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PRESENTATION ON STEEL INDUSTRY

By: NEHA AHUJA PRAVEEN KUMAR PAVAN KUMAR RAHUL KUMAR TANVEER SINGH CHANDRASHEKHAR

INTRODUCTION  Consumption of steel is taken to be an indicator of economic development.  Steel production in India has increased by a compounded annual growth rate (CAGR) of8percent over the period 2002-03 to 2006-07.  Steel is manufactured as a globally tradable product with no major trade barriers across national boundaries to be seen currently.  government policy restrictions have been negligible worldwide and even if there are any the same to respond to specific conditions in the market and have always been temporary.  the industry in general and at a global level is unlikely to throw up substantive competition issues in any national policy framework.  Further, there are no natural monopoly characteristics in steel. 

Does not mean that there is no relevant or serious competition issue in the steel industry.

MAJOR PLAYERS •

India had a small Iron and Steel industry with production of about a million tonnes (mt).

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Government mainly focused on developing basic steel industry, where crude steel constituted a major part of the total steel production.

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Public sector had a dominant share in the steel production till early 1990s.

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Mostly private players were in downstream production, which was mainly producing finished steel using crude steel products.

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Establishment of Tata Iron and Steel Company (TISCO) in 1907 was the starting point of modern Indian steel industry.

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Mysore Iron and Steel Company, (later renamed Vivesvaraya Iron & Steel Ltd) in 1923

• Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron & Steel Ltd) in 1923

• TISCO, public sector entities, POSCO, Jindals , Essar, and Arcelor-Mittal are among the major players accounting for the bulk of the million tons of production and about 100 million tons in future •

All these companies were in the private sector.

COMPETITION •

Steel sector was the 1ST to be liberalized

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During early 1990’s steel industry dominated by government

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After liberalization a few private players entered the market.

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The growing consolidation in the steel industry worldwide through mergers and acquisitions has already thrown up several significant concerns.

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Enabled private players to expand their operations and bring in new cost effective technologies to improve competitiveness not only in the domestic but also in the global market.

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Internationally steel has always been an oligopolistic industry

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With increasing need for large investments in the industry private sector’s role would be crucial in the development of the steel industry.

• The future, it appears, will continue to be dominated by a few large players and the industry will remain oligopolistic – as it is internationally.

• Two broad category of products • A. FLAT PRODUCTS • B. SEMI FINISHED PRODUCTS

Flat products • Only 5 producers (SAIL, TATA STEEL , JSW , ESSAR STEEL, IPSAT industries) • due to lack of entry • Artifical entry barriers SEMI FINISHED PRODUCTS Only 3 major players Command over prices

Polices in steel sector  Under the new industrial policy, iron and steel has been made one of the high priority industries. Price and distribution controls have been removed as well as foreign direct investment up to 100% (under automatic route) has been permitted.  The Trade Policy has also been liberalized and import and export of iron and steel is freely allowed with no quantitative restrictions on import of iron and steel items.

 With the abolishing of price regulation of iron and steel in 92, the steel prices are market determined.  Set up an R&D Mission in order to provide accelerated thrust on R&D and thereby improve the competitiveness of the industry.

Role of Government ďƒ˜ The role of the Ministry of Steel is now considered that of a facilitator rather than regulator. This is how the government itself sees its role.

Some of these role are given below.

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Given the oligopolistic features of the steel industry, the role of Government in promoting competitive forces in the industry is of some importance.

Providing linkage for raw materials, rail movement clearance etc. for new plants and expansion of existing ones.

Regular interactions with entrepreneurs proposing to set up new ventures, to review the progress of implementation and assess problems faced.

Encouraging research & development activities in the steel sector.

MARKET STRUCTURE OF INDIAN STEEL INDUSTRY • Iron ore is the most important mineral in manufacturing of the steel.

• huge demand in the Indian Steel Market, leads to a proper structure of the market in which there is supply to the big steel firms.

• The Iron Ore Market is divided into various segments through which companies obtains Iron Ore

• Segmentation in supply: • • •

Public Sector Mining Companies Steel Firms Captive Mines Private Mining Merchant Companies Selling Iron Ore in the market

Segmentation in Demand : • Iron and Steel Firms Using captive Mines • Iron and Steel Firms Buying from Government • Iron and Steel Firms Buying from private merchant

DEVELOPMENTS •

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The auto industry has been one of the biggest users of steel in recent years, due to the increasing number of sales of vehicles — two- and fourwheelers.

– Japanese company Sumitomo Corp. announced recently that it had decided to go in on a joint venture with local steel firm Mukand Ltd (4060%), and will begin processing specialty steel long products for the automobile industry in India.

The usage of steel in cost effective manner is possible in the area of housing, fencing, structures and other possible applications where steel can substitute other materials which not only could bring about advantages to users but is also desirable for conservation of forest resources Latest technology has been adopted by Indian steel manufacturers for production of superior quality of steel for these applications.

For example, pre-coated sheets are being used in manufacture of appliances, furnishings, electric goods and public transport vehicles.

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

Quality improvement of Indian steel combined with its low cost advantages will definitely help in substantial gain in export market.

CONCLUSION

• The Indian steel industry is among the upcoming industries of the world • It has a number of iron ores, which means that it has plenty of resources from which to draw its raw material.

• The rate of production of steel in India has been going up at a steady rate in the last few years • There are also a number of steel companies in India like Tata and Arcelor Mittal that are either coming up or have established themselves as prominent forces in the world steel scenario.

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In 2004 India was ranked as the seventh largest producers of steel in the world, which is testimony to the standing of the Indian steel industry of the world • India is also supposed to have the best growth potential in the context of steel and is preceded only by China, which is a prominent steel producing and consuming country of the world • According to the Ministry of Steel, India is expected to become the second largest producer of crude steel in the world by 2015-16