Professional Documents
Culture Documents
Steel Industry in Crisis
Steel Industry in Crisis
The world crude steel production for 2008 was 1330 mt, a decline
of 1.2 % as compared to 2007. China produced 502 mt of crude steel in 2008,
a growth of 3 % over the 2007 level. The picture in the other developed parts
of the world was of continued decline in steel demand triggered by the decline
in the GDP in these economies. As per IMF the world GDP growth estimated
for 2008 is 3.7% as compared to 5 percent achieved in 2007.
What has the global downturn meant for the steel industry in India?
Fortunately for us, the steel industry in India is highly country centric, and
focus is substantially on the domestic market. However with the decline in the
world steel demand exports have had to be scaled down considerably. The
buoyancy with which the future plans were being made and taken up for
execution has also been affected. However, the situation cannot be termed as
desperate.
INDUSTRY REACTION
It is obvious that every steel company in India and elsewhere in the
world is viewing the situation from its own perspective and arriving at a plan
of action that it thinks is most appropriate to its future.
The Indian steel market has grown to a fairly large size( 5 th largest
steel producer in the world) already . There is overall appreciation in all
quarters ( government, Planning commission, industry) that the growth of
steel is vital for economic growth and development. The initiatives taken in
the last 10 years in terms of creation of appropriate infrastructural support,
and policy framework have led to fast track growth in this sector. All
indicators point towards the industry being well poised to reach the second
position in the world ( 120 mt) behind China in the next 5 to 8 years. In the
Indian context, it would be right to say that the real consumption would be the
answer to the crisis.
Cost competitiveness
Right now, the principal issue to address is competitiveness. L&T
is working with world leaders in their respective areas to provide the optimum
solutions in the indian context. L&T can bring to fore its extraordinary abilities
and resources to customer's benefit. Fast track implementation of projects to
international bench marks, cost containment through optimisation of
construction quantities, coordinated installation and trouble free
commissioning and fast ramp up can lead to substantial savings in
investment& interest costs, early positive cash flow and profitability . L&T can
play a positive role in working with the client for finding the right solutions.
Policy reform
In this context, the Chinese example for policy reform in the steel
sector is very relevant. It may be recalled that the rules of steel projects have
been completely rewritten in China over the last 10 years. Uneconomic units (
mini BF’s, micro converters) , outdated technologies, energy guzzling
production methods are being phased out and replaced by efficient
technology and optimum units.
The Indian scene will also call for such measures in the not too
distant future if the quality demands, competitiveness and long term
sustainability are to be effectively addressed. It is worth noting that even now
the induction furnace process contributes to almost 30 % of the steel
production. There is also enormous scope for energy savings in many vital
areas. The large scale dependence on imported coal is also an aspect which
requires to be addressed effectively with appropriate alternative solutions.
L&T APPROACH
L&T has been privileged to be associated with most of the leading
steel producers of the country. In the present context , L&T’s approach would
be to :
i. Find optimum solutions to current projects along with the clients
ii. Assist in fast track project implementation resulting in optimised
costs and better cash flow
iii. Hold hands as O&M to ensure fast ramp up forming the foundation
for profitability
iv. Work with the clients for optimising the projects of the future
adopting the well proven and efficient project solutions provided by
them already to a number of clients in the country
v. Leverage resources optimally to provide a win win for both.