INDIA AHOY!!!!!

STEEL SECTOR
 World Steel Industry – Top Ten
8
4 1
7 Ukraine
Germany 38.6 mT
Russia China
45.8 mT 68.5 mT 502 mT

10 2
Japan
Italy 118.7 mT
30.6 mT
USA
91.4 mT
S. Korea
53.6 mT
India
3 6
58.1 mT

5
Brazil
33.7 mT
9

Global crude steel Production: 1326.5 million tonnes (mT) Source: IISI
Global ranking of Indian steel
Indian Steel Industry
Supply
With trade barriers having been lowered over the years, imports play
an important role in the domestic markets.
Demand
The demand is derived from sectors that include infrastructure,
consumer durables and automobiles.
Barriers to entry
High capital costs, technology.
Bargaining power of suppliers
The government’s move on railway freight costs and grid power costs
would determine the final price of the metal.
Bargaining power of customers
High, presence of a large number of suppliers and access to global
markets.
Competition
High, presence of a large number of players in the unorganized sector.
 Indian Potential for Steel
Huge Potential for Demand
• High GDP growth rate of 7%
• 1 billion population
• Low per capita steel consumption of 33kg (World av. 181 kg)

Growth Abundant Iron Ore

Skilled Human
factors Reserves 23 billion tonnes
Resources
for India

Government Policy
• Stable currency • Encouraging trade relations with
ASEAN and other countries
• Easing of regulations
• Infrastructure building
• Strong Banking & judicial
• Exploring new Energy resources
system
 Indian Steel Industry – An Overview

 Fifth largest producer of steel in the world and second largest

producer of crude steel - Press Information Bureau
 Steel production reached 28.49 million tonne (MT) in April-
September 2009.
 About 50% of the steel produced in India is exported.
 India accounts for over 7% of the total steel produced globally
 India accounts for around 5 per cent of the global steel
consumption
 Huge Iron Ore reserves – 23 bn. tonnes
 Indian Steel Producers are increasingly looking for overseas
acquisitions in steel as well as raw materials.
 Positive overall growth in the production of crude steel
 Composition of Steel Production
-A Value Proposition
Quantity %age

Pipe Long 13.928 42%

Prods.
HR 7.254 22%
GP Plates 1.832 5%
Long Products
CR 2.251 7%
GP 4.790 14%
CR Pipes 3.616 11%

Plate Total 33.670 100%

HR

HR
Steel - Products
Indian Steel Industry
SWOT Analysis
 SWOT ANALYSIS OF INDIAN STEEL
INDUSTRY

STRENGTHS WEAKNESSES
• Abundant resources of iron ore • High cost of energy
• Low cost and efficient labour • Higher duties and taxes
force
• Infrastructure
• Strong managerial capability
• Quality of coking coal
• Strongly globalised industry and
• Labour laws
emerging global competitiveness
• Dependence on imports for
• Modern new plants & modernised
steel manufacturing equipments
old plants
& technology
• Strong DRI production base
• Slow statutory clearances for
• Regionally dispersed merchant development of mines
rolling mills
 SWOT ANALYSIS OF INDIAN STEEL
INDUSTRY

OPPORTUNITIES THREATS
• Huge Infrastructure demand • Slow growth in infrastructure
development
• Rapid urbanisation
• Market fluctuations and
• Increasing demand for China’s export possibilities
consumer durables
• Global economic slow down
• Untapped rural demand
• Increasing interest of foreign
steel producers in India
 Michael Porters Five Forces Analysis
Buyers’ Power
• Increasing Demand for Steel
• Fragmented Coke Suppliers

Suppliers’ Power
• High Raw Material Prices
• Lack of Captive Source Hurting Steel Producers
• Lack of Transportation
• Backward Integration

Intensity of Competition
• Competition from Foreign Players
• Spurt in Merger and Acquisition Activities

Threat of New Entrants

• High Cost of Basic Inputs and Services

Threat of Substitutes
• Use of Aluminum/Plastic
 PEST Analysis
Political Factors
• Recommendations on Captive Mines
• National Steel Policy to Remove Bottlenecks

Economic Factors
• GDP Growth Rate
• Reduction in Customs Duty

Social Factors
• Rural-Urban Divide
• Higher Disposable Income

Technological Factors
• Popularity of Steel Portals
• Application of SML (Steel Markup Language)
 Top 10 Players
• 1st; 103.3 mmt; ArcelorMittal
• 2nd; 37.5 mmt; Nippon Steel
• 3rd; 35.4 mmt; Baosteel Group
• 4th; 34.7 mmt; POSCO
• 5th; 33.3 mmt; Hebei Steel Group
• 6th; 33.0 mmt; JFE
• 7th; 27.7 mmt; Wuhan Steel Group
• 8th; 24.4 mmt; Tata Steel
• 9th; 23.3 mmt; Jiangsu Shagang Group
• 10th; 23.2mmt; U.S. Steel
Source: World Steel Association
 ArcelorMittal
• largest steel company, with 315,867 employees
in more than 60 countries.
• formed in 2006 by the merger of Arcelor and
Mittal Steel. ($38.3 billion )
• It ranks 28th on the 2009 Fortune Global 500
list.
• the market leader in steel for use in automotive,
construction, household appliances and
packaging.
• ArcelorMittal is looking to develop positions in
the high-growth Indian and Chinese markets.
 MAJOR PLAYER - SAIL
• fully integrated iron and steel maker.
• GOI - 86% of SAIL's equity
• However, SAIL, by virtue of its "Navratna"
status, enjoys significant operational and
financial autonomy.
• SAIL and TISCO (which enjoy the benfits
of captive ore mines) are among the
lowest cost producers of steel in the world.
 Major units of SAIL are as under: .
Integrated Steel Plants
• Bhilai Steel Plant (BSP) in Chhattisgarh
• Durgapur Steel Plant (DSP) in West Bengal
• Rourkela Steel Plant (RSP) in Orissa
• Bokaro Steel Plant (BSL) in Jharkhand

Special Steel Plants

• Alloy Steels Plants (ASP) in West Bengal
• Salem Steel Plant (SSP) in Tamil Nadu
• Visvesvaraya Iron and Steel Plant (VISL) in Karnataka

Subsidiaries
• Indian Iron and Steel Company (IISCO) in West Bengal
• Maharashtra Elektrosmelt Limited (MEL) in Maharashtra
• Bhilai Oxygen Limited (BOL) in New Delhi
 SAIL’S GROWTH PLANS

mT

2005-06 2011-12
Hot Metal 14.60 22.5

Crude Steel 13.47 21.6

Saleable 12.05 20
Steel

- Planned Investments of US$ 7.7 bn.

- Includes only growth in existing Units
 Other Major steel producers
• Tisco
• JSW
• Essar Steel
• RINL
• MECON
• MOIL
• MSTC
• KIOCL
• NMDC
TATA STEEL LIMITED

• Tisco -1907
• country's single largest
• Integrated steel plant
• ranks 34th in the world
• Technical collaboration with Nippon Steel
& Arcelor
• In January 2007 Tata Steel made a
successful $11.3 billion offer to buy
European steel maker Corus Group PLC.
 STEEL SECTOR TRENDS
• India - world’s largest producer of
direct reduced iron (DRI) or sponge
iron with nearly 20 million tonnes
production in 2008-09.

• Estimated steel production capacity

-124 million tonnes by the year
2011-12.

• Generate additional employment of

around 4 million by 2020 for
production of around 295 million
tonnes of crude steel by 2019-2020.

• 222 MoUs have been signed with

various States for planned capacity
of around 276 million tonnes
Steel: Key facts
Performance of PSUs
Production, consumption and
growth of steel
Crude steel production
Trends in production,
private/public sector
 Turnaround in Industrial Activity
12
10 Services
8
Industry
6
% growth

4
2
0

2000
-2 2001 2002 2003 2004 2008
-4
-6
Agriculture
-8

Agriculture Industry Services

Services and Industry contribute to higher GDP growth

 Indian Steel Growth
-Slowly, Steadily
40

ce
36.5

en
35

id
nf
30

Co
26.2
25 Stag24.2
nation
20 l
t ro
n
15 e co 14.3
D 12.02
10
Controlled 9.36
6.75
5 Regime 5.05
3.23
1.1 1.1 1.62
0
1951 1991 2005
Proof of the Pudding !
 Booming Capital Market
Indicators 2003-04 2004-05 2005-06

BSE Index as on March 31 5591 6493 11280

Market Capitalisation as on 266.8 377.33 671.5

March 31 (US$ bn.)

Foreign Institutional 6.7 8.65 10.4

Investors Net Purchases in
Equity market (US$ bn.)
(For Calendar Year)
 Other Key Indicators
 Exports crossed US$100bn. mark in 2005-06.
Fourth consecutive year of more than 20%
exports growth
 Imports of Capital goods increasing
 Moderate inflation rate - within 4-5%
 Stable Rupee against US dollar
 Growing corporate sector profits
 Growing Forex reserves - US$ 160 bn.
 Business Confidence at all time high
 Steel Sector
The Back Seat Drivers!
 BOOMING STEEL CONSUMING SECTORS
20

Construction
15
Capital Goods

10 Construction
Manufacturing
% growth

Manufacturing
5
Consumer Durables
Capital Goods
0
00-01 01-02 02-03 03-04 04-05 05-06

-5 Consumer
Durables
-10

Industrial growth led by Manufacturing

Capital and Consumer Goods sectors flag bearers of manufacturing sector growth
 INDIA’S CRUDE STEEL PRODUCTION (MT)
HISTORIC TRENDS
58 mT
45 in 2008
1.25 mT
40 in 1948 6.6 mT 16.2 mT TH
in 1991 O W
in 1973
35 India gains independence GR
in 1947 I GH
H
30

25 H
OWT
T GR
DES
20
MO
Enabled by
15 WTH
SLO W GRO India’s
10 Economic
liberalization
5 process

0
1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2008

* Year indicates FY
 Apparent Finished Steel
Consumption (mT)

40
38.4
35 CAGR – 7.0%
33.3
31.2
30
mT

28.9
26.5 27.4
25 25
21.7 22.1 22.6 23.5
20
18.7
15 14.8 15 15.3

10
91-92 93-94 95-96 97-98 99-00 01-02 03-04 05-06
National Steel Policy

Addressing the Weaknesses

&
Harnessing the Opportunities
Approved by Government of India in September 2005
 OBJECTIVE
 To have modern and efficient steel industry of world
standards, catering to diversified steel demand.
 To achieve global competitiveness in cost, quality, product-
mix, efficiency and productivity
 To attain Finished Steel production of 110 mTpa by 2019-20

Production Imports Exports Consumption

2019-20 110 6 26 90

CAGR 7.3% 7.1% 13.3% 6.9%

(Base –
08-09)
 STRATEGY
 Demand Side
– Strengthening of delivery chain
– Interface between producers, designers of steel intensive
products, fabricators and ultimate user
– Creating awareness about cost-effective and technically efficient
end-use of steel

Supply side
– Enhanced and easy access to critical inputs – iron ore & coking
coal
– Expansion and improvement in quality of infrastructure
– Well developed financial market
– Increased focus on R&D, training of manpower and integrated
information services
New Capacities
Proposed state-wise capacity additions upto 2012.
J’khand:
34 mtpa

W Bengal:
4 mtpa

Ch’garh:
9 mtpa

Orissa :
38 mtpa

AP:
3.3 mtpa

Karnataka:
9.7 mtpa
SAIL
Tata Steel
RINL
Essar
Bhushan
JSPL
JSW
Ispat
Sterlite
Mittal
POSCO
MMK
Future of Indian Steel Industry

You ain’t seen nothing yet !

 Projected per Capita consumption of
Finished Steel in India (kg)

Year Per Capita Steel Consumption

2011-12 48

2019-20 80

2024-25 110

2029-30 135

2034-35 175

India’s current population is - 1100 million

It is assumed that till 2051, population would be about : 1.4 bn.
 GROWTH SCENARIOS
Optimistic Medium Conservative
Case Growth
Fin. Steel Consum- Fin. Steel Consum- Fin. Steel Consum-
Cons. ption Cons. ption Cons. ption
Growth (mTpa) Growth (mTpa) Growth (mTpa)
Rate Rate Rate
2005- 7.6% 100 6.9% 90 * 5.5% 76
2020
2020- 6.5% 188 5.5% 147 4.5% 118
2030
2030- 5.0% 305 4.0% 217 3% 158
2040
2040- 5.0% 498 4.0% 322 3% 212
2050

* - Also projected by National Steel Policy

 INDIAN STEEL INDUSTRY
A BRIGHT FUTURE
RESOURCES
Abundant Iron Ore reserves
Strong Managerial skills in Iron and Steel making
Large pool of skilled Man-power
Established steel players with strong skills in steel making

OPPORTUNITIES
High economic growth driven increasingly by industry
Faster Urbanisation
Increased Fixed Asset Building
Automobiles and component industry growth

POLICY
Pro-active stance of Govt.
Encouragement for overseas investments
• 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.
 Highlights of 2008-09
• Crude steel production was at 54.52
million tonnes, a growth of 1.23% over last
year with capacity utilisation at 89% during
the year. It grew at more than 9% annually
from 38.72 million tonnes (MT) in 2003-04.
• The growth was driven by capacity
expansion from 43.91 million tonnes per
annum (MTPA) in 2003-04 to 64.40 MTPA
in 2008-09.
 Financial Year '09
• first half it experienced an extraordinary spurt in demand backed by
expansion of key consumer sectors.
• second half experienced a significant demand contraction on account of the
global financial crisis.
• Thus overall, India’s crude steel production grew by 1.2%YoY to 54.5 MT.

• The various monetary and fiscal packages announced by the government

helped the domestic steel industry to counter the slowdown and thus the
demand started reviving upwards from the fourth quarter onwards.

• Domestic steel prices and international steel prices experienced a divergent

trend in FY09. While during the first half, international prices touched an all
time high levels backed by robust demand, the second half witnessed more
than 50% fall in the prices on account of significant contraction in demand
due to the global credit crisis. Raw material prices like iron ore and coking
coal also experienced a similar trend. It may be noted that most of the
domestic steel players entered into an annual contract for coking coal in
June-July 2009 when prices were at their peak. Hence the industry
experienced a severe pressure on the margins.