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Production and Consumption Trends in The Total Finished Steel Market (In Million Tonnes)

The steel industry in India has experienced high growth in recent years and is expected to continue growing strongly. Steel consumption has increased annually by over 10% driven by sectors like infrastructure, construction, automobiles and engineering. India is now the 5th largest steel producer and largest producer of sponge iron. The government has supported the industry through policies promoting investment and exports. Major companies like SAIL and Tata Steel have ambitious expansion plans to increase production capacity significantly by 2012-13 which will boost the industry further. The future of the Indian steel industry looks bright with growing domestic demand and an expectation that India will become the world's 2nd largest steel producer by 2015.

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90 views6 pages

Production and Consumption Trends in The Total Finished Steel Market (In Million Tonnes)

The steel industry in India has experienced high growth in recent years and is expected to continue growing strongly. Steel consumption has increased annually by over 10% driven by sectors like infrastructure, construction, automobiles and engineering. India is now the 5th largest steel producer and largest producer of sponge iron. The government has supported the industry through policies promoting investment and exports. Major companies like SAIL and Tata Steel have ambitious expansion plans to increase production capacity significantly by 2012-13 which will boost the industry further. The future of the Indian steel industry looks bright with growing domestic demand and an expectation that India will become the world's 2nd largest steel producer by 2015.

Uploaded by

Monish Rc
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Introduction

Steel industry has a major role to play in the economic growth of India. With new global acquisitions by Indian steel giants, setting up of new state-of-the-art steel mills, modernization of existing plants, improving energy efficiency and backward integration into global raw material sources. India is now on the centre of the global steel map. Consumption of steel in the construction sector, industrial applications, and transport sector has been on the rise and special steel usage in engineering industries such as power generation, petrochemicals and fertilizer industry is also growing. The Indian steel industry has been on a high-growth trajectory led by buoyancy in sectors such as infrastructure and construction, oil and gas and automobiles. The demand for steel is expected to further increase with major international automobile manufacturers setting manufacturing facilities in India. The domestic demand for steel is estimated to rise at an annual average rate of more than 10 per cent till 2014.The steel production capacity is estimated to reach 124 million tonnes by 201112. In 20092010, the installed capacity for crude steel was estimated at 72.8 million tonnes. The production during AprilDecember 2009 was estimated at 45.8 million tonnes, resulting in 84 percent capacity utilization up to December 2009. This was primarily a result of the 6.4 million tonnes capacity added during AprilDecember 2009. Demand from construction and infrastructure constituted 61 per cent of the total finished steel consumption, while demand from the manufacturing sector comprising capital goods, consumer durables and packaging was 19 per cent of the total finished steel consumption during 2009 2010. With trade barriers having been lowered over the years, imports play an important role in the
domestic markets

Production and consumption trends in the total finished steel market (In Million Tonnes)

SWOT Analysis
Strength Abundance of Iron Ore and Coal Forth Largest Iron Ore reserve (13 b tones) Third largest pool of technical manpower Labour Low unit labour rate Mature production base

Weakness Endemic Deficiencies


High Ash content of indigenous coaking coal High basicity index in iron ore Certain key ingredients e.g. nickel, ferro-molybdenum are unavailable

Systematic Deficiencies High Cost of capital Steel companies are charged interest rate of around 14% on capital in india compared to 2.4% in japan and 6.4% in USA. High Cost of basic Inputs and Services E.g. Cost of electricity is 3 cents in USA compared to 10 cents in India. Other Systematic Deficiencies include: Opportunity Unexplored rural market. Usage in cost effective manner Housing Fencing Structure Agriculture machineries Furniture Poor quality of basic infrastructure like road, port, etc. Lack of expenditure on research and development. Delay in absorption in technology by existing units. Limited access of domestic producers to good quality of iron ores which are normally earmarked for exports.

Growing domestic demand in other sectors Automobiles Packaging Engineering industries Irrigation and water supply

Export Market Penetration World steel consumption will double in next 25 years.

Threats

Low production cost advantage. Need quality improvement.

Slow Industrial Growth Strong linkage between economic growth of country and growth of steel industry. 1970-90 a sluggish growth period for domestic steel industry. Increase market share was only way to grow. Consequence: price war and heavy trade discounts.

Threats of Substitutes Plastics and composites Aluminum Already replaced: Large diameter water pipers (RCC pipes) Small diameter pipes (PVC pipes) Domestic water tanks (PVC pipes) Technological change Change industrial structure. Price Sensitivity and Demand Volatility Inability to tune production in line with the market demand fluctuation. Other threats: Ever decreasing import duty on steel. Dumping of steel by developed countries. High quality products from developed countries available for import at very competitive prices.

PEST Analysis
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)

List of Steel Companies

The Indian steel industry is consolidated, with the three main producers accounting for 38

percent of the total production of crude steel in 20092010. Public sector companies contributed 27 per cent to the total crude steel production till December 2009. Steel Authority of India Ltd (SAIL) and Tata Steel have captive iron ore mines in India to cater to domestic steel manufacturing plants, while other players rely on NMDC and other domestic players for their iron ore requirement.

Company

Sales (20092010) US$ billion (INR billion)

Products

Tata Steel Ltd

21.99 (1,042)

Finished steel (non-alloy steel)

SAIL

9.31 (441)

Finished steel (non-alloy steel)

J S W Steel Ltd

4.25 (201) 2.45 (116)

Hot rolled coils, strips, sheet

Jindal Steel & Power Ltd

Iron and steel

Ispat Industries Ltd

2 (91) 1.61 (76)

Hot rolled coils, strips, sheet

Welspun-Gujarat Stahl Rohren Ltd J S L Ltd

Tubes and pipes

1.37 (64)

Flat products Cold rolled coils, strips, sheet

Bhushan Steel Ltd

1.26(59) 0.99 (47)

Uttam Galva Steels Ltd

Flat products

Financial Year 2010


India has retained its position as the 5th largest producer in 2010 and recorded a growth of 11.3 per cent as compared to 2009. India has also emerged as the largest sponge iron/direct reduced iron (DRI) producing country in the world in 2010, a rank it has held on since 2002. Sponge iron production grew at a CAGR of 11 per cent to reach a level of 20.74 million tonne (MT) in 200910 as compared to 14.83 MT in 2005-06. With the expanding consumer market, Indian steel industry is likely to receive huge domestic and foreign investments. Nearly 222 memorandums of understandings (MoUs) for planned capacity of around 276 MT have been signed between the investors and various State Governments, mostly in Orissa, Jharkhand, Chhattisgarh and West Bengal. India has recorded a growth of over 8.6 per cent, producing 6.35 MT of steel in March 2011 as against 5.85 MT in the corresponding month in 2010, according to World Steel Association (WSA). Steel exports has increased by 17.3 per cent as it reached an estimated 2.46 MT, while steel imports were at an estimated 5.36 MT, a growth of 2.8 per cent in 2010. Crude steel production was registered at 51.57 MT during April-Dec 2010 in the country as per Joint Plant Committee (JPC). The production is expected to be nearly 110 MT by 2012-13. Crude steel production grew at a compound annual growth rate (CAGR) of 8.4 per cent during the five years, 2005-06 to 2009-10. The crude steel performance accounted for 31 per cent of the total crude steel production in the country during 2009-10, contributed largely by the strong trends in growth of the electric route of steel making, particularly the induction furnace route, which was a key driver in the growth of the segment. In case of total finished steel (alloy + nonalloy), production for sale was recorded at 47.30 MT, a growth of 7.9 per cent during Apr-Dec 2010. The consumption of steel domestically was recorded at 44.28 MT, indicating further strengthening of demand during Apr-Dec 2010. The consumption of steel in the country has

shown an increase of 10.3 per cent during April 2010 to January 2011 as compared to the same period of previous year.

Future of steel industries in India


Steel Industry is expected to become the 2nd in rank by the year 2015 as predicted by the analysts. The scope that finds the sustainable growth in the fields of steel industry in the recent times is due to the rise in the export and the growing demand in the manufacturing, real estate and automobile sectors. These have led to this development and have bettered the future of steel industry in India by strengthening its footing. Steel industry has already proved its strong hold on the construction, housing and transport and even the engineering sectors like the petro-chemicals, Power generators and the fertilizer industries. It is expected that the growth rate of the consumption of finished steel would grow at CAGR at around 7% in the financial year 2012 to 2014. Moreover the credit for the glittering scopes of this industry even is enhanced by the helpful hand extended by the Government by initiating unrestricted external trade, low import duties, and an easy tax structure. Steel Authority of India (SAIL) Ltd has planned to enhance its hot metal production capacity from the level of 13.82 million tonnes per annum (MTPA) to 23.46 MTPA under its current phase of expansion and modernisation which is expected to be completed by financial year 201213. In the next phase, SAIL would increase its capacity further to 26.18 MTPA.The indicative investment for current phase is about US$ 13.28 billion. Additionally, approximately US$ 2.21 billion has been earmarked for modernisation and expansion of SAIL Mines. NMDC Ltd plans to increase the production of iron ore from the present level of about 24 MT to 40 MT by 2014-15. Besides, setting up a 3 MTPA Integrated Steel Plant at Nagarnar in Chhattisgarh. The environmental clearance for the plant has been accorded by Ministry of Environment and Forests (MoEF).

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