Impact on Recession On Steel Industry

The Subprime crisis was the main reason of recession that started in US in the year 2007. The other name for Subprime Crisis is Housing Bubble. Though India was never in recession but still it witnessed economic slowdown. The impact of recession was very minimal because of various precautionary measures taken by the government. The subprime Crisis had a major impact on retail sector. Buildings that were under construction remain under construction, people started hesitating to buy new properties, confidence and moral of people came down, all these and other factor lead to fall in demand of steel in domestic as well as in international level. As there was no demand for their product in the market the steel industry reduced their productions, which lead to sharp fall in their price. The prevailing condition in steel had raised question in the prospects of India’s steel industry. Even a one single negative speculation and exaggerated fear pulled all stocks down, the steel industry stock was been hit by specified and genuine concerns.

Many steel producers acquired steel making, processing or mining assets in the past few years. All these assets had lost their value with the downswing in the market. The current reality proves that these assets were bought expensive. Their fate will depend on how long this recession will continue and what will be the long-term growth path of the industry. It is well understood that these assets were not gobbled up to take advantage of short-term conditions, but, even on a longer term considerations, many of the acquisitions may prove burdensome to Indian steel companies. As per the analysts, global steel consumption can fall in absolute terms in future. Whether it is in the housing industry or any other industry, substantial surplus capacity has already been created.

The conditions in China are terrible. The market seems to have collapsed. Steel production has fallen sharply. No one knows today how far China will go down this way? Ports are packed with iron ore with no buyers despite the fact that imports from India and Brazil have fallen sharply. If China's annual steel consumption falls by about 50-60 million tons in 2009 and production by the same measure, it will have a huge impact on global steel and related industries. Much of the capacity enhancement in iron ore, coal or shipping globally was based on the strong growth prospects of the Chinese economy.

Performance Of Major PSUs Under The Ministry Of Steel: -

STEEL AUTHORITY OF INDIA LTD (SAIL)

During the year 2008-09, SAIL recorded profit (before tax) of RS 9,403 crores and profit (after tax) of RS 6,175 crores. SAIL registered a record turnover of RS 48,681 crores in the same year, 6.9% higher year-on-year basis. During all these time shareholders were happier as they got higher dividend. As recommended by the SAIL Board, the company paid final dividend to its shareholders at 13% of paid-up-equity, with total dividend payout (including interim dividend of 13%) for the year 2008-09 at 26% amounting to RS 1.074 crores. 250 MW power plant in joint venture with NTPC at Bhilai, slab caster along with secondary steel making facilities at Bhilai, oxygen plant and cold dust injection in two blast furnaces at Durgapur, pipe coating plant at Rourkela, up gradation of hot strip mill and oxygen plant at Bokaro were also commissioned during the year. During 2008-09, SAIL produced 12.5 million tons of saleable steel by achieving 113% capacity utilization, and produced 14.4 million tons of hot metal and 13.4 million tons of crude steel.

RASHTRIYA ISPAT NIGAM LTD (RINL)

RINL was facing a stiff competition from SAIL throughout the year. In order to overcome from this stiff competition, RINL came up with expansion plan to double its annual liquid steelmaking capacity from the present level of 3 million tons per annum of production to 6.3 million tons per annum at an estimated cost of RS 12,228 crores. During the year RNIL achieved a turnover of RS 10,458 crores in 2008-09 surpassing the level of RS 10,433 crores achieved in 2007-08. Sales in domestic market were RS 10,379 crores and export at RS 79 crores. Being a Public Sector Unit, RNIL also provided a financial assistance of RS 7 crores and medical services amounting to RS 1.71 crores, twice through team of doctors for flood-affected area in the state of Bihar. In RINL, a total of 134 dealers have been appointed in almost all districts in the southern states and adjoining states in order to ensure wider availability and reach in interior parts of the country. During 2008-09, a total of 42,000 tons of steel was lifted by District Level Dealers.

NMDC LTD : -

During the year NMDC produced 28.97 million tons of Iron ore compared to 29.82 million tons in the previous year 2007-08. The domestic sales of iron ore registered 22.60 million tons during the same year as against 24.41 million tons during the previous year 2007-08. The company exported 3.87 million tons of iron ore to Japan, South Korea and China valuedat approximately RS. 1,703 crores during the current year compared to 3.78 million tons valued at RS. 875 crores during the previous year. The total sales during the year were RS 26.47 million tons as against 28.18 million tons during the previous year.

Performance Of Major Private Sector: -

TATA STEEL LTD

TATA Steel has an integrated steel plant, with an annual crude steel making capacity of 6.8 million tons, located at Jamshedpur, Jharkhand. During the period of 2008-09 the crude steel production of TATA Steel was 5.6 million tons which is higher by 12% over the production of 5.0 million tons previous year. The saleable production was at a higher level during the period April 2008-March 2009 (5.3 million tons) compared to the corresponding period last year (4.9 million). TATA Steel continuing with its program of expansion of hot metal and steelmaking capacity by 3 million tons to reach 10 million tons.

Production of crude Steel

2007-2008: 5.0 million tons

2008-2009: 5.6 million tons

JSW Steel

JSW Steel has commissioned India’s largest furnace with 3 million tons hot metal production per annum. JSW Steel is a 6.8 million tons per annum integrated steel plant. The Brownfield expansion plan of the Vijayanagar plant is in progress and is likely to complete by 2010, with a total installed capacity of 9.6 million tons per annum. JSW Steel Tarapur and Vasind Works specialize in down-streaming facilities which include 1.0 million tons.

JINDAL STEEL & POWER LTD

Jindal Steel & Power Limited is one of the fast growing major steel units in the country. Raigarh plant of JSPL has a present capacity of 1.37 MTPA. Jindal Steel and Power LTD, it has plans for expansion of its Raigarh plant to a capacity of 6.0 million tons per annum. It also has plan for two Greenfield projects in Orissa and Jharkhand with proposed capacity of 6.0 million tons per annum each in the first phase.