indian iron and steel industry

8/14/2019 Indian Iron and Steel Industry

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Presented by:

Group 8

Section E


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Iron is one of the oldest inventions in theworld

Backbone of the human civilization

Automobiles Infrastructure

Contribution :

GDP 10% GNP 6%


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Objective

To study the structure and performance ofIndian Iron and Steel industry

What are the factors influencing iron andsteel industry ?

What is the role of major players?What is the current scenario?


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Production Technology

Blast Furnace (BF)/ Blast Oxygen Furnace(BOF)

Electric Air Furnace (EAF)

COREX


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Structure of Indian steelindustry 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 capitasteel consumption.


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Factors influencing iron andsteel industry

Backward integration

Consolidation

Branded products

Longer contracts

Government initiatives Impact of Liberalization

Cost competitiveness


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


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Framework for industryanalysis

Entry barriers: HighCost of capital

Competition: High

Bargaining power of suppliers: HighThreat of substitutes: Low

Bargaining power of Consumers: Mixed

Qualitative Analysis


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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


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External assessment

Opportunities Unexplored rural market Other sectors

Export penetration

Threats

Slow Industry Growth Technological Change Price Sensitivity and Demand Volatility


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Quantitative Analysis

Key ratios considered:

- Debt equity ratio

- Interest coverage ratio

- Debtors turnover ratio


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Companies considered foranalysis

Top 5 companies Bottom 5 companies

1. Steel Authority of India Ltd

2. Tata Iron and Steel CompanyLtd

3. Jindal Iron and Steel CompanyLtd

4. Essar steel5. Ispat Industries Ltd

1. Sunflag Iron and Steel Industry

2. Shah Alloys Ltd

3. MUSCO

4. Surya Roshni

5. Usha Martin


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Current Global Scenario

Sub Prime crisisUS slow down

US Dollar weakening

Impact on the overall IndustryWidening Credit Spreads

Increase in Capital cash


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Influence on Global Iron andSteel Industry

Source: International iron & steel institute


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Influence on Indian Iron andSteel Industry Influence of US crisis on Indian ExportsIron 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 IndiaTATA

Present Scenario
http://ratan%20tata%20letter.pdf/http://export%20details.docx/http://export%20details.docx/http://ratan%20tata%20letter.pdf/


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Domestic Steel Companies Margin under

PressureHigh cost of coking coal (US$300-350 per ton)

Crude Steel Production Down and PlantUtilizationCapacity utilization of Ispat Industries is 30%

JSW Steel and Essar Steel is 60-70% eachBhushan Steel is 50 percent


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thrust to update the technology

Further liberalization towards tariff structure

R&D focus is to be increased substantially

HRP , Training

Market Driven

Resource utilization

Recommendations


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Future Outlook

Growth of steel demand will be around11% annually

Produce 110 million tons of steel by

2020 India would become the second biggest

producer of steel

Upcoming projects


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Innovations

Steel Junction

NUCOR Steel


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Key Success Factors

WHAT DO CUSTOMERS

WANT?

(Analysis of demand)

HOW DO FIRMS SURVIVE

COMPETITION?

(Analysis of competition)

KEY SUCCESS

FACTORS

Low price.

Product consistency.

Reliability of supply.

Specific technical

specifications for special

steels.

Commodity products,

excess capacity, high fixed

costs, excess capacity, exit

barriers, and substitute

competition mean intense

price competition and

cyclical profitability.

Cost efficiency and strong

financial resources

essential.

Conventional sources of

cost efficiency include:

large-scale plants, low-cost

location, and rapid

adjustment of capacity to

output.

Alternatively, high

technology, small scale

plants can achieve low

costs through flexibility and

high productivity.

Differentiation through

technical specifications and

service quality.


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indian iron and steel industry

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