Steel Sector

STEEL SECTOR: AN ANALYSIS

INTRODUCTION STEEL SECTOR IN BRIEF

STEEL It is an alloy consisting of  Iron  Carbon content (0.02% - 2.04%)  Manganese and Tungsten The major processes of production:  Bessemer Process  Basic Oxygen Steelmaking

TYPES OF STEEL 

Early Modern Steel  Blister

steel  Crucible steel 

Contemporary Steel  Carbon

Steel  High Strength Low Alloy Steel  Low Alloy Steel  Tool Steel  TRIP Steel

HISTORY

Source: IISI

Stages in Global Production of Steel

MAJOR PRODUCTS      

Semi-Finished Product like Slabs,blooms etc Ordinary Steel Products like tubes,pipes etc Hot rolled coils (HRC) Cold rolled coils (CRC) Galvanised Sheets Speciality steel products like stainless steel pipes & foils etc

ROUTES OF STEEL PRODUCTION Primary/Integrated Types of raw material used

Secondary/Mini Mills

Iron ores and scrap Steel Scrap only

Mostly Used in Developing countries

Developed countries

Companies in India

Essar,Ispat

SAIL,Tata Steel

MAJOR CONSUMERS OF STEEL

MAJOR PLAYERS

INDIAN COMPARISON Tata Steel

SAIL

JSW

Essar Steel

BASED ON OWNERSHIP PUBLIC           

VISAKHAPATNAM STEEL PLANT NMDC MSTC LIMITED FERRO SCRAP NIGAM LIMITED MOIL KIOCL BIRD GROUP OF COMPANIES SPONGE IRON INDIA LIMITED MECON LIMITED HSCL BHARAT REFRACTORIES LIMITED

PRIVATE      

TATA-CORUS ESSAR ISPAT JSW STEEL LIMITED MUKAND LIMITED SESA GOA

GLOBAL COMPANIES 

Arcelor - Mittal

Nippon Steel  JFE  POSCO  Bao steel- Bayi Group  Tata - Corus  US Steel 

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120 mtpa

32.7 mtpa  32 mtpa  30.1 mtpa  25.6 mtpa  24.7 mtpa  21.2 mtpa 

VALUATION METRICS

M&As 

Arcelor - Mittal  32.2bn$

deal  Mittal pips Severstal 

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Tata-Corus  11.3bn$

deal  Tatas pip CSN

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TRENDS INDIAN SCENARIO

Quantity (in million tonnes)

PRODUCTION IN INDIA 50 45 40 35 30 25 20 15 10 5 0

2003-04

2004-05

2005-06 YEAR

Source: Joint Plant Committee

2006-07

IMPORT AND EXPORT OF STEEL 5

Quantity (in million tonnes)

4 3 IMPORTS EXPORTS

2 1 0

2003-04

2004-05

2005-06

YEAR

2006-07

INDIAN TRENDS Average growth rate for past 15 years 7% pa  Improved rank to 7th place  Projected growth rate 7.3% pa  Expected to be world's 2nd largest steel producer by 2016 

Race for the capacity 16% CAGR over 5 years  Steam still left in the super cycle  Steel companies in India to outperform  Joined at the hip (to the globe) 

Indian production growth slowed by capacity

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INDUSTRIAL REGULATIONS        

Pollution Control ESI RPF Central Excise Duty Custom Duty Auxiliary Duty Sales Tax Laws under Factory Act

INDUSTRIAL REGULATION SUBSIDIES  Interest Subsidy  Capital Investment Subsidies  Stamp Duty Exemptions  Electricity Subsidies.

LICENSE  Trade License  Health License  Fire License

SWOT FOR INDIAN STEEL SECTOR Strength  Availability of iron ore and coke  Low wage labor availability  Quality manpower  Mature production base

Weakness  Unscientific mining  Low productivity  Coking coal import dependence  Low R&D investment  High cost of debt  Inadequate infrastructure

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

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

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

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 

TRENDS GLOBAL SCENARIO

GLOBAL TRENDS 

The global consumption of steel has increased at a pace of 7%

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Chinese steel industry is booming

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World’s big producers are all pursuing largescale investment projects in India

CHINESE STEEL INDUSTRY •Heavy influence on global steel industry in past 5 yrs •Emerged as a leading producer and consumer

CHINESE STEEL INDUSTRY (contd..) Growing infrastructure and huge Govt subsidies have fuelled this success Challenges  Overcapacity is a challenge industry needs to tackle for future growth  Non availability of iron ore reserves is a disadvantage 

RECYCLING Reliance on steel scrap in production Developed countries: 50-70%  Emerging countries: 15-20% 

RECENT HAPPENINGS & FORECASTS

Foreign Direct Investments 

MoU signed between POSCO and Govt. of Orissa

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Mittal has set up 2 steel plants in Jharkhand and Orissa with a capacity of 24 MT

FUTURE ROADMAPS 

The fact that steel is cent percent recyclable should be used to our advantage

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Ore policy in India requires pressing reform

A Presentation put together by: Ashwin Maniyar  Palak Sood  Pallavi Patil  Rahul Lodha  Rahul Kumar  Swathi Velisetty 