Rahul Final Iron & Steel

8/8/2019 Rahul Final Iron & Steel

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IRON & STEEL INDUSTRY

GROUP 4

PRESENTED BY :-

NERAJ

GAURAVMANDEEP

RAHUL

VAIBHAV

SAMEKSHA


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CONTENT


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Steel Industry

Steel is an important indicator to analyze the economic

development of a country. The steel industry is highly

scientific and technology oriented. Technological

advancement is very important for the overall health of the

steel industry.

Steel is an alloy consisting mostly ofiron, with a carbon

contentbetween 0.2% -2.14% by weight, depending on grade.

Carbon isthe most cost-effective alloying material foriron.

other alloying elements used are manganese, chromium,

vanadium, and tungsten.

Steel withincreased carbon content can be madeharder and

strongerthan iron, butis also morebrittle.

Itis morerust-resistantthan steel and welds moreeasily.


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Before Independence

Thehistory ofiron and steel making in India datesto 480 BC

Theroots ofthe Indian Steel industry laid in 1874, Bengal Iron works

at Kulti in West BengalLandmarks was commencement ofthe Tata Iron and Steel at

Jamshedpurin 1907

Other Prominent manufacturers Indian Iron & Steel Company

(1922),Mysore Iron &

Steel Works(1923) and Steel Corporation of Bengal (1937).

After Independence

Difficulty in sustaining dueto the lack oftechnological reasons.

Thehigh cost of developing technology.

Some oftheprominentsteel plantthen wasin

Rourkela in collaboration with West Germany and

Bokaro in collaboration with Russia.


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METHODS OF PRODUCING STEEL

BLAST FURNACE(BF)/BLAST OXYGEN FURNACE

MOST POPULAR METHOD

57 % OF TOTAL PRODUCTION BY THIS METHOD

GOOD FOR VOLUME PRODUCTION

INVOLVES HUGE CAPITAL COSTS

THE ELECTRIC AIR FURNACE(EAF)GAINING POPULARITY GLOBALLY

USES SPONGE IRON/SCRAP & COKE

FLEXIBLE TO PRODUCE DIFFERENT GRADES OF STEEL


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COREX

NEW MODERN SMELTING TECHNOLOGY

RECENTLY INTRODUCED IN INDIA

DOES NOT REQUIRE COKE


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Varieties of Steel

HR COIL/SHEET

BAR & RODS

C R COIL/SHEET

OTHERS

MORE THAN 3500 GRADES OF

STEEL AVAILABLE TODAY


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FINISHED STEEL PRODUCTS

FLATS -USES

AUTOMOBILES

COMMERCIAL VEHICLESCONSUMER DURABLES


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LONGS -USES

CONSTRUCTION

INFRASTRUCTURE

HEAVY ENGINEERING

BARS & RODS -USES

CONSTRUCTION

ENGINEERING SECTORS

H R COILS & SHEETS-26% DOMESTICPRODUCTION


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POPULAR VARIETIES OF STEEL IN INDIA

HOT ROLLED (HR) STEEL -USES

COLD ROLLED PRODUCTS

PIPES & TUBESAUTOMOBILE COMPONENTS

ELECTRONICS LIKE FRIDGES

CONSTRUCTION PURPOSES


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MAJOR COMPONENTS OF COST OF PRODUCTIONRaw materials

Raw material costs formsroughly about 62% ofthetotal cost ofproduction.

Thebasic raw materialsthat are used in producing steel areiron ore, coal and

limestone.

Power costs

Power and fuel contributing as much as 10.1% oftotal production costs.

Global steel industry account for nearly 4% ofthetotal energy consumption in the

world.

Interest payments

Interestpayments form on averagebetween 7 9% ofthetotal costsbuthave

recently come down to as low as 3.2%.

Taxes and duties

Excise duties, salestax, other direct and indirecttaxes furtherpush up costs

Total taxes contribute morethan 16% oftotal costs.

Other expenses

Wagebills, depreciation costs and distribution expenses are among the other major

cost


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WORLDWIDE CRUDE STEEL

PRODUCTIONSeptember 2009 in thousands of metric tons.

Regions 2009 ( 9 Months) 2008 (9 Months) % change

EU (27) 97165 160111 -39.3

OtherEurope 20868 25093 -16.8

CIS (6) 68891 95331 -27.7

North America 56878 103508 -45.1

South America 26265 37703 -30.3

Africa 10694 13630 -21.5

Middle East 12477 12209 2.2

Asia 568805 581599 -2.2

Oceania 3994 6591 -39.4

Total 66 Countries 866037 1035 774 -16.4


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INDIA A MAJOR PRICE MAKER


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MAJOR STEEL PRODUCERS ARE:

TISCO ( TATA IRON AND STEEL CORPORATION LTD)

SAILESSAR STEEL

JINDAL STEELS LTD

SAW PIPES

UTTAM STEELS LTD

ISPAT INDUSTRIES LTD

MAHINDRA STEEL COMPANY LTDTATA SSL LTD

USHA ISPAT LTD

SESA GOA LTD

LLOYDS STEEI INDUSTRIES LTD INTEGRATED STEEL PLANTS

BHILAI STEEL PLANT (BSP) IN CHHATTISGARH

DURGAPUR STEEL PLANT (DSP) IN WEST BENGAL

ROURKELA STEEL PLANT (RSP) IN ORISSA

BOKARO STEEL PLANT (BSL) IN JHARKHAND

BHILAI OXYGEN LIMITED (BOL) IN NEW DELHI


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Company Name Production of

Salable Steel (MT)

Market Share (%)

SAIL 17,634,18 31.98%

TATA STEEL 6074939 11.07%

ISPAT (RNIL) 4410721 8%

Others (ESSAR, JINDAL,

JSW STEEL etc)

27023606 48.95


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MILESTONE

Thetakeover oftheBritish steel giant Corus

steel by Tata Steel .

TATA Being 5TH Majorproducer of world

The acquisition ofArcelor by Mittal Steelheralds a new beginning .

Some oftheprominentsteel producers ofthe

world today are Posco, Essar, Ispat, Sail,JSW andRinl.


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FIVE FORCES


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[A] The Threat of Entry:

1. Economies of Scale:Steel making is only efficient when carried out in a large scale.

Benefits in the form of lower costs, R& D expenses ,procurement of raw

materials.

The potential threat from steel companies which integrate their mines like iron

ore, coal etc dont have to depend on the suppliers more.

2. Capital Requirements:

major barrier to the entry in the steel industry.

Initial investment for setup required is very high

estimated to be around Rs 30bn for 1 Million Tones Per Annum (MTPA) of

integrated steel plant. The major expenditure is on basic oxygen converter, blast furnace, rolling

mills and transportation infrastructure which reduces the livelihood of new

entrants.


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3. Legalization or Government action:Legal restraints on competition vary patent protection,

STRINGENT NORMS

4. Experience:A lot of expertise is required in establishing a steel plant which

creates a barrier .

This industry also has a high MOST COST EFFICIENT LEVEL OF

PRODUCTION (MCEP) which is the point at which the cost of

production is minimum which restricts the entry of new businesses.

5.Supply or distribution channels: the manufacturers generally dont have full control over the supply

and over distribution channels.

These industries tend to have fully vertically integrated facilities in

which fixed costs, such as capital and administration, can be spread

across a broader set of operations,


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6. Expected Retaliation:

Mainly dominated by 5-6 major players

There can be retaliation to prevent entry of new entrantsby increasing entry cost or reduction in prices.

7. High Exit Costs:

Exit costs are relatively higher as it has many specializedassets.

Govt. restrictions

Labour agreements

8. Differentiation:

In steel industry the products are majorly undifferentiated

so there is not much threat of entry.


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[B] Threat from Substitutes:

Theproduction ofsteel isvery high;

So threat from itssubstitutes likestone and

brick for construction, aluminum and plastic (PVC) for automotives

& timber.

Althoughtheprice ofthe alternatives may befavorablein some market conditionsbut

switching costs arehighin thisindustry.


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[C] Bargaining power of Suppliers

Thebargaining power forsuppliersis low fortheproducers.

fully integrated plants donthaveto depend moreon theirsuppliers.Eg. Jindal Steelshave

successfully implemented backward integration

manufacturers who havesemiintegrated millshaveto depend on theirsuppliers.Eg. SAILimports coking coal from itssuppliers located inAustralia

Chhattisgarh, Karnataka, Jharkhand and Orissa -

share major supply function.


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[D] Bargaining Power of Buyers

Key buyers areinfrastructure, construction, automotive,

power shipping etc. which do bulk buying from SAIL, JSW

Steel, TATA Steel, ISPAT .

Buying in huge quantities, influencesitsprice on largescale

On theinternational arena steel prices areinfluenced bythesteel giants likeChina and India.

Thisinfluence also determines local prices.

Factors like low switching costs also contribute.

Undifferentiated product. Largescope of global logisticsto buyers whichincreases

thebargaining power.


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FORCES LEVEL

The Threat of Entry HIGH

Threat form Substitute SIGNIFICANT

Bargaining Power of Supplier LOW

Bargaining Power of Buyer SIGNIFICANT

Competitive Rivalry INTENSE


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SWOT ANALYSISSWOT ANALYSISStrengthsStrengths

1. Availability of iron ore and coal1. Availability of iron ore and coal

2. Low labour wage rates2. Low labour wage rates

3. Abundance of quality manpower3. Abundance of quality manpower

4. Mature production base4. Mature production base

WeaknessesWeaknesses

1. Unscientific mining1. Unscientific mining

2. Coking coal import dependence2. Coking coal import dependence

3. Low R&D investment3. Low R&D investment

4. Inadequate infrastructure4. Inadequate infrastructure

5.5. Endemic Deficiencies

6.Systemic Deficiencies

7.High Cost of Capital8.Low Labor Productivity

OpportunitiesOpportunities

1.1. Unexplored rural marketUnexplored rural market

2. Growing domestic demand2. Growing domestic demand

3. Exports Penetration3. Exports Penetration

4. Consolidation4. Consolidation

ThreatsThreats

1.1. China becoming net exporterChina becoming net exporter

2. Protectionism in the West2. Protectionism in the West

3. Dumping by competitors3. Dumping by competitors

4.4. Slow Industry Growth

5. Technological Change

6. Price Sensitivity and Demand Volatility


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FUTURE TRENDS

Steel industry istrying to offsetthe negativeeffect

especially stainlesssteel,

Focus on transportation and construction projects

funded by the government.India'ssteel consumption estimated to grow at nearly

16% annually till 2012.

The National Steel Policy has forecasted theDomestic

demand forsteel would reach 110 mn tons & export190mt by 2019-2020.

Documents

Rahul Final Iron & Steel