STEEL INDUSTRY ANALYSIS

 JOSNI JOSEPH
 AMIT SINGH
 TEJDIPSINH
 AGENDA
 Industry Overview
 Industry Value chain & Structure
 Market size and Growth
 Industry Growth and segment
 Major players and Competition
 Technology
 Regulation
 Issue and Concerns
 Growth Drivers
 Outlook
 Industry Overview

 Production wise India accounts 3.93% of total steel production globally.

 India is a 5th largest steel producer globally and china at first position.
 Steel industry contribution to GDP is 1.2%.
 Currently India has 59.58mt installation Capacity for 2008-09.
 The growth rate of 1.23% over last year with capacity utilisation at 89%
 The exports decreased by 26% at 3.77mt while imports decline 18% at 5.77mt for
2008-09.
 The steel industry 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
W o r ld s te e l p r o d u c tio n
 Global crude steel production
reached 1.33bnt in 2008. 600
500
 China is the largest producer 400

mn. tonnes
with 502mtn with 2.06% 300

growth. 200
100
 India may become second 0

largest steel producer in the

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world by 2015.

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www.steel.nic.in.
 Steel making process

Iron ore Fluxes Coal

Sinter plant Coke plant

Blast Furnace

LD1 LD2

Slab caster Continuous billet caster

Slabs

Hot strip mill Cold strip mill Billets Merchant mill Wire mill
 Market size and Growth
 Production of steel
gradually increases
 The industry is 60% Steel production and Growth rate

organized. 60000 14
50000 12
 Per Capita steel

'000 tonnes
40000 10
8
consumption is 45 kgs, 30000

%
6
20000
leaving scope for 10000
4
2

further increase in 0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
0

production. Production Growth rate

www.steel.nic.in
 Segments of steel
 Technology:
 Basic oxygen furnace
 Electric arc furnace
 Induction furnace
 Products
 Flat iron
 Long iron
 Value chain

Integrated steel producers
 Secondary steel producers
 Customers
 Construction
 Transport equipment
 others
 Major Players
S a le s o f T o p T e n P la y e rs F o r T h e-0Y9e a r 2 0 0 8

• In India, Public Sector 600

companies contributes 32%

400

R
s.bn
200

of total production. 0
T ata S teel S A IL JSW R IN L IS PA T B hus han S teel
U ttam S tee lLloy ds S teelE s s ar S teel M uk and Ltd

• SAIL,Tata steel and JSW steel

Ltd. Ltd.

are major three players. S a l e s (R s . B n )

• The market leader as per

installed capacity is SAIL
with capacity of 15.2 Mt
• Tata steel is the 2nd largest
player after SAIL.

www.steel.nic.in
 Herfindal Index
Company Net sales Market share Index value

TATA STEEL 253950 55.03 3027.828

SAIL 100391 21.75 473.172

ISPAT 20480 4.44 19.691

JSW 47565 10.31 106.221

BHUSHAN 12985 2.81 7.916

BSL LTD. 546.4 0.12 0.014

STEEL CO OF GUJRAT 1142.8 0.25 0.061

JSPL 24453 5.30 28.073

TOTAL 461512 3662.976

It implies that the competition in the steel industry is medium to high and
with high concentration.
 Michel Porter Analysis
 Threat of Entry: Low to moderate

 Bargaining power of Buyer: Moderate to high due to high

competition

 Bargaining power of Supplier: Moderate to high


 Threat of substitute: Low

 Competitive Rivalry: Moderate to high but compared to

other industry its still low
 Technology
• Two main Technology used:
Basic Arc furnace and
Electric Arc Furnace C ru de ste e l p ro d uctio n by P roce ss R oute

• Cost competitiveness &

quality improvement Induc tion
F urnac e(IF )
initiatives 33%
B as ic O x y gen
F urnac e(B O F )
47%
• Auto operation of blast E lec tric A rc
furnace charging conveyors F urnac e(E A F )
20%
resulting in downtime of
conveyors& increase in Hot
metal production

Sail.nic.in
 Regulation
 Currently 100% FDI allowed.
 Trade policy has been liberalized
 Excise duty cuts to 8 %, Import duty cuts to 5%
 Full utilization of ppp(public, private, partnership) in development of
infrastructure
 Govt. policy allows private capital in port development so that steel
producers would be encouraged to develop port and berth facilities
so as to improve steel productivity
 National Steel Policy 2005
 To enhance the indigenous steel production to 110 MT per annum by 2019-20 from the 04-
05 level of 38MT, implying a compounded annual growth rate of 7.3%.

 To boost steel consumption in the rural areas.

 Developing of risk-hedging instruments like futures and derivatives to contain price

volatility in the steel market.

 To strengthen the existing training and research facilities available to the domestic steel
industry.

 Protection of industry from unfair trade practices resulting in integration of the Indian and
global industry especially in periods of downturn.

 To boost exports govt. will support all efforts to make available export credit, provide trade
information, and cut transaction costs in general.
 Issues and Concerns
 Unscientific Mining
 Coking coal import dependence
 Low R&D investment
 High cost of Debt
 Inadequate Infrastructure
 Low productivity
 China becoming the net exporter
 Growth Drivers
 Key Growth Drivers: Construction, Automobiles, Infrastructure,
Consumer durable, oil and Gas.
 Huge source iron ore, Cheap Labour, quality man power.
 Mostly Steel plants are located near the Raw material Sources.
 Reduction in custom duty in respect of non-alloy steel production.
 The Counter Vailing Duty on the TMT roads and bars reduced from
14% to Nil.
 The ministry of steel has approved 59 R&D projects costing Rs.408
crores, which work on:
 Merger and Acquisition has evolved to be one of the major growth
drivers in the industry leading to economic of scale.
 OUTLOOK
 Indian 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.
 Demand in automobile and infrastructure will lead to growth in steel industry
 Per capita consumption is 40 kg compare to 150kg globally, which has potential
ahead.
 Shortage of Cocking coal will be huge challenge.
 World steel demand to double in next 25 years, a huge opporunities for the
steel industry.
 Upcoming Budget certainly will have great impact on steel industry future.
Thank