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India is currently the fifth largest steel-producing nation in the world, with the capital investment of more than Rs1 lakh crore and production of over 53 million tonnes (MT) per annum. The Indian steel industry accounts for a little over 7% of the world's total production. India is the only country world over to post a positive overall growth in crude steel production at 1.01% in JFM09 as compared to the same period previous year. Also in the first 10 months of 2008-09, India's steel production went up to 46.8MT up by 1.1% from the previous year. The recovery in steel production has been aided by the improved sales performance of steel companies. The Indian steel industry has registered an average growth rate of more than 10% CAGR in output in the last few years. The National Steel Policy has a target for taking steel production up to 110MT by 2019–20. Nonetheless, with the current rate of ongoing Greenfield and Brownfield projects, the Ministry of Steel has projected that India's steel capacity is expected to touch 124.06MT by 2011–12. In fact, based on the status of Memoranda of Understanding (MOUs) signed by the private producers with the various state governments, India's steel capacity is likely to be 293MT by 2020. To support this Former Steel Minister, Ram Vilas Paswan, has said that an investment worth US$176.49 billion is likely to go into the steel sector by 2020.
Demand for steel in India is likely to grow at around 12% against the global average of 5–6%. While the demand for steel will continue to grow in traditional sectors such as infrastructure, construction, housing automotive, steel tubes and pipes, consumer durables, packaging, and ground transportation, specialized steel will be increasingly used in hi-tech engineering industries such as power generation, petrochemicals, and fertilizers, among others. The new airports and railway metro projects will require a large amount of stainless steel.
India has a very low per capita consumption of steel of around 40kgs as against an average of 200kgs of the world. However, steel consumption will continue to grow at nearly 16% rate annually, till 2012, fuelled by demand for construction projects worth US$1 trillion. Steel consumption grew at 3.8% in the JFM09 over the same period last year. The wide gap in relative steel consumption indicates that the potential ahead for India to raise its steel consumption is high.
The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore is also available in abundant quantities. This provides major cost advantage to the domestic steel industry, with companies like Tata Steel being one of the lowest cost producers in the world. Steel consumption has declined as construction activities have slowed down. This has led to a fall in steel prices by 40% in the last six months. Steel prices currently range between Rs28, 000 and Rs40, 000 a tonne from Rs55, 000 a tonne a couple of months ago.
World steel production in JFM09 was 264mmt, a decrease of -22.8% compared to JFM08. In the first three months of 2009 Asia produced 173mmt of crude steel, a decrease of 8.9% over the first quarter of 2008. The EU produced 30mmt of steel in the first quarter of 2009, down by 43.8% compared to the same quarter of 2008. North America showed a 52.1% decline, producing 16.6mmt during the first three months of 2009. Other than India, China showed a slight increase of 1.4%. The reason for this negative growth is mainly the economic slowdown all over the world, besides the demand for motor vehicles, home appliances and residential properties was likely to remain poor.
Out of India's annual iron ore production of more than 200MT, about 50% is exported. Iron ore exports increased 17% to 12.6MT in February 2009 from 10.8MT in the same month a year ago, owing to a moderate revival in demand from Chinese steel producers. India's exports during April-December 2008 were 64.4MT. The government has reduced export duty on iron ore lumps from 15% to 5%, which has given a further fillip to exports. Further, the reduction in railway freight has also benefited the domestic iron ore miners.
Subsequent to the recent fall in international prices of commodities and to protect Indian producers, the Indian government has announced some changes in customs duty rates, which were effective from November 2008. Iron and steel products like pig iron, sponge iron, semi-finished products, flat products and long products are now subject to a basic custom duty of 5% ad valorem. The Indian government plans to invest over US$350 billion in industries related to infrastructure and construction which will give a fillip to the steel sector.
Though the current market turmoil has dented the growth curve of various industries such as automobile and construction, which, in turn, has hit the Indian steel industry hard, but with the government's plans to boost up the economy by injecting funds in various industries like infrastructure, construction, automobile and power, the near-term future is expected to see growth, says the 'Indian Steel Industry Outlook to 2012' report. Increase in the plan/ non plan expenditure by Rs200 billion as well as speedy
Clearance of infrastructure projects (like Golden Quadrilateral and Bharat Nirman Scheme), and steps taken to increase the demand in the economy will spurt up the demand for the steel in the near future.
Finally, India is poised to be the world's second largest producer of steel before 2016 and production per year would be 137MT. India's steel consumption will continue to grow at nearly 16% rate annually, till 2012, fuelled by demand for construction projects worth US$1 trillion. Per capita steel consumption is likely to increase from its current rate of 40kg. Additional capacity enhancement in the sector would generate employment for around 4 million people.
This in-depth report provides a detailed analysis of the Indian steel industry coupled with a comparative study of SAIL.
"The steel industry in India is concentrated in the east, south and west of the country. The integrated foundries are located in the east, while electric steel is produced predominantly in the south and west. In the future the east will see rapid expansion as more integrated capacities are being built in Orissa and other eastern states due to its raw materials.
Although India is now one of the world top ten steel producers, its domestic output is insufficient to meet the demand in all segments. Imports increased in 2005 by 8% and it is likely that India will continue to import in many segments over the medium term. According to Deutsche Bank Research, 1 the three biggest steelmakers in India have a combined output of almost 20 million tons and have a domestic market share of 51%. Their domestic competitors are numerous medium- sized and smallish companies and more mergers can be expected between these companies as these firms need to improve their position with regard to the Powerful suppliers of raw materials.
The Indian steel industry have entered into a new development stage from 2005-06, riding high on the resurgent economy and rising demand for steel. Rapid rise in production has resulted in India becoming the 5th largest producer of steel.
It has been estimated by certain major investment houses, such as Credit Suisse that, India’s steel consumption will continue to grow at nearly 16% rate annually, till 2012, fuelled by demand for construction projects worth US$ 1 trillion. The scope for raising the total consumption of steel is huge, given that per capita steel consumption is only 40 kg – compared to 150 kg across the world and 250 kg in China.
The National Steel Policy has envisaged steel production to reach 110 million tons by 2019-20. However, based on the assessment of the current ongoing projects, both in Greenfield and Brownfield, Ministry of Steel has projected that the steel capacity in the county is likely to be 124.06 million tons by 2011-12. Further, based on the status of MOUs signed by the private producers with the various State Governments, it is expected that India’s steel capacity would be nearly 293 million tons by 2020.
CONSUMPTION OF STEEL IN INDIA
Driven a booming economy and concomitant demand levels, consumption of steel has grown by 12.5 per cent during the last three years, well above the 6.9 percent envisaged in the National Steel Policy. Steel consumption amounted to 58.45 mt in 2006-07 compared to 50.27 mt in 2005-06, recording a growth rate of 16.3 per cent, which is higher than the world average. During the first half of the current year, steel consumption has grown by 16 per cent. A study done by the Credit Suisse Group says that India's steel consumption will continue to grow by 17 per cent annually till 2012, fuelled by demand for construction projects worth US$ 1 trillion. The scope for raising the total consumption of steel in the country is huge, as the per capita steel consumption is only 35 kgs compared to 150 kg in the world and 250 kg in China.
With this surge in demand level, steel producers have been reporting encouraging results. For example, the top six companies, which account for 70 per cent of the total production capacity, have recorded a year-on-year growth rate of 13.4 percent, 15.7 per cent and 11.7 per cent in net sales, operating profit and net profit, respectively, during the second quarter of 2007-08
We can expect strong demand growth in India over the next five years, driven by a boom in construction (43%-plus of steel demand in India). Soaring demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put India's steel industry on the world steel map."
Acknowledgement
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1. Introduction
2. Executive summary
3. History of steel
4. Global scenario of steel industry
5. Domestic scenario of steel industry
6. Consumption of steel in India
7. Production of Iron and steel
8. Steel prices
9. Input costs
11. Demand
12. Major consumer in Indian markets
13. Determinants of prices
14. Supply & demand Mismatch
15. Import and Exports of Iron and Steel
16. GDP and Consumption of steel
17. Major players of Indian steel Industry
18. Comparison between Tata steel, Sail, Jsw, Essar steel
19. Competition analysis
20. Factor holding back the Indian steel industry
21. SWOT analysis
22. SAIL company profile
23. SAIL Joint venture
24. Ownership and SAIL today
25. Future expansion plan
26. Product mix
27. Revenue and cost model
28. Bhilai steel plant
29. Bokaro steel plant
30. Durgapur steel plant
31. Rourkela steel plant
32. IISCO steel Plant
33. Other raw material divisions and mines
34. Exports of SAIL
35. Material cost analysis
36. Revenue model with facts and figures
37. Profit and loss account
38. Working capital analysis
39. Balance sheet
40. Segregation of incomes and expenses
41. Ratios
42. Capital structure
43. Cash flow statement
44. Du-Pont analysis
45. Cost of capital
46. Analysis of financial performance
47. Tata steel Company profile
48. Business units of Tata steel
49. Joint ventures of Tata steel
50. Manufacturing process
51. Revenue and capital employed
52. Raw material
53. Major products and service
54. Markets served by Tata steel
55. Manufacturing plants of Tata in India
56. Global operations
57. Expansion projects
58. A comparison between SAIL and TISCO
59. Ratio analysis of Tata steel
60. 61. Share market analysis of SAIL and TISCO
Outlook
Bibliography
Tables and charts
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An analysis of the Indian steel industry with a comparative study of SAIL | 154 pages | | | €9.00 |
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