STEEL
SUBMITTED TO:
Project Giude
Submitted By:
Amit Parmar
PGPIBM 2009-11
CONTENTS
SR. NO. TOPICS PAGE NO
2. About Steel 3
4. Type of Producers 5
Fragmentation
Price Fluctuation
Labour Power
Energy Intensity
Entry Barriers
8. Export – Import 9
13. Conclusion 15
14. Bibliography 16
PREFACE
India is the 5th largest steel producing countries in the world with the production of 55.2 million metric
tons in 2008. Primary producers alone contribute around 68% whereas secondary producers contribute the
rest. At present the steel industry’s demand is strong because of growth in automobile sector and in
construction industry. In recent global meltdown demand for steel in India fell but not in the way it
happened elsewhere in the world. Ministry of Steel has set a target to achieve 100 MMT of steel
production by 2019-20. Steel consumption in India is expected to outgrow GDP growth and increase at
the rate of 10% in the coming years.
This report focuses on the business opportunities available in the steel sector. This report covers history of
steel, basic steel manufacturing process, classification of steel major exporter and importers of steel,
major steel producers in the world, key drivers, outlook of steel prices in the world and India, effects of
recent meltdown in the steel industry.
This report will help to understand the Indian steel industry and its current growth. It also helps to identify
business opportunities available in the steel sector. As students we get an overview of the steel sector
which is at present one of the growing sector in India and will experience robust growth in the coming
years.
India is the 5th largest steel producing countries in the world with the production of 55.2 million
metric tons in 2008.
The industry currently provides employment to around 2 million people directly or indirectly.
Indian steel producers are divided in to two categories: primary and secondary, with primary
producers alone contributes around 68% of total steel production.
India is major exporter of pig iron. India finished steel exports have declined to 3.85 MMT in 2008-
09 from 5.242 MMT in 2007-08 due to recent global meltdown.
Following the global trend, TISCO too took the path of M&A I order to expand and grow.
TISCO acquires Corus Group in US$10 billion which was the biggest overseas acquisition by an
Indian company.
Steel companies are in capacity expansion mode as the industry is targeting to achieve 100 MMT of
steel production by 2019-20 set by Ministry of Steel.
Despite of recent global meltdown demand for steel has not fallen as it happened elsewhere in the
world.
Strong economic growth in developing economies such as China and India are expected hold steel
prices heavily.
ABOUT STEEL
Steel is the most common metal alloy in the world. In its simplest form, Steel mostly consist alloy iron,
with a carbon content between 0.2% and 2.1% by weight, depending on the grade as both iron and carbon
have been well-known since ancient times, steel has been produced in one form or another since well
before the birth of Christ. Some of the very earliest steel was made in the eastern regions of Africa,
around 1400 BCE.
The metal known as cast iron is actually steel that has a very high carbon content, which gives it a
lower melting point and greater castability. Steel is well-known for its strength, which is given to it
precisely by the alloying elements.
Steel had been produced by various inefficient methods long before the Renaissance, its use became more
common after more efficient production methods were devised in the 17th century. With the invention of
the Bessemer process in the mid-19th century, steel became a relatively inexpensive mass-
produced material.
The modern steel industry produces steel through the use of the basic oxygen furnace. In these furnaces,
molten iron has pure oxygen blown through it, lowering the levels of impurities in the iron. Cleaning
agents called fluxes are also added for this same purpose. The main advantage to this process is high
quality product and processing speed.
Alloys with higher carbon content are known as cast iron because of their lower melting
point and castability. Steel is distinguished from wrought iron, which can contain a small amount of
carbon, but it is included in the form of slag inclusions. Two unique factors are steel's
increased rust resistance and better weldability.
Today, steel is one of the most common used materials in the world and is a major component in
buildings, infrastructure, tools, ships, automobiles, machines, and appliances. Modern steel is generally
identified by various grades of steel defined by various standards organizations.
Melting
Refining
Casting
Rolling
Steel Melting Process
BLAST FURNACE
It is a type of shaft furnace that acts as a vertical counter current heat exchanger as well as chemical
reactor in which iron ore fines along with coke fed form the top descend downward and the impurities are
removed as gases or slag.
RAW MATERIALS
Iron ore lumps, sinter, coke (made from coking coal) and fluxes such as limestone and dolomite are the
major raw materials in the steel production.
REDUCING AGENT
Reducing agent in the blast furnace is the carbon monoxide gas generated by the oxidation of carbon in
the coke.
TYPE OF PRODUCERS
STEEL PRODUCERS
Processors
Large Producers
(> 1MMT capacity)
KEY CHARACTERISRICS
1. FRAGMENTATION
It is one of the key features of steel industry. 6 major producers of steel account for 66% of total steel
production in the country.
2. PRICE FLUCTUATION
Steel prices have been quite volatile in the last few years. Over a period prices of steel started growing at
a historic growth. In the beginning of 2008 steel prices reached to 37060 Rs/MMT but after recent global
meltdown steel prices fell drastically.
Mar-06
Mar-08
Mar-09
Dec-05
Sep-06
Mar-07
Dec-06
Sep-07
Dec-07
Sep-08
Dec-08
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
3. LABOUR POWER
Labour is cheap in India but productivity is low compared to other steel producing countries. This is
because many small and medium sized enterprises are using inefficient technology, which results into
low labour productivity.
4. ENERGY INTENSITY
Energy constitutes about 35% of the total manufacturing cost of steel. Primary sources of energy in
the steel sector include coking coal, non coking coal, liquid hydrocarbons and electricity. The steel
industry in India consumes around 10% of electricity and 27% of coal that of the total consumption of
Indian industry.
5. ENTRY BARRIERS
Entry barrier is one of the key characteristics of the steel industry in India. It covers factors that
prevent any new company from entering the industry. These factors include high capital expenses,
long gestation period, and unavailability of scrap, energy efficient coking coal and minimum
economic size. The Indian domestic steel industry faces all these entry barriers.
There are lots of opportunities available in steel. There are mineral resources, manpower, technical skills
and most of what we required to make steel. There is huge growth potential of the domestic market as the
enormous resource of high quality iron ore is available in the country.
Over past few years the number of small and medium scale producers of steel has grown rapidly which
have capacity to around 0.2 to 1 million tons.
The total production of finished carbon steel in the country has been 59.02 million tonnes in 2008-09 as compared
to 14.33 million tonnes in 1991-92. Primary sector alone contributes around 68% of total production. The high
share of the secondary sector in finished steel production is largely due to substantial supplies of semis, the basic
feed material from the main producers for conversion to needed shapes by rolling.
2006-07
2007-08
2008-09
2005-06
2006-07 55.146
2007-08 58.233
2008-09 59.02
EXPORT – IMPORT
EXPORT SCENARIO
Although steel export began in 1964, substantial growth in exports of finished steel was witnessed only
after economic reforms. The growth in the sectors such as automobiles, infrastructure, engineering further
boost the exports of steel. India is the major exporter of pig iron. Recent global meltdown results into fell
in exports but long trends of exports are satisfactory.
IMPORT SCENARIO
As per new industrial policy steel can be freely imported. Import duty rates have been brought down
progressively in the post deregulation period. Since 2004-05 steel imports rises heavily till the period of
global meltdown. The reasons of increase in imports is the growth in production capacity of certain steel
products legged behind the domestic needs.
OTHERS
10%
10% 24%
9%
50%
57% 8%
8%
6%
4%
5%
5%
4%
Manufacturing
Infrastrucutre 23%
25%
Construction
21%
2. AUTOMOBILES
With the economic growth of the country large section of the middle class population is growing. In
addition to this availability of soft interest rate based car loans triggered tremendous demand for
automobiles in the country. Automobiles sector in 2008 grew at around 15% which is expected to be
continue in the near future. This is a positive sign for the persons associated with the steel industry.
3. CONSUMER DURABLES
If the automobile sector has pushed the demand for steel, the domestic consumer durable are not far
behind. Consumer durable includes home appliances such as TV sets, music system, white goods,
washing machine, air conditioners and microwave ovens. The rising level of income, change in lifestyle
of people, availability of a disposable income which further raise the demand for the consumer durable
goods. Out of total steel production in 2007-08, 6% is consumed alone by consumer durable industry.
ROLE OF GOVERNMNET
The role of government in steel sector is motivating. The separate ministry of steel is exist whose
major objectives are:
Co-ordination and planning of the growth and development of Iron and Steel Industry in the country
both in the Public and Private Sectors;
Formulation of policies in respect of production, pricing, distribution, import and export of iron &
steel. eel industry.
In 2005 steel ministry has implemented NATIONAL STEEL POLICY with the objective of having a
modern and efficient steel industry of world standard to cater as diversified steel demand. The policy was
focusing to achieve global competitiveness not only in terms of cost, quality but also in terms of global
benchmark of efficiency and productivity. The government has set a target of achieving 100 million
tonnes of steel production per annum by 2010-20.
Government is also taking care of the small and medium scale producer. The different governments
departments such as State Small Scale Industries Corporations (SSICs) and National Small Industries
Corporations (NSICs) ensure a proper allocation of steel materials to the small and medium sector
industries.
Since the liberalization government is reducing the various duties and tariffs applicable to the
imports and exports of steel. Currently 5% custom duty is applicable to the all steel related items.
In addition there is an export duty of 15% on iron and steel melting scrap and 5% export duty on iron ore.
CONCLUSION
In a summary, we can conclude that steel is the one of the most common used metal in the world. There
are lots of growth opportunities are available in this sector. The strengths of Indian steel industry are
availability of Iron ore and coal, low labour wage rates and availability of quality manpower. On the other
hand there some weaknesses also such as low productivity, low R&D investments, high capital
investment, long operating cycle and inadequate infrastructure.
In addition to this the underestimation of the potential growth of the local and world steel market, lack of
sufficient investment funds, poor project management, lack of professionalism in managing the project
were responsible for the slowdown in steel sector investment in the past.
As an individual if you want to enter in the steel business there are lots of growth opportunities available
in this sector. In India still the rural market is not explored completely and in addition the domestic
demand for steel is growing. Demand of Steel in World is also rising so one can directly enter into the
business of export of steel rather than entering into the hectic manufacturing process.
On the other hand there are some threats in steel sector such as china is becoming net exporter of steel and
some of the western countries have protected policies regards to steel. There is also a threat of dumping
by your competitors such as china is doing in India. In addition long term investment in the non
performing assets results into several steel companies became liabilities for the bank.
Despite all these positive and negative aspects of steel sector one cannot ignore the presence of steel in
most of the growing and developing sectors of the world including India.
BIBLIOGRAPHY
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