INDUSTRY OVERVIEW
Steel is a important measure of which reflects the development of any modern economy and is considered to be the backbone of human civilization right from its discovery down to the industrial revolution to the present times.
The level of per capita consumption of steel is treated as an important index of the level of socio-economic development and living standards of the people in any country. It is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flows and income generation.
All major industrial economies are characterized by the existence of a strong steel industry and the growth of many of these economies has been largely shaped by the strength of their steel industries in their initial stages of development.
India's economic growth is contingent upon the growth of the Indian steel industry. Consumption of steel is taken to be an indicator of economic development. While steel continues to have a stronghold in traditional sectors such as construction, housing and ground transportation, special steels are increasingly being used in engineering industries such as power generation, petrochemicals and fertilizers. India occupies a central position on the global steel map, with the establishment of new state-of-the-art steel mills, acquisition of global scale capacities by players, continuous modernization and up gradation of older plants, improving energy efficiency and backward integration into global raw material sources.
India is currently the world's fourth largest producer of crude steel (knocking to be the third largest by the year end) and is expected to become the second largest producer by 2020. Steel production in India has increased from 81 million tonnes (mt) in 2013-14 to 88 mt in 2014-15 with the capacity being increased from 100 mt in 2013-14 to 110 mt in 2014-15. The steel sector contributes nearly 2% of the country's GDP and employs over 6 lakh people. The per capita consumption of total finished steel in the country has risen from 51 kg in 2009-10 to about 60 kg in 2014-15.
Steel industry derives its demand from other important sectors like infrastructure, aviation, engineering, construction, automobile, pipes and tubes etc. With the Indian economy poised for its next wave of growth under the reforms being unleashed in the last one year, there lies tremendous opportunity for the Indian steel industry to prosper and grow exponentially.
The Indian steel industry is largely iron-based through the blast furnace (BF) or the direct reduced iron (DRI) route. Indian steel industry is highly consolidated. About 50% of the crude steel capacity is resident with integrated steel producers (ISP). But the changing ratio of hot metal to crude steel production indicates toward the increasing presence of secondary steel producers in the ecosystem.
It is heartening to note that Indian economy is moving at the highest rate in the recent period and would continue to do so in the near future if the projections by IMF, World Bank, ADB and other reputed consultants are to be believed. In the current year, Indian GDP is projected to grow at 7.1%, closely followed by China (6.7%), South East Asian countries (3.5-6.5%) and advanced countries (1.0-3.7%). There is an overall appreciation of economic reforms underway in several states of the country that are making significant contributions to improve the country's ranking in doing business, competitiveness and similar other economic indicators.
SWOT Analysis of Indian Steel Industry.
A close study and the SWOT analysis of Indian steel industry will give a clear picture of the profile of the Steel Industry in India.
Strength
(a) Availability of iron ores, limestone?s, and dolomite mines etc., in India.
(b) Abundance of skilled manpower, available at low wage rates.
(c) Emphasis on the part of government through its five year plan, and huge investment in infrastructures like railways, roads, shipping, ports, civil aviation etc.
Weakness
(a) Expensive energy, infrastructure and finance.
(b) Power shortage, transportation problem and mining malpractices have led to more wastage than utilization of ore etc.
(c) Transportation has emerged as a big challenge for steel industry
(d) Low labor productivity and inefficient human resources management especially in present scenario of professionalism has also posed a great challenge for steel industry
(e) Less availability of coking coal deposits of low quality.
(f) Out of the production of 100 tons of iron ore, about one-third is utilized indigenously, whereas two-third is exported by India at offhand prices .
(g) Bureaucratic restriction over SAIL,
(h) Dependence on foreign technology.
(I) Utilization of inefficient and obsolete technology, which require more input and produce less output.
(j) Indian steel industry still lags in the area of bio-ethics and value chain . (j) Unequal access to the raw material due to the control of SAIL and TISCO over the large iron ore resources.
Opportunity
(a) Optimistic reports has estimated 44 kg per capita finished steel consumption in India for year 2008-09, thereby representing tremendous growth potential in coming years
(b) Rural markets also have great growth potential.
(c) Being the fast emergent economy in the world, India requires more and more steel to meet up her demand in various other sectors of economy like, defense, navy, aviation, infrastructures, automobiles, consumer durables, railways, power, telecom, petrochemicals, fertilizers, etc.,
(d) Automakers in India still import nearly 75% of high-grade automotive steel for outer panels of cars and other vehicles which can be indigenously produced.
(f) High grade indegeneously produced steel will increase demand of steel may increase in international market.The international demand will always grow.
(d) Merger and acquisition, joint venture or global expansion for coking coal, iron ores or advanced technology can help the Indian steel industry in gaining its competitive advantage.
(e) Establishing the global presence of Indian steel industry through market expansion and brand development.
(f) As per the analysis, the break-even size of a steel plant is 5 million metric ton per annum with a mix of captive mines and right partnership. Therefore, it would be sensible for companies to focus on a mix of small
(g) Intensive research and development activities, continuously increasing domestic per capita steel consumption, improved energy efficient technologies, import substitution and increasing demands for export etc. have also opened the bright opportunities for Indian steel industry.
Threats
(a) The liberal policy of Government of India towards the export of iron ore has emerged as a threat for Indian steel industry. It has resulted into the export of nearly half of iron produced in our country.
(b) The imported steel has become more cheaper as compare to that of domestic steel due to reduction in import duty by 5% and enhancement of excise duty in respect to Indian steel . Further 100% enhancement in the import of steel has also been reported in last few months.
(c) Limited availability of metallurgical coal, reducing reserve of hard quality cooking coal has enhanced the problem of concern industry.
(d) Managing the relative cost efficiency and credible raw material resources towards long-term security are going to be the major challenge
(e) Unsupportive government policy regarding resettlement, rehabilitation, land acquisition, environment clearances and opening of mines has become the major hurdle for the initiation of greenfield projects in India
