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ACKNOWLEDGEMENTThis dissertation examines the growth in prices of the steel industry and also products which dominate the market. The report has been written as part of the course program for Bachelors of Business Administration at the J.D. Birla Institute.
I am thankful to the director of this institute- Mr. ASIT DUTTA, for incorporating such an exercise into the course since it has presented me with an excellent opportunity to explore and enjoy my analytical and reportwriting skills, consequently preparing me for my corporate future.
In addition, I would also like to thank my supervisor at J.D. Birla Institute Mr.TAPOBRATA RAY for his generous support and guidance. I would like to express thanks to the librarians for the use of various textbooks from the learning resource center at J.D. Birla Institute, which provided me with background information about the academic topics that have been applied in the project.
It has been a pleasurable challenge and I look forward to many more such experiences.
India accounts for over 7% of the total steel produced globally, while it accounts to about 5% of global steel consumption. The steel sector in India grew by 5.3% in May 2009. Globally India is the only country to post a positive overall growth in the production of crude steel at 1.01% for the period of January - March in 2009. In this research paper, it is seen that the price of steel is greatly influenced by the price of furnace oil. However the price of sponge iron, pig iron and aluminium also affect the price of steel. In the research paper regression between the price of steel and its raw materials such as sponge iron, pig iron, furnace oil and aluminium have been shown which further proves our hypothesis that price of furnace oil has a major impact on the price of steel. India's ranks among the world's top 10 steel producers with a grand total production of over 18.5 million tonnes per annum (TPA) of steel.
TABLE OF CONTENTS SERIAL NO. 1 1.1 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 SUBJECT PAG E NO.
INTRODUCTION RESEARCH OBJECTIVE LITERATURE REVIEW PRICING STRATEGY FACTORS AFFECTING THE PRICE OF STEEL BACKGROUND OF THE STEEL INDUSTRY USES GROWTH OF THE INDUSTRY STEEL PRODUCERS CATEGORIES AND TYPE OF STEEL PRODUCTION CONSUMPTION TRADE INDIASN STEEL INDUSTRY SWOT ANALYSIS INDIAN STEEL INDUSTRY PORTERS FIVE FORCES INDUSTRY ANALYSIS ROLE OF IRON AND STEEL IN INDIAS GDP
2.15 4.1 4.2 5 6 7 8
ARTICLES PROBLEM IDENTIFICATION ENVIROMENTAL IMPACT OF IRON ORE HYPOTHESIS RESEARCH METHODOLOGY DATA ANALYSIS RESULTS
1.INTRODUCTIONThis dissertation in general attempts an industry analysis of the steel sector in India and in particular focuses on the factors responsible for the rapid growth in steel prices from the 1995. Thus it falls under the marketing branch of management and specially under pricing.
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Iron in its pure form (pig iron) is soft and almost useless so alloying material is added to make it harder. Steel is one of the most important manufactured products as it has an umpteen amount of applications in uses. Steel is used in almost all facets of our lives whether it be cars, construction material, refrigerators washing machines etc., as such it is one of the most important engineering and construction material. Earlier when steel was not discovered iron was used for the said purposes but iron is usually prone to rust and not as strong .It is versatile and can be molded, pressed, machined welded and woven to suit thousands of different purposes. The iron and steel industry presents one of the most energy intensive
sectors within the Indian economy and is therefore of particular interest in the context of both local and global environmental discussions. Increases in productivity through the adoption of more efficient and cleaner technologies in the manufacturing sector will be effective in merging economic, environmental, and social development objectives. A historical examination of productivity growth in Indias industries embedded into a broader analysis of structural composition and policy changes will help identify potential future development strategies that lead towards a more sustainable development path.
1.1 RESEARCH OBJECTIVE The primary objective of the research is to analyze and understand the THE STEEL INDUSTRY as a whole and factors affecting the price of steel. The Indian steel industry is one of the largest in the world with a massive raw material and product manufacturing base. The economy is largely dependent on the steel manufacturing and trade in addition to other major industries. This industry is poised to meet the increased global competition in the future. Consequently the steel industry at large is poised for growth and the prices would tend to rise even further. This research aims not only to provide an overview of the steel industry but specifically the affect of the rise in raw materials ,import quantity and export quantity. 1.In this research paper, the objective is to find how price of steel is greatly influenced by the price of furnace oil , sponge iron, pig iron and aluminium. 2.In this research paper, the objective is to find the sector wise demand of steel. 3.In the research paper my objective is to find the regression between the price of steel and its price of raw materials such as sponge iron, pig iron, furnace oil and aluminium.
4.In this dissertation the objective will be to show the regression between the export , import , consumption of steel with the production of steel. 5.In this dissertation the objective will be to show the problems of the Iron ore Industry. 6.In this dissertation the objective will be to show the correlation between the sponge iron, pig iron, furnace oil and aluminium. with the price of steel. 7. Role of Iron and Steel in Indias GDP.
2.LITERATURE REVIEW2.1 Background of Steel IndustryThe establishment of Tata Iron and Steel Company (TISCO) in 1907 was the starting point of modern Indian steel industry. Afterwards a few more steel companies were established namely Mysore Iron and Steel Company, (later renamed Vivesvaraya Iron & Steel Ltd) in 1923; Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron & Steel Ltd) in 1923; and Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron and Steel Co) in 1939.1 All these companies were in the private sector.
2.2USESIron and steel are used widely in the construction of roads, railways, other infrastructure, applicances, and buildings. Most large modern structures, such as stadiums and skyscrapers, bridges, and airports, are supported by a steel skeleton. Even those with a concrete structure will employ steel for reinforcing. In addition to widespread use in major appliances and cars. Despite growth in usage of aluminium, it is still the main material for car bodies. Steel is used in a variety of other construction materials, such as bolts, nails, and screws. Other common applications include shipbuilding, pipeline transport, mining, offshore construction, aerospace, white goods (e.g. washing
machines), heavy equipment such as bulldozers, office furniture, steel wool, tools, and armour in the form of personal vests or vehicle armour (better known as rolled homogeneous armour in this role). Historical Before the introduction of the Bessemer process and other modern production techniques, steel was expensive and was only used where no cheaper alternative existed, particularly for the cutting edge of knives, razors, swords, and other items where a hard, sharp edge was needed. It was also used for springs, including those used in clocks and watches. With the advent of speedier and thriftier production methods, steel has been easier to obtain and much cheaper. It has replaced wrought iron for a multitude of purposes. However, the availability of plastics in the latter part of the 20th century allowed these materials to replace steel due to their lower cost and weight. Long steel
As reinforcing bars and mesh in reinforced concrete Railroad tracks Structural steel in modern buildings and bridges Wires
Flat carbon steel
Major appliances Magnetic cores The inside and outside body of automobiles, trains, and ships.
Cutlery Rulers Surgical equipment Wrist watches
Low-background steel Steel manufactured after World War II became contaminated with radionuclides due to nuclear weapons testing. Low-background steel, steel manufactured prior to 1945, is
used for certain radiation-sensitive applications such as Geiger counters and radiation shielding.
2.3 GROWTH OF THE INDUSTRYGlobal steel production grew enormously in the 20th century from a mere 28 million tones at the beginning of the century to 781 million tones at the end.
World Steel Production in the 20th CenturyOver the course of the 20th century, production of crude steel has risen at an astounding rate, now fast approaching a production level of 800 million tons per year. Today, it is difficult to imagine a world without steel. During the 20th century, the consumption of steel increased at an average annual rate of 3.3%. In 1900, the USA was producing 37% of the worlds steel. With post war industrial development in Asia that region now (at the turn of the 20th century) accounts for almost 40%, with Europe (including the former Soviet Union) producing 36% and North America 14.5%. Steel consumption increases when economies are growing, as governments invest in infrastructure and transport, and build new factories and houses. Economic recession meets with a dip in steel production as such investments falter. If you were to overlay the above graph with a time sheet showing major historical events, the peaks and dips become meaningful. Note for example the peaks corresponding to the years of the two World Wars, followed each time by a dip, and soon after by strong climbs as the major economies recovered from the war and entered new periods of prosperity and growth, most notably in the
1950s and 1960s. The trend over the past three decades can also be seen to be in line with cyclical economic trends, with alternating periods of prosperity and recession.That was the period when the steel industry developed in Western Europe and the USA followed by the Soviet Union, Eastern Europe and Japan. However, steel consumption in the developed countries has reached a high stable level and growth has tapered off. After being in the focus in the developed world for more than a century, attention has now shifted to the developing regions. In the West, steel is referred to as a sunset industry. In the developing countries, the sun is still rising, for most it is only a dawn. Towards the end of the last century, growth of steel production was in the developing countries such as China, Brazil and India, as well as newly developed South Korea. Steel production and consumption grew steadily in China in the initial years but later it picked up momentum and the closing years of the century saw it racing ahead of the rest of the world. China produced 220.1 million tonnes in 2003, 272.2 million tonnes in 2004 and 349.36 million tonnes in 2005. That is much above the production in 2005 of Japan at 112.47 million tonnes, the USA at 93.90 million tonnes and Russia at 66.15 million tonnes.
2.4 Steel ProducersBroadly there are two types of producers in India viz. integrated producers and secondary producers. Integrated steel producers have traditionally integrated steel units have captive plants or iron ore and coke, which are main inputs to these units. Currently there are three main integrated producers of steel namely Steel Authority of India Limited (SAIL), Tata Iron and Steel Co Ltd (TISCO) and Rashtriya Ispat Nigam Ltd (RINL). SAIL dominates amongst the three owing to its large steel production capacity plant size. Secondary producers use steel scrap or sponge iron/direct reduced iron (DRI) or hot briquetted iron (HBI). It comprises mainly of Electric Arc Furnace (EAF) and Induction Furnace (IF) units, apart from other manufacturing units like the independent hot and cold rolling units, rerolling units, galvanizing and tin plating units, sponge iron producers, pig iron producers, etc. Secondary producers include Essar Steel Ltd., Ispat Industries Ltd., and JSW Steel Ltd. There are 120
sponge iron producers; 650 mini blast furnaces, electric arc furnaces, induction furnaces and energy optimizing furnaces; and 1,200 re-rollers in India. The integrated producers constitute most of the mild steel production in India. Their main products include flat steel products such as Hot Rolled, Cold Rolled and Galvanised steel. They also produce long and special steel in small quantities. On the other, secondary producers largely produce long steel products. Re-rollers are the units that come under secondary producers category, and produce small quantity of steel like long and flat products. These units either procure their inputs from the market or through their backward integrated plants. They use sponge iron, pig iron or combination to produce finished steel or ingots.4
LIST OF STEEL PRODUCERSTOP PRODUCERS BY VOLUMEThis is a list of the largest steel-producing companies in the world according to the World Steel Association. The WSA reports and analyzes its rankings in terms of steel volumes. The WSA is compiling this list every year. Note that not all steel is the same, some steel is far more valuable than other steel, so volume is not the same as turnover.Millions Millions of Ranking of tonnes(2009 tonnes (2009 ) (2008) 1 2 3 4 5 6 77.5 31.3 31.1 26.5 25.8 20.5 103.3 35.4 34.7 37.5 33.0 23.3 Millions of tonnes (2007) 116.4 28.6 31.1 35.7 34.0 22.9 Company Headquart ers Luxembourg China South Korea Japan Japan China
ArcelorMittal Baosteel Group POSCO Nippon Steel JFE Jiangsu Shagang
7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
20.5 20.1 16.7 15.3 15.2 15.1 14.2 14.0 13.7 13.5 12.0 11.3 11.0 11.0 10.9 10.6 9.6 8.9 8.9
24.4 16.0 19.2 17.7 23.2 12.2 20.4 20.4 27.7 13.7 33.3 16.0 14.1 15.9 11.3 10.0 12.0 11.0
26.5 16.2 17.3 16.2 21.5 12.9 18.6 20.0 20.2 13.9 31.1 17.9 13.8 17.0 9.7 10.1 13.3 10.9 11.7
Tata Steel Ansteel Severstal Evraz United States Steel Corporation Shougang Gerdau Nucor Corporation
India China Russia Russia United States China Brazil United States
Wuhan Iron and Steel China Steel Authority of India Limited India
Hebei Iron and Steel China Gruppo Riva Sumitomo Metal Industries ThyssenKrupp Novolipetsk IMIDRO Magnitogorsk Iron and Steel Works China Steel Shandong Laiwu Steel Italy Japan Germany Russia Iran Russia Taiwan China
10.0 23.6 14.2 13.1
Hyundai INI Steel Anshan Iron & Steel Group Corporation Magang Group Techint Shandong Iron and Steel Group Valin Steel Group World total
South Korea China China Italy / Argentina China China
12.1 11.1 1,219 1,329 1,351
2.5 Categories and Types of steelSteel is an iron based mixture containing two or more metallic and/or non metallic elements usually dissolving into each other when molten. Since it is an iron based alloyas per its end use requirementsother than iron it may contain one or more other elements such as carbon ,manganese, silicon, nickel, lead, copper, chromium, etc. For example, stainless steel (a type of steel) mainly contains chromium that is normally more than 10.5 percent with/without nickel or other alloying elements. Steel is produced using Steel Melting Shop that includes converter, open hearth furnace, electric arc furnace and electric induction furnace .There are broadly two types of steel according to its composition: alloy steel and non-alloy steel .Alloying steel is produced using alloying elements like manganese, silicon, nickel, chromium, etc. Non-alloy steel has no alloying component in it except that are normally present such as carbon. Non-alloy steel is mainly of three types viz. mild steel (contains upto 0.3% carbon), medium steel (contains between 0.3-0.6% carbon) and high steel (contains more than 0.6% carbon). All types of steel other than mild steel are called special steel. It is mainly because a special care is taken in order to maintain particular level of chemical composition in such steel. This process gives different properties to the steel according to its composition. In India, non-
alloying steel constitutes about 95 percent of total finished steel production, and mild steel has large share in it. According to shape/size/form steel is categorized into different types such as liquid steel, ingots, semis (semi-finished steel) and finished steel. Liquid steel is a first product that comes out from Steel Melting Shop. Liquid steel further goes into ingots, and then ingots advance to semis. Semis are called semi-finished steel products because they are further subject to forging/rolling in order to produce finish steel products such as flat steel products and long steel products. Crude steel generally includes ingots and semis. According to end use, steel is categorized into structural steels, construction steel, deep drawing Steel, forging quality, rail steel, etc. The following chart depicts various types of steel products according to different categories.
Carbon content, steel classifications, and alloy steelsBy Bob CapudeanAugust 28, 2003
Steel classification is important in understanding what types are used in certain applications and which are used for others. For example, most commercial steels are classified into one of three groups: plain carbon, low-alloy, and highalloy. Steel classification systems are set up and updated frequently for this type of information. Generally, carbon is the most important commercial steel alloy. Increasing carbon content increases hardness and strength and improves hardenability. But carbon also increases brittleness and reduces weldability because of its tendency to form martensite. This means carbon content can be both a blessing and a curse when it comes to commercial steel. And while there are steels that have up to 2 percent carbon content, they are the exception. Most steel contains less than 0.35 percent carbon. To put this in perspective, keep in mind that's 35/100 of 1 percent. Now, any steel in the 0.35 to 1.86 percent carbon content range can be hardened using a heat-quench-temper cycle. Most commercial steels are
classified into one of three groups: 1. Plain carbon steels 2. Low-alloy steels 3. High-alloy steels
Plain Carbon SteelsThese steels usually are iron with less than 1 percent carbon, plus small amounts of manganese, phosphorus, sulfur, and silicon. The weldability and other characteristics of these steels are primarily a product of carbon content, although the alloying and residual elements do have a minor influence. Plain carbon steels are further subdivided into four groups: 1. 2. 3. 4. Low Medium High Very high
Low. Often called mild steels, low-carbon steels have less than 0.30 percent carbon and are the most commonly used grades. They machine and weld nicely and are more ductile than higher-carbon steels. Medium. Medium-carbon steels have from 0.30 to 0.45 percent carbon. Increased carbon means increased hardness and tensile strength, decreased ductility, and more difficult machining. High. With 0.45 to 0.75 percent carbon, these steels can be challenging to weld. Preheating, post heating (to control cooling rate), and sometimes even heating during welding become necessary to produce acceptable welds and to control the mechanical properties of the steel after welding. Very High. With up to 1.50 percent carbon content, very high-carbon steels are used for hard steel products such as metal cutting tools and truck springs. Like high-carbon steels, they require heat treating before, during, and after welding to maintain their mechanical properties.
Low-alloy SteelsWhen these steels are designed for welded applications, their carbon content is usually below 0.25 percent and often below 0.15 percent. Typical alloys include nickel, chromium, molybdenum, manganese, and silicon, which add strength at room temperatures and increase low-temperature notch toughness. These alloys can, in the right combination, improve corrosion resistance and influence the steel's response to heat treatment. But the alloys added can also negatively influence crack susceptibility, so it's a good idea to use low-hydrogen welding processes with them. Preheating might also prove necessary. This can be determined by using the carbon equivalent formula, which we'll cover in a later issue.
High-alloy SteelsFor the most part, we're talking about stainless steel here, the most important commercial high-alloy steel. Stainless steels are at least 12 percent chromium and many have high nickel contents. The three basic types of stainless are: 1. Austenitic 2. Ferritic 3. Martensitic
2.6 ProductionDuring the last five years finished steel production (alloy and non-alloy) grew at the rate of 8 percent (CAGR) to reach at 57.66 mt in 2006-07 from 39.22 mt in 2002-03 (Table 2.2). In 2006-07, the secondary producers alone contributed about 76 percent and the rest came from the main producers. After liberalization, on the account of active participation of private sector in the steel industry, public sector share in the total production started dwindling. In 2003-04, share of public sector in the finished steel production (alloy & non-alloy) was 28 percent, which was reduced to 23 percent in 2006-07. According to estimates of Ministry of Steel6, Government of Indiaproduction capacity of the steel industry will be 124 mt at the end of the year 2011-12. It is mainly attributed to positive trends in the consumption. Main producers such as TISCO, SAIL and JSW are
aggressively investing in expanding their plant capacities. TISCO has an installed production capacity of 7.5 to 8 mt with another 2.4 mt would be added by 2009. The TISCO is the front runner with an expansion plan of about 30 mtpa by 2020. JSW and SAIL have expansion plans of about 27 mtpa and 24 mtpa, respectively.
LIST OF COUNTRIES BY STEEL PRODUCTIONThis is a list of countries by steel production from 2007 to 2010, based on data provided by the World Steel Association.Crude steel production (million tonnes): Ra nk 1 2 3 4 5 Country/Region World People's Republic of China European Union Japan United States Russia India 2007 2008 2009 2010
1,351.3 1326.5 494.9 209.7 120.2 98.1 72.4 53.5 500.3 198.0 118.7 91.4 68.5 57.8
1,219.7 1,413.6 573.6 139.1 87.5 58.2 60.0 62.8 626.7 172.9 109.6 80.6 67.0 66.8
6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
South Korea Germany Ukraine Brazil Turkey Italy Taiwan Mexico Spain France Canada Iran United Kingdom South Africa Belgium Poland Australia Austria Egypt Netherlands Czech Republic Argentina
51.5 48.6 42.8 33.8 25.8 31.6 20.9 17.6 19.0 19.3 15.6 10.1 14.3 9.1 10.7 10.6 7.9 7.6 6.2 7.4 7.1 5.4
53.6 45.8 37.3 33.7 26.8 30.6 19.9 17.2 18.6 17.9 14.8 10.0 13.5 8.3 10.7 9.7 7.6 7.6 6.2 6.8 6.4 5.5
48.6 32.7 29.9 26.5 25.3 19.7 15.7 14.2 14.3 12.8 9.0 10.9 10.1 7.5 5.6 7.2 5.2 5.7 5.5 5.2 4.6 4.0
58.5 43.8 33.6 32.8 29.0 25.8 19.6 17.0 16.3 15.4 13.0 12.0 9.7 8.5 8.1 8.0 7.3 7.2 6.7 6.7 5.2 5.1
28 29 30 31 32 33 34 35 36 37 38 39 40
Saudi Arabia Sweden Slovakia Kazakhstan Malaysia Finland Romania Thailand Indonesia Vietnam Luxembourg Belarus Venezuela Others
4.6 5.7 5.1 4.8 6.9 4.4 6.3 5.6 4.2 2.3 2.9 2.4 5.0 29.8 (est.)
4.7 5.2 4.5 4.3 6.4 4.4 5.0 5.2 3.9 2.7 2.6 2.6 4.2 28.3 (est.)
4.7 2.8 3.7 4.1 4.0 3.1 2.7 3.6 3.5 2.7 2.2 2.4 3.8 23.3 (est.)
5.0 4.8 4.6 4.3 4.1 4.0 3.9 3.7 3.6 2.7 2.6 2.5 2.2 25.6 (est.)
Government of India, Ministry of Steel, Annual Report 2007-08.
2.7 ConsumptionDuring last five years (2002-03 to 2006-07) the steel consumption has grown by about 11 percent, which was higher than the estimation of National Steel Policy 2005. Especially in last two years (2005-06 and 2006-07) consumption growth has been quite impressive, 13.90 percent and 12.91 percent, respectively. The consumption has reached its ever highest level of 46.78 mt in 2006-07. Some estimations state that this upturn trend in consumption will continue in the future
mainly owing to healthy economic growth and promising demand from growth driving sectors such as infrastructure, construction, housing, consumer durables, etc. Indias per capita consumption of steel stood at 46 kg, whereas world average is 150 kg. Average for developed world is 450 kg. Thus, it is clear that there is much scope for the growth of consumption in India. Major sectors which contributed to steel consumption in 2005-06 are depicted in the figure below (Figure 2.3). Infrastructure and manufacturing sectors together contributed almost 50 percent of total demand for the steel in 2005-06.
2.8 TradeIn last five years (2002-03 to 2006-07) imports are growing at much faster rate than exports. As a result net trade in steel is getting narrower (see Table 2.1). While imports have grown by CAGR of 24.49 percent, exports have grown just by a CAGR of 2.16 percent in last five years. Overall net trade in steel has managed to be in surplus till 2006-07.
2.9 Indian Steel IndustryData from a range of sources including Joint Plant Committee, Prowess Database, as well as international trade data, all reveal that there is no single entity that dominates either the sector as a whole, or any of the major product segments. But the key point is that this is not a monopoly, either in its aggregate form, or in any of its components. Later chapters will discuss whether there is any evidence of anti-competitive behavior by the incumbents.In segment after segment, the pattern is very clear; the more aggressive growth oriented firms have been capturing greater market shares. In some cases, they may be relatively smaller secondary producers, and in others the larger one. There is no evidence, of expansion of output or profitability, that anti-competitive behaviour of any of these firms, should have resulted in.
As mentioned above, growth of the Indian steel industry has been quite rapid; production growth CAGR was about 8 percent (see Table 2.2), very much in line with economic growth during 2002- 03 and 2006-07. The private sector constituted 77 percent of the total production in 2006-07, and its share has been rising for the past few years. While SAIL is a major public sector undertaking, it is also the largest producer of steel in the country accounted for 17 percent of the total production in 2006-07, followed by TSL and RINL with shares 8 percent and 5 percent, respectively. At-least where market sizes are concerned, whether individually or as a group, the public sector is no longer at the commanding heights of the steel sector. In 2006-07 non-alloy steel constituted 95.6 percent of total finished steel production and rest was alloy steel. Out of total non-alloy production non-flat products were 49.27 percent, and in the rest 48.34 percent were flat products and 2.39 percent were pipes. Of total finished (non-alloy) productions of bars & rods (non-flat product) and hot rolling coils/skelp/strips (flat product) were 37.48 percent and 22.27 percent, respectively. Together these two major products constituted for 59.75 percent of total finished (non-alloy) steel production in 2006-07. This trend has been more or less constant for last five years. The top six segments: Bars & rods, structurals, HR coild/strips/skelps, cold rolling coils/strips, plates and GC/GP sheets, contributed about 93.50 percent of total finished steel (non-alloy) production in 2006-07. About 70 percent of bars and rods production came from secondary producers in 2002-03, which was increased to 72.3 percent in 2006-07. Secondary producers comprising ESSAR, JSWL, ISPAT and other small secondary producers have experienced rise in their shares in total production of HR coils/sheets/strips/skelps.
StructuralsThe two public sector undertakings, SAIL and RINL, are the major producers of structurals. Both the companies constituted 36 percent of total production of structurals in the country. However, the shares of SAIL and RINL have been
declining quite rapidly. In 2006-07 combined share of SAIL and RINL stood at 23 percent, which was 36 percent in 2002-03. The share of SAIL has declined more than RINL. However the share of secondary producers in total structurals has been rising from 64 to 77 percent between 2002-03 and 2006-07. This does not indicate any great advantages that these players might have, but merely that the public sector entities have not been investing as much.
ImportsTop six steel products were responsible for 73 percent of total imports of steel in India in 2006-07. Main contributors were HR coils/skelps/strips/sheets, Plates and CR coils/sheets, which together constituted 56 percent of total imports in 2002-03, which increased to 62 percent in 2006-07. Particularly in the last two years (2005-06 and 2006-07) imports of BR and structurals have declined. Flat products such as plates, CR coils/sheets and GP/GC sheets have seen positive growth from 2004-05 to 2006-07. Imports of HR coils/skelps/strips/sheets, a single largest import item, have observed marginal decline in 2006-07. In general India is becoming net importer and expected to be so in 2007-087. Imports grew at a CAGR of about 24 percent in last five years. This is mainly due to increase in domestic demand for specific quality/size/grade of steel.Moreover, price considerations for specific quality/size/grade of products have pushed import. Imports as percentage of total consumption have grown in last five years. India imported 5.42 percent of its total steel consumption in 200203, which rose to 10.64 in 2006-07.
ExportsGP/GC sheets constituted a single largest product in total exports of steel. Share of GP/GC sheets were 30 percent in total steel export in 2002-03, which dipped by 5 percent in the following year. However, it recovered to reach at 37 percent in 2006-07. Although exports of three major segments: GP/GC sheets, HR coil/strips/skelps/sheets and CR sheets/coils have declined in the last three, these segments still formed 70 percent of total exports of steel in 2006-07. Overall moderate growth of exports during the last five years has been mainly due to the need to meet the growing domestic demand and to some extent
appreciating rupee was also responsible for the slow growth in exports.During the last five years share of exports in total finished steel (alloy & non-alloy) production has declined.India exported 14.21 percent of total production in 200203, which reduced to 11.24 percent in 2006-07.
FinancialsThe year 2006-07 was a good year for Indian steel industry as it registered positive growth as a whole. During January-March 2007 PTA for the sector as a whole was Rs. 4109.6 crores a growth of 14 percent over previous quarter10. PAT as a share of Capital Employed varies greatly, as for the big players like SAIL, TSL and JSW Steel it is around 16 percent, 15 percent and 14 percent respectively. For other secondary main producers such as Essar Steel Ltd and Ispat Industries Ltd the figures were 4.84 percent and -0.12 percent. Even if we see figures on Return on Capital Employed (ROCE), the picture remains same as Essar Steel and Ispat Industries have performed badly compared to other three big steel producers. The later sections of this report will show that the government preference towards big steel players especially in the context of iron ore captive mining have put smaller players at disadvantageous state in the market. Big players, with full or partial captive facilities, do enjoy low cost of production and secure supply of raw material. Nevertheless, inherent nature of the steel industry, which requires huge initial investments to create production base and expand the capacities, is also responsible for the oligopolistic nature of the industry.
3. FACTORS AFFECTING THE PRICE OF STEEL.1 .Raw-materials affect the price of steel maximum. Raw-materials like aluminium , coal , pig-iron , sponge-iron , furnace oil. 2. China's Influence on Steel Prices. U.S. metal fabricators had high hopes that when the steel tariffs were repealed, imports would help drive materials prices down. That has not been the case. As one survey respondent wrote, "After some relief, the mills are again pushing price increases down my suppliers' throats."The principal reasons steel producers cite for price increases and surcharges are the devalued U.S. dollar, frenzied consumption in China, skyrocketing prices for steel scrap and other raw materials, and soaring energy costs.In November 2005 Toronto-based TD Bank Financial Group reported that the Chinese raw material demand is driving up prices. Steel prices more than doubled between 2002 and 2004, and while prices have since fallen off their 2004 peak, they remain well above their five- and 10-year averages. The group's topic paper "2006 to Test Steel's Mettle" reported that "Like most of its counterparts within the resource sector, steel prices have not only ridden the coat-tails of strong U.S. economic growth, but have received a particular boost from the Chinese economy's emergence on the world stage. In fact, powered in part by skyrocketing auto production, China's steel consumption growth exploded by 20 percent per year in the 2001 2004 period, compared with an annual gain in the rest of the world of less than 3 percent. In 1994 China accounted for 17 percent of the world steel consumption. [In November 2005]that comparable figure [was] 27 percent."The report also stated that while China's ever-growing steel demand is no secret, less commonly known is the fact that China also is the world's largest steel producer. Over the past two years, China has produced more steel than Japan and the U.S. combined. Spurred by investments in new capacity, China's output now has outstripped the
country's demand. In 2005 China became a net exporter of steel products, although the country still relies on net imports of certain steel types, such as high-end plates used for bridges and buildings. Increasing China's effect on steel prices is its dependency on raw material imports. The demand has caused prices for iron ore, metallurgical coal, coke, and steel scrap to skyrocket, and producers are passing these increases on to their customers and changing prices frequently. As one "Fabricating Update" subscriber remarked, "It is not only the cost of the steel [that's a concern], but the volatility. We have pricing agreements that last 12 to 18 months, and steel prices are changing monthly. 3.POLICIES The National Steel Policy 2005 has projected India's steel production capacity at 110 million tonnes by 2019-20. However, based on the investment scenario in the steel sector, it has been further assessed that the steel production capacity in the country is likely to be 124.06 million tonnes by the year 2011-12. During April-September last year, the government took a number of fiscal and administrative steps to control steel prices, in view of rising inflation in the economy. These include waiver of import duty on all non- alloy steel, pig iron, sponge iron, Ferro-alloy, zinc and met coke; complete withdrawal of countervailing duty on Thermo Mechanically Treated (TMT) bars & structurals, imposition of export duty on certain iron and steel items as well as withdrawal of Duty Entitlement Pass Book (DEPB) facilities on certain steel items. As a result of various steps taken by the government, domestic steel process remained stable. During the period of July -- August 2008, when steel prices in the international market remained at their all time high, domestic steel prices tumbled at Rs 8000 -- Rs 10,000 lesser over the landed cost of import. Fiscal Policies: Gist of fiscal measures taken during the year for achieving price stability (April-September 2008) * Import duty on all non-alloy steel, zinc, Ferro-alloys and met coke revised to "nil" from 5% with effect from 29.04.08. * Countervailing Excise duty (CVED) withdrawn on TMT bars and structural. * Export duty @ 15% imposed on 10.05.2008 on all flat products
(HR, CR, GP/GC and pipe and tubes). This was subsequently withdrawn on 13.06.2008 on assurance of major steel producers. * Export duty @15% imposed on 10.05.2008 on pig iron, sponge iron, scrap, ingots and all categories of non-alloy semi-finished steel. * Export duty @ 10% was imposed on long products such as bars, wire rods, angles etc. on 10.05.2008. This was later revised to 15% with effect from 13.06.2008 * Ad valorem export duty of 15% imposed on iron ore of all categories and grades with effect from 13.06.2008 * 5% import duty on pig iron, semifinished, flat and long category of products with effect from 18.11.2008.] The National Steel Policy of INDIA:- has a target for taking steel production upto 110 million tones by 2019-20. Nonetheless, with the current rate of ongoing Greenfield and brownfield projects, the Ministry of Steel has projected Indias Steel capacity is expected to touch 124.06 million tones by 2011-12. In fact, based on the status of Memoranda of Understanding signed by the private producers with the various State Governments, Indias steel capacity is likely to be 293 million tones by 2020. According to report from Barclays Capital, China and India are going to provide the impetus for steel demand for the next few years. Indias buoyant demand contrasts with a dismissal global outlook, with the International Stainless Steel Forum expecting little recovery in demand in 2008 from a year ago when rising prices of key raw materials affected production cuts. However, in October 2009, companies like Essar and Ispat reduced production by around 40% to correct the demand-supply disparity. JSW also brought down production by 20% in November. After cutting down on production in October 2008 by upto 40% due to low demand, companies like Ispat, Essar and JSW, have either restarted fullscale operations or raised production levels. In December 2008, the Government came up with a multi-billion-dollar package to increase demand ion the infrastructure sector including steel. It declared a 4% slash in central excise duty on steel products, a step that is likely to have a significant effect on the economy.Industry analysts feel that the steel
industry is likely to lead the revival of the economy in 2009, with rising demands and profits.
3.1 TATA IRON AND STEEL INDUSTRYEVOLUTION STORY
The BeginningThe modern iron and steel industry in India owes its origin to the grand vision and perseverance of Jamsetji Nusserwanji Tata. The Tata Iron and Steel Company Limited (Tata Steel) was registered in Bombay on 26th August 1907. The construction of the steel plant was then taken up in earnest with the first stake being driven in February 1908. R.G. Wells, an American with steel plant construction experience took over as the General Manager in 1909. Success came when the first blast furnace was blown-in on 2nd December 1911, and the first ingot rolled on 16th February 1912. The company was originally constructed for a capacity of 160,000 tonnes of pig iron, 100,000 tones of ingot steel, 70,000 tones of rails, beams and shapes, and 20,000 tonnes of bars, hoops and rods. The plant essentially consisted of a battery of 180 non-recovery coke ovens and 30 by-product ovens with a sulphuric acid plant, two blast furnaces (each of 350 tonnes per day capacity), one 300 tonne hot metal mixer, four open hearth furnaces of 50 tonne capacity each, one steam engine driven 40-inch reversing blooming mill, one 28-inch reversing combination rail and structural mill with re-heating furnaces, and one 16- inch and two 10-inch rolling mills. Besides, the steel works had a power house, auxiliary facilities and a well-equipped laboratory. The cost of the plant as erected came to around Rs.23 million.
The War Years
Soon after the outbreak of the First World War in 1914, the plant was geared to meet the priority needs of the government. It worked on a 24 hour schedule, and sold its product to the government at a fraction of the price prevailing in the open market. Two more open hearth furnaces of 60 tonnes capacity each were added to make more steel. Tatas supplied 1500 miles of rails and 300,000 tonnes of steel to the allies war effort. During this period, Tata steel embarked on an expansion of the works. The greater extension programme was taken up in 1917 to raise the steel production to 500,000 tonnes. This phase saw the then latest Duplex process of steelmaking being introduced along with an electric driven blooming mill. The programme was delayed due to the war and could be completed only in 1924. As against the original estimate of Rs.67.6 million, the final cost came to Rs. 196 million. The company progressively added new units such as the third Duplex furnace in 1929, two new roughing and finishing mills in 1933, and a new blast furnace along with coke ovens in 1935. Simultaneously, mining leases were renewed or obtained afresh and attention was given to ancillaries and, a capacity of 800,000 tonnes of saleable Steel was attained by 1939. At that time, Tata Steel came to be regarded as the largest Steel plant in the British Empire and also the cheapest exporter of pig iron in the world (the latter reminiscent of the state in 1999). During the years of the Second World War between 1939 and 1945, Tata Steel contributed in a big way towards supplying war materials. This was a result of successful experimentation and innovation with existing resources. At the instance of the Government, in 1941, Tata Steel put up a wheel, tyre and axle plant to meet the requirements of the railways; in 1942 a mill to manufacture 1,000 tonnes per month of armour plates for defence carriers was added; a benzol recovery plant for producing toluene needed for the manufacture of explosives was put up in 1943; special quality sheets of alloy Steel and of high silicon were made in 1944-45 along with Steel for the famous Tatanagar tanks. Subsequently, Tata Steel was looking for new areas of diversification and for modernizing the works. Expansion to Two Million Tonnes
The Steel target of six million tonnes of ingot Steel per annum in India set for the second five year plan included expansion of the existing Steel plants. Tata Steel was permitted to go in for an expansion to two million tonnes of ingot Steel per annum. Tata Steels expansion programme, the largest project in the private sector, was started in 1955 and completed by December 1958. The rated daily capacity of the five blast furnaces in existence prior to TMP was 4200 tonnes. Blast furnace F, with a rated capacity of 1650 tonnes per day, provided sufficient hot metal for the two million tonne programme. By providing sintered ore, blast furnace production increased by 10% to an annual output of 1,870,000 tonnes. Blast furnace F was completed and put in operation on October 10, 1958. One of the largest and most modern furnaces in the world, it was designed for high top-pressure operation and the use of sinter in the burden. The blowing-in ceremony of blast furnace F was regarded as the official christening of TMP. A huge Steel Melting shop no. 3 (closed down in 1999) comprising two 800 tonne hot metal mixers, three 32 tonne Bessemer converters and seven 200 tonne open-hearth furnaces (with the possibility of adding an eighth furnace) was the corner stone of steelmaking under TMP. A new rolling mill complex was constructed consisting of soaking pits, Blooming Mill no.2 and a sheet Bar and Billet mill (this was closed in early 1999). Between the two mills, the primary capacity was nearly three million tones of ingots per annum. The continuous sheet bar and billet mill no.2 was the main mill for semi-finished products for feeding the sheet mills, tin bars for the tinplate company and gothics for the manufacture of seamless tubes. The Medium and Light Structural mill, which was also installed along with the other mills, was capable of rolling diversified products in wide ranges and was designed to roll 350,000 tonnes of blooms per annum. The products manufactured were to be mainly beams, channels, angles, junior beams and parallel flange beams-the last two for the first time in country. The revamping of the rail and structural mill (closed down in 1989), sheet bar and billet mill no.1 (closed down in 1998) and the merchant mill were also undertaken. A new merchant mill no.2 was commissioned in 1962. The additional service facilities included water supply arrangement, power
supply and distribution to meet the total maximum demand of 125,000 kW and railway track facilities. The two million tonne programme was completed on schedule and involved no major delay.
Period between 1960-80 During the decade of the sixties, consideration was given to the expansion of Tata Steel in the private sector. In July 1961, Tata Steel obtained an industrial license for setting up alloy steel Sinter plant: A new 1.37 mtpa sinter plant (SP2) to raise the total sinter production to 2.5 mtpa and thereby, increase sinter in blast furnaces to around 65%. Coke ovens: A coke oven battery with 54 ovens using stamp charging technology to make coke of internationally acceptable quality was established. Stamp charging has given following advantages:
Superior coke strength after reaction (CSR) compared with top charged coke, as well as higher bulk density. Higher yield of sized coke for the blast furnaces. Improved blast furnace productivity because of usage of coke with better room temperature and high temperature properties.
Waste recovery: 1 Mtpa Waste recycling plant to recover metallics from the plant was established Ancillary technologies: The main technology improvement in phase II was the introduction of coal injection in blast furnaces. The limited reserves of coking coal in India have always spurred Indian iron makers to strive for lower coke rates. Tata Steel commissioned a coal injection unit in 1991 for its F blast furnace. The system developed by Kloeckner Sstahl Technik (KST) was adopted on the success of coal injection in F blast furnace; the technology was extended to G blast furnace as a part of modernisation phase III and thereafter, also incorporated in D blast furnace.
Modernization phase III The success of modernization phases I and II and the need to enter the flat product market, provided the necessary impetus to embark on the crucial third phase of modernization. Keeping in view the international and domestic Steel scenario, it was felt necessary for Tata Steel to set up an internationally competitive flat products complex. Apart from a one million tonne hot strip mill, a new one million tonne G blast furnace was also installed. The landmarks during this phase were: Iron making: To augment steelmaking capacity, a corresponding increase in hot metal production was necessary. Hence, a highly automated blast furnace of 1 mtpa capacity, called the G blast furnace, was commissioned in November 1992. Steelmaking: A new LD shop 2 with two 130t capacity LD vessels, with one out of two operating at any given moment, was commissioned. New Cold Rolling Mill at Tata Steel In addition to modernization, Tata Steel has defined its vision for the next millennium and has embarked on an unprecedented expansion in flat products. As a first step, taking into account the doubling of the capacity of the HSM, a 1.2 million tonnes cold rolling complex has been commissioned in Jamshedpur towards the middle of the year 2000. Some of the salient features of this new development are highlighted. Facilities in the cold rolling complex Internationally, the technology of cold rolling has developed to an extremely sophisticated level. This progress has been augmented by the work on technology by equipment suppliers around the world, focused on further improving the processes to produce better products, thereby propelling cold rolled strips to higher levels of quality and cost competitiveness. The major facilities include a pickling-cum-tandem cold rolling mill, an annealing facility, and galvanizing lines. Steelmaking and casting Major developments in the steelmaking and casting area includes the following:
Switchover from duplex and open hearth steelmaking to the oxygen process. Adopting optimum KD vessel configuration (to accommodate the high slag volume as a result of high silicon and phosphorus in hot metal) and use of bottom inert gas agitation. Strategy to make low phosphorus Steel. Improvement of vessel lining life from 160-180 heats to over 1000 heats Adoption of continuous casting through billet and slab casters.
Tata Steel Today As a result of innovations and technological upgradation, Tata Steel, has become a well-run ultra modern plant - one of the best in the world. Fundamental changes in some metallurgical parameters have brought about this remarkable transformation. Necessity became the mother of invention and numerous innovations invoked improvement. The metallurgical changes introduced were essentially centered around:
Reducing alumina level in sinter from 4.4 to 2.5 %. Improving in coke quality Making changes in the fluxes used in sintermaking essentially to decrease the alkali input. Adopting the optimum LD vessel configuration and blowing conditions to accommodate the high slag volume required to deal with high silicon and phosphorus in Indian hot metal. Increasing the yield during LD steelmaking Introducing continuous casting (CC) instead of ingot casting to increase the net yield.
All these factors have made Tata Steel internationally cost competitive. In terms of hot metal costs, Tata Steel is amongst the lowest in the world and has a clear advantage over other major integrated producers. The cost of conversion from hot metal to a finished product such as hot rolled coils where Tata Steel has not been very competitive so far would be taken care of in the near future as investments already made to achieve the results foreseen. High ash in coke, poor room temperature and high temperature strengths of coke, high alumina in the iron oxide feed, high silicon in hot metal, low yields during steelmaking, low yield of finished products, high
energy consumption, high manpower, etc. have been the weaknesses not only of Tata Steel but of the Indian Steel industry as a whole. Appropriate steps taken by the Company have already resulted in better yield lower energy consumption, lower silicon in hot metal, lower silicon in hot metal, lower lime consumption in steelmaking, higher vessel life, etc., all of which augur well for the Steel Company in future.
Tata Steel in The New Millennium Tata Steel is all set to establish itself as the supplier of choice by delighting all its customers with its products and services. The Organisation is envisaged to become the most cost competitive Steel plant to serve the community and the nation. Where Tata Steel would venture, others will follow. The 21st century will certainly see a new Tata Steel - an integrated Steel plant in India with truly world class facilities along with a will to win amongst a committed and streamlined workforce.
3.2 SWOT ANALYSISThe steel industry in India has been moving from strength to strength and according to the Annual Report 2009-10 by the Ministry of Steel, India has emerged as the fifth largest producer of steel in the world and is likely to become the second largest producer of crude steel by 2015-16. Led by strong demand for autos and engineering services, the domestic steel demand in India remains robust, as per Moody's sectoral analysis on Asia's steel sector. According to the analysis, the outlook for the domestic operating environment is positive, driven by robust growth in infrastructure, autos and construction and constrains on additional supply by 2011. Recently, Mr Virbhadra Singh, Minister for Steel, said that India will become the world's second-largest steel producer by 2012, with a capacity of 124 million tonnes (MT) as part of the push being given to assist overall infrastructure development. Production India's steel production during 2009-10 was 64.88 million tonne (MT), up 11 per cent from a year ago, according to Mr A Sai Pratap, Minister of State for Steel. During the second quarter ended September 2010, steel majors Tata Steel and Steel Authority of India Ltd (SAIL) reported a high growth in steel sales. SAIL registered sales of 3.17 MT in the period under review, while Tata Steel's total sales for the quarter stood at 1.66 MT which is around 14 per cent higher than the corresponding quarter last year.
Meanwhile, JSW Steel's production during the quarter grew by 8 per cent to 3.14 MT on the back of a steady rise in demand. Consumption The domestic steel consumption grew by 9.8 per cent to 29.82 MT during April-September 2010 over the year-ago period, on the back of steady demand from sectors like automobile and consumer durables. As per the provisional data from the Ministry of Steel, consumption was at 27.15 MT in the same period a year ago. In September 2010, steel consumption rose 4.1 per cent to 4.72 MT, against 4.53 MT in the year-ago period. Investments A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive huge domestic and foreign investments. The domestic steel sector has attracted a staggering investment of about US$ 238 billion, according to Mr A Sai Prathap, Minister of State for Steel. This consists of nearly 222 MoUs signed between the investors and various state governments mostly in the states of Orissa, Jharkhand, Chhattisgarh and West Bengal. Tata Steel plans to invest US$ 226.17 million to commission its proposed ferroalloys plant and bar mill at its industrial park at Gopalpur and a greenfield steel plant at Kalinga Nagar. Essar Steel plans to expand its exclusive steel showrooms, Hypermart and retail outlet, Expressmart in Madhya Pradesh. JSW Steel plans to invest US$ 17 billion over the next 10 years to ramp up capacity from 7.8 million tonne per annum (MTPA) to 32 mtpa through greenfield and brownfield projects. Jindal Steel has completed the acquisition of Oman-based Shadeed Iron and Steel Co LLC for US$ 464 million. Japan's Nippon Steel will begin a manufacturing operation in India making steel pipes for use in automobiles and plans to invest US$ 37 million on
production and sales operations. Government Initiative As per the Press Information Bureau (PIB), during 2009, the government took a number of fiscal and administrative steps to contain steel prices. Central value added tax (CENVAT) on steel items was reduced from 14 per cent to 10 per cent with effect from February 2009. Moreover, in the Union Budget 2010-11, the government has allocated US$ 37.4 billion to the infrastructure sector and has increased the allocation for road transport by 13 per cent to US$ 4.3 billion which will further promote the steel industry. Exchange rate used: 1 USD = 42.21 INR (as on October 2010). Structural Weaknesses of Indian Steel Industry Although India has modernised its steelmaking considerably, however, nearly 6% of its crude steel is still produced using the outdated open-hearth process. Labour productivity in India is still very low. According to an estimate crude steel output at the biggest Indian steelmaker is roughly 144 tonnes per worker per year, whereas in Western Europe the figure is around 600 tonnes. India has to do a lot of catching in the production of stainless steel, which is primarily required by the plant and equipment, pharmaceutical and chemical industries. Steel production in India is also hampered by power shortages. India is deficient in raw materials required by the steel industry. Iron ore deposits are finite and there are problems in mining sufficient amounts of it. India's hard coal deposits are of low quality. Insufficient freight capacity and transport infrastructure impediments too hamper the growth of Indian steel industry.
OPPORTUNITIESThe Indian public sector steel and heavy engineering industry has been playing the leading role in the country's industrialization and development of the national economy for over a period of 50 years, since independence.
The first Indian company to operate in these sectors were the Tatas. The development of Public sector companies in India generated a lot of jobs and employment. After the independence, the sovereign government undertook setting up of a strong national economic infrastructure. The iron & steel industries, heavy electrical and heavy engineering activities, were focused at this stage, and gave rise to many jobs at the various levels starting form manufacturing jobs to management jobs.
ENGINEERS INDIA LIMITED(EIL) Engineers India Limited (EIL), one of the premier engineering consultancy organizations in Asia, is established to provide engineering and related technical services to petroleum refineries and other industrial projects. EIL has diversified into several new areas that include Highways & Bridges, IT, Airports, Mass Rapid Transport Systems, Ports & Terminals, Power Projects, Non-conventional / Renewable Energy Sources, Specialist Materials and Maintenance Services, Intelligent Buildings, Water and Urban Development projects. Jobs with EIL EIL offers very lucrative job opportunities for energetic and ambitious professionals with an organizational culture of growth based on performance and potential in its various offices in India and abroad. The company has job vacancies for Management Trainees , Civil, Electrical, Instrumentation and Chemical Engineers and experienced professionals. BHARAT HEAVY ELECTRICALS LIMITED(BHEL) Bharat Heavy Electricals Limited (BHEL) is one of the largest engineering and manufacturing enterprises in India and is ranked among the leading Power Plant Manufacturers in the world. BHEL operates mainly in three industry segments, namely Power, Industry - including Transmission, Transportation, Telecommunication & Renewable Energy and Overseas Business. Jobs with BHEL BHEL invites applications for various positions for its different locations across the country both in the core and functional areas. The candidates can avail more information regarding the vacancies, application forms and
other useful details from the company's website. STEEL AUTHORITY OF INDIA LIMITED (SAIL) Steel Authority of India (SAIL) is one of the top ten public sector companies in India which operates five Integrated Steel Plants, three Special Steel Plants and one Subsidiary Steel Plant in different parts of the Country. SAIL is involved in the production and sell of a variety of steel products that include hot and cold rolled sheets and coils, galvanized sheets, electrical sheets, structurals, railway products, plates, bars and rods, stainless steel and other alloy steels. Jobs with SAIL SAIL has a well organized HRD Department That is actively involved in recruitment and training of its human capital. The company conducts regular recruitment programs for various positions such as Management Trainees, officers, Executives and other designations. GAIL (India) Limited Career opportunities GAIL (India) Limited, India's principal natural gas transmission and marketing company is operating in diversified areas of LPG, Propane, SBP Solvent and Pentane; transmission of Liquefied Petroleum Gas (LPG); Petrochemicals like HDPE and LLDPE; leasing bandwidth in Telecommunications. GAIL (India) Limited invites applications for Junior and Middle Level positions. The jobs are not only well paying but also gives a high standard of life.
THREATS Effects of Globalization on Indian Steel Industry The effects of Globalization on Indian steel industry are not same throughout the country. The effects depend on the different regions, the type of raw materials used, the condition of the markets, technological advancements, the policies of the governmental authorities pertaining to the trade and business activities of the Indian steel industry, etc. In this age of the globalization, as the other industries of the developing countries, the
Indian steel manufacturing sector needs to restructure itself, in order to have a sustainable growth. This will be very helpful for providing the correct strategies for the steel industry in India. The restructuring should depend on the different requirements of the steel industry. The government played a very important role in the development of the steel industry in India. The India steel industry is experiencing a slow but steady growth. The steel industry in India has huge scopes in the future with massive scale of infrastructural development happening all across the country. The steel industry in India caters to many other industrial sectors such as construction industry, mining industry, transportation industry, automobile industry, engineering industry, chemical industry, etc. The steel segment includes the manufacturing of three different kinds of steel such as carbon steel, ferro-chrome steel, and stainless steel. The steel industry in India has further plans of development. Plans are being chalked out on setting up of three pig iron manufacturing units of the combined capacity of 6 lakh tons per year and a steel manufacturing unit of the capacity of producing 1 million tons yearly in West Bengal, with the technical and financial support of China. With all these developments steel industry in India is all set to become one of the most reputed industries not only in India but also in the international market as suggested by experts. In order to survive the immense competition under the globalization, the Indian steel industry plans a reversal of the production of steel industry. The main objectives of the strategy is the derivation of the benefit from the optimum utilization of the plant capacity, the nullification of any form of drawbacks, to track the opportunities in order to get the maximum from it and to tackle the possible threats. The strategy suggested for the reversal of the steel industry in India is double layered in nature, effecting the reversal and at the same time sustaining the reversal. The strategy has to be growth and survival oriented. The survival part would assure the survival of the industry in the fierce competitive atmosphere and the growth part would boost the sustainable growth of the industry. The two different parts of the strategy has to be integrated into one to have the expected results. The reduction of the cost is another major factor in the survival of the Indian steel industry in the age of globalization. The cost reduction would be the
main aspect of the improvement pertaining to the competitiveness of the industry. The manufacturers under the steel industry in India have to focus their attention in the areas such as:
The reduction in the cost of operations The reduction in the costs pertaining to the working capital The reduction in the costs pertaining to the production inventory or stock that is not sold The improvement in the economics operating in the technological aspects of production.
3.3 Indian Steel Industry - Porter's Five Forces Strategy AnalysisThere have been almost revolutionary changes in the global steel scene with fierce competitive pressures on performance, productivity, price reduction and customer satisfaction. National boundaries have melted to encompass an ever increasing world market. Trade in steel products has been on the upswing with the production facilities of both the developed and the developing countries complementing each other in the making of steel of different grades and specialty for the world market. Technological innovations have provided the competitive edge to the technologically strong companies. Smooth and quick transfer of technology has, however, meant an increasingly competitive pressure on the companies to be ahead of the others in the race for technological superiority to maintain and, if possible, to strengthen the bottomlines. The Indian steel industry comprises of the producers of finished steel, semi-finished steel, stainless steel and pig iron. Indian steel industry, having participation from both public sector and private sector enterprises, is one of the fastest growing markets for steel and is also increasingly looking towards exports as driving the growth of the industry.
Aruvian Research analyzes the Indian Steel Industry in Michael Porter's Five Forces Analysis. It uses concepts developed in Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Porter referred to these forces as the microenvironment, to contrast it with the more general term macroenvironment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace.
3.4 ROLE OF IRON AND STEEL IN INDIAS GDP- FACTSThe Iron and Steel Industry in India is one of the fastest growing sectors The demand drivers for the Indian Iron and Steel industry are increase in the activities of the automobiles industry, real estates industry, transportation system, aircraft industry, ship building industry, etc. India ranks 5th in the world in terms of production of steel The domestic consumption of steel has grown by12.5% in the past three years The construction projects all over India are major consumer of steel The per capita consumption of steel in India is 35kgs As the per capita consumption of steel is lower than other countries, so the steel industry has huge opportunities in the future. Indian steel sector was the first core sector to be freed from licensing regime and the pricing and distribution controls because of its inherent strength and capabilities. After liberalization in 1991, the industry made remarkable performance with colossal development in the areas of capacity building and a consistent effort towards bringing about more improved product. However, in the year 2001, the growth fell down due to various factors, which include general slow down in the industrial production and constriction activities coupled with lack of growth in major steel consuming
sectors. Gradually, with the revival of demand for automobile and engineering goods and general improvement in the economy in the year 2004 onwards, the growth in the steel sector again started picking up with immense development, where all the units were modernized, expanded and a large number of new green field steel plants also came up in different parts of the country based on modern, cost effective, state-of-the-art technologies. Further again in the year 2005-06 the GDP growth was around 8% owing to economic development as well as industrial development, thereby boosting the steel demand and production in the country and also resulting in India becoming the fifth largest producer of steel globally. However, this favorable period continued till mid 2008, post this period, the demand in the steel sector once again fluctuated and this time it was due to global economic slowdown, which had cast its impact over all the industrial as well as the related sectors. Analyzing the present condition, experts view the steel sector has to face severe difficulties in the upcoming times as among the major sectors hit by economic slump, steel occupies the top position with its demand falling by 18%. Further a study conducted by ASSOCHAM and AEP stated that demand growth across the sectors is hit as the recession engulfs the world economy weakening the demand in India as well. The study also analyzed the sales data from top twelve steel firms to access the steel demand in the sector, revealed that the sales figure in the third quarter of fiscal 2008-09 was Rs. 17.58 thousand crore, lower than the pat sales figures. This is recession time for the Indian steel industry at the moment. There is no denying of the fact that the sharp fall in the steel prices, low demand and soaring raw material prices and the prevailing recessionary conditions have posed the biggest challenge ever in front of the steel sector of the country as well after the ongoing slump hit the entire world steel industry very badly over the past few months.
The dark shadow of this demand slump has already been reflected in the continuous poor performance of the steel industries in the domestic arena, evident in the last two quarters performances of the countrys frontline steel companies, where the major steel players were all forced to go for production cut, and mellowing down over the implementation of projects. Almost all the new steel projects, announced in the last 2-3 years, have rescheduled their project completion timeline keeping in mind the recent slump in the domestic steel market. 6The steel manufacturers are now waiting for the required demand pull from the market in order to give them the required boost against this negative sentiments currently prevailing in the market.
4. ARTICLESAs per the Article: Steel demand in India is better placed : Macquarie. Article from: PTI - The Press Trust of India Ltd. Dated March 22, 2009. Mumbai, Mar 22 (PTI) -- Global research firm Macquaire has said demand for steel in India remains better placed than many other countries, but there would be pressure on margins. "India is a rare example where the steel industry is still operating at 90 per cent capacity utilisation and inventories are reducing," Macquarie said in its latest report on the Indian steel sector. "We believe India remains better placed on the demand side than many other countries, but margins are being reduced as steel prices follow global demands," the report said. As per the Article: India: India steel demand up by 7pct in 7 months on auto boost. Article from: TendersInfo dated November 15, 2009.
According to Mr Atul Chaturvedi steel secretary of India, India s steel demand grew by 7% in the first seven months of the fiscal year up to October, spurred by the needs of makers of cars and appliances and builders of rural homes. The minister said that demand for some products rose 9% in the same period. But the minister gave no further details. He said that increasing demand for automobiles, refrigerators and air conditioners and rising farm income are boosting steel sales in India, the world s second fastest growing major economy. As per the Article: India: India Steel Demand May Rise 10% on Infrastructure, Rastogi Says. Article from: TendersInfo dated June 12, 2009. India s steel demand may gain as much as 10 percent this fiscal year, almost double the pace previously estimated, as the government spends more on infrastructure, Steel Secretary Pramod Rastogi said. Based on the economic factors, it will not be a surprise to see a surge in consumption, Rastogi said in an interview in New Delhi, revising his May 18 forecast of 6 percent growth this year. Demand, which almost disappeared last year, rose 6 percent in the past two months, he said. As per the Article: Maruti to increase steel purchase from India: Khattar. Article from: PTI - The Press Trust of India Ltd. Dated April 19, 2006. New Delhi, Apr 19 (PTI) The country's biggest carmaker Maruti Udyog Ltd today said it would be buying more steel from the domestic market this fiscal in comparison to last year which will result in reducing costs. "In my estimate, India's domestic consumption could reach a level of about 200 million tonnes by 2020 and a level of over 500 million tonnes per year on a sustainable basis in the years to come," Muthuraman said in his
message at an international conference, which was read out by Tata Steel Chief Operating Officer H M Nerukar. As per the Article: STEEL AUTHORITY OF INDIA HIKES STEEL PRICES. Article from: AsiaPulse News dated February 4, 2010 NEW DELHI, Feb 4 Asia Pulse - Indian state-owned steel major Steel Authority of India Ltd (SAIL) (BSE:500113) on Wednesday said it has hiked steel prices by Rs 500 (US$10.88) a tonne effective from Feb 1. "SAIL has increased the prices of its flat steel products (primarily used by automobile and consumer durable industries) by Rs 500 a tonne, effective from February 1," a company spokesperson said. There is no change in prices of long steel products, consumed mainly by the infrastructure and construction firms. As per the Article: New Delhi, Sept 1 (PTI): Steel prices in the country have gone up with state-owned Steel Authority of India (SAIL), Ispat and Essar joining the bandwagon. Article from: PTI - The Press Trust of India Ltd. Dated September 1, 2005 "In keeping with the international prices, which are showing upward trend, we have decided to raise the price across the products range by Rs 500 per tonne," a SAIL spokesman said. Private sector Ispat Industries hiked the prices by 2.3 per cent with immediate effect. As per the Article: Steel meeting in India BRIEFING: MUMBAI Article from: International Herald Tribune dated July 3, 2008
The Indian steel ministry has summoned steel producers to a meeting Thursday to discuss measures to control prices, which have risen despite pledges to increase supplies, people close to the talks said. The government was expected to verify whether steel firms had maintained prices in line with a guarantee given in May and increased supplies to the local market.
As per the Article: CHINESE STEEL MAKERS CHALLENGED BY INDIA'S IRON ORE TARIFF RISE. Article from: AsiaPulse News dated January 10, 2008 BEIJING, Jan 10 Asia Pulse - India's iron and steel industry ministry recently proposed raising the export tariff for iron ore from the current 10 per cent to 15 per cent. The Indian ministry even suggested abolishing the 300 rupees ton (about US$7.6/ton) export tariff on pellet to encourage the export of processed minerals with high added value. Chinese industry insiders hold that the move by India will disturb the world's iron ore market greatly. China's iron ore imports from India grew 4.65 per cent year on year in the first eleven months of 2007, As per the Article: IMPROVED DEMAND SCENARIO FOR STEEL TO CONTINUE: INDIA'S CMIE. Article from: AsiaPulse News dated April 16, 2009 MUMBAI, April 16 Asia Pulse - Economic think-tank Centre for Monitoring Indian Economy (CMIE) has said that the demand for steel has improved and the trend will continue in the current fiscal.
"The ongoing government funded infrastructure projects during the peak construction season, a slight revival in the automobile industry and a sharp 40-45 per cent correction in steel prices from the peak level of July 2008 spurred the demand for the commodity," the CMIE said in its monthly review of the Indian economy. As per the Article: India : Steel Production in India. Article from: TendersInfo Dated January 12, 2010
Just as the market is showing signs of a decent recovery, your government is pouring millions into infrastructure projects and the demand is allowing you to raise prices, as the market strengthens you are raising prices in modest increments only to have the government make you reverse the increases according to the Hindu Times. Not something the steel industry in the US has to contend with but in India things are done differently and the government feared Steel Authority of India s (SAIL) recent Rupee 1,500/metric ton increase (US$33/ton) would add to inflationary pressures and force the state owned steel producer to retract the announcements
As per the Article: PER CAPITA STEEL CONSUMPTION IN INDIA ONLY 27 KG: EXPERT. Article from: AsiaPulse News dated January 2, 2002
PURI, Jan 2 Asia Pulse - Lack of downstream fabrication and welding facilities was one of the major reasons for the low per capita consumption of steel in India, according to the Union Minister for Steel, Braja Kishore Tripathy. The present per capita steel consumption in the country was an abysmal 27 kg against the world average consumption of 116 kg, Tripathy said at the inaugural function of Biju Patnaik National Steel Institute (BPNSI) here Monday.
BPNSI, set up to train technicians for the steel sector, was inaugurated by the Chief Minister Naveen Patnaik.
As per the Article: India : India Steel Ministry proposed to increase iron ore export tariffs. Article from: TendersInfo dated October 29, 2009
India Steel Ministry expected to adopt a new policy to improve the added value on export products. The body believed that iron ore export tariffs should be raised firstly. Virbhadra Singh, minister from India Steel Ministry said in an interview that India, as a large iron ore producing country, it most products were exported at a low price, thus the country should issue a new policy to help improve added value on export products to obtain greater benefits. He has proposed to increase iron ore export tariff, but did not elaborate the margin
As per the Article: India's steel demand to beat global trend; grow 2 pc in 2009. Article from: PTI - The Press Trust of India Ltd. Dated April 28, 2009 India's steel demand to beat global trend; grow 2 pc in 2009 London, Apr 28 (PTI) Bucking the global trend, India's steel consumption is likely to rise by nearly 2 per cent to 53.5 million tonnes in 2009, the World Steel Association has said. In its short-range outlook for global steel sector, the Association representing 180 steel producers across the world, said that India's steel
consumption is estimated to grow by 1.7 per cent to 53.5 million tonnes (MT) this year against 526 MT in 2008. As per the Article: Research and Markets: Indian Exciting Steel Industry Outlook to 2012.(Industry overview) Article from: Business Wire dated February 17, 2009
India is a reputed name in the world steel industry; the country's steel industry is catching up the pace and luring the steel majors from all over the world. The industry has gained strength from the strong Indian economy, and strong sectors like infrastructure, construction and automobile. Although India consumes less steel as compared to other Asian countries, it was ranked the fifth major crude steel producer in the world in 2008
As per the Article: Global outlook strong for steel Article from: Tribune-Review/Pittsburgh Tribune-Review dated May 7, 2008 Author: Joe Napsha Global demand for steel is increasing but the industry faces challenges, from rising costs for raw materials to the possibility that China will flood the market with lower-grade exports, industry leaders said Tuesday. "We think the (steel) market will remain strong. Steel is going to be a growth industry ... in North America," Robert Soulliere, chief executive officer of ThyssenKrupp Steel USA LLC, said yesterday at a news conference at the AISTech 2008 steel conference and exposition at the David L. Lawrence Convention Center, Downtown As per the Article: High Growth Reported for the Indian Steel Industry, Outlook to 2012.(Industry overview) Article from: Journal of India dated March 3, 2009
Reportlinker.com announces that a new market research report is available in its catalogue. Indian Steel Industry Outlook to 2012 http://www.reportlinker.com/p0102177/Indian-Steel-Industry-Outlook-to2012.html India is a reputed name in the world steel industry; the countryEs steel industry is catching up the pace and luring the steel majors from all over the world. The industry has gained strength from the strong Indian economy, and strong sectors like infrastructure, construction and automobile. Although India consumes less steel as compared to other Asian countries, it was ranked the fifth major crude steel producer in the world in 2008.
As per the Article: 'Steel consumption in India likely to grow at 15 pc annually'. Article from: PTI - The Press Trust of India Ltd. Dated February 27, 2008 Steel consumption in India likely to grow at 15 pc annually' Jamshedpur, Feb 27 (PTI) The steel consumption in India is expected to grow at 10-15 per cent per year, Tata Steel managing director B Muthuraman said here today. "In my estimate, India's domestic consumption could reach a level of about 200 million tonnes by 2020 and a level of over 500 million tonnes per year on a sustainable basis in the years to come," Muthuraman said in his message at an international conference, which was read out by Tata Steel Chief Operating Officer H M Nerukar. As per the Article: Steel Consumption In India Is Expected To Grow Significantly In Coming Years; New report provides detailed analysis of the Industrial market. Article from: OfficialSpin dated March 25, 2010 The Indian steel industry has made a rapid progress on strong fundamentals over the recent few years. The industry is getting all essential ingredients required for dynamic growth. The government is backing the
industry through favorable industrial reforms, while the private sector is supporting it with investments worth billions of dollars. Even in the tough times of economic slowdown, the industry succeeded to sustain its positive growth momentum on the strong fundamentals of domestic demand from construction, automobile and infrastructure sectors.
4.1PROBLEM IDENTIFICATIONBackward integration Although India is self-sufficient in iron ore, its companies rely on costlier coking coal imports. Even in the case of iron ore, the current availability can be improved by focusing more on exploration. Suggesting backward integration by steel companies as a viable tool to boost profitability, the report pointed out that raw material integration is difficult due to the multiple government controls and approvals, leading to delays in acquiring raw material linkages, thereby adding cost burden on the companies. Besides, poor logistics also increases costs and affects the bottomline. The report advised the industry to build its cost-competitiveness for large-scale global operations, improve labour productivity through reduced headcount and performance improvement and upgradation of ageing technology to reduce manufacturing costs. China ahead of India World steel output declined by 9 per cent in 2009, but increased in China and India. Though euphoria about the marked resilience to economic downturn and cycles is justified for India, this exuberance can be shortlived if the country does not resolve major issues hampering its capacity addition plans. India's steel production is close to one-tenth of its neighbour. In terms of capacity additions, China was able to add 300 million tonnes between FY03 and 08 period, compared with 20 million tonnes added by India. In terms of raw materials security also, China is well ahead of India due to its consistent efforts to acquire stakes in iron ore and coking coal mines in Australia and Brazil. In 2009, China was involved in almost every second transaction of the top 20 steel related M&A deals; India was involved only in five. India is the world's fourth-largest producer of iron ore, producing
220 MT in FY-09. It has the sixth-largest reserves globally, at 6 per cent, but the iron ore industry is small compared to other players. India has a low R/P (reserves/production) ratio of 111 as compared to Australia (134) and Brazil (184). Iron ore production increased at a CAGR of 12 per cent during FY04-09 period. Close to 50 per cent of Indian iron ore produced was being exported, mainly to China. In 2009, India produced 33 MT of coking coal and imported 24 MT, as the key raw material for steelmaking. Capacity additions Analysing the regulatory environment in India, it said the State governments signed 222 MoUs over the last three-four years to add nearly 276 million tonnes of capacity but not many of the projects envisaged have taken off. Currently, India is the fifth-largest steel producer in the world and the Government expects it to be the second-largest by 2015 on the back of capacity additions. India's per capita consumption of steel continues to be low at 44.3 kg compared to the world average of 190.4 kg during 2008. Further, India's consumption figures compare unfavourably with that of other developing economies such as China (318.5 kg), Russia (249.6 kg) and Brazil (123.6 kg).
Inefficient transport system In India, insufficient freight capacity and a transport infrastructure that has long been inadequate are becoming increasingly serious impediments to economic development. Although the country has one of the worlds biggest transport networks the rail network is twice as extensive as Chinas its poor quality hinders the efficient supply of goods. The story is roughly the same for port facilities and airports. In the coming years a total of USD 150 bn is to be invested in transport infrastructure, which offers huge potential for the steel industry. In the medium to long term this capi-tal expenditure will lay the foundations for seamless freight transport
Indias position globally India is the fifth largest producer of steel in the world. India Steel Industry has grown by leaps and bounds, especially in recent times with Indian firms buying steel companies overseas. The scope for steel industry is huge and industry estimates indicate that the industry will continue will to grow reasonably in the coming years with huge demands for stainless steel in the construction of new airports and metro rail projects. The government is planning a massive enhancement of the steel production capacity of India with the modernization of the existing steel plants Government targets to increase the production capacity from 56 million tones annually to 124 MT in the first phase which will come to an end by 2011 - 12. Currently with a production of 56 million tones India accounts for over 7% of the total steel produced globally, while it accounts to about 5% of global steel consumption. The steel sector in India grew by 5.3% in May 2009. Globally India is the only country to post a positive overall growth in the production of crude steel at 1.01% for the period of January - March in 2009. About 50% of the steel produced in India is exported. India's export of steel during April - December 2008 was 64.4 MT as against 9.7 MT in December 2007. In February 2009, steel export increased by 17% to 12.6 MT from 10.8 MT in the same month last year. More than 50% of steel from India is exported to China. The Government's decision to reduce export duty on iron ore lumps from 15% to 5% has given a major boost to the export of steel.  Power shortage hampers the production of steel. Use of outdated process of production. Lags behind in the production of stainless steel. Deficiency of raw-material required by the industry. Labour productivity is low. Inadequate shipment capacity and transport structure.
4.2 ENVIROMENTAL IMPACT OF IRON ORE :IMPACT ON LAND Mining is a temporary land use of the area. Being a site specific industry there is no choice insisting a mining project, a luxury available to most other industries. Land is required not only for the mine excavation proper and laying approach / haul roads, but also for beneficiation plant, ore handling & dispatch units, waste dumps, tailing ponds etc. Land is also required for ancillary facilities and statutory buildings (workshops, stores, offices, canteen, and crche). In addition to these, residential colony and related welfare amenities like school, hospital, shopping centre ,recreation centre etc. also require land. The major impact on the land use during the pre-mining phase is removal of vegetation and resettlement of displaced population. During mining and post-mining phases, drastic changes in landscape with landform take place. The major associated impacts are soilerosion, loss of topsoil, creation of waste dumps and voids, disposal of wastes, deforestation etc. The impacts of iron ore mining on land are as outlined hereunder; Topography and land scenario changes due to excavation of open pits and dumping of overburden rock mass in the form of land heaps. The land-use pattern undergoes a change due to the use of the land for mining, dumping, and other mining and associated activities. The land-use in the surrounding areas may get affected due to the impacts of mining on water regime.
Leachates from overburden dumps and other rock masses and polluted water from the pits affect the characteristics of the top-soil affecting the land-use. In the mines having mineral concentration/processing plants, it is required to make tailings pond to store the tailings generated from the processing plants. These tailing ponds require massive area and may cause pollution of ground and surface water bodies ,if proper care is not taken. The drainage pattern of the area undergoes a change due to the alterations in the surface topography due to mining and associated activities. It is evident from the above that the mining and associated activities can significantly change the land use and drainage pattern of the region. These changes