Steel Sector

The Affect of Recession ON

INDIAN STEEL SECTOR :

07/16/09

1

The Presentation Put Together By • • • • • •

Aman Shrivastava Kamta Prasad Piyush Tandon Subhash Sahu Anil Kumar Shikha Bakshi

07/16/09

2

INTRODUCTION

STEEL SECTOR IN BRIEF

07/16/09

3

• Steel- The backbone of human civilization • Very crucial to the development of any modern economy • Its per capita consumption shows the living standards of the people in any country

07/16/09

4

HISTORY

Source: IISI

Stages in Global Production of Steel 07/16/09

5

CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL INDUSTRY Contributions USA 6%

JAPAN 8% INDIA 4%

OTHERS 48% CHINA 34%

07/16/09

6

Countries in the world Country Rank 2008 2007 China 1 502.0 489.2 Japan 2 118.7 120.2 US 3 91.5 98.2 Russia 4 68.5 72.4 India 5 55.1 53.1 (Production figures in million tonnes)

Source: Steel and Natural Resources Strategy Research (SNRSR)

07/16/09

7

MAJOR PLAYERS

07/16/09

8

07/16/09

9

MARKET SHARE OF LEADING PLAYERS IN IRON AND STEEL INDUSTRY COMPANY

PRODUCTION OF STEEL (In MILLION TONNES)

MARKET SHARE in %

SAIL

17.63

32%

TATA STEEL

6.06

11%

RINL

4.41

8%

ESSAR,ISPAT,JSWL

10.46

19%

OTHERS

16.53

30%

TOTAL

55.1

100%

07/16/09

10

COMPARITIVE STUDY (Rupees in Crores) 2006-07

2007-08

2008-09

Net Sales

35026.21

40214.16

44023.08

Net Profit

6202.29

7536.78

6188.41

EPS

15.02

18.25

14.98

Net Sales

25213.31

131535.88

145686.32

Net Profit

4165.61

12321.76

4849.24

EPS

73.06

177.18

66.07

Net Sales

8594.44

12456.65

15934.84

Net Profit

1303.89

1658.47

242.73

EPS

80.86

90.30

12.88

SAIL

TATA STEEL

JSW STEEL

07/16/09

11

SAIL

TATA STEEL

BSE

NSE

JSW STEEL

BSE

NSE

BSE

NSE

Open

154.5

148.5

369.75

369.8

534.7

531.7

Day High

154.5

154.25

369.75

369.8

534.7

537.35

Day Low

153.6

146.2

365.1

364.25

528.6

528.3

Previous Close

152.95

153

364.2

364.05

527.2

526.65

52-Week high

186

263

783.9

925.5

1049.9

1205

52-Week low

55.25

55.25

146.35

137.5

161.15

160.1

P/E

10.21

10.21

5.19

5.18

35.87

35.83

63504.9

63195.12

26761.5

26673.8

9923.01

9899.62

22268

11361791

67064

150491

17243

57971

Market Cap (Rs cr) Volume 07/16/09

(Source : www.nseindia.com)

12

MAJOR CONSUMERS OF STEEL Consumer%

Automotive Engeneering 5%

Others 20% Construction 43% Mechanical Engeneering 32%

07/16/09

13

TRENDS INDIAN SCENARIO

07/16/09

14

Quantity (in million tonnes)

PRODUCTION IN INDIA 60 50 40 30 20 10 0

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 YEAR

Source: Joint Plant Committee 07/16/09

15

Consumption trends in India

07/16/09

16

IMPORT AND EXPORT OF STEEL Quantity (in million tonnes)

5 4 3 IMPORTS EXPORTS

2 1 0

2003-04

2004-05

2005-06

2006-07

YEAR

07/16/09

17

07/16/09

18

INDIAN TRENDS • Average growth rate for past 15 years 7% pa • Improved rank to 5th place • Projected growth rate 7.3% pa • Expected to be world's 2nd largest steel producer by 2018

07/16/09

19

GLOBAL TRENDS • The global consumption of steel has increased at a pace of 7% • Chinese steel industry is booming • World’s big producers are all pursuing large-scale investment projects in India

07/16/09

20

Race for the capacity • 16% CAGR over 5 years • Steam still left in the super cycle • Steel companies in India to outperform

07/16/09

21

SWOT FOR INDIAN STEEL SECTOR Strength • Availability of iron ore and coke • Low wage labour availability • Quality manpower • Mature production base • Automation 07/16/09

Weakness • Controlled by Govt. • Coking coal import dependence • Low R&D investment • High cost of debt • Inadequate infrastructure • Unscientific mining 22

SWOT contd.. Opportunities • Unexplored rural markets • Growing domestic demand • Exports • Consolidation

07/16/09

Threats • China becoming net exporter • Dumping by competitors • Protectionism from the West

23

Marketing Strategy • Developed such a system so that company production and customer specification can be met at the same time or(Customization). • Giving quality and specification which is of world level. • To create competitive differentiation they are adopting focused marketing approach. 07/16/09

24

• Advertisement 2.Sail:- SAIL came out with a new ad/slogan ‘there is a little bit of SAIL in everybody’s life. 3.Tata:- “we also make steel” 4.ESSAR:- 24 Carat Steel tag line.

07/16/09

25

STRATEGIES FOR GROWTH On the demand side • Extensive promotional campaigns • Strengthening of rural delivery chain • Encouraging infrastructure development

07/16/09

26

On the supply side • Creation of additional capacity • Removal of bottlenecks in the availability of raw material • Encourage R&D • Invest to create professional technical man power

07/16/09

27

RECENT HAPPENINGS & FORECASTS

07/16/09

28

07/16/09

29

Foreign Direct Investments

• MoU signed between POSCO and Govt. of Orissa for opening steel plant • Mittal has set up 2 steel plants in Jharkhand and Orissa with a capacity of 24 MT • According to the Investment Commission of India investments of over US$ 30 billion in steel are in the pipeline over the next 5 years. • Japan's Sumitomo Metal Industries is planning to build a blast furnace steel plant in India with mid-tier producer 07/16/09 30

• Arcelor-Mittal, the largest steel maker of the world, is planning to set up a captive port near Paradip in Orissa. The port will be used to serve two mega integrated steel plants of the company proposed in Orissa and Jharkhand.

07/16/09

31

FACTORS HOLDING BACK THE INDIAN STEEL INDUSTRY • • • •

Energy supply Problems procuring raw material inputs Inefficient transport system Govt. rules and regulations

07/16/09

32

RECENT ARTICLES • India aiming to double steel production by 2011-12 • “I strongly believe, that India steel consumption will continue to grow at a pace varying between 6 per cent and 8 per cent during the current financial year, fully supported by the various fiscal, monetary and administrative measures taken by the Government from time to time,” Mr. Virbhadra Singh Union Minister of Steel • According to the Steel Secretary, P.K. Rastogi,

07/16/09

33

Cont…. • Mr. B. Muthuraman, Managing Director, Tata Steel, said the company would be increasing production by 25 per cent this year from its current capacity of 6.8 million tonnes a year. • The Steel Authority of India, while increasing prices on certain flat steel products by about Rs. 500-700, has reduced prices on long products by Rs. 1500- 2000, or about 5 per cent. • According to the Chairman, Mr. S.K. Roongta, this was in view of the slowing down of construction activities due to the monsoon. (Source : Business Line)

07/16/09

34

Government Initiative • The Indian government plans to invest over US$ 350 billion in industries related to infrastructure and construction which will give a fillip to the steel sector. • Indian government has announced some changes in customs duty rates, which were effective from November 2008. • The government has removed full exemption of customs duty on some industrial and agricultural commodities. Iron and steel products like pig iron, semifinished products, flat products and long 07/16/09 35 products are now subject to a basic

Road ahead • While the demand for steel will continue to grow in traditional sectors such as infrastructure, construction, housing automotive, steel tubes and pipes, consumer durables, packaging, and ground transportation, specialized steel will be increasingly used in hi-tech engineering industries such as power generation, petrochemicals, fertilizers, etc. The new airports and railway metro projects will require a large amount of stainless steel. • According to an estimate, with the growing need for oil and gas transportation infrastructure, a US$ 118 billion opportunity is waiting to be tapped by steel manufacturers in the next five years. 07/16/09 36 •

Bibliography • • • • •

www.google.com www.wikipedia.com www.moneycontrol.com www.nseindia.com http://steel.nic.in/

• www.indianindustry.com • ANNUAL REPORT OF MINISTRY OF STEEL 07/16/09

37

07/16/09

38