STEEL INDUSTRY ANALYSIS

By(Group 3):

Deepanjan Kundu

Devshuvro Ghosh

Debadrita Ray Chaudhuri

Damyanti Pathak

Abhishek Bose

Overview:• India ranks 5th in the world ranking for production of steel

and fourth largest producer of crude steel in 2011-12 with 89 million tonnes (MT).

• India produced 66.8 million tonnes in 2010-11in comparison to China’s 626.7 million tonnes.

• 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.• The total employment in the industry is more than 2 million

(including direct and indirect employment).

Players in the Industry:• Tata Steel: wire rods, bars, and steel flats.• Jindal Steel & Power: mild steel slabs and sponge iron.• JSW Steel: gamut of steel products .• Essar Steel: sponge iron, steel and iron ore pellets.• Rashtriya Ispat Nigam Ltd: liquid steel.• Bhushan Power & Steel Ltd: iron Ore Beneficiation.• Lloyds Steel: corrugated sheets and steel coils.• Steel Authority of India Limited: steel and iron.

Reasons for Growth of the Indian Steel Industry:

• Abundant resources of iron ore.• Low cost and efficient labour force.• Strong managerial capability.• Strongly globalised industry and emerging global

competitiveness.• Modern new plants & modernised old plants.

Development enhancing facilities:• Huge Infrastructure demand.• Rapid urbanisation.• Increasing demand for consumer durables.• Untapped rural demand.• Increasing interest of foreign steel producers in India.

PEST Analysis of Indian Steel Industry:

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).

Michael Porter’s Five Forces AnalysisBuyers’ Power:•Increasing Demand for Steel.•Fragmented Coke Suppliers.Suppliers’ Power:•High Raw Material Prices.•Lack of Transportation.Intensity of Competition:•Competition from Foreign Players.•Spurt in Merger and Acquisition Activities.Threat of New Entrants:•High Cost of Basic Inputs and Services.•Industry is Capital Intensive.Threat of Substitutes:•Use of Aluminium, Plastic, Carbon Fibre.

Challenges faced by the Indian Steel Industry:

• High cost of energy.• Higher duties and taxes.• Quality of coking coal.• Dependence on imports for steel manufacturing

equipments & technology.

Global Impact on the Indian Steel Industry:• Slow growth in infrastructure development.• Market fluctuations and China’s export possibilities.• Global economic slowdown.

Government Regulations:

• Emphasis on infrastructural development during the formulation of the Union Budget 2011.

• Noteworthy reductions in import duties on key steel-making raw materials.

• To ensure growth of Iron and Steel Sector in India, Ministry of Steel takes up their issues with the other concerned Ministries/ Departments such as:Ministry of Coal for allocation of Coal Blocks and Coal

Linkages to Iron and Steel Industry.Ministry of Petroleum & Natural Gas for supply of

Natural Gas to Iron and Steel Industry

Future Prospects for Development:Resources:•Strong Managerial skills in Iron and Steel making.•Large pool of skilled Man-power.•Established steel players with strong skills in steel making.•Abundant Iron Ore reserves.

Opportunities:•High economic growth driven increasingly by industry.•Faster Urbanisation.•Increased Fixed Asset Building.•Automobiles and component industry growth.

Government Policies:•Pro-active stance of the government.•Encouragement for overseas investments.

Thank You!