INDIA AHOY!!!!!

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INDIA AHOY!!!!!
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STEEL SECTOR
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World Steel Industry Top Ten
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Ukraine 38.6 mT
Germany 45.8 mT
China 502 mT
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Italy 30.6 mT
S. Korea 53.6 mT
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6
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Global crude steel Production 1326.5 million
tonnes (mT)
Source IISI
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Global ranking of Indian steel
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Indian Steel Industry
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• Supply
• With trade barriers having been lowered over
  the years, imports play an important role in the
  domestic markets.Demand
• The demand is derived from sectors that include
  infrastructure, consumer durables and
  automobiles.Barriers to entry
• High capital costs, technology. Bargaining
  power of suppliers
• The governments move on railway freight costs
  and grid power costs would determine the final
  price of the metal. Bargaining power of
  customers
• High, presence of a large number of suppliers
  and access to global markets.Competition
• High, presence of a large number of players in
  the unorganized sector.

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Indian Potential for Steel
Huge Potential for Demand

• High GDP growth rate of 7
• 1 billion population
• Low per capita steel consumption of 33kg (World
  av. 181 kg)

Growth factors for India
Abundant Iron Ore
Skilled Human Resources
Reserves 23 billion tonnes
Government Policy

• Encouraging trade relations with ASEAN and other
  countries
• Infrastructure building
• Exploring new Energy resources

• Stable currency
• Easing of regulations
• Strong Banking judicial system

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Indian Steel Industry An Overview

• Fifth largest producer of steel in the world and
  second largest producer of crude steel - Press
  Information Bureau
• Steel production reached 28.49 million tonne (MT)
  in April-September 2009.
• About 50 of the steel produced in India is
  exported.
• India accounts for over 7 of the total steel
  produced globally
• India accounts for around 5 per cent of the
  global steel consumption
• Huge Iron Ore reserves 23 bn. tonnes
• Indian Steel Producers are increasingly looking
  for overseas acquisitions in steel as well as raw
  materials.
• Positive overall growth in the production of
  crude steel

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Composition of Steel Production -A Value
Proposition
HR
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Steel - Products
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Indian Steel IndustrySWOT Analysis
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SWOT ANALYSIS OF INDIAN STEEL INDUSTRY

• STRENGTHS
• Abundant resources of iron ore
• Low cost and efficient labour force
• Strong managerial capability
• Strongly globalised industry and emerging global
  competitiveness
• Modern new plants modernised old plants
• Strong DRI production base
• Regionally dispersed merchant rolling mills

• WEAKNESSES
• High cost of energy
• Higher duties and taxes
• Infrastructure
• Quality of coking coal
• Labour laws
• Dependence on imports for steel manufacturing
  equipments technology
• Slow statutory clearances for development of
  mines

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SWOT ANALYSIS OF INDIAN STEEL INDUSTRY

• THREATS
• Slow growth in infrastructure development
• Market fluctuations and Chinas export
  possibilities
• Global economic slow down

• OPPORTUNITIES
• Huge Infrastructure demand
• Rapid urbanisation
• Increasing demand for consumer durables
• Untapped rural demand
• Increasing interest of foreign steel producers in
  India

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Michael Porters Five Forces Analysis

• Buyers Power
• Increasing Demand for Steel
• Fragmented Coke Suppliers
• Suppliers Power
• High Raw Material Prices
• Lack of Captive Source Hurting Steel Producers
• Lack of Transportation
• Backward Integration
• Intensity of Competition
• Competition from Foreign Players
• Spurt in Merger and Acquisition Activities
• Threat of New Entrants
• High Cost of Basic Inputs and Services
• Threat of Substitutes

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PEST Analysis

• Political Factors
• Recommendations on Captive Mines
• National Steel Policy to Remove Bottlenecks
• Economic Factors
• GDP Growth Rate
• Reduction in Customs Duty
• Social Factors
• Rural-Urban Divide
• Higher Disposable Income
• Technological Factors
• Popularity of Steel Portals
• Application of SML (Steel Markup Language)

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Top 10 Players

• 1st 103.3 mmt ArcelorMittal
• 2nd 37.5 mmt Nippon Steel
• 3rd 35.4 mmt Baosteel Group
• 4th 34.7 mmt POSCO
• 5th 33.3 mmt Hebei Steel Group
• 6th 33.0 mmt JFE
• 7th 27.7 mmt Wuhan Steel Group
• 8th 24.4 mmt Tata Steel
• 9th 23.3 mmt Jiangsu Shagang Group
• 10th 23.2mmt U.S. Steel
• Source World Steel Association

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ArcelorMittal

• largest steel company, with 315,867 employees in
  more than 60 countries.
• formed in 2006 by the merger of Arcelor and
  Mittal Steel. (38.3 billion )
• It ranks 28th on the 2009 Fortune Global 500
  list.
• the market leader in steel for use in automotive,
  construction, household appliances and packaging.
• ArcelorMittal is looking to develop positions in
  the high-growth Indian and Chinese markets.

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MAJOR PLAYER - SAIL

• fully integrated iron and steel maker.
• GOI - 86 of SAIL's equity
• However, SAIL, by virtue of its "Navratna"
  status, enjoys significant operational and
  financial autonomy.
• SAIL and TISCO (which enjoy the benfits of
  captive ore mines) are among the lowest cost
  producers of steel in the world.

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Major units of SAIL are as under .

• 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
• Special Steel Plants
• Alloy Steels Plants (ASP) in West Bengal
• Salem Steel Plant (SSP) in Tamil Nadu
• Visvesvaraya Iron and Steel Plant (VISL) in
  Karnataka
• Subsidiaries
• Indian Iron and Steel Company (IISCO) in West
  Bengal
• Maharashtra Elektrosmelt Limited (MEL) in
  Maharashtra
• Bhilai Oxygen Limited (BOL) in New Delhi

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SAILS GROWTH PLANS
mT
- Planned Investments of US 7.7 bn. - Includes
only growth in existing Units
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Other Major steel producers

• Tisco
• JSW
• Essar Steel
• RINL
• MECON
• MOIL
• MSTC
• KIOCL
• NMDC

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TATA STEEL LIMITED

• Tisco -1907
• country's single largest
• Integrated steel plant
• ranks 34th in the world
• Technical collaboration with Nippon Steel
  Arcelor
• In January 2007 Tata Steel made a successful
  11.3 billion offer to buy European steel maker
  Corus Group PLC.

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STEEL SECTOR TRENDS

• India - worlds largest producer of direct
  reduced iron (DRI) or sponge iron with nearly 20
  million tonnes production in 2008-09.
• Estimated steel production capacity -124 million
  tonnes by the year 2011-12.
• Generate additional employment of around 4
  million by 2020 for production of around 295
  million tonnes of crude steel by 2019-2020.
• 222 MoUs have been signed with various States
  for planned capacity of around 276 million tonnes

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Steel Key facts
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Performance of PSUs
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Production, consumption and growth of steel
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Crude steel production
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Trends in production, private/public sector
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Turnaround in Industrial Activity
Services
Industry
Agriculture
Services and Industry contribute to higher
GDP growth
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Indian Steel Growth-Slowly, Steadily
Confidence
Stagnation
Decontrol
Controlled Regime
2005
1991
1951
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Proof of the Pudding !
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Booming Capital Market
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Other Key Indicators

• Exports crossed US100bn. mark in 2005-06. Fourth
  consecutive year of more than 20 exports growth
• Imports of Capital goods increasing
• Moderate inflation rate - within 4-5
• Stable Rupee against US dollar
• Growing corporate sector profits
• Growing Forex reserves - US 160 bn.
• Business Confidence at all time high

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Steel Sector The Back Seat Drivers!
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BOOMING STEEL CONSUMING SECTORS
Capital Goods
Construction
Manufacturing
Consumer Durables
Industrial growth led by Manufacturing Capital
and Consumer Goods sectors flag bearers of
manufacturing sector growth
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INDIAS CRUDE STEEL PRODUCTION (MT) HISTORIC
TRENDS
58 mT in 2008
1.25 mT in 1948
16.2 mT in 1991
6.6 mT in 1973
HIGH GROWTH
India gains independence in 1947
MODEST GROWTH
Enabled by Indias Economic liberalization
process
SLOW GROWTH
Year indicates FY
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Apparent Finished Steel Consumption (mT)
CAGR 7.0
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National Steel PolicyAddressing the Weaknesses
Harnessing the Opportunities
Approved by Government of India in September 2005
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OBJECTIVE

• To have modern and efficient steel industry of
  world standards, catering to diversified steel
  demand.
• To achieve global competitiveness in cost,
  quality, product-mix, efficiency and productivity
• To attain Finished Steel production of 110 mTpa
  by 2019-20

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STRATEGY

• Demand Side
• Strengthening of delivery chain
• Interface between producers, designers of steel
  intensive products, fabricators and ultimate user
• Creating awareness about cost-effective and
  technically efficient end-use of steel
• Supply side
• Enhanced and easy access to critical inputs
  iron ore coking coal
• Expansion and improvement in quality of
  infrastructure
• Well developed financial market
• Increased focus on RD, training of manpower and
  integrated information services

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New Capacities
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Proposed state-wise capacity additions upto 2012.
Jkhand 34 mtpa
W Bengal 4 mtpa
Chgarh 9 mtpa
Orissa 38 mtpa
AP 3.3 mtpa
Karnataka 9.7 mtpa
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Future of Indian Steel Industry
You aint seen nothing yet !
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Projected per Capita consumption of Finished
Steel in India (kg)
Indias current population is - 1100 million It
is assumed that till 2051, population would be
about 1.4 bn.
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GROWTH SCENARIOS
- Also projected by National Steel Policy
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INDIAN STEEL INDUSTRY A BRIGHT FUTURE
RESOURCES

• Abundant Iron Ore reserves
• Strong Managerial skills in Iron and Steel
  making
• Large pool of skilled Man-power
• Established steel players with strong skills in
  steel making

OPPORTUNITIES

• High economic growth driven increasingly by
  industry
• Faster Urbanisation
• Increased Fixed Asset Building
• Automobiles and component industry growth

POLICY

• Pro-active stance of Govt.
• Encouragement for overseas investments

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• Currently with a production of 56 million tones
  India accounts for over 7 of the total steel
  produced globally, while it accounts to about 5
  of global steel consumption.
• The steel sector in India grew by 5.3 in May
  2009. Globally India is the only country to post
  a positive overall growth in the production of
  crude steel at 1.01 for the period of January
  March in 2009.

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Highlights of 2008-09

• Crude steel production was at 54.52 million
  tonnes, a growth of 1.23 over last year with
  capacity utilisation at 89 during the year. It
  grew at more than 9 annually from 38.72 million
  tonnes (MT) in 2003-04.
• The growth was driven by capacity expansion from
  43.91 million tonnes per annum (MTPA) in 2003-04
  to 64.40 MTPA in 2008-09.

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Financial Year '09

• first half it experienced an extraordinary spurt
  in demand backed by expansion of key consumer
  sectors.
• second half experienced a significant demand
  contraction on account of the global financial
  crisis.
• Thus overall, Indias crude steel production grew
  by 1.2YoY to 54.5 MT.
• The various monetary and fiscal packages
  announced by the government helped the domestic
  steel industry to counter the slowdown and thus
  the demand started reviving upwards from the
  fourth quarter onwards.
• Domestic steel prices and international steel
  prices experienced a divergent trend in FY09.
  While during the first half, international prices
  touched an all time high levels backed by robust
  demand, the second half witnessed more than 50
  fall in the prices on account of significant
  contraction in demand due to the global credit
  crisis. Raw material prices like iron ore and
  coking coal also experienced a similar trend. It
  may be noted that most of the domestic steel
  players entered into an annual contract for
  coking coal in June-July 2009 when prices were at
  their peak. Hence the industry experienced a
  severe pressure on the margins.