Comprehensive Study on the Indian Steel Industry_ REPORT

A Project Report on

“COMPREHENSIVE STUDY

OF THE INDIAN STEEL

INDUSTRY”

Submitted in partial fulfillment of the requirements

for the award of

Degree of BBM [e-Banking & Finance]

By

RAHUL R. FOFALIA (071204047)

SURABHI MAHARISHI (071204046)

NEHA GOEL (071204067)

UNDER THE GUIDANCE OF

Ms. Khyati Shetty and Mr. Aunali Rupani

May- July 2009

Department of Commerce,Manipal University, Manipal-576 104

1

DECLARATION

We, the students of BBM [e-Banking & Finance], Department of Commerce,

Manipal University, declare that the Project Report entitled

“COMPREHENSIVE STUDY OF INDIAN STEEL INDUSTRY”, being

submitted to the Department of Commerce, Manipal University, in partial

fulfillment of the requirements for the award of Degree of BBM [e-Banking &

Finance], is our original work and the same is / was not earlier submitted to

any other Degree, Diploma, Fellowship or any other similar title or prizes

RAHUL R. FOFALIA (071204047)

SURABHI MAHARISHI (071204046)

NEHA GOEL (071204067)

Date:

2

CERTIFICATE

This is to certify that the Project entitled “COMPREHENSIVE STUDY OF

INDIAN STEEL INDUSTRY”, is submitted to Department of Commerce,

Manipal University, in partial fulfillment of the requirements for the award of

Degree of BBM [e-Banking & Finance].

RAHUL R. FOFALIA (071204047), SURABHI MAHARISHI (071204046)

and NEHA GOEL (071204067) have worked under my supervision and

guidance and that no part of this Report has been earlier submitted for the

award of any other Degree, Diploma, Fellowship or any other similar title or

prizes and that the work has not been published in any journal or magazine.

Ms. Khyati Shetty

Faculty, Department Of Commerce

Manipal University

Date:

3

ACKNOWLEDGEMENT

With regard to the Project, we would like to thank each and every one who

offered help, guideline and support whenever required.

First and foremost, we would like to express our deepest gratitude to Mr.

Aunali Rupani, Director of ARM Research Pvt. Ltd. for his valuable time and

advice in the making of this project. Without his support and guidance, the

completion of this project would not have been possible. The faculty members

of Department of Commerce, especially, our project guide, Ms. Khyati Shetty,

who extended her guidance and support in the successful completion of this

summer internship.

We thank our institute, Department of Commerce, for providing us a platform

and supporting us towards the successful completion of this project. We also

want to thank our batch mates who have helped me in getting acquainted with

various aspects during the project. Finally, not forgetting the staff of ARM

Research Pvt. Ltd, I want to thank them all, for providing me with all the

information required and co-operating in every possible way that they could.

RAHUL R. FOFALIA (071204047)

SURABHI MAHARISHI (071204046)

NEHA GOEL (07120

4

INDEX

TABLE OF CONTENTS

PARTICULARS PAGE NO:

Chapter I: Introduction to the title with industry overview 1-2

Chapter-II: Research Design 3

2.1: Objectives 4

2.2: Research Methodology 5

2.3. Limitations 5

Chapter-III: Literature review 6-10

Chapter IV: Profile of the Company 11

4.1. Company Profile 12

4.2. Vision 12

4.3. Methodology of research 13

Chapter V: Steel: Introduction 14

5.1. Introduction 15

5.2. Properties 15-16

5.3. History of steel 16-18

5.4 Conclusion 19

5

Chapter VI: Cost of Production 20

6.1. Components of the cost of production 21

6.1.1.Raw materials 21-24

6.1.2.Power costs 24-25

6.1.3.Interest payments 25

6.1.4.Taxes & duties 25

6.1.5.Other expenses 26

6.2. Conclusion 26

Chapter VII: Process of Steel Making 27

7.1. Basic Oxygen Steel-making 28-29

7.2. Electric Arc Steel-Making 30-31

7.3. Induction Furnace 31-32

7.4. CONARK Steel-making 33

7.5. Conclusion 34

Chapter VIII: Types of Steel 35

8.1.Based on chemical composition 37

8.1.1.Carbon steel 37

8.1.2.Alloy steel 37-38

8.2.Based on application 38

8.2.1. High strength low alloy steel 38

8.2.2. Free machining steel 38

6

8.2.3. Wear resistant steel 38

8.2.4. Bearing steel 39

8.2.5. Stainless steel 39

8.2.6. Electric steel 39

8.2.7. Tool steel 39-40

8.3.Based on Shape and Surface 40

8.3.1.Flat products 40-41

8.3.2Long products 41-42

8.4. Conclusion 42

Chapter IX: Indian Steel Industry Overview 43

9.1. Characteristics 44-46

9.2. Structure 46-48

9.3. SWOT Analysis 49-57

9.4. Major players 58-71

9.5. Enterprise Value 71-77

9.6. Consolidations in the Steel industry 77-81

9.7. Conclusion 82

Chapter X: Demand and Supply 83

10.1. Overview 84-85

10.2. Production & Consumption 85-89

10.3. Imports & Exports 90-91

10.4. Conclusion 92

7

Chapter XI: Government Policies and Regulations 93 11.1. Ministry of steel 94-95

11.2. Reform measures and policy initiatives 95-96

11.3. National Steel Policy, 2005 97-99

11.4. Conclusion 99

Chapter XII: Challenges Faced by the Indian Steel Industry 100-103

Chapter XIII: Conclusion 104-106

Chapter XIV: Suggestions 107-109

Chapter XV: Annexure 110

Chapter XVI: Bibliography 111

8

LIST OF TABLES :

Chapter VTable 5.1. Timeline of Steel

Chapter VIII

Table 8.2. Types of carbon steel

Chapter IX

Table 9.1. Classification of steel producers based on products

Table 9.2. Classification of steel producers based on the route of production

Table 9.3. SAIL

Table9. 4. TATA Steel Ltd.

Table 9.5. JSW ltd.

Table 9.6. Comparison among SAIL, TATA Steel, & JSW Steel

Table 9.7.Calculation of EV/Tonne for SAIL

Table 9.8.Calculation of EV/Tonne for TATA Steel

Table 9.9.Calculation of EV/Tonne for JSW

Table 9.10 Merger of Arcelor & Mittal

Chapter X

Table 10.1. Infrastructural activities to boost steel demand

9

LIST OF FIGURES:

Chapter VI

Figure 6.1. Components of Cost of production of steel

Figure 6.2. Prices of Iron ore and Coking coal

Chapter VII

Figure 7.1. Basic oxygen steel-making

Figure 7.2. Electric Arc Steel making

Figure 7.3. Induction Furnace Steel making

Figure 7.4. CONARK Steel making

Chapter VIII

Figure 8.1. Types of steel

Chapter IX

Figure 9.1. Strengths of Indian Steel Industry

Figure 9.2. Weaknesses of Indian Steel Industry

Figure 9.3. Opportunities in Indian Steel Industry

Figure 9.4. Threats faced by Indian Steel Industry

Figure 9.5. SAIL’s Company Structure

Figure 9.6. SAIL Plants

Figure 9.7. Capacity, Production & Planned increase : SAIL

Figure 9.8. Shareholding Pattern : TATA Steel

Figure 9.9. Production Capacity Break-up

Figure 9.10. Shareholding Pattern : JSW Steel

Figure 9.11. Company Structure: JSW Steel

Figure 9.12. Comparison of Cost of production

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Chapter X

Figure 10.1. Indian Steel Production & Consumption

Figure 10.2. Steel Emand break-up

Figure 10.3 Per Capita steel consumption of various countries & position of

India

Figure 10.4. Export- Import of Indian steel

11

EXECUTIVE SUMMARY

Steel has been the key material with which the world has reached to a

developed position. All the engineering machines, mechanical tools and most

importantly building and construction structures like bars, rods, channels,

wires, angles etc are made of steel for its feature being hard and adaptable.

Steel is crucial to the development of any modern economy and is considered

to be the backbone of the human civilization. The level of per capita

consumption of steel is treated as one of the important indicators of socio-

economic development and living standard of the people in any country. It is a

product of a large and technologically complex industry having strong forward

and backward linkages in terms of material flow and income generation.

Steel is a highly capital intensive industry and cyclic in nature. Its growth is

intertwined with the growth of the economy at large, and in particular the steel

consuming industries such as manufacturing, housing and infrastructure. As

India moves ahead in the new millennium, the steel industry will play a critical

role in transforming India into an economic superpower.

12

This Project gave us a great learning experience and at the same time it gave us

enough scope to implement our analytical ability. The findings and analysis

presented in this Project Report is based on primary as well as secondary

research. This Report will help to know about the future of the Indian steel

industry and also the demand & supply of steel in India in the coming years.

The report starts with the very basics of steel covering different aspects like

steel manufacturing, types of steel available in Indian cement market etc. The

report then goes on to cover industry analysis which includes the present

scenario, history, leading market players, demand & supply situation,

government policies with regards to the Indian steel sector etc.

The primary data was collected by interviewing the Chief Financial Officer;

Ispat industries that helped us in understanding the steel sector in a better

manner by providing some new insights into the project topic. The data

collected has been well organized and presented. We hope the research

findings and conclusion will be of use.

13

CHAPTER 1.0

INTRODUCTION TO THE TITLE WITH

INDUSTRY OVERVIEW

14

Concept & Significance of the study

Steel is crucial to the development of any modern economy and is considered

to be the backbone of the human civilization. Today, Steel (the carbon alloy of

Iron) finds application in every imaginable facet of our life. The global steel

industry has been witnessing many interesting events that have influenced

market dynamics in the last ten years. It’s because of these reasons it was

decided to study the Indian steel sector.

Scope of the study

The scope of the study lies in getting familiar with the problem and challenges

faced by the Indian steel manufacturers. Only the top three steel companies

have been studied as a part of this project to get a glimpse of the Indian steel

sector.

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CHAPTER 2.0

RESEARCH DESIGN

16

2.1. Objectives of the study

To study the structure and performance of the Indian Steel Industry.

To analyze the fundamentals of a company so as to acquire deep

knowledge about the Indian steel companies.

To study the demand and supply position of steel in India.

To examine the factors influencing the demand for steel in India.

To evaluate the competitiveness of the Indian steel Industry.

To study the government rules and policies with regards to the Indian

Steel Sector.

To understand the role of raw materials and energy in the steel

manufacturing process.

To study the overall consumption of steel in the world.

To study the importance of fundamental analysis of a company & its

importance in the investment decision.

17

To study the challenges faced by the Indian steel manufacturers.

2.2.. Research Methodology

Primary data was collected by:

1) Discussing with our Project Guide, Mr. Aunali Rupani, Director & Mentor,

ARM Research Ltd.

2) Discussing with Mr. J.P. Agarwal, CFO, Ispat Industries Ltd.

Secondary data was collected by:

1) Reading the Annual Reports of various steel producing companies.

2) Reading various articles and books on steel.

3) Visiting various websites.

2.3. Limitations of the study

The project was undertaken just for a span of one and a half month, and

studying the market keenly in to the depth, in such a short span was not

possible. The study is limited to the Indian context only.

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CHAPTER 3.0

LITERATURE REVIEW

19

National Mineral Policy ( Huda Committee Report)

Planning Commision, Government of India, December 2006

The Huda Comitte Report aims at encouraging the flow of private investments

and Introduction of state-of-the-art technology in exploration and mining .

It also aims at giving suggestions to the planning comisiion, Government of

India to develop better Infrastructure Support for Minerals like, Ferro-Chrome,

Silica, Iron-ore, etc.

Indian Steel Sector Research

Prakash Patil, Swati Rajde, Manoj Mohta CRISIL , March 09.

This report deals with detail and minute analysis of the Indian Steel Sector’s

production Components , their costing , availability, Scope and threats to

resources,It also analyses raw material supply and logistic management of top

Indian Steel Players.

The major companies are profiled in this report. For each company, business

description is given followed by financial highlights and recent developments.

The analyst opinion and projections help us in evaluating the future of the

industry. It gives an insight into the investment opportunities present in the

sector.

20

Steel Sector Watch

Pankaj Pandey, Goutam Chakraborty, Abhisar Jain , icicidirect.com, May

2009.

This report brings forth the importance of maintaining steel demand-supply

balance globally. It also emphasizes on Margin improvement after raw material

contract renegotiation

Furthe analyzing Product price correction , stability expected at current levels.

ts projections clearly state expectations of India to log domestic demand

growth despite slowdown. It also gives us Recommendation and prefer

domestic plays with strong balance sheets.

Indian Steel Industry - PEST Framework Analysis

Aruvian Research, March 2009

Aruvian Research analyzes the Indian Steel Industry in a PEST Framework

Analysis. A PEST analysis is concerned with the environmental influences on

a business. The acronym stands for the Political, Economic, Social and

Technological issues that could affect the strategic development of a business.

Identifying PEST influences is a useful way of summarizing the external

environment in which a business operates.

21

Indian Steel Industry 2009

Credit Analysis & Research Limited, March 2009

- This report on the Indian Steel Industry contains comprehensive data and

analysis of the sector apart from giving outlook on the sector. With our

established network of primary and secondary sources, we have captured

exhaustive data on the various parameters of the industry. We have also

forecasted the future sector-wise demand of finished steel. In addition, monthly

updates included with the subscription to this report will help the user to keep

abreast of the latest developments

Indian Steel Sector : Sector Report

By Daedal Research, August 2009

- In this report the Structure of the industry, market size, and growth rates have

been analyzed.The Value chain analysis categorizes the value-adding activities

to develop low-cost differentiation strategies. There is inclusion of Trend

analysis detects historical patterns that could help in forecasting future demand

periods.Critical issues are also reviewed that may become a threat to the

industry PEST analysis uses a framework of external factors for macro-

environmental scanning of the industry to help in taking advantage of

22

opportunities and making contingency plans for threats

The report also gives a picture of Competitive positioning of the industry

leaders has been evaluated in terms of sales, profitability, stock trend and other

performance indicators

Indian Steel Industry Outlook to 2012

RNCOS, Aug 2009

- The report gives a detailed analysis of the forces which have shaped the

Indian steel industry over the past years. The report also includes detailed

analysis and future outlook of various industries related to the steel industry,

including automotive, consumer durables, aerospace and marine, power,

telecom, railways, and housing industries.

The report classifies the finished steel product market into two categories -

alloy and non-alloy. It also covers the information on industry-wise steel

demand, overall steel consumption, production and trading market. Apart from

this, it also provides industry forecast (FY 2010 to FY 2012).

23

CHAPTER 4.0

INTRODUCTION TO THE

COMPANY

4.1. Company Profile

4.2. Vision

4.3. Methodology of research

24

ARM RESEARCH PRIVATE LTD.

4.1 Company Profile

ARM Research Private Ltd. was established on by Mr. Aunali Rupani, who is

serving as the Director of the company. He is a Self Educated professional

with 14 years of market exposure and strong values and vision, and believes

that there is no replacement for knowledge and true mantra for success lies in

implementing it. The Registered office of the Company is at Andheri. It’s

basically an equity research and portfolio management company. It is also a

brokerage firm, where it is acting as a franchisee of Motilal Oswal Securities

Ltd.

The number of employees in the company is 18, who are working in a team of

4. The average age of employee in the research team is 30 years.

4.2 Vision

Introduce innovative and path breaking methods in field of Research and Asset

management and empower investors to make investing simple.

25

4.3 Methodology of research

Conduct extensive Sectoral research with the vision and the ability to

foresee its growth prospects in years ahead.

Monitor changes in Domestic and World economy & impact of

changes in the Government policies on the sectors.

Focus on event based activities that can bring a turnaround/trigger in

the Company/Sector performance.

Focus on the Small & Midcap stocks in sunrise sectors with the

potential to join the Multi bagger league

26

CHAPTER 5.0

STEEL: INTRODUCTION

5.1. Introduction

5.2. Properties

5.3. History of steel

5.4 Conclusion

27

5.1. Introduction

Steel is crucial to the development of any modern economy and is considered

to be the backbone of the human civilization. The level of per capita

consumption of steel is treated as one of the important indicators of socio-

economic development and living standard of the people in any country. It is a

product of a large and technologically complex industry having strong forward

and backward linkages in terms of material flow and income generation.

Steel is an alloy consisting mostly of iron, with carbon content between 0.2%

and 2.14% by weight depending on grade. Carbon is the most cost-effective

alloying material for iron, but various other alloying elements are used such as

manganese, chromium, vanadium, and tungsten. Carbon and other elements act

as a hardening agent.

5.2. Properties

The amount of alloying elements and their presence in the steel controls

qualities such as hardness, ductility, and tensile strength of the resulting steel.

28

1) Hardness refers to various properties of matter in the solid phase that

gives it high resistance to various kinds of shape change when force is

applied.

2) Ductility is a mechanical property used to describe the extent to which

materials can be deformed plastically without fracture.

3) Tensile strength measures the force required to pull something such as

rope, wire, or a structural beam to the point where it breaks. Steel with

increased carbon content can be made harder and stronger than iron,

but is also more brittle.

5.3. History of steel: A Timeline

The earliest recorded metal employed by humans appears to be gold which can

be found free or "native". Small amounts of natural gold have been found in

Spanish caves used during the late Paleolithic period, 40,000 BC. The first

invention of steel was in 13th century BC when iron and charcoal were

combined properly.

29

History of the Steel Industry dates back to the ancient times in Armenia which

is approximately around 3500 B.C. The earliest known production of steel is a

piece of ironware excavated from an archaeological site in Anatolia and is

about 4,000 years old. Other ancient steel comes from East Africa, dating back

to 1400 BC.

In the 4th century BC, steel weapons like the Falcata were produced in the

IberianPeninsula, while Noric steel was used by the Roman military. Wootz

steel was produced in India and Sri Lanka from around 300 BC.

The mass-production of steel only became possible after the introduction

of the Bessemer process, named after its brilliant inventor, the British

metallurgist Sir Henry Bessemer (1813-1898).

30

Year Event

3 rd millennium BC Copper metallurgy is invented and copper is used for

ornamentation.

2 nd millennium BC Bronze is used for weapons and armour.

1 st millennium BC Pewter beginning to be used in China and

Egypt

16th century BC The Hittites develop crude iron metallurgy.

13th century BCInvention of steel when iron and charcoal were

combined properly.

400 BCIron pillar of Delhi is the oldest surviving example of

corrosion-resistant steel

326 BC

Alexander was presented 30 pound of Indian steel other precious things in 326 BC in northwestern India as a

tribute.

300 BCWhootz steel making, a high quality steel making technique

believed to have originated in India in 300 BC.

200 BCSteel making widely used in Han Dynasty

China.

1000 AD

The whootz, crucible and stainless steels were invented in India, and were widely exported, resulting in "Damascus

steel" by the year 1000.

1448 Johann Gutenberg develops type metal alloy.

31

1740 Benjamin Huntsman developed the crucible steel technique.

1855Bessemer process for mass production of steel patented.

1912 Harry Brearley invents stainless steel.

1980Development of duplex stainless steels which resist oxidation

in chlorides.

Table 5.1. Timeline of Steel

5.4.Conclusion

“Wootz was the first high-quality steel made anywhere in the world.

According to reports of travelers to the East, the Damascus swords were made

by forging small cakes of steel that were manufactured in Southern India. This

steel was called wootz steel. It was more than a thousand years before steel as

good was made in the West.”

- J. D. Verhoeven and A. Pendray, Muse, 1998

1) Today, steel is the most commonly used material in the world. It has a

wide range of usage from shipbuilding, pipeline transport to office

equipments and household appliances.

32

2) The property of finished steel depends upon the percentage of alloying

elements present in it.

3) The first metal being used by human beings was gold and then copper

followed by bronze. It was only in 13th century that STEEL was

invented. The mass production of steel was possible only after

Bessemer invented the Bessemer process in 1855.

CHAPTER 6.0

COST OF PRODUCTON

6.1. Components of the cost of production

6.1.1.Raw materials

6.1.2.Power costs

6.1.3.Interest payments

6.1.4.Taxes & duties

33

6.1.5.Other expenses

6.2. Conclusion

6.1. Components of cost of production

Figure 6.1. Components of Cost of production of steel

34

Any sustained rise in input prices usually lead to an increase in product prices

through the cascading effect. The major components of the costs of production

of finished steel are:

6.1.1.Raw materials - Raw material costs forms roughly about 62% of the

total cost of production. This only emphasizes on how important sharp

movements in raw material prices mean for the steel industry. The basic raw

materials that are used in producing steel are :

6.1.1.1.Iron ores:

Iron ores are rocks and minerals from which metallic iron can be

economically extracted. 98% of the mined iron ore is used to make

steel. The best kind of iron ore meant for steel manufacturing contains

67% iron. For production of steel, pure iron ore can be processed into

the following forms, namely sponge iron & pig iron. Sponge iron is

the generic name of metallic product produced through direct reduction

of iron, iron ore pellets in the solid state.

Sponge iron is divided into two types namely Direct Reduced Iron

(DRI) and Hot Briquetted Iron (HBI). DRI is produced through the

coal based route in the form of lumps or pellet of about 4 by 44 mm. It

35

has a disadvantage of lower yield and rusting easily and thus they are

converted into HBI through a gas based route. HBI are produced in the

form of briquettes (small cubes) and have the advantage of higher

yields and easier storage and transportability. DRI involves low

investment and can be produced by small capacity plants unlike the

HBI.

Pig iron is an intermediate product of smelting iron with coke and

fluxes like limestone. It contains approximately 92% iron and about 3.5

– 4.5 % carbon. The balance is largely silicon and manganese with a

small percentage of phosphorus, sulphur and other impurities.

6.1.1.2. Ferrochrome:

Ferrochrome (FeCr) is an alloy of chromium and iron containing 50% -

70% chromium. It is produced by electric arc melting of chromite, an

iron magnesium chromium oxide and the most important chromium

ore. Most of the world's ferrochrome is produced in South Africa,

Kazakhstan and India.

36

6.1.1.3. Ferrosilicon:

Ferrosilicon, or ferrosilicium, is a ferroalloy an alloy of iron and silicon

with between 15% and 90% silicon. It is used in steelmaking and

foundries as a source of silicon in production of carbon steels, stainless

steels, to prevent loss of carbon from the molten steel.

6.1.1.4.Coking coal:

Hard coking coal, an important input for steel making, is basically

bituminous coal, which is “coked” to remove volatile components..

Yearly, over 400 mn tonnes of coke is produced worldwide.

37

Figure 6.2. Prices of Iron ore and Coking coal

6.1.2. Power costs

The steel industry is an energy intensive industry with power and fuel

contributing as much as 10.1% of total production costs. It has been

estimated that the global steel industry account for nearly 4% of the

total energy consumption in the world. Most steel majors like SAIL,

TSL and JSW have captive power plants but smaller players have to

depend on outside supply.

6.1.3. Interest payments

38

Steel is a capital-intensive industry and as such many companies resort

to outside borrowings, mostly in form of long term loans. Interest

payments always used to form on average between 7 – 9% of the total

costs but have recently come down to as low as 3.2%. Interest coverage

ratio has also shot up to nearly 10 after hovering above the zero levels

for a number of years.

6.1.4. Taxes and duties

Excise duties, sales tax, other direct and indirect taxes further push up

costs in the steel sector. Total taxes contribute more than 16% of total

costs. Here, the government can play an active role and provide

structured concessions for new and old capacities.

6.1.5. Other expenses

Wage bills, depreciation costs and distribution expenses are among the

other major cost components.

6.2. CONCLUSION

39

1) Coking coal, iron ore and scrap shortage are responsible for the increased

cost of production, coupled with low average prices of Rs.17,000 - 18,000

TPA in the past. Integrated players with their own captive mines for iron ore

and coal will find it an advantage as they will be shielded from the

fluctuating prices of raw materials.

2) The financial cost, cost of power, and some other materials are high. All

these account for about 35 - 40% of the cost of steel production in India,

whereas it is about 28% in the developed countries. All these make the pre-

tax cost of steelmaking in India higher than that of South Korea, Australia,

Mexico, and CIS countries

CHAPTER 7.0

40

PROCESS OF STEEL MAKING

7.1. Basic Oxygen Steel-making

7.2. Electric Arc Steel-Making

7.3. Induction Furnace

7.4. CONARK Steel-making

7.5. Conclusion

7.1. Basic Oxygen Steel-making:

Basic oxygen steelmaking (BOS, BOF, Linz-Donawitz-Verfahren, LD-

converter) is a method of primary steelmaking in which carbon-rich molten pig

iron is made into steel. Blowing oxygen through molten pig iron lowers the

41

carbon content of the alloy and changes it into low-carbon steel. The vast

majority of steel manufactured in the world is produced using the basic oxygen

furnace. Modern furnaces will take a charge of iron of up to 350 tons and

convert it into steel in less than 40 minutes.

42

Figure 7.1. Basic oxygen steel-making

43

7.2. Electric Arc Steel-Making:

About one-quarter of the world’s steel is produced by the electric-arc method,

which uses high-current electric arcs to melt steel scrap and convert it into

liquid steel of a specified chemical composition and temperature. External arc

heating permits better thermal control than does the basic oxygen process, in

which heating is accomplished by the exothermic oxidation of elements

contained in the charge. This allows larger alloy additions to be made than are

possible in basic oxygen steelmaking.

The electric-arc furnace (EAF) is a squat, cylindrical vessel made of heavy

steel plates. It has a dish-shaped refractory hearth and three vertical electrodes

that reach down through a dome-shaped, removable roof. The shell sits on a

hydraulically operated rocker that tilts the furnace forward for tapping and

backward for slag removal.

44

Figure 7.2. Electric Arc Steel making

7.3. Induction Furnace:

An induction furnace is an electrical furnace in which the heat is applied

by induction heating of iron ore in a crucible placed in a water-

cooled alternating current solenoid coil. The various types of Induction

Furnaces used for Steel making are Medium frequency and High frequency.

Raw materials used are Steel melting Scrap and Direct Reduced Iron. Alloying

45

elements are added as per requirement. Mild steel, Stainless Steel and low and

high alloy Steel can be made from these furnaces An Induction furnace today,

has a capacity up to a maximum of 16-tonne/charge.

Figure 7.3. Induction Furnace Steel making

46

7.4. CONARC Steel-making:

CONARC (CONverter process with electric ARC steelmaking) process

combines electrode arc melting with the oxygen blowing process. This process

gainfully utilizes the process advantages of both (BOF & EAF). The CONARC

design concept combines the conventional BOF process with electric steel

making in a single production unit which consists of two identical vessels. The

steelmaking process in a CONARC unit is consequently split up into two main

phases:

Converter process to decarbonizes the liquid hot metal by top lance

injection of oxygen and

The electric arc furnace process to melt down all cold charge materials,

using electrical energy, and to superheat them up to tapping

temperature.

Figure 7.4. CONARK Steel making

47

7.7. Conclusion

1) Steel making process is going considerable changes; new processes are

being developed to use various types of Iron ores, coal and gas.

2) Iron ore fines are used for making Pig Iron. It is to be seen whether new

processes are economically viable comparing to old systems.

3) All these processes trim to make cheaper steel and conversation of energy.

Duplexing and Tripplexing process may become necessary to make steel in

future.

48

CHAPTER 8.0

TYPES OF STEEL

8.1. Based on chemical composition8.1.1.Carbon steel

8.1.2.Alloy steel

8.2. Based on application

8.2.1. High strength low alloy steel

8.2.2. Free machining steel

8.2.3. Wear resistant steel

8.2.4. Bearing steel

8.2.5. Stainless steel

8.2.6. Electric steel

8.2.7. Tool steel

8.3. Based on Shape and Surface

6.3.1 Flat products

6.3.2 Long products

8.4.Conclusion

49

Steel can be classified based on three parameters namely-

TYPES OF STEEL

Figure 8.1. Types of steel

50

Based on Chemical

Composition

Based on Application

Based on Shape & surface

Carbon SteelCarbon Steel

Alloy SteelAlloy Steel

High Strength Low alloy steelHigh Strength

Low alloy steel

Free Machining Steel

Free Machining Steel

Wear Resistant Steel

Wear Resistant Steel

Bearing SteelBearing Steel

Stainless SteelStainless Steel

Electric SteelElectric Steel

Tool SteelTool Steel

Flat productsFlat products

Long ProductsLong Products

8.1. BASED ON CHEMICAL COMPOSITION

8.1.1. Carbon steel (≤2.1% carbon; low alloy)

Carbon steels are most produced and used, accounting for about 90 % of

the world’s steel production. Carbon steel, also called plain carbon steel,

is steel where the main alloying constituent is carbon.

Types of Carbon Steel Carbon Content (%) Uses

Low carbon steel 0.05–0.15Structural steel, Sheets,

Wires, Pipes

Mild carbon steel 0.16–0.29 Rails, Boilers, Plates, Axles

Medium carbon steel 0.30–0.59Large equipments, Forging,

Automotive components

High carbon steel 0.6–0.99Springs & High strength

wires.

Ultra-high carbon steel 1.0–2.0% Non industrial purpose

Figure 8.2. Types of carbon steel

8.1.2.Low-alloy Steels:

Low-alloy steels constitute a category of ferrous materials that exhibit

mechanical properties as a result of additions of alloying elements Total alloy

content can range from 2.07% up to levels just below that of stainless steels,

51

which contain a minimum of 10% Cr. Low-alloy steels can be classified

according to Chemical composition & Heat treatment.

8.2. BASED ON APPLICATION

8.2.1. High-Strength Low-Alloy Steels (HSLA)

High-strength low-alloy (HSLA) steels, or microalloyed steels, provide better

mechanical properties and/or greater resistance to atmospheric corrosion. The

HSLA steels have low carbon contents (0.05-0.25% C) in order to produce

adequate formability and weldability, and they have manganese contents up to

2.0%.

8.2.2. Free machining steel

This group, developed for good machinability and fabricated into bolts, screws,

and nuts, contains up to 0.35 % sulfur and 0.35 % lead.

8.2.3. Wear-resistant steels

Wear-resistant steels, made into wear plates for rock-processing machinery,

crushers, and power shovels. Manganese steels are often called Hadfield steels,

after their inventor, Robert Hadfield. A special case, piano wire.

52

8.2.4.Bearing steels

These steels often contain 1% carbon, 1.2 % chromium, 0.25 % nickel, and

0.25% molybdenum and are very hard after heat treatment. They are used for

roller and ball bearings.

8.2.5. Stainless steel

Stainless Steel" is a type of alloy steels, that are "stain-less" or resistant to

corrosion or staining. It is also called corrosion-resistant steel or CRES.

Stainless steel is 100% recyclable. In fact, an average stainless steel object is

composed of about 60% recycled material, 25% originating from end-of-life

products and 35% coming from manufacturing processes.

8.2.6. Electrical steels

An important group of steels, necessary for the generation (in generators) and

transmission of electrical power (in transformer), is the high-silicon electrical

steels (upto 6.5%). Also called lamination steel, silicon steel or transformer

steel.

8.2.7. Tool Steel

Tool steels are produced in small quantities, and contain carbide formers such

as tungsten, molybdenum, vanadium, and chromium and cobalt or nickel to

53

improve high-temperature performance and carbon content between 0.7% and

1.4%, the manganese content is often kept low to minimize the possibility of

cracking during water quenching. Tool steels are used for special applications

like injection molding.

8.3. BASED ON SHAPE AND SURFACE:

8.3.1. Flat products

Flat products include plates, hot-rolled strip and sheets, and cold-rolled strip

and sheets. They are rolled from slabs or ingots which are semi finished

product.

a) Plates are hot-rolled either from slabs or directly from ingots. Plates

are usually made in small quantities and to a customer’s specification,

with different dimensions. They are used in boilers and industrial

machinery.

b) Hot-rolled strip is often shipped directly from the hot-strip mill in a

large coil. It is used in construction, automobile ship building etc.

c) Cold-rolled strip is produced from hot-rolled strip. Cold-rolled

products are available with a specific roughness, electrolytically

54

cleaned, chemically treated, oiled, or coated with metals such as zinc,

tin, chromium, and aluminum or with organic substances. They are

used in office equipments, white goods etc.

8.3.2. Long products

Long products are made of either blooms or billets, which are, like slabs,

considered a semi finished product and are cast by a continuous caster or rolled

at a blooming mill.

Long products include:

a) Bars are long products with square, rectangular, flat, round, hexagonal,

or octagonal cross sections. A special group of rounds are the

reinforcing bars; they provide tensile strength to concrete sections

subjected to a bending load.

b) Hot-rolled wire rods are produced in diameters between 5.5 and 12.5

mm. The use of wire is extremely wide, ranging from cords for belted

tires to cables for suspension bridges.

c) Tubular steels are broadly grouped into welded and seamless products.

Longitudinally welded tubes are normally produced up to 500 mm in

55

diameter and 10 mm in wall thickness. Seamless tubes are subjected to

more demanding service; they are often rolled in diameters ranging

from 120 to 400 mm and in wall thicknesses up to 15 mm.

8.4. Conclusion

1) Steel is classified on different parameters namely Chemical Composition,

Application, Shapes & Surfaces and Standards.

2) Carbon steel contributes to 90% of the steel production and it is most

widely used.

3) Stainless steel is the most corrosion resistance steel.

4) 25% of old scraps (end-of-life product like tanks or industrial equipment)

is used in the production of stainless steel as it is 100% recyclable.

56

CHAPTER 9.0

INDIAN STEEL INDUSTRY

OVERVIEW

9.1. Characteristics

9.2. Structure

9.3. SWOT Analysis

9.4. Major players

9.5. Enterprise Value

9.6. Consolidations in the Steel industry

9.7. Conclusion

57

9.1. Characteristics of the Indian Steel Industry

1) Cyclicality:

Steel is a cyclical industry, strongly co-related to economic cycles, since its

key users viz. automobiles, construction and consumer durables are heavily

dependent on the state of the economy. Apart from the cyclicality of the end-

user industries, heavy capital investment and a gestation of period of 2-3 years

for a new plant also contribute to the cyclicality of steel prices.

2) Continuous production process:

Steady supply of raw materials is important to the steel industry since steel

manufacture is a continuous process. Most steel manufacturers tend to ink

long-term agreements with their local suppliers where possible. Most Indian

manufacturers are also currently trying to gain control over mines to ensure

steady supply at stable prices.

3) Working capital intensiveness:

The long working-capital cycle is primarily due to high inventory maintained

by manufacturers both in terms of raw material and finished goods, owing to

the continuous nature of the production process, the standardized nature of the

58

finished products and the limited and geographically disparate supply of raw

materials. Additionally, in a scenario where demand exceeds supply, rising

prices of inventory - both raw material and finished goods as well as increased

stocking of raw materials by steel manufacturers who do not have control over

their raw material supply or prices, results in increased working capital

requirements.

4) Ability to pass on input costs to customers:

Manufacturers of steel are invariably able to pass on the increase in cost of raw

material to consumers in a normal market scenario due to the importance of

steel to many economic activities like construction, infrastructure sector, and

manufacture of consumer durables and modes of transportation.

5) Entry barriers:

The capital-intensive nature of the steel industry coupled with the long

gestation period (2-3 years) acts as an entry barrier to small entrants. However,

in India, to circumvent this problem, a number of players have set up induction

furnaces which need less investment. However, these induction furnaces

produce lower quality and quantity of steel.

6) Availability of finance:

The steel industry is both fixed capital and working capital intensive. Thus,

availability of finance for both, expansion as well as running day to day

59

operations in terms of inventory acquisition and holding and payment to

creditors is critical. The raw material suppliers tend to dictate the payment

terms as there is heavy dependence on the supply of raw materials.

9.2. Structure of the Indian Steel Industry

The steel industry in India is concentrated in the east, south and west of the

country. The integrated foundries are located in the east, while electric steel is

produced predominantly in the south and west. In the future the east will see

rapid expansion asore integrated capacities are being built in Orissa and other

eastern states due to its raw materials. Although India is now one of the worlds

top ten steel producers, its domestic output is insufficient to meet the demand

in all segments.

60

The industry classification based on product categories (and the major

producers) can be divided into the following:

Name of the

product

Major producers

Iron ore

National Mineral Development Corporation (NMDC), Kudremukh

Iron Ore Co (KIOCL) and Sesa Goa (Sesa) are the major merchant

producers of iron ore. SAIL and Tata Steel have their captive iron

ore mines.

Pig IronKIOCL, Sesa Goa and Usha Ispat., Mini Blast Furnace (MBF) pig

iron producers and even integrated steel plants like SAIL and RINL.

Sponge IronEssar Steel, Ispat Industries, Vikram Ispat (a division of Grasim) are

the major producers of gas based sponge iron.

Flat steel

products

SAIL, Tata Steel, Essar Steel, Ispat Industries and Jindal Vijaynagar

(JVSL) are the major producers of hot rolled coils (HRC). SAIL,

Tata Steel, Ispat Industries, Jindal group of companies, Uttam Steel

and Bhushan Steel are the big producers of cold rolled coils/ sheets

(CRC) and galvanized sheets (GP/ GC).

Long steel

products

RINL, SAIL and Tata Steel

Alloy Steel Mukand, Mahindra Ugine (Musco) and Kalyani Carpenter

Table 9.1. Classification of steel producers based on product

Based on the routes of production, the industry (and major producers)

can be classified into the following categories:

61

S.No. Route of

Production

Major Producers

1. Integrated SAIL, RINL, Tata Steel and JVSL are the

largest primary steel producers.

2. Secondary Essar Steel, Ispat Industries and Lloyds

steel are the largest producers of steel

through the secondary route.

Table 9.2. Classification of steel producers based on the route of

production

9.3.SWOT ANALYSIS

62

9.3.1.Strengths

Figure 9.1. Strengths of Indian Steel Industry

1) Availability of iron ore

India has rich mineral resources. It has abundance of iron ore, coal and many

other raw materials required for iron and steel making. It has the fourth largest

iron ore reserves (10.3 billion tonnes) after Russia, Brazil, and Australia.

Therefore, many raw materials are available at comparatively lower costs.

2) Availability of labor at low wage rates

63

India has the third largest pool of technical manpower, next to United States

and the erstwhile USSR, capable of understanding and assimilating new

technologies. Considering quality of workforce, Indian steel industry has low

unit labor cost, commensurate with skill. This gets reflected in the lower

production cost of steel in India compared to many advanced countries.

9.3.2.Weaknesses

Figure 9.2. Weaknesses of Indian Steel Industry

64

1) Endemic Deficiencies

These are inherent in the quality and availability of some of the essential raw

materials available in India, e.g., high ash content in indigenous coking coal

adversely affecting the productive efficiency of iron-making and are generally

imported.

2) Systemic Deficiencies

However, most of the weaknesses of the Indian steel industry can be classified

as systemic deficiencies. Some of these are described here.

a) High Cost of Capital

Steel is a capital intensive industry; steel companies in India are charged an

interest rate of around 14% on capital as compared to 2.4% in Japan and 6.4%

in USA.

b) Low Labor Productivity

In India the advantage of low cost labor gets offset by low labor productivity;

e.g., at comparable capacities labor productivity of SAIL and TISCO is 75

t/man year and 100 t/man year, for POSCO, Korea and NIPPON, Japan the

values are 1345 t/man year and 980 t/man year.

65

c) High Cost of Basic Inputs and Services

High administered price of essential inputs like electricity puts Indian steel

industry at a disadvantage; about 45% of the input costs can be attributed to the

administered costs of coal, fuel and electricity, e.g., cost of electricity is 3 cents

in the USA as compared to 10 cents in India; and freight cost from Jamshedpur

to Mumbai is $50/tone compared to only $34 from Rotterdam to Mumbai.

Added to this are poor quality and ever increasing prices of coking and non-

coking coal. Other systemic deficiencies include:

Poor quality of basic infrastructure like road, port etc.

Lack of expenditure in research and development.

Delay in absorption in technology by existing units.

Low quality of steel and steel products.

Lack of facilities to produce various shapes and qualities of finished

steel on-demand such as steel for automobile sector, parallel flange

light weight beams, coated sheets etc.

Limited access of domestic producers to good quality iron ores which

are normally earmarked for exports, and High level taxation. Besides

these, Indian steel makers also lack in international competitiveness on

determinants like product quality, product design, on-time delivery,

66

post sales service, distribution network, managerial initiatives, research

and development, information technology and labor productivity etc.

9.3.3.Opportunities

Figure 9.3. Opportunities in Indian Steel Industry

67

1.Increasing consumption of steel

The biggest opportunity before Indian steel sector is that there is enormous

scope for increasing consumption of steel in almost all sectors in India. There

is untapped potential of increasing steel consumption in India.

2.Unexplored Rural Market

The Indian rural sector remains fairly unexposed to the multi-faceted use of

steel. Enhancing applications in rural areas assumes a much greater

significance now for increasing per capital consumption of steel. The usage of

steel in cost effective manner is possible in the area of housing, fencing,

structures and other possible applications where steel can substitute other

materials which not only could bring about advantages to users but is also

desirable for conservation of forest resources.

3.Other Sectors

Excellent potential exists for enhancing steel consumption in other sectors such

as automobiles, packaging, engineering industries, irrigation and water supply

in India. New steel products developed to improve performance simplify

manufacturing/installation and reliability is needed to enhance steel

68

consumption in these sectors. For example, pre-coated sheets can be used in

manufacture of appliances, furnishings, electric goods and public transport

vehicles. Production and supply of superior grades of steel in desired shapes

and sizes will definitely increase the steel consumption as this will reduce

fabrication need; thereby reduce cost of using steel.

4.Export Market Penetration

It is estimated that world steel consumption will double in next 25 years. This

poses as a huge opportunity to the steel industry.

69

9.3.4.Threats

Figure 9.4. Threats faced by Indian Steel Industry

1) Slow Industry Growth

The linkage between the economic growth of a country and the growth of its

steel industry is strong. The Indian steel industry is no exception. The growth

of the domestic steel industry between 1970 and 1990 was similar to the

growth of the economy, which as a whole was sluggish. This sluggish growth

in the steel industry has resulted in enhanced rivalry among existing firms. As

the industry is not growing the only other way to grow is by increasing one’s

70

THREATSTHREATS

market share. Consequently, the Indian steel industry has witnessed spurts of

price wars and heavy trade discounts, which has done Indian steel industry no

good as a whole.

2) Technological Change

Technological changes often force the industry structure to change. For a

developing country like India where capital itself is costly, technological

obsolescence is a major threat.

3) Price Sensitivity and Demand Volatility

The demand for steel is a derived demand and the purchase quantity depends

on the end-user requirements. The traders tend to exhibit price sensitivity and

buy when there are discounts. This volatility of demand often affects the

integrated steel manufacturers because of their inability to tune their

production in line with the market demand fluctuations. Some other threats are:

Ever decreasing import duty on steel.

Dumping of steel by developed countries.

High quality products from developed countries available for import at

very competitive prices.

Non-availability of capital from financial institutions for iron and steel

sector.

71

9.4. Major players in the Indian steel industry:

9.4.1. STEEL AUTHORITY OF INDIA LTD.

Registered Office New Delhi

Incorporated On 24th January, 1973

Chairman S.K. Roongta

Table 9.3. SAIL

SAIL, the Navratna PSU, is the largest steel making company in India with

strong backward and forward integration. The company produces both basic

and special steel products for sectors like construction engineering, railways,

automobile and defense.

The company has five main integrated steel plants in addition to three special

steel plants and boasts of a four decade history of technical, managerial and

other know-how in steel making. SAIL manufactures and sells a broad range of

steel products in both flats and longs category. The company has the

distinction of being India’s largest producer of iron ore after NMDC and

owning the country’s second largest mines network. This gives SAIL a

competitive edge in terms of captive availability of iron ore, limestone and

72

dolomite, which are key inputs for steel making. It has 9 Iron ore mines, 5

limestone mines, 2 dolomite mines, and 3 collieries.

Figure 9.5. SAIL’s Company Structure

73

Figure 9.6. SAIL Plants

In order to achieve long term sales volume growth, SAIL is currently

implementing a modernization and expansion plan through the Brownfield

route to expand its capacity of saleable steel to over 23 MT from the base level

of around 13 MT by 2011-12.

74

Figure 9.7. Capacity, Production & Planned increase : SAIL

75

9.4.2.TATA STEEL LTD.

Registered Office Bombay House, Mumbai

Incorporated On 1907

Chairman Ratan Tata

Table9. 4. TATA Steel Ltd.

Tata Steel (earlier known as Tata Iron & Steel Company or Tisco) was

established in 1907. It represents the country's single largest, integrated steel

plant in the private sector. The company has a wide product portfolio, which

includes flat and long steel, tubes, bearings, ferro-alloys and minerals as well

as cargo handling services. While in terms of size, Tata Steel ranks 34th in the

world; it was ranked first (for the second time) among 23 world class steel

companies by World Steel Dynamics in June 2005. With its plant located in

Jamshedpur (Jharkhand) and captive iron ore mines and collieries in the

vicinity, Tata Steel enjoys a distinct competitive advantage. The main plant at

Jamshedpur manufactures 6.8 MTPA of flat and long products.

76

Shareholding pattern

Figure 9.8. Shareholding Pattern : TATA Steel

The company has proposed three greenfield steel projects in Jharkhand, Orissa

and Chhattisgarh with additional capacity of 23 MTPA. Through investments

in Corus, Millennium Steel (renamed Tata Steel Thailand) and NatSteel

Holdings, Singapore, Tata Steel has created a manufacturing and marketing

network in Europe, South East Asia and the Pacific-rim countries.

77

Production Capacity break-up (MT)

Figure 9.9. Production Capacity Break-up

Tata Steel India is one of the most operationally sound companies in India and

has always maintained high EBITDA margins due to strong backward and

forward linkages, good supply contracts in domestic markets and special

branded products.

Tata Steel India has achieved a balanced portfolio with 50:50 mix in flats and

longs post expansion, which was earlier skewed towards flat products. With

flat product sales having declined lately and long product demand remaining

robust, Tata Steel has been successful in altering its product mix to align with

the industry demand.

78

9.4.3.JSW STEEL LTD.

Registered Office Hisar, Haryaa

Incorporated On 1982

Chairman Savitri Jindal

Table 9.5. JSW ltd.

JSW Steel Ltd, the flagship company of the JSW group, is a fully integrated

steel maker and is ranked second in India in terms of volume. With the

commissioning of India’s largest blast furnace (2.8 MT capacity) in February,

2009 JSW Steel became the largest private steel producer in India with a total

capacity of 7.8 MT on a standalone basis. JSW Steel is the only company in

India to use corex as well as blast furnace technology for steel production. The

company’s upstream steel-making facility is located in Vijaynagar, Karnataka,

and downstream in Maharashtra. JSW Steel acquired an integrated steel plant

in Salem, Tamil Nadu in November, 2004, which primarily produces long

category of steel.

79

Shareholding pattern

Figure 9.10. Shareholding Pattern : JSW Steel

80

Company structure

Figure 9.11. Company Structure: JSW Steel

The company has a presence in the overseas market also mainly with Houston

plate and pipe mill in the US, iron ore mine in Chile and coking coal mine in

Mozambique. The company’s products range from MS slabs, hot rolled coils to

value-added products like galvanized coils/sheets and cold rolled coils/sheets

to long products, for example, bars and wire rods. The company is on the verge

81

of further major expansion plan of adding 3.2 million tonnes (MT) to its

current capacity of 7.8 MT in India by March 2011, which would take the total

capacity to 11 MT.

Jindal Steel is amongst the largest corporate groups in India. Jindal Group is

presently a US $5 billion conglomerate and ranks fourth amongst the top

Indian Business Houses in terms of assets. Jindal Steel is one of the largest

steel producers in India with 12 plants in India and 2 in USA.

A Comparison

Major steel makers in India include SAIL, Tata Steel and JSW Steel who

together control close to 45% of steel making capacity in the country. All these

players fall into the category of main steel producers. Among them, SAIL and

Tata Steel have both backward and forward integration to a large extent and

are low cost manufacturers of steel. Also, all the main producers have

aggressive expansion plans through the brownfield and greenfield route lined

up for the next five to 10 years to increase capacity and meet demand.

82

2006-07 2007-08 2008-09

SAIL

Net Sales 35026.21 40214.16 44023.08

Net Profit 6202.29 7536.78 6188.41

EPS 15.02 18.25 14.98

TATA STEEL

Net Sales 25213.31 131535.88 145686.32

Net Profit 4165.61 12321.76 4849.24

EPS 73.06 177.18 66.07

JSW STEEL

Net Sales 8594.44 12456.65 15934.84

Net Profit 1303.89 1658.47 242.73

EPS 80.86 90.30 12.88

Table 9.6. Comparison among SAIL, TATA Steel, & JSW Steel

Sales for TATA steel is more than double than that of SAIL but if we compare

their net profits then SAIL is ahead of TATA steel, JSW ranks 3 rd . EPS for

TATA Steel is much higher than SAIL & JSW.

Production cost analysis

83

Indian steel players enjoy a competitive advantage over their global peers in

terms of cost of production due to availability of captive resources like iron ore

and thermal coal. The only laggard is the unavailability of good quality coking

coal because of which the current production cost is relatively higher. Tata

Steel is the lowest cost producer of steel in India (with 100% captive iron ore

access and 60% captive coking coal) followed by SAIL (100% captive iron

ore, but only 30% coking coal).

Figure 9.12. Comparison of Cost of production

The difference between costs of production for various players would be

reduced after contract prices for raw materials like iron ore and coking coal are

renegotiated at a significantly lower prices. The biggest beneficiaries would be

84

SAIL and JSW Steel and it would bring their cost of production close to Tata

Steel and also provide strong headroom for making decent margins even at HR

sales realisations of US $ 450-500/tonne.

9.5. Enterprise value [EV] – a tool for assessing the

efficiency of the enterprise:

A measure of a company's value, often used as an alternative to

straightforward market capitalization. EV is calculated as market cap plus debt,

minority interest and preferred shares, minus total cash and cash equivalents.

9.5.1 Calculation of Enterprise Value:

Enterprise value is calculated by adding a corporation’s market capitalization,

preferred stock, and outstanding debt together and then subtracting out the cash

and cash equivalents found on the balance sheet. (In other

words, enterprise value is what it would cost one to buy every single share of a

company’s common stock, preferred stock, and outstanding debt. The reason

85

EV= Mkt Cap + Debt – Cash - Cash Equivalents

the cash is subtracted is simple: once we have acquired complete ownership of

the company, the cash becomes ours).

9.5.2 The components of enterprise value:

Market Capitalization: Frequently called “market cap”, market capitalization

is calculated by taking the number of outstanding shares of common stock

multiplied by the current price-per-share.

Example, A Company had 1 million shares of stock outstanding and the

current stock price was $50 per share, the company’s market capitalization

would be $50 million (1 million shares x $50 per share = $50 million market

cap).

Preferred Stock: Although it is technically equity, preferred stock can actually

act as either equity or debt, depending upon the nature of the individual issue.

A preferred issue that must be redeemed at a certain date at a certain price is,

for all intents and purposes, debt. In other cases, preferred stock may have the

right to receive a fixed dividend plus share in a portion of the profits (this type

is known as “participating”). Regardless, the existence represents a claim on

the business that must be factored into enterprise value.

86

Why Is Enterprise Value Important?

Some investors, particularly those that follow a value philosophy will look for

companies that are generating a lot of cash flow in relation to enterprise value.

Businesses that tend to fall into this category are more likely to require little

additional reinvestment; instead, the owners can take the profit out of the

business and spend it or put it into other investments.

9.5.2. EV- Top 3 players:

STEEL AUTHORITY OF INDIA Ltd.:

87

Total no of shares as on March 2009 413,04,00,545

Market Price as on 1st July 2009 153.65

Rs in Cores

Market Capitalization 63,463.60

Debt Rs in Cores

Secured loans 1,473.60

Unsecured loans 6,065.19

Total Debt 7,538.79

Rs in Cores

Cash 4,469.09

Steel production installed capacity (in MT) 24EV/Tone (Rs) 27,722.08

Table 9.7. Calculation of EV/Tonne for SAIL

TATA STEEL:

Total no of shares as on March 2009 48,25,22,747

88

EV= Mkt Cap + Debt – Cash - Cash Equivalents 66,533.30

Market Price as on 1st July 2009 395

Rs in Cores

Market Capitalization 19,059.64

Debt Rs in Cores

Secured loans 3,913.05

Unsecured loans 23,033.13

Total Debt 26946.18

Rs in Cores

Cash 1,590.60

Steel production installed capacity (in MT) 14EV/Tone (Rs) 31,725.15

Table 9.8. Calculation of EV/Tonne for TATA Steel

JSW STEEL Ltd.:

Total no of shares as on March 2009 18,70,48,682

89

EV= Mkt Cap + Debt – Cash - Cash Equivalents 44,415.22

Market Price as on 1st July 2009 621.95

Rs in Cores

Market Capitalization 11,633.49

Debt Rs in Cores

Secured loans 8,214.61

Unsecured loans 3,058.02

Total Debt 11,272.63

Rs in Cores

Cash 419.96

Steel production installed capacity (in MT) 7.8EV/Tone (Rs) 28,828.14

Table 9.9. Calculation of EV/Tonne for JSW

Conclusion:

90

EV= Mkt Cap + Debt – Cash - Cash Equivalents 22,486.16

TATA Steel Ltd. Has the highest EV/Tonne at compared to that of SAIL at and

JSW Steel Ltd. at . This shows that TATA Steel has the highest operational

and production efficiency and stands higher in its enterprise value per tone

when compared to its competitors. Hence at Rs. 395.00 CMP, TATA Steel is a

good scrip for investment in the Indian Steel Sector.

9.6. Consolidations in the Steel Industry:

9.6.1. Arcelor- Mittal Merger:

91

Founded in 1989 2001

Key people L.N.Mittal Guy Dolle

Headquarte

rNetherland Luxembourg

Company

It was formed when Ispat

International acquired LNM

Holdings

The company was created by a

merger of the former companies

Aceralia (Spain), Usinor (France)

and Arbed (Luxembourg)

Capacity(MT) 63.0 46.7

Revenues

(US$ bn)28.1

39.1

Employees 224,000 110,000

Table 9.10. Merger of Arcelor & Mittal

The original bid:

In January 2006, Mittal Steel launched a $22.7 billion offer to Arcelor’s

shareholders. The deal was split between Mittal Shares (75 percent) and cash (25

percent). Under the Offer, Arcelor shareholders would have received 4 Mittal

Steel shares and 35 euros for every 5 Arcelor shares they held. (Ultimately the

power to buy or sell the shares rests with the shareholder and the company

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management can at best advice its shareholders whether to accept or reject the

bid)

The Controversy

Arcelor Management:

The management believed that Arcelor itself would have been doing the

acquisitions and not the other way around. The management was extremely hostile

to Mittal Steel’s bid from the beginning. Arcelor repeatedly played the patriotic

card in order for shareholders to reject the bid. The CEO of Arcelor dismissed

Mittal Steel as a “company of Indians” and unworthy of taking over a European

company. (all this despite the fact that most industry analysts and investment

banks pointing out that the deal was in Arcelor‘s best interests)

European Government:

The French government (despite not being a shareholder) was against the deal

because of worries over its 28000 Arcelor employees. Despite repeated assurances

from Mittal that the deal would not lead to layoffs the government of France was

never convinced. The government of Luxembourg (a stakeholder) was against the

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deal as well for a variety of reasons. The European Union approved of the Mittal-

Arcelor deal.

Moves by Arcelor to counter the bid by Mittal:

Declaration of Dividend:

On February 16, Arcelor declared a dividend of 1.2 Euros, which was 85 percent

higher than the previous dividend in 2004. This was seen as an attempt by the

company to convince shareholders that the situation under the current

management was extremely positive. Many analysts accused the company of

“creative” accounting.

The Russian Angle:

In an attempt to thwart the offer from Mittal Steel, Arcelor released a 13 billion

Euro merger plan with Severstal, a Russian company. This merger would have

made the new Severstal-Arcelor entity too big for Mittal Steel to buy. Despite the

merger plan being fraught with loopholes, the Arcelor management tried to

convince shareholders that this was the best deal for them. The shareholders

however rejected the merger with not one shareholder voting in favour of them.

9.5.2.Tata Steel - Corus

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Tata Steel on April 2, 2007 completed its £6.2 billion (US$12 billion)

acquisition of Corus Group at a price of 608 pence per ordinary share in cash.

The enlarged company has a pro forma crude steel production of 27 million

tonnes in 2007 and is the world's fifth largest steel producer with 84,000

employees across four continents.

Background (before the deal)

TATA Steel:

Tata Steel, formerly known as TISCO (Tata Iron and Steel Company Limited),

is a steel company based in Mumbai, India. It is part of Tata Group of

companies. Its main plant is located in Jamshedpur, Jharkhand, though with its

recent acquisitions, the company has become a multinational with operations in

various countries.

CORUS:

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Corus Group plc, normally referred to simply as Corus, is one of the world's

largest producers of steel, headquartered in London. It was formed from the

merger of Koninklijke Hoogovens N.V. with British Steel Plc on 6 October

1999.

The Takeover

As per the agreement, 75 per cent of Corus shareholders tendered their shares

for the acquisition to be complete.

The combined entity of Tata Steel-Corus would have a capacity of 40 million

tonne by 2011-12.The combined entity will have a turnover of $32 billion by

2011-12 with an EBIDTA margin of 25%.

9.7.CONCLUSION

1) Tata Steel India has lowest cost of production.

2) SAIL has a strong Balance Sheet to support the huge capex plan that it is

goin to undertake in the coming years.

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3) JSW Steel is the only company in India to use corex as well as blast furnace

technology for steel production.

4) Steel is a highly cyclical industry. It’s a very capital intensive industry &

there is a huge gestation period of around 2-3 years.

5) There is an opportunity for India to increase it’s per capita consumption

which is, at present, 47 kgs. Steel hasn’t touched the lives of people in rural

areas.

6) Although India is now one of the worlds top ten steel producers, its

domestic output is insufficient to meet the demand in all segments.

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CHAPTER 10.0

DEMAND AND SUPPLY DYNAMICS

10.1. Overview

10.2. Production & Consumption

10.3. Imports & Exports

10.4. Conclusion

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10.1. Overview

The 90s were a very tumultuous time for the Indian economy 1992 saw India

takes its first step towards economic liberalization. Along with the opening up

of the economy, Indian Steel also saw the entry of a number of domestic

players. Private investment flowed into the industry adding fresh capacities.

The major growth came after economic liberalization in 1992. Steel production

and consumption, which were earlier controlled by government, were

liberalized. This encouraged the growth of private enterprises that were further

responsible for the growth of the industry, especially during 1990-2005. In

1990, the Indian steel Industry had a production capacity of 23 MT, the last

decade saw the Indian steel industry integrating with the global economy and

evolving considerably to adopt world-class production technology to produce

high quality steel.

The years between 1997 and 2001 once again saw a downturn in the global

steel industry.

Some of the significant characteristics of this period were:

Demand supply mismatch

Unremunerative prices

Erosion of bottom line

Crude steel production grew at more than 10 % annually from 34.71 MT in

2002-03 to 50.82 MT in 2006-07. This growth was driven by both capacity

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expansion (from 40.41 MT in 2002-03 to 56.84 MT in 2006-07) and improved

capacity utilization (from 86% in 2002-03 to 89% in 2006-07). During 2006,

India emerged as the 5th largest crude steel producing country in the world as

against 8th position three years back.

10.2. Production and consumption

Traditionally, Indian steel industry was classified into Main Producers (SAIL

plants, Tata Steel and Vizag Steel/ RINL) and Secondary Producers. However,

with the coming up of larger capacity Steel making units, of different process

routes, the classification has been characterized as Main Producers & Other

Producers.

The graph below shows the crude steel production & apparent consumption in

India from FY05 to FY09. There has been a considerable increase in the

production & consumption from FY05 to FY08 but due to the global financial

crisis, the domestic steel production and consumption remained flat in FY09.

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Figure 10.1. Indian Steel Production & Consumption

Demand driven by construction and automobile

Steel demand in India depends mainly on the construction sector, which

consumes close to 60% of the total steel consumed in the country with

automobile contributing 11%. The construction and auto sector have shown

phenomenal growth over the last few years and were on an upswing till mid

2008 before the global liquidity crunch showed its effects and led to a massive

slowdown in these two sectors causing steel demand to slacken. The recent

pick up in both these sectors has helped steel demand to bounce back sharply.

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Figure 10.2. Steel Demand break-up

Infrastructure spend to boost construction activities

There has been a pick up in steel demand from both the auto and construction

sectors in recent months. The situation seems to be stabilising. Steel demand is

expected to remain robust and show 5% growth in FY10 on the back of falling

interest rates, cooling inflation, return of consumer confidence with

infrastructure spend in the Eleventh Plan giving a boost to the construction

sector. We expect 7 MT of incremental steel demand per annum from the

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planned infrastructure spending programmed of the government during the

Eleventh Plan.

11th Five year Plan Roads/

Railways

Urban Irrigation Airport Telecom Power Bridges

Investment

expected from

11th Plan (Rs. Bn)

3142 2618 1829 2533 1190 2548 6665

Assuming that

70% will be spent

2199 1833 1280 1773 833 1784 4666

Civil Construction

(%)

100 40 60 50 40 15 25

Steel Component

(%)

14 25 18 15 25 20 15

Total Steel

(Rs. Bn)

308 183 138 133 83 54 175

Steel Prices Rs/T 32000 32000 32000 32000 32000 32000 32000

Total steel

required (MT)

10 6 4 4 3 2 5

Total steel for

11th Five year

Plan

34

Average annual

steel ccnsumption

(MT)

7

Table 10.1. Infrastructural activities to boost steel demand

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India’ per capita steel consumption is a dismal 47 kg at present. It ranks bottom

among all developing nations with rural per capita steel consumption as low as

3 kg. India compares poorly with world average per capita steel consumption

of 180 kg and other developing countries like China (310 kg) and Brazil (120

kg). With huge infrastructure spending committed by the government in the

Eleventh Plan, falling interest rates and steel use being promoted increasingly,

demand is expected to pick up after the recent slowdown and remain robust,

going forward. This would help India improve its per capita steel consumption.

Figure 10.3 Per Capita steel consumption of various countries & position

of India

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10.3. IMPORTS AND EXPORTS

Imports are mostly on price considerations and, in some cases, to supplement

domestic production. The observed growth in imports is mainly in hot rolled

coils, cold rolled coils, semis and steel scrap. Increased emphasis on import

substitution has emerged as a key trend in the domestic industry.

India has already registered its presence in the global market in the recent

years. While India started steel production in the year, 1911, steel exports from

India started only in 1964. However, steel exports have been sporadic. From

1964 to 1968 India exported a large quantity of steel mainly due to recession in

the domestic iron and steel market. Subsequently, exports declined with revival

of the domestic demand.

Figure 10.4. Export- Import of Indian steel

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The graph above shows the expot and import patten of steel in India. The

imports have seen a robust growth since 2005 to 2008 due to the increase in

demand of steel from the aoutomobiles and construction sector.

Waning demand for steel is evident in a dip in imports, which cumulatively till

August-08 had grown by a robust 28%. Then during September, October

import fell sharply. As a result aggregate imports decline by 8.6% during

April-October 2008. Inventory levels have also piled up, with the same

indicating a whopping 128% rise Y-O-Y at the end of October 2008.

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10.4.CONCLUSION

1. Steel demand in India is mostly dependant on demand from the

Construction & automobile sector, of which construction accounts for

close to 60% of total steel demand.

2. There has been a considerable increase in the production & consumption

of steel from FY05 to FY08 but due to the decrease in demand from

automobile & construction sectors, domestic steel production and

consumption remained flat in FY09.

3. India’ per capita steel consumption is a dismal 47 kg at present . Robust

infrastructure spending in Eleventh Plan to boost construction activities

which will in turn increase the demand for steel.

4. The increase in overall imports of steel is mainly in hot rolled coils, cold

rolled coils, semis and steel scrap.

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CHAPTER 11.0

GOVERNMENT POLICIES AND

REGULATIONS

11.1. Ministry of steel

11.2. Reform measures and policy initiatives

11.3. National Steel Policy, 2005

11.4. Conclusion

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11.1. Ministry of steel

The Ministry of Steel is responsible for the planning and development of the

iron & steel industry, which interalia includes development of essential inputs

such as iron ore, limestone, dolomite, manganese ore, chromite, Ferro alloys,

sponge iron, refractories etc. and other related functions.

The main functions of the government are:

(a) Formulation of policies in respect of production, distribution, prices,

imports and exports of Iron and Steel and Ferro Alloys;

(b) Planning, development and facilitation for setting up of iron and steel

production facilities;

(c) Development of iron ore mines in the public sector and other ore mines

used in the iron and steel industry; and

(d) Overseeing the performance of Steel Authority of India Limited (SAIL)

and its subsidiaries and of other Public Sector Undertakings/Government

managed companies functioning in the iron and steel sector.

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Liberalization of the Indian steel sector

The Indian steel sector was the first core sector to be completely freed from the

licensing regime and pricing and distribution controls. This was done primarily

because of the inherent strengths and capabilities demonstrated by the Indian

iron and steel industry. The economic reforms and the consequent

liberalization of the iron and steel sector which started in the early 1990s

resulted in substantial growth in the steel industry and green field steel plants

were set up in the private sector.

11.2. REFORM MEASURES AND POLICY INITIATIVES

The important policy measures which have been taken over the years for the

growth and development of the Indian iron and steel sector are as under:-

1) In the Industrial policy announced in July 1991, iron and steel industry was

removed from the list of industries reserved for the public sector and also

exempted from the provisions of compulsory licensing under the Industries

(Development and Regulation) Act, 1951.

2) With effect from 24th May 1992, iron and steel industry was included in the list

of ‘high priority’ industries for automatic approval for foreign equity investment

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up to 51%. This limit has since been increased to 100%.

3) Pricing and distribution of steel was deregulated from January, 1992.

4) The import regime for iron and steel has undergone major liberalization

moving gradually from a controlled import by way of import licensing, foreign

exchange release, canalization and high import tariffs to total freeing of iron and

steel imports. Export of iron and steel items has also been freely allowed.

5) Duties on raw materials for steel production were reduced. These measures

reduced the capital costs and production costs of steel plants.

6) Levy on account of Steel Development Fund was discontinued from April,

1994 thereby providing greater flexibility to main producers to respond to market

forces.

7) In pursuance of the decision taken in the Steel Consumer’s Council meeting

held on 30.6.2006 under the Chairmanship of Honorable Steel Minister, Ministry

of Steel has constituted a Steel Pricing Monitoring Committee (SPMC). The aim

of the SPMC is to monitor price rationalization, analyze price fluctuations and

advise all concerned regarding any irrational price behavior of steel commodity.

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11.3. NATIONAL STEEL POLICY, 2005

With a view to accelerating the growth of the steel sector and attaining the vision

of India becoming a developed economy by 2020, the Ministry of Steel

formulated a National Steel Policy (NSP) in 2005. The following are the salient

features of the NSP:-

1) The NSP sets out a broad roadmap for the Indian Steel Industry in its journey

towards reform, restructuring and globalization.

2) The long-term goal of the NSP is that India should have a modern and efficient

steel industry of world standards, catering to diversified steel demand. The

focus of the policy is to achieve global competitiveness not only in terms of

cost, quality and product-mix but also in terms of global benchmarks of

efficiency and productivity.

3) In order to achieve the goal of 110 million tones of steel production by 2019-

20, the NSP seeks to remove the supply-side constraints to the growth of this

industry in an open, globally integrated and competitive environment.

4) The NSP seeks to adopt a multi-pronged strategy to move towards the long-

term policy goal. On the demand side, the strategy would be to create

incremental demand through promotional efforts, creation of awareness and

strengthening the delivery chain, particularly in rural areas. On the supply side,

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the strategy would be to facilitate creation of additional capacity, remove

procedural and policy bottlenecks in the availability of inputs such as iron ore

and coal, make higher investments in R&D and encourage the creation of

infrastructure such as roads, railways and ports.

5) The NSP acknowledges the low per capita consumption of steel in the country,

especially in the rural areas and the need to boost steel consumption to improve

quality of life and help in meeting the growing aspirations of masses.

6) In order to achieve the strategic goal of 110 MT of steel production by 2019-

20, the industry would need additional capital. In order to mobilize such vast

resources NSP seeks to encourage FDI and to make the fiscal incentives,

available to infrastructure projects, accessible to the steel industry.

7) The NSP seeks to support developing of risk-hedging instruments like futures

and derivatives to contain price volatility in the steel market.

8) The NSP seeks to mount aggressive R&D efforts to create manufacturing

capability for special types of steel, substitute coking coal, use iron ore fines,

develop new products suited to rural needs, enhance material and energy

efficiency, utilize waste, and arrest environmental degradation.

9) The NSP acknowledges the important role played by the secondary steel sector

in providing employment, meeting local demand of steel in rural and semi-

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urban areas. The NSP envisages institution of mechanisms for import

surveillance, and monitoring export subsidies in other countries.

11.4.CONCLUSION

1) Increased infrastructure spending by the Government of India and development

of roads could generate significant savings in freight and transportation cost,

making Indian steel companies and other industries globally competitive.

2) There was expansion of the steel sector after the economic reforms. The new

entrants as well as the existing manufacturers went for technical tie-ups with

leading steel producers of the world.

3) The government has a favorable policy for steel manufacturers. However, there

are certain discrepancies involved in allocation of iron ore mines and land

acquisitions. Furthermore, the regulatory clearances and other issues are some

of the major problems for the new entrants.

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CHAPTER 12.0

CHALLENGES FACED BY THE

INDIAN STEEL INDUSTRY

Disparities in steel consumption

Thrust on infrastructure related activities

Raw Materials

Government intervention

Land requirements

Untapped export potential

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CHALLENGES BEFORE THE INDIAN STEEL INDUSTRY

1) Disparities in steel consumption

The real challenge lies in addressing disparities in steel consumption across

different states and regions and also between urban and rural areas. The per

capita consumption of steel in India is just 47 kg and has to go a long way to

reach consumption levels of around 627 kg in developed countries like Japan

and 358 kg in USA.

2) Thrust on infrastructure related activities

There is a need to continue the current thrust on infrastructure related activities

and extend them to rural India. Rural Indian today presents a challenge for

development of the country and the opportunity to increase usage of steel in

these areas through projects such as rural housing etc.

3) Raw materials

Current shortage of inputs has pushed up the costs for the steel industry.

Government should ensure that quality raw material such iron-ore and coke are

available to the industry. With Ministry of Steel targeting an output of 100 MT

of steel by 2020 there is an urgent need to develop raw material resources for

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inputs like iron-ore and coal within or outside the country. Countries like Japan

have already taken similar steps to safeguard their industries.

4) Government intervention

Government should not regulate prices and free market forces should prevail.

Intervention by the Government is only a short-term solution to the issue of

steel prices in the country. Once left alone, market dynamics will automatically

ensure price corrections and determine the optimum price of steel.

5) Land Requirements:

Choice of location will be governed by various considerations, such as, likely

sourcing of raw materials, target markets for finished products, envisage

capacity in this case of operation, infrastructure facilities etc. In case of

existing plants undergoing expansion/up gradation, the choice of location does

not arise but for new capacities which will heavily depend on export of

finished products, the coastal location could be advantageous. Any Greenfield

project will require land. In India, land is available in remote villages and

demographically in backward states like Orissa etc. Numerous problems are

there in acquiring lands.

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6) Untapped export potential

India’s share in world trade steel is a miniscule 2%. Given the capabilities of

the Indian steel industry there is tremendous scope to increase this share

further. While the steel industry will continue servicing the domestic demand

there is a lot of untapped export potential with the industry.

Un-interrupted supply of raw material is to be ensured before commissioning

or thinking about new projects. The sources of raw materials are limited.

Though India has good reserves of iron ore but at the same time lack of

matching and adequate reserves of coking coal and non-availability of good

quality lime-stone for steel making have also to be technology bypass these

primary requirements.

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CHAPTER 13.0

CONCLUSION

119

Conclusion

1) The liberalization of industrial policy and other initiatives taken by the

Government have given a definite impetus for entry, participation and

growth of the private sector in the steel industry. While the existing units

are being modernized/expanded, a large number of new/Greenfield steel

plants have also come up in different parts of the Country based on modern,

cost effective, state-of-the-art technologies.

2) Indian steel players, now, concentrate on the global market as they know the

trend of world steel market. The recent movement of Tata steel is also a big

evidence for the development of Indian steel industry.

3) Efforts to make this sector more eco-friendly will meet success only if

competent

authorities take up the developmental jobs in proper spirit.

4) The global steel industry has been notoriously cyclical and although internal

demand is likely to remain high in India for the foreseeable future,

overcapacity in the global market place remains a real threat in the next decade.

Overcapacity would bring about increased competition.

5) Although the Indian steel industry is growing and its share of global steel

production is rising, the industry is still being constrained by major deficiencies

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in fundamental areas. Financing problems mean that although major

infrastructure programmes are taking place the amount remains well below

Government targets, therefore slowing steel demand.

6) The steel industry demonstrates a high degree of variability, both in terms of

earnings and production. The factors attributable for driving this variability are

global economic conditions with a particular sensitivity to the performance of

the automotive, construction, capital goods and other industrial products

industries.

7) There is a need to continue the current thrust on infrastructure related activities and

extend them to rural India. Rural Indian today presents a challenge for

development of the country and the opportunity to increase usage of steel in these

areas through various projects.

8) Adequate enabling infrastructure such as power, ports, roads, rail transport is pre-

requisite for the Indian steel industry to remain competitive.

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CHAPTER 14.0

SUGGESTIONS

122

Suggestions

The following suggestions are given to rejuvenate the Indian steel industry:

1) Technology policy is to be so designed by the government that it will

generate the thrust to update the technology by the steel producers.

2) Further liberalization towards tariff structure, full convertibility of Indian

currency, more equity participation by foreign partners, rationalization of

tax structure etc. will be required.

3) Steel companies must assess their core competency and realign their

strategy to cope with the internal and global competition.

4) R&D focus is to be increased substantially. Expenditure on R&D by steel

plants should be increased. With a strong R&D base, organizations will be

able to assimilate the technology faster.

5) Organizational adjustments must be made while adopting newer

technologies. Effective human resource policy will help speedier

technology adoption. Socio-economic aspects should be dovetailed while

selecting a technology.

123

6) Training and re-training with updated inputs should be a continuous process

in steel plants. Training programmers should be designed for people from

different hierarchy including top level management.

7) As economy is becoming more and more market driven, steel sector should

also tune to it.

8) Technology transfer plans are to be worked out more carefully. Indian firms

must select appropriate technology with proper scope of adoption.

9) Firms must do technological forecasting, which is not common in Indian

steel industry, to take better decisions on product mix and investment

proposals.

10) Resource utilization must be more effective to improve on the productivity.

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CHAPTER 15.0

ANNEXURES

Balance Sheet

Profit & Loss Account

Cash Flow Statement

Of

1.SAIL

2.TATA Steel Ltd.

3.JSW Steel Ltd.

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CHAPTER 16.0

BIBLIOGRAPHY

126

BIBLIOGRAPHY

1) CMIE Journal

2) Annual Report of Ministry of Steel

3) CRISIL Report

4) www.sail.com

5) www.worldsteel .org

6) www.steel.nic.in

7) www.steelworld.com

8) www.mysteel.com

9) www.moneycontrol.com

10) www.tatasteel.com

11) www.armresearch.in

12) www.icicidirect.com

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