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METHODS
TERM PAPER ON
STEEL PIPE MARKET VS PVC PIPE MARKET
BY
DINESH SHARMA
ROLL NO 9
KC SHAKDWIPEE
ROLL NO 14
PANKAJ G SACHDEV ROLL NO 25
3rd
SEMESTER
MBA E 2003-06 IIFT NEW DELHI
CONTENTS
SL NO
TITLE
PAGE NO
EXECUTIVE SUMMARY
INTRODUCTION
PIPE DEMAND
4.1
PROBLEM
IDENTIFICATION
4.2
RESEARCH
METHODOLOGY
SAMPLING PLAN
4.4
4.5.1
4.6
16
RESEARCH FINDINGS
25
CONCLUSION
26
QUESTIONNAIRE
27
EXECUTIVE SUMMARY
There was market feedback that PVC pipes are coming in a big way in the market
and taking away share of Steel pipe market .Management wanted to know the
real picture as about 2 lac mt steel was being consumed all over India by steel
pipe manufacturers.
Data of All India sales segment wise was compiled for sales of PVC PIPE and
STEEL PIPE FROM 2001-2004.Prices of pipe were also compared .The increase
in the price of steel pipe was quite steep compared to PVC pipe rate
increase.Moreover the PVC pipe was much lighter in weight compared to Steel
Pipe.Both these factors led to replacement of steel pipe by PVC pipe in some
appplications in agriculture segment ,infrastucture and housing segment.
People were not aware of the carcinogenic effects of PVC.Durability and price
were the major factors in customer deciding the use of PVC or Steel
pipe.Traditionaly steel pipes were being used in all sectors .But of late relative
market share of PVC is gradually increasing in all segments.
Due to constraints of time only nearby Delhi PVC pipe manufacturers who were
also producing steel pipes were contacted .These producers of pipes are
gradually increasing the capacity utilization of PVC Production .In steel pipes
production the same increase in capacity utilization is not there.
While for PVC Dealer Channel was predominantly used for steel pipes direct
marketing by producers to Government departments and Exports was utilized.
Sales of steel is not being immediately hit because of growth in steel pipe
consuming segments but in the long run steel manufacturers will have to explore
other potential user segments of steel .
2 INTRODUCTION
Steel is an alloy of iron and carbon containing less than 2% carbon and 1%
manganese and small amounts of silicon, phosphorus, sulphur and oxygen.
Steel is the most important engineering and construction material in the world. It
is used in every aspect of our lives, from automotive manufacture to construction
products, from steel toecaps for protective footwear to refrigerators and washing
machines and from cargo ships to the finest scalpel for hospital surgery.
IT IS WIDELY USED FOR PIPES.
are added to make stainless steel, which can help prevent rust. Galvanizing is
done on pipes to prevent corrosion. Steel pipes are videly used in production of
oil and natural gas and in modern power stations .They use steel pipes as these
remain impermeable even at extreme temperatures of 580 degree C or 270
degree centigrade.
3. PIPE DEMAND
The demand for pipes is directly related with the performance of the economy
and the agriculture in particular.There is demand for irrigation pipes.The
housing sector is a big consumer of pipes.The interlinking of rivers,rural water
supply schemes and urban development measures contribute to demand of
pipes.Major schemes of the Central Government like Swajal Dhara Scheme,
AP s Govt drip irrigation project of Rs 11.2 Billion require massive quantity of
pipe.Lot of State Governments requirements are there in drinking water and
sanitation projects.Of late PVC pipes have come in the market which are light in
weight and much cheaper in price. Replacement of PVC in several critical
segments has been forecast.
A realistic appraisal of PVC Pipe was needed to properly assess its future in a variety
of applications in light of environmental pressures exerted over the past decade. It
may be noted here that some scientific studies have concluded that PVC causes
cancer, PVC compounding is done by weight, and compounds are formulated in parts
per hundred. Following is a list of ingredients in a typical Compound.
4.RESEARCH
4.1)
PROBLEM IDENTIFICATION
RESEARCH OBJECTIVES:
4.3)TYPE OF RESEARCH:
It started with exploratory research and further descriptive research was done.
4.4)SAMPLING PLAN
Sampling Frame:
Industrial Directory of Manufacturers of both PVC Pipe
and Steel pipe .
Unit of analysis:
It was found from Industrial Directory that there are only
Three manufacturers of pipes around Delhi who manufacture both Steel and PVC pipes.
Sampling Method used.
STRATIFIED RANDOM SAMPLING
SECONDARY DATA
ANALYSIS
Based on above the following data was arrived at after checking and cross checking
with above people.
TABLE 1
2001
2002
2003
2004 E
AGRICULTURE
427350
450000
500000
500000
NFRASTRUCTURE
341880
350000
400000
450000
HOUSING
OTHERS
512821
256410
550000
250000
600000
300000
630000
300000
TOTAL
1538461
18
17
26
31
1710
1615
2470
2945
22
21
30
35
2090
1995
2850
3325
%
GROWTH
IN 2004
OVER
2001
17
32
23
17
22
72
72
59
59
The price of Black Pipe over the same period has increased by 72% while Galvanized
pipe price has increased by 59%.
TABLE 2
2001
AGRICULTURE
301000
INFRASTRUCTURE
125000
HOUSING
OTHERS
185000
22500
TOTAL
633500
AVERAGE PRICE
PER KG(Rs)
7 INCH PIPE PRICE
INFERENCE:
2002
2003 2004 E
48
50
50
55
1248
1300
1300
1430
FROM TABLE 2
There is overall growth of 39% in PVC pipe demand in 2004 compared to 2001 demand.
The growth is highest in Others Sector 76% followed by housing 49%, agriculture 33%
sector and infrastructure 32%.
The price of PVC pipe has increased by 15% over the same period.
INFERENCE:
%
GROWTH
IN 2004
OVER
2001
33
32
49
76
39
15
15
As is evident from Graph 1 in agriculture sector if we take the total demand of pipe the
share of PVC pipe has increased compared to steel pipe .Similarly in infrastructure
housing ,and other sectors the share of PVC pipes has increased .A look at overall pipe
market Graph 5 shows that share of PVC PIPE is gradually increasing.
GRAPH 6
This graph highlights the weight advantage of PVC pipe compared to Steel pipe of same
dia.
GRAPH 1
AGRICULTURAL DEMAND OF
PVC PIPE VS STEEL PIPE IN MT
1000000
800000
600000
400000
200000
0
2001
2002
2003
STEEL
2004
PVC
GRAPH 2
10
INFRASTRUCTURE DEMAND OF
PVC PIPE VS STEEL PIPE IN MT
700000
600000
500000
400000
300000
200000
100000
0
2001
2002
2003
2004
STEEL PIPE
PVC PIPE
GRAPH3
2002
2003
STEEL PIPE
2004
PVC PIPE
11
GRAPH 4
2002
2003
STEEL PIPE
2004
PVC PIPE
2002
2003
2004
12
STEEL PIPE
PVC PIPE
GRAPH 6
3500
3000
2500
2000
1500
1000
500
0
2001
PVC PIPE
2002
2003
2004
GALV STEEL PIPE
13
GRAPH 7
WEIGHT ADVANTAGE
APPROX WEIGHT IN KG OF 1 Mtr PIPE OF 110 mm DIA
10
WEIGHT
PVC PIPE
1.7
GI STEEL PIPE
10
14
Following comparison was taken from internet site which solves the dilemma of a customer whether
to choose steel pipe or PVC pipe and advantages of steel pipe.
Distortion
Steel is stronger than PVC. It can resist minor collisions with forklift traffic better than PVC.
PVC is not as resistant to water hammer as steel.
PVC will distort or bend permanently if very hot temperatures are applied. PVC pipe must
not be used for water temperatures above 140 F. A special version of PVC called CPVC
must be used for higher temperatures.
Corrosion
Resistance
PVC will not rust, however, fittings, pumps or heat exchangers combined in a PVC system
can corrode and require a corrosion prevention program in the water treatment. New steel
piping can be cleaned and pacivated to minimize future corrosion with a treatment program.
Thermal
Conductivity
Thermal
Expansion
PVC has a lower thermal conductivity than steel and can reduce the need for insulation.
PVC pipe expands and contracts at 4.5 times the rate of steel (0.36" per 100 ft length at a
10F temperature differential). As a result the suspension system should be designed with
sliders to accommodate this movement. Expansion loops may also be required. 200 feet
of PVC pipe installed at 75F and operating at 50F will contract 2".
Fire
Resistance
Handling
Cost
Where pipes penetrate a fire rated wall, floor or ceiling assembly, PVC cannot be used.
PVC pipe is lighter than steel pipe and can reduce the need for heavy equipment lifts during
installation.
The installation costs for steel are higher than those for PVC. PVC materials, however, are more
expensive and special fittings such as valves, filters and y strainers more than double the cost.
Often to save money, flanged PVC connections are made to steel or brass flanged valves to
15
reduce the cost, however, the advantage of a corrosion resistant system is lost. In small
(1-6 machine) molding halls PVC can be a good choice since the entire installation can be done with
maintenance staff.
System
Efficiency
Although PVC pipe is smoother than steel pipe, it is not as strong. The result is that lower face
velocities (less than 5 feet per second) must be used in the design and this translates to larger
pipe diameters than a comparable steel pipe system (which can accommodate face velocities
ideally at 7 to 10 feet per second). Larger diameter pipes exert a higher load on the building
structure and support is more expensive.
Workmanship
PVC can be assembled with a minimum of skill and often for this reason, systems are installed
by less experienced workers and the results show. Steel pipe is typically welded and the required
skill level ensures the finished installation is neater in appearance and of higher quality. Repairs
and minor changes to PVC systems can be made by in-house maintenance people while similar
work on steel systems requires that outside help be brought in.
Durability and long service life Records indicate many instances where steel pipe has been in
service for more than 100 years and is still doing a great job today. With the improved steels, and
advancements in linings and coatings during the past few decades, the useful life of steel pipe is only
getting better.
Economy of installation and maintenance Steel pipe is not only economical to purchase and
install, but will usually have a better life cycle cost compared to the alternatives.
With the above Exploratory data in background endeavor was made to collect
primary data from actual producers of both PVC and Steel pipe around Delhi.
16
SOMEWHAT
IMPORTANT
33
33
NEITHER
IMPORTANT
NOR
UNIMPORTANT
67
67
SOMEWHAT
UNIMPORTANT
17
MOST
UNIMPORTANT
INFERENCE
In case of undecided customer coming to producers for pipe they consider customer
needs on top of their mind .
c) Factors that customer considers important while making purchase decision
FACTORS
SURVEY RESULTS ( IN %)
MOST
SOMEWHAT
IMPORTANT IMPORTANT
PRICE
WEIGHT OF PIPE
DURABILITY
BRAND
TRANSPORTATION
HAZARDOUS TO
HUMAN HEALTH
HAZARDOUS TO
ENVIRONMENT
33
34
33
NEITHER
IMPORTANT
NOR
UNIMPORTANT
SOMEWHAT
UNIMPORTANT
MOST
UNIMPORTANT
33
67
100
33
100
100
67
33
67
PERCENTAGE
100
18
JINDAL
2
100
PRAKASH/SURYA
3
67/33
SWASTIK/RAMA
4
67/33
APOLLO/ADVANCE 5
33/67
INTERPRETATION: It is interesting to note that all the three producers considered
Brand as neither important nor unimportant they were unanimous in rating TATA
as No 1 followed by Jindal Prakash Surya & Swastik.Their Brand was placed by
them on $th position by one and 5 th position by two of them.
INFERENCE: As their brand was placed at 4 th or 5th position either they were
targeting non Brand conscious customer or using some other marketing strategy
to sell their product.
e) Brand preference of PVC pipe
BRAND
NUMBER
PERCENTAGE
FINOLEX/TIRUPATI
1
67/33
SUPREME
2
100
KISSAN/JAIN JALGAO
3
67/33
PRAKASH/KISHAN/PRINCE 4
33/33/34
APOLLO/RAMA/NIL
5
33/33/34
INTERPRETATION Two of them considered Finolex as No 1 Brand while 1
considered his brand Tirupati as No 1.All of them considered supreme as No 2.Two
of them considered Kissan as no 3 brand while one considered Jain Jalgao as No 1
brand. Each of them considered either Prakash /Kishan or Prince as no 4 Brand
.One of them didnt rate any of them as No 5 while two of them rated as their
Brands as no 5.
INFERENCE As in two cases their brand was placed at 5th position either they
were targeting non Brand conscious customer or using some other marketing
strategy to sell their product
f) PERCENTAGE BREAKUP OF SEGMENT WISE SALES OF PVC & STEEL
PIPE.
SEGMENT
PVC %
STEEL PIPE %
HOUSING
10
10
CONSTRN
AGRICULTURE
70
15
INFRASTRUCTURE 20
35
DRINKING WATER 0
35
OTHERS
0
5
20%
GRAPH 8
HOUSING
0%
10%
70%
AGRICULTURE
INFRASTRUCTURE
OTHERS
19
GRAPH 8
SEGMENT WISE SALES OF STEEL PIPE IN PERCENTAGE
20
35%
15%
5%
10%
35%
AGRICULTURE
OTHERS
INFRASTRUCTURE
DRINKING WATER
HOUSING
INTERPRETATION
THEIR % segment wise sales was as shown in the pie table.
INFERENCE
PVC pipe sales was maximum in the Agriculture sector followed by infrastructure
and housing sector. Steel pipe sales was maximum in infrastructure and drinking
water supply scheme followed by agriculture housing and others.
g) Channel wise sales of PVC & steel pipe
PVC PIPE %
STEEL PIPE %
21
DEALERS
DIRECT PVT
DIRECT GOVT
EXPORT
65
10
20
5
20
15
35
30
GRAPH 9
70
60
50
40
30
20
10
0
PVC PIPE
DEALERS
STEEL PIPE
DIRECT PVT
DIRECT GOVT
EXPORT
22
FACT B (MT)
8000
6000
60000
36000
FACT A (MT)
12000
12000
40000
30000
FACT H (MT)
6000
4800
72000
60000
GRAPH 10
80000
70000
60000
50000
40000
30000
20000
10000
0
H
PVC PIPE PRDN
STEEL PIPE PRDN
23
B FACTORY
PVC PIPE CAPACITY
2001
NOT
INSTALLED
0
2002
NOT
INSTALLED
0
40000
24000
40000
24000
6000
75
60000
36000
60
60
60
A FACTORY
PVC PIPE CAPACITY
PVC PIPE PRDN
% AGE UTILIZATION
STEEL PIPE CAP
STEEL PIPE PRDN
% AGE UTILIZATION
2001
12000
8000
67
40000
27000
2002
12000
10000
83
40000
28000
2003
12000
12000
100
40000
30000
68
70
75
H FACTORY
PVC PIPE CAPACITY
PVC PIPE PRDN
% AGE UTILIZATION
STEEL PIPE CAP
STEEL PIPE PRDN
% AGE UTILIZATION
2001
6000
2000
33
72000
50000
2002
6000
3500
58
72000
55000
2003
6000
4800
80
72000
60000
69
76
83
2003
8000
INTERPRETATION:
As is evident from Table 4 the percentage utilization of capacity for Factory B for
steel pipes is 60% while for PVC in first year of production it is 75%.In case of
factory A while for steel pipes the capacity utilization is 68%in 2001,70% in 2002
and 75% in 2003,for PVC PIPES the capacity utilization has reached 100% in 2003.
In case of factory H the steel tube capacity utilization has increased from 69% to
83% ,for PVC pipe it has increased from 33% to 80%
INFERENCE
Demand from PVC is increasing fast compared to steel pipes demand.
i)
24
All the three were of the view that demand has shifted from Steel pipes to PVC pipes
in certain segments of AGRICULTURE Sector and Infrastructure sector.
REASONS
The main reasons given was.
1) CHEAP PRICE OF PVC PIPE
2) LIGHT WEIGHT OF PVC PIPE
5) RESEARCH FINDINGS
The growth in steel pipe market in future may not be at the same rate as growth of
overall pipe market. There is ALL INDIA overall growth of 39% in demand of PVC
PIPE in 2004 compared to 2001.The same figure FOR Steel pipe is 22%.While the
price of PVC pipe has increased by 15% in 2004 compared to 2001,the
corresponding increase in galvanized steel pipe price is 59%.Weight of 110 mm dia
PVC pipe is 1.7 Kg ,while the same dia pipe of steel weighs 10 Kg.When customer
makes a decision regarding purchase of pipe the most important factor is durability
of pipe followed by price and hazardous to HUMAN HEALTH & ENVIRONMENT
and weight of pipe.. In case of undecided customer coming to producers for pipe
they consider customer needs on top of their mind rather than their turnover and
margin.. As their brand was placed at 4 th or 5th position either they were targeting
non Brand conscious customer or using some other marketing strategy to sell their
product. As in two cases their brand was placed at 5 th position either they were
targeting non Brand conscious customer or using some other marketing strategy to
sell their product.
PVC pipe sales was maximum in the Agriculture sector followed by infrastructure
and housing sector. Steel pipe sales was maximum in infrastructure and drinking
water supply scheme followed by agriculture housing and other segments.
PVC pipe maximum sales was through dealers followed by Government
Departments done directly by producers. In case of steel pipes maximum
percentage of sales was to Government Departments done directly by producers
followed by exports and dealers.
The percentage utilization of capacity for PVC is higher compared to Steel pipe
installed capacity.
There has been a shift in demand from Steel pipes to PVC pipes in certain
segments of AGRICULTURE Sector and Infrastructure sector. The main reasons
given were CHEAP PRICE and LIGHT WEIGHT of PVC pipe.
6) CONCLUDING REMARKS
To increase its growth rate the steel pipe manufacturers will have to find new segments,
cut down costs and try to increase the durability of pipes further.As the pipe market is
25
growing there is no immediate threat for HR coil Producers but in the long run they will
also have to explore newer segments for sales.
----------------------------------------------------------------------------------------------------------Please note
APPENDIX 1
7. QUESTIONNAIRE
26
1.) you are in the pipe manufacturing business for the past how many years
(a)
< Than 5
(b)
> 5 - 10
(c)
> 10 - 15
(d)
> 15
2.) In your opinion the FUTURE of STEEL PIPE is
(a)
Good
b)
Bad
(c) So so
For Q 3 & Q 4
5=
4=
3=
2=
1=
MOST IMPORTANT
SOMEWHAT IMPORTANT
NEITHER IMPORTANT NOR UNIMPORTANT
SOMEWHAT UNIMPORTANT
MOST UNIMPORTANT
3) Please rate the importance of following Parameters, when you influence the
customers purchase decision in case of undecided customer steel pipes vs. a vs.
PVC pipes
1
i) YOUR MARGINS
MOST
UNIMPORTANT
1
ii)
YOUR
TURNOVER
CUSTOMER
NEEDS
MOST
UNIMPORTANT
1
iii)
MOST
IMPORTANT
MOST
UNIMPORTANT
5
MOST
IMPORTANT
MOST
IMPORTANT
27
1
i)
PRICE
MOST
UNIMPORTANT
MOST
IMPORTANT
1
iii)
MOST
IMPORTANT
DURABILITY
MOST
UNIMPORTANT
1
iv)
MOST
IMPORTANT
BRAND
MOST
UNIMPORTANT
MOST
IMPORTANT
v) TRANSPORTATION
MOST
MOST
28
UNIMPORTANT
1
vi)HAZARDOUS TO
HUMAN HEALTH
MOST
UNIMPORTANT
1
vii)HAZARDOUS TO
ENVIRONMENT
IMPORTANT
5
MOST
IMPORTANT
MOST
UNIMPORTANT
5
MOST
IMPORTANT
5.)
Please give the ranking of BRAND PREFERENCE OF STEEL PIPE by the
customer
1.
2.
3
4.
5.
6.
6)
Please give the ranking of BRAND PREFERENCE OF PVC PIPE by the
customer
1.
2.
3
4.
5.
6.
7.) YOUR % BREAKUP OF ANNUAL sales to FOLLOWING SEGMENT OF
PVC & STEEL PIPES is
SEGMENT
PVC
a) HOUSING CONSTRUCTION
b) AGRICULTURE
c) INFRASTRUCTURE
d) DRINKING WATER SUPPLY
e) OTHERS
TOTAL
|
|
STEEL PIPE
|
|
|
|
|
|
|
|
|
100%
|
|
100%
29
SEGMENT
PVC
|
|
a) DEALERS
b) DIRECT PVT
c) DIRECT GOVT
d) EXPORT
TOTAL
STEEL PIPE
|
|
|
|
|
100%
|
|
|
|
|
100%
10)
Please give in MT
PRODUCTION for
2002
and ACTUAL
2003
30
13) WHY DO YOU THINK they are SHIFTING FROM STEEL PIPES TO PVC
PIPES
31
ADDRESS
OWNERS NAME
Sh
CONTACT NUMBER
ANNUAL TURNOVER
IN CRORES)
DATE OF VISIT
VISITED BY
:
:
32
33
34
35