indian iron and steel industry
TRANSCRIPT
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Presented by:
Group 8
Section E
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Iron is one of the oldest inventions in theworld
Backbone of the human civilization
Automobiles Infrastructure
Contribution :
GDP 10% GNP 6%
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Objective
To study the structure and performance ofIndian Iron and Steel industry
What are the factors influencing iron andsteel industry ?
What is the role of major players?What is the current scenario?
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Production Technology
Blast Furnace (BF)/ Blast Oxygen Furnace(BOF)
Electric Air Furnace (EAF)
COREX
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Structure of Indian steelindustry India is 5th largest steel producer
Divide into two distinct groups:
integrated steel producer
small/stand alone plants
Potential demand of steel in India and the per capitasteel consumption.
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Factors influencing iron andsteel industry
Backward integration
Consolidation
Branded products
Longer contracts
Government initiatives Impact of Liberalization
Cost competitiveness
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Current investments
Tata Steel: planning for 5 million tonne plant in Chhattisgarh ( US$ 3.59 billion)
setting up greenfield projects in Jharkhand and Orissa
Reliance Infrastructure: plans to build a 12-million tonne steel plant in Jharkhand; likely to be completed by
2012.
Indian Railways:
plans to invest around US$ 437.25 million per annum to raise its consumption ofstainless steel for adding new alloy-made wagons and coaches to its portfolio.
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Framework for industryanalysis
Entry barriers: HighCost of capital
Competition: High
Bargaining power of suppliers: HighThreat of substitutes: Low
Bargaining power of Consumers: Mixed
Qualitative Analysis
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Internal assessment
Strengths
Availability of iron ore
Availability of labor at low wage rates
Weakness
High Cost of Capital Low Labor Productivity
High Cost of Basic Inputs and Services
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External assessment
Opportunities Unexplored rural market Other sectors
Export penetration
Threats
Slow Industry Growth Technological Change Price Sensitivity and Demand Volatility
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Quantitative Analysis
Key ratios considered:
- Debt equity ratio
- Interest coverage ratio
- Debtors turnover ratio
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Companies considered foranalysis
Top 5 companies Bottom 5 companies
1. Steel Authority of India Ltd
2. Tata Iron and Steel CompanyLtd
3. Jindal Iron and Steel CompanyLtd
4. Essar steel5. Ispat Industries Ltd
1. Sunflag Iron and Steel Industry
2. Shah Alloys Ltd
3. MUSCO
4. Surya Roshni
5. Usha Martin
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Current Global Scenario
Sub Prime crisisUS slow down
US Dollar weakening
Impact on the overall IndustryWidening Credit Spreads
Increase in Capital cash
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Influence on Global Iron andSteel Industry
Source: International iron & steel institute
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Influence on Indian Iron andSteel Industry Influence of US crisis on Indian ExportsIron ore exports from India till December 15, 2008
declined over 13% despite huge price decline in
steelmaking raw materials.(Source: Federation of Indian Minerals Industries (FIMI) )
Low Iron Ore Exports from IndiaTATA
Present Scenario
http://ratan%20tata%20letter.pdf/http://export%20details.docx/http://export%20details.docx/http://ratan%20tata%20letter.pdf/ -
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Domestic Steel Companies Margin under
PressureHigh cost of coking coal (US$300-350 per ton)
Crude Steel Production Down and PlantUtilizationCapacity utilization of Ispat Industries is 30%
JSW Steel and Essar Steel is 60-70% eachBhushan Steel is 50 percent
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thrust to update the technology
Further liberalization towards tariff structure
R&D focus is to be increased substantially
HRP , Training
Market Driven
Resource utilization
Recommendations
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Future Outlook
Growth of steel demand will be around11% annually
Produce 110 million tons of steel by
2020 India would become the second biggest
producer of steel
Upcoming projects
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Innovations
Steel Junction
NUCOR Steel
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Key Success Factors
WHAT DO CUSTOMERS
WANT?
(Analysis of demand)
HOW DO FIRMS SURVIVE
COMPETITION?
(Analysis of competition)
KEY SUCCESS
FACTORS
Low price.
Product consistency.
Reliability of supply.
Specific technical
specifications for special
steels.
Commodity products,
excess capacity, high fixed
costs, excess capacity, exit
barriers, and substitute
competition mean intense
price competition and
cyclical profitability.
Cost efficiency and strong
financial resources
essential.
Conventional sources of
cost efficiency include:
large-scale plants, low-cost
location, and rapid
adjustment of capacity to
output.
Alternatively, high
technology, small scale
plants can achieve low
costs through flexibility and
high productivity.
Differentiation through
technical specifications and
service quality.
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