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Volume 91, October 2010 15

Strategy for Revival and Growth of Indian Steel Industry

P Gupta, Associate Member

S Ghosh, Non-member

Dr R Datta, Non-member

D Singh, Non-member

Dr D Mukerjee, Non-member

A ‘smart’ metal that is completely recyclable, steel is a material common to all fields: energy, transportation,

housing, food, and recreation. With approximately 850 million Mt of steel produced annually worldwide, and

employing 859000 people, the steel industry has undergone numerous changes in the last few years. In

times of great uncertainty, an understanding of long-term industry trends can help to plot robust strategies.

Having winning strategies is very important for a company. Executing these strategies is the key to business.

The market has turned really to a buyers market, where ‘quality’ and ‘customer service’ are the keywords for

survival and steps towards revival of growth in the segment. Presently not only India but whole world is

experiencing the meltdown in economic recession while all industries had their ups and downs. Steel, being

a commodity, is prone to cyclical downturns and upturns. Changes in business environment call for periodical

review of both long and short term plans and setting of new goals by adoption of appropriate strategies.

These goals can be achieved by building sustainable competencies based on growth by exploiting fully the

potential of available assets, differentiation through quality and service, profitability by excellence in operations

and cost reduction, and leveraging the skill and knowledge base of the company’s human resources. The

challenges that confront Indian steel industry in the age of globalization are complex in nature. The secret of

sustainable turnaround lies in how Indian steel industry faces the challenges and develops combative and

anticipatory prowess. Problems and solutions may vary with organizations but there is more a commonality

than initially meets the eye. The survival strategy provides a foundation upon which a potent growth strategy

could be formulated. While the survival strategy would ensure the survival of the ailing steel industry, the

growth strategy would simultaneously take care of its total transformation towards a better future. Both

stages, to be implemented through an integrated plan, are essential to enable the industry overcome the

present imbroglio. The scenario presented in the paper aimed for both long and short term strategies to

achieve growth. The suitable diversified strategy and identified market segments with focus on value-added

products close to the core business will be key to success. The strategy for revival and growth of Indian

steel industries with a faster economic growth needs to unlock its full potential. This strength lies in low cost

and fairly skilled workforce coupled with faster technological improvement and operational efficiency through

better manpower planning, logistics and raw material sourcing along with government help to have cutting

edge in steel market at higher output and profit margins. The factors for revival of Indian steel industry are

buoyant global steel consumption, buoyant local steel consumption, lower cost of production and adequate

rise in price against hike in input costs together with backward integration, consolidation and branded product

sales, marketing alliances, etc. The article defines the strategic business processes to frame policy goal,

the feasibility of realizing this goal supported with past and projected growth figures of steel through tools

like SWOT, PEST etc. The supply side requirements to meet the anticipated demand in terms of availability

of critical inputs, infrastructure requirements and current limitations in the country and the need for foreign

investment to improve the scenario are highlighted in the article. The strategy suggested for the reversal of

the steel industry in India is double layered in nature, effecting the reversal and at the same time sustaining

the reversal. The strategy has to be growth and survival oriented. The survival part would assure the survival

of the industry in the fierce competitive atmosphere and the growth part would boost the sustainable growth

of the industry. The two different parts of the strategy has to be integrated into one to have the expected

results. The future concerns and measures regarding the steel price volatility, human resource requirements,

R&D requirements, environmental issues, government’s role, role of China etc have also been addressed to

achieve sustainable growth of Indian steel industry. Industry must develop new technology, improve energy

P Gupta, S Ghosh, Dr R Datta, D Singh and Dr D Mukerjee are with the Steel Authority of India Limited (SAIL), R&D Centre for Iron andSteel (RDCIS), Ispat Bhawan, P O : Doranda, Ranchi 834 002, Jharkhand.

This paper was received the SAIL Award 2009, which was presented to the authors in the Twenty-fourth Indian Engineering Congress held atSuratkal during December 10-13, 2009.

16 IE(I) Journal–MM

efficiency and unlock more challenging resources. Complete utilization of existing capacities, elimination of

bottlenecks in production, along with identification and starting of idle production capacities is also a great

challenge in the coming years as the exiting demand to be fulfilled by the existing capacities. The paper

discusses the accomplishment by executing successful growth strategies and providing the growth teams

with the skills, know-how, and tools to generate growth opportunities, evaluate these opportunities to create

a growth pipeline, and implement a growth strategy to deliver measurable business results.

Keywords : SWOT; PEST; Revival; Growth; Steel industry

From a fledgling industry, steel in twenty-first century hasbeckoned a virtual resurrection. After three decades of nearflat growth, steel industry has registered a buoyant growthof 7.9 percent during 2001 to 2007. Crude steel productionwhich was 0.85 bt in 2001 crossed 1.3 bt in 2007. India'ssteel production and consumption in 2009 is showing apositive trend1.

In the era of planned economy, iron and steel, a core andbasic sector, received the full attention of the Government.It became a key sector for public investment for the firstFive-Year Plan itself.

Sector Structure/Market Size

The Indian steel industry entered into a new developmentstage from 2005 to 2006, resulting in India becoming the5th largest producer of steel globally which is being movedto third place as depicted in Figure 1. Producing about 55 Mtof steel a year, today India accounts for over 7% of theworld's total production. India is the only country in the worldto post a positive overall growth in crude steel productionat 1.01% for the January to March period of 2009. Therecovery in steel production has been aided by the improvedsales performance of steel companies. The steel sector2- 4

grew by 5.3% in May 2009.

Production

Steel production grew at 1.2% in the January to Marchquarter of 2008 to 2009 over the same period last year.The fourth quarter saw most of the large steel companiessuch as SAIL, Tata Steel, Essar and JSW operating at fullcapacity. Indian Steel industry has surpassed the negativegrowth registered by rest of the countries other than China.

INDIAN STEEL INDUSTRY : TODAY AND TOMORROW

‘We still have a number of persons in our country in SAIL,TISCO and other big and small steel plants who have thecapabilities. They have the will to excel and transform thecountry, given a long-term vision. We should be ready tocompete in outside market. If our steel industry gears up inabout three to four years, Indian steel can be both in Indianand foreign markets. Our vision should be towards this’.Indian 2020: A vision for the new millennium by APJ AdbulKalam and YS Rajan.

The Indian Steel industry is more than 100 years old now.Till 1990, the Indian steel industry operated under aregulated environment with insulated markets and large-scale capacities reserved for the public sector. Productionand prices were determined and regulated by theGovernment, while SAIL and Tata Steel were the mainproducers, the latter being the only private player.

The industry took its first faltering steps in 1907 with thesetup of the first integrated steel plant in Jamshedpur byTISCO. Since then the Indian steel industry has emergedas one of the core sectors in the Indian economy with avery significant impact on economic growth. As it traversedits long history during the past 60 years, the Indian SteelIndustry has responded to the challenges of the highs andlows of business cycles.

The Indian steel industry can be divided into two distinctproducer groups:

í Major Producers : Also known as Integrated SteelProducers (ISPs), this group includes large steelproducers with high levels of backward integration andcapacities of over 1 Mt. These include SAIL, TISCO,RINL, ESSAR, ISPAT and JSW. Now many new steelplants are coming up.

í Other Producers : This group consists of smallerstand-alone steel plants that include producers andprocessors of steel, such as, processors/ rerollers,stand alone units making pig iron and sponge iron

SAGA OF STEEL

Since, the beginning of the twentieth century, the globalsteel industry has witnessed a chequered history. Startingfrom its role in construction and household sector to providethe major inputs for arms and ammunition, steel industrygradually became an integral part of the development andgrowth of nations. Figure 1 Indian steel production at global level

2006 2007 2008 2009

Cru

de

ste

el p

rod

uctio

n,

Mt India

World

Januaryto May2009

1400

1200

1000

800

600

400

200

0

Rank

6

Rank

6Rank

5

49.4 53.1 55.1 22.7

448

133013511251

Rank3


The National Steel Policy has a target for taking steelproduction up to 110 Mt by 2019 to 2020. Nonetheless,with the current rate of ongoing green field and brown fieldprojects, the Ministry of Steel has projected India’s steelcapacity to touch 124.06 Mt by 2011 to 2012. In fact, basedon the status of Memoranda of Understanding (MOUs)signed by the private producers with the various stategovernments, India's steel capacity5,6 is likely to be 293 Mtby 2020.

Consumption

India accounts for around 5% of the global steelconsumption. Almost 70% of the total steel used is forkitchenware. However, its use in railway coaches, wagons,airports, hotels and retail stores is growing immensely. Steelconsumption grew at 5.2% during the first quarter of 2009to 2010 as against 3.8% in the January to March quarterlast year. The production and consumption pattern is shownin Table 1 and sector consuming steel is depicted5, 7 inFigure 2.

A Credit Suisse Group study states that India’s steelconsumption will continue to grow by 16% annually till 2012,fuelled by demand for construction projects worth US$ 1trillion. The World Steel Association has forecast a 2%growth in the country's steel consumption in 2009, makingit the only major economy to post an increase in a year thatwill see global consumption of the metal fall by around 15%.India is expected to consume 53.5 Mt of steel in 2009 anddemand-gap projections are shown in Figure 3.

The scope for raising the total consumption of steel is huge,given that per capita steel consumption is only 35 kg —compared to 150 kg across the world and 250 kg in China.

Export, Import and Investments

India’s exports of finished steel have remained almoststagnant in the range of 4 Mt to 5 Mt in the past six years.But import of finished steel has grown from 1.5 Mt infinancial year 2003 to 6.5 Mt in financial year 08, registeringa CAGR of 33.8%. In financial year 2008, India turned intoa net importer of finished steel as country’s import rose byalmost 46% on YoY basis. Centre for Monitoring IndianEconomy (CMIE) expressed that India's export of steelwill fall by a whopping 35% to 3.2 Mt during the currentfiscal buoyed by healthy domestic demand.

India imported 40% more finished steel products in March2009 than the previous month indicating that the boostermeasures announced by the government to kickstart theeconomy have started rejuvenating the infrastructure andconstruction sectors. Against 3.4 lakh t in February, thecountry imported 4.8 lakh t of finished steel goods in March2009, according to the latest data released by the steelministry. On a broader level, the data showed that steelimports slipped 18% to 5.77 lakh t in financial year 2009against 6.83 lakh t in the previous fiscal4,7,8.

A host of steel companies have lined up major investmentproposals. Furthermore, with an expanding consumermarket, the Indian steel industry is likely to receive hugedomestic and foreign investments. According to theInvestment Commission of India investments of over US$30 billion in steel are in the pipeline over the next five years.To sustain growth rate during global meltdown, the Indiangovernment is targeting an investment of US$ 20.38 Billionover the next two years in the infrastructure sector9.

Economic Scenario and Future Outlook

According to the pre-budget economic survey 2008 to 2009— a report on India's resilient economy-tabled in Parliamenton July 2, 2009 by Finance Minister Pranab Mukherjee,India could grow up to 7.5% in 2009 to 2010 up from 6.7%in 2008 to 2009, provided the global economic slowdown

Table 1 Production and consumption of steel

Period Production, Mt Consumption, Mt

2005 - 06 44.5 43.9

2006 - 07 50.1 49.7

2007 - 08 52.6 54.5

2008 - 09 e 53.1 56.0

Automotiveengineering 5%

Figure 2 Sector consuming steel in India

Mechanicalengineering 32%

Construction43%

Others 20%

UA

ETa

iwa

nS

ou

th K

ore

aH

on

g K

on

gJa

pa

nG

erm

an

yA

ustr

alia

US

AF

ran

ce

Ch

ina

Ind

ia

Figure 3 Steel demand projections

Countries

kg

/ca

pita > 150 Mt, the

present gap

Apparent steelconsumption of

countries

1400

1200

1000

800

600

400

200

0

Worldaverage– 170

UAE – 1252

India – 33


bottomed out by September and the government was ableto implement significant economic policy reforms.

The economic survey estimates:

í GDP to grow to 7.5% in 2009 to 2010.

í Agriculture and rural demand continue to be strongand agriculture production prospects are normal.

í A rise in multi-brand retail foreign direct investment(FDI) cap.

í Despite the slowdown in growth, investment remainedrelatively buoyant, growing at a rate higher than thatof GDP.

í The performance of six core industries comprisingcrude oil, petroleum refinery products, coal, electricity,cement and finished steel (carbon) grew at 2.7% ascompared to 5.9% in 2007 to 2008.

í The index of industrial production for the year 2008 to2009 points towards a sharp slowdown with growthbeing placed at 2.4%.

Growth in key sectors will drive the steel demand, the needis to trigger the opportunities. Moreover, steel has majorcontribution in the growth of GDP in India. In India, there isenormous potential for growth in steel consumption. Heavyinvestment in developing the country’s infrastructure, suchas, railways, ports, and roads will fuel growth in the steel-intensive construction sector.

A future of steel in India is indeed very bright and demand-gap assessment in Indian scenario is shown in Figure 4. Itis to be decided how best the expectations of our countrycan be met in the rising level of demand 7,9,10.

INDIAN STEEL INDUSTRY : REVIVAL FACTORS ANDANALYSIS

The factors for revival of Indian steel industry are buoyant

global steel consumption, buoyant local steel consumption,lower cost of production and adequate rise in price againsthike in input costs. Apart from this, backward integration,consolidation and branded product sales, marketingalliances, etc, have led to the revival of the Indian steelindustry. Complete utilization of existing capacities,elimination of bottlenecks in production, along withidentification and starting of idle production capacities isalso a great challenge in the coming years as the exitingdemand to be fulfilled by the existing capacities. The Metalsindustry is highly capital intensive, therefore overall costefficiency in operations plays a very critical role. Steelproducers will need to operate at higher efficiency, lowbreakdowns, low cost etc following which Indian SteelIndustry has registered a growth.

SWOT and PEST Analysis : Steel Industry a PracticalApproach

A number of business models and modern techniques arethere for analysis of business techniques, productionplanning, cost etc, such as, SWOT, PEST and five factoranalysis etc.

SWOT Analysis

It is a useful summary technique for summarizing the keyissues arising from an assessment of a business’s ‘internal’position and ‘external’ environmental influences. It helps inidentifying existing organizational strengths, weakness,market opportunities to exploit and threats to the futuresuccess.

Strengths

í Availability of iron ore;

í Availability of labour at low wage;

í Quality manpower.

Weakness

í Endemic deficiencies;

í Systemic deficiencies;

í High cost of capital;

í Low labour productivity;

í High cost of basic inputs and services;

í High rate of taxes;

í Quality issues and less expenditure on R&D.

Opportunities

í Unexplored rural market and other sectors;

í Export penetration and increase in demand;

í Mergers and acquisition.Figure 4 Steel demand projections in India

All figure in Mt

Gap : ~ 20to 25 Mnt

100

80

60

40

20

0

Current Projected Capacity Currentdemand demand addition (P) supply

Demand side Supply side

42

90

65

34


Threats

í Slow industry growth;

í Technological change;

í Price sensitivity and demand volatility;

í China factor.

PEST Analysis

It is an investigation of the important factors that arechanging which influence a business from the outside likechange in government and policies, economics, socialtrends and living standard and technology.

After understanding the various issues arising after SWOTand PEST analysis, revival factors and the kind of strategycan be devised and followed. These will provide variouschallenges and opportunities for developing a turnaroundby the Indian steel industry. The struggling of Indian steelindustry with high manufacturing costs, long productioncycles and capacity bottlenecks elaborate a detailedtechnical blueprint that can show the required technicalimprovements.

Challenges for Revival and Growth of Steel in India:Suggested Ways

The growing self-confidence of our steel industry ismanifested by the fact that Indian producers are nowenlarging their global reach and presence.

The key drivers of steel demand and growth in India are:

í Industry driven economic growth;

í Infrastructure development;

í Raw material security through adoption of appropriatepolicy;

í Growing population and low per capita steelconsumption;

í Housing and high degree urban development;

í Steel intensive products demand like high demand inthe auto sector;

í About 100000 MW new capacities (90% of present)will be added in power sector in next seven years.This should also act as strong driver of steel growth.

The Indian steel manufacturers are faced with some majorproblems and concerns, which work as inhibiting factors totheir effort towards gaining the competitive edge and growthof the sector.

Steel demand will grow and steel producers of India havenot only to bridge the gap in demand but also to feel theirpresence globally. In order to meet this objective, variousplanning and settlements/steps to be taken on urgent basis

so as to catch the demand bus of steel in time to achieveprofit and business.

As the gap between domestic production and demandgrows in India, imports of steel will increase. But to meetthis supply challenge, the industry must develop newtechnology, improve energy efficiency and unlock morechallenging resources. Contractors and suppliers mustincrease their capacity to support the industry, reducing costand schedule uncertainty and improving productivity.Governments can contribute by providing access to areasthat are currently off-limits to the industry and adoptingefficient and coordinated greenhouse gas emissionsregulations.

The certain areas of difficulties and the ways to face thechallenges of a growing demand for steel in India arementioned here.

Vertical and Backward Integration and Moving towards

Raw Material

Coking coal, iron ore and scrap shortage are responsiblefor the increased cost of production, coupled with lowaverage prices of Rs 17000 to Rs 18000 TPA in the past.Integrated players with their own captive mines for iron oreand coal will find it an advantage as they will be shieldedfrom the fluctuating prices of raw materials. In steel, verticalintegration is still very valid and a very important supplychain strategy.

De-integration of Process/Consolidation

Consolidation within the industry is the need of the hour asit might generate benefits of economies of scale andimprove labor productivity. Also, a set-up of semi-finishedcapacities near the place of availability of raw materialsand capacities for finished products near the place ofconsumption will act as a major booster for the playerswithin the industry due to the savings in freight cost.Consolidation of companies also means consolidation oftheir supply chain, resulting in changes in distributionnetwork, transport consolidation and consolidation insourcing policy of raw materials.

Long Product Cycle and Product Differentiation

Increased focus on branded products could allow theproducers to charge a premium for their products andimprove their average per tone realizations. Also, increasedfocus on value-added products will help improve revenuesfor companies as cold rolled coils, galvanized steel andcolor coated steel enjoy better per tonne realizations thanHot Rolled (HR) coils.

Steel has very low barriers in terms of product differentiationas it doesn't fall into the luxury or specialty goods and thusdoes not have any substantial price difference. However,certain companies like Tata Steel still enjoy a premium fortheir products because of its quality and its brand valuecreated more than 100 years back.


Long Contracts/Marketing Alliance

Players within the industry enter into long contracts for theirfinished products with automobile original equipmentmanufacturers. This will mitigate demand risks, ensure highproduct off-take and better capacity utilization. Themarketing alliance between TATA steel and SAIL throughMETAL-JUNCTION is an exemplary in this regard.

Government Investments

Increased infrastructure spending by the Government ofIndia and development of roads could generate significantsavings in freight and transportation cost, making Indiansteel companies and other industries globally competitive.

Government has very ambitious plans in the Eleventh Five-Year Plan as depicted in Figure 5 but the actual expenditureand implementation to be brought in reality7.

Impact of Liberalization

The economic reforms initiated by the government in 1991have added new dimensions to the industrial growth ingeneral and steel industry in particular. Some of theimportant features due to liberalization are:

í Licensing requirement for capacity creation has beenabolished;

í Steel industry has been removed from the list ofindustries reserved for the state sector;

í Restrictions on external trade, both in import andexport, have been removed;

í Import tariff reduced from 105% in 1992 to 1993, to30% in 1996 to 1997;

í Other policy measures like convertibility of rupee ontrade account, permission to mobilize resources fromoverseas financial markets, and rationalization ofexisting tax structure.

There was expansion of the steel sector after the economicreforms. The new entrants as well as the existing

manufacturers went for technical tie ups with leading steelproducers of the world and technical universities in Indiaand abroad.

Cost Competitiveness of Indian Steel Industry

The cost competitiveness of Indian steel industry in termsof various process benchmarks can be seen in Tables 2and 3. The cost of major raw materials like iron ore, cokingcoal, and other raw materials is less in India among thecountries mentioned. The labor cost is low, but it isneutralized by its low level of productivity. The financial costand the cost of power, oil and some other materials arehigh. Energy accounts for about 35% to 40% of the cost ofsteel production. The above is depicted11-13 in Figure 6.

Steel industry is a capital intensive business. It is estimatedthat to set up 1 Mt/a capacity of integrated steel plant, itrequires between Rs 25 bn to Rs 30 bn depending uponthe location of the plant and technology used.

Economies of Scale

As far as the sector forces go, scale of operation doesmatter. Benefits of economies of scale are derived in theform of lower costs, R& D expenses and better bargainingpower while sourcing raw materials. It may be noted thatthose steel companies, which are integrated, have their ownmines for key raw materials such as iron ore and coal andthis protects them for the potential threat for new entrantsto a significant extent.

Table 2 Cost competitiveness through benchmarking

Parameter Indian International

Blast furnace, t/m3/d 1.3 – 2.2 2.5 – 3.5

Sinter plant, t/m2/h 1.2 – 1.5 > 1.8

Coke rate, kg/ thm 450 – 610+ 350 – 400

Steel making, blows/year/working converter 4K – 4.5K 6K – 10K+

BOF lining life (number of heats) 2K – 10K 5K – 10K+

Cont casting, m/min

Slab 1.0 – 1.9 1.4 – 2.5

Billet 3.0 – 3.5 3.0 – 4.7

Bloom 0.5 – 0.9 0.5 – 1.0

Hot strip mill

Mill utilization, % 70 – 78 85 – 90

Yield from slab, % 96.3 – 97.6 98.5

Cold rolling mill

Mill utilization, % 56 – 64 90

Yield, % 92.7 – 94.3 95+

Specific energy consumption, GCal/tcs 6.45 – 8.5+ 4.5 – 5.5

CO2 emission, kg/tcs 2600 – 3300 1200 – 1800

Table 3 Comparison of input costs

China India

Power US cents/kWH 4.5 9.0

Freight US cents/t/km 0.96 1.6

Finance Interest rate, % 6 10

Figure 5 Amount of expenditure in improving infrastructure

Civil Ports Shipping Roads Railwaysaviation and

bridges

200000

175000

150000

125000

100000

75000

50000

25000

0

43560

3315 1000

72530

194263

Outlay, Rs Crores


Government Policy

The government has a favourable policy for steelmanufacturers. However, there are certain discrepanciesinvolved in allocation of iron ore mines and land acquisitions.Furthermore, the regulatory clearances and other issuesare some of the major problems for the new entrants.

The policies must now shift focus from protectionism tocompetition and development, to break the vicious circleof high prices and low demand. Indian steel industry hasby and large operated in an insulated environment with highcustom tariffs and non-tariff barriers. It must be realizedthat the competition changes the entire work culture,objectives and the efficiency of an organization to achieveglobal competitiveness and several industries in India havealready achieved this objective.

Moreover, the lack of coordination between differentdepartments/ministries and state governments are also amatter of concern.

Bargaining Power of Suppliers

The bargaining power of suppliers is low for the fullyintegrated steel plants mine, for example, SAIL, Tata Steel,as they have their own mines of key raw material like ironore, coal etc. However, those who are nonintegrated or semiintegrated has to depend on suppliers. An example couldbe SAIL, which imports coking coal. Globally, the top threemining giants BHP billiton, CVRD and Rio Tinto supplynearly two-thirds of the processed iron ore and commandvery high bargaining power. In India, NMDC is a majorsupplier to stand-alone and nonintegrated steel mills.

Threat of Substitutes

Usage of aluminum has been rising continuously in theautomobile and consumer durables sectors, it still does not

pose any significant threat to steel as the latter cannot bereplaced completely and the cost differential is also veryhigh. In the domestic steel industry, demand still exceedsthe supply. India is a net importer of steel. However, a threatfrom dumping of cheaper products does exist. Plastics andcomposites pose a threat to Indian steel in one of its biggestmarkets — automotive manufacture.

Utilization of Idle Assets

Steel industry is a capital intensive industry, in the processof development a lot of idle assets have been generatedboth in terms of physical and production. The companiesare in delima to choose and how to utilize them.

Upstream Supply Chain and Challenges of Remote

Logistics

Any supply chain will have its own bottlenecks andchallenges. In the case of steel, the upstream supply chainis faced with a few major challenges. The supply chain, inthe case of steel, starts from mining supplies.

As Indian steel producers gear up for augmenting theircapacity and produce steel more cost efficiently, variousinputs at competitive prices are required for steel makinglike coal, power, fuel and oil. Although India has huge ironore reserves, development and exploitation of iron orereserve would require huge infrastructural resources likeroads and railway linkages with mine locations. Higherimport of coking coal would involve development of ports,better transportation infrastructure to and from ports. Theefficiency of Indian ports is affected by low productivity, highcosts, long vessel turnaround times, and lengthy customsdelays. Shipment from India to the USA costs 20% more,than from Thailand and 35% more than from China.Expanding India's steel sector depends on lower port costsfor handling key inputs such as coking coal which ispredominantly imported, as well as servicing potential steelexports

Remote Logistics Management (RLM) is a process tomanage complex supply strategies for various supplymaterials, spare parts and items of equipment which arerequired at remote locations, for example at the mine site.

Any maintenance order will automatically trigger the correctreplenishment orders based on the predefined businessrules assigned to the supply materials, spare parts and itemsof equipment for permitted supply strategies. Any requiredmaterial or items of equipment can be supplied by a centraldistribution center, or by a vendor via the distribution centre.

Challenges of Solid Waste Handling and Emission

Management — Green Supply Chain

The iron and steel industry involves a myriad of operationswhich generate vast volumes of air emissions, liquideffluents and solid wastes. Environmentally suitable meansof disposal of this hazardous waste is a priority butunfortunately this area has not been addressed properly.

Figure 6 Cost of production of crude steel

1000

800

600

400

200

0

– 200

160

245

775863

–72

Bra

zil

CIS

Ind

ia

Ja

pa

n

So

uth

Ko

rea

Ch

ina

Glo

ba

l a

ve

rag

e

OthersEnergy creditRaw materials

LabourEnergyDepreciation and interest

153

307

364034–66

155

289

576671

–79

171

398

123

8151

–91

157

383

98

108

43

–102

160

399

35

8855

–89

143

372

89

6546– 68


There will be more regulations from both government andsociety to arrest the emission and recycle the wastegenerated in various processes.

Low Labour Productivity

In India the advantages of cheap labour gets offset by lowlabour productivity; for example, at comparable capacitieslabour productivity of SAIL and TISCO is 75 t/man yearand 100 t/man year, for POSCO, Korea and NIPPON, Japanthe values are 1345 t/man year and 980 t/man year14.

Cooperation Necessary for Development of Steel

Industry

All the eastern states of India should work together for thesteel industry to flourish. Emphasis shall be given on theneed for better cooperation among the states for properdevelopment of the steel industry in the region along withthe cooperation amongst steel makers. The various bottlenecks are discussed in operating and expert committeemeetings by major steel makers.

Implementation Challenges — Mobilization of Financial

Resources and Delays

Non-Completion of Infrastructural projects in the stipulatedtime frame is going to pose a significant risk for the Indiansteel Industry. Many Fls have refused to offer loans to theIndian Steel companies which have affected the expansionprogrammes of all majors like JSW, ISPAT, TAT etc.

STRATEGY FORMULATION : UNDERSTANDING THEPROCESS

Value Creation Strategies in the Steel Industry essentiallylooks at the forecasted demand and supply of steel, thevalue chain, future trends and company strategies. Itdescribes the opportunities and potential constraints forsteel companies to create additional value by takingadvantage of the ‘downstream space’.

Johnson and Scholes (exploring corporate strategy) definestrategy as follows 15:

‘Strategy is the direction and scope of an organization overthe long-term: which achieves advantage for theorganization through its configuration of resources within achallenging environment, to meet the needs of markets andto fulfil stakeholder expectations’.

í Understand the strategic context

ª Global supply demand balance market;

ª Technological and global forces;

ª Infrastructure constraints and opportunities;

í Plan for the range of scenarios for growth.

ª Any single forecast of production will be wrong;

ª Identify the possible scenarios and prepareforecasts;

ª Forecast the infrastructure needs;

ª Identify the stages of development, lead times andtriggers.

í Be prepared means

ª Understanding the constraints to growth;

ª The cost of being ‘under prepared’ for rapid growthcan be much greater than the cost of being ‘overprepared’ for slow growth;

ª Having strategic plans in place — is challengingbecause the ‘industry’ is not a single body.

í The shape and timing of growth curves is hard topredict

ª Timing may be affected by as yet unforeseeneconomic, market and political events;

ª Timing is less important in enabling infrastructureplans than;

ª The need always to be prepared for the next step.

Strategists, now facing the most profoundly uncertain timesin their careers, are creating disaster scenarios that wouldhave been unthinkable until recently and making thepreservation of cash integral to their strategies. Strategiesare developed at three levels, namely, corporate, businessand functional level and are integrated in order to achievesustained growth and turnaround. The points to beconsidered while making strategies are15

í Be realistic about scenario planning;

í Intense monitoring;

í Looking beyond the crisis.

Whole process is shown in Figure 7.

Figure 7 Business strategic approach

Futures thinking

Strategic intents

Strategic planning

Analysis

Evaluation

Corporate culture

Types of strategy

Business strategy


Developing scenarios in greater depth, monitoringstrategies more rigorously, and remaining focused on thelong term will all help strategists boost the odds of creatingplans that can lead their companies through the turbulenceand revival of their business and growth towards excellenceand competitiveness.

Over and above the most important thing is to manage thestrategy through ‘strategic decisions’ that answer thequestions asked while formulating it.

Transforming growth of Indian Steel Industry :Through Restructuring

Even the best change plan will not achieve sustainablebusiness results, unless it is directly tied to the company’sorganizational and business strategy. Restructuring evolvewith senior management and through internal teams, toanalyze the business, review its strategy and highlight thechallenges to a successful implementation. The need is tounderstand capability and appetite for change so that steeldemand grows upon strengths and mitigates weaknesses.

í Strategies for growth

ª On the demand side

è Extensive promotional campaigns;

è Strengthening of rural delivery chain;

è Encouraging infrastructure development.

ª On supply side

è Creation of additional capacity;

è Removal of bottlenecks in the availability of rawmaterial;

è Encourage R&D;

è Invest to create professional and technical manpower.

Strategic Business Restructuring

The effect of globalization on steel industries in differentregions or countries has not been uniform. Each region isunique in its own way in terms of raw materials availability,technology adopted, market conditions, trading policies, etc.The divergent strategies adopted for restructuring by steelindustries in different countries/regions provide the rightperspective for building a turnaround strategy for Indiansteel industry. Business restructuring is a process by whichcompanies are transformed into entities that are fightingfit. The process includes rightsizing of manpower,concentrating on core competency, hiving off of non-coreassets, prioritizing capital expenditure decisions and raisingself sufficient profit centers. Redesigning corporate keyprocesses is essential in this respect. Increase in verticalintegration through possibilities of strategic alliances and

collaborative arrangements among competitors in mutuallybeneficial areas could be explored.

Joint R&D may save a lot of investments and joint marketingin noncompetitive areas will help in getting better results atlower costs. However, as the Indian steel industry isextremely fragmented, it will be more reasonable to expectan evolutionary rather than a revolutionary consolidation.Example: once SAIL was planning to change businessrestructuring based on long and flat products and thestrategy of corus16 is shown in Figure 8.

Financial Restructuring

With steel and textiles being the two areas where mostFinancial Institutions (FIs) have huge NPAs, the two areashave been declared as no-go by the FIs.The restructuringplan for companies like Jindal Vijaynagar Steel (JVSL) andthe Mittal-controlled Ispat Industries (IIL) have been againstopped, albeit temporarily. Restructuring of high cost debtis estimated to increase their competitiveness in the globalmarkets with better ability to manage the cyclicality of theindustry. The initiative by the steel companies to go forExternal Commercial Borrowings (ECB) and FCCB forreplacing high cost debt is aimed at further reducing thecost of debt. The companies should try to remain in blackand maintain sound financial health with focus atrepayments of borrowings and disinvestments.

The recent upturn in the sector enabled many companiesto pay off their long-term debts early and, in general, interestpayments have also come down. Essar Steel, for instance,has come out of the purview of CDR (corporate debtrestructuring) by repaying its entire CDR debt of Rs 2800crore. In the process, it has brought down the averageinterest cost from 11.6% to 8% to 9% per annum. Mukandhas pumped in funds from the sale of land it owned in Kurla,thereby reducing bank borrowings. And Bhushan Steel haspaid off a lot of its high-cost debt. There is thus a need to

Figure 8 Business strategic approach of CORUS

The corus way

The future for corusCorus

Operationalperformance

Growth

Safety

Service

Savings

Strengthening thebalance sheet

Invesments

Organic growth

More differentiatedproducts

Continuousimprovement

Access to low coststeel making

More selectivebusiness portfolio

Restoring success The corus way

Objectives 2006 to 2007


religiously monitor important parameters like sales, grossmargins, interest and depreciation, profit after tax, net worth,total debt and debt equity ratio. The key feature of a financialrestructuring would be:

í Restructuring of asset values by writing down to theextent of interest capitalised;

í Writing off loans and interests to the extent possible;

í Restructuring of capital and liabilities through reductionof debts by financial institutions, to the extent possible;

í Reduction in plant inventory through just-in-timeprocurement;

í Strategic partnership in non-core businesses;

í Outsourcing of non-core services.

Divestment is a form of retrenchment strategy used todownsize the scope of business activities by selling, closing,or spin-off a strategic business unit, major operatingdivision, or product line. This move often is the final decisionto eliminate unrelated, unprofitable, or unmanageableoperations.

The government is considering divesting some of its stakein the country's largest steel producer SAIL and the samemay be discussed in the PSU's board meeting. The equitysale could go along with the proposed public issue of thePSU.

Financial restructuring will have a positive impact on theprofitability of the company through reduction of interestand depreciation charges as well as efficient deploymentof capital.

Operational and Technological Restructuring

It is required by industry to benchmark productivity byunderstanding the productivity gaps at the operational level(for example, scale, organization) and adjusting fordifferences in relative costs of labor and capital. Apart fromthis human factor in understanding why managers do notimprove operations along with external environment forimproving and expanding operations.

Operational management has primarily focused onimproving current levels of efficiency and output inincremental measures. Strategic management on the otherhand has been addressing the technological needs forensuring added edge to the competitiveness of thecompany, by probing and keeping future market-productlinkage in perspective. Strategic technology management,therefore, has involved quantum jump in technology status,continually reducing the cost of production while improvingproduct quality. The Company's competitive edge dependslargely on how effectively strategic technology shifts aremanaged and nurtured internally while encouragingoperational technological improvements. The operational

management shall highlight the benchmarked parametersas shown in Table 2.

For example, if the demand in India or abroad becomesless then capacity utilization will go down and in turn thecost of production may go high. In this situation operationdecisions are taken in compliance with business objective,and with the functional objectives of the market, financeand human resource department for restructuring andliquidity management. This is equally true for the acquiredand merged production units.

Technological restructuring towards latest technology toimprove productivity and reduce wastage for efficientoperations and continual improvement in best maintenancepractices are required to be followed. Moreover, strategictimely decisions to upgrade and complete utilization ofexisting capacities, elimination of bottlenecks in production,along with identification and starting of idle productioncapacities are key to revival.

Indian steel industry faces potential availability constraintsin high grade iron ore and coking coal inputs, as high gradeiron ores are generally earmarked for exports andindigenous coals are having high ash content. Hence,development of technological alternatives, such as, spongeiron instead of pig iron, which can be produced with lowgrade coal, the COREX process for pig iron manufacture,again using low grade coal, and the Romelt process whichmakes pig iron from even iron ore fines. POSCO is comingwith FINEX technology, which doesn’t require coking coaland lump iron ores. Implementation of Dry-cleaned andAgglomerated pre-compaction System (DAPS) allows useof non or low coking coals. Preheating of coal beforecharging enables use of 25% non-coking coal in coal blend.Stamp-charging, in place of top-charging eliminates use ofprime coking coal (for example, TATA Steel). Non-cokingcoal can also be used in Partial Briquetting of Coal Charge.Further, natural gas can be used in Blast Furnace, whichreduces usage of coke by 30%. All the technologies talkedabout must be equipped with latest state of art automationand process models.

Infrastructural Restructuring

It aims to develop both internal and external infrastructuresto make the growth conducive, ie, enabling infrastructurewithout which growth cannot occur and supportinginfrastructure which follows growth but is not fundamentallyscarcity of resources or barriers to implementation. Whengrowth accelerates then infrastructural restructuring basedon business strategies particularly for land at appropriatelocation will become bottleneck and the factors affectingdemand picture is shown in Figure 9.

In 2005 to 2006, JSW commissioned a 100 MW captivepower plant in Vijayanagar, which helped reduce powercosts by nearly 25%. Earlier it used to buy the power fromoutside and paid Rs 2.60 per unit. But now, this cost wasreduced to Rs 2 per unit. This will result in a benefit of


close to Rs 100 crore. Bhushan Steel has captive powerplants in Khopoli and will set up a 2000 MW thermal powerplant in Orissa. Essar Steel has power supply agreementswith Essar Power and Bhander Power.

SAIL is already having dedicated power plants and is busywith new proposals based on coal bed methane (CBM).Further, JSW — which was dependent on the Goa portearlier — has set up a dedicated jetty. Freight costs havecome down due to this. The company paid Rs 55 lakhdemurrage (charges levied if a vessel is berthed beyondthe time allowed or agreed upon) in 2004 to 2005. In 2005to 2006, it didn’t pay any. Indian companies are alsoengaged in backward integration to mitigate risks. Forinstance, Bhushan Steel and Strips buy hot-rolled steel andconverts them to high-end cold rolled and galvanised steelfor auto and white good application. Today, it is setting up a3 Mt steel making and hot rolling facility in Orissa.

Restructuring in Marketing Approach

Increasing and promoting the steel consumption couldprove to be a potent medium-term strategy for the Indiansteel manufacturing units. New avenues should be exploredand market expanded for steel companies to turnaroundspecially thrust on rural marketing. The restructuring in theaggressive market approaches will bring the image of thesteel companies. This includes alliance with the companies,making of strategic business units and e-business. Despiteselling products at a reduced margin, the ultimate consumerhad not benefited because traders and other intermediariesreaped high profits after judging the local demand-supplysituation, this is the place where real restructuring inmarketing-selling is to addressed.

The marketing strategy shall focus around:

í Development of a system so that company productionand customer specification can be met at the sametime or (customization);

í Giving quality and specification which is of world level;

í Creating competitive differentiation through focusedmarketing approach.

Data from sales, profit, etc must be used to evaluate theprogress and success of the strategy and to inform ofchanges to the transformation and restructuring in the lightof it.

Marketing approaches to brand products will not onlyenhance customer acceptance and loyalty, but also allowssteel companies to charge a premium. Accordingly, it isbeing witnessed that companies like Tata Steel, SAIL, Essar,JSW, Jindal Stainless, increasingly focusing on brandingsteel. For Tata Steel, branded products accounted for 25%share in flat products and 31% share in long products, salesduring H1 financial year 2005 (against 21% and 30%,respectively, in H1 financial year 2004). Tata Tiscon, Tatapipes, Tata agrico, Tata shakti are some of the brands fromTata steel. SAIL is having SAILJYOTI for GP/GC plates/sheets, SAIL-TMT rebars for construction, SAILCOR forwagon and coaches, SAILMA for earthmovers and bridges,SAIL-HITEN for ATM machines, SAIL KAVACH for bullet-proof jackets. Innovative advertisements also add to brandvalue17.

Restructuring in Government Policies and Review

System

The government to have a mineral policy in favour of Indiancompanies as china will be a major competitor to overcome.The fast decision for allotment of leases of mines etc to betaken based on certain rules and regulations to promotegrowth and expansion of Indian steel industry. Technologypolicy is to be so designed by the government that it willgenerate the thrust to update the technology by the steelproducers to have clean and healthy India. However, themajor restructuring is required in the method of review ofthe policies and implementation of the same.

STRATEGIES FOR REVIVAL AND GROWTH ONINDIAN STEEL INDUSTRY

The strategy suggested for the reversal of the steel industryin India is double layered in nature, effecting the reversaland at the same time sustaining the reversal. The strategyhas to be growth and survival oriented. The survival partwould assure the survival of the industry in the fiercecompetitive atmosphere and the growth part would boostthe sustainable growth of the industry. The two differentparts of the strategy has to be integrated into one to havethe expected results.

The strategies are based on time frame make thecompanies ahead of competitors. These include short term,medium term and long term formulation at corporate,business and functional level to revive the demand andattain growth.

Short Term Strategies : Quality Reinforcement

The short-term plan is aimed at providing a lease of life tothe ailing steel industry. It would also help it to withstandthe adverse pressures of the environment and move

Figure 9 Factors for infrastructural restructuring

Identifyprojects,lead timesand triggervolumes

En

ab

ling

Su

pp

ort

ing

Identifyprojects andtiming underdifferentgrowthscenarios

Develop scenarios for incremental populationimpact as the fundamental driver of local

government and agency planning

Macro Micro

Dams

Powerdistribution

Skilled workers

Railways

Pipelines

Ports

Power generation

AirportsRoads

Community

SchoolsHealth

Dwellings


Figure 10 Competitive environment and innovative technology

Cost curve having slow technologicaldevelopmentHigh

Low

Past (low) Future (high)

Time (intensity of competition)

Pro

du

ctio

n c

ost

The difference in costcompetitiveness due to

innovation

Cost curve having fasttechnological development

towards growth and development. The short-term planwould also provide it with a breathing time for working apotent strategy for future.

These shall aim at the following issues:

í Cost reduction by minimizing maintenance andoperational cost;

í Focused marketing with shorter product cycle;

í Utilization of idle assets and maximization of revenues;

í Technological improvements;

í Lowering fixed costs-manpower reduction;

í Focusing on core competency.

According to analysts from Barclays Capital, the outlookfor steel demand in the short-term appears very weak, withlittle foreseeable strengthening in consumer activity. Withthe current market scenario, it would be very difficult to seesteel demand picking up before the second half of 2009.Infrastructure sector is the biggest consumer of steelindustry, but the infrastructure projects could be put on holdor delayed as tightness in credit markets restricts theavailability of finance with high borrowing costs have madeit difficult for companies to raise capital.

In order to utilize the existing raw material and processtechnology certain temporary steps can bring operationalcost on lower side by using non-coking coal, natural gas inblast furnace, use of by-products as input etc.

In order to arrest the recurring problems and quality issuesthe concept of quality circles, six sigma teams and predictiveand preventive maintenance practices shall be followed toimprove effectiveness to achieve growth through costreduction.

In maintenance practices, the concept of zero defects hasbeen felt necessary for improving overall efficiency.Availability of equipment is very important for production ofquality products at low cost. The maintenances are doneon predictive and condition based. The predictivemaintenance tools such as thermal imaging, mathematicalmodeling etc are helpful in reducing cost and efficiency ofthe plant and various linkages in the process are notdisturbed. Setting up an effective maintenance programusing condition based monitoring system (CBMS) booststhe productivity of plant equipment by increasing itsavailability through avoiding unplanned shutdowns anddecreasing the time needed to make repairs. Commontechniques used for condition monitoring are : vibrationanalysis, shock pulse measurement analysis, wears debrisanalysis and thermography.

The way out is to utilize the idle assets and maximize therevenues by aggressive marketing and collection ofpayments along with efforts to select products and marketsthat give maximum net sales realization and return.

Strategic Decision to Promote Innovation

The Austrian economist Josef Schumpeter once declaredthat economic downturns are ‘a good cold shower for theeconomic system’. Economic downturns can have positiveeffects; they force companies to increase their efficiency,cut waste, and strive to do things in smarter ways.

All companies have to cut costs, and deciding what shouldstay and what should go is the first challenge that facesthem. One of the early victims of downsizing is oftenspending on innovation activities such as R&D, training, oreducation budgets. Long-term projects are shelved, hiringis frozen, and workers are made redundant. Worse, riskcapital evaporates. Unfortunately, this is akin to patientsdeciding to reduce expenditure by not spending money onmedication (as, indeed, has been reported recently).

During economic downturns, innovation is the single mostimportant condition for transforming the crisis into anopportunity. And while many businesses simply won't beable to afford further investment in innovation, governmentsshould recognize that innovation systems, with all theiracademic, industrial, and public components, are strategicnational assets that need to be protected, just like thefinancial and housing sectors.

While operating efficiently in the present, one has toconstantly strive to innovate effectively for the future.

í Operational management of technology;

í Strategic management of technology;

í Fully exploiting existing technology;

í Implementing new technology to create competitiveadvantage;

í Integrating technology strategy with business strategy.

Figure 10 shows the relationship between competitiveenvironment and technological innovation

There are two options for any steel player in the world tohave a competitive edge in this red-hot competitive steel


market — consolidation to control the price of steel bycontrolling the supply. Examples: Mittal Steel’s acquisitionof its rival arcelor and Tata Steel’s acquisition of corus, thesecond largest steel producer in Europe, reducing cost byhaving control over the raw materials for a long term basis.

Major players in the steel industry to adopt a collaborativeand competitive approach to create distribution channelsin semi-urban and rural areas; share best practices tobecome cost competitive; effectively tackle environmentissues; focus on development of skills of steel industrypersonnel; and develop products that are best suited to theneeds of Indian steel users.

LONG AND MEDIUM TERM STRATEGIES : POLICYAND ORGANIZATIONAL REINFORCEMENT

The key strategies which companies can adopt in thisscenario is to focus on value-added products, rationalizecost structure through better manpower planning, logisticsand raw material sourcing. The companies with a focus onthe domestic market are likely to be more favorably placed,given the relatively stronger demand from the local users.Raw material security to drive merger and acquisition inthe long-term.

Larger Mines and Fragmented Small Players

Presently 300 mines produce 206.4 Mt of iron ore, wheremines of 2 MTPA and above are only few run by publicsectors, large private sectors and government undertakings.It is the need of the hour to combine small mines and runonly large mines to get the following benefits :

í Larger mines have higher profitability to take care ofCSR, environment;

í Loss of ore in mine barriers will be minimized;

í Lower cut off ore can be mined with better technology.

It can be seen from Figure 11 that 39.6% of crude steelproduction is by other small steel makers which requiredattention as well11, 9.

Cost Competitiveness of Indian Steel Industry

A long term strategy is required to become cost effectivefor sustainability. The reduction of the cost is another major

factor in the survival of the Indian steel industry in the ageof globalization. The cost reduction would be the mainaspect of the improvement pertaining to the competitivenessof the industry. The manufacturers under the steel industryin India have to focus their attention in the areas such as:

í The reduction in the cost of operations;

í The reduction in the costs pertaining to the workingcapital;

í The reduction in the costs pertaining to the productioninventory or stock that is not sold;

í The improvement in the economics operating in thetechnological aspects of production;

í The transposition of basic materials of production;

í The sources of the procurement should be different.

Technology Transfer, Technology Adaptation andInnovation

Indian companies lack experience in managing innovationand there are no easy recipes to follow. Intellectual PropertyRights (IPRs) play an important role in protecting innovationsfrom being copied by others and companies now have toformulate IPR strategies that complement their competitivestrategies.

Lack of expenditure in research and development can beseen in the balance sheet of the Indian steel majors. Thereis need of Technology push from the R&D for:

í From specific project requirements (user specs);

í Product development strategy and evolution (driverapproach);

í From competition analysis (follower approach);

í Tuning technology to business.

R&D which was considered to be a technology incubator(in the past) but today it linked to the business process bycreating leading edge products and processes.

Lack of adoption of scientific mining methods, especiallyby small players, leads to inefficient extraction of ores fromcommercial mines. There is a need for ore miners, as wellas the state governments to focus upon adopting the latesttechnology for ore mining for supply at pace and goodquality.

When additional capacity will come on-line, the oversupplysituation will become more dramatic with respect to theproduct mix leading to cut-throat competition. Therefore,focus on producing wider product-mix with emphasis onvalue added products and improved product quality to bemade during technological plans for the projects.Developing countries like India cannot always afford todevelop their own technologies. They need to import many

Figure 11 Share of different steel plants in crude steel production

in India

Others 39.6%

RINL 6.9%

SAIL 26.6%

ESSAR, ISPATand JSWL 16.5% TISCO 10.2%


technologies from developed nations. Since late ‘50s, largenumber of steel producers in India went for technicalcollaborations with the world majors. Many public sectorsteel plants were built with collaboration from countries likeUnited Kingdom, Germany and erstwhile USSR. In earlieryears, many of these plants faced problems in theircollaboration projects.

Export Market Penetration

It is estimated that world steel consumption will double innext 25 years. Quality improvement of Indian steelcombined with its low cost advantages will definitely help insubstantial gain in export market. Signs of revival are beingwitnessed in overseas markets. Iraq, for instance, iscommitting more than $40 billion in reconstructing its entirewar ravaged cities. Iran and other countries in the Gulf arelikewise pumping in a lot of money in infrastructure.

Once the government accelerates investment ininfrastructure, steel consumption will go up manifold.Construction of grain silos, roofing in rural sides,construction of natural gas pipelines and changes frombamboo scaffoldings to steel will spur domesticconsumption. Emphasis on these would be mutuallybeneficial, besides arresting environment damage. Whilethe demand for steel will continue to grow in traditionalsectors such as infrastructure, construction, housingautomotive, steel tubes and pipes, consumer durables,packaging, and ground transportation, specialized steel willbe increasingly used in hi-tech engineering industries suchas power generation, petrochemicals, fertilizers, etc. Thenew airports and railway metro projects will require a largeamount of stainless steel.

According to an estimate, with the growing need for oil andgas transportation infrastructure, a US$ 118 billionopportunity is waiting to be tapped by steel manufacturersin the next five years. Indian steelmakers are set to makethe most of booming global demand for steel pipes andtubes with the government withdrawing the 10% duty onthe exports of these products. According to a study by ICICIDirect, Indian steel companies are likely to get 19% of thetotal global demand in the years to come.

Therefore enhancing domestic capabilities to offer high endproducts for the high end application segments in domesticmarkets is the biggest challenge.

Capacity Expansion and Technology Upgradation :Quality Issues and Project Management

Capacity enhancement through technology upgradation andmodernization is called by the demand in steel and thestringent quality issues of the customer and some of thecapacity expansion programs are mentioned5,6,20 inTable 4.

The need for steels with superior performance capability atlower cost has seen a steady increase over the last fewdecades. This has been met through continuousupgradation of Iron and steel making and rollingtechnologies which require a regular attention. The varioushindrances in the path of modernization must be removedand planning to mitigate the past problems as mentionedbelow:

í As the project progresses, it may be found that thescope of the project has changed which requiresadjustments to cost, time, quality, risk or other projectdeliverables;

Table 4 Steel sector — investments looking good

Company Project Capacity addition, Mt Investment, Rs bn Expected completion, year

Tata Steel Jamshedpur exp, Phase II 2.9 45.5 2010

Tata Steel Orissa steel project 6.0 220.0 Phase I of 3 Mt, 2010

Tata Steel Jharkhand steel project 12.0 420.0 NA

Tata Steel Chattisgarh steel project 5.0 180.0 NA

SAIL Modernisation 10.4 530.0 2010

Rastriya Ispat Nigam Vishakapatnam exp 3.3 86.0 NA

JSW Steel Karnataka, Phase II 3.2 70.0 2010

JSW Steel Jharkhand steel project 10.0 350.0 NA

JSW Bengal Steel West Bengal 9.2 350.0 Phase I of 3 Mt, 2010

Arcelor Mittal India Orissa steel project 12.0 400.0 NA

Arcelor Mittal India Jharkhand steel project 12.0 400.0 NA

Posco India Orissa steel project 12.0 510.0 NA

Ispat Industries Maharashtra 1.4 20.0 2011

Ispat Industries Maharashtra 5.0 60.0 2015

Ispat Industries Jharkhand steel project 2.8 67.5 NA

Ispat Industries Karnataka 3.0 71.5 NA

Essar Steel Chattisgarh steel project 3.2 70.0 NA

Essar Steel Hazira SEZ 3.9 105.0


í The ever-changing nature of our economies andorganizations creates uncertainty on organizationalpriorities. One of the most frustrating experiences aproject manager can suffer is managing within thisenvironment — while the project is being implemented;

í A change in top management may be accompaniedby a change in priorities and even in the direction ofexpansion and other efforts;

í A full project management-training curriculum hasbeen missing to address the ongoing developmentneeds of functional management, project sponsors,project managers and team members. The variousaspects of project management like hands-on skillsand techniques that enhance the ability to manage allelements of a project, risk management, knowledgeretention strategies and other important aspects ofproject management success has been missing.Probably this is true to all the major steel projectscarried till date in India.

Organizations have never linked their projects back to theircorporate strategies and plans, which have led, projectdelays. One must understand how each project contributesto achieving corporate goals.

The list below highlights some of the top projectmanagement challenges in past faced by Indian SteelIndustry which may continue in future also which arerequired to be addressed by the steel producers of Indiafor timely completion of the projects to meet the demandare:

1. Unrealistic deadlines;

2. Communication deficit;

3. Scope changes due to lack of.

4. Resource competition projects usually compete forresources (people, money, time) against other projectsand initiatives, putting the project manager in theposition of being in competition. Management ofproject Portfolio to define and set priority across allprojects was really missing.

The new technology to be adopted with focus on the majorkey technological areas mentioned below:

í 100% production of steel through BOF route oralternate technology;

í 100% processing of steel through continuous castroute;

í Provision of alternative fuel injection methods like coaldust/tar injection in all the blast furnaces;

í State-of-the-art process control computerization /automation;

í State-of-the-art on-line testing and quality controlfacilities;

í Envisaging Enterprise Resource Planning (ERP)across its plants.

Many steel giants are coming with the technologies wherethe dependencies on basic raw materials like coking coal,Iron ore Lumps are not there. For example, POSCO iscoming with FINEX technology.

While the steel companies have enough resources tofinance these massive projects, major problems faced bythem are on the front of land acquisitions, forest clearances,and iron ore mining leases for the Greenfield projects.Despite all these problems, none of the steel companieshave made announcements to shelve their projects. Thiscan be attributed to the presence of significant amount ofhigh quality iron ore and coal reserves in India and thepotential opportunities in infrastructure, auto andconstruction sectors. Thus, long term scenario lookspromising indeed.

Focusing on each project's challenges and learning fromthem will help to build a more capable and successful projectmanagement capability.

Focus on Reduction in Product Development Cycleand Branding of Products with Customer Service

Increased focus on branded products could allow theproducers to charge a premium for their products andimprove their average per tonne realizations. Also,increased focus on value-added products will help improverevenues for companies as cold rolled coils, galvanized steeland color coated steel enjoy better per tonne realizationsthan HR coils.

Long Contracts/Marketing Alliance

Players within the industry enter into long contracts for theirfinished products with automobile original equipmentmanufacturers. This will mitigate demand risks, ensure highproduct off-take and better capacity utilization.

Search of New Markets

Domestic steel demand would reach 70 Mt and steel supplywould touch 77 Mt by the end of the terminal year of 11thPlan, ie, 2011 to 2012. These would represent 40% and66% growth rates respectively as compared to 2007 to2008, the first year of the Eleventh Plan period. TheMarketing Strategy shall focus around:

í Developing such a system so that company productionand customer specification can be met at the sametime or (Customization);

í Giving quality and specification which is of world level;

í To create competitive differentiation they are adoptingfocused marketing approach;


í Advertisement and Slogans (like, SAIL came out witha new ad/slogan ‘there is a little bit of SAIL ineverybody’s life, Tata — ‘we also make steel’ andESSAR — 24 Carat Steel tag line).

Branding of Products with Customer Service

Science is eternal, whereas, technology and products havenationality and branding like SAIL’s or TATA’s product. Thecore, manufactured products today are so entwined withservices, that they have become indistinguishable.Moreover, these services are expected by the customer asan integral part of the product. In such a scenario, theanswer to gaining competitive advantage lies in providingsuperior value to the customer, by providing customerservice with the product at a lower delivery cost. Usingcustomer service to retain and acquire customers couldprovide a new strategic advantage for steel makers.

Value Creation Strategies

Steel industry essentially looks at the forecasted demandand supply of steel, the value chain, future trends andcompany strategies. It describes the opportunities andpotential constraints for steel companies to create additionalvalue by taking advantage of the ‘downstream space’between the rolling mills on one hand, to the automotiveand construction assembly lines on the other.

The new market for the product mix has to be explored sothat the full capacity utilization of the plants can be made inspite of less consumption in the targeted sectors and areas.India is in search of a new market for its steel productsparticularly in South-East Asian countries, which areshowing signs of economic revival. Attempts to exploreadditional markets in the Middle East, Bangladesh,Myanmar, South Africa, Mexico, Taiwan and some othercountries are required to be made. Till date no steel makerhas tried to the best to explore the rural market, hence theunexplored rural market is needed to be explored. This newfocus- in essence, ‘going on offense’ — required a newplaybook, to be developed by examining the strengths,weaknesses, opportunities and threats facing each marketsector and providing a plan to generate steel growth20.Market development strategic plans to identify keycompetitive issues, define best practices, and implementsteel solutions that meet customers’ needs and advancesteel’s competitive edge in the marketplace.

China Factor and Global Scenario

China has substantial reserves of Iron ore but is a largesteel user as well, has banned iron ore exports and in fact,actively encourages its steel producers to secure anddevelop iron ore deposits outside. Therefore, theinternational trade of iron ore is driven by China. Moreover,with their low labour costs and huge capacities, the Chinesecan compete on the price front in steel. An equally strong ifnot stronger contender for the same is Korea. It is expectedthat global capacity and overproduction due to mergers and

acquisitions will tend to drive prices down though it willincrease trade. For the next few years, the effect of mergerson the industry would keep both prices and trade high andkeeping eye on these factors proved to be crucial for thegrowth of business and production. China takes a goodamount (90 Mt) of Iron ore from India. Export duties andtraffic congestions from Australia and Brazil are turningopportunities to India. Indian miners and steel producersshould put pressure on government to have a mineral policyin favour of Indian companies as china will be a majorcompetitor to overcome.

Overcapacity is a challenge industry needs to tackle forfuture growth.

Contingency Planning

The profitability of steel industry in India is strongly linkedto variations in business cycle. Steel companies registerheavy profits when there is boom in the economy and profitsdecrease when there is depression. In the late 1990’s, theIndian steel industry was experiencing a glut and thisaffected the profit margins of players.

Contingency planning might actually be the most criticalaspect of overall strategic plan. Just think about all thedrivers. It shall be set to tone as to how rapid change intechnology, government regulation, globalization, changein social and cultural aspects of consumers, pressuregroups, watchdogs and green marketing issues impact themarketing of an organization. Early diagnosis of thesefactors by managers of the company enables them to findways to boost their company's strategic flexibility and tomake proactive marketing strategy. To reduce itsdependence on external environment, a two-prongedstrategy can be involved for

í branding its products; and

í moving to high value products.

Survival Strategies

So what are companies doing for survival? Broadly, thestrategies can be divided followed by the companies intofour different categories.

The first one is to move up the value chain for deliveringhigh value-added products. In production terms this meansproducing thinner, stronger steel as well as a greaterproportion of coated products, to add more value toproduction. The idea is that higher value addition would beable to offset high capital cost associated with expensivemodernization or greenfield plants put up earlier. Examplescan be given of CSN in Brazil, Anganag and Chongqing inChina, SAIL, Essar and Tisco in India.

The second visible trend is to scrap inefficient plants. Byreducing the capacity overhang, this eases supplypressures and there is a likelihood of price rise which wouldoffset the mistakes of the past.


In the third week of March, four major EAF players in SouthKorea, ie, Dungkuk Steel, Inchon Iron and Steel, Korea Ironand Steel and Kangwon Industries — decided to bandtogether under a common holding company in an attemptto reduce excess capacity. The excess capacity (accordingto estimates, in the region of 4 Mt) would either be scrappedor sold to outsiders. The same decision has been taken byfour major Japanese steel makers — NKK, Nippon Steel,Sumitomo and Hitachi. They have agreed to a productioncut of 10 Mt and another 10 Mt of capacity would be phasedout of the system in the next fiscal.

The third visible trend is the strategy followed to pick upscrapped plants at a bargain and then turn them around.Ispat International has become the world’s largest EAF steelproducer by picking up inexpensive steel assets atthrowaway prices and then reworking the plant to make itoperationally efficient. The company also derives a lot ofincentives from the government which also has an effecton the cost structure of the final product. This strategy hasso far paid rich dividends for Ispat International. But suchcompanies are more the exception rather than the rule.

The fourth visible trend is to try to look inwards into thelocal market rather than exports or imports. This is clearlyseen in the synergy between the strategies pursued byChina and Japan. Construction activity has reached asaturation point in Japan. Accordingly, Japanesemanufacturers are selling plants which are into longproducts (mostly used in the construction sector).Simultaneously China, which is in a different stage ofeconomic development, has shown keen interest in pickingup the Japanese plants.

At the end of day, the strategy to scrap inefficient plants tocut down losses might well clinch the deal for players in theAsian region.

Potential Utilization through InformationTechnology (IT)

The advantage of a proper IT-based information system isthat accurate information can be obtained at a much fasterrate, reducing downtime and speeding up decision-makingprocess. Since, time is more than money, it would havedirect impact on cost. The objective would be to implementIT in all operations and to integrate these with day-to-daydecision-making process. IT applications will help instreamlining both process chain and supply chain and wouldthereby result in cost reduction and increase in productivity.

Therefore, the need to train the manpower to make themacquaintance with the new IT tools has to be the part ofstrategic planning for successful implementation of theproject. There is a need to adopt the usage of IT to harnessits potential for project management at appropriate placesfor monitoring and control even during project execution.Steel plants in India are still using legacy software in India.They are unable to take advantage of IT in order to attractglobal customers. IT applications to achieve customer

centric processes, cost effectiveness, enhanced profitability,product quality and stake holder satisfaction. The planenvisages strengthening of IT communication network,establishing Production, Planning and Control (PPC)computerization and implementation of EnterpriseResource Planning (ERP) and Manufacturing ExecutionSystem (MES) to avail the benefit of transparency innegotiations and purchasing at best available market price.

The software vendors should come up with specificsolutions for the steel plants as they have for other verticals.There is a need for lot of automation in the industry. The ITapplications can help them streamline both supply andprocess chains that will ultimately help them reduce costand increase productivity. Moreover steel companies needto adapt ‘business models’ for volume market and changingbusiness scenario and marketing for branding the products.

The introduction of SAP solutions within Tata Steel has ledto efficient business processes, enhanced customerservice, reduced costs, improved productivity, acceleratedtransaction time, workflow management and reduction inthe number of credit management errors.

‘Post the introduction of the SAP solution, the results havebeen terrific. The company has spent close to Rs 40 croreon SAP implementation, and has already saved Rs 33crore’, said by Mr R C Nadrajog, Vice President (Finance),TATA Steel. The manpower cost has reduced from over$ 200/t two years ago, to about $140/t in 2000. The overdueoutstanding has been brought down from Rs 5170 millionsin 1999 to Rs 4033 millions by June 2000. The inventorycarrying cost has drastically deflated from Rs 190/t toRs 155/t . To add to this, there have been significant costssavings through management of resources with theimplementation of SAP.

Competent Workforce and Manpower

Many contractors do not have appropriate staffing levels tosupply planners and schedulers to large projects. When anumber of projects will come for execution at a time,manpower availability will be a real constraint. One of themajor innovative HR practices is the use of work teamswith multi-skill training and responsibility. In particular, theuse of production workers for routine maintenance reducesthe need for specialized maintenance workers, who areoften underutilized. The use of multi-skilled workers andfewer job classifications is critical to a high-performanceworkplace in the steel industry.

In order to execute successful growth strategies and providethe growth teams with the skills, know-how, and tools togenerate growth opportunities, evaluate these opportunitiesto create a growth pipeline, and implement a growth strategyto deliver measurable business results shall be part of thestrategies to achieve sustainability.

The methods that are adopted for the creation of wealth inthe Indian steel industry are also supposed to act as


hindrances to the growth and development of the Indiansteel industry. The Indian steel industry has also not beenable to draw the best professionals in the steel industryand that has been a major drawback of the industry.

The assignment of respective jobs as per the merit andexpertise available within the organization will be a realchallenge for smooth execution of the project. Hence fasterplanning and shaping of projects is required to take theservices of available resources. This is to be clearlyunderstood that the so-called big advantage of low labourcost in India is more or less a myth for two reasons. It haswidely seen that more man hours utilized often neutralizeslow wage rates. Also, low wage rates are the root causesof poor labour productivity.

Government Policies and Directives

The Ministry of Steel is expected to play a crucial role inensuring harmonious and integrated growth of the steelsector in India. Steel being a core sector, its sustainedgrowth is a prerequisite for attaining the level of GDP growthenvisaged in the Eleventh Five-Year Plan. The Ministry ofSteel is expected to play the role of a facilitator to removebottlenecks faced by Indian steel sector. This includesensuring the availability of raw materials, development ofinfrastructure, constant interaction with Financial Institutionsfor making provision of the needed capital and alsointeracting with other concerned Ministries and Departmentsof the Government for appropriate policy responses.

Boosting Demand in the Steel Consuming Sectors

To boost the demand and consumption of steel an Institutefor Steel Development and Growth (INSDAG) has beenset up in Kolkata with leading steel producers in the countryas its members. The Development Commissioner for Ironand Steel (DCI&S) has launched a National Campaign forincreasing the demand for steel, in nontraditional sectors,particularly in the construction, rural and agro-basedindustrial sector. Moreover, interest rates will have to comedown to enable a common man to buy a house and otherutilities

Duty on Project Imports

To enhance the consumption of steel in the country, theFinance Ministry has been urged to provide a level playingfield to domestic steel producers for steel supply againstInternational Competitive Bidding (ICB) under 'projectimports' in the fertilizer, power, oil sectors by exemptingthem for excise and sales tax.

Reduction in Power and Rail Tariffs

The Ministry of Steel has been interacting with StateGovernments to provide power at reduced/ concessionaltariffs especially to mini steel plants all over the country.Similarly, the freight rates adopted by the Railways havebeen rationalized after inter action with the Railway Board

and freight cost on raw material transportation for steelproducers is reduced.

Reduction in Input Costs

The Ministry of Steel has also been able to rationalize theclassification of coking coal in consultation with the CoalMinistry so as to reduce the impact of royalty payable onthis basic raw material. Import duties on several rawmaterials, such as, scrap, ships for breaking, coke, non-coking coal etc. used by the steel industry has been reducedsteadily over the past four to five years.

Import Duty

In the last budget, imports duties on finished steel itemshave been increased as a result of rationalization of taxstructure.

Excise Duty

The Finance Ministry was requested not to resort to furtherincrease in Excise Duties on iron and steel materials, inthe last few budgets. On the other hand, a case has beenmade to reduce the excise duty levels on all finished steelitems, especially long products (which are consumed bythe construction sector) by at least 10%, as the constructionsector cannot avail of MODVAT benefit.

Strengthening of Anti Dumping Mechanism

To check the increasing trend of cheap imports in certaincategories of flat products especially from CIS and SouthEast Asian countries, the Ministry of Steel has urged theCommerce Ministry and the Finance Ministry to strengthenanti dumping mechanism so that fast decision on dumpingcan be taken.

The strategy suggested for the reversal of the steel industryin India is double layered in nature, effecting the reversaland at the same time sustaining the reversal. The strategyhas to be growth and survival oriented. The survival partwould assure the survival of the industry in the fiercecompetitive atmosphere and the growth part would boostthe sustainable growth of the industry. The two differentparts of the strategy has to be integrated into one to havethe expected results.

The reduction of the cost is another major factor in thesurvival of the Indian steel industry in the age ofglobalization. The cost reduction would be the main aspectof the improvement pertaining to the competitiveness ofthe industry. The manufacturers under the steel industry inIndia have to focus their attention in the areas such as:

í The reduction in the cost of operations;

í The reduction in the costs pertaining to the workingcapital;

í The reduction in the costs pertaining to the productioninventory or stock that is not sold;


í The improvement in the economics operating in thetechnological aspects of production;

í The transposition of basic materials of production.

Future Strategies — use of Alternate Energy Sources

Scientists are of the view that use of coal has to be phaseout quickly or risk an uninhabitable planet. Controlling theemissions of carbon dioxide (CO2) as a measure againstglobal warming is one of the crucial environmental issuesthat the steel industry must undertake. If steel industry doesnot abled to take care of these factors, a day may comewhen production is required to stop. This may lead tostoppage of many steel plants affecting the supply-demandgap. Moreover, the cost of energy will be very significant indriving the steel industry, calling for saving of energy atdifferent levels of production. A schematic of potential areasof saving energy14,19,20 is shown in Figure 12.

Case Studies : Strategy for Revival and Growth

Company Country Strategic

ArcelorMittal Luxembourg Sale of selected CentralEuropean steel assets. Minesafety improvements inEastern Europe. Longer-term downstream pursuit ofconstruction markets,including building design /fabrication / distribution /erection jv’s in Asia

Azovstal Ukraine Leverage of cost advantage/strategic localization throughregional M&A

Baosteel China Merger or acquisition withMagang Group [Ma'anshan]and with Handan Steel tocreate world’s secondlargest steelmaker behindArcelor Mittal

Blue Scope

Steel Australia Disposal of downstreamcold rolling / coatingventures [Asia CoatedProduct Operations] inThailand and Indonesia;perhaps also of North Starjoint venture in the USA to alarge CIS steel group

Bohler

Uddeholm Austria Special steels opportunitiesin Eastern Europe

Cleveland

Cliffs USA Corporate governanceissues

Corus UK Long term exit from UKsteelmaking includingTeesside

GSHL Nigeria Long-term start-up ofAjaokuta driven by medium-term ramp up ofdownstream production

Mittal SteelKrivoy Rog[formerlyKrivorozhstal] Ukraine Switch (perhaps just partial

Figure 12 Energy saving measures

Sintering machine

Coke dryquenching

Cokingcoal

Co

ke

ove

n g

as

BF top-pressurerecovery turbine BOF gas boiler

Reheatingfurnace

Blastfurnace

Basic oxygenfurnace

Hot charge rolling

Hot directrolling

Continuouscaster Continuous

annealing line

Steam recovery

Sensible heat recovery

Electricity recovery

Fuel saving

Ga

s

Ga

s

Coldrolling

Batchannealingfurnace

Hot charge rolling

Hotrolling

Cold rolled steelproducts

Hot rolled steelproducts


initially) from long to flat hotrolled products, making useof local iron ore for theproduction of higher qualitysteels

Mittal SteelTermitau[formerlyKarmet] Kazakhstan The priority need seems to

be mining health and safetyimprovements

Nippon Steel Japan Consolidation with JFEfollowed by facilityrationalization and internalrestructuring along lines ofthe British Steel turnaroundseen in the late 1970s

Nucor United States Upstream emphasis on ironunit sourcing.Downstreamcontinuation of pursuit ofopportunities in construction

POSCO Korea Pursuit of internationalventures especially inVietnam, Laos, Cambodia;acquisition of [or muchcloser production orientedcollaboration with] theVietnamese SteelCorporation

Severstal Russia Sale of Severcorr and otherNorth American assets [forexample, to CSN] to helpwith debt repayment

Sumitomo Japan Shift from technicalcooperation to internationalmanufacturing jv andcooperation agreements

SystemCapitalManagement Ukraine Iron ore price control through

dominance (throughMetInvest / Smart) ofUkrainian supply

Tata Group India Development of globalassets, capabilities andbrands. Much deeperintegration of Corus withslab sourcing fromJamshedpur plant in Indiaand / or from new Greenfieldsteelmaking facilities inAfrican continent [for

example, Liberia] fed bylocal iron ore and low costlocal gas

Thyssen Krupp Germany Joint ventures / partnershipslooking East

TISCO China Melt shop upgrade andcapacity expansion;reorientation to specialsteels

US Steel USA Acquisition led businessgrowth and / or Greenfieldinvestment in South America

Voestalpine Austria Growth beyond 500 kmhinterland — developmentof larger scale throughGreenfield Central or EastEuropean CSP Plant,possibly in the Black Searegion

SAIL India Focusing on corecompetency and restrictingof business, man powerreduction, selling of idleassets and improved costmeasures in operations

CONCLUSION

The growth of the steel sector is intricately linked with thegrowth of the Indian economy and especially the growth ofthe steel consuming sectors. Production and productioncapacities should be increased through expansion andinstallation of new plants using secondary steel makingroutes that are more cost effective and quality conscious.At the same time, productivity of our steel plants must bemaintained at levels close to international standards. Indiansteel industry must try to derive benefit from enormouseconomies of scale in production, distribution, marketingand management.

For the Indian steel industry to revive and grow technologicalinnovations are vital. For a running steel plant, the approachhas to be such that a delicate balance is struck betweenintroducing operational improvements and at the same timeplanning for strategic technology shifts.

All in all, in order for the steel industry to become globallycompetitive it is important that strategies have to be madeso that bottlenecks in the growth of this sector are removedand the companies are more responsive to change. AsCharles Darwin once said, ‘It is not the strongest of thespecies that survive, or the most intelligent, but the onesmost responsive to change’. Those that respond withoutdelay will be the success stories of the future.

The following suggestions are given to rejuvenate the Indian


steel industry:

í Technology policy is to be so designed by thegovernment that it will generate the thrust to updatethe technology by the steel producers;

í Further liberalization towards tariff structure, fullconvertibility of Indian currency, more equityparticipation by foreign partners, rationalization of taxstructure etc. will be required;

í Steel companies must assess their core competencyand realign their strategy to cope with the internal andglobal competition;

í R&D focus is to be increased substantially.Expenditure on R&D by steel plants should beincreased. With a strong R&D base, organizations willbe able to assimilate the technology faster;

í Organizational adjustments must be made whileadopting newer technologies. Effective humanresource policy will help speedier technology adoption.Socio-economic aspects should be dovetailed whileselecting a technology;

í Training and retraining with updated inputs should bea continuous process in steel plants. Trainingprogrammers should be designed for people fromdifferent hierarchy including top level management;

í As economy is becoming more and more market-driven, steel sector should also tune to it;

í Technology transfer plans are to be worked out morecarefully. Indian firms must select appropriatetechnology with proper scope of adoption;

í Firms must do technological forecasting, which is notcommon in Indian steel industry, to take betterdecisions on product mix and investment proposals;

í Resource utilization must be more effective to improveon the productivity.

The suitable diversified strategy and identified marketsegments with focus on value-added products close to thecore business will be key to success. The strategy for revivaland growth of Indian steel industries with a faster economicgrowth needs to unlock its full potential. This strength liesin low cost and fairly skilled workforce coupled with fastertechnological improvement and operational efficiencythrough better manpower planning, logistics and rawmaterial sourcing along with government help to havecutting edge in steel market at higher output and profitmargins.

The factors for revival of Indian steel industry are buoyantglobal steel consumption, buoyant local steel consumption,lower cost of production and adequate rise in price againsthike in input costs together with backward integration,consolidation and branded product sales, marketingalliances, etc.

Even in these tumultuous times, strategic planning doesn'thave to be an exercise in anxiety-or futility.

ACKNOWLEDGEMENT

Authors are grateful to the colleagues of SAIL for sharingtheir thoughts for the problems and various strategies/solutions for the revival and growth of Indian Steel Industry.Authors are highly obliged to the management of RDCISfor their valuable supports extended to them in bringingthis paper.

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