STEEL SECTOR: AN ANALYSIS

INTRODUCTION

STEEL SECTOR IN BRIEF

STEEL

It is an alloy consisting of Iron Carbon content (0.02% - 2.04%) Manganese and Tungsten

The major processes of production: Bessemer Process Basic Oxygen Steelmaking

TYPES OF STEEL Early Modern Steel

Blister steel Crucible steel

Contemporary Steel Carbon Steel High Strength Low Alloy Steel Low Alloy Steel Tool Steel TRIP Steel

HISTORY

Stages in Global Production of Steel

Source: IISI

MAJOR PRODUCTS

Semi-Finished Product like Slabs,blooms etc Ordinary Steel Products like tubes,pipes etc Hot rolled coils (HRC) Cold rolled coils (CRC) Galvanised Sheets Speciality steel products like stainless steel

pipes & foils etc

ROUTES OF STEEL PRODUCTIONPrimary/Integrated Secondary/Mini Mills

Types of raw material used

Iron ores and scrap Steel Scrap only

Mostly Used in Developing countries

Developed countries

Companies in India

SAIL,Tata Steel Essar,Ispat

MAJOR CONSUMERS OF STEEL

MAJOR PLAYERS

INDIAN COMPARISONTata Steel

SAIL JSW Essar Steel

BASED ON OWNERSHIP

PUBLIC VISAKHAPATNAM STEEL

PLANT NMDC MSTC LIMITED FERRO SCRAP NIGAM LIMITED MOIL KIOCL BIRD GROUP OF COMPANIES SPONGE IRON INDIA LIMITED MECON LIMITED HSCL BHARAT REFRACTORIES

LIMITED

PRIVATE TATA-CORUS ESSAR ISPAT JSW STEEL LIMITED MUKAND LIMITED SESA GOA

GLOBAL COMPANIES

Arcelor - Mittal

Nippon Steel JFE POSCO Bao steel- Bayi Group Tata - Corus US Steel

120 mtpa

32.7 mtpa 32 mtpa 30.1 mtpa 25.6 mtpa 24.7 mtpa 21.2 mtpa

VALUATION METRICS

M&As Arcelor - Mittal

32.2bn$ dealMittal pips Severstal

Tata-Corus11.3bn$ dealTatas pip CSN

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TRENDS

INDIAN SCENARIO

PRODUCTION IN INDIA

05

101520253035404550

Qu

an

tity

(in

mill

ion

to

nn

es

)

2003-04 2004-05 2005-06 2006-07

YEAR

Source: Joint Plant Committee

IMPORT AND EXPORT OF STEEL

0

1

2

3

4

5

Qua

ntity

(in

mill

ion

tonn

es)

2003-04 2004-05 2005-06 2006-07YEAR

IMPORTS

EXPORTS

INDIAN TRENDS Average growth rate for past 15 years 7%

pa Improved rank to 7th place Projected growth rate 7.3% pa Expected to be world's 2nd largest steel

producer by 2016

Race for the capacity

16% CAGR over 5 years Steam still left in the super cycle Steel companies in India to outperform Joined at the hip (to the globe)

Indian production growth slowed by capacity

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INDUSTRIAL REGULATIONS

Pollution Control ESI RPF Central Excise Duty Custom Duty Auxiliary Duty Sales Tax Laws under Factory Act

INDUSTRIAL REGULATION

SUBSIDIES Interest Subsidy Capital Investment

Subsidies Stamp Duty

Exemptions Electricity

Subsidies.

LICENSE Trade License Health License Fire License

SWOT FOR INDIAN STEEL SECTOR

Strength Availability of iron ore

and coke Low wage labor

availability Quality manpower Mature production

base

Weakness Unscientific mining Low productivity Coking coal import

dependence Low R&D investment High cost of debt Inadequate infrastructure

SWOT contd..

Opportunities Unexplored rural

markets Growing domestic

demand Exports Consolidation

Threats China becoming net

exporter Dumping by

competitors Protectionism from

the West

STRATEGIES FOR GROWTH

On the demand side Extensive promotional campaigns Strengthening of rural delivery chain Encouraging infrastructure development

On the supply side

Creation of additional capacity Removal of bottlenecks in the availability

of raw material Encourage R&D Invest to create professional technical man

power

TRENDS

GLOBAL SCENARIO

GLOBAL TRENDS

The global consumption of steel has increased at a pace of 7%

Chinese steel industry is booming

World’s big producers are all pursuing large-scale investment projects in India

CHINESE STEEL INDUSTRY•Heavy influence on global steel industry in past 5 yrs•Emerged as a leading producer and consumer

CHINESE STEEL INDUSTRY (contd..) Growing infrastructure and huge Govt

subsidies have fuelled this success

Challenges Overcapacity is a challenge industry

needs to tackle for future growth Non availability of iron ore reserves is a

disadvantage

RECYCLING

Reliance on steel scrap in production

Developed countries: 50-70% Emerging countries: 15-20%

RECENT HAPPENINGS & FORECASTS

Foreign Direct Investments MoU signed between POSCO and Govt.

of Orissa

Mittal has set up 2 steel plants in Jharkhand and Orissa with a capacity of 24 MT

FUTURE ROADMAPS

The fact that steel is cent percent recyclable should be used to our advantage

Ore policy in India requires pressing reform

A Presentation put together by:

Ashwin Maniyar Palak Sood Pallavi Patil Rahul Lodha Rahul Kumar Swathi Velisetty