BOS steel so it is used to 14 make structural beams. The most commonly recycled items are containers.100 kilograms of iron ore. Russia. The steel industry is often considered to be an indicator of economic progress. EAF steelmaking uses almost 100% recycled steel. 630 kilograms of coal. plates. Carbon and other elements act as a hardening agent. its use became more common after more efficient production methods were devised in the 17th century. and has drastically reduced energy and material requirements compared with refinement from iron ore.2% and 2. ArcelorMittal is however the world's largest steel producer. Today. Two distinguishing factors are steel's increased rust-resistance and better weldability. precipitated phase) controls qualities such as the hardness. more than 60 million metric tons were recycled. Recycling one ton of steel saves 1. but is also less ductile. vanadium.1% by weight. waiting to be recycled Steel is one of the most recycled materials in the world and as of 2007. It is cheaper to recycle steel than to mine iron ore and manipulate it through the production process to form new steel. Varying the amount of alloying elements and form of their presence in the steel (solute elements. and industrial drums. comparing the current steel consumption for each industry with the amount of recycled steel being produced. in 2000. in large part because it is economically advantageous to do so. Alloys with a higher carbon content are known as cast iron because of their lower melting point and castability. At the end of 2008. but it is included in the form of slag inclusions. but historically they were separate products. depending on the grade. with a carbon content between 0. more than 97% of structural steel and 110% of automobiles were recycled. Though steel had been produced by various inefficient methods long before the Renaissance. which is enough to power eighteen million l to make new steel. automobiles. The energy saved by recycling reduces the annual energy consumption of the industry by about 75%. which can contain a small amount of carbon. chromium. the steel industry faced a sharp downturn that led to many cut-back A pile of steel scrap in Brussels. and any waste that is produced may be .Steel is an alloy consisting mostly of iron. and rebar. and appliances. Because steel beams are manufactured to standardized dimensions. The steel industry has been actively recycling for more than 150 years. several Indian [44] and Chinese steel firms have risen to prominence like Tata Steel (which bought Corus Group in 2007). The British Geological Survey reports that in 2005. and the USA. Since 2000. Between 2000 and 2005. ships. such as basic oxygen steelmaking. With the invention of the Bessemer process in the mid-19th century. further lowered the cost of production while increasing the quality of the metal. soup cans. and tensile strength of the resulting steel. more than 78% of steel was recycled in the United States. steel became a relatively inexpensive mass-produced material. In the United States it is the most widely recycled material. Further refinements in the process. steel is one of the most common materials in the world and is a major component in buildings. China was the top producer of steel with about one-third world share followed by Japan. BOS steel is more malleable than EAF steel so it is often used to make automotive fenders. For example. Carbon is the most cost-effective alloying material for iron.

PRESENT MAJOR PLAYER 15 .

the steel works had a power house. and one 16.» The Beginning » The War Years » Expansion to Two Million Tonnes » Period between 1960-80 » Steelmaking and casting » Tata Steel Today The Beginning The modern iron and steel industry in India owes its origin to the grand vision and perseverance of Jamsetji Nusserwanji Tata. hoops and rods. auxiliary facilities and a well-equipped laboratory. one 300 tonne hot metal mixer.inch and two 10-inch rolling mills. 16 . 70. R. and 20. 100. The company was originally constructed for a capacity of 160. The construction of the steel plant was then taken up in earnest with the first stake being driven in February 1908.000 tonnes of pig iron. The Tata Iron and Steel Company Limited (Tata Steel) was registered in Bombay on 26th August 1907. an American with steel plant construction experience took over as the General Manager in 1909. The company was originally constructed for a capacity of 160. Success came when the first blast furnace was blown-in on 2nd December 1911. four open hearth furnaces of 50 tonne capacity each. beams and shapes. Besides.23 million. Wells. one 28-inch reversing combination rail and structural mill with re-heating furnaces.000 tonnes of bars. two blast furnaces (each of 350 tonnes per day capacity).G. one steam engine driven 40-inch reversing blooming mill. The cost of the plant as erected came to around Rs.000 tones of ingot steel.000 tones of rails. and the first ingot rolled on 16th February 1912. The plant essentially consisted of a battery of 180 non-recovery coke ovens and 30 by-product ovens with a sulphuric acid plant.

8 MT at Rourkela and 1. It moved to Calcutta in July 1956. 1.5 MT stage at Bhilai.the Tandem Mill . From April 1957.6 MT. The 1 MT phases of Bhilai and Rourkela Steel Plants were completed by the end of December 1961. A new steel company. with the completion of the 2. 1954. For Bhilai and Durgapur Steel Plants. and the 1.CHAPTER-2 PAST PERFORMANCE OF STEEL SECTOR A Rich Heritage The Precursor SAIL traces its origin to the formative years of an emerging nation .was commissioned in February 1968.8 MT phase of Rourkela .India. the supervision and control of these two steel plants were also transferred to Hindustan Steel.7 MT in 1968-69 and subsequently to 4MT in 1972-73. The steel sector was to propel the economic growth.6 MT at Durgapur.The second phase of Bhilai Steel Plant was completed in September 1967 after commissioning of the Wire Rod Mill. After independence the builders of modern India worked with a vision . the preliminary work was done by the Iron and Steel Ministry. The 1 MT phase of Durgapur Steel Plant was completed in January 1962 after commissioning of the Wheel and Axle plant. Holding Company 17 .to lay the infrastructure for rapid industrialisaton of the country. Expanding Horizon (1959-1973) Hindustan Steel (HSL) was initially designed to manage only one plant that was coming up at Rourkela. Hindustan Steel Private Limited was set up on January 19. The crude steel production of HSL went up from .6 MT stage of Durgapur Steel Plant was completed in August 1969 after commissioning of the Furnace in SMS. the total crude steel production capacity of HSL was raised to 3. The registered office was originally in New Delhi.158 MT (1959-60) to 1. The last unit of the 1. and ultimately to Ranchi in December 1959. was incorporated in January 1964 to construct and operate the steel plant at Bokaro. Bokaro Steel Limited. Thus.

Durgapur. Besides. Since its inception. In 1978 SAIL was restructured as an operating company. On this basis the concept of creating a holding company to manage inputs and outputs under one umbrella was mooted. The company. the Alloy Steel Plant and the Salem Steel Plant. This led to the formation of Steel Authority of India Ltd. Rourkela and Burnpur. Bokaro. It has triggered the secondary and tertiary waves of economic growth by continuously providing the inputs for the consuming industry. it has immensely contributed to the development of technical and managerial expertise. 1972. was made responsible for managing five integrated steel plants at Bhilai. 2000 crore. 18 . 1973 with an authorized capital of Rs.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 December 2. SAIL has been instrumental in laying a sound infrastructure for the industrial development of the country. incorporated on January 24.

Washed coal is supplied from different washeries at Dugda. Bhawanathpur. Iron ore fines and lumps. Iron ore and fluxes are sourced from the captive mines of SAIL situated at Kiriburu. modernised double Cast Houses. It also maintains a buffer stock to take care of any supply interruptions. Ammonium Sulphate and Extra-hard Pitch in the process. blended with imported coal. Light Solvent Naphtha. using PLC Charging System and Computer Controlled Supervision System. Kargali and Giddi. The Coke Oven battery has 8 batteries with 69 ovens each. Coke Ovens & By-product Plant The Coke Oven Complex at Bokaro converts prime coking coal from Jharia. Kathara and Mahuda. Benzene. Toluene. use of phenolic water and other pollution control measures. Sinter Plant and Refractory Materials Plant as per their requirements. Tulsidamar and Kuteshwar. Meghahataburu. Xylene. recovering valuable by-products like Anthracene Oil. Bell-less Top Charging. into high quality coke for the Blast Furnaces. The wastes products like Blast Furnace slag and gas are either used directly within plant or processed for recycling / re-use. 19 .PRODUCT BASKET BOKARO STEEL PLANT . Dugda and Moonidih and medium coking coal form Kargali. Bokaro is situated in the prime coal belt of the country. Some 9 MT of different raw materials viz. Limestone (BFand SMS grade). stores and supplies different raw materials to Blast Furnace.Hot Metal . Dolomite lumps and chips.for steel making. Blast Furnaces Bokaro has five 2000-cubic metre Blast Furnaces that produce molten iron .FACILITIES Raw Materials & Material Handling Plant The Raw Materials and Material Handling Plant receives. while raw coal is obtained from Jharia coalfields.GROWTH PATTERN OF STEEL SECTOR BOKARO STEEL PLANT . maintained meticulously in terms of fugitive emission control. Coal Dust Injection and Cast House Slag Granulation technologies have been deployed in the furnaces. hard Coal and Manganese ore are handled here every year. Kathara. The process of iroin-making is automated. blends.

2 mm to 20 mm and width from 750 mm to 1850 mm.thickness varying from 1.363 million tonnes has a wide range of products . The air mist cooling and continuous straightening facilities keep the slabs free from internal defects like cracks. unique in the country. Hot Strip Mill Slabs from CCS and Slabbing Mill are processed in the state-of-the-art Hot Strip Mill.5% pure Oxygen through it in the LD converter. Deep Drawing. using advanced systems for process optimisation with on-line real time computer control. producing high quality slabs of width ranging from 950 mm to 1850 mm. Slabbing Mill Slabbing Mill transforms ingots into slabs by rolling them in its 1250 mm Universal Four-High Mill. WTCR. to produce internally clean slabs. on-line slab cutting. The mill is equipped with state-of-the-art automation and controls. The Ladle Furnace is used for homogenising the chemistry and temperature. SMS-I has 5 LD converters of 130T capacity each. SMS-II has 2 LD converters. CCS has a Ladle Furnace and a Ladle Rinsing Station for secondary refining of the steel. maintaining steel quality. The rolling capacity of the Mill is 4 MT per annum. monitoring and process optimisation. Controlled heating in Soaking Pits. unique in the country. The casters are fully automated with dynamic cooling. The concast machines have straight moulds. Continuous Casting Shop The Continuous Casting Shop has two double-strand slab casting machines. The shop has Hot and Cold Scarfing Machines and 2800 T Shearing Machine.Steel Melting Shops Hot Metal from the Blast Furnaces is converted into steel by blowing 99. It also produces low alloy steels like LPG. Suitable alloying elements are added to produce different grades of steel. with suppressed combustion system and Continuous Casting facility. 20 . SAILCOR and API Grade.SMS-I and SMS-II. close dimensional accuracy during rolling and hot and cold scarfing help produce defect-free slabs. CCS produces steel of Drawing. Boiler and Tin Plate quality. Bokaro has two Steel Melting Shops . gives better surface quality. The eddy current based automatic mould level control. each of 300 T capacity. de-burring and customised marking. It produces various Killed and Semi-Killed steels. The shop is equipped with advanced Level-3 automation and control systems for scheduling. The fully automatic Hot Strip Mill with an annual capacity of 3. It is capable of producing Rimming steel through the ingot route. PLCs and technological control systems. Argon injection in the shroud and tundish nozzle prevent re-oxidation and nitrogen pick-up. Extra Deep Drawing.

The Hydraulic Coilers maintain perfect coil shape with On-line Strapping system. Shearing Lines. The first shop of Bokaro Steel to get the ISO-9001 certification way back in 1994. Tin Mill Black Plate and Galvanised Products. liquid and soil corrosion.000 Tonnes/ year respectively. Hot Dip Galvanising Complex The Hot Dip Galvanizing Complex integrated with the CRM produces zinc-coated Cold Rolled strips resistant to atmospheric. The 5-stand Tandem Mill is capable of rolling sheet gauges upto 0. Rolling is done well below recrystallization temperature without any prior heating of the material. High-pressure Descaling System helps eliminate rolled-in scale. computerised mill regulation and optimisation control. one 2-high Roughing Stand and four 4-high Universal Roughing Stands. Cold rolling is done to produce thinner gauge strips of very smooth and dense finish. Hydraulic Automatic Gauge Control system in the finishing stands ensures close thickness tolerance. The CRM complex comprises of two Pickling Lines (including a high speed Hydrochloric Acid Pickling Line with re-generation facilities). The shop has two shearing lines with capacities of 6.000 Tonnes/ year and 4. an Electrolytic Cleaning Line. two SkinPass Mills. HR Coils rolled against direct shipment orders are sheared and finished to customer-required sizes and despatched to customers.45.75. a Continuous Annealing Line. The products of CRM are used for deep drawing purposes. The finishing group consists of a Flying Shear. Edgers in the roughing group maintain width within close tolerance. two Tandem Mills. It has sophisticated Hydraulic Automatic Gauge Control. this complex has maintained a high-standard of coating quality and its SAILJYOTI branded products enjoy a loyal market. Slitting Lines and a packaging and despatch section. other bending and shaping jobs and coated steels.5-17. railway coaches. Cold Rolling Mill The Cold Rolling Mill at Bokaro uses state-of-the-art technology to produce high quality sheet gauge material.5 metres per second.15 mm thickness. steel furnitures. Finishing Scale Breaker and seven 4-high Finishing Stands. drums and barrels. The roughing group has a roughing train of a Vertical Scale Breaker. The Laminar Cooling System is a unique feature to control coiling temperature over a wide range within close tolerance. with better mechanical properties than hot rolling strips. The material is supplied as per Indian specifications and many international/ foreign specifications. The Continuous Coil Corrugation Line in the HDGC produces corrugated sheets and the Galvanised Sheet Shearing Line produces galvanised plain sheets for a variety of applications. ensuring consistency in thickness throughout the length. The rolling speed at the last finishing stand is between 7. On-line Robotic Marking on the coil helps in tracking its identity. The Work Roll Bending System ensures improved strip crown and flatness. Bell Annealing Furnaces. Hot Rolled Coil Finishing All the Hot Rolled coils from the Hot Strip Mill are received in HRCF for further distribution or despatch. automobile bodies.Walking Beam Reheating Furnaces provide uniform heating with reduction in heat losses. 21 . a Double Cold Reduction Mill (DCR).

Energy Management juggles the supply and demand of by-product gases and their demand as process fuel.Community Peripheral Development Bokaro Steel is striving to reach the glow and warmth of its furnaces to people living at the periphery of this thriving steel city. Maintenance Departments Bokaro has centralised maintenance departments for large-scale electrical and mechanical maintenance. Cast Iron and Non-Ferrous Foundry. These facilities are capable of executing massive capital repairs. have executed a number of highly sophisticated procurement-substitution. Bokaro has a cluster of engineering shops such as Machine Shop. Water Management and Energy Management provide invaluable support to this gigantic plant. The auxiliary shops and maintenance wings of Bokaro Steel. Steel Foundry. productivity enhancement and quality improvement jobs. Ingot Mould Foundry. supported by the fabrication facilities of the auxiliary shops. Bokaro Steel has a vast networked of railway tracks and over 40 diesel locos to smoothly run its operations. Oxygen Plant.This complex made certain innovations for higher productivity to help re-build earthquake-ravaged Gujarat. saving revenues and enhancing equipment availability. along with the service departments. The expertise and operational scale of these departments. Most of the repairs and maintainance requirements of the plant are met in-house. Forge Shop. makes Bokaro a truly integrated plant. in addition to shop-based maintenance wings for running repairs and maintenance. BOKARO STEEL PLANT .a valuable support network The service departments like Traffic. aided by in-house design teams. In recent years. Water Management looks after the huge water requirements of the plant and the township. All villages and residential settlements within a radius of 20 kilometers are covered under the peripheral development programmes that benefit some 3 lakh persons. Structural Shop. housing many virtual enterprises within Bokaro Steel. providing different grades of water and taking care of recycling needs. Services . Nitrogen and Argon for processes like steelmaking and annealing. The Oxygen Plant provides Oxygen. Auxiliary Shops To meet its needs for maintenance and repairs. the stress has been on 22 . Electrical Repair Shop and Power Facilities Repair Shop in addition to shop-specific Area Repair Shops.

Free medicines are also supplied to Asha Dan.a holy journey of some 100 kilometres. and renovating the existing facilities. apparel and embroidered clothes. Bokaro Mahila Samiti Founded in 1964. Bokaro Steel has been sponsoring a First Aid camp during Shravani Mela for the Kanwariyas walking with holy water from Sultanganj in Bihar to Deoghar in Jharkhand . They are getting developmental opportunities of the modern world. Bokaro Steel pitched in with its share in the relief of victims of natural calamities like the Orissa cyclone. dresses and education. provide livelihood to a number of women. These children live under the love and care of Bokaro Steel. primary health centres. For a number of years. To keep them abreast of the prevailing quality assurance standards. Bokaro Steel has adopted children belonging to the primitive Birhor tribe that has a very limited population. without having to shun their own cultural moorings. The Plant aids these industrial units by providing testing facilities. giving succour to needy people and creating opportunities for skill enhancement and self-employment. flour. technical support for modernisation and upgradation. getting free board. Free medical consultation for neonates and their mothers and mobile dispensary play a key role in providing primary healthcare to needy persons.developing basic and infrastructure facilities like roads. safety gloves. The Samiti organises aid drives 23 . Regular health camps are organised to reach immunisation and free medicines to people. soap. The Samiti runs a number of schools for poor children and for uneducated elderly and a children's library. schools. shawls. Gujarat earthquake and Bihar floods. bridges. Encouraging Ancillaries The ancillaries under the Bokaro Industrial Area Development Authority symbolise the spill-over of economic activities due to Bokaro Steel. and preferential procurement orders in their areas of strength that match Bokaro Steel's requirements. Bokaro Mahila Samiti is a leading philanthropic organisation of the spouses of steelmen. and to government hospitals in the event of natural calamities. wells. Bokaro Steel has been giving free consultations to these units for developing their ISO 9001 QA Systems. The training centre and Udyog Kendra with wings for making spices. Community Care In a uniquely sensitive gesture of social care. pumps etc. lodging. a hospital for the lepers.

The ASSOCHAM’s projections are based on different levels of growth in industrial production and Gross Fixed Capital Formation (GFCF) which have been contained in a Background Paper brought out by the Chamber on Galvanising Future Growth of Steel Sector. “all said and done. Ram Vilas Paswan at ASSOCHAM organised India Steel Summit to be held here on Thursday (28th September).9% growth by 2012 in view of growing boom of the sector which will further accelerate. However. which is about 365mt as against India’s current share of 1. ASSOCHAM President said “the increased rate of growth witnessed in both economy and steel in the last 3 years. Agarwal. Anil K. the NSP target of 6. steel sector operates at 42 MTPA capacities. Thus it is essential that both captive iron ore and coal mines be provided to both Brownfield and Greenfield expansions of Indian steel companies 24 .for lepers. Thus the country can target steel demand growth anywhere between 10-12%. Likewise. “If we take into account the 11th plan targets set in the draft paper. Currently.9% growth (57MTPA) by 2001-12 will be easily overshot by at least 10 million tonnes at a growth rate of approx 10%”. victims of natural calamities. India being one of the lowest cost producers of steel in the world. children from poor families and other resource-constrained people.5% (5mt). Mr. the operating capacities of indigenous steel industry will rise to 73 MTPA against NSP projections of 57 MTPA. It is of this view. Nearly 60% of the existing steel capacities have no captive source of raw materials. Steel Sector Growth to Rise to 10 to 12% by 2012 : ASSOCHAM The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has projected that the domestic steel industry would grow by 10 to 12% against the National Steel Policy (NSP) target of 6. The background paper will be released by Steel Minister. Agarwal. Our analysis of the competitiveness of steel industry and determinants of profitability in the steel industry reveals that control over raw materials is the single most important source of competitive advantage. Mr. the Indian Steel Industry’s growth need not be restricted to the limits set by domestic growth. the Chamber has forecasted that by 2012. overtaking projected NSP target by 15mtpa. can easily replace over 50% of the cross border steel market as of today. The 11th Five Year Plan targets should therefore be ambitious enough to create globally competitive steel capacities to serve not only 10% plus growth in the domestic market but also to gain significant presence in the global market. developing new steel capacities through either Brownfield or Greenfield route is not an easy proposition in India. added Mr. which would require additional capacities of at least 26-31 mtpa by 2012 over and above the current operating capacity of 42 mtpa”. the steel demand can grow to 73mtpa by 2012. The Chamber feels that the Indian steel industry is no doubt ready to become the Global Steel hub and will in probability overtake the NSP targets by a safe margin. Commenting on findings of the Paper.

It is also essential to evolve a conducive regulatory & fiscal environment to enable the industry to achieve the required growth”. the Steel Ministry and the industry should aim at much higher growth than the one set by the NSP”. the actual growth of manufacturing would depend on the global business cycles and level of infrastructure availability in the country. Agarwal.9% by 2011-12. these are ambitious targets which would require host of changes in policies. However. ownership of lower cost ore and coal. However. Also provision of all necessary infrastructure at the project site by the State Governments is of paramount importance to bring up globally competitive capacities at a fast pace. Referring to approach for the Steel Industry . quality products. felt Mr. Non-Food credit growing at above 30% pa. The World Steel Dynamics have ranked the companies. India is uniquely placed to become the Steel hub of the World. WORLD CLASS STEEL MAKER The parameters undertaken are like operating costs. With India’s per capita income in PPP terms reaching the US$ 3330 level. Against fast growing economy and the ambitious 11th plan targets. the country would end up with just 57mtpa of production capacity. If country achieves sustainable growth of 8. said ASSOCHAM Chief. The Paper also points out that steel user segments such as construction. institutions and governance. At the forecasted growth rates of 6. and the rapidly growing over 300 million strong Indian middle class. is fueling demand to new highs. India will in the next few years reach the threshold US$4000-5000 level of per capita income to enter the Steel Intensity stage of growth. India’s steel demand having risen at a CAGR of almost 10% during the last 3 years along with the 11th plant target of 12% manufacturing growth. the target set by National Steel Policy (NSP) appears to be very conservative. It further says out that the emphasis on manufacturing and Infrastructure in the 11th plan approach paper if accepted by the government provides a bright outlook for the steel industry in India. productive workforce.on Priority basis. it would put India in a high growth trajectory similar to that witnessed in Korea and China. aided by this retail loan revolution. In addition to this.rapid manufacturing growth will require equally rapid Steel Growth”. consumer durables. ASSOCHAM Paper notes.5% in the next 5 years. automobiles. “possessing all the necessary factor advantages and also a rapidly growing domestic market. etc are showing rapid growth (Graph below). market for the product and domestic growth rate of the industry. Thus every indicator suggests that this is the right time for the country to aim at ambitious targets for the steel industry. which are as follows: Company Name Rank TATA 1 Usinor 2 Posco 3 CSN 4 Baosteel 5 China Steel 6 Gerdau 7 25 . balance sheet.

with .2 million tons in 1870 to 14. patents to protect innovations. and a global process of salarization of the iron-workers. The mechanization of the forge resulted in rising production of iron and steel for the interregional and international markets. on the eve of the World War. process. Before about 1860 steel was an expensive product. France. all large metal structures were made of wrought or cast iron. went from 2. which supplied the European and the American markets. This process was accompanied by strong intervention on the part of the state and other public institutions by way of orders. In the Bessemer.3 in 1913. 1. 19th century trends The growth of pig iron output was dramatic. Belgium. Henry Bessemer demonstrated the process in 1856 and had a successful operation going by 1864.4 in 1913. The introduction of cheap steel was due to the Bessemer and the open hearth processes. molten pig iron is converted to steel by blowing air through it after it was removed from the furnace.32 million tons in 1870. The open26 . After 1890 the Bessemer process was gradually supplanted by open-hearth steelmaking and by the middle of the 20th century was no longer in use. By 1870 Bessemer steel was widely used for ship plate and rails. or pneumatic. Britain went from 1. and 31. tools and cutlery. made in small quantities and used mostly for swords.56 in 1871 and 19.Nucor Car-Tech Nippon Steel Severstal Dofasco Pre-1800 8 9 10 10 11 Arnoux. Britain. an increasing use of wood. (2001) shows how in mining and the metallurgical industry. The air blast burned the carbon and silicon out of the pig iron. as happened in the iron-making industry with the diffusion of Walloon processes throughout northwestern Europe. the process of technical innovation and the growth of demand in the period 1450-1550 made possible the emergence of new types of production and commercialization. During the war the demand for artillery shells and other supplies caused a spurt in output and a diversion to military uses.7 million in 1870 and 10. Germany went from .5 in 1913.19 million tons in 18509 to 1. The US started behind. combined. two technological advances made in England. and even state-owned industrial factories. releasing heat and causing the temperature of the molten metal to rise. Austria-Hungary. Steelmaking was centered in Sheffield.1 million tons in 1913.74 million in 1870. The growing authority of the forge masters over the workers in smelting and hammering plants signals the development of forges as industrial firms. and Russia.3 million tons in 1840 to 6. but grew faster.

. In France in 1867 Emile and Pierre Martin.S. higher coal and oil costs. the industry was again nationalized. indeed American products were now underselling British steel in Britain. But by then twenty years of political manipulation had left companies such as BSC with serious problems: a complacency with existing equipment. however. T. but these measures were undone by Conservative governments in the 1950s. Britain had lost its American market. The usual open-hearth process used pig iron. poor quality assets. lack of funds for capital improvement. and was losing its role elsewhere. and little was sent to the U. under Labour control. not switching to the open hearth furnace method until long after the technology was developed. the British share of world production had plunged to 29% for pig iron and 22. Héroult-Heroult in France and Fredrik Kjellin in Sweden adapted the electric arc furnace to steelmaking in 1900. Abé. In 1967. By 1920 the electric furnace had largely supplanted the crucible process for specialty steels. Paul L.S.5% for steel. The leading problem of the company was its focus on the wrong technology. Since 1945 Blair (1997) uses the history of the British Steel Corporation (BSC) since World War II to illustrate the problem of government intervention in a market economy. made good quality steel by melting wrought iron and scrap in an open hearth.S. The Siemens-Martin process allowed closer control over the composition of the steel. By 1867 he had succeeded in making steel from pig iron and iron ore in an open hearth. also. plants operating under capacity (low efficiency). outdated technology. The crucible process remained important for making high-quality alloy steel into the 20th century. a substantial quantity of scrap could be included in the charge. and increasing world 27 . and became known as the Siemens-Martin process. 40% of British output was exported to the U. which was rapidly building its rail and industrial infrastructure. It is apparent that the company was not focused on long-term decision-making. Two decades later in 1896. In 1946 the first steel development plan was put into practice with the aim of increasing capacity. Britain In 1875 Britain accounted for 47% of world production of pig iron and almost 40% of steel. and the Iron and Steel Act of 1949 led to nationalization of the industry. was now the world leader and Germany was catching up to Britain. using a Siemens furnace. The U. (1996) explores the record of iron and steel firms in Victorian England by analyzing Bolckow Vaughan & Company. By 1861 William Siemens experimented using an open hearth heated by a gas flame. and scrap. Following the war it was difficult to persuade iron and steel companies to upgrade their plants despite the fact that the industry had followed a patchwork growth pattern that needed to be rationalized to improve efficiency in the face of world competition.hearth process originated when the Siemens brothers of Germany used the heat in the waste gas exiting a furnace to preheat the entering fuel and air. ore. government price controls.

and practices which shaped his expectations. a specialized bureau of calculation was established as well as a bureau for the control of times and wages and the so-called Rechnung-RevisionsBüro as methods of the revision of these calculations.market competition. The first modern furnace was built in 1849. transport. These developments set the stage for the creation of combined business concerns.813 full-time employees. Germany The Ruhr Valley provided an excellent location for the German iron and steel industry because of the availability of raw materials. a skilled labor force. the owners of the GHH. and this was especially difficult for BSC as it was a major employer in a number of depressed regions. McIntyre explores the world of the steelworks boilermaker as a species of industrial man. and the steelworks. as Germany started to catch up with Britain. During the last third of the 19th century the most important factors for the growth of German industries and enterprises were mass production. cultural studies. and an entrepreneurial spirit that led to the creation many firms. The establishment of the Vereinigte Stahlwerke (United Steel Works) by several 28 . his history and culture. modified the basic organizational structure of the company. symbols. By 1850 there were 50 ironworks with 2. From 1880 to World War I. Eventually. nearby markets. British Empire In Australia. values. economic depression reduced the earnings in the German iron and steel industry. In addition Alfred Krupp initiated a thorough reform and improvement of the accounting system as a result of a grave shortage of working capital. In 1873 and in 1878 the Haniel family. each working on a separate level of production. and between 1872 and 1874 the Krupp family modified the structure of top management. often in close conjunction with coal mines. that the rival firm GHH wished to install similar organizational reforms. large-scale family firms were forced to reorganize in order to adapt to the changing conditions. In the 1870s. In 1825 pig iron production in the Ruhr amounted to only 5% of total German output. including the ideas. Many diverse. Mixed enterprises could unite all levels of production through vertical integration. diversification of products. the Broken Hill Propriety Company Limited's (BHP's) Newcastle Iron and Steel Works was a major mill from its commissioning in 1915 until its closure in 1999. thus lowering production costs. McIntyre (2005) looks at the boilermaker. The creation of the German Empire in 1870 gave further impetus to rapid growth. and social theory. New guidelines were laid down for the accounting systems. By the 1970s the government adopted a policy of keeping employment artificially high in the declining industry. the industry of the Ruhr area consisted of numerous enterprises. coal. his task. Under private control the company has dramatically cut its work force and undergone a radical reorganization and massive capital investment to again become competitive in the world marketplace. Technological progress brought new advantages as well. and technological progress. outlook. Drawing on historical method. in the 1980s BSC was re-privatized as British Steel. and actions as a skilled industrial worker. The measures taken proved to be so elaborated and adequate to the existing conditions and the future changes in the Economy. the increased speed of capital flow.

use of technology. Throughout this process. However. Nazi Era Stallbaumer. where. made predictable results in the business world increasingly difficult. by August 1944. Previous research has stressed specific German lines of business organization. and the polymorphous character of policies against Jews. the Flick group's ability to reach deals on their own terms became increasingly difficult. management strategies. The important difference with regard to American was that consumer capitalism as an industrial strategy did not seem plausible to German steel industrialists. in turn. the lack of volunteers led the French government to introduce a law in September 1942 effectively deporting French workers to Germany. but it is also a microcosm of some dominant and consistent features of the Nazi state: rivalry for control of decision-making. the determinative role of racial and etatist ideology. they constituted 15% of the labor force. the Flick Concern was able to avail itself of a business opportunity which otherwise might not have existed.major iron and steel corporations in 1926 was the most famous rationalization project in Germany. notably in the metalworking industries. and transition to mass production there were many similarities to the US Steel Corporation. they were able to expand into pig iron production and Braunkohle operations which fit into the long-range expansion goals of this coal and steel firm. The Germans turned also to the civilians in countries they had conquered to increase the labor force. By virtue of the state's ant-semitic policies. With regard to the company's internal structure. 29 .and ironworks. (1996) uses the Flick Concern's participation in the "aryanization" of Hochofenwerk L ubeck AG. and limited food supplies were frequent. The complex picture which emerges from a detailed analysis of Flick's role in these "aryanizations" reveals that "understandings" with Nazi state officials were based upon the exigencies of the moment and that. the Flick group viewed the Nazi state as a tool which could be manipulated to their advantage if they adopted a cooperative attitude. and the Julius and Ignaz Petschek Braunkohle properties located in Germany for her case study of the relationship between industry and state in the Third Reich. they nevertheless maintained a significant presence in the steel. While the proportion of French workers in civil and military positions reached its peak by 1943. and often miserable living conditions in which poor housing. However. long hours. The United Steel Works in Germany developed a multi-divisional structure and aimed at return-on-investment as a measure of success. In Nazi Germany prisoners of war provided the main source of French forced labor at the beginning of World War II. The management of this "old industry" company was at least as up to date as that of the better known corporations in the electrical industry. but the development of the United Steel Works until 1934 should be described as an Americanization of the German iron and steel industry. As a result of the deals which the Flick group negotiated. the central role of autarkic goals in policy decisions. the largest number working in the giant Krupp works in Essen. Low pay. The Flick group's experience not only sheds light on the nature of industry-state relations. became more prevalent by the end of the war. as the "aryanization projects" became more protracted at the same time that Germany moved closer to war. combined with harsh discipline and inadequate medical facilities. insufficient heating. as early as autumn 1940.

population. had low productivity. Asia: Japan. the entrepreneurial structure of this sector. early expectations were only partly realized. Of particular importance are data about Spanish iron and steel wire manufacturing workshops and factories and imports and exports. all depended on iron and 30 . In Yugoslavia only by studying how enterprises worked in practice can the conditions undermining the economic system of socialist Yugoslavia be understood. India. Because no one had the responsibility and incentive to improve efficiency the country continued to be saddled by its losses. mining. geographical location. and several industries (paper. with operations throughout Europe.3 billion to become the world's biggest steel maker. the U. The enterprise's losses resulted from an unbalanced production structure. and Asia. The case of Metallurgical Kombinat Smederevo. China Japan Yonekura. a huge iron and steel enterprise that ran massive deficits. flour products. and an orientation toward unprofitable exports. In Italy a shortage of coal led the steel industry to specialize in the use of hydroelectrical energy. Despite a high national income level. collusive agreements. but controlled by the Mittal family) acquired Arcelor. or resource factors. an inability to construct an efficient plant. The nation's sudden transformation from feudal to modern society in the late nineteenth century. Topics addressed include technological change. iron and steel wire manufacturers provided a wide and heterogeneous range of products for agriculture. yet did not improve competitiveness or reduce prices. service machinery. Despite periods of innovation (1907-14). or manage spare parts inventories. is illustrative. for $38. (2005) provides new data on the growth of this auxiliary sector for the years 1856-1935. based in Luxembourg. growth (1915-18). and the institutional environment. France did suffer from industrial retardation that weakened its economy. instead. and machinery) during the process of Spanish industrialization. a period that has been neglected in research on Spanish metallurgy. In Spain. (1990) shows the steel industry was central to the economic development of Japan. its heavy industrialization and imperialist war ventures in 19001945. they reinforced the dualism of the sector and initiated a vicious circle that prevented market expansion.S. Fernández Pérez. and these were more the result of social and economic attitudes than inherent geographic. and the post-World War II high-economic growth. its location and lack of access to raw materials. and saddled the republic of Serbia with foreign debt. Electrical processes were an important substitute. exploiting ideas pioneered by Ernesto Stassano from 1898.Other Europe In 2006 Mittal Steel (based in London. and consolidation (1918-22). French steel and metal industries revealed aspects of retardation.

Abundant coal was available in Pennsylvania and Ohio. 31 .0% for the US. Many analysts credited the role of the government and especially the activist Ministry of International Trade and Industry. accounting for 6. A key element was the easy availability of iron ore. Other ranges were opened by 1910.steel. For modern capital intensive industries. technological and organizational capabilities were absolute prerequisite to achieve competitiveness. including the Menominee. and 4. automobiles. or of the government's shrewdly building steel mills. Detroit. In January 2007 India's Tata Steel made a successful $11. but the Lake Superior region contained huge deposits of exceedingly rich ore.6% of manufacturing employment and 7. In 1869 iron was already a major industry. 6. the unbalanced development between iron and steel production. coal. The other great Japanese industries. assisted by other factors.3 billion offer to buy European steel maker Corus Group PLC. and gauged demand and sources of raw materials and finances. The post-WW2 development of the industry proved to be the historical solution to a long-standing problem. arrived in great numbers. From 1850 to 1970. This iron ore was shipped through the Lakes to ports such as Chicago.S. and industrial machinery are closely linked to steel. such as the iron and steel. The annual growth rates 1870-1913 were 7. such as shipbuilding. Belgium and Russia.0% for Germany. However. and manpower. but immigrants from Britain and Germany (and later from Eastern Europe).3 million tons (the third largest in the world).0% for Britain. including (according to steelmen) the protective tariff and the continuous rapid expansion of urban infrastrures. Iron ore of fair quality was abundant in the eastern states. by far the dominant world leader. railroads and other sectors that increasingly demanded steel. Few Americans wanted to work in the mills.000 tons to 60 million tons annually. Cuyuna. planned the transfer and adoption of technology. the Marquette Range was discovered in 1844. United States From 1875 to 1920 American steel production grew from 380. Erie and Bussalo for shipment by rail to the steel mills. encouraged by the postwar discontinuities and the prewar technological and organizational capabilities. This historical solution was not initiated by the government but by one entrepreneur. factories. The Japanese government learned from the overcontrolled economy during World War II how not to control private firms. the industry increased its crude steel production from virtually nothing to 93. Manpower was short. and. (in 1892) the Mesabi range in Minnesota. making the U. the other major producres. the successful transfer of technology from the West and the establishment of the competitive firms involved far more than were transporting hardware from one continent to another. operations began in 1846. India The Indian steel industry began expanding into Europe in the 21st century. This explosive growth rested on solid technological foundations. greatest of all. 1. Gogebic. Vermilion.3% for France. Japan internally developed the necessary technological and organizational capabilities. Cleveland.8% of manufacturing output. office buildings.

Carnegie. This project was an important proof-of-concept for steel technology which marked the opening of a new steel market. Carnegie Steel and Federal Steel. through Keystone. and prices fell. its annual production exceeded the combined output of all German and Austro-Hungarian firms. US Steel By 1900 the US was the largest producer and also the lowest cost producer. prices. Carnegie's empire grew to include the J. with a capacity to produce approximately 2. Louis (completed 1874). US Steel combined finishing firms (American Tin Plate. and 41 mines. and demand for steel seemed inexhaustible. It was capitalized at $1. Other firms Bethlehem Steel 32 . Pittsburgh Bessemer Steel Works. and Andrew Carnegie owned a large part of it. a 425-mile (685 km) long railway. By 1889. and almost 30% of the world's. His company's great innovation was in the cheap and efficient mass production of steel rails for railroad lines. promoter and financier. & Company alone stood at $40. he did not directly supervise his steel mills. the Lucy Furnaces.S. Output had tripled since 1880. and a line of lake steamships. the Union Mill (Wilson. and National Tube) with two major integrated companies.Carnegie Andrew Carnegie. Morgan and Elbert Gary led the team that worked with Carnegie and Schwab to create United States Steel.000 being Carnegie's share. Pennsylvania. and the Scotia ore mines. one thousand miles of railroad. Productivity-enhancing technology encouraged faster and faster rates of investment in new plants. output of steel exceeded that of Britain. J. was a salesman. it accounted for 66% of America's steel output. Carnegie bought the rival Homestead Steel Works. but not an engineer. and coke in the world. the center of the American industry until the late 20th century. supplied the steel for and owned shares in the landmark Eads Bridge project across the Mississippi River in St.466 billion. Edgar Thomson Steel Works. It was based in Pittsburgh. steel rails. the Keystone Bridge Works. and profits. and included 213 manufacturing mills. In 1888. However during recessions. Charles M.000 tons of pig metal per day.000 with $25. Carnegie Steel was the largest manufacturer of pig iron. the profits of Carnegie Bros. P. In the late 1880s. an immigrant from Scotland.000. the Union Iron Mills. A consolidation of Carnegie's assets and those of his associates occurred in 1892 with the launching of the Carnegie Steel Company. By 1900. Schwab of Carnegie Steel proposed a solution: consolidation. American Steel and Wire. by far the largest non-railroad corporation in the world in 1901. the Hartman Steel Works. During World War I. which included an extensive plant served by tributary coal and iron fields. In 1901. Walker & County).000. the Frick Coke Company. the U. demand fell sharply taking down output.

By 2001 steel accounted for only 0. reflecting the widespread optimism in the steel industry.8% of manufacturing output. we're not in business to erect buildings. it became the third-largest steel producer in the U.S.8% of manufacturing employment and 0.1939) and Eugene Grace (1876–1960) made Bethlehem Steel the second-largest American steel company by the 1920s. "We have a nice business as it is. steel accounted for 4. Bethlehem's capacity rose from 13 million tons a year to 23 million tons from 1945 to 1955. He became the fiorst president of US Steel in 1901. after US Steel and Bethlehem Steel. All the plants were making money. as the downward spiral began. As Bethlehem's comptroller explained. rom 1945 to 1959. However the company refused to invest in new technologies then being developed in Europe and Japan. We're in business to make money. "We're not in business to make steel. He left to become head of Bethlehem Steel in 1903. Bethlehem like the other majors agreed to large wage and benefits increases that obliged them to raise prices at a time when the foreign steel companies had just begun to challenge their American counterparts. we're not in business to build ships. that Bethlehem was profitable enough and did not need to innovate. In 1930. it concentrated on government contracts. Comparison of steel grades by chemistry[1][2] EN steel SAE EN steel name number grade Carbon steels BS 970 UNS DIN UNI JIS 33 .4% of manufacturing employment and 4. Judge Gary was his boss. Seeking labor peace in order to avoid strikes. for $18 million..Charles Schwab (1862." The company's president Arthur Homer explained in 1962. basedin Cleveland. Ohio. so that by 1967." he boasted. Recent decades Growth continued at a rapid rate but other industries grew even faster.9% of manufacturing output. Republic Steel Cyrus Eaton (1983-1979) in 1925 purchased the small Trumbull Steel Company of Warren. The problem was that short term profits meant avoiding innovations and that led to long-term competitive weaknesses. In the late 1920s he purchased undervalued steel and rubber companies. and on construction beams. Eaton consolidated his steel holdings into the Republic Steel Company. such as ships and naval armor. Schwab started with Carnegie Steel and by 1897 was its president.

0727 35S20 45S20 1140/11 46 35S20 45S20 1.0718 1.7223 1.1191 1.0401 1.0715 1.0726 1.1193 1.1141 1.7218 4130 25CrMo4 GS25CrMo4 708A3 25CrMo4 0 (KB) CDS1 30CrMo4 10 1.0737 11SMnPb30 11SMnPb37 12L14 9SMnPb28 9SMnPb36 Alloy steels SCM 420 SCM 430 SCCrM1 SCM 440 34 1.0736 11SMn37 1215 9SMn28 9SMn36 230M0 CF9SMn28 SUM 25 7 CF9SMn36 SUM 22 En1A 230M0 SUM 7 CF9SMnPb2 22L Leade 9 SUM d CF9SMnPb3 23L En1A 6 SUM Leade 24L d 1.1194 C45 1045 C45 CK45 CF45 CQ45 S45C S48C 1.7225 42CrMo4 4140/41 41CrMo4 42CrMo4 708M4 41CrMo4 0 38CrMo4 .0453 C15D C18D 1018 CK15 C15 C16.0503 1.8 040A1 5 080M1 C15 5 C16 080A1 1C15 5 EN3B 060A4 7 C45 080A4 1C45 6 C46 080M4 C43 6 212M4 0 En8M S15 S15CK S15C 1.1.

1.3563 42 42CrMoS4 43CrMo4 708A4 2 (KB) 709M4 G40 CrMo4 0 42CrMo4 En19 En19C SCM 440H SNB 7 SCM 4M SCM 4 1.0 40NiCrMo7 4 En24 (KB) SNCM 447 SNB241-5 1.6582 1.4301 X2CrNi19-11 304 X2CrNi18-10 35 .4310[cit ation needed] X10CrNi18-8 301 S3010 0 1.6562 34CrNiMo6 4340 35NiCrMo6 34CrNiMo6 817M4 (KB) 40NiCrMo8.6543 1.7227 1.6523 20NiCrMo2-2 8620 805A2 21NiCrMo22 0 SNCM 20NiCrMo2 21NiCrMo2 805M2 200 (H) 0 Stainless steels 1.4305 X8CrNiS18-9 303 202S S3030 X10CrNiS18 21 X10CrNiS18 SUS 303 0 -9 En58 -09 M 304S 15 304S X5CrNi18-9 16 SUS 304 S3040 X5CrNi18X5CrNi18304S SUS 0 10 10 18 304-CSP XCrNi19-9 304S 25 En58E 1.4318[cit ation needed] X2CrNiN18-7 301LN 1.

4306 X2CrNi19-11 304L S3040 3 S3045 3 S3040 9 S3050 0 X5CrNiMo1 7 12 2 X5CrNiMo1 S3160 7 13 3 0 X5CrNiMo 19 11 X5CrNiMo 18 11 S3160 3 304S 11 SUS304 L 1.4311[cit X2CrNiN18ation needed] 10 1.1.4438[cit X2CrNiMo18317L ation needed] 15-4 1.4406[cit X2CrNiMoN1 ation needed] 7-12-2 S3165 316LN 1.4436 X5CrNiMo1712-2 316 X5CrNiMo1814-3 316S 29 316S 31 316S 33 En58J X5CrNiMo1 7 12 SUS 316 X5CrNiMo1 SUS316 7 13 TP X8CrNiMo1 7 13 1.321S 0 10 31 1.4571 316Ti 1.4948[cit ation needed] 304LN X6CrNi18-11 304H 1.4401 1.4303[cit ation needed] X5CrNi18-12 305 1.4404 X2CrNiMo17316L 12-2 316S 11 SUS316 L 1.4429[cit X2CrNiMoN1 3 ation needed] 7-13-3 S3163 X6CrNiMoT 320S 5 i17-12 33 S3170 3 S3210 X6CrNiTi18.4541 321 SUS321 36 .

4512[cit ation needed] S3210 9 S4090 0 S4100 0 S4300 X6Cr17 0 S4400 2 S4400 3 S4400 4 S4402 X14CrMoS1 0 7 N0890 4 S3125 4 SUS430 F 430S 17 X6CrTi12 409 410 1.4125[cit ation needed] 440C 1.2363 X100CrMoV5 A-2 X100CrMoV X100CrMoV BA 2 SKD 12 51 5-1 KU 37 .4539[cit X1NiCrMoCu 904L ation needed] 25-20-5 1.4112[cit ation needed] 440B 1.4547[cit X1CrNiMoCu ation needed] N20-18-7 Tool steels 1.1.4104 440F 1.4016 430 SUS430 440A 1.4878[cit X12CrNiTi18321H ation needed] 9 1.

1.2379 X153CrMoV1 D-2 2 X153CrMoV X155CrVMo BD 2 SKD 11 12-1 12-1 95MnWCr-5 KU 1. inexpensive energy and iron ore are competitive advantages of steel makers in Iran because the huge natural resources of the country let the government to provide inexpensive production factors for the industry. we will offer some policies to mitigate the fluctuations of stock prices. As a matter of fact. But Iran's producers experienced almost no rise in their production factor prices especially key factors of energy and iron ore prices.1. World crude steel production 38 . no material is as central to economic growth processes and industrial development as steel. the sharp rise of crude oil as well as iron ore price caused the sharp rise of steel price because of the rise in prices of key production factors. As a consequence of globalization and the associated catching-up processes in emerging market economies. In 2008. World crude steel production has almost doubled during the last 15 years.2510 O-1 100MnCrW4 Bo 1 QUALILATIVE ANALYSIS OF PRODUCTION AND SALES Steel making is an energy intensive industry and for this reason. from automotive to household industries. have an important effect on this industry. In this paper we are to model the effects of fluctuations in world steel price on stock price of one of Iranian steel producers. In the end. Introduction Steel is a fundamental material for many industries. steel has experienced a worldwide boom. energy prices. especially oil and natural gas prices. But these inexpensive factors have some side effects that one of them is on the stock price of steel makers in stock market. With an exception of crude oil.

whose production grew by 16% in 2007. This is the most important element and the basic difference of various methods of steelmaking.reached more than 1.344 million tons in 2007. in the middle of 2008 due to the financial crisis. the prices fell down sharply. this method is able to process on wide range of iron ore types. subject is important. semi-finished products. in 39 . This country experienced a growth of 19% in the year before namely 2006. it is necessary to describe some technical aspects of different steel production methodes. Table 2 shows a brief comparison between the two processes. As it is shown in this figure. because of the unique nature of steel market in Iran. So it is more flexible. Just limited to Direct Reduced Iron (DRI) Semi-Finished Products Is called Pig iron Is called Sponge iron Environmental Aspects More polluting than gas-based Process Less polluting Investment costs No difference No difference Operation costs Coal is important Natural Gas is important With this brief description of the steel market and different steel making methods. the price doubled in just 6 months and suddenly decreased by 70% just in 3 months. Table 1 shows the world crude steel production from 1997 to 2007. although the prices doubled in the first six months of 2008. Actually the year 2008 was the most turbulent year in the steel market. an increase of almost 7% over 2006. 1 shows the monthly average price of billet from 2006 to the end of 2008. This sharp rise and drastic fall were the result of a similar rise and fall in the oil market. Table 2: Comparison of two methods of steel making Coke-based processes Gas-based processes Iron Ore Specification In some cases. these two methods differ from each other in some other aspects such as iron ore. Production processes can be divided into two categories: Coal (coke) based processes (Blast Furnace) Gas based processes (Direct Reduction) In addition to energy consumption. This increase is largely due to growth in China. Source: International Iron and Steel Institute (IISI) The price of steel billet as an important intermediate product has risen in recent years.1 Steelmaking Methods Steelmaking is a process which needs huge amounts of energy. The Fig. 1. Before introducing the steel market of Iran. environmental and investment issues.

The most important advantages are easy billion dollar income from selling oil and other natural resources. Table 3 shows Iran's Production. was based on coal process and blast furnace. On the other hand. Problem Definition Iran is among the countries rich in natural resources especially crude oil and natural gas. Actually the oil revenue was about 80% of the total revenue of Iran's government in 2008. That easy billion dollar income has also created lots of local party conflicts over the control and consumption of it. These problems. For 40 . This change caused Iran to become the third country in the world that produces steel with DRI1 technology after Mexico and Venezuela. 1. And finally. called Zob-e-Ahan. Since 1990s. after a few years of operation. developing energy consuming industries with high profit margin due to availability of inexpensive production factors.the next section we will describe the conditions of Iran s steel industry. 1 Direct Reduced Iron 2. and even political power in the region and the world. According to this table.2 Iran's Steel Industry The foundation of the first steel-making company in Iran was laid after signing a contract with the USSR in 1965 to finance and erect a steel plant in Isfahan. the huge available resources of natural gas. However. Iran has the third largest oil reserves and also has the second largest natural gas reserves in the world after Russia. These rich natural resources have brought both advantages and disadvantages for Iran. the most important disadvantage of these natural resources is the inefficient and energy consuming industries that are not able to compete with their global competitors even with subsidized energy. Zob-e-ahan was facing some problems such as shortage of scrap and quality coking coal. the expansion of steel industry in Iran has changed the technology route to make the best use of locally available iron ore and natural gas. the easy income reduced the innovation and other intellectual productions of the country. and the required raw materials forced the government to convert its steelmaking technology to direct reduction technology. These inexpensive natural resources are the roots of a problem that this paper is aimed to model. it s obvious that there is a surplus of demand in the steel market which forces the importation of steel. Export and Import of crude steel. The company.

To support domestic industries. even if the global prices doubled or tripled! 41 . with the CFR price of Billet in Bandar-abbas port in south of Iran. steel is made with subsidized production factors. all steel plants were government-owned so the steel making companies had no control over pricing their final product. Government intervention in pricing caused many problems and created a black market. it would support domestic industries by providing subsidized production factors. but it is sold in Iranian Metal Exchange with free market mechanism in which the price follows the world price of steel plus tariff and other costs. which resulted in corruption in the market. most of Iran s steel making plants are based on gas technology or DRI technology that uses huge amount of natural gas and electricity as energy factors. Although it is obvious in many countries that when the global price of a product rises. Khoozestal Steel Company (KSC). in electricity production sector. Billet price: CFR of Bandar-Abbas as Importation Price and KSC Sell Price Source: AGAHAN Company Investment Department When the companies were government-owned. Until two years ago. In addition. But another policy was executed two years ago. using inefficient combined-cycle gas-turbine technology.example. These companies used subsidized inputs but sold their products in free market and their profit directly was divided among private share holders. gasoline. most of the electricity is produced in steam boilers. in Iran the price of many important factors like oil. "Mass privatization of Government-Owned Companies". the domestic prices of that product and related products will rise too. government decided to give steel plants subsidized production factors that three key subsidized factors are natural gas. As described earlier in the steel industry section. the steel price in Iran was sometimes less than half of its world price. the monthly average price of billet sold by one of Iranian steel makers. it was considered that this profit will return to the government treasury. electricity and iron ore. With the entrance of steel companies to the Iranian National Stock Market. Hence. everything changed. Another source of problem of subsidized production factors in Iran is the fixed price policy over a year. the government decided to change its policy and liberated steel price. For example in some cases the black market price was twice the government price. From three years ago. Therefore. electricity and iron ore are set for one year and nothing can change those prices during that year.

It means that perceived attraction does not change as soon as capital gain increased.The main products of the company are billet. It needs some time for people to know the attractiveness of the market to invest in. 3. stock market sector and steel pricing sector. Hence. In this sector. Therefore the loop which is a reinforcing one is formed. [8. Based on the literature review mentioned in the previous parts. dynamics which run these two sectors are discussed here. demonstrates the change of attractiveness of investment in the stock market and so its demand due to the stock price. bloom and slab. 9] The first loop. Higher perceived attraction result in increasing of demand for stock and higher demand leads to higher stock price. Dynamic Model Description The model is established in two main sectors. Increasing of capital gain makes the stock market more attractive for investment so the total attractiveness of the stock market will increase. In the figure. electricity and iron ore (main production factors of steel making) are shown Fig.Its production factors are entirely subsidized although the company is privatized and sells its products in free market with global price. Stock Market Attractiveness loop 42 . we can track the world price easily. 3. two main loops in a tight relation result in response of stock market. With this description of steel market in Iran. higher stock price leads to higher capital gain and total return on stock. 2. These two sectors by interaction with each other create the behavior of the stock price as a focus of attention in this paper. 7.The mentioned policies in natural gas. namely crude steel that is suitable for our purpose because these products are to some extent standard products. So its stock price and its financial statements are publicly available.It is one of companies that were privatized two years ago as a step in mass privatization program in Iran. Other steel making companies in Iran produce 3. Stock market sector Dynamics of stock market is well described in the literature.4 and Fig. we consider the effects of price fluctuations in world steel market in the last year on Khuzestan Steel Company (KSC) stock price which is a domestic producer of crude steel in Iran. This loop is shown in Fig. We selected that company for three main reasons: 1. Fig. 5. This perceived attraction comes from the delay between the rise in capital gain and people awareness of this rise. After a while this attractiveness become known by people so perceived attraction will increase.

attractiveness of the stock market will be affected and will decrease. In this sector Pricing strategy of the domestic steel is one of the most important points to change the behavior of the model as well as the policies which are going to be discussed further. there is a time delay for this adjustment during increasing time as well as decreasing time. Domestic steel price rates (increasing rate and decreasing rate) are both strongly affected by the world price. This balancing loop comes from a very important factor which is P/E ratio (Profit/Earning ratio). Another point in this part is that the domestic price will never become less than the domestic cost. In this sector the dynamics of pricing the steel in the country according to the domestic costs and world price and its effect on the earning are modeled. By going far from the normal P/E ratio. domestic price will decrease with a considerable delay. 43 . the domestic price will increase sooner but by a decrease in world price. If the current domestic steel price is lower than world price. the decreasing rate will work to adjust the domestic price with the world price. Decreasing of attractiveness will decrease the perceived attraction and demand for stock as well. Furthermore.There is another loop which limits the rise of stock price as a balancing loop. Earning is the point of relation between two sectors. It means that the minimum domestic price will be equal to the domestic cost regardless of the world price because government uses tarrifs to support the domestic producers. In the model. Fig. Therefore the balancing loop is shaped. Another important factor in this loop is the number of shares which influence the earning. On the other hand. Therefore the parameter Delay1 is one third of Delay 2 . It means that by an increase in the world price. In this loop rising of stock price will increase the P/E ratio. the time delay for increasing rate is less than that of decreasing rate. 8 shows both loops. if the domestic price is higher. This indicator is very significant to investors. Regarding the experts in steel field. which shows a combination of profit as well as the risks behind their investment. the dynamics of stock market contains two major loops which interact with each other to balance the stock price. then the domestic price will increase to adjust itself with the world price so the increasing rate of the domestic price will change according to the discrepancy between them. Pricing strategy is based on the adjustment of the domestic steel price with the world s steel price. As shown in the figure.

F1 shows the Attractiveness as a function of Capital Gain . Total domestic demand for steel is assumed to be constant. . Stock price market which shows the dynamic of the stock market is based on the two positive and negative loops. As this proportion go below zero the price will increase by a negative rate. These demands then form the earning. This function is an increasing function which shows that Attractiveness is positively influenced by the changes in Capital Gain and will change in the same direction. F2 describes Attractiveness as a function of P/E ratio to Normal P/E ratio . Another function in this sector is F3 which describes the Stock price change as a function of proportional value of Stock supply to Demand for stock . the stock price will change in accordance with the demand for it and the constant supply of the stock in the stock market. As mentioned above two Time delays affecting the rates of Domestic steel price are different due to the perception of people in increasing or decreasing the steel price. even if it is more expensive than the world one because of the surplus demand of Iran's market and also the delay of providing the import steel. Stock supply and total demand for stock in this section have constant values over time. In constructing the model there are some assumptions worthy of notice. There are some points about the stock and flow model which is mentioned here. Domestic cost and Number of shares are assumed to be constant. Parameter Earning is gained by the Demand fulfilled by the domestic products . Division of the demand between these two groups is assumed to be proportional to the world price and domestic price. Therefore. Pricing sector can be seen in the left part of the model. There are two functions acting on the Attractiveness . This function starts from a maximum value which is for the P/E ratio equal to zero and then decline by increasing the proportional P/E ratio. Number of shares and Domestic cost . In this sector. It models the pricing strategy which leads to the demands fulfilled by domestic products as well as the demands fulfilled by imported products. It is modeled as the time delay in decreasing rate is three times more than the delay time in 44 . When this proportional value approach a maximum value the Attractiveness will be zero. As this proportion approaches one the function will be zero which means that there will be no rate change.Second concept in this sector is the effect of the domestic price on the demands fulfilled by imported products and on the other hand by domestic products. Besides. it is assumed that all the domestic production is used.

which results in the constant production cost during these years. this model consists of two sectors. the oscillation takes place with the same frequency but the amplitude of the oscillation increases. As the blue diagram shows. (4) In this scenario there is also a fluctuation in steel price. the stock price oscillates as depicted in the red graph. 5. Simulation and Results As described. which demonstrates the economical expansion in the stock market. we can observe the normal oscillation in the steel stock market. In this section we will compare the results of these scenarios the change in the world price under each of these circumstances is shown: Based on our simulations for each of these scenarios were obtained. there will be a dreadful situation for domestic producer. there will be a reduction in the price. We have three different scenarios: (1) There is no change in the steel world price.increasing rate and this happens because of hope that the decline in current domestic steel price will not last for a long time. but the price of these inputs are under the control of government through some subsidizing programs during these years in Iran. This phenomenon hasn't taken place yet. The effects of such a change in world price on the stock price can be seen in the gray graph. (2) There is an increase in the price of production factors which results in an increase in the world price of steel. but it's possible due to the rapid change of technology and efforts in cost reduction worldwide. We should consider that always after an increase in the price of production factors. Regarding the constructed model. if the level of reduction is lower than the domestic cost of products. When there is a crisis in the market of production factors. The main concern here is that the world price of the steel fluctuates based on the price of production factors such as gas and iron ore. In this scenario domestic producers will move toward bankruptcy. We can conclude that in this case. and the steel price increases. The reason of such a 45 . The first sector is the stock market and the second sector is a description of how producers price their products. As you can see in the graph. in this case a recession will occur in the stock market. This is the third scenario and the result is shown in green curve. but the level of steel price reduction is to the extent which is lower than the domestic production cost. It seems that the change in steel world price due to the fluctuation in the price of production factors has a direct effect on the domestic stock price. Finally. when the price of domestic steel price and world stock price are equal. we want to examine the effects of such fluctuations on the stock price and its situation. (3) There is a fluctuation in the steel world price which generates an increase in the price of production factors and afterward a decrease in the factor prices. because of severe competition between domestic products and foreign ones.

mainly based on the non-subsidy factors for domestic producers. The result of this policy compared to the other scenarios. one of the main reasons that the change in production factor prices especially in the price of energy factor intensely influences the stock price is the subsidizing policies of government on the price of energy factors for domestic producers. It seems that this policy will be effective in mitigating the mentioned effect. 6. we will examine the effect of the removing subside from production factors. Policies As mentioned. In this section. We assume that the domestic cost of production will change according to the price chance of production factors. As demonstrated in this graph. 46 .direct effect is a result of the pricing strategy of domestic producers. In the next section. It's a controversial issue in the guild of domestic steel producers about the effects of removing governmental subsidizing programs on the domestic steel stock market and domestic steel market. It means that an increase or reduction of production factor prices will directly affect the price of domestic productions. we will propose some policies for mitigating the effects of the world price of production factors on the stock market. but there is a concern of how this price liberation should be done so that the social and political side effects of such a change will remain at the minimum level. this policy will make the amplitude of the stock market oscillation insensitive to the price change of production factors.

Carbon fills this role nicely. where it cools.1. silicates. these remain in the iron after it is refined. Iron can be mixed together with various other elements to create alloys with desired properties. This is done contemporarily in the silo-like structure known as a blast furnace. known as pig iron.5% . or coke. creating wrought iron. limestone must be added to the mix and the heat increased. and is readily available in the form of everyday charcoal.CHAPTER-3 MANUFACTURING PROCESS IRON ORE TO PIGIRM the oxygen atoms away from the iron ore requires heat and an alternate atomic partner for the oxygen to bond to. a form of carbon made from coal. The carbon atoms bond with the oxygen in the ore to create carbon dioxide and carbon monoxide. which floats on top of the pure liquid iron. Steel is much more difficult to work than wrought iron. a malleable and strong form of iron used by blacksmiths throughout history. which do not bond to the carbon. creating a material called slag. or other impurities. To create an even purer form of iron. such as lightness or resistance to rust (stainless steel). The pig iron can then be converted into wrought iron by mixing it with silicon. but is greatly stronger. Steel is a form of iron mixed together with 0. Because iron ore typically contains silicates. or processed further to create steel. 47 . The iron is periodically drained into a mold from a port at the bottom of the blast furnace.5% carbon but no oxygen. gases which escape out a chimney. The calcium in limestone bonds with the silicates in the ore.

to rusty red. beneficiation usually involves a combination of crushing and milling as well as heavy liquid separation. Inferior sources of iron ore generally require beneficiation. particularly during World War II. and goethite or bog ore used during the American Revolution and the Napoleonic wars.wikipedia. Banded Iron formations are known as taconite within North America. when certain hematite ores contained 66% iron and could be fed directly into iron making blast furnaces. 98% of the mined iron ore is used to make steel. Magnetite is often used because it is magnetic and hence easily liberated from the gangue minerals. When the density of the solution is properly calibrated. and unwanted minerals which are an intrinsic part of the ore rock itself (gangue). This is achieved by passing the finely crushed ore over a bath of solution containing bentonite or other agent which increases the density of the solution. all sources of iron used by human industry exploit iron oxide minerals. The ores are usually rich in iron oxides and vary in color from dark grey. massive hematite and pisolitic ironstone d Banded iron deposits http://en. The waste comes in two forms. This has included utilisation of taconite in the United States. goethite (Fe0(OH)). the primary form which is used in industry being hematite. The mining involves moving tremendous amounts of ore and waste. Mining of BIF formations involves coarse crushing and screening.JPG http://en. Iron ore is the raw material used to make pig iron. with a US Quarter shown for scale.wikipedia. deep purple.org/wiki/File:TaconitePellet. The iron mineral present may be the carbonate siderite. Banded iron formations (BIF) are metamorphosed sedimentary rocks composed predominantly of thinly bedded iron minerals and silica (as quartz). hematite (Fe2O3). Therefore.Iron ore This heap of iron ore pellets will be used in steel production.JPG Processed Taconite pellets as used in the steelmaking industry. Due to the high density of hematite relative to silicates. There are four main types of iron ore deposits worked currently. titanomagnetite. the hematite will sink and the silicate mineral fragments will float and can be removed. Iron ore mining methods vary by the type of ore being mined. Iron ores are rocks and minerals from which metallic iron can be economically extracted. but those used as iron ores contain the oxides magnetite or hematite. The mullock is mined and 48 . limonite (Fe0(OH)2O5(H2O)) or siderite (FeCO3). The name refers to the early years of mining. which is one of the main raw materials to make steel. The iron itself is usually found in the form of magnetite (Fe3O4). However in some situations. depending on the mineralogy and geology of the ore deposits. followed by rough crushing and fine grinding to comminute the ore to the point where the crystallised magnetite and quartz are fine enough that the quartz is left behind when the resultant powder is passed under a magnetic separator. These are magnetite.[1] is virtually unknown on the surface of the Earth except as iron-nickel alloys from meteorites and very rare forms of deep mantle xenoliths. bright yellow.org/wiki/File:TaconitePellet. bedrock in the mine (mullock) that isn't ore. Hematite is also known as "natural ore". more inferior iron ore sources have been used by industrialized societies when access to high-grade hematite ore was not available.

Currently magnetite iron ore is mined in Minnesota and Michigan in the U. and the gangue is separated during the beneficiation process and is removed as tailings. Taconite tailings are mostly the mineral quartz.piled in waste dumps. The grain size of the magnetite and its degree of commingling with the silica groundmass determine the grind size to which the rock must be comminuted to enable efficient magnetic separation to provide a high purity magnetite concentrate. This material is stored in large. The typical magnetite iron ore concentrate has less than 0. with the largest intensity in South America. and can easily come to more than 2. formed by shearing of ophiolite ultramafics. which exports significant quantities to Asia. and there is a nascent and large magnetite iron ore industry in Australia.. There are several graniteassociated deposits of this nature in Malaysia and Indonesia. 3–7% silica and less than 3% aluminium. Magnetite bearing BIF is currently mined extensively in Brazil. The typical grade of iron at which a magnetite-bearing banded iron formation becomes economic is roughly 25% Fe. Magnetite concentrate grades are generally in excess of 63% Fe by weight and usually are low phosphorus. and Eastern Canada mine taconite. minor. but usually are more easily upgraded via crushing and screening. These ores form a niche market. A few iron ore deposits. Australia and Asia. The size and strip ratio of most magnetite resources is irrelevant as BIF formations can be hundreds of metres thick. which can generally yield a 33% to 40% recovery of magnetite by weight. with specialty smelters used to recover the iron. Generally most magnetite BIF deposits must be ground to between 32 and 45 micrometres in order to provide a low-silica magnetite concentrate. low aluminium. Most large hematite iron ore deposits 49 . regulated water settling ponds. this is written by RISDHAD [edit] Magmatic magnetite ore deposits Occasionally granite and ultrapotassic igneous rocks segregate magnetite crystals and form masses of magnetite suitable for economic concentration.1% phosphorus.S. 12% Ti and 0. These ores are beneficiated essentially similar to banded iron formation ores. Other sources of magnetite iron ore include metamorphic accumulations of massive magnetite ore such as at Savage River. tonnes of contained ore. Chilean magnetite iron ore deposits within the Atacama Desert have also formed alluvial accumulations of magnetite in streams leading from these volcanic formations.[citation needed] Hematite ore Hematite iron ore deposits are currently exploited on all continents. This determines the energy inputs required to run a milling operation. The typical titanomagnetite concentrate grades 57% Fe. source of iron ores are magmatic accumulations in layered intrusions which contain a typically titanium-bearing magnetite often with vanadium. Some magnetite skarn and hydrothermal deposits have been worked in the past as high-grade iron ore deposits requiring little beneficiation. the grade of the iron within the BIF host rock. Another. with hundreds of kilometres of strike. Tasmania. to produce a concentrate grading in excess of 64% Fe by weight. titanium and vanadium. which is chemically inert.5% V2O5. The key economic parameters for magnetite ore being economic are the crystallinity of the magnetite.500 million or more. notably in Chile. are formed from volcanic flows containing significant accumulations of magnetite phenocrysts. and the contaminant elements which exist within the magnetite concentrate. low titanium and low silica and demand a premium price.

but ore-grade commercial mining operations are dominated by the countries listed in the table aside. Geological Survey Country Production China Australia Brazil India Russia Ukraine United States South Africa Canada Sweden Venezuela Iran Kazakhstan Mauritania Other countries Total world 520 270 250 150 105 73 54 40 33 24 20 20 15 11 43 1690 Iron is the world's most commonly used metal. The main constraint is the position of the iron ore relative to market. However. Hematite ores are harder than magnetite ores and therefore require considerably more energy to crush and grind if benefication is required. World production averages one billion metric tons of raw ore annually. Export grade Hematite ores are generally in the 62–64% Fe range[citation needed]. The world's largest producer of iron ore is the Brazilian mining corporation Vale. Production and consumption Estimated iron ore production in million metric tons for 2006 according to U. Hematite ores can also contain significantly higher concentrations of penalty elements. The major constraint to economics for iron ore deposits is not necessarily the grade or size of the deposits. followed by 50 . and general industrial applications (machinery). automobiles. typically being higher in phosphorus. because it is not particularly hard to geologically prove enough tonnage of the rocks exist. water content (especially pisolite sedimentary accumulations) and aluminium (clays within pisolites). It is used primarily in structural engineering applications and in maritime purposes.S. Iron-rich rocks are common worldwide.are sourced from metasomatically altered banded iron formations and rarely igneous accumulations. Hematite iron is typically rarer than magnetite bearing BIF or other rocks which form its main source or protolith rock. the cost of rail infrastructure to get it to market and the energy cost required to do so. but it is considerably cheaper to process as it generally does not require beneficiation due to its higher iron content.

and the dominant metasomatically-altered banded iron formation related ores such as at Newman. Karnataka. Goa. Rajasthan and Tamil Nadu are the principal Indian producers of iron ore. with an annual growth of 38%. which consume a significant amount of raw iron ore and metallurgical coal. Depletion Iron ore reserves at present seem quite vast.408 million tones of magnetite. Maharashtra. Kerala. and to remove the iron from the oxygen.  Carbon monoxide (CO) is the principal reduction agent. the iron ore must be powdered and mixed with coke. For instance. China is followed by Japan and Korea. for instance laterite iron ore deposits near Lake Argyle in Western Australia. Japan.602 million tones of hematite and 3. Madhya Pradesh. the Hamersley Range and Koolyanobbing. Thus.  Air blast and charcoal (coke): 2 C + O2 2 CO. but some are starting to suggest that the maths of continual exponential increase in consumption can even make this resource seem quite finite. Smelting Main articles: blast furnace and bloomery Iron ores consists of oxygen and iron atoms bonded together into molecules. it is not entirely as simple as that. However. World consumption of iron ore grows 10% per annuon average with the main consumers being China. To convert it to metallic iron it must be smelted or sent through a direct reduction process to remove the oxygen. Bihar. Korea. In 2006. Other types of ore are coming to the fore recently. Oxygen-iron bonds are strong. Thus. China is currently the largest consumer of iron ore. such as oxidised ferruginous hardcaps. The total recoverable reserves of iron ore in India are about 9. Fortescue Metals Group Ltd may eventually bring Australia's production to second in the world. Western Australia. to be burnt in the smelting process. which translates to be the world's largest steel producing country. the Chichester Range. Western Australia. Andhra Pradesh. Carbon is used because the strength of a carbon-oxygen bond is greater than that of the ironoxygen bond. the iron and carbon smelting must be kept at an oxygen deficient (reducing) state to promote burning of carbon to produce CO not CO2. the United States and the European Union. A further Australian supplier. China produced 588 million tons of iron ore. o Stage One: 3 Fe2O3 + CO 2 Fe3O4 + CO2 o Stage Two: Fe3O4 + CO 3 FeO + CO2 o Stage Three: FeO + CO Fe + CO2  Limestone fluxing chemistry: CaCO3 CaO + CO2 51 . carbon monoxide is the primary ingredient of chemically stripping oxygen from iron. Orissa. at high temperatures.Anglo-Australian companies BHP Billiton and Rio Tinto Group. a stronger elemental bond must be presented to attach to the oxygen. Lester Brown of the Worldwatch Institute has suggested iron ore could run out within 64 years based on an extremely conservative extrapolation of 2% growth per year. In Australia iron ore is won from three main sources: pisolite "channel iron deposit" ore derived by mechanical erosion of primary banded-iron formations and accumulated in alluvial channels such as at Pannawonica.

12%. Ideally iron ore contains only iron and oxygen. p. High enough concentrations of phosphorus render any iron unusable (Rostoker & Bronson 1990. where the speed and amount of carbon absorption is the overriding consideration. a piece of iron that is perfectly serviceable in summer. some catastrophically bad. Depending on the use intended for the iron. might become extremely brittle in winter. 0. bendable. p. The effects of cold shortness are magnified by temperature. 22). High phosphorus iron can also be hardened by cold hammering. 57). the more silicon will be present in the iron. Some chemicals are deliberately added such as flux which makes a blast furnace more efficient. Turner (1900. or give it some other desirable quality. It is preferred for casting purposes for this reason.Trace elements The inclusion of even small amounts of some elements can have profound effects on the behavioral characteristics of a batch of iron or the operation of a smelter. and resistant to shock at room temperature. The choice of ore. The hotter the furnace. Modern steel makers can increase hardness by as much as 30%. [edit] Phosphorus Phosphorus (P) has four major effects on iron: increased hardness and strength. lower solidus temperature.07 and 0. These effects can be both good and bad. In reality this is rarely the case. The strength and hardness of iron increases with the concentration of phosphorus. There is some evidence that 52 . Although. iron ore contains a host of elements which are often unwanted in modern steel Silicon Silica (SiO2) is almost always present in iron ore. fuel. harder. and cold shortness.5% Si in European cast iron from the 16th to 18th centuries. lowering the number of bad castings. and flux determine how the slag behaves and the operational characteristics of the iron produced. At temperatures above 1300 °C some will be reduced and form an alloy with the iron. without sacrificing shock resistance by maintaining phosphorus levels between 0. It also increases the depth of hardening due to quenching. the harder the iron becomes and the more it can be hardened by hammering. Thus.05% phosphorus in wrought iron makes it as hard as medium carbon steel. 192–197) reported that silicon also reduces shrinkage and the formation of blowholes. but at the same time also decreases the solubility of carbon in iron at high temperatures. The addition of phosphorus has a down side. bar iron is usually worked hot. its uses often require it to be tough. Most of it is slagged off during the smelting process. At concentrations higher than 0. pp. these effects are either good or bad. The more phosphorus. The hardening effect is true for any concentration of phosphorus. Typically. Cold short is especially important for bar iron. increased fluidity. Gray iron is less brittle and easier to finish than white iron. The major effect of silicon is to promote the formation of gray iron.2% iron becomes increasingly cold short. A nail that shattered when hit with a hammer or a carriage wheel that broke when it hit a rock would not sell well. This would decrease its usefulness in making blister steel (cementation). Others are added because they make the iron more fluid. or brittle at low temperatures. It is not uncommon to find up to 1. Bog ore often has a high Phosphorus content (Gordon 1996.

p. is achieved at a concentration of 10. The resulting iron filled molds with fewer voids and also shrank less. For instance Isaac Zane. Sulfur dissolves readily in both liquid and solid iron at the temperatures present in iron smelting. 194). Increasing the ratio of lime flux will decrease the viscosity (Rosenqvist 1983. Phosphorus depresses the liquidus temperature. don't use ore or a lime source with a high aluminium content. Sulfur Sulfur (S) is a frequent contaminant in coal. The first is avoidance. allowing the iron to remain molten for longer and increases fluidity. This is due to the erosion of the furnace lining by the liquid slag. But. If the iron your ore produced was cold short.2–0.2% (Rostocker & Bronson 1990. 311). As a result aluminium contamination of the iron is not a problem. The addition of 1% can double the distance molten iron will flow (Rostoker & Bronson 1990. There are two remedies for high phosphorus iron. At the extreme this could lead to a frozen furnace. it does increase the viscosity of the slag (Kato & Minowa 1969. p. This will have a number of adverse effects on furnace operation. The maximum effect. Phosphorus cannot be easily removed by fluxing or smelting. 202–204). The oldest. For foundry work Turner felt the ideal iron had 0. The second method involves oxidizing the phosphorus during the fining process by adding iron oxide. prolonging the process. 37 and Rosenqvist 1983. Careful control of phosphorus can be of great benefit in casting operations. The thicker slag will slow the descent of the charge. The extreme fluidity allowed them to make very complex and delicate castings. The former can be removed by washing the ore prior to smelting. Aluminium Small amounts of aluminium (Al) are present in many ores (often as clay) and some limestone. In the 19th century some producers of decorative cast iron used iron with up to 5% phosphorus. Given Zane's reputation for keeping abreast of the latest developments. one would search for a new source of iron ore. as they had no strength (Turner 1900. It is also present in small quantities in many ores. the owner of Marlboro Iron Works did not appear to know about it in 1772. This technique is usually associated with puddling in the 19th century. 311). However.during the Middle Ages the very wealthy may have had a high phosphorus sword for summer and a low phosphorus sword for winter (Rostoker & Bronson 1990. p. and easiest.55% phosphorus. 22). High aluminium will also make it more difficult to tap off the liquid slag. 22). and may not have been understood earlier.6%. they could not be weight bearing. The effects of even small 53 . p. but can be removed by calcining. p. about 500 °C. Phosphoric acid is used at a rust converter because phosphoric iron is less susceptible to oxidation. Until the introduction of brick lined furnaces the amounts are small enough that they do not have an effect on either the iron or slag. The iron pillar of India which does not rust is protected by a phosphoric composition. the technique was probably unknown to the ironmasters of Virginia and Pennsylvania. and so iron ores must generally be low in phosphorus to begin with. when brick is used for hearths and the interior of blast furnaces. Phosphorus is a deleterious contaminant because it makes steel brittle. p. However. even at concentrations of as little as 0. is avoidance. the amount of aluminium increases dramatically. There are a number of solutions to a high aluminium slag. pp. Aluminium is very hard to reduce.

p. made with coal and coke. Coal was not used in Europe (unlike China) as a fuel for smelting because it contains sulfur and therefore causes hot short iron. but it requires a great deal more time and effort. Large cracks cause the iron or steel to break up.03% sulfur is avoided. A piece of hot short iron will crack if worked with a hammer. If an ore resulted in hot short metal. Today iron with over 0. p. There are a number of remedies for sulfur contamination. and the one most used in historic and prehistoric operations.5% can counteract the effects of slow cooling and a high silicon content (Rostoker & Bronson 1990. Smaller cracks can cause the object to fail during use. Hot short iron can be worked. Sulfur causes iron to be red or hot short (Gordon 1996. 21). Hot short iron is brittle when hot. except in China where high sulfur cast iron. Roasting oxidizes sulfur to form sulfur dioxide which either escapes into the atmosphere or can be washed out. When a piece of hot iron or steel cracks the exposed surface immediately oxidizes. some as high as 0. it was coked. Wrought iron is shaped by repeated blows with a hammer while hot. They were one of the first worked out by iron makers. is avoidance. The first. Only with the introduction of hot blast from 1829 was raw coal used. but it has to be worked at low temperatures.15% sulfur. but will make poor wrought iron. The metal must be struck more often and harder to achieve the same result. 200). pp. A mildly sulfur contaminated bar can be worked. but also harder. In the rest of the world a high sulfur cast iron can be used for making castings. This layer of oxide prevents the mending of the crack by welding. White cast iron is more brittle. In cast iron sulfur promotes the formation of white iron.57%. was used to make bells and chimes (Rostoker. Working at lower temperatures requires more physical effort from the smith or forgeman. In warm climates it is possible to leave pyritic ore out in the rain. Sulfur can be removed from ores by roasting and washing. The degree of hot shortness is in direct proportion to the amount of sulfur present. good foundry iron should have less than 0. The combined action 54 . It is generally avoided. because it is difficult to work. ironmasters looked for another ore.amounts of sulfur are immediate and serious. According to Turner (1900. This was a serious problem as most iron used during the 17th and 18th century was bar or wrought iron. Bronson & Dvorak 1984. 760). 7). When mineral coal was first used in European blast furnaces in 1709 (or perhaps earlier). As little as 0. p.

PIGIRM TO STEEL MELTING

Pig iron is the intermediate product of smelting iron ore with coke, usually with limestone as a flux. Pig iron has a very high carbon content, typically 3.5–4.5%,[1] which makes it very brittle and not useful directly as a material except for limited applications. The traditional shape of the molds used for these ingots was a branching structure formed in sand, with many individual ingots at right angles to a central channel or runner. Such a configuration is similar in appearance to a litter of piglets suckling on a sow. When the metal had cooled and hardened, the smaller ingots (the pigs) were simply broken from the much thinner runner (the sow), hence the name pig iron. As pig iron is intended for remelting, the uneven size of the ingots and inclusion of small amounts of sand was insignificant compared to the ease of casting and of handling. Traditionally pig iron would be worked into wrought iron in finery forges, and later puddling furnaces, more recently into steel. In these processes, pig iron is melted and a strong current of air is directed over it while it is being stirred or agitated. This causes the dissolved impurities (such as silicon) to be thoroughly oxidized. An intermediate product of puddling is known as refined pig iron, finers metal, or refined iron. Pig iron can also be used to produce Gray iron. This is achieved by remelting pig iron, often along with substantial quantities of steel and scrap iron, removing undesirable contaminants, adding alloys, and adjusting the carbon content. Some pig iron grades are suitable for producing Ductile iron. These are high purity pig irons and depending on the grade of ductile iron being produced these pig irons may be low in the elements silicon, manganese and phosphorous. Modern uses Today, pig iron is typically poured directly out of the bottom of the blast furnace through a trough into a ladle car for transfer to the steel plant in mostly liquid form, referred to as hot metal. The hot metal is then charged into a steelmaking vessel to produce steel, typically with an electric arc furnace or basic oxygen furnace, by burning off the excess carbon in a controlled fashion and adjusting the alloy composition. Earlier processes for this included the finery forge, the puddling furnace, the Bessemer process, and open hearth furnace. Modern steel mills and direct-reduction iron plants transfer the molten iron to a ladle for immediate use in the steel making furnaces or cast it into pigs on a pig-casting machine for reuse or resale. Modern pig casting machines produce stick pigs, which break into smaller 4–10 kg pieces

55

56

Alloy steel Alloy steel is steel alloyed with other elements in amounts of between 1 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 differentiation between the two is somewhat arbitrary; Smith and Hashemi define the difference at 4%, while Degarmo, et al., define it at 8%. However, most commonly alloy steel refers to low alloy steel. These steels have greater strength, hardness, hot hardness, wear resistance, hardenability, or toughness compared to carbon steel. However, they may require heat treatment to achieve such properties. Common alloying elements are molybdenum, manganese, nickel, chromium, vanadium, silicon and boron. Low alloy steels are usually used to achieve better hardenability, which in turn improves its other mechanical properties. They are also used to increase corrosion resistance in certain environmental conditions.[3] With medium to high carbon levels, low alloy steel is difficult to weld. Lowering the carbon content to the range of 0.10% to 0.30%, along with some reduction in alloying elements, increases the weldability and formability of the steel while maintaining its strength. Such a metal is classed as a high-strength low-alloy steel. Some common low alloy steels are: · · · D6AC 300M 256A

Principal low alloy steels[4] SAE designation 13xx 40xx 41xx 43xx 44xx 46xx 47xx Composition Mn 1.75% Mo 0.20% or 0.25% or 0.25% Mo & 0.042% S Cr 0.50% or 0.80% or 0.95%, Mo 0.12% or 0.20% or 0.25% or 0.30% Ni 1.82%, Cr 0.50% to 0.80%, Mo 0.25% Mo 0.40% or 0.52% Ni 0.85% or 1.82%, Mo 0.20% or 0.25% Ni 1.05%, Cr 0.45%, Mo 0.20% or 0.35%
57

00% or 0.65% Cr 0.55%.00%.27% or 0.28% or 0.50% Cr 0.55%.60% or 0.25% Cr 0.92% or 1.65% or 0.00% or 1. Mo 0. Mo 0.95%. Cr 0.40% or 0.00% min Cr 0. V 0. Cr 0.55%.50% or 0. C 1.10% or 0. Mn 0.40% or 2.15% min Ni 0.50%.45%.25% Ni 0.80% or 0.12% 58 .35% Si 1.87% or 0.50%. Cr 0.00% min Cr 0.50%. Mo 0.50%.00% min Cr 0.20% Ni 0.80% or 0.82% or 0. C 1.40%. C 1.50%.85%. Mo 0. Cr 0. Cr 0.05% Cr 1.02%.48xx 50xx 50xxx 50Bxx 51xx 51xxx 51Bxx 52xxx 61xx 86xx 87xx 88xx 92xx 94Bxx Ni 3.45%. Mo 0.65% Ni 0.80% Cr 1.

40 >1 Primary function Alloying element in nitriding steels Improves machinability Powerful hardenability agent Increases hardenability Corrosion resistance Corrosion resistance Improves machinability Combines with sulfur to prevent brittleness Increases hardenability by lowering transformation points and 59 . Zirconium. Vanadium. The type of carbide that chromium forms depends on the amount of carbon and other types of alloying elements present. forming (Fe. or aluminium are added during the steelmaking process to remove dissolved oxygen from the melt.Mn)3C. and niobium are strong carbide forming elements.Material science Alloying elements are added to achieve certain properties in the material. Nickel and copper improve corrosion resistance in small quantities. Aluminium dissolves in the ferrite and forms the compounds Al2O3 and AlN. Chromium.Cr3)C. and NiC. forming the carbides V3C3. selenium. vanadium.5–2 4–18 0. TiC.001–0.1–0. and tellurium increase machinability. Tungsten and molybdenum form carbides if there is enough carbon and an absence of stronger carbide forming elements (i. Chromium forms partitions between the ferrite and carbide phases in steel. and copper are added to increase strength by forming solid solutions in ferrite. and tungsten increase strength by forming second-phase carbides. Cr7C3. respectively. Manganese. usually Ni3Al. alloying elements are added in lower percentages (less than 5%) to increase strength or hardenability. titanium & niobium).4 0.25–0. MnO•SiO2. With enough of these elements the austenitic structure may be obtained at room temperature. Nickel is very soluble in ferrite. Molybdenum helps to resist embrittlement. respectively. these elements are known as ferrite stabilizing elements. such as corrosion resistance or extreme temperature stability. lead. cerium. therefore it forms compounds. and calcium increase toughness by controlling the shape of inclusions. titanium. molybdenum. Alloying elements also have an affect on the eutectoid temperature of the steel.30 0. or in larger percentages (over 5%) to achieve special properties. Manganese sulfide. bismuth. nickel. As a guideline.003 0. and Cr23C6. Carbide forming elements raise the eutectoid temperature. Manganese mostly dissolves in ferrite forming the compounds MnS. Element Aluminium Bismuth Boron Chromium Copper Lead Manganese Percentage 0. silicon. Manganese. but will also form carbides in the form of (Fe.95–1. Manganese and nickel lower the eutectoid temperature and are known as austenite stabilizing elements. they form the carbides Mo2C and W2C. Silicon is also very soluble and usually forms the compound SiO2•MxOy. The alloying elements tend to either form compounds or carbides. silicon.e.

increases strength while retaining ductility.2–5 2–5 Nickel 12–20 0.15 Improves magnetic properties Free-machining properties Fixes carbon in inert particles. reduces martensitic hardness in chromium steels Hardness at high temperatures Stable carbides.08–0.15 0.causing transformations to be sluggish Molybdenum 0.7 2 Silicon Higher percentages Sulfur Titanium Tungsten Vanadium 0.2–0. inhibits grain growth Toughener Corrosion resistance Increases strength Spring steels 60 . promotes fine grain structure Stable carbides.

01≦Al≦0. a hole expansion ratio more than about 50%. vanadium in an amount up to about 0. copper in an amount up to about 0.manganese in a range from about 0.aluminum in a range from about 0.10% by weight and nitrogen less than about 0.01≦C≦0.2. and the amount of molybdenum may be up to 0. with the balance iron and incidental ingredients. niobium in an amount up to about 0.with the balance of the composition comprising iron and incidental ingredients.01. andcalcium in a range from about 0. The hot rolled steel sheet of claim 1.5%.008% by weight.chromium and nickel in combination from about 0. where the ferrite phase is between 50% and 90% by volume. 0.2% by weight to about 2% by weight. Also. 0.8% by 61 . where the ratio of Al/N is more than about 2. 6. Claims: 1. The hot rolled steel sheet of claim 1.silicon in a range from about 0. and a hole expansion ratio more than about 70%. the silicon range may be from about 0. where the ferrite phase is between 65% and 85% by volume.1% by weight to about 2% by weight and nickel if present is in an amount up to about 1% by weight. 3. 5. A hot rolled steel sheet comprising:(a) a dual phase microstructure comprising a martensite phase less than 35% by volume and a ferrite phase more than 50% by volume formed by hot rolling and cooling a steel sheet.2% by weight.2% by weight.2% by weight. 0. the hot rolled steel sheet has a tensile strength of at least 500 megapascals.0005% by weight to about 0. where the ferrite phase is more than 65% by volume. and(c) properties comprising a tensile strength of more than about 500 megapascals and a hole expansion ratio more than about 50%. Mo less than about 0.10. The hot rolled steel sheet of claim 1. 2. boron in an amount up to about 0.3% by weight to about 3% weight.3≦Mn≦3. where the properties comprise a tensile strength of at least about 590 megapascals.2% by weight.2≦Cr+Ni≦2.2≦Si≦2. a yield strength/tensile strength ratio less than 70%.01% by weight to about 0.2%.(b) a composition comprising:carbon in a range from about 0.Abstract: A hot rolled steel sheet having a dual phase microstructure with a martensite phase of less than 35% by volume and a ferrite phase of more than 50% by volume and a composition containing by percent weight: 0. 0.molybdenum less than 0. The hot rolled steel sheet of claim 3.02% by weight. where the composition further comprises one or more of:titanium in an amount up to about 0. Hot rolled sheet for cold rolling. 4.01% by weight.05% to about 2%.01% by weight to about 0. and. 0.0005≦Ca≦0. The hot rolled steel sheet of claim 1.2% by weight to about 2% by weight where chromium if present in a range from about 0.2% by weight.

11. 14.5% by weight.1% by weight. The hot rolled steel sheet of claim 1.molybdenum less than 0.aluminum in a range from about 0.manganese in a range from about 0.02% to about 0. andcalcium in a range from about 0. the combination of chromium and nickel is in an amount between about 0.5% by weight. the combination of chromium and nickel is an amount between about 0.with the balance of the composition comprising iron and incidental ingredients.2% by weight to about 2% by weight where chromium if present in a range from about 0.2% and about 1.01% by weight.5% by weight.008% by percent.03% by weight.01% by weight to about 0.0005% by weight to about 0. A hot rolled steel sheet comprising:(a) a dual phase microstructure comprising a martensite phase less than 35% by volume and a ferrite phase more than 50% by volume formed by hot rolling and cooling a steel sheet.001% to about 0.3% and about 1.weight. The hot rolled steel sheet of claim 1. 12.08% by weight.015% to about 0. the silicon ranges from about 0. phosphorous in an amount up to about 0.1% by weight to about 2% by weight and nickel if present is in an amount up to about 1% by weight.(b) a composition comprising:carbon in a range from about 0.3% by weight to about 3% weight.01% by weight to about 0. 62 . where the carbon ranges from about 0. 8.02% by weight. the aluminum ranges from about 0.chromium and nickel in combination from about 0. where the carbon ranges from about 0. where the ratio of Al/N is more than about 2.10% by weight and nitrogen less than about 0.02% to about 0. 13. The hot rolled steel sheet of claim 8.000 g-m on a V-notch Charpy specimen of about 5 millimeters thickness.2% by weight.05% by weight to about 2% by weight.03% to about 0.12% by weight. where weld properties comprise a microhardness difference less than about 100 HV (500 gf) between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld. where weld properties comprise a microhardness difference less than about 80 HV (500 gf) between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld. where properties comprise a mean impact energy more than about 10.0008% to about 0. the aluminum ranges from about 0.009% by percent. The hot rolled steel sheet of claim 1. The hot rolled steel sheet of claim 1. 9. the manganese ranges from about 0. the calcium ranges from about 0. The hot rolled steel sheet of claim 1.1% by weight. the calcium ranges from about 0. 10. and sulfur in an amount up to about 0.5% to about 2. where properties comprise a yield strength/tensile strength ratio less than 70%. 7. where the steel sheet further comprises one or both of a zinc coating or a zinc alloy coating.silicon in a range from about 0. and(c) properties comprising a tensile strength of more than about 500 megapascals and a hole expansion ratio more than about 50%.5% by weight.09% by weight.5% by weight. The hot rolled steel sheet of claim 1.2% to about 1.

015% to about 0.8% by weight.2% to about 1. where the steel sheet further comprises one or both of a zinc coating or a zinc alloy coating. where the ferrite phase is more than 65% by volume.0008% to about 0. 17. where the carbon ranges from about 0. The hot rolled steel sheet of claim 14. 18.3% and about 1. 22. the combination of chromium and nickel is an amount between about 0. where the ferrite phase is between 65% and 85% by volume. The hot rolled steel sheet of claim 14.5% to about 2.02% to about 0. the silicon ranges from about 0.2% and about 1. The hot rolled steel sheet of claim 21. where the ferrite phase is between 50% and 90% by volume. The hot rolled steel sheet of claim 16. where the properties comprise a tensile strength of at least about 590 megapascals. The hot rolled steel sheet of claim 14.03% by weight.15. 20. the aluminum ranges from about 0. 24. vanadium in an amount up to about 0.5% by weight. 19.5% by weight. the calcium ranges from about 0. 16.5% by weight. where properties comprise a mean impact energy more than about 10. where weld properties comprise a microhardness difference less than about 100 HV (500 gf) between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld. The hot rolled steel sheet of claim 14. copper in an amount up to about 0. 25.000 g-m on a V-notch Charpy specimen of about 5 millimeters thickness. The hot rolled steel sheet of claim 14.008% by percent. the manganese ranges from about 0. where weld properties comprise a microhardness difference less than about 80 HV (500 gf) between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld.5% by weight. niobium in an amount up to about 0.2% by weight. The hot rolled steel sheet of claim 14. the combination of chromium and nickel is in an amount between about 0. The hot rolled steel sheet of claim 14.02% to about 0. 26. where properties comprise a yield strength/tensile strength ratio less than 70%. where the carbon ranges from about 0. and sulfur in an amount up to about 0.2% by weight.09% by weight.1% by weight. and a hole expansion ratio more than about 70%. boron in an amount up to about 0. The hot rolled steel sheet of claim 14.009% by percent. phosphorous in an amount up to about 0.08% by weight. 23. The hot rolled steel sheet of claim 14 where the composition further comprises one or more of:titanium in an amount up to about 0. the calcium ranges from about 0.008% by weight. 63 .03% to about 0.1% by weight.12% by weight. 21. the aluminum ranges from about 0. The hot rolled steel sheet of claim 14.2% by weight.001% to about 0.

2% by weight. and sulfur in an amount up to about 0. The method of claim 27.with the balance of said composition comprising iron and incidental ingredients.(II) cooling the hot band at a mean rate of at least about 5. vanadium in an amount up to about 0. A method of making a hot rolled dual phase steel sheet.5% by weight.molybdenum less than 0. (about 1382. 31.2% by weight. F. 30.12% by weight. 35.). The method of claim 27./s (about 9.2% by weight to about 2% by weight. where the martensite phase comprises from about 3% by volume to about 30% by volume of the hot band.degree. 29. C. and about 980.degree.5% to about 2.degree.3% by weight to about 3% weight. phosphorous in an amount up to about 0.008% by weight.2% by weight to about 2% by weight where the chromium if present is in a range from about 0.1% by weight to about 2% by weight and nickel if present is in an amount up to about 1% by weight. 64 .degree. 32. 34.2% by weight./s) to a temperature not higher than about 750. (about 1796. where the ratio of Al/N is more than about 2.01% by weight to about 0. C.chromium and nickel in combination from about 0. where the ferrite phase is more than 65% by volume of the hot band. where the carbon ranges from about 0. 33. The method of claim 27. 28.02% to about 0.03% by weight. niobium in an amount up to about 0. the manganese ranges from about 0. F.02% by weight.01% by weight to about 0. (b) said composition. The method of claim 27.degree.2% by weight. where the composition further comprises one or more of:titanium in an amount up to about 0.27. The method of claim 27. and(III) coiling the hot band to form a coil at a temperature more than the martensite formation temperature obtaining a steel sheet comprising (a) a dual phase microstructure comprising a martensite phase of less than 35% by volume and a ferrite phase of more than 50% by volume. and (c) properties comprising a tensile strength of at least about 500 megapascals and a hole expansion ratio more than about 50%. where the steel slab comprises a composition comprising:carbon in a range from about 0.0005% by weight to about 0.silicon in a range from about 0.).8% by weight. C. where the properties comprise a tensile strength of about least about 590 MPa. where the martensite phase comprises from about 8% by volume to about 30% by volume of the hot band. boron in an amount up to about 0. where the ferrite phase is more than 65% and less than 85% by volume of the hot band. The method of claim 27.manganese in a range from about 0.aluminum in a range from about 0.degree. comprising:(I) hot rolling a steel slab into a hot band at a hot rolling termination temperature in a range between about (Ar3-60)° C.01% by weight. The method of claim 27. The method of claim 27. and a hole expansion ratio more than about 70%. copper in an amount up to about 0. F. andcalcium in a range from about 0. where the martensite phase comprises from about 10% by volume to about 28% by volume of the hot band.10% by weight and nitrogen less than about 0.2% by weight.1% by weight.

40. the calcium ranges from about 0. 38.the silicon ranges from about 0.3% to about 1.001% to about 0. F./s (about 18. The method of claim 27.2% to about 1.08% by weight.degree. where properties comprise a mean impact energy more than about 10. 39.03% to about 0.015% to about 0.02% to about 0. 41. The method of claim 27. 42. C. where cooling the hot band is at a mean rate of at least about 10. nickel in combination ranges from about 0. 36.degree. The method of claim 27. the aluminum ranges from about 0. where the total reduction during hot rolling is more than about 75%. The method of claim 27. C. C.1% by weight. 46.3% by weight to about 3% weight. where the hot rolling termination temperature is in a range between about (Ar3-30)° C. The method of claim 27.2% by weight to about 2% 65 . where the carbon ranges from about 0.).degree. (about 1796.5% by weight. F.degree.manganese in a range from about 0.5% by weight.degree. 43. 47. where weld properties comprise a microhardness difference less than about 100 HV (500 gf) between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld. 45. A method of making a hot rolled dual phase steel sheet. The method of claim 27. further comprising:applying a coating of one or both of a zinc coating or a zinc alloy coating to the hot rolled steel sheet. further comprising pickling the coil. the calcium ranges from about 0. the chromium. The method of claim 27. the aluminum ranges from about 0. 37. and about 950.silicon in a range from about 0.chromium and nickel in combination from about 0./s) to a temperature not higher than about 650.000 g-m on a V-notch Charpy specimen of about 5 millimeters thickness.2% to about 1.degree.degree.009% by percent.05% by weight to about 2% by weight.).09% by weight. where properties comprise a yield strength/tensile strength ratio less than about 70%. and about 980. F.01% by weight to about 0. 44. the chromium and nickel in combination ranges from about 0. The method of claim 27.degree.). (about 1742. comprising:(I) hot rolling a steel slab into a hot band at a hot rolling termination temperature in a range between about (Ar3-60)° C. (about 1202.008% by percent.2% by weight. The method of claim 27.0008% to about 0. C. where the total reduction during hot rolling is more than about 50%. The method of claim 27. where weld properties comprise a microhardness difference less than about 80 HV (500 gf) between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld.5% by weight. The method of claim 27. where the steel slab comprises a composition comprising:carbon in a range from about 0. F.

where the martensite phase comprises from about 3% by volume to about 30% by volume of the hot band. 49. The method of claim 47.12% by weight. 53. and a hole expansion ratio more than about 70%. and sulfur in an amount up to about 0. The method of claim 47.by weight where the chromium if present is in a range from about 0. (b) said composition. where the properties comprise a tensile strength of about least about 590 MPa. The method of claim 47.02% to about 0. 50.015% to about 0. 51. C. nickel in combination ranges from about 0. niobium in an amount up to about 0./s) to a temperature not higher than about 750. The method of claim 47.3% to 66 . where the ferrite phase is more than 65% and less than 85% by volume of the hot band.degree.01% by weight. where the martensite phase comprises from about 8% by volume to about 30% by volume of the hot band. C.5% by weight.2% by weight.005% by weight to about 0.degree.008% by weight.03% to about 0. 56. where the martensite phase comprises from about 10% by volume to about 28% by volume of the hot band.2% to about 1. copper in an amount up to about 0.5% by weight.10% by weight and nitrogen less than about 0. The method of claim 47. the silicon ranges from about 0. the aluminum ranges from about 0./s (about 9.). where the ratio of Al/N is more than about 2. 48.aluminum in a range from about 0. and (c) properties comprising a tensile strength of at least about 500 megapascals and a hole expansion ratio more than about 50%. andcalcium in a range from about 0.8% by weight. where the carbon ranges from about 0.degree.1% by weight to about 2% by weight and nickel if present is in an amount up to about 1% by weight. F. The method of claim 47.2% by weight.5% by weight.09% by weight. 52.03% by weight. vanadium in an amount up to about 0. where the carbon ranges from about 0. (about 1382.02% by weight.5% by weight. boron in an amount up to about 0. The method of claim 47. F.1% by weight.with the balance of said composition comprising iron and incidental ingredients. where the composition further comprises one or more of:titanium in an amount up to about 0.009% by percent. the calcium ranges from about 0.0008% to about 0. 54. the chromium.molybdenum less than 0. phosphorous in an amount up to about 0.degree.2% by weight. the manganese ranges from about 0.5% to about 2.01% by weight to about 0. The method of claim 47. where the ferrite phase is more than 65% by volume of the hot band. The method of claim 47. 55.1% by weight. and(III) coiling the hot band to form a coil at a temperature more than the martensite formation temperature obtaining a steel sheet comprising (a) a dual phase microstructure comprising a martensite phase of less than 35% by volume and a ferrite phase of more than 50% by volume. the chromium and nickel in combination ranges from about 0.(II) cooling the hot band at a mean rate of at least about 5.2% to about 1.

electric apparatus. 60. 63.degree. 66. which is hereby incorporated by reference. The method of claim 47.008% by percent. The method of claim 47. 64. F. C. where weld properties comprise a microhardness difference less than about 80 HV (500 gf) between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld. where weld properties comprise a microhardness difference less than about 100 HV (500 gf) between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld. The method of claim 47.001% to about 0. 57. where properties comprise a mean impact energy more than about 10. is attracting more and more attention due to such dual 67 . (about 1202. C. The method of claim 47.about 1. building components and machineries are currently increasing. No. and about 950. where the total reduction during hot rolling is more than about 75%. 62. where properties comprise a yield strength/tensile strength ratio less than about 70%.02% to about 0./s (about 18./s) to a temperature not higher than about 650.degree. where cooling the hot band is at a mean rate of at least about 10. BACKGROUND AND SUMMARY The present invention is directed to a dual phase structured (ferrite and martensite) steel sheet product and a method of producing the same.000 g-m on a V-notch Charpy specimen of about 5 millimeters thickness. The method of claim 47. The method of claim 47.degree. C. 24. 58. filed Nov. The method of claim 47. which possess microstructures of martensite islands embedded in a ferrite matrix. The method of claim 47. 59.08% by weight. further comprising:applying a coating of one or both of a zinc coating or a zinc alloy coating to the hot rolled steel sheet. Among these high strength steels. dual phase steel. further comprising pickling the coil. (about 1742. F. F. the aluminum ranges from about 0.degree. 65. The method of claim 47. 61. Applications of high strength steel sheets to automotive parts. Description: RELATED APPLICATIONS This application is a continuation-in-part of application Ser.5% by weight. 10/997. where the hot rolling termination temperature is in a range between about (Ar3-30)° C.degree.480. 2004.degree. where the total reduction during hot rolling is more than about 50%.).). the calcium ranges from about 0. The method of claim 47.

S. disclose a cold rolled dual phase structure steel sheet.20 mass % carbon.02 or less mass % sulfur. or less.sub. The previous research and developments in the field of dual phase steel sheets have resulted in several methods for producing dual phase steel sheets.748 (Divisional) and U. as the matrix phase of tempered bainite) or lower. per second (° C.8 mass % silicon. both to Satoh et al.S. followed by coiling./s.708. 1.06 or less mass % aluminum. and iron as the balance.584 to Nagataki et al.. relates to a high tensile hot dip zinc coated steel plate having a composition comprising 0. Pat.. because of these properties. excellent formability. 6. U. and./s or more down to the Ms point or lower. discloses a dual phase steel sheet having low yield ratio. Particularly with respect to automotive parts.0 mass % manganese. which is produced by rough rolling a steel.01-0. many of which are discussed below. continuous yielding.440. meaning (Ar3-50)° C. and a step of cooling at an average cooling rate of 20° C. finish rolling the rough rolled steel at a temperature of Ar3 point or more. which consists of 68 . and a step of cooling at an average cooling rate of 3° C. martensite/ferrite dual phase steels help to improve vehicle fuel efficiency and vehicle safety. 0. or less at a cooling rate of 1 to 50° C.S.. U. and 0. and hot dip galvanizing the coiled steel at a pre-plating heating temperature of Ac1 to Ac3. Pat.05-0. No.0-3. and cooling the galvanized strip so that the residence time at 400 to 600° C. Pat.γ3-50)° C. martensite/ferrite dual phase steels.615. The method of producing this steel sheet includes hot rolling and continuous annealing or galvanization steps. a step of further applying averaging at a temperature from 100 to 600° C.S. Therefore. is directed to a hot dip galvanized steel sheet. U..426 to Kobayashi et al. can improve vehicle crashworthiness and durability. so as to obtain 20% or more by volume of tempered martensite in the steel structure. No. coiling the finish rolled steel at a temperature of 700° C. or to the Ms point or higher and the Bs point (defined by Ikeda et al. cooling the soaked strip to a temperature range of 600° C. or higher.15 or less mass % phosphorus. is within 200 seconds. No. U. 4. 4.5-3.749 (Parent). Pat. 0.5 or less mass % silicon. 0. 6. 0. A continuous hot dip galvanizing operation is performed by soaking a pickled strip at a temperature of 750 to 850° C. The continuous annealing step includes a step of heating to a temperature of the A1 point or higher and the A3 point or lower. low yield strength/tensile strength ratio and/or high work hardening. Patent Application Publication No. The hot rolling step includes a step of completing finish rolling at a temperature of (A. and a tertiary step of galvanizing treatment and rapid cooling. 0.423. and excellence in the balance for strength-elongation and bake hardening properties.S.0 mass % manganese. and also can be made thin to help to reduce vehicle weight as well. a secondary step of secondary heat treatment and subsequent rapid cooling. The steel contains 0. optionally.20 mass % carbon. No. 2003/0084966A1 to Ikeda et al. The steel is subjected to a primary step of primary heat treatment and subsequent rapid cooling to the martensite transition temperature point or lower. hot dip galvanizing the cooled strip.phase steel having a superior combination of the properties of high strength./s) or more down to the Ms point (defined by Ikeda et al. as the matrix phase of tempered martensite) or lower.3-1.

001-0. silicon in a range from about 0.2% by weight.0 weight % silicon.01% by weight. Alternately. before cold rolling.01% by weight to about 0. and then cooled at an average rate of not less than 0.1% by weight. work hardening./s in a temperature range of from 750° C.02% by weight. The present invention is a hot rolled steel sheet having a dual phase microstructure comprised of a martensite phase less than 35% by volume and a ferrite phase of at least 50% by volume formed in the hot-rolled steel sheet after cooling. All of the above patents and the above patent publication are related to the manufacture of dual phase steel sheets using a continuous annealing method applied to cold rolled steel sheet.10% by weight and nitrogen less than about 0. and calcium in a range from about 0.05-1. Additionally. phosphorous in an amount up to about 0. not more than 1.0050 weight % boron. alternative steel composition may be provided as above described except the silicon range may be from about 0.05% to about 2%.3% by weight to about 3% weight. chromium and nickel in combination from about 0. the steel sheet comprises properties comprising a tensile strength of more than about 500 megapascals and a hole expansion ratio more than about 50% and more particularly may have a tensile strength 590 megapascals and a hole expansion ratio more than about 70%. aluminum in a range from about 0.5° C.0005-0.2% by weight to about 2% by weight.15 weight % phosphorus./s in a temperature range of from the soaking temperature to 750° C. where the ratio of Al/N is more than about 2./s but less than 20° C. molybdenum less than 0.8% by weight. A need is thus still called for to develop a new manufacturing method to produce dual phase steel sheets directly by hot rolling without subsequent cold rolling and annealing to reduce manufacturing processes and corresponding costs.2% by weight to about 2% by weight where chromium if present is in a range from about 0.002-0. where a number of steel manufacturers have no continuous annealing production lines to perform controlled cooling.5%. or may be more than about 3.008 weight % carbon. the ratio of Al/N may be more than 2. with the balance of the composition comprising iron and incidental ingredients. manganese in a range from about 0. not more than 0.01% by weight to about 0.03% by weight.01-0.5. The steel sheet also has a composition comprising carbon in a range from about 0.10 weight % aluminum.8 weight % manganese. 0. As used herein a "hot rolled sheet" and "hot rolled steel sheet" means a steel sheet that has been hot rolled. or transformation by another process.050 weight % niobium and 0. The steel sheet is manufactured by hot and cold rolling a steel slab with the above chemical composition and continuously annealing the resulting steel sheet in such a manner that the steel sheet is heated and soaked at a temperature from a→γ transformation point to 1000° C. 0.. heat treatment.1% by weight to about 2% by weight and nickel if present is in an amount up to about 1% by weight. the 69 . In various embodiments. 0. and subsequently at an average cooling rate of not less than 20° C. This appears particularly important in North America. and sulfur in an amount up to about 0. and the amount of molybdenum may be up to 0.0005% by weight to about 0.0. For hot rolled sheet which is for subsequent processing by cold rolling. In some embodiments.2% by weight. the steel composition may have copper in an amount up to about 0. to not more than 300° C.

(about 1382° F. when welded with a conventional gas metal arc welding system such as a metal inert gas (MIG) welding system using 90% argon and 10% carbon dioxide gas. The dual phase microstructure of the steel sheet may have a ferrite phase between about 60% and about 90% by volume or between about 65% and about 85% by volume in the hotrolled steel sheet after cooling./s) to a temperature not higher than about 750° C./s (about 9° F. (about 1796° F. between the highest hardness on a weld and the lowest hardness on a heat affected zone adjacent the weld.2% by weight. BRIEF DESCRIPTION OF THE DRAWINGS The accompanying drawings assist in describing illustrative embodiments of the present disclosure.008% by weight. such as between about 100 millimeters and 300 millimeters. and more particularly from about 10% by volume to about 28% by volume in the hot-rolled steel sheet after cooling. but in such thicker slabs preheating may be needed before hot rolling. The hot rolled dual phase steel may be made by a method comprising: (I) hot rolling a steel slab having the above composition into a hot band at a hot rolling termination temperature in a range between about (Ar3-60)° C. and about 950° C. and about 980° C. 70 . The steel slab prior to hot rolling may have a thickness between about 25 and 100 millimeters.). In addition.composition may additionally include titanium in an amount up to about 0. niobium in an amount up to about 0.). or alternatively less than 80 HV (500 gf). the steel slab may be thicker than 100 millimeters. cooling the hot band at a mean rate of at least about 5° C. vanadium in an amount up to about 0. Alternately. the hot-rolled steel sheet may have a yield strength/tensile strength ratio less than about 70%. and boron in an amount up to about 0. The present dual phase steel has improved weld properties with a more stable microhardness profile between the weld and the heat affected zone adjacent the weld than prior dual phase steels. 1 is a flow chart illustrating an embodiment of the presently disclosed process. 2A is a photograph taken through a 500× microscope of one embodiment of the present hot rolled dual phase steel sheet. The invention is explained in more detail in connection with the accompanying Figures and description set forth below. The microhardness stability of the present dual phase steel provides a difference of less than about 100 HV (500 gf).2% by weight. and (III) coiling the hot band to form a coil at a temperature higher than the martensite formation temperature.2% by weight. The hot rolled steel sheet may comprise a dual phase microstructure having a martensite phase between about 3% by volume and about 35% by volume in the hotrolled steel sheet after cooling.). (about 1742° F. in which: FIG. the hot rolling termination temperature may be in a range between about (Ar3-30)° C.

and FIG. 2A. low carbon.01% by weight to about 0. phosphorous in an amount up to about 0.05% to about 2%.2% by weight. the steel sheet has a tensile strength of more than about 780 MPa.3% by weight to about 3% weight. the composition may additionally include titanium in an amount up to about 0. In various embodiments.8% by weight. an alternative steel composition may be provided as herein described except the silicon range may be from about 0. vanadium in an amount up to about 0. Alternatively. and calcium in a range from about 0. 3.2% by weight to about 2% by weight where chromium if present is in a range from about 0. In some embodiments.01% by weight. The hot rolled steel sheet has a composition comprising carbon in a range from about 0. It is a diagrammatical side view of a test specimen showing microhardness measurement points through a weld and heat affected zones adjacent the weld. niobium in an amount up to about 0. aluminum in a range from about 0.2% by weight. DETAILED DESCRIPTION OF THE DISCLOSURE The present disclosure is directed to a hot rolled.5%.1% by weight to about 2% by weight and nickel if present is in an amount up to about 1% by weight.2% by weight to about 2% by weight.0005% by weight to about 0.2% by weight. where the ratio of Al/N is more than about 2.10% by weight and nitrogen less than about 0. dual phase steel sheet and a method of making such a steel sheet. manganese in a range from about 0.008% by weight. silicon in a range from about 0.1% by weight. as described in more detail below. and the amount of molybdenum may be up to 0. boron in an amount up to about 0. with the balance of the composition comprising iron and incidental ingredients.2% by weight. The yield strength/tensile strength ratio is less than about 70%. the steel composition may have copper in an amount up to about 0. in that the steel sheet has a tensile strength of more than about 500 megapascals (MPa) and a hole expansion ratio of at least 50%. The hot rolled steel sheet exhibits high tensile strength and excellent formability. and sulfur in an amount up to about 0. The steel sheet as hot-rolled according to the present disclosure possesses a microstructure comprising up to about 35% by volume martensite islands dispersed in a ferrite matrix phase of more than 50% by volume formed in the as-hot-rolled steel sheet after cooling.2B is a photograph taken through a 1000× microscope of the steel sheet of FIG. the microstructure of the steel sheet may have about 71 .01% by weight to about 0.2% by weight. For hot rolled sheet which is for subsequent processing by cold rolling. chromium and nickel in combination from about 0. and a hole expansion ratio of at least 50%. and more particularly a tensile strength of more than about 590 MPa and a hole expansion ratio of at least 70%.02% by weight. molybdenum less than 0. Alternately. 4 is a graph showing microhardness across the weld and heat affected zones of the test specimen of FIG.03% by weight.

and other applications. the amount of manganese in the present steel composition should be more than about 0. the ferrite matrix phase is the continuous phase in which the martensite phase of up to about 35% is dispersed after cooling. In order to enable the formation of martensite contributing to the improvement of the strength properties. Alternatively.2% and about 2% in the present steel composition has been found to provide the desired strength. machineries. for automobiles. and reasons for the ranges of ingredients in the present steel composition. are described below. the amount of manganese may be less than about 2.1% by weight in the present steel.3% to about 30% by volume martensite islands embedded in a ferrite matrix phase formed in the as-hot-rolled sheet. Alternately or in addition. The ranges for the content of various ingredients such as carbon in the composition of the resultant steel sheet. it has been found that the weldability of the steel sheet of the present steel composition is adversely affected. building components. The steel sheet of the present disclosure can be used after being formed (or otherwise press formed) in an "as-hot-rolled" state. and may be more than 65% of the microstructure by volume in the as-hot-rolled sheet after cooling. for instance. The ferrite matrix phase may be less than 90% by volume and is formed in the as-hot-rolled sheet after cooling. carbon may be about 0. the ferrite matrix phase is between about 60% and about 90% by volume. carbon may be present in a range from about 0.02% by weight.3% by weight of manganese has been found in order to provide the strength and hardenability of the steel sheet. Alternatively. the carbon content in the present steel may be no more than about 0. the upper limit of the carbon content is about 0.3% and 3% by weight in the present steel composition is another alloy enhancing the strength of steel sheet. Manganese of between about 0. Alternatively.2% by weight for an integrated hot mill.5% and about 2.01% by weight in order to enable the desired martensite and ferrite phases and strength properties to the steel sheet. low yield strength/tensile strength ratio.12% by weight for steel sheet made by hot mills at compact strip production (CSP) plants to provide excellent castability of the steel sheet.03% by weight to about 0. when the amount of manganese exceeds about 3% by weight. excellent weldability (microhardness stability across welds) and excellent formability (hole expansion ratio. Carbon in the present steel composition provides hardenability and strength to the steel sheet. Silicon in the range of about 0. Alternatively. Carbon is present in an amount of at least about 0. On the other hand. As described in more detail below. An amount of at least about 0. or optionally can be coated with zinc and/or zinc alloy. the presently disclosed dual phase steel sheet has improved properties of high tensile strength. and not significantly impairing the desired 72 . Since a large amount of carbon in the present steel composition has been found to markedly deteriorate the formability and weldability of the steel sheet.5% by weight or between about 0. electrical appliances. stretch flangeability) formed directly by hot rolling. in order to enhance the stability of austenite in the present steel composition and at least about 3% by volume of a martensite phase in the steel sheet.5% by weight.5% by weight in the present steel.

02% and about 0. At least 0. the combination of chromium and nickel may be present in a range from about 0. Theoretically. These properties have been provided in the present steel by a combination of chromium and nickel from about 0. Alternatively.5% by weight in the present steel.01% and about 0. Aluminum is present in the present steel composition to deoxidize the steel composition and react with nitrogen. calcium may be present in a range from about 0. however. the present composition has silicon in an amount in the range of about 0. it has been found that the beneficial effect of silicon is saturated and accordingly. Chromium and nickel in combination in an amount between about 0. or. where chromium if present is in an amount between about 0. this beneficial effect has been found to be saturated when the amount of calcium exceeds about 0. silicon may be present in a range from about 0.008% by weight in the present steel.01% by weight of aluminum is effective as a deoxidation element in the present steel composition.01% by weight in the present steel composition.2% and about 2% by weight. Hence. Chromium and nickel in such amounts has also been found useful in the present steel for stabilizing the remaining austenite and to promote the formation of martensite while having minimal or no adverse effects on austenite to ferrite transformation. or in the range between about 0.009% by weight. Alternatively. if any. the silicon range may be from about 0. the ratio of Al/N may be above about 3. and in some cases above 3. or from about 0. When the content of aluminum exceeds about 0.2% by weight and about 2% by weight in the present steel composition has been found effective for improving the hardenability and strength of the steel sheet.. the acid-soluble amount of (27/14) N.5.0008% by weight to about 0. Practically. At least about 0. on the other hand. Alternately. the upper limit of silicon content is about 2% by weight. if any. Calcium assists in reducing the harmful effect due to sulfur.1% in the present steel.08% by weight in the present steel.09% by weight. 1.2% by weight to about 2% by weight.05% to about 2%.0005% by weight of calcium has been found to be needed in the present steel composition to provide these beneficial properties. if any. Alternatively.3% by weight to about 1.5. the amount of aluminum in the present steel is between about 0.e.2% by weight to about 1. As pearlite is not desired in the ferrite matrix of the steel sheet. When the content of silicon exceeds about 2% by weight in the present steel. On the other hand. aluminum may be present in a range between about 0. Calcium is used in the present steel composition is to assist the shape of sulfides. and in some cases above 2.5% by weight.5% by weight in the present steel. the ductility and formability of the steel sheet has been found to significantly degrade. from about 0. is required to fix nitrogen as aluminum nitrides. Silicon in this range also has been found in the present steel composition to promote the ferrite transformation and delay the pearlite transformation. to form aluminum nitrides.1% and about 2% by weight and nickel if present in an amount up to about 1% by weight. i. it has found that the ratio of Al/N needed in the present steel composition is above about 2. For hot rolled steel sheet which is for subsequent processing by cold rolling.1% by weight. so that is the upper limit specified for calcium.9 times the amount of nitrogen. and improve the stretch flangeability and fatigue property of the present steel sheet.001% by weight to about 0.015% and about 0.ductility or formability of the steel sheet. Alternatively. 73 .2% by weight to about 1.

For hot rolled steel sheet which is for subsequent processing by cold rolling.Phosphorus is generally present as a residual ingredient in iron sources used in steelmaking. Sulfur is not usually added to the present steel composition because as low as possible sulfur content is desired. when boron is added in excess. or alternately may be about 0.02% by weight in the present steel composition.08% by weight. so that residual sulfur if present typically is precipitated in the form of manganese sulfides. excess addition of copper in the steel composition has been found to significantly deteriorate the surface quality of the steel sheet. the upper limit of sulfur content is about 0. the upper limit of nitrogen content is about 0. or about 0. Molybdenum in the present steel composition is effective for improving the hardenability and strength of the steel sheet. Accordingly. molybdenum is expensive. It is also possible that no boron is present in the present steel sheet. When nitrogen exceeds about 0. used in steelmaking. the upper limit of phosphorus content in the present steel composition is about 0. The upper limit for copper 74 .005% by weight in the present steel.3%. However. the castability and rollability of the steel sheet has been found to deteriorate. is very effective for improving the hardenability and strength of the steel sheet in the present steel composition. the upper limit of boron may be about 0.2% by weight in the present steel. Also.06% by weight in the present steel. or about 0. excess addition of molybdenum results in a saturated effect and promotes the formation of an undesired bainite phase.008% by weight. Furthermore. For these reasons. The upper limit for molybdenum in the present steel composition is about 0. Alternatively. the present steel composition contains manganese. it has been found that the ductility and formability of the steel sheet are significantly reduced. since a large amount of manganese sulfide precipitate greatly deteriorates the formability and fatigue properties of the present steel sheet. Alternatively. the rollability of the present steel sheet is found to be significantly lowered. such as scrap. the upper limit of sulfur may be about 0.015% by weight. the segregation of phosphorus at grain boundaries of the present composition has been found to result in brittleness of the steel sheet.5%.02% by weight. In addition. when a large amount of phosphorus is added to the present steel composition.1% by weight. or about 0.006% by weight.01% by weight in the present steel. the upper limit of boron content in the present steel composition is about 0. Copper is also expensive. A residual amount of sulfur may be present depending on the steel making technique that is employed in making the present steel composition.02% by weight in the present steel composition. In principle. the upper limit of nitrogen may be about 0.03% by weight. even in a small amount. or about 0. Copper as an alloy in the present steel composition is also effective for improving the hardenability and strength of the steel sheet. Alternatively. which in turn impairs its formability and weldability. the upper limit of molybdenum may be about 0. However. On the other hand. the upper limit of phosphorus may be about 0. However.01% by weight in the present steel. the segregation of boron at grain boundaries deteriorates the formability. Alternatively. For these reasons. However. phosphorus in the present steel composition exerts an effect similar to that of manganese and silicon in view of solid solution hardening. Also with excess amounts of boron. Boron. Copper may be present as a residual ingredient in iron sources.

reducing castability and rollability during manufacturing the steel sheet. Hot rolled band is also referred to as a hot rolled steel sheet. and/or niobium may be about 0. Alternatively. These elements are also useful in the present steel composition to accelerate the transformation of austenite phase to ferrite phase in the steel microstructure. when the hot band has cooled to a temperature higher than about 400° C. (1796° F. A thin slab can be produced from a molten steel having a composition within the ranges disclosed above by using. as occurs in preparation of molten composition in a steelmaking furnace such as an electric arc furnace (EAF). the present steel composition has no more than about 0. and/or niobium. The total reduction used during hot rolling is more than 50%. Obtain or produce as a starting material a thin steel slab having a composition within the ranges disclosed above. In the present steel composition. or may be more than 75 [0053]iii.).2% by weight of titanium. Titanium. By the present process./s (9° F.4% by weight in the present steel. An embodiment of the disclosed process comprises the following steps. dual phase steel composition of less than 35% by volume martensite phase in a continuous ferrite phase of more than 50% by volume can be made directly by hot rolling and cooling.6% by weight. a continuous slab caster or an ingot caster. (1382° F. when each of these elements alone or in combination exceeds about 0.in the steel composition is about 0. The corresponding precipitation hardening becomes very high. the strength of the steel sheet is markedly increased. or about 0. When a moderate amount of one or more of them is added. vanadium.15% by weight in the present steel. and about 980° C. titanium. (about 1382° F. Incidental ingredients and other impurities should be kept to as small a concentration as is practicable with available iron sources and additives with available purity used in steelmaking. the upper limit of each of titanium.2% by weight. at a mean rate not slower than about 5° C. or niobium may be used alone or in any combination in the steel composition. [0054]iv. Incidental ingredients are typically the ingredients arising from use of scrap metals and other additions in steelmaking. Coil the hot rolled steel by a coiler.8% by weight. an unacceptable large amount of the respective precipitates is formed in the present steel sheet. and having a thickness suitable for hot rolling into a hot rolled band. for instance. Cool the hot rolled steel. A 75 . and also unacceptably deteriorating the formability of the present steel sheet when forming or press forming the produced steel sheet into final parts. the upper limit for copper may be about 0. As a result.) and not higher than about 750° C.). However./s) to a temperature not higher than about 750° C. vanadium. after completing hot rolling. [0052]ii. Hot roll the steel slab into a hot band and complete the hot rolling process at a termination or finishing temperature in a range between about (Ar3-60)° C. vanadium. Alternatively. Accordingly.). in order to obtain a fine-grained ferrite matrix capable of producing an ashot-rolled sheet with a microstructure of more than 50% ferrite phase by volume with a martensite phase of less than 35% dispersed therein. the disclosed process can be carried out at most existing compact strip or CSP mills or carried out at most existing integrated mills. (752° F. The presently disclosed process to produce a dual phase steel composition requires a less demanding and restrictive facility and processing steel with described properties. and/or niobium may also be used as an alloy and have a strong effect on retarding austenite recrystallization and refining grains. vanadium.

the coil then cools to below the martensite formation temperature.1% aluminum (Al). to form martensite islands of less than 35% by volume embedded in a ferrite matrix phase. the coiling step may occur at a temperature above the martensite formation temperature. about 0. and usually less than 8% by volume. and may be between about 10% and about 28% by volume in the ferrite matrix phase. in practice it is difficult to obtain a strictly dual phase material. While the ferrite phase may contain neither precipitates nor inclusions and no other microstructure phases present in the steel sheet.03% sulfur (S).conventional coiler may be used. Then. such as pearlite and/or bainite. not more than about 0. not more than about 0.2% titanium (Ti).01% calcium (Ca). not more than about 0.3% to about 3% manganese (Mn). about 0. the remainder essentially being iron (Fe) and raw 76 . where the ratio of Al/N is more than about 2.01% to about 0.02% nitrogen (N). such as a zinc coating and/or a zinc alloy coating. The sum of residual or incidental phases may be less than 15% by volume. The present process is for producing a dual phase steel sheet having high tensile strength and excellent formability by a hot rolling process as follows: Produce or obtain as a starting material a thin steel slab. not more than about 0. about 0.0005% to about 0. the martensite phase may be between about 8% and about 30% by volume in the ferrite matrix phase in the as-hot-rolled sheet. or the martensite start temperature. a combination of chromium (Cr) and nickel (Ni) between about 0. and about 0. or may be more than 65% and less than 85% by volume in the ashot-rolled sheet after cooling. the "as-hot-rolled" sheet or coated sheet may be formed or press formed into a desired end shape for a final application. not more than about 0.2% and 2% by weight with about 0. The ferrite phase is thus more than 50% by volume and may be more than 60% or 65% by volume in the as-hot-rolled sheet after cooling.2% carbon (C). to the steel sheet may be effected. The coating should improve the corrosion resistance of the steel sheet. obtaining a dual phase microstructure having a martensite phase up to about 35% by volume in a ferrite matrix phase of more than 50% by volume in the as-hot-rolled sheet. The martensite formation temperature may vary with the steel composition.008% boron (B).01 to about 0.2% to about 2% silicon (Si). or the martensite start temperature.2% niobium (Nb).2% vanadium (V). The martensite phase may be between about 3% and 30% by volume in the ferrite matrix phase in the as-hot-rolled sheet. for instance using a CSP facility. there may be a small amount of residual or incidental other phases in the steel sheet. The ferrite phase is more than 50% by volume and may be less than 90%. not more than about 0. After hot rolling. cool the coiled sheet to a temperature lower than about the martensite formation temperature. Although not desired. If desired. typically with a thickness ranging from about 25 to about 100 millimeters. not more than about 0. to form a steel composition including (in weight percentages) about 0. The martensite formation temperature is the temperature at which martensite begins to form when cooling.1% phosphorous (P). [0055]v. Alternately or in addition. Alternately or in addition. Further.1% to about 2% by weight chromium (Cr) and up to 1% by weight nickel (Ni). not more than about 0. applying a coating. and about 450° C. not more than about 0. the ferrite phase is more than 60% and less than 90% by volume in the as-hot-rolled sheet. but may be between about 300° C.8% copper (Cu).2% molybdenum (Mo). After coiling the hot-rolled steel sheet.

On the other hand. or. For a thicker slab produced in an integrated mill. Starting the coiling when the hot band has cooled to a temperature not higher than about 650° C. 1 is a process flow diagram which illustrates the above-described steps of the presently disclosed process. Hot roll the steel slab to form a hot rolled band and complete the hot rolling process at a termination or finishing temperature in a range between about (Ar3-30)° C. The samples tested are shown in TABLE 1 having compositions according to the present disclosure and manufactured according to the presently disclosed process.). As shown in TABLE 2. and K) was hot rolled to form hot bands 77 . the coiled sheet is at a temperature lower than the martensite formation temperature to form martensite islands dispersed in a ferrite matrix phase. For instance. Several types of low carbon molten steels were made using an electric arc furnace.) and more typically between about 1100° C.material impurities. (2012° F. starting the coiling process when the hot band has cooled to a temperature above the martensite formation temperature.) and about 1300° C. A steel slab for each of presently disclosed steels (Samples A. where the martensite is between about 3% and 30% by volume. [0061]ii. and were then formed into thin slabs with a thickness of about 53 millimeters at the Nucor-Berkeley compact strip production plant. the steel slab thickness may be about 150 millimeters or thicker. a reheating process may be required before conducting the above-mentioned hot rolling operation.). E./s (18° F. The following were specific process conditions recorded for steel samples of the composition and process of the present disclosure.). The coiling temperature may be higher than about 450° C. When cooled. In the disclosed process. (1742° F.). the measured fraction of martensite phase ranged from 11% to 28% by volume for the steel samples having compositions according to the present disclosure and manufactured according to the present process. [0062]iii.) and lower than about 650° C. (842° F. The total reduction used during hot rolling is more than 50%. Cool the hot rolled steel sheet immediately after completing hot rolling at a mean cooling rate not slower than about 10° C. Coil the hot rolled steel on a coiler. and then holding at this temperature for a time period of not less than about 10 minutes and more typically not less than about 30 minutes.) and about 1350° C. and about 950° C. with the above-noted chemical composition. [0063]iv. can be produced in an integrated hot mill by continuous casting or by ingot casting. (1202° F. F.) may result in better formability and drawability properties. and may be more than 75%. the reheating process is usually not needed unless the slab is cooled. (1922° F. J. v. about 300 millimeters and thicker. Further. B. by reheating the steel slab to a temperature in a range between about 1050° C. (2462° F. I. (1202° F. (about 1202° F. for a thin slab (under about 100 mm) cast as occurs in a CSP plant. (2372° F. or about 200 millimeters or yet thicker. a starting material steel slab thicker than about 100 millimeters (mm) may be employed. The reheating helps to assure the uniformity of the initial microstructure of the slabs before conducting the hot rolling process of the present disclosure. Such a steel slab employed as a starting material. C. hot dip plating or electroplating may be performed to apply a zinc coating and/or a zinc alloy coating onto the surface of the above hot rolled steel sheet to improve the corrosion resistance. Either the "as-hot-rolled" sheet or coated sheet may be formed or press formed into the desired end shapes for any final applications./s) to a temperature not higher than about 650° C. FIG.

for testing of the respective mechanical properties of the various steel sheets.9 millimeters. at 500× and 1000× magnification. and total elongation. The hole expansion ratio is defined as the amount of expansion obtained in a circular punch hole of a test piece when a conical punch is pressed into the hole until any of the cracks that form at the hole edge extend through the test piece thickness. (932° F. square test specimens of about 100 millimeters by 100 millimeters were cut from steel sheets of various thicknesses. Tensile testing was conducted in accordance with the standard ASTM A370 method to measure the corresponding mechanical properties. and were machined into tensile specimens in the longitudinal direction. 2A and 2B. The compositions of these various steel compositions are presented below in TABLE 1. namely along the hot rolling direction.using hot rolling termination temperatures (also called finishing or exit temperatures) ranging from 870° C. 78 .5 millimeters to 5. Do=Original hole diameter (Do=10 millimeters). and coiled at coiling temperatures ranging from 500° C. which may indicate ability of the steel sheet to be formed into complex shapes. The microstructure of the present hot-rolled dual phase steel sheets was examined. and Dh=Hole diameter after fracture (in millimeters). the hot rolled steel sheets were water cooled on a conventional run-out table at a mean rate of at least about 5° C.) to 650° C. Typical micrographs obtained using a Nikon Epiphot 200 Microscope are given in FIGS./s (about 9° F. as defined by the following equation: λ=((Dh-Do)/Do)×100 where λ=Hole expansion ratio (%). A greater hole expansion ratio may enable the stamping and forming of various complex parts without developing fractures during stamping or forming processes. The total reduction used during hot rolling was more than 85% to obtain the thickness of the hot rolled steel sheets ranging from 2. It is such a dual phase structure that provides the excellent combination of strength and formability for the presently disclosed steel sheet. (1598° F.) to 930° C. as shown in TABLE 2.). (1202° F. martensite islands are substantially uniformly distributed in the continuous ferrite matrix. The test data obtained are presented below in TABLE 2. Immediately after hot rolling. As illustrated by the micrographs./s). The hole expansion ratio λ was determined according to Japan Iron and Steel Federation Standard JFS T1001. tensile strength. Test pieces were taken from the resulting hot rolled steel sheets. To compare the stretch flangeability and stretch formability of the presently disclosed hot rolled steel sheet with comparison commercial hot rolled dual phase steel. including yield strength. hole expansion ratio λ is a measure of stretch flangeability.). the hole expansion ratio is expressed as the ratio of the final hole diameter at fracture through thickness to the original hole diameter. Numerically. (1706° F.

Vickers microhardness measurements were taken on the welded samples through heat affected zones 30 adjacent the weld.8 81. 4. The more stable microhardness profile through the weld. this value is lower than 40% for comparative commercial Steel Sample O. Samples of steel A. and more particularly more than 75%. 4.1 36. E and K of the present composition and microstructure were compared to prior comparative commercial Steel Sample I in TABLE 3. The values of hole expansion ratio λ measured on Steel Samples A. heat affected zone and unwelded base metal obtained with the presently disclosed hot rolled steel improves the weld fatigue performance of the steel. Weld fatigue properties are affected by differences between the hardness of the weld. The hole expansion ratio λ of the presently disclosed hot rolled dual phase steel is more than 50%. and across the weld 40.1 75. the hardness of the unwelded base material. 4 showing the difference between the microhardness in the weld 40 and the microhardness in the heat affected zone 30 adjacent the weld 40. A microhardness difference 50.045 inch (1. and K are more than 70%. The test specimens 20 were welded using a metal inert gas (MIG) welding process using an OTC Almega-AX-V6 robot and OTC DP400 power source. By contrast. As shown in the graph of FIG. or reducing the difference in hardness. The hardness near position B is the hardness of the unwelded base material.2 84. Alternately or in addition. which may decrease weld fatigue properties in the resulting assembly. Alternately or in addition.14 millimeters) ER70S-3 electrode.4. Weld hardness of the dual phase hot rolled steel is shown in FIGS. the hardness of the weld was greater in the comparative commercial Steel Sample O than the present Steel Sample C.8 E Invention 2. and may be less than 70 HV (500 gf). The filler metal or welding wire was 0. 79 . the unwelded material.7 K Invention 4. As shown in FIG.6 Prior Arts The present hot rolled dual phase steel provides improved hole expansion ratio results.9 O Commercial. 60 is shown in FIG. E. and the shielding gas was 90% argon and 10% carbon dioxide. the comparative commercial Steel Sample O was softened in the heat affected zones where the heat affected zones of the present Steel Sample C were about the same hardness as the unwelded base material. 3 and 4.TABLE-US-00003 TABLE 3 Hole Expansion Thickness Ratio λ Steel Remark (millimeters) (%) A Invention 3. and the heat affected zones. the weld properties comprise a microhardness difference less than about 80 HV (500 gf). the microhardness of gas metal arc-welded test specimens 20 was measured in a plurality of locations from position A to position B. the weld properties of the present hot rolled dual phase steel comprise a microhardness difference 50 between the weld 40 and the heat affected zone 30 adjacent the weld less than about 100 HV (500 gf). As shown in FIG. between the weld. 3. and may be more than 70%. and the hardness of the heat affected zones adjacent the weld. Additionally. One challenge in prior high strength steels is suitable fatigue properties at welds.8 3.5 79. Fatigue properties may be improved in the present steel by improving the stability of the hardness. the hole expansion ratio λ of the present dual phase steel may be more than 80%. A large microhardness difference 60 was measured from the weld 40 to the heat affected zone 30 of the comparison Steel Sample O.

and even more particularly more than about 13. omissions. omissions.000 g-m. Various modifications. it is intended to cover all such modifications. In order to evaluate the impact toughness and crashworthiness of the present hot rolled dual phase steel sheets compared to comparison hot rolled dual phase steel sheets. as evidenced by the present hot rolled dual phase steel sheets having a mean impact energy more than about 10. a number of V-notch Charpy impact test specimens having a thickness of about 5 millimeters were machined and prepared according to ASTM E23-05. and additions may be made to the disclosed embodiments without materially departing from the novel teachings and advantages of the invention. and the mean impact energy was calculated based on at least 5 measurements of each steel sample.000 g-m. Each impact energy measurement was taken on a V-notch Charpy specimen of about 5 millimeters thickness. particularly in light of the foregoing teachings. the present hot rolled dual phase steel sheets have a mean impact energy more than about 12.The hot rolled dual phase steels manufactured by the present process has improved impact toughness and crashworthiness over prior dual phase steels. TABLE 4 shows the mean impact energy for samples of the present Steel Sample B compared to Comparison Steel O. These specimens were then tested for the material property of mean impact energy at ambient temperature using an Instron Corporation Sl-1 K3 Pendulum Impact Machine. the present hot rolled dual phase steel sheets have notably higher impact toughness and crashworthiness. on a V-notch Charpy specimen of about 5 millimeters thickness. 80 .18 m/s (17 ft/s).000 g-m on a V-notch Charpy specimen of about 5 millimeters thickness. additions. TABLE-US-00004 TABLE 4 Steel Remark Mean Impact Energy B Invention 13756 g-m (99. it should be understood by those skilled in the art that it is not intended to limit the invention to specific embodiments disclosed. Accordingly. and equivalents as may be included within the spirit and scope of the invention as defined by the following claims. a 407 J (300 ft-lb) Charpy pendulum with a length of 800 millimeters was used at an impact velocity of 5.3 ft-lb) Although the present invention has been shown and described in detail with regard to exemplary embodiments. More particularly.5 ft-lb) O Comparison 5848 g-m (42. During testing. Compared to the prior art hot rolled dual phase steels.

The annealing in BA line is done in controlled atmosphere of cracked ammonia to avoid any oxidation of metal which ensures a bright finish called as BA finish. 2B. Coil Buildup line Coil buildup line is used to attach leader ends in hot rolled coils for increasing the overall yield of coils.00mm thickness. 81 .3. s. No. No. It is also equipped with edge trimming to improve production for further opera-tions. elevators etc. It is used to give cold rolled pass by polished ground work roll on 2D finish dull material to convert to 2B bright surface finish. The continuous annealing and pickling line is equipped with a neutral electrolyte tank for pickling by Ruthner process using sodium sulphate for the neutral electrolyte.g. The present installed capacity of cold rolled products is 1. other ferritic and Martensitic stainless steel. The facilities at Hisar is equipped to produce and sup-ply material in 2D. Razor Blade. annealing and pickling lines and various sophisticated associated equipments and processing lines to produce Cold Rolled Coils and Sheets with quality surface finishes. CRD III & CRD IV comprises a combination of 20 Hi Sendzimer mills. Strip Grinding Line The strip Grinding line is used to produce No.50.4 and BA surface finishes.The cold rolling mill complex comprises of the four units CRD I. restaurant equipments. No. dairy equipments.3. Annealing and Pickling line The annealing and pickling line is used to anneal and pickle Hot Rolled stainless and Cold rolled stainless steel coils. CRD I .45mm to 6MM. CRD II is engaged in production of precision strips in thinner sizes (0.05mm to 0.4 and some special finishes requiring grinding which is used for decorative purposes in architectural applications. Bright Annealing line The bright annealing (BA) line at Jindal Hisar works is one of its kind in India. Shearing Line The flying shearing line with Voss Leveller is used to produce sheets with good flatness which is the first and foremost requirement of customers. CRD II & CRD III & CRD IV .000 TPA. Slitting Line Slitting lines are used to side trim the coils and cater the market requirements in smaller width coils with a thickness from 0. Skin pass Mill The skinpass mill is designed and installed in dust proof housing. The mill is designed to meet requirements in 600 to 1600mm width coils in 0.40 to 3. lifts. scanacon system for acid recovery and removal of metal content.50mm thick) e. precise dimensional control and good flatness control in wider coils (>600mm width).

RAZOR AND SURGICAL BLADE STEEL Jindal Stainless is an exclusive producer of stainless razor blade steel in India. . The microstructure of our strips is designed to optimize / facilitate hardening, sharpening and honing operations at customers end and to develop ideal characteristic for intended end application. These are achieved with stringent quality checks utilizing modern and sophisticated testing equipments such as Metallurgical microscope with advanced image analyzer, digital micro-hardness tester, microprocessor controlled Tensile testing machine and scanning electron microscope. Persistent R & D activity had led to the improvement in quality of product enabling us, not only to cater to the Indian razor blade steel requirement but also to export a substantial quantity on a regular basis. The current capacity for precision strip production is 12,000 TPA COIN BLANKS Jindal Stainless has been supplying AISI 430 grade ferritic stainless steel coils & blanks to India Govt. Mint & Foreign mint for making coins on regular basis. To diversify its product range, coin blanking and associated processing facilities of world-class quality has been installed and commissioned. . At present Jindal Stainless is supplying Ferritic Stainless Steel coin blanks of denomination of 25 Paise, 50 Paise and 1 Rupee to Govt. of India, Mint. In addition to these we have developed Cupro-Nickel coin blanks of 2 and 5 rupees denomination. The present installed capacity for coin blanking is 10,000 MTPY. Production Process The cold rolled and bright annealed coils are processed at coin blanking lines. This comprises of a blanking press, deburring machine, edge rimming machine, annealing furnace and polishing machines. Subsequently the coin blanks are inspected on Inspection Conveyors, then counted by counting machine and packed in drums for despatch. The punched out strips of AISI SS430 is a by-product while making coin blanks. These are aesthetically pleasing and elegant and have a vide variety of applications such as cable trays, kitchen racks, Paper Basket etc. These can be supplied in coil forms. Cupro-Nickel Complex In order to expand the business for coin blanks, an independent production line has been installed to produce high value copper-base non-ferrous alloys importantly cupro-nickels. The production facility includes induction melting, continuous horizontal strip casting, cold rolling, annealing, pickling and slitting. The installed melting and casting capacity is 6000T per annum. Apart from Cuppro-Nickels, the
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unit can produce Aluminum-Bronze, Phosphorus Bronze, Nickel-Silver and Tin bearing copper for various engineering and jewellry applications. Aluminum-Bronze along with Cupro-Nickel is used to manufacture duplex coins. In summary, the difference between the old style, traditional manager, and the approach taken by managers using TQM can be summarized as follows:|6~ Old Style Managers * Self-image as a manager or boss * Follows the hierarchical chain of command to attain quality goals * Works within a set formal, functional structure * Acts and makes decisions as an individual * Is protective and even distorts information * Becomes an expert and spends whole career in one function * Demands long hours and only loyalty to one boss Managers Using TQM * Self-image as a team leader, sponsor, or internal consultant * Cuts across functional lines dealing with anyone necessary to attain quality goals * Changes the composition of teams in response to customer needs and needed innovation * Acts and makes decisions as part of a team * Shares and supplements information with the team or anyone else who needs it * Becomes an expert and has significant assignments in many different functions * Demands quality results and loyalty not only to the organization and one's boss, but also to subordinates, teammates in other departments, and especially customers Implementing TQM The discussion so far has tried to give a general understanding of what is meant by and what is involved in TQM. Now we turn to implementation. Although the steps will differ depending on the past experience and culture of the organization, the following discussion can be used for general guidelines for successful implementation of TQM. Formulate the Overall TQM Strategy and Philosophical Framework Like any overall strategy, the TQM strategy involves goals, policies and plans.|7~ This strategic process is customer driven and strives for continuous improvement. The strategic goals spell out what the organization intends to accomplish in terms of delivering quality products/services to customers. Importantly, these goals start with defining who the customers really are and then letting them express their needs and expectations. The level of the goals should be determined by "benchmarking." This is the term used in TQM that establishes the very best in the industry and in the world. Finding out the "benchmark" for various quality goals may take some effort and digging, but generally is not as big a problem as it may appear. Valuable benchmark information can be gained from published sources, government documents, and, especially for electric cooperatives, industry professional services such as those offered by NRECA. An organization can even directly contact competitors and prestige firms in the industry to get the needed benchmark data. In addition to establishing the goals in the strategic process for TQM, policies and plans are also formulated. The policies provide guidelines for how the organization will work toward the quality goals. These policies are rules that are intended to shape the organization's actions toward the delivery of quality to customers. The plans, on the other hand, are more specific; they spell out the means that will be used to attain
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the goals of the delivery of quality to customers. The plans are a specific set of actions that should take place to accomplish the quality goals. The TQM strategy can be structured along the lines of widely recognized philosophical frameworks such as Deming's 14 principles or the Baldrige criteria. W. Edwards Deming is the best known quality guru who is given credit for teaching the Japanese statistical quality control after World War II. Now in his nineties, Deming's 14 well-known principles can be used as the philosophical framework in formulating the strategy for TQM. Deming's Fourteen Points 1. Create constancy of purpose. 2. Adopt the new philosophy. 3. Cease dependence on mass inspection to achieve quality. 4. End the practice of awarding business on price tag alone. Instead, minimize total cost, often accomplished by working with a single supplier. 5. Improve constantly the system of production and service. 6. Institute training on the job. 7. Institute leadership. 8. Drive out fear. 9. Break down barriers between departments. 10. Eliminate slogans, exhortations, and numerical targets. 11. Eliminate work standards (quotas) and management by objective. 12. Remove barriers that rob workers, engineers, and managers of their right to pride of workmanship. 13. Institute a vigorous program of education and self-improvement. 14. Put everyone in the company to work to accomplish the transformation. Like the Deming principles, the Baldrige criteria can also be used as a philosophical framework. Named after Malcolm Baldrige, a popular secretary of commerce who died in a rodeo accident in 1987, the award was established by Congress in 1987 to encourage American companies to improve their quality efforts. Motorola was named the first winner and today hundreds of thousands of firms use the criteria for structuring their quality strategy. These criteria are so widely accepted that some firms will not even use suppliers that have not applied for the Baldrige Award. Baldrige National Quality Award Leadership (100 points) Examines the senior executives' leadership in creating quality values and incorporating those values into the way their company conducts business. This category is divided into four sections: 1. Senior Executive Leadership 2. Quality Values 3. Management for Quality 4. Public Responsibility Information and Analysis (70 points) Examines the scope, validity, use, and management of data and information that underlie the company's overall quality improvement program. Strategic Quality Planning (60 points) Examines the company's planning process in achieving or retaining quality leadership and how quality improvement planning is integrated into overall business planning. Human Resource Utilization (150 points) Examines the company's effectiveness at developing and utilizing the full potential of its work force, including management, and to maintain an environment that is conducive to full participation, continuous improvement, and personal and organizational growth. Quality Assurance of Products and Services (140 points) Examines the statistical and procedural approaches used for designing and producing goods and services based, primarily, upon process design and control. Quality Results (180 points) Examines the levels of quality improvement based upon objective measures derived from analysis of customers' requirements and expectations and from analysis of business operation.

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everyone must be trained in things like handling customer complaints and interacting with customers like WalMart's "Aggressive Hospitality" approach. responsiveness. which has proven to be the case in most instances. A throw-back to the old concept of delegation. There may be a reduction of personnel in a few cases that can be handled by attrition. Also. One of the biggest mistakes of the traditional approaches to handling quality was that it was assumed employees would use common sense and be courteous and knowledgeable when dealing with customers. than formulating overall strategy. Such empowerment. cross training. interfunctional teams. but the thrust of TQM is certainly not to reduce the number of personnel. and team building.|9~ Finally. Finally. The word "empowerment" is very popular these days and certainly is a fad. Simple "brainstorming" techniques. This may involve a reorganization that combines certain functions and/or reduces the levels of management. However. But because of the extensive use of self-managed. 85 . however. identifying technical problems. and eliminating the causes and changing the process. overall customer service systems. what empowerment stands for is very important and is vital to successful TQM. For example. Drawing from the "laws of behavior. personnel may need to be reconfigured and especially trained and empowered. everyone must be cross trained.|8~ One is statistical training that can be used in measuring performance. successful TQM application involves more people intensive systems. Besides customer interaction training. Importantly. The second is problem solving training that can be used by teams to address quality issues that are best handled with a nonquantitative approach. because of the cross-functional emphasis. or specialized group problem solving approaches such as nominal grouping technique (NGT) would be examples. They could be empowered to fix a bill or cancel a cost without going to their boss for a decision. quality followed by no consequence/extinction will also weaken and decrease it over time. Under TQM. have the authority and autonomy. to make decisions that have to do with the delivery of quality to customers. There must be a significant commitment made to training in implementing TQM. and because of the extensive use of teams. like quality itself. Develop the Organization and Train/Empower the Personnel After the strategy has been formulated.Customer Satisfaction (300 points) Examines the company's knowledge of its customers. assumes that the benefits of quality service are greater than the costs. if not more important. By the same behavioral laws. even hourly paid front-line employees should be empowered to carry out the quality goals such as making it right for the customer at any cost. there are two generally recognized types of TQM training. not less. developing the organization and training/empowering the personnel is the need to reward quality improvement. the next step of implementation is to communicate the strategy to everyone and develop the organization to accommodate TQM. Establish the Reward Systems for Quality Improvement Equal. of course. this reorganization effort for TQM should not be equated with eliminating people or downsizing. all personnel must be empowered."|10~ the simple fact is that the delivery of quality to customers followed by a positive consequence/reward will tend to strengthen the quality effort and cause it to be repeated. and ability to meet customers' requirements and expectations. quality efforts followed by a negative consequence/punishment will weaken and decrease it in subsequent frequency. In fact. general participative techniques. this phase of TQM implementation involves empowering the personnel. training in team building is important.

Industry & Trade The new Economic Order & Industrial growth. Globalising of Trade & Telecommunications A NEW ERA Though agriculture has been the main preoccupation of the bulk of the Indian population. India is continuing her untiring efforts to bring about a constructive dialogue between the developed and developing countries in their quest for a cooperative approach towards a new International Economic Order. construction equipment. Duties have been lowered. some Indian companies have also begun to gain international recognition.CHAPTER-4 PRICING AND CONSUPTION IN STEEL SECTOR Economy. the founding fathers saw India becoming a prosperous and Modern State with a good industrial base. Economic development strategies were evolved with an eye on these twin objectives. Since independence. 100% in case of export oriented industry. precision instruments. India has achieved a good measure of self-sufficiency in manufacturing a variety of basic and capital goods. locomotives. heavy electrical machinery. Economic Restructuring The international confidence in India's economy has been fully restored. New International Economic Order As a responsible and progressive member of the international community. The reforms launched have made India an attractive place for investment. cars. communication equipment and computers. India is among the major exporting nations with an overflow of scientists in the field. repatriation of profit made liberal and levels of foreign equity raised considerably. The output of the major industries includes aircraft. power generation and transmission equipment. ships. changes is the only answer to the various economic ills and problems of development confronting the world today. While several multinational companies have entered the Indian market. India is convinced that the establishment of an equitable International Economic Order involving structural and other. Early planners in free India had to keep in mind two aims: all-round development and generation of large-scale job opportunities. 86 . chemicals. Programs were formulated to build an adequate infrastructure for rapid industrialization. In the field of computer software.

power. Petroleum and Natural Gas: The recent exploration and production activities in the country have led to a dramatic increase in the output of oil. The country has huge reserves of coal approximately 197 billion tons.000 MW of power have came in. On its part. The rupee is convertible on the trade account. shares and debentures.With the conclusion of the Uruguay Round of Multilateral Trade Negotiations. Power: The generation of power has increased impressively in recent years.288 MW The policy of inviting private sector has been well received. exports grew by 17%. As a result of special attention given to the area in recent years. Infrastructure In view of their crucial importance.6 billion-kilowatt hour of electricity. allowing companies to operate captive mines.1 billion-kilowatt hour. NRIs The government acknowledges the great role that the vast number of Indians living and working abroad. India generated 6. the infrastructure industries have been growing at the rate of 9 to 10 per cent annually. Figures for 1995-96 show that exports grew at a rate of 28. The country currently 87 . The installed capacity. Approval is given automatically on investment in certain technical collaborations. can play in accelerating the pace of development in the country. In 1994. about 140 offers that can generate over 60. transport and other infrastructure industries are owned by the State. About 90% of India's import are financed by export earnings. They can buy Indian Development Bonds and acquire or transfer any property in India without waiting for government approval. A sufficient amount of lignite (brown coal used in thermal power stations) is also available. The Foreign Exchange Regulation Act has been amended to permit NRIs to deal in foreign currency and they can also bring in five kg of gold. There are programs to utilize the scientific and technical talents of the NRIs with the help of the Council of Scientific and Industrial Research.8%. Coal: Coal is the primary source for power generation in India. The NRIs are allowed 100% investment in 34 priority and infrastructure facilities on non-repatriation basis. India hopes that developing countries will not suffer on account of any protectionism. has crossed 83. In 199051. India produced about 270 million tons of coal in 1995-96. In the 1980s. the Non-Resident Indians. successor to GATT. in 1995-96 the figure was 380.in industry. The Non-Resident Indian (NRI) enjoys special incentives to invest in India like tax exemption and higher interest rates on deposits. India has opened several sectors hitherto restricted to the public sector. India decided to join the new World Trade Organization. Several initiatives have been taken to attract NRI investments . the NRIs contribution through their remittances was instrumental to a large extent in stabilizing the balance of payment situation. The government now welcomes private investment in the coal sector. which was 1400 MW at Independence in 1947.

already links more than 80 stations with its fleet of turboprop aircraft and it plans to 88 . While Indian scooters have established a good foreign market. the car industry is also looking up with several foreign companies setting up plants in India. drinking water and cleaning of trains. compared to 17 years of the international shipping fleet. trucks. Following the policy of liberalization. plans are afoot to introduce faster trains. Hindustan Aeronautics Limited (HAL) is India's gigantic aeronautical organization and one of the major aerospace complexes in the world. meals. is well known for its quality service spanning the world. coaches and other components. Within the country. By the end of the Eighth Five-Year Plan. With improvement in tracks. India is also among the few countries that offer fair and free competition to all shipping companies for obtaining cargo.1 million-km. five international airports and more than 88 other airports are linked by Indian Airlines. with the country producing over 22. Lately. Road Transport: The roadways have grown rapidly in independent India. The Railways have also started a scheme to privatize several services that will include maintenance of railway stations. It is well equipped to meet its demands for locomotives. major ports. Air India. India also manufactures most of its motorized vehicles -cars. an intermediate feeder airline. certain prestigious long distance trains will be running at 160 Kin per hour. the Indian shipping industry. India's international carrier. and imports another 27 million tons. The average age of the shipping fleet in India is 13 years. jeeps. the Railways have launched a massive gauge conversion drive as about a third of the track is meter or narrow gauge. Refinery production in terms of crude throughput of the existing refineries is about 54 million tons. It carries more than 4000 million passengers per year and transports over 382 million tons of freight every year.000 Kin and a fleet of 7000 passenger and 4000 goods trains. the Indian Railways is the second largest network in the world. vans. Shipping: The natural advantage of a vast coastline requires India to use sea transport for the bulk of cargo transport. There is no cargo reservation policy in India. Vayudoot. Natural gas production has also increased substantially in recent years.produces 35 million tons of crude oil. two thirds of which is from offshore areas. Natural gas is rapidly becoming an important source of energy and feedstock for major industries. as also national highways and water transport have been throw open to the private sector. Railways: With a total route length of 63. buses and a wide range of two-wheelers of various capacities. Aviation: India has an aviation infrastructure. the country has a road network of 2. Shipping activity is buoyant and the number of ships registered under the Indian flag has reached 471.000 million cubic meters. Ranging from the cross-country link of the national highways to the roads in the deepest interiors. Very soon. production was likely to reach 30 billion cubic meters. which caters to every aspect of this industry.

which derives advantage from its ability to interface with computers. and innovation in organization and management. increased productivity. Many private airlines are already operating in the country. During 1995. at Bokaro and Vishakhapatanam. Private sector plants. a quantum jump in key technologies. cellular services in most major urban areas were functional. Till September 1996. 17 billion.500 crore program to modernize them. provides services in difficult terrain. The Steel Authority of India (SAIL).6 million). The private sector is expected to play a major role in the future growth of telephone services in India after the opening of the economy. Costing nearly Rs. India has nearly 7. India is linked to most parts of the world by E-mail and the Internet. The Government has given a push to sponge iron plants to meet the secondary sector's requirement of steel scrap. TISCO and a large number of mini steel plants in the country contribute about 40% of the steel production in the country. Key Industries Steel: The iron and steel industry in India is over 122 years old. Besides. Pipelines: Oil and natural gas pipelines form an important transportation network in the country.1 lakh (12. on schedule. However. the 1700 km Hazira-Bijaipu Jagdishpur pipeline. the number of telephone connections had reached 126. India now uses digital technology in telecommunications. production of salable steel in the country was about 21. India has established manufacturing capabilities in both the Government and private sectors. besides establishing indigenous R&D in digital technology. The country completed recently. 1940 crore). Durgapur and Rourkela. producing a wide range of items.96. India is a major exporter of heavy and light engineering goods. of which the Tata Iron and Steel Company (TISCO) is the biggest. and telephone connections were available on demand. The 89 . a concerted effort to increase the steel output was made only in the early years of planning. Moving towards selfreliance. deep in the mainland in Uttar Pradesh.build and expand its network to over 140 airports in the far-flung and remote areas of the country.000 km of pipeline mainly for the transportation of crude oil and its products.10 lakh tons in 1992-93 (valued at Rs.'708 crore) to over 20 lakh tons (Rs. the pipeline transports liquid gas from the South Bassein offshore field off Mumbai to Jagdishpur and Aonla. a helicopter service. one of its most ambitious projects. Three integrated steel plants were set up at Bhilai. were set up. The recent growth in telecommunications has also been impressive. By 1997. Pawan Hans. Telecommunications: With rapid advances in technology. have been allowed to raise their capacity. Soon every village panchayat will have a telephone.4 million tons. The present strategy focuses on a balanced growth of the network rapid modernization. The five SAIL plants accounted for over half of this: The export of iron and steel jumped from 9. which manages the public sector plants. Later two more steel plants. 40. The Government has adopted a liberal civil aviation policy with a view to improving domestic services. has undertaken a Rs. Engineering and Machine Tools: Among the Third World countries.

banking. Electronics: The electronics industry in India has made rapid strides in recent years. 200 billion annually. diesel engines. The engineering industry has shown its capacity to manufacture large-size plants and equipment for various sectors like power. will remain in the public sector. Lately. Some of the major items manufactured in India are computers. artificial intelligence and fifth generation systems. The software export during the same year reached Rs 2.6 crore which was 13. transport vehicles. 35. The Software Technology Park scheme for attracting investments has proved successful. tractors. Public Sector: The public sector contributed to the initial development of infrastructure and diversification of industrial base. The compound growth of the computer industry has been 50% during the last five years. The relative low cost of production in India makes items made in India competitive in the world market. cotton textile and sugar mill machinery. account for one third of India's total exports. keyboards. the largest industry in the country employing about 20 million people. television sets. Almost the entire demand for floppy disk drives. textile exports were estimated at Rs. several controls have been removed and in October 1996. fertilizer and cement. The country also makes construction machinery. During 1995-96. Exports are also rising. till 1999.504. In recent years.3% more than the 1994-95 figure. fertilizer. The heavy electrical industry meets the entire domestic demand. insurance and financial applications. Textiles: Textiles. dot matrix printers.bulk of capital goods required for power projects. Recognition for the Indian computer software industry has been global. a new longterm Quota policy was announced to boost exports over the next three years. broadcasting and strategic electronics. computers have been identified as a major thrust area. It is now being exposed to competition. communication equipment. equipment for irrigation projects. Special emphasis has been given to software export.5 billion. cement. Compared to 1994-95. 4.5 billion. the software export growth in 1995-96 rose by an impressive 70%. But many core and strategic areas. The country produces electronics items worth over Rs. important for economy and self-reliance. line printers and plotters is met from indigenous production. With the availability of trained technical manpower. in 1995-96 they reached Rs. air pollution control equipment is also being made in the country. Research and Development 90 . Part equity of some units is being disinvested. microwave ovens and washing machines. steel and petrochemical plants and mining equipment are made in India. The Indian software industry has developed skill and expertise in areas like design and implementation of management information and decision support systems. CRT terminals. Indian software enterprises have completed projects for reputed international organizations in 43 countries.

include fixed and variable costs associated with the product. Traditional Industry Indian handicrafts have withstood competition from machines over the years. art metalware. 6. selfreliance. Traditional textiles are as popular abroad as they are within the country. Set pricing objectives .define the product. and promotion. revenue maximization. Estimate the demand curve .Research and Development activities are supported by the governments at the Center and the states as well as by public and private sector undertakings. hand-printed textiles and leather. pricing affects other marketing mix elements such as product features. channel decisions. The Department of Scientific and Industrial Research recognizes over 1200 in-house R & D units. About 200 research laboratories exist in government departments and agencies. Calculate cost . The major export items include hand-knotted carpets. or price stabilization (status quo). 4. 91 . distribution.evaluate likely competitor actions. the following is a general sequence of steps that might be followed for developing the pricing of a new product: 1. The benefits of the R & D works are reaching various fields like industry. segmentation. India is moving towards indicative planning which will outline the priorities and encourage a higher growth rate. modernization and social justice. The handicraft and handloom sector is a major source of rural employment and earns substantial foreign exchange. Understand environmental factors .for example. draws up five-year plans under the guidance of the National Development Council to ensure growth.understand how quantity demanded varies with price. Pricing is an important strategic issue because it is related to product positioning. profit maximization. The skills are passed on from one generation to the next. understand legal constraints. and promotional tactics. Furthermore. The Rs. Develop marketing strategy . Its role has been redefined in the eighth plan document: from a centralized planning system. agriculture and commerce. Planning for Development The Planning Commission headed by the Prime Minister.000 billion eighth plan envisaged a growth rate of 5. 2. 5. While there is no single recipe to determine pricing. Pricing Strategy One of the four major elements of the marketing mix is price. 3. etc.6%. targeting. 4. Make marketing mix decisions . and positioning.perform marketing analysis. wood and cane wares.

From a competitive standpoint. 92 . Environmental Factors Pricing must take into account the competitive and legal environment in which the company operates. so price is an important variable in positioning. Pricing Objectives The firm's pricing objectives must be identified in order to determine the optimal pricing. Determine pricing .seeks to maximize current profit. select a pricing method. distribution.seeks to maximize the number of units sold or the number of customers served in order to decrease long-term costs as predicted by the experience curve. Calculate Costs If the firm has decided to launch the product. For existing products. otherwise. The underlying objective often is to maximize long-term profits by increasing market share and lowering costs. There usually is a tradeoff between product quality and price. Because of inherent tradeoffs between marketing mix elements. The total unit cost of a producing a product is composed of the variable cost of producing each additional unit and fixed costs that are incurred regardless of the quantity produced.7. Current profit maximization may not be the best objective if it results in lower long-term profits. • Current revenue maximization . the marketing strategy is formulated. Estimate the Demand Curve Because there is a relationship between price and quantity demanded. experiments can be performed at prices above and below the current price in order to determine the price elasticity of demand. the firm must consider the implications of its pricing on the pricing decisions of competitors. • Maximize quantity . collusion with competitors to fix prices at an agreed level is illegal in many countries. The pricing policy should consider both types of costs. there may be price controls that prohibit pricing a product too high.seeks to maximize current revenue with no regard to profit margins. These steps are interrelated and are not necessarily performed in the above order. The unit cost of the product sets the lower limit of what the firm might charge. there likely is at least a basic understanding of the costs involved.using information collected in the above steps. Inelastic demand indicates that price increases might be feasible. taking into account revenue and costs. Common objectives include the following: • Current profit maximization . For example. there might be no profit to be made. the above list serves to present a starting framework. and promotion decisions. it is important to understand the impact of pricing on sales by estimating the demand curve for the product. Offering a different price for different consumers may violate laws against price discrimination. For example. develop the pricing structure. setting the price too low may risk a price war that may not be in the best interest of either side. Setting the price too high may attract a large number of competitors who want to share in the profits. and determines the profit margin at higher prices. From a legal standpoint. a firm is not free to price its products at any level it chooses. including target market selection and product positioning. Pricing it too low may be considered predatory pricing or "dumping" in the case of international trade. pricing will depend on other product. and define discounts. Marketing Strategy and the Marketing Mix Before the product is developed. Finally. Nonetheless.

For new products. These methods include: • Cost-plus pricing . and what the consumer perceives to be fair. • Large cost savings are not expected at high volumes. • Psychological pricing .base the price on the effective value to the customer relative to alternative products. survival may take a priority over profits. • Survival . and the product's anticipated price elasticity of demand. • The company does not have the resources to finance the large capital expenditures necessary for high volume production with initially low profit margins. existence of economies of scale. so this objective is considered temporary. Skim pricing attempts to "skim the cream" off the top of the market by setting a high price and selling to those customers who are less price sensitive.set the price to achieve a target return-on-investment. It is most appropriate when: • Demand is expected to be highly elastic. Skimming is most appropriate when: • Demand is expected to be relatively inelastic. • Partial cost recovery .attempts to maximize the unit profit margin. that is. the pricing objective often is either to maximize profit margin or to maximize quantity (market share). barriers to entry. • Target return pricing .base the price on factors such as signals of product quality. Joel Dean discussed these pricing policies in his classic HBR article entitled. popular price points. • Value-based pricing . there likely will be changes in the demand curve and costs. recognizing that quantities will be low. rate of product diffusion. • Quality leadership . the firm's resources.the firm may seek price stabilization in order to avoid price wars and maintain a moderate but stable level of profit. • There is a threat of impending competition. managers may make use of several pricing methods. In this case. Penetration pricing pursues the objective of quantity maximization by means of a low price. As the product lifecycle progresses. or it is difficult to predict the cost savings that would be achieved at high volume. product differentiation.use price to signal high quality in an attempt to position the product as the quality leader. • Status quo . • The product is of the nature of something that can gain mass appeal fairly quickly. skim pricing and penetration pricing strategies often are employed. that is. Pricing Methods To set the specific price level that achieves their pricing objectives. Skimming is a strategy used to pursue the objective of profit margin maximization. the pricing policy should be reevaluated over time. Pricing Policies for New Products. the goal may be to select a price that will cover costs and permit the firm to remain in the market.• Maximize profit margin . • Large decreases in cost are expected as cumulative volume increases.an organization that has other revenue sources may seek only partial cost recovery. As such.set the price at the production cost plus a certain profit margin. customers are price sensitive and the quantity demanded will increase significantly as price declines. The pricing objective depends on many factors including production cost. the customers are not highly price sensitive.in situations such as market decline and overcapacity. 93 . To meet these objectives.

there is not much of a change in the price of long steel prices. It is expected that other steel corporates like Ispat Industries. has increased from Rs 900 to Rs 1.a discount that increases as the cumulative quantity increases. For example. This price usually is discounted for distribution channel members and some end users. they also can be based on day of the week or time of the day.500 per tonne. “The cost of production has increased sharply by 30% in the October-December quarter compared to the July-September quarter. pellet steel and coking coal. For example. Marketing > Pricing Strategy Domestic steel companies are reviewing their pricing strategy as the cost of production touched a new high during the last three months. The current landed price of the iron ore is Rs 2.based on the time that the purchase is made and designed to reduce seasonal variation in sales. “We have increased prices of flat steel by Rs 500 per tonne with effect from January 1. Afterwards. a trade discount may be offered to a small retailer who may not purchase in quantity but nonetheless performs the important retail function. a Sail spokesperson confirmed the price hike and said. • Seasonal discount . Cumulative discounts may be offered to resellers who purchase large quantities over time but who do not wish to place large individual orders. the travel industry offers much lower off-season rates. Many software suppliers have changed their pricing to a subscription model in which the customer subscribes for a set period of time. • Quantity discount . Such discounts do not have to be based on time of the year. managers have the opportunity to design innovative pricing models that better meet the needs of both the firm and its customers. 94 . Tata Steel and Jindal Iron and Steel are likely to review their pricing strategies over the next couple of days. Essar Steel.” The price of hot-rolled steel will now be Rs 29. When contacted.extended to customers who pay their bill before a specified date. This model offers stability to both the supplier and the customer since it reduces the large swings in software investment cycles. However. • Promotional discount . For example.a functional discount offered to channel members for performing their roles. software traditionally was purchased as a product in which customers made a one-time payment and then owned a perpetual license to the software.offered to customers who purchase in large quantities. • Trade discount . such as pricing offered by long distance and wireless service providers. This was a result of increase in prices of raw material like iron ore. Ispat sources said that the cost of raw materials touched an all-time high during the last three months. They added that the ex-mine prices of iron ore. There are several types of discounts. • Cash discount .160 per tonne during AugustNovember 2004. the subscription must be renewed or the software no longer will function. as outlined below. Public sector steel major Steel Authority of India (Sail) increased the price of hotrolled steel by Rs 500 per tonne with effect from January 1.In addition to setting the price level. Price Discounts The normally quoted price to end users is known as the list price.500 per tonne. • Cumulative quantity discount . such as one year. a key raw material for steel production.a short-term discounted price offered to stimulate sales.

freight up 15% “Under these circumstances. “Our pricing strategy is under review at this stage. Significantly. Officials at Essar Steel too confirmed that a pricing review was underway.” According to officials at Jindal Iron & Steel Co (Jisco). we don’t have any plan to increase prices.500 per tonne to Rs 5.” Ispat sources added. it is logical that all steel companies will consider a hike in prices. the price of coking coal for the 2005 contract has been increased from $58 to $125. Cost Push • Essar. Jisco. The last time prices were hiked was in early December when Jisco and Ispat Industries increased hot-rolled coil prices by Rs 350 per tonne. go up by as much as Rs 3. the largest private steel player.000 per tonne.000 per tonne. Steel sector analysts explain that with annual supply contracts coming up in MarchApril. we have to review our pricing strategy. coal. “Currently. said. Ispat set to review prices • Hikes likely to be announced this week • Tata Steel not to hike prices for now • Iron ore. 95 . Sail had increased long steel product prices in November by Rs 1.Meanwhile. This is apart from a 15% increase in railway freight.400 during the last three months. The revised prices will be announced shortly. Tata Steel. in fact. pellet prices touch highs. They added that prices could. resulting in a 115% hike. the cost of pellets has also increased from Rs 3.” said Jisco officials. China has already indicated a 25% appreciation in coke prices on spot trading.

"They realized that we weren't budging on our conditions and. In This Special Section How Mittal Steel Proved Its Mettle in a Tough Marketplace Travelocity's Michelle Peluso Changed the Business Model and the Company Took Off Career Advice from ADP's Arthur Weinbach Tyco's Edward Breen: When Leadership Means Firing Top Management and the Entire Board The Cow in the Ditch: How Anne Mulcahy Rescued Xerox Back to Special Section Home Today. even though the plant was losing $1 million a day. recalls Aditya Mittal. continued to expand. grappling with financial problems of its own.-based 96 . Mittal Steel. which occurred five years ago. Rotterdambased Mittal Steel." In April.S. the company capped a 15-year string of acquisitions with the completion of its $4. often stretched on for 15 hours. he and a colleague. along with two advisers. both sides agreed to the deal. illustrates the business strategy that has made Mittal Steel the world's largest steel maker -.5 billion purchase of U.3 billion. then head of mergers and acquisitions for his family's company. Mittal. Fortune magazine in January named Lakshmi Mittal. the company's chairman and chief executive and Aditya's father. wanted to acquire a steel mill owned by the Romanian government. its Europe Businessman of the Year (2004) for his "deal making and steel making. Mittal Steel pursued its vision of becoming a global giant. And as competitors insisted that steel should remain a regional business. As the steel industry overall struggled in the early part of this decade. The incident. Mittal Steel was the only bidder. Eventually. more than that.CHAPTER-5 MARKET TREND Each day." Mittal says." The negotiations. would be locked in a conference room with "24 chain-smoking representatives of the Romanian government. which the Romanians insisted on tape-recording.a commitment to consolidation and globalization and a willingness to take risks that scare off competitors. the company has plants in 14 countries and a market capitalization of $20. but the Romanians kept pushing hard for concessions. they realized that the restructuring was necessary.

In years past. he is president and chief financial officer. "conducted "in a tense televised auction that set a new benchmark for acquisitions" in the steel industry "underscores the increasing premiums being paid for former state-owned steel plants. not just near home." Just as important as these recent acquisitions is the fact that Mittal Steel has begun to change the way that its industry does business.. he has stuck to a common formula: Import modern management practices. Today. "We were the only steel company pursuing a strategy of globalization when we started. create new efficiencies by taking steps like acquiring nearby coal and iron ore mines. at its peak. His father. competitors followed. Lakshmi Mittal ran a factory for him in Indonesia before striking out on his own with a plant in Trinidad. their course of action had been to continue producing.companies should operate worldwide. globalization . the transaction.. india. "An Opportunity Basket" Lakshmi Mittal built Mittal Steel from a single mill. knowledge management. mergers Articles Follow the Sun: Predicting Population Growth in the U.International Steel Group. In some locations. who earned his undergraduate degree at Wharton in 1996. he spoke with KnowledgeWharton about the company's strategy and future plans. Because of Mittal's position in the industry.S. often scooping up underperforming former government outfits in such far-flung places as Kazakhstan. In early October. like the Czech Republic. Cosmetics and Steel: How Two Companies Defied Conventional Wisdom by Going Global Offshore Outsourcing and the Relative Value of Growth: A Conversation with Katzenbach Partners Auto Industry Consolidation: Is There a New Model on the Horizon? From Wall Street to Beijing: Global Finance Has New Rules. like Romania. the company announced that it was cutting production substantially. he seized on a strategy of serial acquisition. driving prices down further and compounding the industry's misery.. he has replaced every member.. will produce 12 million metric tons of steel a year. too. Most participants at 97 . where possible. In others. New Players Around the World on $48 (or So): How High Can Discount Airlines Fly? Aditya Mittal says his father understood sooner than most steel executives that their . china. when steel prices dipped. based in London. Earlier this year. And in late October. or Out? The View from Investors Knowledge Wharton Aditya Mittal. Mittal Steel announced that it would construct a new plant in the Jharkhand state in India which. Read More About.in Calcutta. During a recent trip to campus.8 billion. Knowledge Wharton Citigroup and Coca-Cola: Two Global Investors Share Their Experiences in Emerging Markets Knowledge Wharton Are Emerging Markets Striking Back. had been a steel man -. joined the company in 1997 after a stint as an investment banker. he has left the local management team intact. We Suggest. Soon. Although the locales have changed over the years. Mittal announced the purchase of Ukraine steel manufacturer Kryvorizhstal for $4. According to a report in the Wall Street Journal. wring out costs and.

" When Mittal Steel considers an acquisition. and Ross had streamlined the companies while reorganizing them. and I want you to pay me in steel. Mittal adds.S. 'Steel can never be global. Similarly. He was trying to buy companies but had no cash to do it. had no obvious source of iron ore. for example. we opened a warehouse and found 50. 'I have an IOU note from the company. U. All the employees came and said. When Mittal staffers discovered that the country had ore deposits.S. acquisitions in the steel industry were contingent on financial measures.' In Romania. 'I'll give you a ton of ore or coal. the company secured a license to open a mine. with the integration of ISG into Inland. and 98 . for example." Historically. which was losing money along with everyone else. But ISG had been cobbled together out of such storied American steel names as Bethlehem and LTV by U. They had traded steel for wine. Then came the 1999 steel market crash. Employee commitment." Mittal recalls. Some companies even cut prices in hopes of protecting their market share. turnaround specialist Wilbur Ross. Mittal says. When prices dropped. companies kept pumping out steel.' You would go to the hospital or the grocery store. Its Algerian plant. and there were these IOU notes. competitors. If one small player cut his output. we will have the lowest cost manufacturing base in the U. I analyzed my mistakes and realized that the game had changed. but also inexpensive labor.' Today.S. even as losses piled up.S. have been whipsawed by commodity pricing and overcapacity in their industry.IOU notes. steel makers filed for bankruptcy. "That was the worst period my life. A third of U.000 bottles of Romanian red wine. giving ISG a cost edge over U." Aditya Mittal says. His first project was a $1 billion deal -which was never completed after another company lured the target firm away." The Game Had Changed Aditya Mittal was named head of mergers and acquisitions as the steel industry teetered on the precipice of its latest slump. steel makers. saddled with high fixed costs. its purchase of International Steel Group did not seem to fit its requirement for low-cost labor. those same organizations are scrambling for assets in Central Europe because of their proximity to raw materials and a growing market. "A very rational person would have decided to focus internally. Steel is regional. The slump put Aditya Mittal in a tricky spot.industry conferences said. they had a central computer which would track all of the barter transactions. wages are among the highest in the world. financial statements have proven unreliable because plants often did business via barter. everyone else would increase theirs and drive him out of business. Cutting production would have risked failing to cover their fixed costs and collapsing into bankruptcy. In the former Eastern Bloc. The industry was so fragmented that no one company or group of companies could stabilize it by reducing production. And they had created their own currency -. "Here I was the head of M&A with one direct report and one failure to my credit. "In Kazakhstan. each of its deals presents unusual challenges. "Traders would come in and say. He laid off employees and jettisoned pension plans. [another Mittal division in America]. Our global vision allowed us to look at the world as an opportunity basket. it seeks not only low-cost inputs and an expanding market. "We believe that.S. Historically. But it will bend its criteria if an opportunity looks promising enough. Although the company has a blueprint for acquisitions. capital-expenditure commitment and media perception were more important now. considered that same path. but those [measures] were no longer as important. and Mittal Steel.

But it takes time. The lure. Its Kazakhstan plant. Chinese government policy has lately seemed to discourage additional domestic production. adding $5 billion to the company's sales. and they meet on a bi-annual basis. I kept looking at opportunities. the Mittals charged into the business mainstream. Arcelor in Luxembourg. the announcement of the ISG acquisition. It has pro forma revenues of $31. bring it primarily inland. International scope brings benefits to the company besides sheer market muscle. is supplying China's red-hot economy. bigger producers will give the industry better economies of scale and greater pricing power." Mittal says.highway bridges and big industrial structures -that requires a significant amount of steel. It also enables it to transfer knowledge among its far-flung subsidiaries. acquired in 1995. creating the world's biggest steel company. as for many companies. last year. Their labor-cost advantage is less than that. After two decades of largely operating in out-of-the-way places. Buying ISG was a coming-out party for Mittal Steel. "But I wasn't ready to do that." Mittal says." In the next year. The risk is that China will decide to ramp up its own production and undercut foreign producers." he says." he says." Mittal Steel's biggest competitor. which should translate to less volatile steel prices. "That allows the cross-fertilization of ideas.that's what the rest of the steel industry did. "We need two or three players in our industry who are producing 100 million tons each. "We want to be a consolidator in China. we are a 60-million-ton steel company. both of which were also losing money. especially when compared with the Mittal family's home country." In addition. "I don't believe China is a low-cost steel producer. Fewer. India. Soon came a deal in the Czech Republic and then. 2000. In September. Today. I had just gotten the job. Mittal managed to acquire all three. produced about 50 million tons in 2003. Aditya Mittal says the company's acquisitions are far from done. The company has long done business in that part of the world." he says. "They import ore. because it doesn't have iron ore. "We have thousands of managers who participate in our knowledge management program." Mittal Steel has found the Chinese government to be an accommodating partner for foreign firms. Mittal notes. then ship it. "That's critical for our industry to survive in the long run. "I don't mean to denigrate democracy. Aditya Mittal envisions more deals there.5 billion and profits of $6." he says. "With India being a democracy. of course. The government has repealed export incentives for the industry and announced its intention to consolidate its domestic firms. there will be trade issues.the plant in Romania as well as ones in Algeria and South Africa. You negotiate with all different 99 . if they become a significant exporter of steel. especially as the Chinese construct the sort of infrastructure -." Dealing with China The future of Mittal. "I think they recognize that. and that involves a lot of cost. exports much of its steel to China.8 billion. Mittal Steel completed its $338 million acquisition of a minority stake in Hunan Valin Steel Tube & Wire Co. can be boiled down to one word: China. setting up operations can be difficult. Our counterparts in Kazakhstan were able to teach our American smelters some better melting practices. make steel. But he thinks that fears about China's designs on a larger piece of the steel business are overblown. according to Mittal. he found three -." Mittal says. China's steel production is already growing each year by the total amount of steel that India produces. "It's critical for consolidation to continue.

'The party secretary wanted to give you a nice welcome. "But I remember going to China. lots of houses -.' Then I get to the plant site. This highway isn't actually open yet. It's a more difficult process than in the United States.' 100 . 'What's going on here?' And they say. everyone will be gone. and there was literally redcarpet treatment. I see houses. And I say.levels of government. I flew into the airport. Then I'm in a car on a highway. In 90 days. 'Where's the land?' And the party secretary says. and there is no one else on the road. but I don't see any land. It can take two or three years. So I ask. You negotiate with tribal people. 'Right here.a village.

Industries can be categorized in the following ways: Offering Based Industry Classification Does the industry provide products.com introduces all the major industries and classification systems. a Small & Medium Business (SMB or SME) industry. Retail. or is it consolidated. Industry can be used to refer to all company groups. or a mix of both products and services? Production Based Industry Classification Does the industry rely more on natural resources. or a global industry dominated by Multi-National Corporations (MNCs)? Target Market Classification Is the industry export-oriented and international. An industry is a collection of companies that all perform similar functions.INDIGENOUS MARKET World industries drive the global economy. and demand in each region. with rounds of mergers and acquisitions leading to a few dominant players? 101 . secondary or tertiary sector? · Primary Industry :. services. with many small 'mom and pop' businesses. or domestic market focused? Concentration Classification Is the market fragmented. human capital or financial capital? Industries can also be described as resource-intensive. or heavy industry.The industries that utilize machines.The agricultural. level of development. farming and fisheries businesses come under this head.Services-based industries are known as tertiary industries. are typical examples of Secondary Industry types. · Secondary Industry :. · Tertiary Industry :. labour-intensive or capitalintensive? Classifying Industries by Sector Is the industry in the primary. This section of EconomyWatch. The manufacturing industries. factories or human labor to convert raw materials into a processed final product. or specifically to industry as being a set of productive entities that utilize productive forces to convert a simple input to a processed final product. food & beverage and professional services are examples of Tertiary Industry Classifying Industries by Size Is the industry a small-scale or cottage indutry. collectively transacting almost USD $70 trillion. The size of various industies vary by country. together with key industry data.

The Asian countries have their respective dominance in the production of the steel all over the world. the recycled material is one of the top products in the manufacturing sector of the world. But with the fast emergence of developing countries like China. Between these years. The main demand creators for Steel Industry are Automobile industry. especially the infrastructural works and real estate projects that has been on the boom around the developing countries. Corus. Steel Industry is becoming more and more competitive with every passing day. During the period 1960s to late 1980s. with the highest ever stock price. The most significant growth that can be seen in the Steel Industry has been observed during the period 1960 to 1974 when the consumption of steel around the whole world doubled. India and South Korea in this sector has led to slipping market share of OECD countries. Oil and Gas Industry. The increasing needs of steel by the developing countries for its infrastructural projects has pushed the companies in this industry near their operative capacity. the rate at which the Steel Industry grew has been recorded to be 5. the steel market used to be dominated by OECD (Organization for Economic Cooperation and Development) countries. Tata Steel of India or TISCO (as listed in BSE) has acquired the world's fifth largest steel company. After this period. and Container Industry · 102 . It has been observed that Steel Industry has grown tremendously in the last one and a half decade with a strong financial condition. This roaring market saw a phase of deceleration from the year 1975 which continued till 1982. Steel Industry is a booming industry in the whole world. The increasing demand for it was mainly generated by the development projects that has been going on along the world. The balance of trade line is also tilting towards these countries. In the last one year. the continuous fall slowed down and again started its upward movement from the early 1990s. particularly after the adoption of the liberalization policies all over the world. listed in Holland. the world has seen two big M&A deals to take place :· The Mittal Steel. Steel Industry was till recently dominated by the United Sates of America but this scenario is changing with a rapid pace with the Indian steel companies on an acquisition spree. Over the years. India being one among the fastest growing economies of the world has been considered as one of the potential global steel hub internationally. has acquired the world's largest steel company called Arcelor Steel to become the world's largest producer of Steel named ArcelorMittal. the World steel industry is growing very fast.EXPORT MARKET World Steel Industry : Steel. Construction Industry. Infrastructure Industry.5 %.

000 metric tones.5 mmt of crude steel in January 2005.9 India 32.7 Brazil 32.Germany 46. up by 8.3 mmt. 103 . This industry is at present working near its productive capacity which needs to be increased with increasing demand. In South America region it was 3.R.3 mmt in January 2005. In Russia it increased by 4. Among the top producers in the steel production. The Steel Industry has enough potential to grow at a much accelerated pace in the coming future due to the continuity of the developmental projects around the world. vacuum degassing. Country Crude Steel Production (mtpa) China 272. Production in the United States was 8.6 mmt of crude steel in January 2005. Both EU and Japan have ranked the top.New innovations are also taking place in Steel Industry for cost minimization and at the same time production maximization. USA and South Korea comes as like India.9 Russia 65.5 mmt in January.5 F. In case of the North America region particularly in Mexico it was 1.4 Ukraine 38. For more information on the subject please browse through the following links :World steel industry and Crude Steel Production The following table gives a clear picture upon the major crude steel producers in the world as of the year 2004.0 per cent to reach at 5.5 mmt of crude steel in January 2005.5 per cent in comparison to the same month in 2004.0 per cent compared to the same month in 2004. Production in Italy increased by 11.6 South Korea 47.4 In the year 2004. the global steel production has made a record level by crossing the 1000 million tones. making of steel through the use of electric furnace. etc. Brazil had produced 2.5 Japan 112. Austria produced 646.7 mmt for January 2005.7 United State 98.6 Italy 28. Production of steel in the 25 European Union countries was at 16. Indian HR Products are categorized in the Tier II category quality of products. China ranked 1 in the world. Italy produced 2. According to rating made by the " World Steel Dynamics". Some of the cutting edge technologies that are being implemented in this industry are thin-slab casting.

CHAPTER-6

SUPPLY AND DEMAND OF STEEL IN INDIA
India: Steeling the growth With automobile, capital goods and industrial productions receiving a setback in recent months due to global downturn, Indian steel industry is hard-pressed to sustain its growth. In fact, in March 2009, India was the only country which registered a positive growth in steel production while major economies like the US, Japan, Europe and even China went southward - with negative growth. More than survival, Indian steel industry is bracing up to meet new challenges in the wake of lower domestic demands and fall in global need for steel and iron ore. It was these pressing issues which saw India's top-notch steel manufacturers converge during a day-long conference organised by FICCI here on Wednesday. The conference titled "Indian Steel Industry: The Way Forward" not only discussed various contemporary issues but also deliberated on technical subjects like outlook and prospects for Indian steel industry, increasing domestic demand/consumption for steel through innovative practices and new applications and technological innovation and environmental issues. While speaking on the inaugural function, Harsh Pati Singhania, President, FICCI said since July 2008 when Indian steel manufacturers met during the steel conclave, the situation has taken a U-turn. He said the global trade is expected to decline by 9% in the current year, posing fresh challenges to the Indian steel industry. Singhania said steel production registered a massive fall in developed countries. The US registered a decline of 54%, Japan 45% and Europe 40%. India and China were the only exception and did well during post-October recession phase. Singhania said India has one of the lowest per capital consumption of steel which was a meagre 44 kg. "Keeping global standard in mind, India should strive towards increasing its per capita consumption at least five times than the present one,” he said. To turn the global recessionary trend in India's favour, Singhania said India should invest heavily in infrastructure and construction so that once the recession is over; India could capitalise on its augmented resources. "We will emerge stronger and more resilient once we execute our priority in proper order," he said.

104

Rana Som, Chairman & Managing Director, NMDC, while giving a global perspective to India's steel industry and tracing the volatility in global steel prices said the only silver lining for Indian manufacturers was its low input cost. "The profitability of Indian steel industry is in doubt. However, what India could do is retain, modify and integrate its production mechanism," he said. Expressing concern over the future of iron ore industry he said many iron ore mines may be shut down as a result of excess supply and low domestic demand. As coking coal was limited and short in supply, Som said the premier organisations like SAIL, NMDC, Coal India have together to bid for coking coal and superior ore mines overseas. "While the demand of steel fell by 11% globally last year, India registered a growth of 5%. In fact, India's steel industry should look inward for its growth as global market would be protective in times to come. If required, India should also resort to protectionism in its self interests," Som said. While attracting audience's attention towards steel distribution channel in domestic market, SK Roongta, Chairman, Steel Authority of India, said that the crisis of 19992003 taught valuable lessons to India. "At that time, we were more price-centric and did little for new technology, modernisation, and expansion which were taken up later. Today, Indian steel is globally competitive," Roongta said. While operating cost of Indian steel manufacturing was lowest in the world, Roongta said it also suffers from disadvantages like lack of latest technology, low manpower productivity, absence of collaborative and competitive approach, demand creation and distribution channel problems. Calling the current situation neither a gloom nor euphoria, Roongta advised Indian firms to look for new coking coal sources overseas when the price and valuation is low. Giving insight into the problem of sustainability post-October phase, Pramod Kumar Rastogi, Secretary, Ministry of Steel, said that 2009 was an exciting year in term of volatility in steel prices. He said that the scenario was not as gloomy as being projected. "In fact, some of the Indian companies have registered 45% growth in March 2009 against the same period during the last year. Talking about the impact of steel prices on consumer durables, capital goods, metal products, machinery and equipment, Rastogi said govt had Indian industry's interest in mind when it restored 5% import duty on steel and re-imposed CVD on bars and rods structure. Expressing concern over mining lease policy and difficulty in getting mining lease, Rastogi said the process needs to be streamlined to facilitate the growth of steel industries in India. With automobile, capital goods and industrial productions receiving a setback in recent months due to global downturn, Indian steel industry is hard-pressed to sustain its growth. In fact, in March 2009, India was the only country which registered a positive growth in steel production while major economies like the US, Japan, Europe and even China went southward - with negative growth. More than survival, Indian steel industry is bracing up to meet new challenges in the wake of lower domestic demands and fall in global need for steel and iron ore. It was
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these pressing issues which saw India's top-notch steel manufacturers converge during a day-long conference organised by FICCI here on Wednesday. The conference titled "Indian Steel Industry: The Way Forward" not only discussed various contemporary issues but also deliberated on technical subjects like outlook and prospects for Indian steel industry, increasing domestic demand/consumption for steel through innovative practices and new applications and technological innovation and environmental issues. While speaking on the inaugural function, Harsh Pati Singhania, President, FICCI said since July 2008 when Indian steel manufacturers met during the steel conclave, the situation has taken a U-turn. He said the global trade is expected to decline by 9% in the current year, posing fresh challenges to the Indian steel industry. Singhania said steel production registered a massive fall in developed countries. The US registered a decline of 54%, Japan 45% and Europe 40%. India and China were the only exception and did well during post-October recession phase. Singhania said India has one of the lowest per capital consumption of steel which was a meagre 44 kg. "Keeping global standard in mind, India should strive towards increasing its per capita consumption at least five times than the present one,” he said. To turn the global recessionary trend in India's favour, Singhania said India should invest heavily in infrastructure and construction so that once the recession is over; India could capitalise on its augmented resources. "We will emerge stronger and more resilient once we execute our priority in proper order," he said. Rana Som, Chairman & Managing Director, NMDC, while giving a global perspective to India's steel industry and tracing the volatility in global steel prices said the only silver lining for Indian manufacturers was its low input cost. "The profitability of Indian steel industry is in doubt. However, what India could do is retain, modify and integrate its production mechanism," he said. Expressing concern over the future of iron ore industry he said many iron ore mines may be shut down as a result of excess supply and low domestic demand. As coking coal was limited and short in supply, Som said the premier organisations like SAIL, NMDC, Coal India have together to bid for coking coal and superior ore mines overseas. "While the demand of steel fell by 11% globally last year, India registered a growth of 5%. In fact, India's steel industry should look inward for its growth as global market would be protective in times to come. If required, India should also resort to protectionism in its self interests," Som said. While attracting audience's attention towards steel distribution channel in domestic market, SK Roongta, Chairman, Steel Authority of India, said that the crisis of 19992003 taught valuable lessons to India. "At that time, we were more price-centric and did little for new technology, modernisation, and expansion which were taken up later. Today, Indian steel is globally competitive," Roongta said. While operating cost of Indian steel manufacturing was lowest in the world, Roongta said it also suffers from disadvantages like lack of latest technology, low manpower productivity, absence of collaborative and competitive approach, demand creation and
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He said that the scenario was not as gloomy as being projected. capital goods. "In fact. Ministry of Steel. World crude steel production has almost doubled during the last 15 years. As a matter of fact. have an important effect on this industry. said that 2009 was an exciting year in term of volatility in steel prices. Roongta advised Indian firms to look for new coking coal sources overseas when the price and valuation is low. World crude steel production 107 . But Iran's producers experienced almost no rise in their production factor prices especially key factors of energy and iron ore prices. Calling the current situation neither a gloom nor euphoria. steel has experienced a worldwide boom. In the end. As a consequence of globalization and the associated catching-up processes in emerging market economies. energy prices. especially oil and natural gas prices. Giving insight into the problem of sustainability post-October phase.distribution channel problems. Secretary. 1. Steel making is an energy intensive industry and for this reason. some of the Indian companies have registered 45% growth in March 2009 against the same period during the last year. Introduction Steel is a fundamental material for many industries. no material is as central to economic growth processes and industrial development as steel. the sharp rise of crude oil as well as iron ore price caused the sharp rise of steel price because of the rise in prices of key production factors. machinery and equipment. In 2008. inexpensive energy and iron ore are competitive advantages of steel makers in Iran because the huge natural resources of the country let the government to provide inexpensive production factors for the industry. Rastogi said the process needs to be streamlined to facilitate the growth of steel industries in India. Talking about the impact of steel prices on consumer durables. metal products. With an exception of crude oil. Expressing concern over mining lease policy and difficulty in getting mining lease. Rastogi said govt had Indian industry's interest in mind when it restored 5% import duty on steel and re-imposed CVD on bars and rods structure. But these inexpensive factors have some side effects that one of them is on the stock price of steel makers in stock market. we will offer some policies to mitigate the fluctuations of stock prices. from automotive to household industries. Pramod Kumar Rastogi. In this paper we are to model the effects of fluctuations in world steel price on stock price of one of Iranian steel producers.

in the next section we will describe the conditions of Iran s steel industry. The price of steel billet as an important intermediate product has risen in recent years. this method is able to process on wide range of iron ore types. Production processes can be divided into two categories: Coal (coke) based processes (Blast Furnace) Gas based processes (Direct Reduction) In addition to energy consumption.reached more than 1. an increase of almost 7% over 2006. Table 2 shows a brief comparison between the two processes. The Fig. So it is more flexible.1 Steelmaking Methods Steelmaking is a process which needs huge amounts of energy. The company. 1 shows the monthly average price of billet from 2006 to the end of 2008. 108 . Table 2: Comparison of two methods of steel making Coke-based processes Gas-based processes Iron Ore Specification In some cases. although the prices doubled in the first six months of 2008. the prices fell down sharply. This increase is largely due to growth in China. This is the most important element and the basic difference of various methods of steelmaking. 1. This country experienced a growth of 19% in the year before namely 2006. these two methods differ from each other in some other aspects such as iron ore. This sharp rise and drastic fall were the result of a similar rise and fall in the oil market. Just limited to Direct Reduced Iron (DRI) Semi-Finished Products Is called Pig iron Is called Sponge iron Environmental Aspects More polluting than gas-based Process Less polluting Investment costs No difference No difference Operation costs Coal is important Natural Gas is important With this brief description of the steel market and different steel making methods.2 Iran's Steel Industry The foundation of the first steel-making company in Iran was laid after signing a contract with the USSR in 1965 to finance and erect a steel plant in Isfahan. the price doubled in just 6 months and suddenly decreased by 70% just in 3 months. As it is shown in this figure. in the middle of 2008 due to the financial crisis. Actually the year 2008 was the most turbulent year in the steel market. environmental and investment issues. whose production grew by 16% in 2007. Table 1 shows the world crude steel production from 1997 to 2007. 1.344 million tons in 2007. semi-finished products.

called Zob-e-Ahan. after a few years of operation. the most important disadvantage of these natural resources is the inefficient and energy consuming industries that are not able to compete with their global competitors even with subsidized energy. Problem Definition Iran is among the countries rich in natural resources especially crude oil and natural gas. According to this table. Table 3 shows Iran's Production. Actually the oil revenue was about 80% of the total revenue of Iran's government in 2008. And finally. For example. 109 . most of the electricity is produced in steam boilers. the easy income reduced the innovation and other intellectual productions of the country. These inexpensive natural resources are the roots of a problem that this paper is aimed to model. These rich natural resources have brought both advantages and disadvantages for Iran. 2. That easy billion dollar income has also created lots of local party conflicts over the control and consumption of it. using inefficient combined-cycle gas-turbine technology. [6] As described earlier in the steel industry section. government decided to give steel plants subsidized production factors that three key subsidized factors are natural gas. in electricity production sector. the huge available resources of natural gas. it s obvious that there is a surplus of demand in the steel market which forces the importation of steel. These problems. This change caused Iran to become the third country in the world that produces steel with DRI1 technology after Mexico and Venezuela. and even political power in the region and the world. To support domestic industries. However. most of Iran s steel making plants are based on gas technology or DRI technology that uses huge amount of natural gas and electricity as energy factors. On the other hand. Since 1990s. developing energy consuming industries with high profit margin due to availability of inexpensive production factors. Iran has the third largest oil reserves and also has the second largest natural gas reserves in the world after Russia. the expansion of steel industry in Iran has changed the technology route to make the best use of locally available iron ore and natural gas. The most important advantages are easy billion dollar income from selling oil and other natural resources. was based on coal process and blast furnace. Zob-e-ahan was facing some problems such as shortage of scrap and quality coking coal. and the required raw materials forced the government to convert its steelmaking technology to direct reduction technology. Export and Import of crude steel.

But another policy was executed two years ago. "Mass privatization of Government-Owned Companies". In addition. the government decided to change its policy and liberated steel price.4 and Fig. we consider the effects of price fluctuations in world steel market in the last year on Khuzestan Steel Company (KSC) stock price which is a domestic producer of crude steel in Iran. 5. Khoozestal Steel Company (KSC). the steel price in Iran was sometimes less than half of its world price. it was considered that this profit will return to the government treasury. We selected that company for three main reasons: 1. Another source of problem of subsidized production factors in Iran is the fixed price policy over a year. with the CFR price of Billet in Bandar-abbas port in south of Iran. Fig. the domestic prices of that product and related products will rise too. With the entrance of steel companies to the Iranian National Stock Market. 2 shows the monthly average price of billet sold by one of Iranian steel makers. For example in some cases the black market price was twice the government price. electricity and iron ore are set for one year and nothing can change those prices during that year. From three years ago. Government intervention in pricing caused many problems and created a black market. With this description of steel market in Iran. These companies used subsidized inputs but sold their products in free market and their profit directly was divided among private share holders. Fig. it would support domestic industries by providing subsidized production factors. but it is sold in Iranian Metal Exchange with free market mechanism in which the price follows the world price of steel plus tariff and other costs. gasoline.It is one of companies that were privatized two years ago as a step in mass privatization program in Iran. [7] Therefore. everything changed. steel is made with subsidized production factors. 2: Billet price: CFR of Bandar-Abbas as Importation Price and KSC Sell Price Source: AGAHAN Company Investment Department When the companies were government-owned. 3. Hence. in Iran the price of many important factors like oil. electricity and iron ore (main production factors of steel making) are shown Fig. Fig. all steel plants were government-owned so the steel making companies had no control over pricing their final product. which resulted in corruption in the market.electricity and iron ore. Until two years ago. even if the global prices doubled or tripled! The mentioned policies in natural gas. Although it is obvious in many countries that when the global price of a product rises. So its stock price and its financial statements are publicly 110 .

It needs some time for people to know the attractiveness of the market to invest in. Another important factor in this loop is the number of shares which influence the earning. Other steel making companies in Iran 3. 3. Decreasing of attractiveness will decrease the perceived attraction and demand for stock as well. In this sector. namely crude steel that is suitable for our purpose because these products are to some extent standard products. In this loop rising of stock price will increase the P/E ratio. two main loops in a tight relation result in response of stock market. bloom and slab.Its production factors are entirely subsidized although the company is privatized and sells its products in free market with global price.1. 8 shows both loops.available. stock market sector and steel pricing sector. Higher perceived attraction result in increasing of demand for stock and higher demand leads to higher stock price. In the model. Dynamic Model Description The model is established in two main sectors.The main products of the company are billet. demonstrates the change of attractiveness of investment in the stock market and so its demand due to the stock price. Fig. 9] The first loop. higher stock price leads to higher capital gain and total return on stock. This perceived attraction comes from the delay between the rise in capital gain and people awareness of this rise. Fig. This indicator is very significant to investors. Based on the literature review mentioned in the previous parts. [8. In the figure. Stock market sector Dynamics of stock market is well described in the literature. This loop is shown in Fig. 7: Stock Market Attractiveness loop There is another loop which limits the rise of stock price as a balancing loop. Hence. 111 . As shown in the figure. Therefore the balancing loop is shaped. By going far from the normal P/E ratio. dynamics which run these two sectors are discussed here. we can track the world price easily. It means that perceived attraction does not change as soon as capital gain increased. 7. which shows a combination of profit as well as the risks behind their investment. Therefore the loop which is a reinforcing one is formed. These two sectors by interaction with each other create the behavior of the stock price as a focus of attention in this paper. This balancing loop comes from a very important factor which is P/E ratio (Profit/Earning ratio). the dynamics of stock market contains two major loops which interact with each other to balance the stock price. attractiveness of the stock market will be affected and will decrease. Increasing of capital gain makes the stock market more attractive for investment so the total attractiveness of the stock market will increase. Earning is the point of relation between two sectors. 3. After a while this attractiveness become known by people so perceived attraction will increase. 2.

3. Division of the demand between these two groups is assumed to be proportional to the world price and domestic price. On the other hand. Therefore. Domestic steel price rates (increasing rate and decreasing rate) are both strongly affected by the world price. Steel pricing sector In this sector the dynamics of pricing the steel in the country according to the domestic costs and world price and its effect on the earning are modeled. Earning is the parameter which join two sectors. If the current domestic steel price is lower than world price. Besides. Demand fulfilled by the domestic products and Number of shares then form the earning which is a critical factor in PE ratio. Regarding the experts in steel field. the decreasing rate will work to adjust the domestic price with the world price. Therefore the parameter Delay1 is one third of Delay 2 . Furthermore. it is assumed that all the domestic production is used. the domestic price will increase sooner but by a decrease in world price. domestic price will decrease with a considerable delay. there is a time delay for this adjustment during increasing time as well as decreasing time. It means that the minimum domestic price will be equal to the domestic cost regardless of the world price because government uses tarrifs to support the domestic producers. Pricing strategy is based on the adjustment of the domestic steel price with the world s steel price. The pricing sector causal relation is shown in Fig. It means that by an increase in the world price. Total domestic demand for steel is assumed to be constant. the time delay for increasing rate is less than that of decreasing rate. 112 . 9. then the domestic price will increase to adjust itself with the world price so the increasing rate of the domestic price will change according to the discrepancy between them. Another point in this part is that the domestic price will never become less than the domestic cost. Second concept in this sector is the effect of the domestic price on the demands fulfilled by imported products and on the other hand by domestic products. even if it is more expensive than the world one because of the surplus demand of Iran's market and also the delay of providing the import steel. if the domestic price is higher.2. In this sector Pricing strategy of the domestic steel is one of the most important points to change the behavior of the model as well as the policies which are going to be discussed further.

Number of shares and Domestic cost . There are some points about the stock and flow model which is mentioned here. As mentioned above two Time delays affecting the rates of Domestic steel price are different due to the perception of people in increasing or decreasing the steel price. As this proportion approaches one the function will be zero which means that there will be no rate change. Stock supply and total demand for stock in this section have constant values over time. Domestic cost and Number of shares are assumed to be constant. As this proportion go below zero the price will increase by a negative rate. the stock price will change in accordance with the demand for it and the constant supply of the stock in the stock market. It models the pricing strategy which leads to the demands fulfilled by domestic products as well as the demands fulfilled by imported products. When this proportional value approach a maximum value the Attractiveness will be zero. It is modeled as the time delay in decreasing rate is three times more than the delay time in increasing rate and this happens because of hope that the decline in current domestic steel price will not last for a long time.4. Therefore. In constructing the model there are some assumptions worthy of notice. There are two sectors and the sectors are joined by the Earning parameter. In this sector. Another function in this sector is F3 which describes the Stock price change as a function of proportional value of Stock supply to Demand for stock . This function is an increasing function which shows that Attractiveness is positively influenced by the changes in Capital Gain and will change in the same direction. There are two functions acting on the Attractiveness . 10. Domestic Steel Price Demand fullfilled by domestic products 113 . F1 shows the Attractiveness as a function of Capital Gain . F2 describes Attractiveness as a function of P/E ratio to Normal P/E ratio . Parameter Earning is gained by the Demand fulfilled by the domestic products . These demands then form the earning. Pricing sector can be seen in the left part of the model. Stock price market which shows the dynamic of the stock market is based on the two positive and negative loops. Simulation Model The model based on the two causal loops mentioned in the previous part is shown in Fig. This function starts from a maximum value which is for the P/E ratio equal to zero and then decline by increasing the proportional P/E ratio.

we can observe the normal oscillation in the steel stock market. (2) There is an increase in the price of production factors which results in an increase in the world price of steel. there will be a dreadful situation for domestic producer. Regarding the constructed model. This phenomenon hasn't taken place yet. As the blue diagram shows. which demonstrates the economical expansion in the stock market. The first sector is the stock market and the second sector is a description of how producers price their products. Finally. 12 were obtained. In this section we will compare the results of these scenarios. In Fig. which results in the constant production cost during these years. but it's possible due to the rapid change of technology and efforts in cost reduction 114 . We have three different scenarios: (1) There is no change in the steel world price. We can conclude that in this case. As you can see in the graph. but the price of these inputs are under the control of government through some subsidizing programs during these years in Iran. the results in Fig. but the level of steel price reduction is to the extent which is lower than the domestic production cost. this model consists of two sectors. 12. 11. This is the third scenario and the result is shown in green curve. the change in the world price under each of these circumstances is shown: Based on our simulations for each of these scenarios.Demand fullfilled by imported products World Price Earning Number of Shares Domestic Cost PE Ratio Figure 10: Complete simulation model 5. Simulation and Results As described. we want to examine the effects of such fluctuations on the stock price and its situation. if the level of reduction is lower than the domestic cost of products. and the steel price increases. (4) In this scenario there is also a fluctuation in steel price. (3) There is a fluctuation in the steel world price which generates an increase in the price of production factors and afterward a decrease in the factor prices. because of severe competition between domestic products and foreign ones. the stock price oscillates as depicted in the red graph of Fig. there will be a reduction in the price. when the price of domestic steel price and world stock price are equal. When there is a crisis in the market of production factors. in this case a recession will occur in the stock market. the oscillation takes place with the same frequency but the amplitude of the oscillation increases. The main concern here is that the world price of the steel fluctuates based on the price of production factors such as gas and iron ore. We should consider that always after an increase in the price of production factors.

Iranian steel makers experience a sharp rise in their profit and consequently in their stock price. when the global price falls. In this scenario domestic producers will move toward bankruptcy. 6. one of the main reasons that the change in production factor prices especially in the price of energy factor intensely influences the stock price is the subsidizing policies of government on the price of energy factors for domestic producers. 7. In the next section. The result of this policy compared to the other scenarios is shown in Fig. They experience a drastic fall. we will examine the effect of the removing subside from production factors. As demonstrated in this graph. It's a controversial issue in the guild of domestic steel producers about the effects of removing governmental subsidizing programs on the domestic steel stock market and domestic steel market. The reason of such a direct effect is a result of the pricing strategy of domestic producers. Conclusion Price fluctuation of the world steel causes some effects on Iranian steel-maker stock price. We assume that the domestic cost of production will change according to the price chance of production factors. It seems that this policy will be effective in mitigating the mentioned effect. It means that an increase or reduction of production factor prices will directly affect the price of domestic productions.worldwide. 13. In this paper we modeled the phenomenon and after that we tried to offer some policies to mitigate the global fluctuation effects on stock price of steel-makers in Iran. we will propose some policies for mitigating the effects of the world price of production factors on the stock market. 115 . In this section. The effects of such a change in world price on the stock price can be seen in the gray graph. this policy will make the amplitude of the stock market oscillation insensitive to the price change of production factors. mainly based on the non-subsidy factors for domestic producers. Policies As mentioned. due to subsidized production factors. but there is a concern of how this price liberation should be done so that the social and political side effects of such a change will remain at the minimum level. It seems that the change in steel world price due to the fluctuation in the price of production factors has a direct effect on the domestic stock price. When the global price rises.

and the Never-ending Conflict Between Efficiency and Fairness in Markets.” Odlyzko writes.. no year is a surprise. There are precedents for telecom companies to ask for ability to charge special fees to companies like Google that might be deriving large profits from the use of the infrastructure. it is hard to come up with an economic justification for them doing so. for steel watchers. 2005 closed with an overall downward correction 116 . consumers tend to hate it in large part because they are always left with the feeling that someone is getting a better deal than they are. It recasts the net neutrality debate largely as an argument over what economists call price discrimination.)” The paper. WITH the given cyclic nature of the world steel market and the tendency of steel prices to touch peaks and bottoms at will. just as government intervention was welcomed in the end by the railroads.CHAPTER-7 PRICE DISCRIMINATION AND ITS IMPACT Net Neutrality and Price Discrimination In the latest of a series of looks at the economics of the Internet. "Network Neutrality. director of the Digital Technology Center at the University of Minnesota. The New Year 2006 too comes on the heels of a mixed 2005. “The question is. is inevitable. he believes.” In the end. In large part. Odlyzko's bottom-line conclusion. a difference in prices that reflects a buyer's willingness or ability to pay rather than differences in the cost of providing a good or service. based on an analysis of rates of return and the cost of capital. Search Neutrality. Starting off with a historically high price line. do they need it? And there is no evidence that they do. (And at some point it may be welcomed by the players. takes a dispassionate look at the dispute and concludes that while carriers certainly have a strong interest in charging premium prices. to set the rules. mathematician Andrew Odlyzko. some form of net neutrality regulation is likely: “The general conclusion is that some form of government intervention. Sellers generally like price discrimination because it leads to higher profit margins. in real terms. is that the operators of the Internet backbone don’t need to charge premium rates for the transmission of high-quality media." is non-technical and well worth reading. that's because the ungraded networks required will actually cost less than the book value of the systems they are replacing.

the country driving world steel demand.34 mt of steel (including billets).5 per cent expected for the current year. fell 32 per cent to $393 by end-2005. which was ruling at a high of $582 per tonne at the beginning of the year. The continued increase in output in China has changed the demand-supply equation in the global and Chinese steel industries. although slightly less than the 3. The party on the demand side gets even better as the International Iron and Steel Institute (IISI) has projected a growth of 4-5 per cent in steel demand in 2006 against an estimated growth of 3 per cent in 2005.of 30 per cent. the stockists' inventories in the US are at their lowest in more than seven years. The strong growth continues to come from China. for instance. is unlikely to see a sudden slowdown in either its GDP or industrial production. pushing world steel production up by 6. the de-stocking activity has almost reached its end. making it a net exporter. as 2005 came to an end.4 per cent and 16. However. was the `de-stocking' of huge quantities of piled-up inventory lying with the service centres and end-users at the beginning of 2005. a renowned steel journal. and the Hurricane Katrina and the tsunami are likely to further push up the demand for steel in the world. The factor that played the crucial role in deciding the demand and supply mismatch. China. In the Asian markets too.7 million tonnes in the first 11 months of 2005. the Europe export price.3 per cent (IMF estimate). In the European markets. which. the growth in apparent consumption of steel went down from 3.03 mt. This de-stocking of inventories deflected a significant portion of demand and did not let it reach the steel producers in full. or mix-match. The US economy is expected to grow reasonably well at 3.6 per cent experienced by the steel industry.1 per cent per annum respectively. China exported 23. For instance.1 per cent in Q3-05 whereas real consumption growth showed figures of 3.7 per cent in Q1-04 and Q305 respectively. new order bookings started picking up due to the de-stocking activity being over in the US and European markets. The rebuilding activities in the aftermath of the Iraq war. West Asia.1 per cent despite rest of the world registering a fall of 0.7 per cent and 0. Its crude steel output rose 25. signalling the arrival of a period of overall price stability.3 per cent. is in itself a huge growth considering the size of the economy. This happened despite the fact that real consumption remained relatively strong through most of the year. Europe and Japan along with Asia too are showing robust growth.4 per cent in Q1-04 to -6. the strong economic and manufacturing growth of 117 . India and South America. China too played a major role.5 per cent. According to Metal Service Centre Institute. virtually the same rate of growth as last year.9 per cent in production. In the case of India too. virtually driving global steel production. The year 2006 starts on a healthy and vibrant note as the global economy is projected to grow at 4. showing that the decline in apparent demand was not real. This projected rate of growth is well above the historical average annual growth rate of 3. These two major factors put together resulted in downward price pressures in the industry. From being a net importer of steel till 2004. to 317. which are currently growing at a scorching pace of 9. against imports of 23.

brings the global party home for the Indian steel producers. This event has the potential to cause considerable heartburn to the global steel industry. with a lot expected to happen on the capacity addition front in the market. A metallothermic mixture (consisting of the right oxides and reducing metals) is introduced. where a third of the steel producers are currently operating below average cost of production.shortage of electricity and high initial capital requirement. is now ready to be transferred to the industry. Every tonne of steel melted consumes 650 to 750 KW of electrical energy. The exothermic process addresses two of the main problems of the steel foundry industry . Chairman of Casto Castings Bangalore. This translates to Rs 100 lakh savings in capital investment. are offering consultancy in a unique process of steel melting by exothermic reaction. However. rising interest rates and increasing imbalances in the US market have so far not shown any significant downward impact on the strong global growth. Also. In China. the fear of Chinese overproduction entering the international markets is somewhat receding. though the high oil prices. Rajendran. the additional supply is most likely to reach the international market. This along with strong performances being witnessed in various user segments. The exothermic process saves on electricity by bringing down consumption to 1 KW. Therefore. there is a note of caution. In the event of Chinese Government failing to control the addition of capacities and growth in production. The industry is likely to see a normal and healthy year with prices remaining stable. the producers are expected to cut down growth in production. The steel scrap is arranged and pre heated to the required temperature. such as capital goods and automobiles. and refines metal automatically.and long-term outlook for the Indian steel sector remains positive. The medium. On the supplyside too there are healthy signs. giving further stability to prices. as behind every growth spurt. there is one here too. Barring these factors. The enormous quantity of heat that is given off during the resulting chemical reaction (reduction of oxides) is itself enough to melt the steel outside a furnace.8. according to NRDC. eliminates need to maintain sophisticated equipment. The process. the overall near outlook for the global steel industry remains positive in the year 2006. 118 . they still remain high risk factors having the potential to affect global economic growth and thereby global steel demand.1 per cent and 9 per cent respectively during April-September 2005 spell hope for the domestic steel industry. NRDC develops new steel melting process NRDC (National Research Development Corporation) and Mr K. developed by Mr Rajendran after years of research. The Chinese Government's ability to control the molten hot Chinese steel sector and to curtail surging steel capacities still remains a billion dollar question.

Historically. For the steel industry. the growth of an economy is very closely related to the quantity of steel consumed by it. over the previous year 119 . Raw material prices racing ahead While India has iron ore reserves. the global economy had the strongest growth in the last two decades at 5. The apparent steel demand is estimated to have risen by 9. with the top ten steel producers controlling less than 30% of the world's steel output. it brought about a greater balance in the demand-supply equation. domestic companies faced severe shortage of coking coal during the year. China accounted for 27% of global steel demand and 26% of crude steel production in 2004.0% respectively. During the year 2004. metallic scrap and coking coal as well as freight rates during the year. apart from being subjected to cyclical ups and downs of demand and prices has suffered from structural deficiencies of large unutilized capacity and high degree of fragmentation. These structural deficiencies in the steel value chain are unlikely to be resolved in the near future. the global steel industry.9% in the previous year. The recent surge of industrialization in China and its emergence as a growing economic power has transformed the world steel scenario. Consequently there has been a substantial increase in the prices of key raw materials such as iron ore. The dragon boosted 2004 performance In 2004.0% as compared to 3. the industry is still fragmented. Though globally the consolidation in the industry has gathered pace.9% and 7. The Indian scene: The buoyancy in the global steel industry was also reflected in the Indian steel industry. While the more matured economies of the West and Japan have seen little change in their per capita consumption of steel. China's consumption of steel has been growing at over 20% in the last four years and it has become the most dominant factor in the world steel market. the industry cost structure is likely to remain high due to shortage of coking coal and iron ore. The table below indicates the trend in the prices of major finished goods and key inputs of the steel industry during FY05: In the near term. domestic steel production and apparent steel consumption increased by 3. The strong growth in steel demand together with the increased prices of inputs had a major impact on margins of the steel majors off late.GOVT IMPOSING EXPORT RESTRICTION ITS EFFECT ON STEEL PRICE Introduction: Steel is considered to be the backbone of human civilization. As the steel industry has tremendous forward and backward linkages in terms of income and employment generation.6% to 968 million tonnes in the calendar year 2004.

000 MW power generating capacity (almost 90% of the present capacity) over the next seven years. The 23 companies selected were from Asia. Current scenario on pricing front In the last 1-1. as well as global players are rushing to set up shop/increase capacity in the country. The rising demand from user industries coupled with firm prices has been responsible for the outstanding performance of the Indian steel Industry. However prices are still higher than the levels of March. most Indian manufacturers of secondary steel propose to integrate backwards to have greater control over these scarce commodities. consumer durable. Consequently. The major demand drivers for healthy steel demand would be: • Automobile and its ancillary industries have recently emerged as strong demand drivers for steel in India (about 8% of the total consumption in India in FY05).5-7% growth in the economy. infrastructure and engineering have registered a brisk growth rate in CY2004. USA (WSD). The future scenario for Indian steel sector: Going forward Indian economy is expected to grow by 7% and domestic steel demand growth is likely to be around 8% during 2005-06. almost all companies have announced capital expenditure outlays.5 month the domestic steel prices have come under pressure due to a lowering of international steel prices and domestic steel makers have reduced steel prices by 2-8% in the first week of June. • Continued boom in house construction due to the continuation of the benign interest rate regime. 120 . With concerns on availability of inputs. • Huge capital expenditure plans announced by Indian companies. The steel prices also remained firm during the year. Europe and were evaluated on 20 various parameters. India contributed approximately 3% to overall steel demand and is capturing attention as a possible low-cost steel making source because of the strategic advantages that it offers and hence domestic. 2005 as steel prices had been raised by 8-14% in early April. a large proportion of capital outlays are directed towards backward integration projects while others towards moving up the value chain and ramp up existing capacities. The user industries which include automobile. A feather in the cap Tata Steel has been ranked as the best steel company in the world (with POSCO remaining at second place) by World Steel Dynamics Inc.thanks to 6. • Growing focus on building of road infrastructure. On the capex spree: Since the existing capacities of 35mtpa are woefully short of the projected demand. These segments are expected to grow at a pace of 11-12% in the coming three years. the world's leading steel information service provider. • · Government’s plans to add more than 100. following the trend in the international market. The central government has targeted consumption of 60mtpa of steel in India by 2012.

. Also though China has done an upward revision of Yuan by 2.5% in 2005. Steel consumption in China is expected to grow by over 10%.1%. the automobile industry in the coming years. investors are advised to satisfy themselves before making any investments. though currently there is sluggishness in global steel market it should peter out in the next 4-6 months. Conclusion: To conclude. As per SEBI requirements it is stated that. an increase of 36 million tonnes compared to 2004. As a matter of practice. does not bear any responsibility for the authentication of the information contained in the reports and consequently.finished steel products in 2005 will exceed 1 billion tonne for the first time. construction.Kisan Ratilal Choksey Shares & Sec Pvt Ltd. urbanization. KRC Research Reports only provide information updates and analysis. 121 . This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. such slight revaluation is unlikely to do much to slow China's fast-expanding economy. In the long run the steel prices are expected to remain higher than their historic average. as production cuts in the West take shape and as export curbs in China play out.. All opinion for buying and selling are available to investors when they are registered clients of KRC Investment Advisory Services. and/or individuals thereof may have positions in securities referred herein and may make purchases or sale thereof while this report is in circulation. KRC refrains from publishing any individual names with its reports. Further the Indian steel industry is relatively better posed with strong demand from infrastructure. an increase of 28 million tonnes during 2005 and the Steel consumption in Asia Pacific region is expected to grow by 6. While the information contained therein has been obtained from sources believed to be reliable. Kisan Ratilal Choksey Shares & Sec Pvt Ltd. Overall the steel industry has entered a ‘new age of steel’ in its continuing evolution. is not liable for any decisions taken based on the same. Further.

The two also co-authored a book: Managing Radical Change.adjacent to its existing Sicartsa facility located in Lazaro Cardenas. the history of the acquiring company.Ispat International N." he says. In 1991. • He can buy 44 lakh Maruti 800s! • Lakshmi Mittal's $19-billion year! In 1992." This faith created 'the only true global steel company. Starting in Indonesia in 1976. Gita Piramal is managing editor. there is a certain commonality in the pre. the other two being organic growth and strategic alliances. and the specific circumstances of each individual acquisition case. 122 . and Mittal's reputation as a doctor of sick steel mills. if you have chosen this strategy. Mittal acquired a Mexican steel mill. Eventually in January 1995 Mittal acquired Hamburg Stahlwerke. In the early 1980s. largely through an acquisitive strategy. According to Peter F Marcus. But why choose acquisition as a growth strategy? When is this strategy more appropriate? And. the Mexican government decided to build a new steel mill -Sicartsa II -. overall. The Smart Manager.V. (now called Mittal Steel) is Indian in both its spirit and management.incorporated in Holland and headquartered in London [ Images ] -. what are the main do's and don'ts for managing it well? While not quite an Indian company -. some variations depending on the nature of the industry. it is possible to distil some simple lessons about how to manage acquisitive growth. the originator of DRI technology on which almost all LN's plants depend. There are. In less that a decade. The story of Ispat Mexicana (Imexa) Lakshmi Niwas Mittal's (widely referred to as 'LN' both inside and outside the company) faith in DRI (direct reduced iron) technology governed his choice of acquisitions. From this case study. director of Paine Webber: "Lakshmi Mittal [ Images ] championed the practice of mini mills becoming integrated producers through the use of scrap alternatives. How does Mittal transform poor performing steel mills into power-packed profit centers? We bring to you an inside account written by written Gita Piramal and late Prof Sumantra Ghoshal. Acquisitions is one of the three major routes for business expansion.' according to the Financial Times. He believed in its future long before others. and has been named by Forbes magazine as the world's third richest man. he bought mini steel mills using the DRI route in various countries and turned them around. Sumantra Ghoshal was a leading management guru.INDIA’S ADVANTAGE OVER OTHER GLOBAL PLAYERS London-based Ispat International (now Mittal Steel) and its founder Lakshmi Niwas Mittal recently became the world's biggest steel maker.and the postacquisition phases. of course. But. "This has spelt success for so many of my plants. Lakshmi Niwas Mittal has spectacularly expanded the company from a wire rod manufacturer in Indonesia to the largest steel producer in the world. this reputation brought the Mexican government knocking at his door.

The government also abandoned the planned plate mill. excluding contingent environmental liabilities. including PMT. the plant operated well below its capacity of two million tons per year and incurred significant operating losses. electric arc furnaces. and decided to privatize both Sicartsa factories in 1991. The Ispat team was impressed. Three years after opening. the Mexican government invited Ispat to join two other steel companies in bidding for Sicartsa. however. a young workforce with an average age of 27 years. Based on Ispat's reputation for turning around Iscoot. "This eliminates consultants and their ivory tower analyses. the end of the oil boom coincided with a faltering economy which forced Mexico to devalue the peso. a steel mill in Trinidad. "These had to be solid and do-able as the person making the recommendation could easily be called upon to implement it. The government curtailed investment in the planned pelletizer plant. Of the cash component. by the recent vintage of the assets. targets are fixed and LN largely steps out of the picture. casters to roll molten steel into flat slabs and a mill to convert these slabs into plates to produce pipes for the then-booming oil industry. The team recommended bidding for the plant. marketing. management and costs.They invested $2. which managed the deep water port facilities and distributed electricity. • The bid: Ispat proposed acquiring all the Sicartsa II factory's assets and liabilities.2 billion in a state-of-the-art facility. which forced Sicartsa management to source high cost iron pellets on the open market. Mittal also explained that some members of the due diligence team would have an opportunity to remain in Mexico if Ispat acquired the facility. Ispat proposed a total consideration of $220 million. forcing the plant to sell steel slabs -. the first DRI plant in the world using the HyL III technology. There were no merchant bankers. consisting of $25 million in cash and $19 million n in ten year bonds (at 15% interest) issued by the Mexican government and secured by a warrant for 49% of Imexsa (not Ispat) equity." said one manager.an intermediate product -. Mexican government officials publicly blamed the management and employees of the factory for the losses. and developed a turn around plan. producing low quality slabs and manned by a dispirited workforce. which included a pelletizer plant to produce iron pellets from ore. which provided the factory with iron pellets and Sersiin. Before the factory was completed. a producer of welded pipes. Pena Colorada. Ispat also bid for 50% equity stakes in several of the businesses that supported the Sicartsa II plant. It took eight months to sew up the contract.rather than finished steel plates. $5 million was a loan from Trinidad and $20mn came from LN's personal resources. however. running at 20% of capacity. The team was divided into sub-units to look at specific are as such as finance. Each team had to make specific recommendations. and the supporting infrastructure." Each team's report provided a valuable check on the other's to eliminate biases and oversight. The pre-acquisition negotiation process • The team: Mittal sent a due diligence team consisting of twenty managers representing all line and staff functions chosen from Ispat's Trinidad and Indonesian plants and instructed them to develop plans to turn around the plant. The team's due diligence revealed a factory plagued by technical problems. After this process. 123 .

"Our focus is slabs and we didn't need the plate mill.' We expressed concern that we might not find a market for the additional slabs. we presented two alternative production plans. including a contract for 400. Impressed by the business plan.and ultimately hired an additional 270 employees. Ispat's proposal also included a clause capping the number of employees it would lay off at 100 of the 1.and another plan for 1. We sat down with each of the departments to understand their problems and viewpoints and gave our input based on international experience and our due diligence. Mr Mittal saw both and said. and included a commitment to invest an additional $350mn. Ten members of the due diligence team remained in Mexico to run various departments. The post-acquisition integration process • Stopping the bleeding: Ispat took control of Imexsa on January 1st 1992 in the midst of a global recession in the steel industry. and Sittard instituted a daily meeting of the heads of each department in the plant.050 workers. but Mr Mittal said. The next step was to quickly develop cost-consciousness and discipline among the Imexsa management team. which began after the day shift ended at 5:00 p. Although these orders provided low margins. one for 600. Production Planning Manager Oscar Vasquez recalled his first meeting with Mittal: "In our first meeting.much of this went towards upgrading facilities. but on international standards. Imexsa's executive director told Business India. Jai K Saraf.2 million tons.was shipped to a Korean company. The plate mill which had been lying abandoned -. If the management of the acquired company is willing to commit to these targets. . The deal brought in $135 million -. the Mexican government selected Ispat's bid. who served as the managing director of Imexsa from 1991 to 1993. with a $50mn penalty if the company failed to follow through on its promised capital spending.thirty fewer than the agreed-upon limit -. they stay. and generally ran until 9:00 or 10:00 at night. just let me know what you need to implement the second plan." RR Mehta. Imexsa also reduced costs by switching to suppliers willing to match the lowest costs provided at Ispat's Trinidad and Indonesia plants. If they have any problems following our business plan and vision.m." he added." Mittal used Ispat Indo's sales network to identify Asian customers for Imexsa's slabs. including Dr Johannes Sittard the former head of Iscoot. 'You will have the volume because I'm going to take care of that for you'.still packed in crates -.000 tons -. 'forget the small plan.it was conservative and based on our past experience -. The $220 million consideration which Ispat had committed to more than halved almost instantly. Despite the shut-down. .000 tons per year with a Taiwanese steel manufacturer. and had to briefly shut down the furnaces because there were no orders for the steel and no place to store the finished slabs. we sat down with management of the acquired company to discuss various options for improvement and we developed the business plan." "Together we set very aggressive targets because we don't benchmark companies based on local standards. 124 . they go. they allowed Imexsa to increase capacity utilization while improving quality to win more profitable business. Imexsa laid off only seventy people -. Ispat International's finance director. The Imexsa managers stayed. Mittal recalled his first steps at Imexsa: "In Mexico we did what we do with every business .Ispat's bid outlined the company's five-year plan for improving Sicartsa's operations.

One of the first things the new management team did was to implement Ispat's daily reporting system which provided overall figures for each day's operations by the next morning. And Nucor founder Kenneth Iverson acknowledged. 'At Imexsa. From 1992 to 1998 Imexsa increased annual steel shipments from 929. Imexsa's accountants collected these data themselves every day. They control costs very very closely. we keep resetting the targets. . and agreed on detailed targets by department for the following day. "There is no feeling of having finished the turnaround .the first year under Ispat ownership -. The idea was to take a decision then and there rather than refer to committees.000 tons. To monitor raw material usage. Antonio Gonzales." Imexsa's existing cost accounting system reported only aggregate production costs on a monthly basis. it was easy to get Dr Sittard's approval and any resources you needed to make it happen.97 man-hours per ton." In 1992 -. melt shop director. the boss just told us how we should do things. ." 125 ." "And Dr Sittard was always asking for higher targets -.000 tons to over 3mn tons. discussed the current day's results. Initially. You got together all of the people involved to talk through any issues. cost. and the entire team monitored how you did against the promised target.that's double our rated capacity.Imexsa increased shipments from 528. while Credit Suisse First Boston reported. purchase director. "Ispat comes in and runs the operations very well. volume.' Imexsa could land a slab in the middle of American at $35 a ton below Nucor's cash cost of production of $210 a ton. described the purpose of the daily meeting: "The idea of the daily meeting was to cut red tape. kudos flowed back. and now we are aiming for 4 million tons per year -. recalled his first impressions of the meetings: "Before Ispat bought the plant. But you had to commit to improvements -. and analysed it by hand. and improved productivity from 2. and as a means of coordinating and resolving day to day problems. Ispat makes Nucor's cost position look almost amateurish. productivity and quality performance. the accountants asked warehouse workers to track the volume of materials leaving the storeroom each day. As the discipline steeped in. and was first available three weeks after the previous month ended.how much you were going to achieve and by when. quality and productivity data for each step in the production process on a daily basis. but the daily meetings were nothing like that. but once we agreed on the right thing to do.000 tons to 929.The team evaluated the previous day's cost. for example.62 to 0. the Pelletizing Plant Supervisor observed. decreased the cash cost per ton produced from $253 to $178. for instance." Raul Torres.he always kept the pressure on us to increase volume and quality and cut costs. Led by Saraf. and earned a small profit." "If we were consuming too much steel in the electric arc furnaces. Imexsa's accounting department began collecting detailed volume. A JP Morgan report hailed Imexsa as the lowest-cost slab producer in the world. Om Mandhana. Dr Sittard would ask: 'Why are you consuming this amount of steel? Is there leakage? Why do you have this amount of leakage? Are you losing steel in the slag? How do you plan to improve this? Is that the cheapest way in the world? Who does this best in the world? Can we adopt their technology?'" "We had open and sometimes heated discussions. Dr Sittard asked a lot of detailed technical questions to force us to think through problems to their root causes.

continued to play a pivotal role at Imexsa. A typical meeting (in March 1998) was attended by representatives from each of the departments. Imexsa's quality efforts won numerous international awards and earned it the British Standards Institute's prestigious Company Wide Recognition. The participants frequently referred to the daily report which provided detailed data on cost. Despite Imexsa's success. volume and quality for each of the departments. one of only two steel companies in the world so honoured (Iscoot was the other). the steel industry as a whole and also identified and studied related processes at global leaders such as Ericsson and General Electric. Imexsa enhanced its product mix from 97% low grade steel sold into construction applications in 1992 to 47% of slabs sold for demanding automotive and coated plate applications in 1997. the seventh largest steel company in the world. MRR Nair joined Imexsa as managing director from the Steel Authority of India. Imexsa would only work with customers and technology suppliers who agreed to openly share information on new technological developments and applications. but they are not as useful in accelerating continuous improvement. for example. On several occasions during the meeting. such as ISO methods. productivity. and probing why targets were not higher. Daily meeting and daily report: The daily meeting. Nair cited four mechanisms for maintaining constant improvement at Imexsa -. and in turn agreed to open their plants for benchmarking. Nair guided the meeting with a series of questions. daily meetings and reports. to describe existing processes. quality team members looked at best practices within the Ispat network. • 01." In benchmarking operating processes. global integration and stretch goals. Imexsa's quality initiatives helped the company upgrade its products to serve more demanding customers. Quality programmes: In 1998. such as increasing one of the DRI facility's production nearly 50% above its rated capacity. Imexsa used standard quality tools. quality programmes.e. When Imexsa management wanted to improve cafeteria service during the busy lunch hour. More importantly. where he had served as chairman and CEO and had been awarded the Best CEO in India award.i. Nair left the room for extended periods on two occasions during the meeting. inquiring about the results of previous experiments to improve performance. Mendoza was not worried that Imexsa would surrender competitive advantage by allowing other companies to benchmark the plant: 126 . most of whom wore the khaki Imexsa uniform. participants jokingly asked whether their targets were ambitious enough to earn a jacket. but the discussion continued with the members of the different departments discussing targets and experiments among themselves. Quality Director Rafael Mendoza wanted more: "Traditional quality programmes such as ISO 9000 provide excellent statistical tools for documenting your current processes. Top 10s and internal agreements.In 1997. For this we introduced benchmarking. • 02. a quality team studied the restaurant in a busy soccer stadium renowned for serving large quantities of excellent food quickly during half time. asking what level of performance was budgeted for the following month. now held each morning for one or two hours. A few of the managers however wore red Imexsa jackets awarded to recognize achievement of ambitious goals.

I probably exchange at least one email every week with them. Prior to the meeting. for instance. provided that they were notified at least one week in advance of the scheduled downtime. The head of the department receiving a service would meet once a year with each internal supplier to articulate their key requirements and agree on targets and concrete measures of service delivery. I don't have to wait until the next KIP meeting. In 1996 Imexsa initiated a systematic program for making internal service agreements between Imexsa's departments and monitoring service delivery levels against these agreements. where the agenda would be set and then distributed to each of the participants in advance. Knowledge integration programme: The Knowledge Integration Program (KIP) was an Ispat corporate initiative designed by Mittal to "keep stirring the whole organisation. develop an action plan and monitor progress against agreed process milestones." In the Top 10 programme. Before agreeing to target service levels. quantified each project's financial impact (in US dollars per year). discuss common technical problems. the participants would review their performance against targets. who would sign off on the performance evaluation. each department identified projects to either cut costs or improve quality. the Top 10 programme introduced a consistent discipline in translating proposed projects into financial results and allowed each department to prioritize its own projects for improvement. with the remainder fulfilling less than 95%. In 1998 Imexsa had 140 internal service agreements across 28 production and service departments and sub-departments in the plant. During the meeting. In Mendoza's view. The head of the department providing the service was responsible for monitoring performance on a daily basis and reporting to the head of the internal customer on a monthly basis. The participants also communicated between KIP meetings. including major accomplishments and disappointments. I can make a phone call or send an email to Canada [ Images ] or Trinidad. 70% of the agreements fulfilled 100% of the requirements. the failure would be elevated for discussion in the daily meeting. but this had occurred only once in the programme's first two years."In the steel industry these days. • 03. update each other on developments in their plant and commit to future targets. 11% of the agreements met between 95% and 99%. Each project was assigned to a project owner charged with selecting a multidisciplinary team to quantify the benefits of the project. These KIP meetings lasted two to four days. If a service provider repeatedly failed to meet goals. and rank ordered the projects from one to ten based on their bottomline impact. all companies have access to good ideas through customers. as Torres described: "If I have a question. the department heads would send their suggestions for discussion topics to Ispat group headquarters in London." 127 . suppliers and consultants. a service provider could request any prerequisites necessary to guarantee delivery. The difference is who can implement them successfully." A few representatives from each operating and staff function (twelve in total) at each Ispat plant would meet twice each year. and rotated among the plants in the Ispat network. These internal agreements yielded significant improvements in operations. The maintenance department might agree to provide preventive maintenance on time.

it was not a laissez fair. then the best steel plant in Mexico." 128 . but now I ask 'why can't we be the best steel plant in the world?' We always wanted to be the best. "Senior managers should ask the departments what they plan to do. but its not forced on me by management. As Raul Torres described: "I feel the need to constantly improve performance every day. why can't you do it again? They can achieve the level at another factory. I'm not fighting against somebody else's budgets -. however. while the targets were very demanding.I agreed to the goal. what prevents you from doing the same? What can we do to help you achieve more?" At the end of such discussions. and presented their plan for achieving these goals. they were owned by the departments instead of being perceived as coerced from above. The process was based on a firm philosophy of Ispat." "At first.• 04. I wanted Imexsa to be the best steel plant in Lazaro Cardenas. Nair and his team asked a lot of questions on the plans that were presented. rather than telling them what to do. "You achieved this level last year. Stretch goals: Each department in Imexsa committed to annual targets for production volume. and the best way to reach a goal is not with a big gun to your head." At the same time. productivity and costs. but we couldn't because the old management put up too many limitations. I set stretch goals because I want Imexsa to win. As described by Nair.

Inelastic demand indicates that price increases might be feasible. Estimate the demand curve . experiments can be performed at prices above and below the current price in order to determine the price elasticity of demand. Pricing is an important strategic issue because it is related to product positioning.include fixed and variable costs associated with the product. and promotion decisions. the following is a general sequence of steps that might be followed for developing the pricing of a new product: 1. and promotion. 3. etc. For existing products. including target market selection and product positioning. the above list serves to present a starting framework. Because of inherent tradeoffs between marketing mix elements. profit maximization. targeting. distribution. The total unit cost of a producing a product is composed of the variable cost of producing each additional unit and fixed costs that are incurred regardless of the quantity produced. Determine pricing . Develop marketing strategy .evaluate likely competitor actions. or price stabilization (status quo). 7. 6.define the product. otherwise. and determines the profit margin at higher prices. understand legal constraints. There usually is a tradeoff between product quality and price. distribution. Calculate Costs If the firm has decided to launch the product. select a pricing method. and positioning. and define discounts. there might be no profit to be made. Furthermore. Understand environmental factors . it is important to understand the impact of pricing on sales by estimating the demand curve for the product. there likely is at least a basic understanding of the costs involved.for example.understand how quantity demanded varies with price. 4. The unit cost of the product sets the lower limit of what the firm might charge. revenue maximization. The pricing policy should consider both types of costs. and promotional tactics. Make marketing mix decisions . 5.perform marketing analysis.using information collected in the above steps. Estimate the Demand Curve Because there is a relationship between price and quantity demanded. develop the pricing structure. Set pricing objectives . channel decisions. Environmental Factors 129 . 2. These steps are interrelated and are not necessarily performed in the above order. so price is an important variable in positioning. Calculate cost .TECHNOLOGY AS AN ADVANTAGE One of the four major elements of the marketing mix is price. While there is no single recipe to determine pricing. Nonetheless. the marketing strategy is formulated. segmentation. Marketing Strategy and the Marketing Mix Before the product is developed. pricing affects other marketing mix elements such as product features. pricing will depend on other product.

Offering a different price for different consumers may violate laws against price discrimination. The underlying objective often is to maximize long-term profits by increasing market share and lowering costs. Current profit maximization may not be the best objective if it results in lower long-term profits. • Maximize quantity . Skim pricing attempts to "skim the cream" off the top of the market by setting a high price and selling to those customers who are less price sensitive. • Status quo . there may be price controls that prohibit pricing a product too high. • Maximize profit margin . • Partial cost recovery . skim pricing and penetration pricing strategies often are employed. the firm must consider the implications of its pricing on the pricing decisions of competitors. • Quality leadership .Pricing must take into account the competitive and legal environment in which the company operates. For example.seeks to maximize the number of units sold or the number of customers served in order to decrease long-term costs as predicted by the experience curve. • Large cost savings are not expected at high volumes.attempts to maximize the unit profit margin. so this objective is considered temporary.the firm may seek price stabilization in order to avoid price wars and maintain a moderate but stable level of profit. setting the price too low may risk a price war that may not be in the best interest of either side. the goal may be to select a price that will cover costs and permit the firm to remain in the market. • Survival . collusion with competitors to fix prices at an agreed level is illegal in many countries. Common objectives include the following: • Current profit maximization . Pricing Objectives The firm's pricing objectives must be identified in order to determine the optimal pricing. For example.seeks to maximize current revenue with no regard to profit margins. Pricing it too low may be considered predatory pricing or "dumping" in the case of international trade. or it is difficult to predict the cost savings that would be achieved at high volume. • Current revenue maximization . recognizing that quantities will be low. To meet these objectives. 130 . Joel Dean discussed these pricing policies in his classic HBR article entitled.seeks to maximize current profit. For new products. the customers are not highly price sensitive. Finally. taking into account revenue and costs. In this case.an organization that has other revenue sources may seek only partial cost recovery.use price to signal high quality in an attempt to position the product as the quality leader. the pricing objective often is either to maximize profit margin or to maximize quantity (market share). Skimming is a strategy used to pursue the objective of profit margin maximization. From a competitive standpoint. Setting the price too high may attract a large number of competitors who want to share in the profits. From a legal standpoint. Pricing Policies for New Products.in situations such as market decline and overcapacity. a firm is not free to price its products at any level it chooses. that is. survival may take a priority over profits. Skimming is most appropriate when: • Demand is expected to be relatively inelastic.

a discount that increases as the cumulative quantity increases.• The company does not have the resources to finance the large capital expenditures necessary for high volume production with initially low profit margins. • Cumulative quantity discount . • There is a threat of impending competition. Penetration pricing pursues the objective of quantity maximization by means of a low price. as outlined below. For example. Such discounts do not have to be based on time of the year. For example. rate of product diffusion. product differentiation. Price Discounts The normally quoted price to end users is known as the list price.offered to customers who purchase in large quantities. The pricing objective depends on many factors including production cost. Cumulative discounts may be offered to resellers who purchase large quantities over time but who do not wish to place large individual orders. such as pricing offered by long distance and wireless service providers. Many software suppliers have changed their pricing to a subscription model in which the customer subscribes for a set period of time. managers may make use of several pricing methods. popular price points.based on the time that the purchase is made and designed to reduce seasonal variation in sales. Pricing Methods To set the specific price level that achieves their pricing objectives. the pricing policy should be reevaluated over time. 131 . • Seasonal discount . Afterwards. These methods include: • Cost-plus pricing . • Target return pricing . This model offers stability to both the supplier and the customer since it reduces the large swings in software investment cycles.base the price on the effective value to the customer relative to alternative products. As such. the travel industry offers much lower off-season rates. • The product is of the nature of something that can gain mass appeal fairly quickly. the subscription must be renewed or the software no longer will function. that is. the firm's resources. existence of economies of scale. they also can be based on day of the week or time of the day. and the product's anticipated price elasticity of demand. It is most appropriate when: • Demand is expected to be highly elastic. barriers to entry. • Large decreases in cost are expected as cumulative volume increases. This price usually is discounted for distribution channel members and some end users. such as one year. customers are price sensitive and the quantity demanded will increase significantly as price declines. there likely will be changes in the demand curve and costs. In addition to setting the price level. and what the consumer perceives to be fair.base the price on factors such as signals of product quality.set the price to achieve a target return-on-investment.set the price at the production cost plus a certain profit margin.extended to customers who pay their bill before a specified date. As the product lifecycle progresses. There are several types of discounts. • Cash discount . • Value-based pricing . managers have the opportunity to design innovative pricing models that better meet the needs of both the firm and its customers. software traditionally was purchased as a product in which customers made a one-time payment and then owned a perpetual license to the software. • Quantity discount . • Psychological pricing .

a trade discount may be offered to a small retailer who may not purchase in quantity but nonetheless performs the important retail function.a short-term discounted price offered to stimulate sales. • Promotional discount .a functional discount offered to channel members for performing their roles.• Trade discount . For example. 132 .

engineering. power. automotive and defence industries and for sale in export markets. this 50:50 joint venture between SAIL and the National Thermal Power Corporation (NTPC) operates and manages the Captive Power PlantsII of the Durgapur and Rourkela Steel Plants which have a combined capacity of 240 MW. Bokaro Power Supply Company Pvt. It is a fully integrated iron and steel maker. railway. Ltd Set up in March 2001. However.MNC’S BEING ATTRACTED BY INDIAN INDUSTURY MAJOR PLAYERS Steel Authority of India Limited (SAIL) is the leading steel-making company in India. Limited This 50:50 joint venture between SAIL and the Damodar Valley Corporation formed in January 2002 is managing the 302-MW power generation and 1880 tonnes per hour steam generation facilities at Bokaro Steel Plant. Major units of SAIL are as under: Integrated Steel Plants Bhilai Steel Plant (BSP) in Chhattisgarh Durgapur Steel Plant (DSP) in West Bengal Rourkela Steel Plant (RSP) in Orissa Bokaro Steel Plant (BSL) in Jharkhand Special Steel Plants Alloy Steels Plants (ASP) in West Bengal Salem Steel Plant (SSP) in Tamil Nadu Visvesvaraya Iron and Steel Plant (VISL) in Karnataka Subsidiaries Indian Iron and Steel Company (IISCO) in West Bengal Maharashtra Elektrosmelt Limited (MEL) in Maharashtra Bhilai Oxygen Limited (BOL) in New Delhi Joint Venture SAIL has promoted joint ventures in different areas ranging from power plants to ecommerce. producing both basic and special steels for domestic construction. enjoys significant operational and financial autonomy. SAIL. NTPC SAIL Power Company Pvt. Bhilai Electric Supply Company Pvt. The Government of India owns about 86% of SAIL's equity and retains voting control of the Company. by virtue of its "Navratna" status. Limited 133 .

this company promotes e-commerce activities in steel and related areas. Metaljunction. which is carried out with carbon in single stage reactor with the use of oxygen. Others major steel producers are Tisco ( Tata Iron and Steel Corporation ltd) Essar Steel Jindal Vijaynagar Steels Ltd Jindal Strips Ltd JISCO Saw Pipes Uttam Steels Ltd Ispat Industries Ltd Mukand Ltd Mahindra Ugine Steel Company Ltd Tata SSL Ltd Usha Ispat Ltd Kalyani Steel Ltd Electro Steel Castings Ltd Sesa Goa Ltd NMDC Lloyds SteeI Industries Ltd 134 . Romelt-SAIL (India) Ltd A joint venture between SAIL. SAIL-Bansal Service Center Pvt. a subsidiary of the US Steel Corporation. on 40:60 basis to promote a service centre at Bokaro with the objective of adding value to steel. North Bengal Dolomite Limited A joint venture between SAIL and West Bengal Mineral Development Corporation ltd on 50:50 basis was formed for development of Jayanti Dolomite Deposit. National Mineral Development Corporation (NMDC) and Russian promoters for marketing Romelt Technology developed by Russia for reducing of iron bearing materials. promotes information technology in the steel sector. UEC SAIL Information Technology Limited This 40:60 joint venture between SAIL and USX Engineers & Consultants.Another SAIL-NTPC joint venture on 50:50 basis formed in March 2002 manages the 74 MW Power Plant-II of Bhilai Steel Plant which has additional capacity of producing 150 tonnes of steam per hour. Ltd. SAIL has formed a joint venture with BMW industries Ltd.com Private Limited A joint venture between SAIL and Tata Steel on 50:50 basis. Jalpaiguri for supply of Dolomite to DSP and other plants.

nearly 60% of crude steel production is from the basic oxygen process and the balance is from the electric arc process. bars. Towards attaining this objective we : • Have active representation in most Government Advisory Committees • Keep organising Seminars. Round Table meetings • Submit representations/memoranda • Bring out publications. Direct Reduced Iron. or sponge iron as it is often referred to. is a substitute for melting scrap in the Electric Arc steel making process." As such one our key objectives at ASSOCHAM is to help formulate policy decisions for creating a healthy environment for trade and industry in India. The Government’s policy attaches great importance to capacity expansions in the steel industry. lime stone and coke. periodicals and discussion papers. tubes etc of varying thickness and dimensions. In India too. 135 . The molten steel is stored and refined in ladles before being solidified and cast into slabs. In India. using the blast furnace and basic oxygen furnace processes. from paper clips to refrigerators and washing machines and from aircrafts to the finest surgical instruments. POLICY ON STEEL SECTOR "Our mission is to impact the policy and legislative environment so as to foster balanced economic. Workshops. billets and bars. and steel production was given a pride of place in the successive five-year plans. flats. sections. the vision of Sir Jamshedji Tata was taken to its logical conclusion by leaders of Independent India. or from recyclable steel scraps via the electric arc furnace process. industrial and social development. to produce and market steel at globally competitive prices. steel application figures prominently in many aspects of human life. the most important engineering and construction material in the world.CHAPTER-8 GOVT. This section presents our policy work on important Business & Industry and National issues Overview By far. from civil structures to automotive manufacture. All major industrial economies have a strong domestic steel industry which shaped their economic growth in the initial stages of their development. A third route for steel making from direct reduced iron [DRI] has been followed since 70s. Semifinished steel is re-rolled (formed and finished) to produce finished steel items like plates. blooms. Steel is produced either from basic raw materials namely iron ore.

the gap in supplies was growing and large quantities of steel were imported into the country by consumers paying high customs duty. The plants set up prior to 60s were based on the open hearth process which was slow and uneconomical. Even within SAIL. the sponge iron units too had their share of problems due to their inputs/services remaining Government controlled. domestic coal supplies were inferior with high sulphur and ash content. power shortages in many states and the technical limitation arising from inability to control the chemistry of furnace output by the manufacturers. The import of coking coal was highly controlled. As a public sector unit. the industry boomed and needed to concern itself only with production and operational aspects. Unfortunately. Hindustan Steel later (reconstituted into SAIL) contributed to the major share of production. These plants were to use steel scraps as their main raw material and electric arc furnaces for converting them into molten and saleable steel. By the turn of 70s. non-coking coal and natural gas were higher than international prices. Coal washing and beneficiation technology had not developed adequately to enable usage of coal with high sulphur and ash content. the sponge iron industry remained a fledgling. major constraints such as availability of recyclable scrap which was canalized by the Government. sponge iron emerged as a viable alternative. Subsequent plants were based on the basic oxygen conversion process (LD converters). The Government attempted to promote private investment in the small and medium sector for setting up mini steel plants. Despite Government promotion. while India had superior grades of iron ore which was well in demand the world over. the main player. 136 . and profitably sustain their operations. The Government was finding it very difficult to provide budgetary support to meet the investment requirement and credit from international agencies was expensive. It was not uncommon during late 70s to observe large inventories piling up in the plants even when there was acute shortage experienced by consumers. dogged the survival of these units. Capacity creation was subject to compulsory licensing. The steel prices were regulated by the Joint Plant Committee [JPC]. due to political pressures.The Iron and Steel industry was reserved for the public sector till 1991 and all the capacities created were only in this sector. The problem for the consumers was compounded with infrastructure bottlenecks in power and transportation. SAIL’s plants were set up in technical collaboration with overseas partners. Bhilai and Bokaro were more efficient while Durgapur was considered a laggard. Administered prices of iron ore. apart from regularizing contractual employees from time to time. On the input side. It was becoming apparent to the policy planners that huge investments were required to create fresh capacities. upgrade their technology. SAIL. Since India was reasonably endowed with reserves of high-grade iron ore as well as non-coking coal and natural gas from Bombay High. TISCO was the sole exception having been in existence since 1911. was compelled to sustain a large strength of employees on its regular payroll. Till the end of the 80s. under the superintendence of the union ministry in such a manner as to reconcile the interests of both the producers and the users. During the 80s the development of sponge iron as an alternative to steel scrap opened up another feasible manufacturing route. modernize the existing plants. In an era of quota and licenses.

allowing free export and withdrawal of freight equalization scheme. and efforts to promote private initiative elicited only feeble responses. a global economic melt-down in the latter half of 90s. in the private sector used the modern state-of-the-art technologies. Meanwhile. The new economic policies pursued by the Government post-liberalization. coking coal. some concern regarding the differential treatment meted out to overseas players to attract investment. automatic approval for foreign equity investment up to 51% (now 75%). R&D and development of skilled human resources. Jindal Vijayanagar etc. The policy provides a major impetus for technology upgradation. moving from controlled import to total freeing and lowering of duty levels. Jindals and Essar hiking their capacities. Though the steel prices have continued to fluctuate. The plants which came up post 1991. The rising demand from China. Nevertheless. refractory material. the Indian industries are expected to emerge as leading players. Ispat. RINL. The focus of the national steel policy 2005. opened up a floodgate of opportunities for expansion of the steel industry. till 1991. To control price volatility. With an enabling trade policy. free import. The Indian steel industry responded enthusiastically to the liberalization and large capacities were created in the private sector. both output and input prices in the industry were administered. like Vizag Steel (RINL) in the public sector and Essar Steels. removal of duty protection. when the boom began. Consequently. However. a majority of the plants have now streamlined their operations and are considered competent to withstand price shocks. are attracting major investment interest both from domestic and international majors. because of decontrol. There is. falling rates of interest were favorable factors. the availability of critical inputs like iron ore. however. limitations to steel output growth from developed countries. inventory pile up. poor capacity utilization. included removal of Iron and steel from the list of industries reserved for the public sector. and. above all. the industry is already into an expansion mode with all steel majors like SAIL. The cost economics were significantly favorable to Indian producers due to lower cost of pig iron and cheaper labor. envisages stepping up domestic steel output to 100 million tonnes by 2019-20 from the present level of around 40 million tonnes. deregulation of price and distribution of steel. since 1991.In the overall analysis. power and gas as well as matching infrastructure in terms of transportation are proposed be stepped up with large-scale capital investments. Most of the integrated plants had taken productivity improvement and cost cutting measures including financial restructuring during the lean period earlier. mainly 137 . as a result. The period from 1997-2001 marked the worst for the industry with price decline. steel supply was short compared to the burgeoning demand. their exemption from the provisions of compulsory licensing. dumping from China and CIS. the industry went through a major crisis. revival of economic growth in most economies. rich in iron ore. it is also proposed to introduce steel futures. Tata Steels. the industry has since turned around impressively due to a combination of factors. Ispat Steels. The important policy measures which were taken for growth and development of the sector since then. liberalization of import regime. dumping through unofficial channels and high interest burden. States like Orissa and Jharkand. they could exploit the growth opportunities.

138 . Constraints in inputs and infrastructure. the industry scenario is expected to radically alter in the coming years. this book. the transition over the years. and the Romelt process which makes pig iron from even iron ore fines. The first section gives an introduction to the Indian Steel Industry and an Overview of its development. current expansion plans of the industry. consumption. Section I: Indian Steel Industry: An Introduction The first article under this section “Indian Steel Industry – Retrospect and Prospects” by N Kannan.in respect of export of iron ore. crude steel/finished steel production. it also features the main points covered in the draft steel policy of 2004 (which has since been legislated) and a SWOT analysis of the industry. which traces its chronological history. The third article “Electric Steel Making Technology in the 21st Century” by R P Varshney is a revisit to the technological developments and upgradations in steel industry. It mentions the potential availability constraints in high grade iron ore and coking coal inputs and development of technological alternatives such as sponge iron instead of pig iron. the COREX process for pig iron manufacture. Its focus. The success of Induction Melting Furnaces used competitively by Indian steel makers for making all types of steel and their growing popularity are also debated. exports and projected growth. overseas acquisition plans by Indian companies. The second section elaborates on the Indian and Global Steel Industry: A Comparison and finally. In the final analysis. production processes. Besides. both global as well as Indian. Electric Arc Furnaces and Induction Melting Furnaces. presents insights into the status of Indian Steel Industry through articles written by experts. In the above context. again using low grade coal. which can be produced with low grade coal. key input-output characteristics of using induction furnaces and envisaging a scenario of a large number of integrated mini steel plants in India in the 21st century. It concludes with the observation that Indian steel makers have now become adept in innovative steel making techniques synergizing with captive power generation. from Bessemere Converters and open hearth process to LD converters. the third section outlines the Emerging Issues and Challenges. the current position and future outlook.com outlines the various technologies for Steel manufacture. constraints in steel scrap availability and their competitive limitations vis-à-vis induction furnaces. The article concludes with a focus on the present scenario in terms of capacity utilized. presents an overview of the Indian steel industry. The second article “Steel Making in India – Technology Scenario Changes” sourced from steelworld. and Steel price volatility are the other issues addressed. however. relating to installed capacities. split into three distinct sections. technology and the critical inputs. It carries data. It discusses the introduction of Electric Arc Furnaces for steel making in India. The article provides basic information on the steel industry including the product classification. foreign direct investments in India. is on the development of electric steel making process in India and the stabilization of induction furnaces as an alternative and commercially competitive process in the Indian context. policy plans for addressing them.

Mittal Steel Company. distorting the real picture of the industry. financial restructuring and manpower rationalization. traces the uneven output growth across various regions in the world. infrastructure related constraints and in creating additional demand through intensive consumption promotion programs. Section II: Indian and Global Steel Industry: A Comparison This section contains articles focusing on the competitiveness of the Indian steel industry amidst dynamic changes in the global scenario. The improvement in the profitability of SAIL and Vishakapatnam Steel Plant. The talk covers a gamut of issues such as GDP led demand growth. are also highlighted in the article. discusses the salient features of the National Steel Policy approved by the Government in 2005. in trying to curb unfair competition from steel surplus overseas sources like Russia and CIS. superior marketing and supply chain management to manage the demand. the need for steel industry to penetrate deeper and wider existing and potential application segments. R&D requirements and environmental issues are also discussed in the article. The future concerns regarding the steel price volatility. The article concludes with the remark that the growth of geographies. in helping the industry to overcome structural rigidities. poor supply chain management and the knee-jerk behavior of the players to price volatility. The second article titled “Global Steel Industry Expansion Scenario – Its Impact on NAFTA Region” by S Bhaskaran. “Steel in the 21st Century: Creating an Attractive and Sustainable Industry”. and the continuing trend of industry consolidation will undoubtedly lead to a virtuous cycle culminating in a sustainable steel industry for the 21st century. COO. The supply side requirements to meet the anticipated demand in terms of availability of critical inputs. the role of China in shaping the future of the supply-side of the industry and the policy directions of the Chinese government to enforce regulation of the industry to both slow down the growth of new capacity as well as rid the industry of sub-scale. are also addressed. The article defines the strategic policy goal.The next article summary “National Steel Policy – 2005” summarized by E Naveen Kumar and N Kannan. The last article under this section “Indian Steel Industry: A Story of Continuing Progress” by Braja Kishore Tripathy. has great significance for the existing players and prospective entrants. The policy is regarded as the basis for longterm projections of the growth of the Indian Steel industry and. the stiff competition and challenges faced by the producers in the NAFTA region and the steps taken by them to counter the threat of competition 139 . input scarcity. summarizes the points made in the lecture delivered by Malay Mukherjee. discusses the significant role played by the Ministry of steel in the post deregulation years in fostering the growth of the industry based on competitiveness and economic efficiency. The volatility of steel prices. longterm inefficient plants. through ambitious modernization. The first article under this section. infrastructure requirements and current limitations in the country and the need for foreign investment to improve the scenario are highlighted in the article. coupled with productivity improvement and cost efficiency. proper pricing of value added products vis-à-vis steel commodities. the supply side of inputs. thus. the feasibility of realizing this goal supported with past and projected growth figures of per capita steel and a SWOT analysis. human resource requirements.

The theme rests on the CEO’s assertion that India can produce steel much cheaper than China. including consolidation. acquiring sick units in developing economies and turning them around to healthy ventures with good supply chain management. The sixth article.through tariffs and barriers. adoption of DRI route. The case starts with the evolution of the world steel industry. scale economies and post-merger management. analyzes the global competitiveness of the Indian Steel Industry in quantitative as well as qualitative terms. The fifth article is a case study titled “POSCO in 2004: The World’s Most Profitable Steel Maker” by M P Jayaprada. in future. Managing Director. These reports provide insights into the comparison of different components of production costs across different countries and cost differentials at various stages of production. The case analyzes Mittal’s business roots. The case describes how POSCO sustained and grew in such conditions. the company’s globalization efforts and their challenge of servicing the automotive market in a big way. Some of the controversial aspects of Mittal’s business dealings are also touched upon. again a case study titled “Lakshmi Niwas Mittal: Spearheading Consolidation in the Global Steel Industry” by Kalyani Vemuri. the South Korean steel maker which was the leading steel company in terms of profitability. 140 . The case talks about POSCO. offers scope for discussion on strategic issues of consolidation. steel producers were resorting to various strategies. unit cost of sales and also Return on Equity. The article draws extensively from the OECD reports and alerts sounded to NAFTA regions. By 2004. the steel industry was considered an old economy and steel was commoditized. It highlights the consolidation strategy practised by Lakshmi Niwas Mittal. the problems faced in raw material acquisition. the article draws reference to research study reports brought out by Joint Plant Committee and World Steel Dynamics. acquisition of manufacturing facilities in the Caribbean and later expansion foray into different parts of the world. The next article is titled “India Can Make Steel Much Cheaper Than China”. As a result. This article is an excerpt from an interview with B Muthuraman. For this purpose. to sustain themselves in the industry. It discusses various issues on steel consumption and comparison between India and China. Section III: Emerging Issues and Challenges This section debates the current and emerging issues confronting the Indian steel industry. which has enabled his group to emerge as the world’s largest steel producer. The increasing competition from mini-mills (companies using the EAF technology to produce steel) left some of the major steel producers’ operations unprofitable. Tata Steel. It dwells at length on the “China factor” in metals. The quantitative analysis focuses on unit cost of production. and the strategies it adopted on its way. and talks briefly about the evolving demand-supply conditions. the major technology shift (from basic oxygen method to electric arc furnace (EAF) method) that changed the industry economics. The third article under this section titled “Indian Steel Industry Globally Competitive – A Comparison of Financial Performance” by N Kannan. achieved its position of leadership.

low cost of debt and relatively low per capita steel consumption in India by Government and all major players. limiting job creations and forex reserves. The article debates the wisdom of such overseas investment and expresses concern that. and raises the concerns put forward by the industry players. India is losing huge potential domestic investments. coupled with tightening of raw material availability. The author then raises concerns about the situation of overcapacity in the face of a feeble outlook on international prices. iron ore availability. Market Analyst. US and Japan. with demand slowing down in China. to manage the situation. Vikram Amin. due to these. amidst apprehension of a repetition of the scenario of mid 1990s when the country was saddled with excess capacity. The interview discusses the revival of the Indian steel industry over the last four years. The author suggests that the Government of India can ease steel export norms and reduce customs tariff so that exporters can play safe and send their output abroad and bring foreign reserves to India. is a debate on the wisdom of large scale capacity expansion planned by all major players in the Indian steel Industry at a huge outlay. Essar. Tata Steel. The fourth article “Steel Regulator: Valid Concerns?” by Anupama Chowdary. Essar Steel and Bratin Biswas. rationalizing customs duty structure etc. The next article “India’s Overseas Investment: An Eye Opener for Policy Planners” by Dilip Kumar Jha provides the details of acquisitions and investments abroad by major steel companies (Tata. “Steel: Will the Big Bets Pay Off?” by Sunil Nayanar. competitive cost of production. which had been voiced by the union minister. instead of overseas capacity creations. The third article “Indian Steel Industry: Consolidation is the Need of the Hour” by S Subramanian. including vertical integration of processes. the current scenario and brings forth the experts’ views on whether Indian steel manufacturers are prepared to bridge the gap 141 . The author brings forth experts’ argument that the Government must rather focus on encouraging fresh investments in steel to match the supply commensurate with rapid growth in demand. should such a body come into force. Indian steel makers need to adopt strategies like consolidation. It cites the justifications put forth for such large scale capacity build-up like demand growth. like coking coal and steel scrap. Marketing. explains that with the Chinese steel industry entering into autocatalytic consumption stage. The fifth write-up “Round Table on Steel Industry” is an interview with three eminent experts B Muthuraman. Finally. Ispat & JSL) and the potential benefits these companies expect to derive from them. MD. The article explains that the trigger for ministerial suggestion would have been mainly the domestic price volatility and pressures from domestic users long used to enjoying stability from price controls. instead of regulating prices. Efficient catering to the needs of overseas customers is cited as an important reason for offshore locations. the article talks about the practical impediments in having a Regulator for the complex steel industry and suggests other areas for Government to focus on like steel futures. Given the increasing steel consumption in the country. the prices of raw materials for steel. easing raw material shortage. The article details the capacity additions planned by various players inland as well as overseas. export push.The first article of this section. Director. debates the wisdom of having an independent regulator for steel prices. have shot up sharply in recent months.

concentration of semi-finished steel manufacturing capacity near pig iron/sponge iron plants. and the steps taken by the company to make its branding initiatives successful so as to withstand rising global competition. The next article “Branding a Commodity: The Tata Steel Way” by K Subhadra and Sanjib Dutta. the author proceeds to discuss the various revival factors. is a case study and focuses on steel marketing by India’s leading private sector steel manufacturer—Tata Steel. and the prospects of the company in the future. The article provides the past steel consumption statistics. revisits the key challenges confronting the Indian steel industry. It touches upon two issues of concern for select players—unequal freight costs across different producers and competition from imports. and dispersion of finished steel manufacturing capacities to consumption centers to save on freight costs. The article concludes by raising some doubts about the feasibility of mobilizing the huge amount of funds required for the expansions and capacity additions. 142 . such as backward integration for captive coke and iron ore supplies. NAFTA. relative growth statistics in China. The case concludes with information on the benefits reaped by the company through its branding of its steel products. industry consolidation. Europe and CIS. as well as doubling per capita steel consumption. a narrative on proposed expansions and modernization programs of the major players. The last article “Indian Steel Scenario: Vision 2011-12” by Sanjay Sengupta. the major transformations it underwent and the new challenges faced against the backdrop of globalization. The other important revival factor attributes as per the author are branding of products and forward and future trade contracts to hedge price risks. The case explains in detail the reasons for the company’s decision to opt for branding. and the problems in respect of availability of inputs and infrastructural requirement. It also provides information about the steps taken by Tata Steel to inculcate customer orientation in its employees. in the light of the earlier failures. the projected finished steel production and consumption figures as per national steel policy. The revamping exercise undertaken by Tata Steel and the different approaches adopted for its two different customer segments – B2B and B2C – are also covered. The book is an attempt to capture the historical development of the Indian steel industry. Further. presents a vision of Indian Steel scenario in the year 2011-12. The sixth article “Indian Steel Industry: Key Challenges” by Deven R Choksey. The interview also highlights their views on the bottlenecks to be removed in order to become a global leader and the advantages of consolidation of companies for achieving the same.between demand and supply triggered by surging global demand.

PRODUCING QUALITY(VALUE ADDDED) PRODUCT

The following is the text of my keynote speech to the Fabricators & Manufacturers Association’s Toll Processing Conference in Orlando, Fla., on February 16, 2007. The two-day conference was devoted to mergers and consolidations in the steel industry, and I addressed the growing worry that Mittal’s concentrated control of steelmaking is resulting in a price squeeze for U.S. industrial users and fabricators. I had expressed concern about the anticompetitive implications of Mittal’s takeover of International Steel Group (ISG) before the merger took place in op-ed articles. The organizers of the conference asked me to compare the recent consolidations to the past history of the industry. As it happened, on February 20, 2007, the U.S. Department of Justice – which I have given poor marks for its antitrust review of the Mittal-ISG merger – announced that Mittal must sell the Sparrows Point, Md., mill to preserve competition in the tinplate market. DOJ said Mittal’s 2006 merger with Arcelor, owner of the Dofasco (Canada) tinplate-making facility, raised “anticompetitive effects” in the marketplace. I was quoted in the AP article on the decision saying that the ruling underscores manufacturers’ frustration with Mittal Steel’s pricing and production policies. And their complaints go beyond tinplate – embracing the pricing of automotive steel and several other mill products. DOJ’s action is a positive step, not only for the future of Sparrows Point, but also for American manufacturing that uses steel, for reasons explained in my speech. Further, it represents the first time that the business policies of Lakshmi Mittal have come under government scrutiny. Here’s hoping that DOJ starts looking at the draconian production cutbacks (described below) at Mittal mills since 2005, apparently aimed at controlling downward swings in steel prices by denying lower-cost steel to customers.

“The problem as I see it,” said Gustave Koven, “is this: how can we keep the small and medium-size manufacturer from extinction?” Koven, who managed a steelfabricating factory in Jersey City, N.J., was testifying back in 1950 before a Congressional committee studying the ownership and pricing policies of the U.S. steel industry. The committee concluded that the industry was dangerously over-concentrated, with three companies, U.S. Steel, Bethlehem Steel, and Republic, operating a “tropoly” that kept prices under the control of a small group of executives.

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Throughout the 1950s, the Truman and Eisenhower administrations pleaded with an industry that had been consolidated under trusts by J.P. Morgan, Charles Schwab, and Andrew Carnegie not to raise prices – after all, we were fighting the Cold War and, for a while, a hot war in Korea. But to little avail. When U.S. Steel raised its prices, so did Beth Steel, Republic, Jones & Laughlin, Youngstown Sheet & Tube, Armco, and Inland Steel – usually within the same 24-hour period. The industry invented some choice vocabulary to justify its actions. “Meeting the competition” was steel talk for the matched prices that the top steel companies instituted nationwide. “Unfair competition” was anything that might undercut these uniform prices. “Inelastic demand” was the purported economic reason why steel was outside the laws of supply and demand, and why the trade could advance prices with impunity. “Our salesmen don’t sell steel; they allocate it,” gloated one executive. Thus, the “Big Steel” companies rolled over the likes of Gustave Koven – the heavymetal, high-octane, chrome-tail-finned Buick Rivieras of U.S. business – until they crashed into President John F. Kennedy. On October 22, 1962, Kennedy opened a White House press conference with the following statement (slightly edited): “Simultaneous and identical actions of U.S. Steel and other leading steel companies increasing steel prices by some $6 a ton constitute a wholly unjustifiable and irresponsible defiance of the public interest. In this serious hour in our nation’s history, when we are confronted with grave crises in Berlin and southeast Asia, when we are asking reservists to leave their homes and families for months on end and servicemen to risk their lives in Vietnam, when restraint and sacrifice are being asked of every citizen – the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives can show such utter contempt for the interests of 185 million Americans.” Kennedy continued: “If this rise in the cost of steel is imitated by the rest of the industry, instead of rescinded, it would increase the cost of homes, autos, appliances, and most other items for every American family. It would add, Secretary McNamara informed me this morning, an estimated $1 billion to the cost of our defenses. It would make it more difficult for American goods to compete in foreign markets and more difficult to withstand competition from foreign imports.”

While rising steel prices in the 1950s and again in the 1970s had short-term benefits for U.S. steel producers, the long-term consequence was increased substitution of competing products by buyers. This chart shows the price of steel mill products relative to other producer prices over the last 60 years. Largely because of wartime price controls, steel prices dropped in the 1940s compared to all producer goods, then began rising at roughly double the rate of producer goods. Following President Kennedy’s intervention, steel-price hikes moderated over the 1960s, only to shoot upward again in the 1970s. Overall, the price
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of all producer goods roughly tripled between 1947 and 1979, while the price of steelmill products rose by a factor of six – faster than any other metal product.

Lakshmi Mittal after winning shareholder approval of his hostile bid for Arcelor Steel in 2006. The takeover made Mittal by far the world’s largest steelmaker, with 330,000 employees in more than 60 countries. While rising prices had obvious short-term benefits for the steelmakers, the long-term consequences were disastrous. Aluminum, plastics, and concrete began replacing steel in markets that, 50 years earlier, steel had conquered from glass bottles, wood-framed cars, brick-and-mortar buildings, and wrought-iron machinery and tools. What was an all-steel kitchen in the days of June Allyson became by the 1990s a kitchen with aluminum and plastic, right down to plastic microwaveable food packaging (in place of tin cans) and aluminum instead of tin foil. Inroads by competitive products and the lack of new steel markets – much more than rigid union work rules or imported steel – played havoc on the economic base of Big Steel. In the 1980s and 1990s, hundreds of thousands of jobs were lost in the cradle of the industry around Pittsburgh and Youngstown, and plant closures spread west to Chicago and east to Johnstown and Bethlehem, Pa. Then there was another factor. Mini-mills that used electric-arc furnaces, thin-slab casters, and motivated employees undercut Big Steel’s prices, delivery dates, and customer service. After all the bloodshed, Big Steel was returning to what it had been before the “trustbuilding” movement of Morgan, Schwab, and Carnegie – a lean, competitive industry. Yes, LTV (former Republic Steel) and Bethlehem struggled, but U.S. Steel and Armco (re-named AK Steel) did an admirable job in restructuring their businesses.

Aping the baroque extravagance of Charles Schwab and Andrew Carnegie during the first steel monopoly, Mittal’s home in London is reported to be the most expensive private residence on Earth. The chart indicates how steel prices responded in the 1990s when competition was robust and no firm had significant control over the marketplace. Returning to levels that were very competitive, steel was making inroads against substitute products, gaining ground, for example, against lumber in the booming housing market. But the dynamics of the U.S. – indeed, world – steel business has rapidly changed as a result of the aggressive business tactics of Lakshmi Mittal. Having succeeded last July in his hostile takeover of Arcelor Steel, the Mittal combine is by far the largest steelmaker on the globe, now employing 330,000 employees in more than 60 countries.

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Mittal. a grand ballroom. in the case of many ex-Soviet states. accumulating strategic control over the same commodity that forged the fortunes of Schwab and Carnegie. In the U.C. or. whose specialty has been scooping up distressed steel properties in remote corners of the world and making them profitable through tough management practices.500 guests from India for five days of festivities in France that included the rental of the Palace of Versailles. Mittal jetted Bill Clinton and New York Senator Hillary Clinton to a celebrity wedding in India in his private Gulfstream plane. Mittal makes his money the old-fashioned way. Comprising the former Russian and Egyptian embassies joined together. and contained jade necklaces or diamond watches for close family friends. the house boasts a swimming pool inlaid with jewels.000 tons) by companies bought by Mittal. most of his acquisitions were in third-world and former Soviet-bloc countries.. A lavish entertainer. Mittal’s dominance came about not through a deal with government apparatchiks. 146 . Invitations for the Hindu nuptials were 20-page thick. Most of his conquests through 2004 involved purchasing state-owned mills in countries such as Mexico and Kazakhstan whose governments had shed their Socialist ways and were being running by privatizers.000 donation to Blair’s Labor Party. Last year. Vanisha. In 2002. Steel shipments (in 1.S.” Between 2002 and 2004. Mittal and his son Aditya – who works intimately with his father – have cultivated ties to politicians in the U. He shelled out $125 million for a mansion next door to the royal family’s Kensington Palace in London. So what’s the secret to the success of Mr.S. Mittal is a serial acquirer. former Communist bosses posing as privatizers. D. Mittal also raised eyebrows for the lavish wedding of his daughter. and a 20-car garage. Since then. the Indian-born. As recently as five years ago. encased in silver. whose steel holdings have multiplied 252 times over the last 18 years? Forget about Internet innovation or creative-class convergence. London-based businessman has not been shy about advertising his wealth. Mittal has cultivated connections with politicians worldwide. Mittal survived the disclosure that British Prime Minister Tony Blair had intervened to help him purchase Romania’s Sidex Works shortly after the mogul had made a $235. Mittal was mostly known for his oddball collection of steel mills in such countries as Kazakhstan. Mittal chartered 12 Boeing jets to fly 1. however. and Mexico. 26. Father and son were photographed with our 41st and 42nd presidents after contributing to a Tsunami-victims fund.Aditya and Lakshmi Mittal pose with former presidents George Bush and Bill Clinton in Washington. Trinidad. Before 2005. With a personal net worth reported at $25 billion. who sits on the Arcelor-Mittal board of directors. but from a deal with a smart and well-regarded exRothschild banker nicknamed the “king of bankruptcy.

S. the largest U. Washington was asleep at the switch. Bearing in mind that Mittal-owned Ispat Steel already owned Chicago-based Inland Steel. Now in the wake of Mittal’s takeover of Arcelor. shown here with wife No. Ross won the applause of the business press in post-9/11 America by announcing that he was a patriotic businessman seeking to “save” a troubled industry and keep steelmaking in America. Ross combined these companies into the nation’s largest steelmaker. port facilities to the Middle East’s Dubai Ports. such divestment – while welcome – is like closing the barn door after most of the animals have escaped. After shedding retiree and widow’s health benefits and letting the government-run Pension Benefit Guaranty Corp. mills flipped them. Mittal announced the $4. Acme. as well as the antitrust division of the Department of Justice. citing post-9/11 security.5 billion buyout of ISG. A year ago.5 billion deal in October 2004. nine finishing mills. 3. And how has the London industrialist treated the mills that he purchased from Mr. The man who said he wouldn’t flip U. The acquisitions moved nearly 25 million tons of capacity from independent operation into a single combination. Since Mittal already owns four of the five integrated mills on the Great Lakes. saying that the company otherwise will have too much pricing power in the domestic tinplate market. and Georgetown Steel.S.Wilbur Louis Ross bought in bankruptcy court five independent steel companies – LTV. Weirton.S. And the reason why Mittal purchased the plants followed his triedand-true business model of owning the majority of steel mills within any given country. and fully 40 percent of U. controlled by New York financier Wilbur Ross. For example.S. Ross? “Squeezing more toothpaste out of the tube” is how I have characterized the Mittal way. DOJ wants Mittal to divest of either Sparrows Point or Weirton.5 billion to Ross and associates and 147 . Bethlehem Steel. Ross’ motivation to pack up his bags was apparent – he pocketed $267 million from the sale of ISG. take over the companies’ underfunded pension funds.S. members of Congress complained loudly about the sale of U. steelmaker. By far the largest of this group was Beth Steel. Mittal Steel currently owns six major steel mills. his acquisition of ISG has had enormous economic ramifications. In October 2005. flat-rolled steel capacity. after paying $4. How fascinating it therefore was to see our patriotic banker turn around and announce the sale of five former independent steel companies to Lakshmi Mittal in a $4. How ironic that these same statesmen did not raise national security alarms when our steelmaking capacity was sold to a little-known London businessman. Hilary Geary. Mittal’s takeover of ISG raced through the Bush Administration’s Committee on Foreign Investments in the U. International Steel Group or ISG.

a smaller integrated steelmaker. But to summarize: There is little long-term planning.S.” he proclaimed to the London Sunday Times. Any mill manager who pushes for more resources than allotted from London is no longer – and I quote – “an effective manager. by U. who in turn was kicked upstairs and replaced by Mike Rippey. especially at the upper ranks. Sparrows Point Works outside of Baltimore. arguing that the steel industry remains globally fragmented and can achieve lasting 148 .” In 2005. in November 2005. Mittal permanently closed the blast furnace and steelmaking operations at the Weirton plant. Rodney Mott. “I want to be the Ford of steel. in 2005. the plant has been starved for capital by Mittal. permanently eliminating 800 jobs and 3 million tons of annual steel capacity. determined vision of Mr. known as Le Roi Soleil. Sparrows Point’s single remaining blast furnace (once there were 11) stopped running when the furnace froze. Mittal at a press conference during his six-month campaign to win Arcelor Steel over the fierce objections of management. Mott was replaced by Louis Schorsch. the respected CEO of ISG and CEO-designate of Mittal USA. Overall. In June-July 2006. it stopped producing hot metal when its blast furnace “froze. What satisfied Mittal just four years ago – ownership of 20 million tons of raw steel capacity – jumped to 70 million with the acquisition of ISG. Most senior ISG executives left immediately after the merger. Mittal says he will only settle for 200 or 300 million tons. the Mittal board of directors took away $40 million in capex previously planned by ISG. This kind of imperial longing fits in with the most expensive house in London and a wedding staged in the palace of Louis XIV. But if there has been turmoil within the ranks. resigned one day before the merger. or The Sun King. a Mittal loyalist from Inland Steel. there has also been the steady. but siring a dynastic line. Since the Mittal takeover. management has been a merry-go-round. Other key findings are described in detail on my website. Mittal. Mittal Steel USA spent no more than $385 million for capex in 2005.” Last summer. And the exodus continues with the resignation or retirement of many department managers. Now with Arcelor inside his corporate kingdom. Mittal has kept capital expenditures at the mills to a bare minimum. Sophisticated rolling equipment is operated to achieve shortterm profit targets with little provision for adequate maintenance or renewal. A cult-like conformity characterizes the corporate culture. No hot metal was produced for many weeks. Steel. or 23 percent more spending. Once the world’s largest steel mill. This compares to $475 million capex. which means not just being the emperor of world steel.simultaneously paying himself a $2-billion dividend to form Mittal Steel. Eight months earlier.

Typically. As the price of HRC (hot-rolled coil) dropped in the last quarter of 2006. 149 . the children of their children. For those in the audience who do not seek to be steel deities – who wish to grow their steel-fabricating business steadily and serve their customers and employees well – what we’ve seen from two years of the “Mittal effect” is worrisome. as HRC prices dropped to $500 per ton. But early last November. the mill runs 21 eight-hour turns per week. I would like to cite two recent examples of the production/pricing squeeze: First. Mittal Steel reduced to 18 the number of turns for the final six weeks of 2006. I suppose. regarding production.prosperity only through consolidation into two or three worldwide companies – led by Mittal and his children and. an interesting thing happened at Mittal’s Sparrows Point mill. Currently. people like you are squeezed between high prices and surcharges for tightly controlled domestic steel production and “dumped” finished steel goods from overseas.

as well as many more. Fortunately for this family-owned. Steel Corp. a Cleveland steel service center.Grand Rapids. temporarily laid off hundreds of workers over Thanksgiving and Christmas. Steel supply concerns Ohio senator Newspaper article from: Charleston Gazette . and form new company) Magazine article from: Crain's Cleveland Business .-based Dennen Steel Corp..next nine months. Last month. Steel Supply Puts Manufacturers In A Pinch... Slump slams center.. Weirton Steel Corp..law protection.S.steelmakers United States Steel Corp. (Nyse:X) Steel.demand for wage and benefit cuts and the union's resistance to concessions.) Magazine article from: Metal Center News . Dennen Steel Supply Co. At least nine domestic steel companies...slump apparently is about to claim another victim. M2 Presswire ... so appealing (see story....war suplus steel and aluminum. was the record 116. Steel Corp.EXPORT INCENTIVES Bellwether Report.....(CASE STUDY: DENNEN STEEL CORP. have filed for bankruptcy. STEEL SUPPLY PLENTIFUL USX STRIKE NOT CRIPPLING. NY) . Dennen Steel has modified its position as a traditional service center with a bold foray into contract manufacturing. alleging.. A "steel supply overhang now seems unavoidable.. by U. (Monarch Steel Co.. including Wheeling.S. 150 ...day nationwide strike by the United Steelworkers of America in 1959..Pittsburgh Steel Corp.com is Doing Due Diligence on United States Steel Corp.. by U...Notice of United States Steel Corp. filed a lawsuit in Cuyahoga Common Pleas Court.. Manufacturing a new identity: to thrive in a changing steel industry. operated out of a Quonset hut on.... In recent.. has sizable debts. It ended only when the U..ensure its future in the rapidly changing steel supply chain.. investors planning to buy debt-laden Manchester Steel.. blaming steel... Steel Corp. could protect Great Lakes Steel division operations in Detroit)(Brief Article)(Editorial) Magazine article from: Crain's Detroit Business .(Business) Newspaper article from: Albany Times Union (Albany.. National Steel deal would forge a future. Page 1).(acquisition of National Steel Corp.research on United States Steel Corp. When.. Manchester Steel Supply Inc.above is what makes the acquisition of National Steel Corp. to buy Manchester Steel Supply Inc... While continuing to distribute. Monday. The last work stoppage at USX. Bethlehem Steel Corp... Mich.look no further than the current debacle in steel supply and pricing to help them see the light. then U.S.industry who asked not to be identified. and Nucor Corp.

Majority of companies surveyed say January orders came incomplete or late Newspaper article from: The Milwaukee Journal Sentinel . "If the duties are dropped. a Washington.C.C. It also gradually raised its product prices in three increments.S.could severely harm the U. News Wire article from: AsiaPulse News . Steel supply puts manufacturers in a pinch.increased..... "If the duties are dropped. there will be a surge of dumped and subsidized.S. Wisconsin) (via Knight-Ridder/Tribune Business News) . attorney who represents Nucor Steel Corp.. steel industry. one of the nation's largest steel producers. attorney who represents Nucor Steel Corp.. D. VSC decided to restrain its factory production to ensure that the overall steel supply matched market demand. one of the nation's largest steel producers.. D.Newspaper article from: The Milwaukee Journal Sentinel (Milwaukee. in line with consumption growth..could severely harm the U. a Washington. 151 ... VIETNAM STEEL CORP TAKES STEPS TO STABILISE PRODUCTION.. steel industry.. said Alan Price.. there will be a surge of dumped and subsidized... Faced with that unfavourable situation. said Alan Price..

Director (Corporate Affairs). The market has given its reaction. which is currently at 5 per cent. Essar Steel.C. Feb. Ispat Industries. “Increasing it marginally could have been good indication. According to Mr Vikram Amin.” he said. irrigation and other infrastructural projects in rural areas under the Bharat Nirman and other Centrally-sponsored projects would help generate additional demand for steel. since this was a voteon-account. the steel industry was expecting a set of measures aimed at reviving demand for steel and controlling dumping of steel products from a host of foreign countries.” he said. can be taken to a peak rate of 7.75 per cent. nothing much could be expected. Jindal Stainless.5 to 10 per cent after which it would need Parliamentary approval. the Government could have at least given some relief to the steel industry. Mr Mathur said the import duty. Home Profile Projects Contact Us Employee Login Enter your search terms Submit search form Organization Key Strengths Our Advantage Key Leadership Our Mission Our Vision Customer Satisfaction Steel Scenario In India Steel Basics Steel Production Flowchart Global 152 . pointing out that many countries have already announced stimulus packages to the tune of hundreds of billions of dollars to save employment and revive demand. “Despite being an Interim Budget. said that in the current economic situation.” said Mr Vinod Mittal. ‘market has reacted’ Mr N. The government can impose this duty during the course of the year by a notification. “I hope the over Rs 60. down 4. because of the current extraordinary situation the industry and economy is currently passing through.000 crore spending plan for construction of rural roads. Executive Director.TAX HOLIDAYS AND OTHER TAX POLICY New Delhi/Hyderabad.” he added. Mathur. he said. The Budget was a good opportunity for the Government to announce major initiatives in this direction. “Steel industry has been seeking import duty to deter countries from dumping their goods in India and it will also insulate Indian companies from unfair trade practices. Vice-Chairman and Managing Director. but the Government decided not to touch it. Metal stocks on BSE sectoral indices fell more than 250 points. 16 The steel industry is disappointed that import duty on steel was not raised to 15 per cent as recommended by the Ministry.

DRI – Electric Arc Furnace route for making steel has proved to be cost effective with low gestation period. In 1996 Asia region produced 38.6 by 2001 and in 2006 the Asian region share in world steel production stands at 53%.080 billion.As per Automobile mission plan (2006-16) report the contribution of this sector to GDP of the country is going to increase to 10% from the existing 3 to 4%.In the year 2006 the production of crude steel has been at 1239 mt the highest in last 20 years and increase of 8. This will act as strong drive for steel growth. As per National Steel Policy 2005. 153 . The over all growth in demand of steel is healthy and is likely to continue at this pace most likely till 2012. India is the largest producer of DRI in the world and total production is likely to exceed 25 million tonne by 2011 (source SIMA). the existing consumption of 2 kg per capita in rural India is likely to go up to 4 kg by 2020. The World Crude steel production has been shown on the right.8 mt an increase of 313. In 1996 China produced 101. The turnover in Automobile sector is going to increase from the existing US $35 billion to US $145 billion by 2016. Tenth plan investment in infrastructure has been revised to 11. Growing urban population and improving macro economic factors are leading to a rapid growth in Housing & infrastructure investment. Asia is poised to be the emerging power house of growth. Indian Perspective In India after liberalization the consumption of finished steel increased from14. per capita steel consumption in India is still very low as compared to other developed countries and is shown on the right.7 million tonne in 1996 to 14. Today India is the seventh largest producer of steel in the world. DRI production in India has grown from 4. The shares of main producers and secondary producer was 36% & 64% respectively. Housing shortage is expected to be 41 million units as per Tenth five year plan (2002-07). In power sector about 100000 MW new capacity is likely to be added in next seven years. 4000 billions over ten years.84 million tones in 1991-92 to 44 million tonne in 2006. However.4% of all crude steel which increase to 46.8% in span of ten years.5 million tonnes in 2006.2 mt and in 2006 it produced 418. India would need indigenous production of over 100 million tones by 2019-20.8% over the previous year 2005. India has one of the lowest electricity consumption at 365 units per capita as compared to 893 in China and 1729 in Brazil. There is need to invest Rs.

Indian steel is competitive today but new technologies to use indigenous resources would have to be developed to remain competitive. The steel industry has the capacity to act as spring board for reaching the national vision of transforming India into a developed country by 2020. 154 .Capacity addition is expected to be 50 million tonnes in next decades.

TQM is not going to be the panacea for rural electric cooperatives. many cynics are calling TQM the latest gimmick. For example. rural electric managers must be aware of this movement that is sweeping across America and the world.|1~ Scott Luecal emphasizes that the consumer dominates the new paradigm. The purpose of this article is to spell out exactly what is meant by TQM. in 155 . Already. the latest fad and quick fix for management problems. not only will there be problems. have entered a new paradigm. Yet. Steve Collier suggests that this new paradigm is mostly characterized by competition. suggest some steps of implementation. Importantly. by Fred Luthans . world class organizations such as Motorola have met their competitive and customer challenges through TQM. Fortunately. A sample of the results achieved through TQM implementation at Wells REC is explained on page 13. Therefore. Obviously. but also the smallest electric cooperative. and bring out some of the common problems. all electric co-op managers should be aware of what is involved in TQM so that they can take all. there is some truth to these accusations. or just what is deemed useful to them. Obviously. This new "quality" approach is needed to meet not only the challenges facing huge multinational corporations such as Motorola. if these challenges are not met. Dan Kessler Introduction In recent issues of Management Quarterly. and rural electric cooperatives in particular. But even the most caustic nay-sayers will admit that "quality" is for real and will definitely provide the competitive edge and improve customer satisfaction. All American organizations today are faced with a new paradigm characterized by global competition and rapidly escalating customer expectations.CHAPTER-9 CASE STUDY Meeting the New Paradigm Challenges through Total Quality Management.|2~ Few would argue that both meeting increasing competition and better satisfying consumers have become extremely important challenges facing all rural electric cooperatives today and in the critical years ahead. it has been suggested that the electric utility industry in general. it should be recognized that rural electric cooperatives are not alone in the tremendous challenges that lie ahead. but rural electric cooperatives may not even survive as we know them today. In fact. many organizations are meeting these challenges through total quality management or TQM.

What Is TQM? Obviously. the definition does point out that there are TQM techniques that are employed to help deliver (the key word in TQM implementation) quality service to customers. consultant or even practitioner has a different meaning for TQM. If suppliers and external support personnel do not deliver quality. The same is true for external suppliers and support personnel such as in maintenance. This is how TQM differs from a traditional customer service orientation. To gain a depth of understanding of TQM. The "Total" Perspective of TQM The total part of TQM differentiates the approach from the traditional inspection. In essence. but so are internal customers such as co-workers or other departments. there are many definitions and connotations associated with TQM. Practically every management author. and anyone who receives anything from anyone in the organization is an internal customer. from the general manager/CEO to the lowest paid hourly workers/clerks are involved in the TQM process. TQM becomes the dominant culture of the organization. 156 .meeting the competitive and consumer challenges that lie ahead in their new paradigm. not just another technique that is used in operations or member services. TQM is the way the organization is managed. then the organization cannot deliver quality to its customers. but also internal customers and outside suppliers and support personnel. the "Customer Is King" (as in Wal-Mart). Well known behavioral scientist Edgar Schein has formally defined organizational culture as "a pattern of basic assumptions--invented. Everyone who gives or passes on anything in the organization is a supplier.|3~ In other words. Everyone in the organization. it would be helpful to examine each letter in the acronym for further refinement and expansion. The "total" part of TQM also encompasses not only the external. Under TQM.. integral part of the TQM approach. not just something in addition to everything else. TQM is an overall organizational strategy that is formulated at the top management level and then is diffused throughout the entire organization. quality control or quality assurance approach. my colleagues and I defined TQM as an organizational strategy with accompanying techniques that deliver quality products and/or services to customers. However. they are also a vital. we feel that TQM is an organizational strategy. or . end-user and purchaser of the product or service. In an earlier article. discovered..

no heating is required. Cold Drawn and Peeled 2. Turned.10 mm approximatly depending on the size of the Dia and as per the customer’s specific requirement. QUALITY MILD STEEL CARBON STEEL FREE CUTTING 157 . that is why it is called a Cold Drawn Bright Bar. Secondly in Peeled / Turned Bright Bar the Hot Rolled Bar is fed into a Turning machine and the surface is turned / removed to the required size of the Dia. no heating is required. This is also a Cold process.e 0. Accurate Tolerance means the tolerance of the Dia is very restricted i. Bright Bars can be used in automatic Machines for making Steel components whereas a Hot Rolled Bar cannot be used.CHAPTER-10 TREND ANALYSIS AND FUTURE SCOPE What is Bright Steel Bars or Bright Bars? Bright Bars are of 2 types-1. These are the reasons why a Bright Bar enjoys advantages over a Hot Rolled Bar. The Bright Bar can be made into the following ranges :SHAPES Rounds Flats (Rectangular Bars) Hexagons (Across Flats) Squares Any other special Shapes / Profiles as per drawing. In a Cold Drawn Bright Bar the Hot Rolled Bars are pickled and drawn through a Tungsten Carbide Die as Cold Rolled. Bright Bars have a smooth and a Bright surface with Accurate Tolerance on the Dia. Bright Bars can be further Ground Finished for special applications.

This is the major sector which consumes Bright Bar. 158 . For various fabrication jobs where accuracy is important. In Textile Machine Manufacturing and in the manufacturing of all types of machineries. In Railways for manufacture of Engines as well as Coaches. Bolts. In Telecom Sector. In Defence Sector for making various Arms and Ammunitions. In Fan Industries. For making shafts in Conveyors. In all Heavy Engineering Industries.ALLOY STEEL What are the uses of a Bright Steel Bar? Bright Bars are used in the following sectors :Automobile Industry :. In all other Engineering Industries. We are making Cold Drawn / Peeled / Turned Bright Bars as per Specific requirements of our customers. Nuts. In Pumps / Electric Motor Industries. All engine components . FROM 3 MM TO 100 MM DIAMETER We also entertain enquiries as per customers specific requirement. shafts are made out of special grades of Bright Bars.

wikipedia.BIBLIOGRAPHY REFRENCES WEBSITE VISITED www.com 159 .google.bokarosteelcity.com www.com www.tatasteel.com www.sail.com www.

K. D. At last I want to thank my parents who financially as well as morally supported us during this entire project work. Greater Noida. I would also like to thank to all those who directly or indirectly supported us during this project work.WORD OF THANKS I take the opportunity to pay our hearty regards to the chairman Dr. shailesh sharma) for his stimulated discussion.K. I am very much thankful to our guide (Mr. M. IIMT. Garg. Prof. constructive and valuable suggestions that helped us in this endeavour. Verma. Dean for extending their hand and their kind support for completion of this project. 160 .

161 .

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