Indian Steel Industry
Agenda
1.Industry overview
2.Industry value chain & structure
3.Industry size & growth
4.Industry segments
5.Major Players & Competition
6.Technology
7.Regulations
8.Issues & Concerns
9.Growth Drivers
10. Outlook
1. Industry overview
WORLD SCENARIO
 World Crude Steel Capacity 1799 mn tons for 2009 and Production 1224 mn tons
 China is world’s largest steel manufacturer with production 567 mn tons 2009
 Steel prices have risen on account of rise in raw materials cost
World crude steel production has registered dip in production by 8% in 2009
World Crude steel production has registered rise of 21.9% Jan-Aug 2010
INDIAN SCENARIO
 Steel industry makes around 2% contribution in GDP
 India is the 5th largest producer of crude steel in the world with annual production
60 mn tons (March 2010); Consumption was 53 mn tons (March 2010)
 India is low cost steel producer in the world (Tata Steel)
 India is net importer of steel
 Per capita steel consumption is 47 kg when compared to world average of 181 kg
 India is world's largest producer of direct reduced iron (DRI) or sponge iron
 India is fifth largest in terms of iron ore reserves 23bn tons of iron ore
World Scenario: Steel Industry expands post
recession
 World Steel industry rebounds
post recession
 Developed countries output
growth surpassed developing
countries
 Developed countries achieved
growth on account of lower
base
 China growth slow down as
government effort to cool
down real estate sector and
 In 2009 developed countries
witness dip an account of
recession
 In 2010 China share in world
steel production has jumped
to 45%
 India has also witnessed
SOURCE: WORLDSTEEL.ORG (2009)
growth of 18% 8 months
ending Aug 2010
World Scenario; Steel producer using M&A route for
growth
• Arcelor Mittal alone
accounts for 8% of global
steel production
• World steel Companies
are using inorganic route
for expansion
• World steel companies
are increasing capacities
in developing countries
• Steel companies hunt for
mines to ensure raw
materials like ore and
coke supply
• BOF methods continues
to be cost effective
method of steel making
C r u d e S te e l P r o d u c io n b y p r o c e s s - 2 0 0 9
O p e n H e a rth
1%
E AF
28%
BO F
71%
SOURCE:WORLDSTEEL.ORG(2009)
World steel prices rebounds on demand
improvement
Demand improvement fuels
steel prices
Rise in input cost also fuels
steel prices
Rise in transportation cost
fuels steel prices
Lack of supply of Iron ore
and coke fuels input price
SOURCE : MEPS ONLINE STEEL PRICE
2. Industry value chain & structure
2.1 Industry Value Chain
2.2 Industry structure
2.3 Categories and type of steel
products
VALUE CHAIN INDUSTRY ANALYSIS - Steel
STEEL
MANUFACTURING
PROCESS
BOF ROUTE
EAF ROUTE
SPONGE/PIG IRON
IRON ORE
FLUXES
RM
RM
COAL
SCRAP
COKE
SMS
ENTERS BLASTFURNANCE FOR
MAKING HOTMETAL
SMS 2
CBC
SLAB
WIRE
MILL
SMS 1
SMS 2
CBC
SLAB
WIRE
MILL
MERCHANT
MILL
BOF; BASIC OXYGEN FURNACE
SMS; STEEL MELTING SHOP
COLD ROLLMILL
MERCHANT
MILL
COLD ROLLMILL
EAF; ELECTRIC ARC FURNANCE
HOT STRIP MILL
HOTSTRIP
MILL
2.2 Industry structure
Around 65% of
Indian
steel market is
organisedand 35%
is unorganised as
of FY 2009-10
Source ministry of steel
2.3 Categories and type of steel products
Steel
From/size/
shape
Liquid
steel
composition
Crude
steel
Structural
steel
ingots
semis
Finished
goods
Flat
products
End use
Non flat
products
Alloy steel
Non-alloy
steel
Stainless
steel
Low carbon
or Mild steel
Construction
steel
Deep drawing
steel
Silicon
electrical
steel
Medium
carbon steel
Rail steel
High speed
steel
High
carbon steel
Foreign
steel
3. Industry Size & Growth
Demand and Supply
on the rising trends
2005-10
Consumption grows
at 8% growth in FY2010
Supply grows at 6% in
FY2010
S h a r e o f P v t V s P u b lic P r o d u c e r s
100%
Private players take
over steel industry from
public sector on
account of speedy
implementation of
capacity expansion
80%
60%
40%
20%
0%
2005-06
2009-10.
P u b lic
PVt
Source ministry of steel
Domestic Scenario: Demand Outstrips supply
growth
•Strong growth in demand
from automobiles and
infrastructure
•Imports meeting the
domestic demand
•Exports continue in negative
growth territory
•Supply dips due to delay in
projects and lack of new
capacity
•Shortage of raw materials
hampers supply growth
•Imports of value added
products on higher side
Industry Size & Growth Contd….
S h a r e o f D o m e s t i c P r o d u c e r s a n d Im p o r t e r s o f S t e e l
India’s dependency of
steel Imports catches
faster due to high demand
Import Duty on steel has
not been hiked so landed
price cheaper than
domestic price
Capacity utilization on
the rise on account strong
domestic demand
100%
80%
60%
40%
20%
0%
A p r- 1 0
May-10
D o m e s t ic P r o d u c e r s
Ju n - 1 0
Ju l- 1 0
Im p o r t e r s h a r e
Source: ministry of steel
Source: ministry of steel
4. Industry Segment
4.1
4.2
4.3
Product wise Industry Segment
Consumer wise Industry Segment
Integration wise Industry Segment
4.1 Product wise and Customer wise Industry
Segment
•Long products
dominate on account
of major use of steel in
construction industry
• Flat witnesses high
growth on account
strong growth in auto
sales
•Flat products demand
met by imports
SH A R I N G O F L O N G A N D F L A T P R O D U C T I N ST E E L
P R O D U C T I O N D U R I N G 2009- 10
42%
58%
L O N G PR O D U C T
F L A T PR O D U C T
Source:- JPC
D E M A N D O F ST E E L I N D I F F E R E N T SE C T O R
D U R I N G F Y 2009- 10
OTH ERS
AU T O M O B IL E
17%
S
11%
M AN U FAC T U R
IN G
C O N ST R U C T I
13%
ON
59%
s o u rc e :- m in is try o f s te e l
4.3 Value Chain wise Industry Segment
Integrated steel
players dominate
V al u e C h ai n W i se S e g m e n t s ( i n % ) - 2009- 10
Biggies wait for
expansion plans to
fructify
38%
62%
ST E E L I N T E G R A T E D
Source- JPC
SE C O N D A R Y P R O D U C E R S
5. Major players & Competition
5.1 Major players
5.2 Herfindahl Index
5.3 Michael Porter Analysis
5.1 Herfindhal Index
COMPANY
MTPA
% SHARE
%^2
13.80
32
1007
TATA STEEL
7.00
16
259
JSW LTD.
6.90
16
252
ESSAR STEEL LTD.
BHUSAN
4.60
3.15
11
7.2
112
52.5
JINDAL STEEL
3.00
6.9
47.6
RINL
2.54
5.8
34.1
ISPAT
2.50
5.7
33
TOTAL
43.49
100
1797
SAIL
Herfindahl Index value 1797 as Herfindahl index is
between 1000 to1800, it is moderately concentrated, price
sensivity and competition is also moderate
5.2 Michael Porter Analysis
BARRIERS TO ENTRY
(moderate to high)
-Huge Capital requirements
-Economies of scale
Bargaining power
of suppliers (low
to moderate)
-For Fully Integrated
Steel Plant it is low
-Moderate for
secondary Steel Plant
Degree of rivalry
(Moderate)
-Technological adv.
-Product
differences
-Brand identity
Threat Of
Subsitutes (low)
-Cost Differential is also High
-Aluminium and plastic are
not a big threat
Bargaining power
of buyers (low to
Moderate)
-High for Buyer with
high volume and
more information
-High when the buyer
has a Brand
identity
6. Technology
Blast Furnace / BOF :-- Basically
converts iron ore into liquid
form of iron
Electric Arc Furnace (EAF) :-Purpose is remelting sponge
iron, melting scrap (ISPAT,
ESSAR, JINDAL)
Induction Arc Furnace :-- It is
most Advanced Process of
Making Steel
Finex Technology is much
cheaper and save 20 kg coal
per ton
Posco’s corex technology is
most advanced technology
T e c h n o lo g y w is e S e g m e n t o f P ro d u c tio n P ro c e s s D ec 2009
E IF
27%
BOF
47%
E AF
26%
7. Regulation
100% Foreign direct investment (FDI) permitted through
automatic route
Licensing requirement for capacity creation has been
abolished
Removed from the list of industries reserved for the
state sector
Price and distribution controls were removed in 1992
Restrictions for import and export have been removed
The min capital requirement for foreign firms To set up
wholly-owned subsidiaries is US$10 million and For joint
venture is US$5 million
Excise duty cuts to 8 %, Import duty cuts to 5%
National Steel Policy 2005
To enhance the indigenous steel production to 110 MT per annum by
2019-20 from the 04- 05 level of 38MT, implying a compounded annual
growth rate of 7.3%
To boost steel consumption in the rural areas
Developing of risk-hedging instruments like futures and derivatives to
contain price volatility in the steel market
To strengthen the existing training and research facilities available to the
domestic steel industry
Protection of industry from unfair trade practices resulting in integration of
the Indian and global industry especially in periods of downturn
To boost exports govt. will support all efforts to make available export credit,
provide trade information, and cut transaction costs in general
8. Issues & Concerns
Shortage of raw materials
Increased transportation
charge , Cheap Imports, Lack Trend of Raw Material Prices US$/ ton
of infrastructure
Low productivity
High input cost
Delay in adoption of new
technology
Threat of substitutes: steel
is replaced by aluminium in
automobile
Price sensitivity and demand2007
2008
2009
2010
volatility.
Data: CRU Analysis.
Lack of Infrastructure
9.Growth Drivers
HUMAN
RESOURCES
• India has large &
Cheap labour base.
GOVERNMENT POLICY
•100 % FDI allowed through
automatic route
GROWTH
DRIVERS
•Support to M&A.
•Infrastructure supportive
policies
•Approval to R&D project
ABUNDANT IRON ORE
• Reserves of 11.43 bt. of
Hematite ore and
10.68 bt of magnetite ore
• Leader in DRI production
HUGE POTENTIAL FOR
DEMAND
• High demand in
infrastructure, housing
& real estate, construction
and automobile
• Higher FDI in steel
industry
• High GDP growth rate
• Lower per capita
consumption
10.Outlook
 Global crude steel
capacity 2051 mn tons by
World apparent consumption of finished steel products, m to
2012
 India has a target to
become with 124 mt
production by 2015
 India has large reserves
of iron ore
 Higher demand in
2009
Data: CRU Analysis.
infrastructure,,
Automobile industry,
Construction Industry, Oil
and Gas Industry and
2010
THANK YOU