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Industry Analysis

STEEL INDUSTRY

SCHOOL OF PETROLEUM MANAGEMENT

Anand Singh Sandeep Prasad

Content

IntroductionEconomic TraitCompetition AnalysisDriving ForceCompetitive PositionCompetitive MovesSuccess FactorsProspects

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Introduction

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• Initial phase, - the Tata Iron & Steel Company, the Indian Iron and Steel Company and Visveswaraya Iron & Steel Ltd.

• India is the 5th largest producer of crude steel in the world and is expected to become the 2nd largest producer by 2015-16.

• Total finished steel during April - December 2010 :– Production for sale was at 47.30MT growth of 7.9 per cent

• Steel exports increased by 17.3 per cent as it reached an estimated 2.46 million tonne while steel imports were at an estimated 5.36 million tonne, a growth of 2.8 per cent.

• India is net importer of steel

Industry Economic Traits• India 5th largest producer in world

• Per capita consumption lowest in world 50kg perCapita VS 190 kg global average

• Indian steel industry during 2005-2010 registered8.4% growth in production and 9.7% consumption

• Major players are-

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TISCO 6.85 MT Rs 76745 Cr

SAIL 14.35 MT Rs 57234 Cr

JSW 14.3 MT Rs 29176 Cr

Source: Money control & company website

Competition Analysis

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Supplier -Moderate to High-Availability of Iron but price as per international benchmark-Coking Coal supplier have considerable power

Threat form SubstituteLow-Carbon fiber , plastic, aluminum

Driving forces• Total investment in infrastructure sector in the

Eleventh Five-Year Plan will be around Rs 20.6 trillion

• Approximately INR 45 trillion will be invested in Twelfth Five-Year Plan

• Automobile grew by 26% in FY10-Low cost passenger car

• Many automobile manufacturers increasing capacity &(or) establishing manufacturing operations in India

• International steel majors are expanding their presence in India– Arcelor Mittal acquired large stake in Uttam Galva– JFE acquired 15% equity of JSW Steel

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Driving forces

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• Companies are increasing their focus on downstream and solutions driven products for their higher value add. – Example: SAIL produce 40% value added steel

• Technology improvement– Boiler project expected to generate 350000 pounds of steam/Hour, produce 38

mw on site.– COREX: don’t require coking coal use thermal coal directly (coking & sintering

plant not required)– FINEX :molten iron is produced directly using iron ore fines and non-coking coal

(sintering and coke making not required)

• The ministry of steel has approved 59 R&D projects costing Rs.408 crores

• Merger and Acquisition has evolved to be one of the major growth drivers in the industry leading to economic of scale.

Competitive position

Company Name Total Asset in Crores INR Sales Turnover in Crores INR Net Profit in Crores INR

Tata Steel 127242 118753 8983

Steel Authority of India 81484 33905 3374.13

JSW Steel 29176 23368 2010

Jindal Steel & Power 20804 9534 2064

Essar Steels Limited 20000 8851

Ispat Industries Ltd 8706 8226 1805

Rashtriya Ispat Nigam Limited 9569 7755 1432.6

Bhushan Steel 22489 7000 1033

Competitive moves

• Tata Steel

– Annual crude steel making capacity of 6.8 million tonne

– TATA Steel is continuing with its program of expansion of hot metal and steel making capacity by 3 million tonne to reach 10 million tonne

– Massive expansion of its capacities through various greenfield projects at Saraikela (Jharkhand), Kalinganagar (Orissa) and Bastar(Chhattisgarh)

Competitive moves

• Steel Authority of India Ltd

– Produced 3.2 million tonne of hot metal, 3.2 million tonne of crude steel by achieving 2%, 1% & 1% growth over the corresponding period of the previous year

– SAIL and M/s Rail India Technical and Economic Services (RITES) have entered into a Joint Venture Agreement for setting up of a wagon manufacturing facility in Kulti, Bardhman Dist. of West Bengal

Competitive moves

• JSW Steel

– One of the lowest cost steel producers in the world

– Formed a joint venture for setting up a steel plant in Georgia

– Acquired a controlling stake in Ispat Industries Ltd.

– Acquired mining assets in Chile, USA and Mozambique

– Entire gamut of steel products - Hot Rolled, Cold Rolled, Galvanized, Galvalume, Pre-paintedGalvanised, Pre-painted Galvalume, TMT Rebars, Wire Rods & Special Steel Bars, Rounds & Blooms

Competitive moves• Jindal Steel & Power Ltd

– One of the fast growing major steel units in the country

– Raigarh plant of JSPL has a present capacity of • 1.37 MTPA sponge iron plant• 2.40 MTPA Steel Melting Shop (SMS),• 1.0 MTPA Plant Mill, • 2.30 sinter plant, • 0.8 MTPA coke oven and a • 330 MW captive power plant

– Capacity addition plan at Raigarh to enhancement the present steel capacity from 2.4 million tonne to 6.0 MT in a phased manner by 2011

– The Company has also commenced hot trials of its 0.6 MTPA Wire Rod Mill at Patratu, Jharkhand

Competitive moves

• Essar Steel Ltd

– Essar produced 3.39 MT flat product and achieved a sales of 3.24 MT showing an improvement of 8% and 6% respectively over the last fiscal

– Transportation by the slurry pipe line from Kirandul to Vizag

– Expanding its production capacity at its Hazira plant to a capacity of nearly 10 million tonnes

– Essar has plans to set up steel units in other parts of the country for • 6.0 million tonnes at Paradip in Orissa• 3.0 million tonnes in Jharkhand• 3.2 million tonnes in Chhattisgarh and • 6.0 million tonnes in Karnataka

Competitive moves

• Ispat Industries Ltd

– IIL has set up one of the largest integrated steel plants with a capacity to manufacture 3 million TPA of Hot Rolled Steel Coils

– The integrated steel plant uses the Converter cum Electric Arc Furnace Route (CONARC process) for producing steel

– IIL has the state-of-the art technology called compact strip production (CSP) process, installed for the first time in India

– Produces high quality and specifically very thin gauges of Hot Rolled Coil

Competitive moves

• Rashtriya Ispat Nigam Ltd

– First shore based integrated steel plant at Visakhapatnam in Andhra Pradesh

– Started with a capacity of 3 million tonnes per annum (MTPA) of liquid steel

– International standards with state-of-the-art technology, incorporating extensive energy saving and pollution control measures

– Doubled it's capacity to 6.3 MTPA of liquid steel and the new units are set to

come on stream progressively from 2011-12

– RINL-VSP is the first PSE & first in Steel sector in India to get BS EN 16001 (Energy Management system) certification on 28.12.10

Competitive moves

• Bhushan Power & Steel Ltd

– Units in Chandigarh & Derabassi, one in Kolkata and the group owns three overseas plants in Nepal, Nigeria & Sudan

– The company is further expanding the capacity from 1.80 MTPA to 2.30 MTPA

– The Company is also setting up Galvanising, Galvolume, Colour Coating, Precision Tube, Black Pipe & GI Pipe

– The company is going one step backward and planning to set up Iron Ore Beneficiation Plant of 6.50 MTPA, Pellet Plant of 3.8 MTPA and further value added products both flat and long

Success factors

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Slow growth in infrastructure development Possibilities of export growth from China Global economic slow down Unrestricted export of iron ore and other exhaustible mineral resources

SWOT

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Future prospects– National Steel Policy (NSP) announced on 3 rd November, 2005 aims at

building a modern and efficient domestic steel industry of global standards

– India has the potential to emerge as global player in steel making if its inherent advantages of availability of quality iron ore, cheap labor, technical manpower and growing domestic demand are properly leveraged

– The Indian steel industry is currently going through an expansionary phase backed by a liberalized policy environment

– Prospects of domestic demand appear to be excellent driven by high investment rate, accelerated growth in the manufacturing industry and expansion in physical infrastructure creation

– Crude steel production grew at the rate of 6.4%

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Future prospects– Indian crude steel production will grow at a CAGR of around 10% during

2010-2013

– India is the fifth largest steel producer at the global front and struggling to become the second largest producer in the coming years

– construction, infrastructure, automobile, and power will drive the steel industry in future

– per capita finished steel consumption is far less than its regional counterparts

– Future potential of various vertical industry segments, including automotive, aerospace, marine, consumer durables, power, railways, telecom, and housing

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Thank You