Presented by:

Group 8
Section E
 Ironis one of the oldest inventions in the
world

 Backbone of the human civilization

○ Automobiles
○ Infrastructure

 Contribution :
○ GDP – 10%
○ GNP – 6%
 Objective

To study the structure and performance of

Indian Iron and Steel industry

 What are the factors influencing iron and

steel industry ?
 What is the role of major players?
 What is the current scenario?
 Production Technology
 Blast
Furnace (BF)/ Blast Oxygen Furnace
(BOF)

 Electric Air Furnace (EAF)

 COREX
Structure of Indian steel
industry
 India is 5th largest steel producer

 Divide into two distinct groups:

integrated steel producer

small/stand alone plants

 Potential demand of steel in India and the per capita

steel consumption.
 Factors influencing iron and
steel industry

• Backward integration
• Consolidation
• Branded products
• Longer contracts
• Government initiatives
• Impact of Liberalization
• Cost competitiveness
 Current investments
 Tata Steel:
 planning for 5 million tonne plant in Chhattisgarh ( US$ 3.59 billion)
 setting up greenfield projects in Jharkhand and Orissa

 Reliance Infrastructure:
 plans to build a 12-million tonne steel plant in Jharkhand; likely to be completed by
2012.

 Indian Railways:
 plans to invest around US$ 437.25 million per annum to raise its consumption of
stainless steel for adding new alloy-made wagons and coaches to its portfolio.
 Qualitative Analysis
Framework for industry
analysis
 Entry barriers: High
Cost of capital
 Competition: High
 Bargaining power of suppliers: High
 Threat of substitutes: Low
 Bargaining power of Consumers: Mixed
 Internal assessment
Strengths
 Availability of iron ore
 Availability of labor at low wage rates

Weakness
 High Cost of Capital
 Low Labor Productivity
 High Cost of Basic Inputs and Services
 External assessment
Opportunities
 Unexplored rural market
 Other sectors
 Export penetration
 
Threats
 Slow Industry Growth
 Technological Change
 Price Sensitivity and Demand Volatility
 Quantitative Analysis
Key ratios considered:
- Debt – equity ratio
- Interest coverage ratio
- Debtors’ turnover ratio
 Companies considered for
analysis

1. Steel Authority of India Ltd 1. Sunflag Iron and Steel Industry

2. Tata Iron and Steel Company 2. Shah Alloys Ltd
Ltd 3. MUSCO
3. Jindal Iron and Steel Company 4. Surya Roshni
Ltd
5. Usha Martin
4. Essar steel
5. Ispat Industries Ltd

Top 5 companies Bottom 5 companies

 Current Global Scenario
Sub Prime crisis
US slow down
US Dollar weakening

 Impact on the overall Industry

Widening Credit Spreads
Increase in Capital cash
Influence on Global Iron and
Steel Industry

 Source: International iron & steel institute

Influence on Indian Iron and
Steel Industry
 Influence of US crisis on Indian Exports
Iron ore exports from India till December 15, 2008
declined over 13% despite huge price decline in
steelmaking raw materials.
(Source: Federation of Indian Minerals Industries (FIMI) )

 Low Iron Ore Exports from India

TATA
Present Scenario
 Domestic Steel Companies Margin under
Pressure
High cost of coking coal (US$300-350 per ton)

 Crude Steel Production Down and Plant

Utilization
Capacity utilization of Ispat Industries is 30%
JSW Steel and Essar Steel is 60-70% each
Bhushan Steel is 50 percent
 Recommendations

•thrustto update the technology

•Further liberalization towards tariff structure
•R&D focus is to be increased substantially
•HRP , Training
•Market Driven
•Resource utilization
Future Outlook
 Growth of steel demand will be around
11% annually
 Produce 110 million tons of steel by
2020
 India would become the second biggest
producer of steel
 Upcoming projects
 Innovations
 Steel
Junction
 NUCOR Steel
 Key Success Factors
WHAT DO CUSTOMERS HOW DO FIRMS SURVIVE KEY SUCCESS
WANT? COMPETITION?
FACTORS
(Analysis of demand) (Analysis of competition)

• Low price. • Commodity products, • Conventional sources of

• Product consistency.
• Reliability of supply.
• Specific technical
specifications for special
steels.
• Cost efficiency and strong
excess capacity, high fixed
costs, excess capacity, exit
barriers, and substitute
competition mean intense
price competition and
cyclical profitability.
• Alternatively, high
financial resources
essential.
cost efficiency include:
large-scale plants, low-cost
location, and rapid
adjustment of capacity to
output.
technology, small scale
plants can achieve low
costs through flexibility and
high productivity.

• Differentiation through
technical specifications and
service quality.