Presented by: Tehseen Khan Jitin Sachdeva

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Industry overview Industry Value Chain & Structure Market Size & Growth Industry Segments Major Players & Competition Technology Regulations Issues & Concerns Growth drivers Outlook

Industry Overview
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Fifth largest producer of crude steel in the world Largest producer of sponge iron in the world Strong public sector presence Showed 7.9 % GDP Growth rate during Q2(July-Sep)2009-10 Showed 7.6 % growth in Index of Industrial Production (IIP) during Q1(April-Nov)2009 Likely to become the second largest producer of crude steel by 2015-16. It is expected to achieve a steel production Capacity of nearly 124mt by year 2011-12 Steel sector is expected to generate additional employment of around 4 million by 2020

Global Scenario

Steel Demand Shift to developing countries:
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Japan and South Korea saw significant decline in their production levels Japan will be still important as an R&D foothold for major steel-using industries Expansion of automotive steel sheet joint venture in Brazil Expansion of automotive steel sheet joint venture in China Starting a new cold rolling mill joint venture in Vietnam. China is the largest producer with 502 MT with 2.06% growth India may become second largest steel producer in the world by 2015 World crude steel production rose to 120.3 MT @ 31% in march 2010

C ru d e S te e l P ro d u c tio n
in M T 1 9 ,5 8 9 2 ,8 8 2 1 6 ,2 9 9
F Y :2 0 0 9 -1 0

2 6 ,5 1 1

1 5 8 ,0 1 0 Ja p a n C h in a In d ia Ir a n U S

Source:Min. of Steel

a.Industry Value Chain
Steel making process Iron Ore Fluxes Sinter plant Coke plant Coal

Blast Furnace LD1


Slab caster Slabs hot strip mill Cold strip mill

Continuous billet caster


Merchant mill

Wire mill

b.Organized Vs Unorganized

Major Chunk of producers are Organized
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Or gani z ed V s Unor gai ni z ed Unor ganized, 40%

Steel Authority of India Limited (SAIL) Tata Steel Limited (TSL) Rashtriya Ispat Nigam Ltd. (RINL) ISPAT ESSAR Jindal South West Limited (JSW) Corex /MBF based units Pig Iron units Electric Arc Furnace units Producers of HR sheets/coils Cold Rolled sheets/coils, GP/GC sheets Color Coated Sheets

Or ganized, 60%

Unorganized segment comprises
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Market Size & Growth
Production & Grow th trend

0.02 0 2004- 2005- 2006- 2007- 2008- 200905 06 07 08 09 10 Ye a rs


Source-Min. of Steel


Production has increased by only 1.96% in FY:2009-10 as compared to 8.50% increase in FY:2008-09 The growth was driven by capacity expansion from 47.99(mtpa) in 2004-05 to 72.76(mtpa) in 2009-10 Present per capita consumption is only around 47 kg which shows prospects to grow

70000 60000 50000 40000 30000 20000 10000

0.1 0.08 0.06 0.04 P roduction growth(% )

('000 tonne)

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With growth in production for sale lagging behind consumption growth, India's imports increased in 2007-08 Exports have declined to ensure greater domestic availability Imports sharply increased from 1.75 MT in 2003-04 to 5.21 MT in Q3 2009 to fill up supply-demand gap in the domestic market Steel exports decreased by 36% as it reached 2.099 MT Steel imports at 5.21 MT, showed a growth of 16.6 % in Q3:2009-10

8000 7000 6000 5000 4000 3000 2000 1000 0

E x p o r t/ I m p o r t T r e n d o f F i n i sh e d S te e l

million tonne

Im p o r t Ex p o r t

2 0 0 4 -0 2 0 0 5 -0 2 0 0 6 -0 7 0 0 7 -0 2 0 0 8 -0 92 0 0 9 5 6 2 8 1 0 :Q 3 Y e a rs

Source-Min. of Steel

Segments of steel

PRODUCTS  Flat iron  Long iron VALUE CHAIN  Integrated steel producers  Secondary steel producers CUSTOMERS  Construction  Transport equipment  others

Finished Steel segments
Finished steel

Long products

Flat products

Bars & rods
CTD/MTD Bars & Rods

Plate Sheet Strips Wide

Wire rods
Angels ,shapes & Sections

Rails Wires Bright bars


Finished Steel Products

Long products are produced by hot rolling/forging of Bloom/billets/pencil ingots into useable shape/sizes Flat iron products are produced from slabs/thin slabs in rolling mills using flat rolls Both Long iron & Flat iron production show a positive trend Long iron production in Q3 2009-10 was 21119 (‘000tn) which was more than Flat iron production at 19382(‘000tn)

Long/Fla t iron production
30000 25000 000 Mt tonnes 20000 15000 10000 5000 0 2005-062006-072007-082008-09 200910-Q3 ye ar s Flat produc ts Long produc ts

Source-Min. of Steel

Sales Figures of Major Players-FY2008-09

SAIL,TSL & JSW are Key Players of the industry. SAIL is the Largest player with Rs 445.29 bn & TSL is 2nd largest with Rs 240.24 bn Market leader as per installed capacity is SAIL with capacity of 15.2 Mt Public Sector companies accounts for 32% of industry’s total production

500 400 Rs.BN 300 200 100 0 SA Tat JS RI IS Bh Utt Llo Es Mu IL a W NL PA us am yds sar ka 445 240 161 123 85 Companies 50 44 26 19 19

Sales (Rs. Bn)

Ky l yr I sa e Cpct (n m e P es nt l d aai y ms a l i t) 20- 9 08 0

S il a O es t r h 3% 8 2% 5

JS W 1% 4 I P T SA 5 % RN I L 5 % T t Se l aa t e 1% 3

Source-Min. of Steel

1. 2.

Herfindahl Index Michel Porter Analysis

Herfindahl Index

Value of Herfindahl index for Integrated steel manufactures is 2724.56
Net sales (RS lakhs) Market share (%) Index value


63074825.47748 969714 39.16916 210470 8.501406 516707 20.87108 1429005.772086 51690.208789

649.102 1534.223 72.27391 435.602 33.31698 0.043593 2724.561


It implies that the competition in the steel industry is medium to high and with high concentration.

Michel Porter Analysis
Michel Porter Analysis of Indian Steel Industry

Entry barriers: High
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High Capital requirement as it is capital intensive industry, depending on location of plant. Government policy: the regulatory clearances and other issues are some of the major problems for the new entrants. As its labor intensive company, labor leads to high bargaining power of supply High bargaining power of suppliers. The steel industry having global in terms of competition with large producing countries like China. Branding is not common and there is little differentiation between competing products. As major steel consumer like oil & gas ,automobiles, shipping, power generation have high bargaining power but small and retail consumers don’t. As steel has no strong substitute , but there are some such as aluminum, plastics.

Bargaining power of suppliers: High to Moderate
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Competition: High
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Bargaining power of Buyers: Mixed

Threat of substitutes: Low to Moderate

C d s e p d c nb P o e sR u ru e te l ro u tio y r c s o te
In u tio dc n F rn c (IF u ae ) 3% 3 B sicOy e a xg n F rn c (B F u a e O) 4% 7 E c A le tric rc F rn c (E F u a e A) 2% 0

Production of hot rolle d long product (source : Ste e
22 20 18 16 14 12 10 8 6 4 2 0 Bars Structural S pecial section Total Reported

in million tonne

SAIL setting up with Posco for using latest technology named Finex.  Finex makes steel on iron fines & non-coking Coal.  Main Technologies : Basic Arc furnace, Induction furnace and Electric Arc Furnace.  Cost competitiveness & quality improvement initiatives  Auto operation of blast furnace 2006-07 is to increase in Hot metal 2007-08 production 2008-09


Source-Min. of Steel

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Government proactive incentive plans to boost economic growth in construction,infrastructure,automobile & power has helped industry to grow Currently 100% FDI allowed Advance Licensing Scheme allows duty free import of raw materials for Exports Import duty reduced to 5% presently Excise duty cuts to 8 % Govt. policy allowed private capital in port development so that steel producers would be encouraged to develop port and berth facilities so as to improve steel productivity Trade policy has been liberalized

Issue & Concerns
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High cost of electricity in India may hamper the steel industry’s production level Low R&D investment Coking coal shortage & import dependence Infrastructure constraints related to ports, rail, road network Slow environmental clearance for project site as well as for iron ore and coal mining activities Technical constraints Unscientific Mining

Growth Drivers
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Key Growth Drivers: Construction, Automobiles, Infrastructure, oil and Gas Abundance of Iron ore, Cheap labor & Quality man power Ministry of Steel has approved 64 R&D projects costing Rs. 422 crore Merger and Acquisition has evolved to be one of the major growth drivers in the industry leading to economic of scale The Counter Veiling Duty on the TMT roads and bars reduced from 14% to Nil Demand is expected to rise in future with economic and industrial growth Reduction in custom duty in respect of non-alloy steel production Steel companies have their own mines for key raw materials

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Steel Co. acquiring stakes in the foreign firms to become global leaders Target to achieve an export ratio of around 25% of total production Target of 110mT by 2020 Increasing Demand in automobile and infrastructure will lead to growth in steel industry Per capita consumption is only 47 kg against the world average of 190,so a great potential ahead. Shortage of Cocking coal will be huge challenge World steel demand to double in next 25 years, a huge opportunities for the steel industry Upcoming Budget certainly will have great impact on steel industry future


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