STEEL INDUSTRY ANALYSIS By(Group 3):
Deepanjan Kundu Devshuvro Ghosh Debadrita Ray Chaudhuri Damyanti Pathak Abhishek Bose
Overview: India ranks 5th in the world ranking for production of steel and fourth largest producer of crude steel in 2011-12 with 89 million tonnes (MT). • India produced 66.8 million tonnes in 2010-11in comparison to China’s 626.7 million tonnes. • About 50% of the steel produced in India is exported. • India accounts for over 7% of the total steel produced globally. • India accounts for around 5 per cent of the global steel consumption. • The total employment in the industry is more than 2 million (including direct and indirect employment). •
Players in the Industry: •
Tata Steel: wire rods, bars, and steel flats. • Jindal Steel & Power: mild steel slabs •
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and sponge iron. JSW Steel: gamut of steel products . Essar Steel: sponge iron, steel and iron ore pellets. Rashtriya Ispat Nigam Ltd: liquid steel. Bhushan Power & Steel Ltd: iron Ore Beneficiation. Lloyds Steel: corrugated sheets and steel coils. Steel Authority of India Limited: steel and iron.
Reasons for Growth of the Indian Steel Industry: • Abundant resources of iron ore. • Low cost and efficient labour force. • Strong managerial capability. • Strongly globalised industry and emerging global
competitiveness. • Modern new plants & modernised old plants. Development enhancing facilities: • Huge Infrastructure demand. • Rapid urbanisation. • Increasing demand for consumer durables. • Untapped rural demand. • Increasing interest of foreign steel producers in India.
PEST Analysis of Indian Steel Industry: Political Factors: • Recommendations on Captive Mines. • National Steel Policy to Remove Bottlenecks.
Economic Factors: • GDP Growth Rate. • Reduction in Customs Duty.
Social Factors: • Rural-Urban Divide. • Higher Disposable Income.
Technological Factors: • Popularity of Steel Portals. • Application of SML (Steel Markup Language).
Michael Porter’s Five Forces Analysis Buyers’ Power: • Increasing Demand for Steel. • Fragmented Coke Suppliers.
Suppliers’ Power: • High Raw Material Prices. • Lack of Transportation.
Intensity of Competition: • Competition from Foreign Players. • Spurt in Merger and Acquisition
Activities.
Threat of New Entrants: • High Cost of Basic Inputs and
Services. • Industry is Capital Intensive.
Threat of Substitutes: • Use of Aluminium, Plastic, Carbon
Fibre.
Challenges faced by the Indian Steel Industry: • High cost of energy. • Higher duties and taxes. • Quality of coking coal. • Dependence on imports for steel manufacturing
equipments & technology. Global Impact on the Indian Steel Industry: • Slow growth in infrastructure development. • Market fluctuations and China’s export possibilities. • Global economic slowdown.
Government Regulations: • Emphasis on infrastructural development during the
formulation of the Union Budget 2011. • Noteworthy reductions in import duties on key steelmaking raw materials. • To ensure growth of Iron and Steel Sector in India, Ministry of Steel takes up their issues with the other concerned Ministries/ Departments such as: Ministry of Coal for allocation of Coal Blocks and Coal Linkages to Iron and Steel Industry. Ministry of Petroleum & Natural Gas for supply of Natural Gas to Iron and Steel Industry
Future Prospects for Development: Resources: • Strong Managerial skills in Iron and Steel making. • Large pool of skilled Man-power. • Established steel players with strong skills in steel making. • Abundant Iron Ore reserves. Opportunities: • High economic growth driven increasingly by industry. • Faster Urbanisation. • Increased Fixed Asset Building. • Automobiles and component industry growth.
Government Policies: • Pro-active stance of the government. • Encouragement for overseas investments.