NCRD Sterling Institute Of Management & studies

A

PROJECT REPORT

ON

STEEL INDUSTRY

submitted by:

submitted to prof. Seema Laddha

Deepak R Gorad Sachin Thete Sanddep Ramraje Ganesh Shirsat Girish Suvarna

Vision:

“DSG STEEL will be a powerful global business group that continuously provides world

class products and most comprehensive services that ameliorate the lifestyle of the people”.

DSG STEEL is inspired in achieving the vision statement through implementing the following values:

We believe in working together as a team in achieving success;

We are determined to grow as individuals in the working environment as well as improving

personal well-being;

We are inspired through a behavior code;

We believe the market values also in our working behavior and in our way we treat other

people;

We strive for a positive working climate in order to motivate and inspire individuals;

We strive for an individual internal locus of control;

We believe in participative management

Mission:

To introduce the latest and most advanced concepts in the construction area, starting

with the idea of adopting a new concept in the fit-out and interior decoration.

To enhance the interior and fit-out industry by providing all possible solutions and

expertise to projects.

To exceed our customers need and expectations by delivering the highest quality

products and best service available.

To provide our employees with all support necessary to bring out the best in them and

to their fullest potential.

To create team work concept. Mission Statement

Michael porter’s five force model

For Steel Industry

Bargaining power of Supply

Buyer

Bargaining power of

Suppliers

Competitive rivalry

Threat of substitutes

Steel Industry

Threats of new entry

Supply With trade barriers having been lowered over the years, imports play an

important role in the domestic markets.

Demand The demand is derived from sectors that include infrastructure, consumer

durables and automobiles.

Barriers to entry High capital cost, technology.

Bargaining power of The government can increase railway freight cost and grid power cost. This in

suppliers turn will determine the final price of metal.

Bargaining power of High presence of large numbers of suppliers and access to global market.

customers

Competition High presence of large number of players in the unrecognized sector.

SWOT Analysis -

•availabilty of iron ore & coa

•low labour wage rates

•abundance of manpower

•mature production base

•unexplored rural market

•growing domestic demand

•exports

strength weakness

opportunity threat

•unscientific mining

ow productivity

ooking coal import ependence

ow R&D investment

high cost of debt

nadequate infrastructure

na becoming superior as exporter

tectionism in west

mping by competitors

Indian Steel Industry 1. Industry Perspective:

India's Steel Industry has a history of more than a century. Before the

liberalization, the Indian steel industry was a predominantly synchronized one with the public sector industry. Tata Steel was the only major private player involved in the production of steel. SAIL and Tata Steel have been the major steel industries of India. The liberalization of the India economy directed to the opening up of many steel industries, consequently, increased production capacity. Since

1990, a huge investment has been made into the industry.

From 1997 to 2001 when the overall global steel industry was facing a

depression, Indian Steel Industry also went through a rough phase but improved after 2002. India has now emerged as one of the largest producers of steel in the entire world. Almost all varieties of steel are now being produced in the country. India has also emerged as a net exporter of steel and Indian steel is being increasingly accepted in the global market.

1.1 Size of Industry

PSU Net worth(31.03.2005) Net worth(31.12.2010)

SAIL 10011.00 36115.00

RINL 6878.00 13266.00 NMDC 2568.77 18601.00

MOIL 257.26 2011.19

MSTC 154.96 450.00 KIOCL 1846.69 1960.84

MECON (-) 234.76 173.23

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Indian Steel Industry 1.2 Employment:

The total employment in the industry is more than two million (including direct and indirect employment). Most of the Steel plants are situated in economically backward regions of the country. Therefore, Steel companies have contributed to the overall development of civic, medical, educational and other facilities in these regions.

Since non-executives recruitments are carried out mainly on regional level,

a large number of SCs/STs and other weaker section of the society get the benefit of employment in SAIL. For jobs of temporary & intermittent nature, generally contractors deploy workmen from the local areas, which again provide an

opportunity for employment of local candidates of economically weaker section.

Establishment of steel plants in economically backward areas has given a fillip to the economic activities thus benefiting the support population providing different types of services. Over the years, a large group of ancillary industries has also developed in the vicinity of Steel Plants. This has created opportunities for local unemployed persons for jobs and development of entrepreneurship.

PSU No. Of employees(31.12.2010)

SAIL 113403 RINL 17900 NMDC 5902 MOIL Ltd 6676 MECON 1851 KIOCL 1349

1.3 Growth over the years The steel industry of India has seen tremendous but a steady growth,

backed by many initiatives taken by Indian Government. The crude steel of India will grow at an annual rate (CAGR) of more than 10 percent during 2010 - 2013. Additional initiatives taken by Government, is proving to be helpful to boost economic growth, by injecting various funds in industry such as Infrastructure, Construction, Power and Automobiles. This growth impetus will definitely cater

future growth of Indian steel industry. The prospective growth of the Indian steel industry not only attracts Domestic capital, but numerous other foreign global steel players have been planning to invest the market or have announced their

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Indian Steel Industry expansion plans. For example, AreclorMIttal & POSCO have planned mega Greenfield projects at many locations of India. Additionally few other global players have entered into strategic partnerships or joint ventures with the Indian

Steel majors to capitalize on existing on the existing client base in the region.

Global Perceptive: Steel Industry is a booming industry in the whole world. The increasing demand for it was mainly generated by the development projects that have been going on along the world, especially the infrastructural works and real estate projects that has been on the boom around the developing countries. Steel Industry was recently dominated by the US but this picture is changing with a rapid pace with the Indian steel companies on an acquisition spree.

1.4 Acquisition over the years

The steel industry has seen major acquisitions over the years and profound the status of one of the most dynamic industry in the world. Mittal Steel, has acquired World’s largest Steel company Arcelor Steel to become the world’s largest producer of steel named Arcelor-Mittal. TATA Steel has acquired the world’s fifth largest company, Corus, with ever highest steel price. The increasing needs of steel by the developing countries for its infrastructural projects have pushed the companies in this industry near their operative capacity. World steel industry is in booming phase where Mergers and Acquisitions are going on all around the world. Thus the present Global scenario suggests that the OECD Countries do not have their monopoly in Steel Market.

1.5 Major Players in the Industry

Steel industry was mostly dominated by Public sector before liberalization in 1991. But liberalization gives a new life to the industry. It allows new private players to enter in the market and encourages existing players to expand their capacity. This eventually brings competition in the market. Presently India is the 5th largest producer of crude steel in the world and is expected to become the 2nd largest producer by 2015-16.

Production of crude steel (in Mn tonnes):

Public Sector 16.714 Private Sector 48.161 Total 64.875 Percentage share of Public sector 26%

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Indian Steel Industry Production of sponge iron (in Mn tonnes):

Coal based 15.52 Gas based 4.48 Total 20

Public sector players: Steel Authority of India Ltd(SAIL) -- market leader public sector company in

the sector Rashtriya Ispat Nigam Ltd. (RINL) NMDC Ltd.

MIOL Ltd

MSTC Ltd

Hindustan Steelworks Construction Ltd. (HSCL) KIOCL Ltd Bird Group Of Companies (BGC)

Private sector Player:

TATA Steel Ltd. - Private sector market leader ESSAR Steel Ltd.

MUKAND LTD. Sun flag Iron & Steel Co. Ltd.

JSW Steel

Bhushan Steel Ltd.

1.6 Foreign Player in Indian market:

Recently, the steel industry is receiving significant foreign investments such as POSCO—South Korean steel producer—and ArcelorMittal Group—UK/Europe based steel producer—announcing plans for establishing about 12 MT production units each in India. But clearance from Environment ministry is delaying in the

process. Such competition in market increases the production capacity of sector. Growth in infrastructure sector is also having an increasing effect on demand of steel. Such competition will help India to become market leader in world and may help to become a net steel export country.

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Indian Steel Industry 1.7 Commodity prices of Steel movement:

Commodity Futures markets are prominent parts of the global financial economy. Futures trading have been an important agency in the way the financial economy has grown to its contemporary form. My role in the project includes investigating the role of commodity futures markets in the financial economy and discusses its theoretical understanding in light of the trading practices in these futures markets. The focus of our research has been maintained on steel futures traded on a commodity exchange.

The result of the limited research that has been done in the short duration of 1 month brings forth the uncertainty of investor behavior and challenges the market oriented idea of rational investors as proposed by the theory of futures trading.

Our research focuses on the importance of commodity futures markets and the role they play in commodity price stabilization. The proponents of futures markets argue about the importance of futures markets based on the factors like price discovery and price stability. Price discovery and price stability parameters are only partly true in any given derivative market and, therefore, show the weakness in the theoretical argument in favour of commodity futures markets. Derivative trading in steel has been chosen as the commodity futures in focus due to the inherent steel price instability and its latest introduction as a commodity to be traded on the futures market.

Steel demand has been growing continuously in the developing economies and any sudden price fluctuations creates detrimental effects in the production process within these economies, as they heavily depend on steel for infrastructural growth. So, steel futures might create a condition of further price fluctuations due to speculative activity and thus can prove to be harmful for the producers and consumers of the emerging economies. These producers and consumers lack the capability to accommodate with the problems of over-production and sudden price rise, impacting the aggregate demand and supply which often has been observed to be imbalanced.

1.8 Dumping:

Many nations are accused of this ‘heinous crime’ on a day to day basis. Though legally speaking ‘dumping’ is not a ‘crime’ as per WTO, which surely does not encourage it but at the same time permits this activity. Things get stranger when China comes into picture.

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