Indian Steel Industry

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Information about Indian Steel Industry

Published on March 4, 2009

Author: anand_16c

Source: slideshare.net

Description

SWOT Analysis of Indian steel on the basis of statistics available till March 2008.

 

173 players in Indian finished steel industry. From 2006, India has emerged as 5 th largest crude steel producer in world. India is likely to achieve steel production capacity of nearly 124 million tones by the year 2011-12. Steel consumption in India (2006-07): 46.14 Mt. Consumption has grown by 12.5% during last three years. Exports have increased by 6.26% in 2006-07 over 2005-06 to touch 4.75 Mt. India has 13 billion tons of iron ore deposits. Copyright©: IAME 2008; Anand Choudhary /15

173 players in Indian finished steel industry.

From 2006, India has emerged as 5 th largest crude steel producer in world.

India is likely to achieve steel production capacity of nearly 124 million tones by the year 2011-12.

Steel consumption in India (2006-07): 46.14 Mt. Consumption has grown by 12.5% during last three years.

Exports have increased by 6.26% in 2006-07 over 2005-06 to touch 4.75 Mt.

India has 13 billion tons of iron ore deposits.

Copyright©: IAME 2008; Anand Choudhary /15 Abundance of iron ore & coal Endemic deficiencies 4 th largest iron ore reserves (13 Bt) Systematic deficiencies 3 rd largest pool of technical manpower Low unit labour cost Unexplored rural market Slow Industrial Growth Other sectors Threats of Substitute Export market penetration Technological change Price Sensitivity and Demand Volatility STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

Abundance of iron ore & coal

Endemic deficiencies

4 th largest iron ore reserves (13 Bt)

Systematic deficiencies

3 rd largest pool of technical manpower

Low unit labour cost

Unexplored rural market

Slow Industrial Growth

Other sectors

Threats of Substitute

Export market penetration

Technological change

Price Sensitivity and Demand Volatility

Abundance of iron ore and coal. Fourth largest iron ore reserves (13 b tones) Third largest pool of technical manpower Low unit labour cost. Copyright©: IAME 2008; Anand Choudhary /15

Abundance of iron ore and coal.

Fourth largest iron ore reserves (13 b tones)

Third largest pool of technical manpower

Low unit labour cost.

Endemic deficiencies High ash content of indigenous coking coal High basicity index in iron ore. Certain key ingredients e.g. nickel, ferro-molybdenum are unavailable. Systematic deficiencies High cost of capital Steel companies are charged interest rate of around 14% on capital in India compared to 2.4% in Japan and 6.4% in USA Copyright©: IAME 2008; Anand Choudhary /15

Endemic deficiencies

High ash content of indigenous coking coal

High basicity index in iron ore.

Certain key ingredients e.g. nickel, ferro-molybdenum are unavailable.

Systematic deficiencies

High cost of capital

Steel companies are charged interest rate of around 14% on capital in India compared to 2.4% in Japan and 6.4% in USA

Low labour productivity SAIL & Tata Steel is 75 & 100 t/man year, for POSCO, Korea & NIPPON, Japan its 1345 & 980 t/man year High cost of basic Inputs and Services E.g. Cost of electricity is 3 cents in USA compared to 10 cents in India. Other systematic deficiencies include: Poor quality of basic infrastructure like road, port, etc. Lack of expenditure in research and development Delay in absorption in technology by existing units Limited access of domestic producers to good quality of iron ores which are normally earmarked for exports. Copyright©: IAME 2008; Anand Choudhary /15

Low labour productivity

SAIL & Tata Steel is 75 & 100 t/man year, for POSCO, Korea & NIPPON, Japan its 1345 & 980 t/man year

High cost of basic Inputs and Services

E.g. Cost of electricity is 3 cents in USA compared to 10 cents in India.

Other systematic deficiencies include:

Poor quality of basic infrastructure like road, port, etc.

Lack of expenditure in research and development

Delay in absorption in technology by existing units

Limited access of domestic producers to good quality of iron ores which are normally earmarked for exports.

Unexplored rural market Other sectors Export market penetration Copyright©: IAME 2008; Anand Choudhary /15

Unexplored rural market

Other sectors

Export market penetration

Unexplored Rural Market Usage in cost effective manner Housing Fencing Structure Agriculture machineries furniture Copyright©: IAME 2008; Anand Choudhary /15

Unexplored Rural Market

Usage in cost effective manner

Housing

Fencing

Structure

Agriculture machineries

furniture

Other Sectors Automobiles Packaging Engineering industries Irrigation and water supply Export Market Penetration World steel consumption will double in next 25 years Low production cost advantage Need Quality improvement Copyright©: IAME 2008; Anand Choudhary /15

Other Sectors

Automobiles

Packaging

Engineering industries

Irrigation and water supply

Export Market Penetration

World steel consumption will double in next 25 years

Low production cost advantage

Need Quality improvement

Slow Industrial Growth Threats of Substitutes Technological change Price Sensitivity and Demand Volatility Copyright©: IAME 2008; Anand Choudhary /15

Slow Industrial Growth

Threats of Substitutes

Technological change

Price Sensitivity and Demand Volatility

Slow Industrial Growth Strong linkage between economic growth of country and growth of steel industry 1970-90 a sluggish growth period for domestic steel industry Increase market share was only way to grow Consequence: price war and heavy trade discounts Copyright©: IAME 2008; Anand Choudhary /15

Slow Industrial Growth

Strong linkage between economic growth of country and growth of steel industry

1970-90 a sluggish growth period for domestic steel industry

Increase market share was only way to grow

Consequence: price war and heavy trade discounts

Threats of Substitutes Plastics and composites Aluminium Already replaced: Large diameter water pipers (RCC pipes) Small diameter pipes (PVC pipes) Domestic water tanks (PVC tanks) Copyright©: IAME 2008; Anand Choudhary /15

Threats of Substitutes

Plastics and composites

Aluminium

Already replaced:

Large diameter water pipers (RCC pipes)

Small diameter pipes (PVC pipes)

Domestic water tanks (PVC tanks)

Technological change Change industrial structure Price Sensitivity and Demand Volatility Inability to tune production in line with the market demand fluctuations Other threats: Ever decreasing import duty on steel Dumping of steel by developed countries High quality products from developed countries available for import at very competitive prices Copyright©: IAME 2008; Anand Choudhary /15

Technological change

Change industrial structure

Price Sensitivity and Demand Volatility

Inability to tune production in line with the market demand fluctuations

Other threats:

Ever decreasing import duty on steel

Dumping of steel by developed countries

High quality products from developed countries available for import at very competitive prices

Copyright©: IAME 2008; Anand Choudhary /15 Survival Strategy Growth Strategy

Today steel industry operate at high levels business complexity. Today there is need that they eliminate all unnecessary complexity and segregate their focus on selected products and markets to achieve as in many other industries. Copyright©: IAME 2008; Anand Choudhary /15

Today steel industry operate at high levels business complexity. Today there is need that they eliminate all unnecessary complexity and segregate their focus on selected products and markets to achieve as in many other industries.

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