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1.1. Shah Lekhanki Vijay KumarShah Lekhanki Vijay Kumar

2.2. Mirza Aslam Baig Azeez BaigMirza Aslam Baig Azeez Baig

3.3. Sanket Shaktibhai MukulSanket Shaktibhai Mukul

4.4. Vikas Kumar GuptaVikas Kumar Gupta

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AgendaAgenda

• Industry Overview• Industry value chain • Market size & growth• Industry segments• Major players & competition• Technology• Regulations• Issue and concern• Growth drivers• Outlook

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World ScenarioWorld Scenario

• China remained the world’s largest Crude Steel producer in 2007 (489.00 mmt) II is Japan (112.47 mmt) and USA (97.20 mmt). India occupied the 5 th position (53.10 mmt) for the second consecutive year.

• The International Iron & Steel Institute (IISI) in its forecast for 2008 said, the steel production shall rising from 1,202 mmt in 2007 to 1,282 mmt in 2008 i.e. by 6.7%.

• The BRIC ( Brazil, Russia, India and China) countries will continue to lead the growth with an expected increase in production by over 11% compared to earlier years.

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Industry OverviewIndustry Overview

• India is the 5th largest producer globally, it is expected to become 2nd largest producer in 2015.

• Tata Steel, the world's sixth largest steelmaker• Producing 54.5 mmt, India accounts for 7% of the world's

total production. • Steel industry contributes 1.4% to GDP, per capita steel

consumption is 46 kg. • India's steel use is at 56 mmt in 2009, a 1.2% increase

from 2008 and is expected to be 59 mmt in 2010 an increase of 8% YoY.

• Iron ore exports increased 17% to 12.6 mmt in Feb 2009 from 10.8 mmt YoY.

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Export & ImportExport & Import• Steel exports declined from 1.032 million tonnes in the first

quarter to 0.642 million tonnes in the second quarter, recording a fall of 37.8 per cent from the first quarter.

• imports decline 5.3 per cent from 1.493 million tonnes to

1.414 million tonnes. • Gaps in Availability are met mostly through imports.

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Value ChainValue ChainUpstream

Iron Ore Steel Making Slabs/HR coils

Develop close to raw material sources:

•Expand internationally through JV, alliance or M&A.

•Ore Proximity and quality/size optimized slab production

Down stream

Cold rollingCold rolled

coilsfinishing Final product distribution market

Develop close to Market:

•Build production and distribution networks

•Regional and/or product specification specializations

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Steel Process flow

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Segment

Technology Application Product wise

•Blast oxygen furnace•Electronic arc furnace

•Infrastructure•Transport and automobile•others

•Long product•Flat product

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Types of Steel and it’s useTypes of Steel and it’s use

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Market size and growthMarket size and growth

Source: Ministry of Steel

Market share

3%

26%

9%

9%

28%

12%

14%

5%

7%

5%

8%

sail

tata steel

jsw steel

essar steel

ispat industries

welspungujrat

bhushan steel

rinl

usha martin

others

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GrowthGrowth

• Steel production (weight of 5.13% in the IIP) registered a growth of 1.6 %(provisional) in April 2009 compared to (-) 0.6% (estimated) in April 2008.

• Steel production grew by 0.4% (provisional) during April-March 2008-09 compared to an increase of 6.2% during the same period of 2007-08.

• Expectation in increase of Steel production with increase in demand of Domestic consumption of Steel.

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Major players

Public sector Private sector

•STEEL AUTHORITY OF INDIA LTD. (SAIL) •RASHTRIYA ISPAT NIGAM LTD. (RINL)•HINDUSTAN STEELWORKS LTD. (HSCL)•BHARAT REFRACTORIES LTD. (BRL)

•TATA STEEL LTD.•ESSAR STEEL LTD. (ESL)•JSW STEEL LTD.•ISPAT INDUSTRIES LTD. (IIL)

Major Players

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Herfindahl IndexHerfindahl Index

• It measures industry concentration. It is arrived as under:

• HI = ∑ (Market Share of each player)2 • monopoly >= 10000. • Duopoly 5000-10000.• Monopolistic =2000-5000.• Moderate =2000-1000• Pure competition <=1000.

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Herfindahl Index contd….Herfindahl Index contd….

• Value of Herfindahl index for Indian steel industry is 1424.22,which indicates there is moderate competition.

companymarket share

Market share2

sail 27.14 736.58

tata steel 12.14 147.38

jsw steel 13.93 194.04

essar steel 8.57 73.44

ispat industries 9.27 85.93

welspungujrat 2.67 7.13

bhushan steel 8.48 71.91

rinl 5.36 28.73

usha martin 7.14 50.98

others 5.3 28.09

Total market share 1424.22

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Threat of new entrant low

Bargaining power of supplierModerate to high

Bargaining power of buyer low

Interfirm firm competitionModerate to high

Threat of new substituteModerate to low

Michael porter analysisMichael porter analysis

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Michael porter analysisMichael porter analysis

1. Threat of new entrant Low as the cost is too high• The recovery period is long• Goodwill is a key Factor• Regulatory Issue

2. Bargaining power of supplier Moderate to high• This is due to mergers, acquisition • and memorandum of understanding.• Fragmented coal supply• Huge International market for coking coal• Major control of Iron ore in few Hands

3. Bargaining power of buyer Low• only a few suppliers

4. Interfirm firm competition Moderate to high• competition between Private and PUC

5. Threat of new substitute• Moderate to low

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Benefits of TechnologyBenefits of Technology

• Steel industry mainly use two type of technology i.e. BOF and EAF

• BOF provide high quality and competitive price. But is depended on coal supply.

• EAF technology is more flexible. Is dependent on electric supply/tariff.

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RegulationsRegulations

• Steel as an industry comes under core industries, so its regulated by the government, “ministry of steel”.

• The steel prices are determined by the interplay of market forces.

• Interaction with All India Financial Institutions to expedite clearance of projects.

• There is a union of steel producers of India: “Indian steel alliance”

• Regular interactions with entrepreneurs proposing to set up new ventures, to review the progress of implementation and assess problems faced.

• Joint advisory policies with railways.

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Regulations cont…Regulations cont…

• There a 5% import duty on most steel items while iron ore lumps attract a tax of 5 %

• The Government exempted pig iron, non alloy steel and steel making inputs like zinc, ferro-alloys and metcoke from customs duty.

• The Government withdraw DEPB benefits on export of various categories of steel products and bringing back railway freight on iron ore from classification 180 to 170 for domestic steel producers.

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Issue and concernIssue and concern

• Downtrend in steel prices.• Concerns over mining lease policies.• Dumping by competitors.• Lack of latest technology.• Low manpower productivity.• Steel production is hampered by power shortage.• Naxalites movement is hampering the movement of

the iron ore.

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Growth driverGrowth driver

Driver industries:

• construction

• Automobile & auto components industry.

• Infrastructure

• Oil & gas

• Consumer durables

• Engineering industries

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Growth drivers Growth drivers continued....continued....

Regulations:• The government has reduced export duty on iron ore lumps from 15%

to 5%, which has given a further fillip to exports.

• Allocation of gas to steel firms.

• Advantages of domestic availability of raw materials and cheap labour.

• Advance Licensing Scheme allows duty free import of raw materials for exports

• Foreign technology as well as foreign direct investment are freely

permitted up to certain limits under an automatic route

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Mergers, Acquisitions & Joint VenturesMergers, Acquisitions & Joint Ventures

• SAIL-NTPC joint venture.• Joint venture between SAIL and USX

Engineers & Consultants, promotes information technology in the steel sector.

• A joint venture between SAIL and Tata Steel to promotes e-commerce activities in steel and related areas.

• SAIL, BMW a joint venture to promote a service centre at Bokaro with the objective of adding value to steel.

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Mergers, Acquisitions & Joint Ventures Mergers, Acquisitions & Joint Ventures cont….cont….

• A joint venture between SAIL and West Bengal Mineral Development Corporation ltd.

• A joint venture between SAIL, National Mineral Development Corporation (NMDC) and Russian promoters for marketing Romelt Technology.

• Joint venture between SAIL and the National Thermal Power Corporation (NTPC).

• Joint venture between SAIL and the Damodar Valley Corporation.

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Impact of Budget on Steel IndustryImpact of Budget on Steel Industry

• Imposition of preliminary anti-dumping duty on cold rolled flat products of stainless steel (SS).

• the over Rs 60,000 crore spending plan for construction of rural roads, irrigation and other infrastructural projects in rural areas under the Bharat Nirman and other Centrally-sponsored projects would help generate additional demand for steel

• Positive Impact on Automobile industry in Budget 2009 • Plans to cover long distance gas pipelines would mean

increase in demand for steel pipes and tubes.

• Increase in tax exemptions for citizens would result in higher disposable income that will likely trigger increased demand for consumer durables, white goods etc, thus eventually boosting the demand for steel.

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OutlookOutlook• Huge spending proposed by Government in

infrastructure & social sector.• Overall consumption growth is projected at 12% pa in

the next decade because Manufacturing Ind are showing a positive growth.

• General decrease of worldwide steel consumption• Indian steel companies are likely to get 19% of the

total global demand in the years to come • Competition from newer materials.• India's steel capacity is likely to be 110 mmt by 2020.• Till 2015, 23lakh are expected to get employed.• Growing demand in Auto industry will have a positive

impact on the Steel industry growth.

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