Indian Iron And Steel Industry

Presented by: Group 8 Section E

 Iron

is one of the oldest inventions in the world

 Backbone

of the human civilization

○ Automobiles ○ Infrastructure

 Contribution

:

○ GDP – 10% ○ GNP – 6%

Objective To study the structure and performance of Indian Iron and Steel industry

 What are the factors influencing iron and steel industry ?  What is the role of major players?  What is the current scenario?

Production Technology  Blast

Furnace (BF)/ Blast Oxygen Furnace (BOF)

 Electric

Air Furnace (EAF)

 COREX

Structure of Indian steel industry 

India is 5th largest steel producer



Divide into two distinct groups: integrated steel producer small/stand alone plants



Potential demand of steel in India and the per capita steel consumption.

Factors influencing iron and steel industry •

Backward integration

•

Consolidation

•

Branded products

•

Longer contracts

•

Government initiatives

•

Impact of Liberalization

•

Cost competitiveness

Current investments 

Tata Steel:  planning for 5 million tonne plant in Chhattisgarh ( US$ 3.59 billion)  setting up greenfield projects in Jharkhand and Orissa



Reliance Infrastructure:  plans to build a 12-million tonne steel plant in Jharkhand; likely to be completed by

2012. 

Indian Railways:  plans to invest around US$ 437.25 million per annum to raise its consumption of

stainless steel for adding new alloy-made wagons and coaches to its portfolio.

Qualitative Analysis Framework for industry analysis  Entry

barriers: High

Cost of capital

 Competition:

High  Bargaining power of suppliers: High  Threat of substitutes: Low  Bargaining power of Consumers: Mixed

Internal assessment Strengths  Availability of iron ore  Availability of labor at low wage rates Weakness  High Cost of Capital  Low Labor Productivity  High Cost of Basic Inputs and Services

External assessment Opportunities  Unexplored rural market  Other sectors  Export penetration   Threats  Slow Industry Growth  Technological Change  Price Sensitivity and Demand Volatility

Quantitative Analysis Key ratios considered: - Debt – equity ratio - Interest coverage ratio - Debtors’ turnover ratio

Companies considered for analysis

1. Steel Authority of India Ltd 2. Tata Iron and Steel Company Ltd 3. Jindal Iron and Steel Company Ltd 4. Essar steel 5. Ispat Industries Ltd

1. Sunflag Iron and Steel Industry 2. Shah Alloys Ltd 3. MUSCO 4. Surya Roshni 5. Usha Martin

Top 5 companies

Bottom 5 companies

 Current

Global Scenario

Sub Prime crisis US slow down US Dollar weakening

 Impact

on the overall Industry

Widening Credit Spreads Increase in Capital cash

Influence on Global Iron and Steel Industry



Source: International iron & steel institute

Influence on Indian Iron and Steel Industry  Influence

of US crisis on Indian Exports

Iron ore exports from India till December 15, 2008

declined over 13% despite huge price decline in steelmaking raw materials. (Source: Federation of Indian Minerals Industries (FIMI) )

 Low

Iron Ore Exports from India

TATA Present Scenario

 Domestic

Steel Companies Margin under

Pressure High cost of coking coal (US$300-350 per ton)

 Crude

Steel Production Down and Plant Utilization Capacity utilization of Ispat Industries is 30% JSW Steel and Essar Steel is 60-70% each Bhushan Steel is 50 percent

Recommendations

•thrust

to update the technology •Further liberalization towards tariff structure •R&D focus is to be increased substantially •HRP , Training •Market Driven •Resource utilization

Future Outlook  Growth

of steel demand will be around 11% annually  Produce 110 million tons of steel by 2020  India would become the second biggest producer of steel  Upcoming projects

Innovations  Steel

Junction  NUCOR Steel

Key Success Factors

•

WHAT DO CUSTOMERS

HOW DO FIRMS SURVIVE

WANT?

COMPETITION?

(Analysis of demand)

(Analysis of competition)

Low price.

•

Product consistency.

•

Reliability of supply.

•

Specific technical

•

specifications for special

Commodity products,

•

FACTORS

•

Conventional sources of

excess capacity, high fixed

cost efficiency include:

costs, excess capacity, exit

large-scale plants, low-cost

barriers, and substitute

location, and rapid

competition mean intense

adjustment of capacity to

price competition and

output.

cyclical profitability.

steels.

KEY SUCCESS

•

Cost efficiency and strong

Alternatively, high technology, small scale

financial resources

plants can achieve low

essential.

costs through flexibility and high productivity. •

Differentiation through technical specifications and service quality.