essar steel

Presented to :Prof Prakash PanditIBS MUMBAI 01 SEP 10’

•Founder Mr. Ravi Ruia & Mr. Shashi Ruia•Founded 1969•Headquarters Mumbai•Products Steel, Oil, Power Mobile

Network, Construction•Employees 60,000•Website essar.com

Introduction•Oil - Essar Oil is a fully integrated oil &

gas company of international scale with strong presence across the hydrocarbon value chain from exploration & production to oil retail.

•Power - Essar Energy, approximately 76% owned by Essar Group, is today India's second largest power generation company in the private sector.

Introduction Cond.•Communication - Essar Communications is in the

communications sector with presence in telecom services, telecom retail, telecom tower infrastructure and business process outsourcing.

•Shipping - Essar Shipping was started in 1945.Ports & Logistics is a comprehensive sea logistics company with presence in sea transportation, ports & terminals, logistics and oilfields services. It owns a shipping fleet of 25 vessels, and has placed orders for 12 new ships.

Essar Steels• It is India's largest exporter of flat steel with

14 MTPA (million tons per annum) of capacity.•In 2007, Essar Steel acquired Algoma Steel in

Canada, which has a current capacity of 4 MTPA, and Minnesota Steel, which has iron ore reserves of over 1.4 billion tons.

•Essar Steel is the largest steel producer in western India, with a capacity of 10 MTPA at Hazira, Gujarat.

•Essar Steel produces customized products catering to a variety of product segments and is India's largest exporter of flat products to the US and European markets.

Essar Steel demand, supply and competitors

•Essar Steel is the largest steel producer in western India, with a current capacity of 4.6 MTPA at Hazira, Gujarat, and plans to increase this to 10 MTPA. The Indian operations also include an 8 MTPA beneficiation plant at Bailadilla, Chhattisgarh, and an 8 MTPA pellet complex at Visakhapatnam. Additionally, Essar is setting up a 6 MTPA integrated steel plant in Paradip, Orissa

Essar steel demand

•Transport Industry•Welded Steel Tubes and Pipes•Cold - Rolling and Drawing•Line Pipe•Corrosion Resistance•Boiler Quality Plates•Tin Mill Black Plate

The products and its uses in different industries:

•Hot Rolled Products•Coils

▫Transport Industry▫Boiler Quality Plates▫Cold Rolling and Drawing▫Tin Mill Black Plate▫Line Pipe▫Corrosion Resistance▫Welded Steel Tubes and Pipes▫Pressure Vessels

Plates ▫Heat Exchangers▫Ship Building▫Railways▫Oil & Petrochemicals▫General & Heavy Engineering▫Marine Containers▫Boiler & Pressure Vessels▫Coal & Mining

Contd…• Sheets

▫LPG Cylinder Fabricators▫Marine Freight Containers▫Automobiles▫General and Heavy Engineering▫Railways

• Shot Blasted and Primed ▫Bridge Girders▫Ship Building▫Welded Beams▫Component Fabrications

Cold Rolled Products

▫Drums & Barrels▫Automotive Body & Components▫General Engineering Application▫White Goods▫Furniture & Office Equipment▫Pipes & Tubes

Galvanized Products

▫Automotive Applications▫Corrugated Sheets▫White Goods▫Agriculture Equipment▫Construction▫Color Coating▫Engineering Applications

Supply analysis• Essar Steel is a global producer of steel with a footprint covering

India, • Canada, USA, the Middle East and Asia. It is a fully integrated flat

carbon steel manufacturer—from iron ore to ready-to market products. Essar Steel has a current capacity of 9 million tones per annum (MTPA). With its aggressive expansion plans in India as well as Asia and the Americas, its capacity will go up to 20 to 25 MTPA by 2012. Its products find wide acceptance in highly discerning consumer sectors, such as automotive, white goods, construction, engineering and shipbuilding. In 2007, Essar Steel acquired Algoma Steel in Canada, which has a capacity of 4 MTPA, and

• Minnesota Steel, which has iron ore reserves of over 1.4 billion tones. While the company is building a 4.1 MTPA steel plant in Minnesota, it is also setting up a 2 MTPA hot strip mill in Vietnam and a 2.5 MTPA integrated steel plant in Trinidad & Tobago. In Indonesia, it operates a 400,000 TPA cold rolling complex with a galvanizing line of 150,000 TPA, making it the largest private steel company in that country.

Essar steel competitors

• Major Competitors • ➢SAIL

TISCO➢JINDAL VIJAY NAGAR STEEL LTD.➢JISCO➢SAW PIPES➢UTTAM STEEL LTD.➢ISPAT INDUSTRIES LTD.➢MUKAND LTD.➢MAHINDRA UJINE STEEL CO.LTD➢TATA STEEL LTD.➢USHA ISPAT LTD.➢KAIYANI STEEL LTD.➢ELECTRO STEEL CASTING LTD.➢

• SESA GOA LTD.NMDC➢LIOYOLS STEEL INDUSTRIES LTD.➢

Essar Marketing objective• To create brand image by offering 24 carat quality

steel. Essar is the 1st • Steel company in the country to brand steel

product. • Marketing Segmentation • Market segmentation of product is done in Two :- Regional Market • Domestic & international market • South east – 35%• Europe – 36%• Middle east – 29%

Existing facilities in India & Abroad

Bailadilla facility: Iron Ore Benefication

• World's richest and finest ore is available•A beneficiation plant of 8 MTPA capacity•The iron ore slurry is pumped through a 267 km

pipeline (the second longest in the world) to the pellet plant,

• Yielding advantages in quality, cost and real time inventory management.

Visakhapatnam facility•The slurry is received at our pellet plant at

Visakhapatnam, • It has a capacity of 8 MTPA•providing vital raw material for the steel plant at

Hazira.

Hazira facility•A 5.0 MTPA sponge iron plant

• The world's largest gas-based sponge iron plant in single location.

•This plant is fed with inputs from four electric arc furnaces and casters.

Continue…•The complex's sophisticated infrastructure includes

independent water supply and power, oxygen and lime plants.

•A township and a captive port capable of handling up to 8 MTPA of cargo with modern handling equipment like barges and floating cranes

Hazira Pipe Mill•Located at Hazira, Gujarat• Has a combined capacity of 0.6 MTPA of helical

submerged arc welded (HSAW) and longitudinal submerged arc welded (LSAW) steel pipes

•Also has internal and external coating facilities.

Pune Maharashtra

• 0.6 MTPA cold rolling plant

• 0.5 MTPA galvanising plant

• 0.4 MTPA colour coating plant

Canada facility: Essar Steel Algoma•Established in 1901.•Production capacity is 4 MTPA. • Low-cost, technologically advanced Direct Strip

Production Complex (DSPC).•Produce steel customized for client requirements, and

a welded beam division.

Indonesia facility: PT Essar Indonesia•PT Essar is Indonesia's largest private sector •Has a domestic market share of 35 percent 

• Its has a production capacity 0.4 MTPA

• Galvanizing capacity is 0.15 MTPA.

Distribution outlets• First steel company to set up an end user distrubution

chain for steel products under the brand name Essar Hypermart.

• It has a strong network of over 474 steel retail outlets. •The hypermarts offer a comprehensive range of flat

steel products for a variety of applications. Other product lines, like longs, structural, and tubular, are also being developed to make Essar Hypermart a one-stop-shop for steel products.

Furnaces

Marketing Mix

Products Main category of products manufactured

in the Essar Steel: • Iron Ore Pellets•Hot Briquetted Sponge iron (HBI)•Hot Rolled Products

i) Coils; ii) Plates; iii) Sheets; iv) Short blasted & Primed

•Cold Rolled Products•Galvanized Products

Product

Hot Rolled Steel Cold Rolled Steel

TMT Bars

Price• Essar Steel is the market leader in many niche

segments in the domestic markets• Present market share is 35% for hot & cold rolled

products• Essar is producing the most customized products. Its

a value for money – as said Essar's promise is Sahi Price, Sahi Delivery and Sahi Quality, which is all any steel buyer can ask for.

• Price is varies as per the different type & grades steel productHR Plates & Sheets – Rs 37/kg; GP Coils – Rs 44.45/kg to Rs 51/kg

Promotion•Essar’s advertising policy is non

conventional they always do need base advertisement

•Taking part in Industrial Exhibition•Sometime useful move of company gives

positive publicity•They don’t do aggressive advertisement•Now – a – days mostly promoting their

steels from their Hypermarts

Place•Production hub as at Hazira, Surat Gujarat•Overall distribution and Selling Hub is

Mumbai•A complete steel processing plant is located

near to Chennai covering the major auto manufacturing hub of India

•A different cold rolling plant of 0.4 MTPA in Pune for the production and distribution of sheet to the different Electrical durable manufacturers

Distribution Channel

• Essar steel distribution channel is consist of the 0level and 1 level

• 0 Level: They directly place order to Essar steel only without involving any other intermediaries.

• 1 Level: Manufacturer will supply material to company’s retail outlet and it will provide material to industrial customerIts basically the regional viz distribution covering the major industrial sectors of every states of India.

• Also they have their sheet metal work engineer mostly near to small industrial cities distributing few tones of their required products

Essar Hyper Mart

• Essar Hyper mart is the first and largest retail chain for steel products in India.

• Essar Hyper mart started operation in December 2006.• Essar Hyper mart, with its pan-India presence is a one-

stop shop for a wide range of flat steel products.• These Hyper marts stock and sell flat products, which

include hot rolled, cold rolled and galvanized steel sheets and TMT bars.

• At Essar Hyper mart are assured of materials from an ISO 9002 and 14001 certified mill. Moreover, these materials are available with a quality test certificate.

Contd…• Essar Hyper mart has is a strong network of over 91

Hyper marts and over 40 Express marts servicing requirements of small and medium enterprises across the country.

• Company also offers micro finance option.• Essar Hyper mart has started consumer awareness and

loyalty programme.• The retail market for steel has been untapped world

over. Small volume, immediate delivery, transparent pricing and above all consistent and guaranteed quality are just some of the basic requirements of retail customers.

• Contributed 33 percent to the total sales volume.• Biggest challenge • Companies operations at present

Swot Analysis Strength Strong International Business

Essar steel is the largest exporter of flat products selling one-third of the production to the US and European market and to the growing market of south east Asia and middle east. Thus Essar has a much stronger international reputation then its Indian counterparts.

Technological Leadership .

• Essar’s key strengths stem form the fact that its has mastered the Steel production process.

• It has also adopted and further developed DRI (Direct Reduction Iron) technology which is the future of steel making (As per Mr. LN Mittal).

• It is the only Indian Steel Company to have mastered both DRI and Corex method of steel production.

• It’s production is automated to an extent that it employs only 440 persons/mt of steel produced as against 6250/mt employed by Tata and around 8000/mt employed by SAIL .

Contd.. Integrated production

• The fact that the broader Essar Group has business interests spanning from Power to Shipping to Oil & Gas and all businesses are synergistically interwoven helps in lowering the cost of production and avoid production variances.

Educated work force.

Excellent brand equity and quality

• It create brand image by offering 24 carat quality steel. Essar is the 1st steel company in the country to brand steel products.

Weakness

Lack of Captive Iron Ore Mines

• Cost of raw-material is high since Essar don’t have it’s own mines. So , getting Raw-Material market is costly affair.

Lack of strong domestic business

• Strong domestic business can potentially safeguard against international downturns. Compared to the global average per capita consumption of 150 kgs. India’s per capita consumption of steel is still a mere 39 kgs. per head

High Cost of Capital

• Steel is a capital intensive industry; steel companies in India are charged an interest rate of around 14% on capital as compared to 2.4% in Japan and 6.4% in USA..

Opportunity The biggest opportunity before Indian steel sector is that there is enormous scope for increasing consumption of steel in almost all sectors in India.

Opportunity

Maximum utilization of cash flow

• This is done through new business & avenues like online sales, steel retail outlets like Essar hyper mart which is the first and largest retail chain for steel products in India & through service centers.

Export Market Penetration

• It is estimated that world steel consumption will double in next 25 years. Quality improvement of Indian steel combined with its low cost advantages will definitely help in substantial gain in export market.

Unexplored rural market.

• Enhancing applications in rural areas assumes a much greater significance now for increasing per capital consumption of steel. The usage of steel in cost effective manner is possible in the area of housing, fencing, structures and other possible applications where steel can substitute other materials.

Threats Technological changes.

Ever decreasing import duty on steel i.e. high quality of product from developed countries available for import at very competitive prices.

High Cost of Basic Inputs and Services 

• High administered price of essential inputs like electricity puts Indian steel industry at a disadvantage; about 45% of the input costs can be attributed to the administered costs of coal, fuel and electricity, eg, cost of electricity is 3 cents in the USA as compared to 10 cents in India;

• Freight cost from Jamshedpur to Mumbai is $50/tonne compared to only $34 from Rotterdam to Mumbai.

• Added to this are poor quality and ever increasing prices of coking and non-coking coal.

Thank youPresented byAviral bhardwajArpit vageriaMd. ZeeshanAbhijeet chatterjeeNitin tripathiPiyush kumar