Industry Analysis of Steel Sector-India

8/3/2019 Industry Analysis of Steel Sector-India

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Industry Analysis

STEEL INDUSTRY

SCHOOL OF PETROLEUM MANAGEMENT

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Anand Singh Sandeep Prasad


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Content

Introduction

Economic Trait

Competition Analysis

Driving ForceCompetitive Position

Competitive Moves

Success Factors

Prospects

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Introduction

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Initial phase, - the Tata Iron & Steel Company, the Indian Iron and Steel

Company and Visveswaraya Iron & Steel Ltd.

India is the 5th largest producer of crude steel in the world and is

expected to become the 2nd largest producer by 2015-16.

Total finished steel during April - December 2010 :

Production for sale was at 47.30MT growth of 7.9 per cent

Steel exports increased by 17.3 per cent as it reached an estimated 2.46

million tonne while steel imports were at an estimated 5.36 million tonne,a growth of 2.8 per cent.

India is net importer of steel


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Industry Economic Traits India 5th largest producer in world

Per capita consumption lowest in world 50kg per

Capita VS 190 kg global average

Indian steel industry during 2005-2010 registered

8.4% growth in production and 9.7% consumption

Major players are-

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TISCO 6.85 MT Rs 76745 Cr

SAIL 14.35 MT Rs 57234 Cr

JSW 14.3 MT Rs 29176 Cr

Source: Money control & company website


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Competition Analysis

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Threat from new entrant-

Low to Moderate

- Industry is Capital Intensive

- Regulatory Environment

Supplier -Moderate to High

-Availability of Iron but price as perinternational benchmark

-Coking Coal supplier have considerablepower

Threat form Substitute

Low

-Carbon fiber , plastic, aluminum

Bargaining Power of BuyerModerate

- Demand is high outpaces supply

- Access to global market

Rivalry Low to Moderate- Steel attribute by 4 major co.

- Excess demand met by import

- Commodity

- High cost of exit


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Driving forces Total investment in infrastructure sector in the

Eleventh Five-Year Plan will be around Rs 20.6 trillion

Approximately INR 45 trillion will be invested in Twelfth

Five-Year Plan

Automobile grew by 26% in FY10-Low cost passenger

car

Many automobile manufacturers increasing capacity &

(or) establishing manufacturing operations in India

International steel majors are expanding their presence

in India

Arcelor Mittal acquired large stake in Uttam Galva

JFE acquired 15% equity of JSW Steel

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Driving forces

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Companies are increasing their focus on downstream and solutions

driven products for their higher value add.

Example: SAIL produce 40% value added steel

Technology improvement

Boiler project expected to generate 350000 pounds of steam/Hour, produce 38

mw on site.

COREX: dont require coking coal use thermal coal directly (coking & sinteringplant not required)

FINEX :molten iron is produced directly using iron ore fines and non-coking coal

(sintering and coke making not required)

The ministry of steel has approved 59 R&D projects costing Rs.408crores

Merger and Acquisition has evolved to be one of the major growth

drivers in the industry leading to economic of scale.


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Competitive position

Company Name Total Asset in Crores INR Sales Turnover in Crores INR Net Profit in Crores INR

Tata Steel 127242 118753 8983

Steel Authority of India 81484 33905 3374.13

JSW Steel 29176 23368 2010

Jindal Steel & Power 20804 9534 2064

Essar Steels Limited 20000 8851

Ispat Industries Ltd 8706 8226 1805

Rashtriya Ispat Nigam Limited 9569 7755 1432.6

Bhushan Steel 22489 7000 1033


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Competitive moves

Tata Steel

Annual crude steel making capacity of 6.8 million tonne

TATA Steel is continuing with its program of expansion of hot

metal and steel making capacity by 3 million tonne to reach 10

million tonne

Massive expansion of its capacities through various greenfield

projects at Saraikela (Jharkhand), Kalinganagar (Orissa) and

Bastar(Chhattisgarh)


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Competitive moves

Steel Authority of India Ltd

Produced 3.2 million tonne of hot metal, 3.2 million tonne ofcrude steel by achieving 2%, 1% & 1% growth over thecorresponding period of the previous year

SAIL and M/s Rail India Technical and Economic Services (RITES)have entered into a Joint Venture Agreement for setting up of awagon manufacturing facility in Kulti, Bardhman Dist. of WestBengal


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Competitive moves

JSW Steel

One of the lowest cost steel producers in the world

Formed a joint venture for setting up a steel plant in Georgia

Acquired a controlling stake in Ispat Industries Ltd.

Acquired mining assets in Chile, USA and Mozambique

Entire gamut of steel products - Hot Rolled, Cold Rolled, Galvanized,Galvalume, Pre-paintedGalvanised, Pre-painted Galvalume, TMTRebars, Wire Rods & Special Steel Bars, Rounds & Blooms


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Competitive moves

Jindal Steel & Power Ltd

One of the fast growing major steel units in the country

Raigarh plant of JSPL has a present capacity of

1.37 MTPA sponge iron plant 2.40 MTPA Steel Melting Shop (SMS),

1.0 MTPA Plant Mill,

2.30 sinter plant,

0.8 MTPA coke oven and a

330 MW captive power plant

Capacity addition plan at Raigarh to enhancement the present steel capacityfrom 2.4 million tonne to 6.0 MT in a phased manner by 2011

The Company has also commenced hot trials of its 0.6 MTPA Wire Rod Mill atPatratu, Jharkhand


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Competitive moves

Essar Steel Ltd

Essar produced 3.39 MT flat product and achieved a sales of 3.24 MTshowing an improvement of 8% and 6% respectively over the last fiscal

Transportation by the slurry pipe line from Kirandul to Vizag

Expanding its production capacity at its Hazira plant to a capacity ofnearly 10 million tonnes

Essar has plans to set up steel units in other parts of the country for 6.0 million tonnes at Paradip in Orissa

3.0 million tonnes in Jharkhand

3.2 million tonnes in Chhattisgarh and

6.0 million tonnes in Karnataka


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Competitive moves

Ispat Industries Ltd

IIL has set up one of the largest integrated steel plants with acapacity to manufacture 3 million TPA of Hot Rolled Steel Coils

The integrated steel plant uses the Converter cum Electric ArcFurnace Route (CONARC process) for producing steel

IIL has the state-of-the art technology called compact stripproduction (CSP) process, installed for the first time in India

Produces high quality and specifically very thin gauges of HotRolled Coil


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Competitive moves

Rashtriya Ispat Nigam Ltd

First shore based integrated steel plant at Visakhapatnam in Andhra Pradesh

Started with a capacity of 3 million tonnes per annum (MTPA) of liquid steel

International standards with state-of-the-art technology, incorporatingextensive energy saving and pollution control measures

Doubled it's capacity to 6.3 MTPA of liquid steel and the new units are set tocome on stream progressively from 2011-12

RINL-VSP is the first PSE & first in Steel sector in India to get BS EN 16001(Energy Management system) certification on 28.12.10


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Competitive moves

Bhushan Power & Steel Ltd

Units in Chandigarh & Derabassi, one in Kolkata and the groupowns three overseas plants in Nepal, Nigeria & Sudan

The company is further expanding the capacity from 1.80 MTPAto 2.30 MTPA

The Company is also setting up Galvanising, Galvolume, ColourCoating, Precision Tube, Black Pipe & GI Pipe

The company is going one step backward and planning to set upIron Ore Beneficiation Plant of 6.50 MTPA, Pellet Plant of 3.8MTPA and further value added products both flat and long


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Success factors

Availability of iron ore and processed inputs like Sponge Iron

Low labor cost

Skilled manpower and managerial capabilities

Ongoing modernization of existing / old plants

High cost of energy

Poor infrastructure and high transaction costs

Poor quality of domestic coking coal

Relatively high cost of capital

Dependence on imports for steel manufacturing equipments andtechnology

Slow statutory clearance for development of mines

Low R&D investments

Potentially huge domestic demand

Unexplored rural market

capacity creation to serve the domestic and overseas markets

Slow growth in infrastructure development

Possibilities of export growth from China

Global economic slow down

Unrestricted export of iron ore and other exhaustible mineralresources

SWOT


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Future prospects

National Steel Policy (NSP) announced on 3 rd November, 2005 aims atbuilding a modern and efficient domestic steel industry of global standards

India has the potential to emerge as global player in steel making if itsinherent advantages of availability of quality iron ore, cheap labor, technicalmanpower and growing domestic demand are properly leveraged

The Indian steel industry is currently going through an expansionary phasebacked by a liberalized policy environment

Prospects of domestic demand appear to be excellent driven by highinvestment rate, accelerated growth in the manufacturing industry andexpansion in physical infrastructure creation

Crude steel production grew at the rate of 6.4%

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Future prospects

Indian crude steel production will grow at a CAGR of around 10%during 2010-2013

India is the fifth largest steel producer at the global front andstruggling to become the second largest producer in the coming years

construction, infrastructure, automobile, and power will drive thesteel industry in future

per capita finished steel consumption is far less than its regionalcounterparts

Future potential of various vertical industry segments, includingautomotive, aerospace, marine, consumer durables, power, railways,telecom, and housing

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Documents

Industry Analysis of Steel Sector-India