CHAPTER 3

DOMINANT FEATURES, ISSUES & CHALLENGES IN

INDUSTRY

Market growth rate and position in the business life

 The Bessemer process was invented in 1855 by Henry Bessemer in England. This process
allowed for the mass production of steel from molten pig iron, reducing the cost of
making steel by more than 50%.

 The open hearth furnace was invented in 1864 by William Kelly in the United States.
This furnace allowed for the production of steel from a wider variety of raw materials
than the Bessemer process, and it was also more efficient.
 Open hearth furnace steel industry

 The Siemens-Martin process was invented in 1865 by Carl Wilhelm Siemens and Pierre-
Émile Martin in Germany. This process was similar to the open hearth furnace, but it
used a different type of fuel and produced a higher quality of steel.

Siemens-Martin process steel industry

 The basic oxygen furnace was invented in 1953 by the Austrian company VOEST-
Alpine. This furnace is now the most common type of steelmaking furnace in the world.
It uses oxygen to blow impurities out of molten pig iron, producing a high-quality steel in
a relatively short amount of time.

Basic oxygen furnace steel industry

These early developments in steelmaking technology made steel a more affordable and versatile
material, and they helped to drive the growth of the steel industry in the late 19th and early 20th
centuries. Steel became a key material in many industries, including construction, shipbuilding,
and manufacturing.

The steel industry continued to grow in the 20th century, but it also faced some challenges. One
challenge was the rise of foreign competition, particularly from Japan and South Korea. Another
challenge was the environmental impact of steelmaking, which led to the development of more
environmentally friendly steelmaking processes.

The steel industry is still a major industry today, and it is expected to continue to grow in the
coming years. However, the industry is facing some new challenges, such as the rise of new
materials and the need to reduce its environmental impact

The steel industry in India has experienced a period of rapid growth and takeoff in recent years.
This growth can be attributed to a number of factors, including:

 The growth of the Indian economy. India is one of the fastest-growing economies in the
world, and this growth has led to an increased demand for steel.

 The government's focus on infrastructure development. The Indian government has made
infrastructure development a key priority, and this has led to increased investment in the
steel industry.

 The availability of raw materials. India is home to large reserves of iron ore and coal,
which are the two main raw materials used in steelmaking.

 The presence of a skilled workforce. India has a large and skilled workforce, which is
well-suited to the labor-intensive nature of steelmaking.

As a result of these factors, the Indian steel industry has grown rapidly in recent years. In 2022,
India was the world's third-largest producer of crude steel, with a production of 120.01 million
tonnes. The industry is expected to continue to grow in the coming years, driven by the country's
economic growth and infrastructure development plans.
Here are some specific examples of the rapid growth and takeoff of the steel industry in India:

 In 2000, India produced 30 million tonnes of crude steel. By 2022, this figure had grown
to 120 million tonnes, an increase of over 300%.

 The Indian steel industry is now the third-largest in the world, after China and Japan. It is
expected to overtake Japan to become the world's second-largest producer of steel by
2030.

 The Indian government has set a target of producing 300 million tonnes of crude steel by
2030. This would require a significant investment in the steel industry, but it would also
create millions of jobs and boost the Indian economy.

The rapid growth of the steel industry in India is a positive sign for the country's economy. It
shows that India is becoming an industrial powerhouse, and it is well-positioned to benefit from
the global demand for steel in the coming years.
 Number of rivals and their relative market share
The steel industry in India is a highly competitive market, with a number of large and well-
established players. The top 10 steel companies in India account for over 70% of the country's
total steel production.

Here is a list of the top 10 steel companies in India, along with their market share:

Market Share
Company
(%)

Steel Authority of India Limited

25.8%
(SAIL)

Tata Steel 22.3%

JSW Steel 13.7%

Jindal Steel and Power 8.7%

ArcelorMittal Nippon Steel India 7.1%

Essar Steel 5.7%

Bhushan Steel 4.5%

Rashtriya Ispat Nigam Limited

3.3%
(RINL)
 Vijay nagar Steel 2.2%

As you can see, the top 3 companies in India, SAIL, Tata Steel, and JSW Steel, account for over
61% of the country's total steel production. These companies are all well-established and have a
strong presence in the domestic market. They are also investing heavily in new capacity, which
will help them to meet the growing demand for steel in India.

The other companies on the list are also significant players in the Indian steel industry. They
have a strong track record of production and sales, and they are well-positioned to benefit from
the growth of the Indian economy.

The steel industry in India is expected to continue to grow in the coming years. This growth will
be driven by a number of factors, including the increasing demand for steel from the
construction, automotive, and manufacturing sectors. The top 10 steel companies in India are
well-positioned to benefit from this growth, and they are likely to maintain their dominant
position in the market.
 Distribution channels

The steel industry uses a variety of distribution channels to get its products to market. The most
common channels are:

 Direct sales: Steelmakers sell directly to end users, such as construction companies,

manufacturers, and fabricators. This channel is often used for large orders or for products
that require specialized expertise.

 Retail: Steel products are also sold through retail outlets, such as hardware stores, home
improvement centers, and lumberyards. This channel is typically used for smaller orders
and for products that are more consumer-oriented.

 Wholesale: Steelmakers sell to wholesalers, who then sell to retailers or to end users. This
channel is often used for products that are not as widely known or that are not as easy to
sell directly to end users.

 Trading firms: Trading firms buy steel products from steelmakers and then sell them to
other companies, such as wholesalers or retailers. This channel is often used for
international trade.

The choice of distribution channel depends on a number of factors, including the type of steel
product, the target market, and the company's marketing strategy. For example, a steelmaker that
produces high-end steel products for the construction industry might use a direct sales channel to
ensure that its products are sold to the right customers. A steelmaker that produces steel products
for the automotive industry might use a wholesale channel to reach a wider range of customers.

In recent years, the steel industry has been using more direct channels to reach end users. This is
due to the increasing demand for customized steel products and the growing importance of
customer service. Direct channels also allow steelmakers to control their brand and to build
closer relationships with their customers.
The choice of distribution channel is an important decision for steelmakers. The right channel
can help a company reach its target market, build its brand, and provide excellent customer
service.
 Technological changes

The steel industry in India has undergone a number of technological changes in recent years.
These changes have helped to improve the efficiency and sustainability of the industry, and they
have also helped to make Indian steel more competitive in the global market.

Some of the most significant technological changes in the Indian steel industry include:

 The adoption of new steelmaking technologies, such as the basic oxygen furnace (BOF)
and the electric arc furnace (EAF). These technologies have helped to improve the quality
of Indian steel and to reduce the environmental impact of the steelmaking process.

 The use of automation and robotics in the steelmaking process. This has helped to
improve productivity and to reduce the number of accidents in the workplace.

 The development of new steel grades with improved properties. These new grades of
steel are being used in a variety of applications, including the automotive, construction,
and energy sectors.

 The adoption of green technologies, such as the use of renewable energy sources and the
development of more efficient steelmaking processes. These technologies are helping to
make the Indian steel industry more sustainable.

These technological changes have had a significant impact on the Indian steel industry. They
have helped to improve the quality, efficiency, and sustainability of the industry, and they have
also helped to make Indian steel more competitive in the global market.

Here are some specific examples of technological changes that have taken place in the Indian
steel industry:

 In 1976, the combined blowing technology (CBT) involving blowing from top and
bottom of the converter was introduced in Indian steel sector. This led to high
productivity, low treatment time and high labour productivity.
  In the 1980s, the Indian steel industry began to adopt electric arc furnaces (EAFs). EAFs
are more energy-efficient than blast furnaces, and they can use scrap iron as a feedstock.
This helped to reduce the cost of steel production in India.

 In the 1990s, the Indian steel industry began to adopt continuous casting technology.
Continuous casting allows steel to be produced in a continuous process, which reduces
the amount of scrap and waste.

 In the 2000s, the Indian steel industry began to adopt new steelmaking technologies, such
as the FINEX process. The FINEX process uses natural gas as a feedstock, which makes
it more environmentally friendly than traditional steelmaking processes.

These are just a few examples of the technological changes that have taken place in the Indian
steel industry in recent years. These changes have helped to improve the efficiency,
sustainability, and competitiveness of the industry.
 Product and Services differentiation

The steel industry in India is a highly competitive market, with a number of large and well-
established players. In order to compete effectively, steelmakers in India have been focusing on
product and service differentiation.

Here are some of the ways in which steelmakers in India are differentiating their products and
services:

 Product differentiation: Steelmakers are differentiating their products by offering a wider

range of grades and specifications. They are also developing new grades of steel with
improved properties, such as high-strength steels and corrosion-resistant steels.

 Service differentiation: Steelmakers are differentiating their services by offering a wider

range of value-added services. These services include:

o Technical assistance: Steelmakers are providing technical assistance to customers

to help them select the right grade of steel for their application.

o Processing services: Steelmakers are providing processing services, such as

cutting, bending, and welding, to help customers save time and money.

o Delivery services: Steelmakers are providing delivery services to help customers

get their steel products on time and in the right condition.

Product and service differentiation is an important strategy for steelmakers in India. By

differentiating their products and services, they can create a competitive advantage and attract
new customers.

Here are some specific examples of product and service differentiation in the Indian steel
industry:
  Tata Steel offers a wide range of steel grades, including high-strength steels, corrosion-
resistant steels, and specialty steels.

 JSW Steel offers a variety of value-added services, such as technical assistance,

processing services, and delivery services.

 ArcelorMittal Nippon Steel India offers a range of green steel products, which are made
using more sustainable production processes.

These are just a few examples of the ways in which steelmakers in India are differentiating their
products and services. By differentiating their products and services, they can create a
competitive advantage and attract new customers.
 Capital requirements and the ease of entry & exit

The steel industry in India is a capital-intensive industry. The capital requirements for setting up
a steel plant are very high, and this can act as a barrier to entry for new players. The cost of land,
equipment, and raw materials are all very high, and this can make it difficult for new entrants to
compete with the established players.

The ease of entry and exit in the steel industry in India is also limited. The government has put in
place a number of regulations that make it difficult for new entrants to enter the market. These
regulations include environmental regulations, safety regulations, and licensing requirements.

The exit barriers in the steel industry are also high. This is because the cost of shutting down a
steel plant is very high. The plant and equipment are often very specialized, and they can be
difficult to sell or repurpose. This can make it difficult for companies to exit the market even if
they are not profitable.

As a result of the high capital requirements, the limited ease of entry, and the high exit barriers,
the steel industry in India is a very concentrated industry. The top 10 steel companies in India
account for over 70% of the country's total steel production.

However, there are some trends that could make it easier for new entrants to enter the steel
industry in India. These trends include:

 The government is gradually relaxing some of the regulations that make it difficult for
new entrants to enter the market.

 The cost of steelmaking technology is declining, which makes it more affordable for new
entrants to set up a steel plant.

 The demand for steel in India is growing, which could create opportunities for new
entrants.
Overall, the steel industry in India is a challenging market for new entrants. However, there are
some trends that could make it easier for new entrants to enter the market in the future.
 Industry profitability

The profitability of the steel industry in India has been volatile in recent years. The industry has
been affected by a number of factors, including the rising cost of raw materials, the slowdown in
the global economy, and the imposition of anti-dumping duties by some countries.

In 2022, the profitability of the steel industry in India improved. This was due to a number of
factors, including the rise in steel prices, the increase in demand for steel, and the government's
intervention to support the industry.

However, the profitability of the steel industry in India is still facing some challenges. The rising
cost of raw materials is a major concern for the industry. The cost of iron ore and coking coal,
which are the two main raw materials for steelmaking, has been rising in recent years. This has
put pressure on the margins of steelmakers.

The slowdown in the global economy is also a challenge for the steel industry in India. The
demand for steel is closely linked to the global economy. If the global economy slows down, the
demand for steel will also slow down. This will have a negative impact on the profitability of the
steel industry in India.

The government's intervention to support the industry has helped to improve the profitability of
the steel industry in India. However, the government's support is not sustainable in the long term.
The industry needs to find ways to reduce its costs and improve its efficiency in order to be
profitable in the long term.

Here are some of the factors that could affect the profitability of the steel industry in India in the
future:

 The cost of raw materials: The cost of raw materials is a major input cost for steelmakers.
If the cost of raw materials continues to rise, it will put pressure on the margins of
steelmakers.
  The demand for steel: The demand for steel is closely linked to the global economy. If
the global economy slows down, the demand for steel will also slow down. This will
have a negative impact on the profitability of the steel industry in India.

 The government's policies: The government's policies can have a significant impact on
the profitability of the steel industry in India. For example, if the government imposes
anti-dumping duties on imported steel, it will help to protect the domestic steel industry
and boost its profitability.

Overall, the profitability of the steel industry in India is expected to remain volatile in the near
future. The industry will need to find ways to reduce its costs and improve its efficiency in order
to be profitable in the long term.
 Issues and Challenges in Industry

The steel industry in India is facing a number of challenges, including:

 High cost of raw materials: The cost of raw materials, such as iron ore and coking coal, is
a major input cost for steelmakers. The high cost of raw materials has put pressure on the
margins of steelmakers.

 Low per capita consumption: The per capita consumption of steel in India is very low
compared to other countries. This is due to a number of factors, including poverty, lack of
infrastructure, and lack of awareness about the benefits of steel.

 Lack of technology adoption: The steel industry in India is still using outdated

technologies. This has led to lower productivity and higher emissions.

 Inefficient supply chain: The supply chain in the steel industry in India is inefficient. This
has led to higher transportation costs and longer lead times.

 Environmental concerns: The steel industry is a major polluter. The industry needs to find
ways to reduce its emissions and become more sustainable.

 Competition from China: China is the world's largest producer of steel. The Chinese steel
industry is heavily subsidized by the government, which gives it an unfair advantage over
the Indian steel industry.

These challenges are posing a threat to the growth of the steel industry in India. The industry
needs to find ways to overcome these challenges in order to remain competitive and sustainable
in the long term.

Here are some of the measures that can be taken to address the challenges facing the steel
industry in India:
  Reduce the cost of raw materials: The government can help to reduce the cost of raw
materials by signing long-term contracts with suppliers and by providing subsidies to the
steel industry.

 Increase per capita consumption: The government can increase per capita consumption
by promoting the use of steel in infrastructure, construction, and other sectors.

 Adopt new technologies: The steel industry needs to adopt new technologies to improve
productivity and reduce emissions. The government can help by providing subsidies and
tax breaks to companies that adopt new technologies.

 Improve the supply chain: The government can improve the supply chain by investing in
infrastructure and by promoting the use of e-commerce.

 Address environmental concerns: The steel industry needs to address environmental

concerns by reducing emissions and by using more sustainable production processes. The
government can help by providing subsidies and tax breaks to companies that adopt
sustainable practices.

 Counter competition from China: The government can counter competition from China
by imposing anti-dumping duties on imported steel and by promoting the export of Indian
steel.

By addressing these challenges, the steel industry in India can become more competitive and
sustainable in the long term.