1. business and industrial
2. iron and steel industry

INDIA AHOY!!!!!
STEEL SECTOR
World Steel Industry – Top Ten
8
4
7
1
Ukraine
Germany
Russia
45.8 mT
68.5 mT
38.6 mT
China
502 mT
2
10
Japan
118.7 mT
Italy
30.6 mT
USA
91.4 mT
S. Korea
53.6 mT
6
3
5
Brazil
33.7 mT
9
Global crude steel Production: 1326.5 million tonnes (mT)
Source: IISI
Global ranking of Indian steel
Indian Steel Industry
Supply
With trade barriers having been lowered over the years, imports play
an important role in the domestic markets.
Demand
The demand is derived from sectors that include infrastructure,
consumer durables and automobiles.
Barriers to entry
High capital costs, technology.
Bargaining power of suppliers
The government’s move on railway freight costs and grid power costs
would determine the final price of the metal.
Bargaining power of customers
High, presence of a large number of suppliers and access to global
markets.
Competition
High, presence of a large number of players in the unorganized
sector.
Indian Potential for Steel
Huge Potential for Demand
• High GDP growth rate of 7%
• 1 billion population
• Low per capita steel consumption of 33kg (World av. 181 kg)
Skilled Human
Resources
Growth
factors
for India
Abundant Iron Ore
Reserves 23 billion tonnes
Government Policy
• Stable currency
• Easing of regulations
• Strong Banking & judicial
system
• Encouraging trade relations with
ASEAN and other countries
• Infrastructure building
• Exploring new Energy resources
Indian Steel Industry – An Overview
 Fifth largest producer of steel in the world and second largest
producer of crude steel
- Press Information Bureau
 Steel production reached 28.49 million tonne (MT) in AprilSeptember 2009.
 About 50% of the steel produced in India is exported.
 India accounts for over 7% of the total steel produced globally
 India accounts for around 5 per cent of the global steel
consumption
 Huge Iron Ore reserves – 23 bn. tonnes
 Indian Steel Producers are increasingly looking for overseas
acquisitions in steel as well as raw materials.
 Positive overall growth in the production of crude steel
Composition of Steel Production
-A Value Proposition
Pipe
GP
Long Products
CR
Plate
HR
HR
Quantity
%age
Long
Prods.
13.928
42%
HR
7.254
22%
Plates
1.832
5%
CR
2.251
7%
GP
4.790
14%
Pipes
3.616
11%
Total
33.670
100%
Steel - Products
Indian Steel Industry
SWOT Analysis
SWOT ANALYSIS OF INDIAN STEEL
INDUSTRY
STRENGTHS
WEAKNESSES
•Abundant resources of iron ore
•High cost of energy
•Low cost and efficient labour
force
•Higher duties and taxes
•Strong managerial capability
•Infrastructure
•Quality of coking coal
•Strongly globalised industry and
emerging global competitiveness
•Labour laws
•Modern new plants & modernised
old plants
•Dependence on imports for
steel manufacturing equipments
& technology
•Strong DRI production base
•Regionally dispersed merchant
rolling mills
•Slow statutory clearances for
development of mines
SWOT ANALYSIS OF INDIAN STEEL
INDUSTRY
OPPORTUNITIES
• Huge Infrastructure demand
• Rapid urbanisation
• Increasing demand for
consumer durables
• Untapped rural demand
• Increasing interest of foreign
steel producers in India
THREATS
• Slow growth in infrastructure
development
• Market fluctuations and
China’s export possibilities
• Global economic slow down
Michael Porters Five Forces Analysis
Buyers’ Power
• Increasing Demand for Steel
• Fragmented Coke Suppliers
Suppliers’ Power
• High Raw Material Prices
• Lack of Captive Source Hurting Steel Producers
• Lack of Transportation
• Backward Integration
Intensity of Competition
• Competition from Foreign Players
• Spurt in Merger and Acquisition Activities
Threat of New Entrants
• High Cost of Basic Inputs and Services
Threat of Substitutes
• Use of Aluminum/Plastic
PEST Analysis
Political Factors
• Recommendations on Captive Mines
• National Steel Policy to Remove Bottlenecks
Economic Factors
• GDP Growth Rate
• Reduction in Customs Duty
Social Factors
• Rural-Urban Divide
• Higher Disposable Income
Technological Factors
• Popularity of Steel Portals
• Application of SML (Steel Markup Language)
Top 10 Players
•
•
•
•
•
•
•
•
•
•
1st; 103.3 mmt; ArcelorMittal
2nd; 37.5 mmt; Nippon Steel
3rd; 35.4 mmt; Baosteel Group
4th; 34.7 mmt; POSCO
5th; 33.3 mmt; Hebei Steel Group
6th; 33.0 mmt; JFE
7th; 27.7 mmt; Wuhan Steel Group
8th; 24.4 mmt; Tata Steel
9th; 23.3 mmt; Jiangsu Shagang Group
10th; 23.2mmt; U.S. Steel
Source: World Steel Association
ArcelorMittal
• largest steel company, with 315,867 employees
in more than 60 countries.
• formed in 2006 by the merger of Arcelor and
Mittal Steel. ($38.3 billion )
• It ranks 28th on the 2009 Fortune Global 500
list.
• the market leader in steel for use in automotive,
construction, household appliances and
packaging.
• ArcelorMittal is looking to develop positions in
the high-growth Indian and Chinese markets.
MAJOR PLAYER - SAIL
• fully integrated iron and steel maker.
• GOI - 86% of SAIL's equity
• However, SAIL, by virtue of its "Navratna"
status, enjoys significant operational and
financial autonomy.
• SAIL and TISCO (which enjoy the benfits
of captive ore mines) are among the
lowest cost producers of steel in the world.
Major units of SAIL are as under: .
Integrated Steel Plants
• Bhilai Steel Plant (BSP) in Chhattisgarh
• Durgapur Steel Plant (DSP) in West Bengal
• Rourkela Steel Plant (RSP) in Orissa
• Bokaro Steel Plant (BSL) in Jharkhand
Special Steel Plants
• Alloy Steels Plants (ASP) in West Bengal
• Salem Steel Plant (SSP) in Tamil Nadu
• Visvesvaraya Iron and Steel Plant (VISL) in Karnataka
Subsidiaries
• Indian Iron and Steel Company (IISCO) in West Bengal
• Maharashtra Elektrosmelt Limited (MEL) in Maharashtra
• Bhilai Oxygen Limited (BOL) in New Delhi
SAIL’S GROWTH PLANS
mT
2005-06
2011-12
Hot Metal
14.60
22.5
Crude Steel
13.47
21.6
Saleable
Steel
12.05
20
- Planned Investments of US$ 7.7 bn.
- Includes only growth in existing Units
Other Major steel producers
•
•
•
•
•
•
•
•
•
Tisco
JSW
Essar Steel
RINL
MECON
MOIL
MSTC
KIOCL
NMDC
TATA STEEL LIMITED
•
•
•
•
•
Tisco -1907
country's single largest
Integrated steel plant
ranks 34th in the world
Technical collaboration with Nippon Steel
& Arcelor
• In January 2007 Tata Steel made a
successful $11.3 billion offer to buy
European steel maker Corus Group PLC.
STEEL SECTOR TRENDS
• India - world’s largest producer of
direct reduced iron (DRI) or sponge
iron with nearly 20 million tonnes
production in 2008-09.
• Estimated steel production capacity
-124 million tonnes by the year
2011-12.
• Generate additional employment of
around 4 million by 2020 for
production of around 295 million
tonnes of crude steel by 2019-2020.
•
222 MoUs have been signed with
various States for planned capacity
of around 276 million tonnes
Steel: Key facts
Performance of PSUs
Production, consumption and
growth of steel
Crude steel production
Trends in production,
private/public sector
Turnaround in Industrial Activity
12
Services
10
8
Industry
% growth
6
4
2
0
-2
2000
2001
2002
2003
2004
2008
-4
-6
Agriculture
-8
Agriculture
Industry
Services
Services and Industry contribute to higher GDP growth
Indian Steel Growth
-Slowly, Steadily
40
36.5
35
30
26.2
25
24.2
20
15
14.3
12.02
10
Controlled
Regime
5
9.36
6.75
5.05
3.23
0
1.1
1951
1.1
1.62
1991
2005
Proof of the Pudding !
Booming Capital Market
Indicators
2003-04
2004-05
2005-06
BSE Index as on March 31
5591
6493
11280
Market Capitalisation as on
March 31 (US$ bn.)
266.8
377.33
671.5
Foreign Institutional
Investors Net Purchases in
Equity market (US$ bn.)
6.7
8.65
10.4
(For Calendar Year)
Other Key Indicators
Exports crossed US$100bn. mark in 2005-06.
Fourth consecutive year of more than 20%
exports growth
Imports of Capital goods increasing
Moderate inflation rate - within 4-5%
Stable Rupee against US dollar
Growing corporate sector profits
Growing Forex reserves - US$ 160 bn.
Business Confidence at all time high
Steel Sector
The Back Seat Drivers!
BOOMING STEEL CONSUMING SECTORS
20
Construction
15
Capital Goods
Construction
% growth
10
Manufacturing
Manufacturing
5
Consumer Durables
Capital Goods
0
00-01
01-02
02-03
-5
03-04
04-05
05-06
Consumer
Durables
-10
Industrial growth led by Manufacturing
Capital and Consumer Goods sectors flag bearers of manufacturing sector growth
INDIA’S CRUDE STEEL PRODUCTION (MT)
HISTORIC TRENDS
58 mT
in 2008
45
40
1.25 mT
in 1948
India gains independence
in 1947
35
16.2 mT
in 1991
6.6 mT
in 1973
30
25
20
Enabled by
India’s
Economic
liberalization
process
15
10
5
0
1949
1953
1957
1961
* Year indicates FY
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2008
Apparent Finished Steel
Consumption (mT)
40
38.4
CAGR – 7.0%
mT
35
33.3
31.2
30
25
21.7 22.1
20
15
22.6 23.5
25
26.5 27.4
28.9
18.7
14.8 15
10
91-92
15.3
93-94
95-96
97-98
99-00
01-02
03-04
05-06
National Steel Policy
Addressing the Weaknesses
&
Harnessing the Opportunities
Approved by Government of India in September 2005
OBJECTIVE
 To have modern and efficient steel industry of world
standards, catering to diversified steel demand.
 To achieve global competitiveness in cost, quality, productmix, efficiency and productivity
 To attain Finished Steel production of 110 mTpa by 2019-20
Production
Imports
Exports
Consumption
2019-20
110
6
26
90
CAGR
(Base –
08-09)
7.3%
7.1%
13.3%
6.9%
STRATEGY
Demand Side
– Strengthening of delivery chain
– Interface between producers, designers of steel intensive
products, fabricators and ultimate user
– Creating awareness about cost-effective and technically
efficient end-use of steel
Supply side
– Enhanced and easy access to critical inputs – iron ore &
coking coal
– Expansion and improvement in quality of infrastructure
– Well developed financial market
– Increased focus on R&D, training of manpower and
integrated information services
New Capacities
Proposed state-wise capacity additions upto 2012.
J’khand:
34 mtpa
W Bengal:
4 mtpa
Ch’garh:
9 mtpa
Orissa :
38 mtpa
AP:
3.3 mtpa
Karnataka:
9.7 mtpa
SAIL
Tata Steel
RINL
Essar
Bhushan
JSPL
JSW
Ispat
Sterlite
Mittal
POSCO
MMK
Future of Indian Steel Industry
You ain’t seen nothing yet !
Projected per Capita consumption of
Finished Steel in India (kg)
Year
Per Capita Steel Consumption
2011-12
48
2019-20
80
2024-25
110
2029-30
135
2034-35
175
India’s current population is - 1100 million
It is assumed that till 2051, population would be about : 1.4 bn.
GROWTH SCENARIOS
Optimistic
Case
Medium
Growth
Conservative
Fin. Steel
Cons.
Growth
Rate
Consum- Fin. Steel
ption
Cons.
Growth
(mTpa)
Rate
Consumption
(mTpa)
Fin. Steel
Cons.
Growth
Rate
Consumption
(mTpa)
20052020
7.6%
100
6.9%
90 *
5.5%
76
20202030
6.5%
188
5.5%
147
4.5%
118
20302040
5.0%
305
4.0%
217
3%
158
20402050
5.0%
498
4.0%
322
3%
212
* - Also projected by National Steel Policy
INDIAN STEEL INDUSTRY
A BRIGHT FUTURE
RESOURCES
Abundant Iron Ore reserves
Strong Managerial skills in Iron and Steel making
Large pool of skilled Man-power
Established steel players with strong skills in steel making
OPPORTUNITIES
High economic growth driven increasingly by industry
Faster Urbanisation
Increased Fixed Asset Building
Automobiles and component industry growth
POLICY
Pro-active stance of Govt.
Encouragement for overseas investments
• Currently with a production of 56 million tones
India accounts for over 7% of the total steel
produced globally, while it accounts to about 5%
of global steel consumption.
• The steel sector in India grew by 5.3% in May
2009. Globally India is the only country to post a
positive overall growth in the production of crude
steel at 1.01% for the period of January – March
in 2009.
Highlights of 2008-09
• Crude steel production was at 54.52
million tonnes, a growth of 1.23% over last
year with capacity utilisation at 89% during
the year. It grew at more than 9% annually
from 38.72 million tonnes (MT) in 2003-04.
• The growth was driven by capacity
expansion from 43.91 million tonnes per
annum (MTPA) in 2003-04 to 64.40 MTPA
in 2008-09.
Financial Year '09
•
•
•
first half it experienced an extraordinary spurt in demand backed by
expansion of key consumer sectors.
second half experienced a significant demand contraction on account of the
global financial crisis.
Thus overall, India’s crude steel production grew by 1.2%YoY to 54.5 MT.
•
The various monetary and fiscal packages announced by the government
helped the domestic steel industry to counter the slowdown and thus the
demand started reviving upwards from the fourth quarter onwards.
•
Domestic steel prices and international steel prices experienced a divergent
trend in FY09. While during the first half, international prices touched an all
time high levels backed by robust demand, the second half witnessed more
than 50% fall in the prices on account of significant contraction in demand
due to the global credit crisis. Raw material prices like iron ore and coking
coal also experienced a similar trend. It may be noted that most of the
domestic steel players entered into an annual contract for coking coal in
June-July 2009 when prices were at their peak. Hence the industry
experienced a severe pressure on the margins.