STEEL INDUSTRY

INTRODUCTION:
Use of metals has been one of the main drivers of industrialization. Historically, steel has
been the most valuable metal. Steel is both a raw material and an intermediate product, so
its production and consumption are commonly used as indicators of a nation's economic
development. Thus, it wouldn't be overstatement to say that the steel industry has always
been at the forefront of industrial advancement and that it forms the basis of any given
economy. Three groups comprise the Indian steel industry: primary producers, secondary
producers, and major producers.
India is the second-largest producer of crude steel in the world, producing 121.29 MT of
finished steel and 125.32 MT of crude steel in FY23.
India is expected to produce 123–127 MT of steel in FY24, an increase of 4-7%.
The availability of inexpensive labor and raw materials like iron ore domestically has been a
major factor in the growth of the Indian steel industry. Consequently, a significant portion of
India's manufacturing output has come from the steel industry.
Modern steel mills can be found in India's steel industry. It has always aimed to upgrade to
higher energy efficiency levels and continuously modernize older plants.
MARKET OVERVIEW:

 In the past 10–12 years, India's steel sector has expanded significantly. Production
has increased by 75% since 2008, while domestic steel demand has increased by
almost 80%. The capacity for producing steel has grown concurrently, and the rise
has been largely organic.

 In FY23, the production of crude steel and finished steel stood at 125.32 MT and
121.29 MT respectively.

 In FY24 (until July 2023), the production of crude steel and finished steel stood at
45.39 MT and 43.01 MT respectively.

 In FY23, crude and finished steel production stood at 125.32 MT and 121.29 MT
respectively. In July 2023, crude steel production in India stood at 11.52 MT. In July
2023, finished steel production stood at 10.53 MT.

 In FY24 (until July 2023), the consumption of finished steel stood at 41.15 MT.
  The per-capita consumption of steel stood at 86.7 kgs in FY23.

 In FY22, the production of crude steel and finished steel stood at 133.596 MT and
120.01 MT, respectively. The consumption of finished steel stood at 105.751 MT in
FY22. In FY23, the consumption of finished steel stood at 119.17 MT. In April-July
2022, the production of crude steel and finished steel stood at 40.95 MT and 38.55
MT respectively.

 In FY23, exports and imports of finished steel stood at 6.7 MT and 6.02 MT,
respectively. In FY22, India exported 11.14 MT of finished steel. In April 2023 exports
of steel stood at 8.55 lakh metric tonnes (LMT), while imports stood at 4.60 LMT. In
FY24 (until July 2023), the exports and imports of finished steel stood at 2.56 MT and
1.98 MT, respectively.

 The annual production of steel is anticipated to exceed 300 million tonnes by 2030-
31. By 2030-31, crude steel production is projected to reach 255 million tonnes at
85% capacity utilisation achieving 230 million tonnes of finished steel production,
assuming a 10% yield loss or a 90% conversion ratio for the conversion of raw steel
to finished steel. With net exports of 24 million tonnes, consumption is expected to
reach 206 million tonnes by the years 2030–1931. As a result, it is anticipated that
per-person steel consumption will grow to 160 kg.

SECTOR COMPOSITION-

STEEL
FORM COMPOSITION END USE
Liquid Steel Crude Steel Finished Steel Alloy Non-alloy

Ignots Flat Stainless Low carbon Structural Steel

Semis Non-flat Silicon Medium carbon Construction Steel
Rail Steel
PORTERS FIVE FORCE MODEL
Porter's Five Forces is a model that identifies and analyses five competitive forces that
shape every industry and helps determine an industry's weaknesses and strengths. Five
Forces analysis is frequently used to identify an industry's structure to determine corporate
strategy.

HIGH Intensity of Competition

The global steel industry is characterized by intense competition. Overcapacity,

particularly in certain regions, can lead to price wars and aggressive marketing
strategies. Differentiation among steel producers may come from factors such as
product quality, innovation, and customer service.

Additionally, global trade dynamics and fluctuations in steel prices contribute to the
competitive intensity.
LOW -MODERATE Threat to New entrants

The steel industry is capital-intensive, requiring substantial investment in facilities,

technology, and raw materials. Existing major players benefit from economies of scale,
making it challenging for new entrants to achieve cost competitiveness.

Additionally, entry barriers include the need for distribution networks, established
relationships with suppliers, and compliance with environmental regulations.

MODERATE Bargaining Power of Buyers

Buyers in the steel industry, such as construction companies, automotive

manufacturers, and infrastructure developers, have some bargaining power. The global
nature of the steel market provides buyers with options to source from various
suppliers. However, differentiation in product quality, service, and delivery can give
steel producers some leverage.

MODERATE Bargaining Power of Suppliers

The main suppliers to the steel industry are iron ore and coal miners. While there are a
few major mining companies globally, the steel producers often have long-term
contracts and strategic relationships with these suppliers. Fluctuations in commodity
prices and availability can influence supplier power, but the consolidation of steel
producers can also affect the bargaining power of suppliers.

LOW – MODERATE Threat of Substitutes

Steel has a wide range of applications, and its unique properties, including strength and
versatility, make it difficult for many materials to serve as direct substitutes. However, in
specific applications, alternative materials like aluminium, composites, and advanced
materials may pose a threat, especially in industries with evolving technological
requirements.
GROWTH DRIVERS:

GROWTH DEMAND

India’s finished steel consumption is anticipated to increase to 230 MT by 2030-31 from

119.17 MT in FY23.

India is the world’s second-largest producer of crude steel, with an output of 125.32 MT of
crude steel and finished steel production of 121.29 MT in FY23.

INCREASING
INVESTMENTS

The industry is witnessing consolidation of players, which has led to investment by entities
from other sectors. The ongoing consolidation also presents an opportunity to global
players to enter the Indian market.

POLICY SUPPORT

In October 2021, the government announced guidelines for the approved specialty steel
production-linked incentive (PLI) scheme.

Under the Union Budget 2023-24, the government allocated Rs. 70.15 crore (US$ 8.6
million) to the Ministry of Steel.
 COMPETITIVE
ADVANTAGE

India’s steel production is estimated to grow 4-7% to 123-127 MT in FY24.

Easy availability of low-cost manpower and presence of abundant iron ore reserves make
India competitive in the global set up.

India is home to fifth-highest reserves of iron ore in the world.

KEY GROWTH INDICATORS:

 The Indian steel industry outlook for 2023 looks promising with the country gearing
to become a US $5 trillion economy by 2030 (or sooner). And as per market
predictions and reports, the steel industry in India will play a pivotal role in steering
India towards its goal

 Budget 2023-34

Though there were no specific funds for driving growth of the steel sector, there are
several opportunities present in other industries that would directly boost the steel
industry outlook.

Railways: The government’s initiative to redevelop 50+ existing railway stations and
the plan to provide a capital of ₹2.4 lakh crore to Railways is likely to scale the need for
steel.

Logistics: An investment of ₹75,000 crore is planned for 100+ critical transportation

infrastructure projects that will connect ports, coal, steel, fertiliser, and food grain
sectors across the first- and last-mile delivery network. This is expected to improve
connectivity and transportation services across major points, in turn leading to a rise in
demand for steel.

City development: Urban planning development projects will be undertaken to

transform cities into sustainable cities. With the proposed ₹10,000 crore annual fund,
the goal is to ramp up infrastructure development, especially in Tier II and Tier III cities.
This is likely to witness a growth in steel demand, especially for steel girders in
infrastructure and TMT steel bars in construction among others.
  INFRASTRUCTURE DEVELOPMENT

Increased government investment in infrastructure projects, such as the

construction of highways, bridges, railways, and urban development, leads to a
surge in demand for steel. Steel is a fundamental material in construction due to its
strength and durability.

 URBANIZATION AND INDUSTRIALIZATION

As populations urbanize and industrialize, there is a growing need for new

structures and facilities. Urbanization involves constructing residential and
commercial buildings, while industrialization requires infrastructure for factories
and manufacturing facilities, all of which drive steel demand.

 AUTOMOTIVE INDUSTRY GROWTH

The automotive industry is a significant consumer of steel, using it in the

manufacturing of vehicle bodies and components. Growth in the automotive sector,
driven by factors like increasing consumer purchasing power and technological
advancements, directly impacts steel demand.

 TECHNOLOGICAL ADVANCEMENTS

Continuous advancements in steel production technologies, including more efficient

processes and the adoption of electric arc furnaces, can lead to cost reductions,
improved productivity, and a more sustainable manufacturing process. These
advancements contribute to the industry's overall growth.

PRCINIG:
An overview of steel pricing will show how steel metal has always had its demand in
India. However, in the last few months, especially following the global economic
crisis caused by the pandemic, the price of steel in India has been dynamic. In
February 2023, there was a 5% increase in steel prices in India.

Multiple factors, including rise of raw material prices (especially iron ore and coking
coal) and rise in infrastructural and engineering projects, has impacted daily steel
price. It is however predicted that steel prices will be above the pre-pandemic rates,
i.e., ₹60,000 per tonne by March 2023.
MAJOR PLAYERS:
TATA STEEL

Tata Steel was established in India as Asia’s first integrated private steel company in
1907 Owned by Tata Group. The companies crude steel capacity across Indian
operations is nearly 19 Mn TPA. Tata Steel is the second-largest steel producer in Europe
with a crude steel production capacity of over 12.1 Mn TPA. It is the largest steel
companies of India

Tata Steel has manufacturing units at Jamshedpur, Jharkhand and Kalinganagar, Odisha
with production capacities of 10 MnTPA and 3 MnTPA, respectively. In Financial Year
2018-19, the Company initiated a 5 MnTPA expansion project at Kalinganagar to
enhance its cumulative capacity to 8 MnTPA.

JSW Steel Ltd

JSW Steel is a flagship company of the JSW Group and the second-largest steel
companies of India. The Company has a steelmaking capacity of 18 MnTPA. Ranked 7 th
amongst Top 34 World Class Steelmakers by World Steel Dynamics. It has a large-scale
presence in both India and international.

Starting with a single plant in 1982, now JSW Steel is India’s leading manufacturer of
value-added and high-grade steel products. The Company has plants in Karnataka, Tamil
Nadu, and Maharashtra.

Steel Authority of India Ltd

Steel Authority of India Limited (SAIL) is a government steel-making company in India

and one of the seven Maharatna’s of the country’s Central Public Sector Enterprises. It is
the Top Government steel companies in India. The company is third in the list of top 10
steel companies in India based on the revenue.

Essar Steel India Ltd

Essar Steel is known for its high quality of flat steel products. The company focuses on
high value-added grade steels and has developed over 300 grades of flat steel for
different applications. Essar Steel is a 10 MTPA integrated steel producer.

It caters to a wide section of industry segments that include auto, shipbuilding, white
and yellow goods, general engineering, power plants, hydrocarbon industry, pipe
making, defence among others. The company is fourth in the list of top 10 steel
companies in India based on the total sales.
 ARCELOR MITTAL

ArcelorMittal, who operates in more than 60 countries, is headquartered in Avenue de

la Liberte, Luxembourg. It was formed in 2006 by the merger of Arcelor and Mittal Steel.
The company has 232, 000 employees and it produces 10% of the world’s steel.

ArcelorMittal plays a major role in supplying it to the markets including household,

packaging, automotive and construction. In total, Europe produces 47% of the steel,
America produces 35% and other regions (Kazakhstan, Ukraine and South Africa)
produces 18%.

(NSSMC) NIPPON STEEL & SUMITOMO METAL CORPORATION

Nippon Steel & Sumitomo Metal Corporation (NSSMC) was manufactured in association
with the Nippon Steel and Sumitomo Metal in 2012. NSSMC is the second largest steel
provider across the globe. It is extended in 15 countries with nearly 83, 000 employees.
This company provides the steel for areas such as construction, automobiles, civil
engineering, energy, resources and railways.

BOASTEEL

Baosteel is one of the largest steel providers around the world. Founded in 1978,
Baosteel Group Corporation is headquartered in Pudong, Shanghai, China. It contains
130, 401 employees and produces steel products such as special steel, stainless steel,
carbon steel that would be exporting to more than 40 countries. It supplies for areas like
automobile, petrochemical, transportation, nuclear power, household appliances,
metalwork, energy, manufacture of machinery, electronic instruments and astronautics.

CAPEX:
 The steel minister emphasized the importance of timely capital expenditure for
enhancing steel production capacity, modernizing old plant equipment, and taking
up environmentally efficient technologies for the future. Such expenditure also
provides a fillip to the Indian economy. It was noted that in FY 2021-22 the CAPEX
 spending by Steel CPSEs was Rs. 10,038 crores, this is an increase of 38% over the
CAPEX of Rs. 7266.70 crores for FY 2020-21.

 The CAPEX target for FY 2022-23 in respect of Steel CPSEs is Rs. 1,3156.46 crores.
The Union Minister of Steel advised the CPSEs to adhere to their monthly CAPEX
Plans and closely monitor projects for ensuring time bound implementation
and achievement of annual target successfully on time. The CMDs of Steel CPSEs
assured that CAPEX targets for FY 2022-23 would be achieved.

 Deliberations were also held on the CPSEs’ plans under the National Steel Policy
(NSP) 2017, as this envisions creating a globally competitive steel industry in India.
The NSP 2017 envisages 300 million tonnes (MT) steel-making capacity and a per
capita consumption of 158 kgs.

 Notwithstanding, the pandemic the Indian steel sector has added capacity of 16.29
MTPA in the last five years to reach the capacity of 154.27 MTPA. Based on the
present assessment Government is confident to reach the capacity of 300 MTPA by
2030-31.
 The increased capex allocation of Rs 10 lakh crore announced in the Union Budget
will lead to pick up in demand for steel and generate employment in the country,
steel industry

 The finished steel consumption is expected at 118 million tonne (MT) in the ongoing
fiscal. It will reach a level of 132 MT in the next 2023-24 financial year.

 The 40 per cent increase in the income tax rebate limit from Rs 5 lakh to Rs 7 Lakh is
a huge comfort that this budget has given to our middle-income group and is a great
step.

SWOT ANALYSIS:
STRENGHTS:

 EASY ACCESS TO RAW MATERIAL

 Iron and carbon are the key ingredients of steel, and you can easily find them on the
earth’s ground. Easy access to and availability of raw materials plays a significant role in
the growth and success of the steel industry. However, some other types of industries
face the challenge of scarcity of resources; either the raw material is not available or
costly access to it. But the steel industry has got easy access and availability to the raw
material.

 CHEAP LABOR

If we look at the top 10 world’s leading steel industries; roundabout 8 steel companies
are in Asia, and the other two are in Europe and America. The main reason for the
growth of the steel industry in China, India, and other Asian countries is because of the
availability of cheap labour. However, the labor cost is very high in Europe and America;
that’s why many brands set up their production and manufacturing facilities in Europe
and America.

 QUALITY OPERATIONS

Manpower and workforce play a significant role in the production and manufacturing of
steel; because the steel industry demands intense labor work. The reason the steel
industry successfully conducts its operations is because of the easy availability of labor.

 SHIPPING & TRANSPORT

The steel industry has got a highly developed network of supply chains and distribution
channels. It allows the company to have the access to the raw material so that the
company could manufacture the steel and meet the customer demands.

 COMMUNITY FOCUSED

According to an estimate, the steel industry contributed roundabout 98% (comprising

1.663 billion dollars) of its revenue back into society in 2019. It was in the form of
building hospitals, schools, transport, and roads. The involvement of the steel industry in
healthcare facilities is very high in developed. Along with community-focused steps, the
company is also creating job opportunities and employing people in its industries.

 GREEN ECONOMY

Steel is a 100% recyclable material; it decomposes into its various building and becomes
part of nature again after some time. Nowadays, the global economy is moving towards
green projects for the safety of the environment and nature. But the steel industry
poses no threats to the environment due to its recycling nature.

WEAKNESS:

 HIGH CAPITAL INVESTMENT

It is no doubt steel industry is highly profitable and falls under the category of the
world’s leading industries. But launching and establishing a steel industry requires a
huge capital investment in the form of the place, equipment, machinery, and workforce.
An ordinary businessman or small investor can’t start the industry without funding from
banks and other investors.

 DEFICIENCIES & RISK

As I mentioned earlier the steel industry demands intensive labor work. The workforce is
dealing with extremely hot and pressurized material. Overall, the environment in the
production and manufacturing facility of the steel industry is very high, and it causes a
lot of health and other risk factors.

 LIMITED PRODUCTIVITY

Natural resources are limited and it takes a lot of time to extract iron from the ground.
The demand for steel in the market has its limits and it can’t go beyond. When you add
up both of these elements, then the growth and productivity of the steel industry are
very compared to its size and investment.

 EXPENSIVE MATERIAL

The raw material “iron” for the production of steel is also expensive, because of the
labor and carriage. Sometimes, steel manufactures have to pay double in the form of
carriage and transportation costs; it increases the production cost and decreases the
company’s profitability.

 LIMITED BUDGET FOR R&D

The owners in the steel industries invest a very limited almost none in research and
development. In fact, they are following the decades-old methods and processes at their
productions and manufacturing units without employing technology or robots.

OPPORTUNITIES:

 INFRASTRUCTURE

If the steel industry could invest in the development of infrastructure like supply chain
roads and distribution channels; then it would speed up the processes and increase
overall efficiency and effectiveness.
 MERGER & ACQUISITION

Merger and acquisition is also a great option for steel manufacturers. Small businesses
should join their strengths and focus on increasing their growth and productivity. It is
good for them in terms of profitability and growth; it would allow them to deal with the
industry issues and challenges collectively.

 HIGH DEMAND & EXPORT

The steel industry and the construction industry are complementing each other. High
investment in the construction industry is increasing the demand for steel. The steel
manufacturers should take advantage of the growing demand in the market, and
increase their profitability and revenue by producing more.

THREATS:

 PRICE CONSCIOUS

The price of steel is a highly sensitive matter in the steel industry, and it could badly
impact the demand and sale of steel. When the production and carriage cost becomes
higher due to interruption and various other factors, then it decreases the profitability
for investors and owners.

 TECH DEVELOPMENT

High technological development is focusing on finding new ways to build houses and
infrastructures that don’t involve a lot of steel. It is decreasing the demand for steel in
the customer market, and it is not good news for manufacturers and owners because
they have invested a lot of resources in the steel industry.

 LIMITED GROWTH

The demand, production, and sales of steel in the market have their limits and they can’t
go beyond that. The limited growth is kicking out the small investors because they can’t
survive the market recession.