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Presented By: Group 8 Section E

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75 views25 pages

Presented By: Group 8 Section E

Uploaded by

Vignesh Aynna
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Presented by:

Group 8
Section E
 Iron is 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 WANT? HOW DO FIRMS SURVIVE KEY SUCCESS
COMPETITION?
(Analysis of demand) FACTORS
(Analysis of competition)

 Low price.  Commodity products, excess  Conventional sources of cost


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

 Differentiation through technical


specifications and service quality.

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