Indians were familiar with iron and steel during the Vedic age more than 4,000 years ago. It is evident from the Iron Pillar at the outskirts of Delhi. But the seeds of modern steel industry were sown by Sir Jamshedji Tata in 1907 when Tata Iron & Steel Company Ltd. (TISCO) was set up. The first steel ingots were rolled in TISCO in 1911. This was followed by the establishment of the Mysore Iron and Steel Works in 1936, later renamed as Visvesvaraya Iron & Steel Works. Three years later in 1939, production of steel started in another private steel company, the Indian Iron & Steel Company, now a subsidiary of the Steel Authority of India Limited (SAIL).
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In India, a major part of steel is consumed in engineering applications, followed by automobiles and construction. The growth of steel, as is well known, is dependent upon the growth of the economy, industrial production and infrastructure sectors. Over the last few years the performance of the Indian steel industry has been adversely affected due to overcapacity, cheap imports, economic slowdown, declining global steel prices and also anti dumping duty imposed by USA on Indian exports.
In the era of planned economy, iron and steel, a core and basic sector, received the full attention of the Government. It became a key sector for public investment for the first Five Year Plan itself. The year 1953 saw the first agreement being signed with the Germans to establish a 1 million tone plant at Rourkela in Orissa. Two more agreements for setting up steel plants, at Bhilai with the erstwhile USSR’s assistance and another at Durgapur with the help of U.K. was signed in 1956. Successive capacity augmentations at Bhili, Durgapur and Rourkela saw their capacity increase to 2.5, 1.6 and 1.8 million tons per annum respectively by the end of the 60s.
A new plant at Bokaro with a capacity of 2.5 million tones per annum went into production in 1973-74. The year 1978 witnessed a major restructuring of these steel-making public sector units giving birth to the public sector giant, SAIL, having a “Navaratna” status today, with an aggregate capacity of over 10 million tones. The first shore-based public sector integrated steel plant, viz. The Rashtriya Ispat Nigam Limited of 3 million tones per annum capacity went into production in August, 1992. During the first two decades of planned economic development, i.e. 1950-60 and 1960-70, the average annual growth rate of steel production exceeded 8 per cent. During 1970-80, this growth rate in steel production came down to 5.7 per cent per annum and gathered up marginally to 6.4 per cent per annum during 1980-90.
Until the 1990s the iron and steel sector was by and large the exclusive preserve of only the public sector, the sole exception being TISCO. The new economic policy announced in 1991 was no doubt a significant milestone in the evolution of the Indian economy. The process of the economic reforms ushered in substantial liberalization of the policies and institutions governing trade, industry and finance. With this the complexion of Indian iron and steel industry has undergone a sea change. Iron and steel industry became one of the foremost sectors to be opened under the New Economic Policy. Substantial private investments flowed in with the consequent changes heralding a new beginning for the interplay of free market enterprise in this vital sector.
A glance at the pre-and post-1991 era reveals some interesting and significant structural changes. At the consumer or demand end, the market for steel has been transformed from a seller to a buyer market. Control and regulation have been replaced by competition. Administered prices have been replaced by supply-and demand-determined market prices. In the post-liberalization era, the structure of the steel industry is significantly and vastly different with the advent of major steel producers in the private sector which have come up with the world class technologies and capacities.
There has been a clear shift towards the selection of the product mix. During the pre-1991 era, the private sector was mainly confined to the production of long products. The only producer of hot-rolled flat products was SAIL in the public sector. Now there are 5 additional major producers of flat products of steel in the private sector.
There has been a clear focus on the state-of-the art technology. Presently, India can boast of new technologies like Corex, Thin Slab Casting and Compact Strip Mill Technology, DC Electric Arc Furnaces, Twin Shells AC EAFs etc. in the steel industry. The industry has now to focus on customer satisfaction and outstanding quality of steel products in a competitive environment. Steel producers in the public and private sector have taken upon themselves with determination and commitment to overcome the new and arduous challenges to come up to the Government’s expectations as also the people of our country in the most difficult and trying period for the last couple of years.
India’s Competitive Position
India is a very competitive country with regards to steel production. India is next only to Brazil if I have to compare the competitiveness of the steel industry. The first and foremost is the availability of iron ore, the next being the adaptability to technology and last but not the least, the labour costs are very competitive as compared to the rest of the world. India is more competitive than countries like US, Europe, Posco of South Korea and Japan and even China. China does not have iron ore resources. China imports almost all of its iron ore requirements.
India’s competitiveness in steel is a good one. But the competitiveness gets eroded a little due to various high infrastructure costs like freight rates in rail as well as through road are very high. Port charges are uncompetitive. The time it takes for loading and unloading of the ships is uncompetitive. For a comparison, export of steel in bulk to London works out to be more cost effective the sending steel to Mumbai from Kolkata.
The response of the private sector in particular has been quite encouraging in the post-liberalization era. Many all-India financial institutions also came forward to support these initiatives and had sanctioned financial assistance to 19 steel projects involving an investment of about Rs. 30,000 crore covering an additional capacity of 13 million tones per annum during the post -liberalization era. Today, India is the tenth largest steel producer in the world.
The Government has been making all-out efforts to help the domestic steel industry to overcome the problems faced by them. To boost the demand and consumption of steel, an Institution for Steel Development & Growth (INSDAG) was set up involving leading steel producers in the country. The Development Commissioner for Iron & Steel had launched a National Campaign for increasing the demand for steel in non-traditional sectors, particularly in the construction, rural and agro-based industrial sectors. Other areas include reduction in power and railway tariffs, reduction in input costs, strengthening of antidumping mechanism, setting up a steel exporter’s forum and an empowered committee for research and development.
Current Scenario for Steel Industry
Global steel demand is rising on the back of accelerated infrastructure activity in China, CIS and India, housing boom in USA, and white goods resurgence in Europe. During the recent recessionary phase, the industry has consolidated in terms of ownership as well as mothballing of inefficient capacities. Steel prices continue firming up.
For the first time in last 20 years, there is demand growth all over the world for steel.
In US, the demand is led by the booming housing industry. Additionally the auto industry is showing signs of recovery as auto sales hit their strongest levels for the year in July even as US posted a 2.4% GDP growth.
In Europe, there is demand from a buoyant housing and white goods industry according to industry sources.
In India, China and other Asian countries the demand is led by emphatic investment activities in infrastructure.
Russia and other CIS nations are also witnessing strong internal demand.
Iraq reconstruction work is expected to fuel further demand for steel over the next three years.
China is consuming steel like never before for its infrastructure with investments such as Three Gorges project on Yangtze as well as part of its build up to the Beijing Olympics in 2008 and the Shanghai Expo in 2010.
2) PRODUCT PROFILE
ESSAR STEEL LIMITED (ESL)
Hot Briquetted Iron (HBI)
Essar steel took various technical initiatives to increase the production and reduce the cost. The capacity utilization improved after the company made various modifications. The HBI plant produced 1,65,052 tons in March 2000. With this the annual production capacity of the plant is close to 2mn tons.
Hot Rolled Coils (HRC)
ESL is one of the largest exporters of hot rolled coils. It increased its exports by 32% from 161,000 tons to 213,000 tons in the last quarter The company has increased its hot rolled coil capacity from 2mn tons to 2.4mn tons. Essar steel expanded capacity to take advantage of the increasing demand in the domestic as well as the international markets. During the year Essar Steel shifted from base grade steel to high value grades to get better realizations. Essar steel has developed new products for segments like the automobile sector.
ISPAT INDUSTRIES LIMITED (IIL)
Direct Reduced Iron (DRI)
The DRI plant operated at 90% capacity utilization and produced 1.07mt of sponge iron, with 95% metallisation quality.. The decline in realizations was due to the oversupply scenario caused by the fall in production levels of all induction and arc furnace units.
Cold rolling mill and Coating plant
The company produced 0.26mt of cold rolled coils/sheets in the last fiscal. During the year the company sold 1.22mt of DRI which was higher by 12% as compared to the previous year’s sales volume of 1.08mt. The full integration of the steel plant will enable the company to produce value-added products and help them change their product mix.
INDAL IRON AND STEEL CORPORATION LIMITED (JISCO)
Hot rolled products
JISCO’s hot rolling facilities are located at Vasind near Mumbai. The plant has an installed capacity to produce 2,80,000 tonnes of HR plates/coils. The company during the year produced 1,61,253 tons of hot rolled plates as compared to 1,97,178 in the previous year, showing a drop of 18.22% yoy. The dip was due to the low demand for HR plates as demand from heavy automobile, construction etc. sectors was low.
Cold rolling and galvanizing
JISCO has an installed capacity to produce 400,000tpa of cold rolled strips/sheets at Vasind (150,000tpa) and Tarapur (250,000tpa). It also has 550,000 tpa capacity of galvanised coils/ sheets at Vasind (175,000 tpa) and Tarapur (225,000 tpa) and has commissioned a 1,50,000 tpa capacity quality line CSD III.
STEEL AUTHORITY OF INDIA LIMITED (SAIL)
SAIL produces nearly the entire range of steel products. The production strategy was altered in line with shifting demand patterns of the market. The production of crude steel through con-cast route increased by 17% yoy with proportion of BOF- CC production going up from 43% in FY02 to 50% in FY 2003.
SAIL incurred a cost of Rs55bn between FY88 and FY92, on modernization. The second phase of modernization has envisaged Rs130bn investment during FY93 to FY97. The modernization has resulted in significant improvement in energy consumption, coke rate, yield etc
Semi-finished products (also called semis) are intermediate products, cast from liquid steel prior to further rolling into finished products. Finished steel products, available in a vast range, can be broadly categorized as longs and flats. Long products include bars, wire rods, angles, structural, channels.
3) DEMAND DETERMINATION OF THE STEEL INDUSTRY
The global demand for steel is at an all time high nowadays. Much of the tremendous demand for steel around the world may be attributed to the numerous construction projects that are going on around the world. Much of these projects are taking place in the economically developing countries of the world like India, China and Thailand.
China is the place where a lot of construction is being done nowadays and much of the construction is for the purpose of the Olympics to be held in 2008 and the Shanghai World Exposition of 2010.
Along with being one of the major users of steel, China is one of the major producers of steel as well. During March, 2007 China produced a record 40.16 million tonnes of steel. The demand for steel has gone up in the United States of America as well.
This may be ascertained from the fact that in 2007 the amount of steel used was 2.2% more than what it was in 2006. Thus it may be ascertained that the supply and the demand for steel is at their respective peaks.
This bodes well for the Indian steel industry as India has plenty of steel to meet up with both the domestic as well as international demand. India has a lot of iron ores.
This implies that India has a ready base for producing sufficient amount of steel and the experts are also of the opinion that the Indian steel industry would continue to grow in the coming years.
In the recent times the production of steel has gone up in the country from 17 million tons in 1990 to 36 million tons in 2003. The Indian steel industry is trying to reach the 66 million tones mark in 2011.
The high levels of production would allow the Indian steel industry to establish a stronghold on a number of areas like housing, construction, and ground transportation. The special steel produced by the Indian steel industry is supposed to be used in high end engineering industries like generation of power, fertilizers and petrochemicals.
The fact that India is not a voracious consumer of steel like some of the major economies like China and the United States of America means that India would be able to use the surplus steel it produces for exporting to other countries. So that their demands are met. This would help the Indian steel industry to be regarded as one of the most prominent steel industries if not the leading one.
4) PLAYERS IN THE STEEL INDUSTRY
The performance of steel industry in India has been quite satisfactory over the past decade.
Steel authority of india limited
The steel industry in the whole of Asia is aided by cutting-edge technology and because of this, the companies in the industry has made great advancements in all their operational areas.The development of steel industry in India is mainly due to the substantial increase in the demand for steel products of India in the global market. The top companies in this industry mainly operate in four different forms like manufacturers of semi-finished steel, producers of finished steel products, manufacturers of stainless steel and producers of pig irons. The list of top companies in the steel sector in India is given below:
Top 10 steel companies in India:
â€¢ Rashtriya Ispat Nigam Limited
â€¢ Steel Authority of India
â€¢ Tata Steel
â€¢ Visveswarayya Steels
â€¢ Bokaro Steel Plant
â€¢ Bhilai Steels
â€¢ Essar Steels Limited
â€¢ Jindal Steel & Power
â€¢ KVS Ispat
â€¢ Jindal Steels Limited
Some of the details regarding these top players in steel industry is given below:
Rashtriya Ispat Nigam Limited:
The foundation stone for Rashtriya Ispat Nigam Limited was laid in the year 1971 and this organization is the corporate body of Visakhapatnam Steel Plant. They have three different mines under their control being the blast furnace grade limestone mine, manganese mine and dolomite mine. They are specialized in the production of the following products:
â€¢ Wire rods
Steel Authority of India:
Steel Authority of India shortly called as SAIL is one of the top public sector steel-makers in India and they produce steel products both for export and for domestic consumption as well. SAIL holds the pride of being one among the four Maharatnas in the Central Public Sector Enterprises in India. They are the major manufacturers and sellers of the following steel products:
â€¢ Alloy steel
â€¢ Stainless steel
â€¢ Rods and bars
â€¢ Railway products
â€¢ Electrical sheets
â€¢ Galvanized steel
â€¢ Cold and hot coils and rolled sheets
Tata Steel is a part of the India’s popular Tata group and they are one among the global steel service and manufacturing companies in India. They have a balance presence in over 50 developed countries in the continent of Europe and they have manufacturing units in 26 different countries all over the world.
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Visveswarayya Steels is actually a unit of the Steel Authority of India and they are dealing in the production of pig iron and alloy steels. The company began as a separate entity in the year 1923 and it has now come under the SAIL.
Bokaro Steel Plant:
Bokara Steel Plant began its journey as a limited company in the year 1964 and the company is situated in the Bokaro District of the state of Jharkhand. The plant holds the pride of being the country’s first Swadeshi Steel Plant. Even though, the company began its journey as a separate entity, it is now merged with the Steel Authority of India.
Bhilai Steels are one of the leading supplier, stockiest, exporter and importer of hast alloy, aluminum, inconel, monel, brass, copper, ally steel, carbon steel and stainless steel. They are also leaders in a wide range of pipefittings like compression type of popes with Ferrules, forges, screwed, SW and BW pipes. The steel products of this company are being used in different industries like cement, power, textile, pharmaceuticals, sugar mills, petrochemicals, fertilizers and chemicals.
Essar Steels Limited:
Essar Steels are one of the most versatile producers of steel-based products and tailor-made products and these products are the best known for their quality. Their 24-carat steel is a product that got worldwide acceptance. They have international centers in different countries like Indonesia, Vietnam, Canada and the USA. Some of the products manufactured by them are:
â€¢ Cold Rolled Products
â€¢ Hot Briquetted Sponge Iron
â€¢ Hot rolled products
â€¢ Galvanized products
â€¢ Iron ore pallets
Jindal Steel & Power:
Jindal Steel & Power is a leading player in different industries like infrastructure, gas and oil, coal to liquid, mining, power and steel. They are continuously creating new opportunities by leveraging their core capabilities to venture into new business, diversifying investments and by increasing production capacity.
KVS Ispat is a flagship of KVS group of companies and the company enjoys a legacy in the industry of steel for the past 22 years. This company is known for its excellence right from its inception and they are consistently making great contribution towards the development of the society. They are dealing with different types of steel products like:
â€¢ Rounds & Squares
â€¢ Light Structural Steel
â€¢ TMT Bars
Jindal Steels Limited:
Jindal Steels are also making a good contribution towards the development of India and they are ranked sixth among the top business houses with respect to their asset holding. They are one among the multi billionaire corporation in India. Their main aim is to become a world player in the industry of steel production and they are committed to maintain world-class quality in their production, to offer products at a competitive price and to do excellent after sales service to their customers.
Thus, like any other industry steel industry in India is also offering wide range of employment opportunities to deserving candidates thereby acquiring the required talents for their organizations and by offering the right job to the right candidate.
5. DISTRIBUTION CHANNEL OF INDIAN STEEL INDUSTRY
Distribution channel in India is now more smooth after 1991. Distribution maybe the best characterize through alarming consolidation. This consolidation is usually, predictable, also understandable as competitors in industry, which are in same business or substitute, additionally set their niches or produce bigger in a hunt for economies of scale.
Distribution channel having their own alteration according to their convenience . for clearing the idea about it , the distribution channel of Indian steel industry are given as below (see Figure 1). Traditionally, sales have playing an important role in each stage of the steel industry supply chain. sales people are remunerated through sales reward typically makes around 2 % of the product MRP . In the model shown in Figure 1, 16 % of the charge in the channel is associated to sales salaries as well as commissions.
As the industry have moved from a home market to a global market, competition has greater than before they face, which help them to earn more profits.
To protect profits, or for competing , the channel has upgrade their production technology . several clients begin to analyze sales calls through salespeople as an interruption in their day. A fine proportion of businesses entered in annual contracts with a companies, negotiated price as well as preset, scheduled material releases salary, or through salarwithcommission, although others draw directly .
6. KEY ISSUES AND CURRENT TRENDS
1.New Steel Policy To Facilitate Rapid Growth Of Domestic Steel Sector, Says Government [Friday, Mar 23, 2012]
A new steel policy will be aimed to ease the faster growth of the domestic steel sector by ensuring faster capacity addition, as realized by the government. The Steel Ministry-constituted panel is scheduled to finalize the draft within two months and there are expectations that it will be prepared in another three-four months. The government conceived of taking country’s capacity to 145 MT by 2015-16. The new policy assumes importance as it is coming up against the backdrop of huge delays in the multi-billion dollar ventures including those of ArcelorMittal and POSCO which were delayed due to the hurdles of regulatory and land acquisition.
ArcelorMittal, which has proposed projects worth Rs 1.3 lakh cr. in Jharkhand, Orissa and Chhattisgarh, is facing land acquisition problems. POSCO, which has proposed a project in Orissa worth Rs 54,000 cr., is also battling regulatory hurdles for several years.
2.Arcelormittal Eyeing Land In Jharkhand
[Saturday, Feb 04, 2012]
Arcelormittal, a steel company, is in the process of identifying land in the Bokaro district for recommended 12-million tonnes per annum Greenfield steel plant in Jharkhand.
AP Singh, Jharkhand Industry Secretary, said, “They are still in the process of searching land in two locations — Chas and Kasmar — in Bokaro district.”
Mr Singh, who has been here to take part at a trade fair organized by CII, said that the recommended project of the international steel company will be delayed although the environment department has proposed the environmental approval, since the nod from the forest department has not come yet. The steel firm needs 2,400 acres of land for the recommended project.
3.Ministry Of Steel-(2012-2013)
To transform India into a global leader in the steel sector, both as a steel producer as well as a steel consuming nation and to enhance the industry’s international competitiveness.
Promoting policies, initiatives and incentives for attaining a national steel production capacity approximately 100 million tons per annum by the year 2012-13.Streamlining the regulatory environment for enabling optimal steel production;
particularly regarding mineral policy and the mine allocation regime, tariff and taxation measures, and land allocation and environmental and forest clearances .Promoting the development of infrastructure required for enhancing national steel production through coordinated efforts, particularly in sectors like Railways, Roads, Ports, Power and Water supply .
Enhancing the domestic demand for steel through promotional efforts and by enlarging the retail network of steel Companies .
Improving the techno-economic efficiency of operations of steel Ministry’s PSUs.
1. To facilitate creation of steel making capacity and growth in steel production during 2012-13.
2. To oversee the completion of the apex and modernization programs of the PSUs.
3. Ensuring adequate availability of raw material for steel industry from domestic and overseas sources, particularly iron ore and coal by PSUs under the Ministry of Steel.
4. Improving the performance of Iron & Steel industry through R&D; intervention, Quality Control and Export Promotion.
5 .To facilitate and monitor mergers, acquisitions and joint ventures by the Steel Ministry’s PSUs.
6. Finalization of New Policy Initiatives.
7 To update information and data base in respect of Re-rolling industry
7. PEST Analysis
India is the 10th largest steel producer of the world. the huge Integrated producers like SAIL, Tisco and RINL have traditionally dominated steel production in India. Due to excessive Government controls as well as regulations, the Indian steel industry are broadly affected from the environmental aspect. A examine of the external macro-environment in which the companies operates can be articulated in terms of the following factors which detailed as below.
Government And Regulatory Interventions
The role of the government is crucial, both as a supplier and as a customer, and also as the supra-environment for business, creating the rules for competition. It creates boundaries within which the steel industry must operate. In the case of the Indian steel industry, the government directly or indirectly controls the finance and many of the inputs – both raw material and services. The government has opened the field for private power plants. This is, in the long run, expected to improve the power situation in the country, to the benefit of the steel industry.
The government as a buyer is very important for the steel industry. The investment of government in infrastructure such as highways, rail, plants, power dams, ports etc are significant key movers for steel demand. In fact, government spending on infrastructure spurs the demand for long products, which is followed, with a time lag, by a demand for flat products. The demand for long products tapers off with a saturation of infrastructure development. This is expected to provide the necessary fillip to the stagnant steel demand.
Government regulations also provide protection to indigenous industry, or take it away. The recent liberalization of the economy has had mixed results for the Indian steel industry. On the one hand, they are free to import machinery6 and select raw material without the earlier procedural delays and checkpoints. On the other hand, they have had to continuously fight the dumping of cheap steel from around the world.
Environmental norms imposed by the government from time to time have a significant reflact, expected to be about 15% of project cost. Government regulations and concerns regarding discharges from steel plants could become one of the major forces driving development of new technologies.
INDIA’S steel exports registered impressive growth in 2002-03. Provisional figures suggest that exports stood at highest level, against last five years. The steel industry was finally showing signs of recovery. Major producers started to export to capitalize on rising international prices and to boost bottom lines that had rusted in 1998-99. However, yet again, the good times comes for steel players. Indian economy become the strongest than it is comparing since last many years, it is absolutely good time for Indian steel industry.
The analysis shows that the Indian steel industry suffer the low productivity of labour but high capital, energy and transportation cost. The steps needed to enhance competitiveness of the Indian steel industry contain investment towards technology up gradation. There is also a vast scope for quality up gradation. Quality monitoring, inspection and control measure have also to be introduced at all stages of operation as well as technical discipline. computerization in process routes, improved maintenance practices, optimum capacity utilization, extensive automation in all possible areas as well as pollution control measures need to be implemented.
The Indian steel industry is at crossroad. It needs to step up values-addition to ensure that the wide fluctuations in HR prices are moderated with greater share of value-added products. Further, it has to modernize itself to bring down production costs.
China makes strong impact in Indian economy. Various steel majors are planning to exports in millions of tonnes to china this year. So. Overall there is a good and grooming economy for Indian steel industry.
In Social point of view, the responsibility of various steel companies towards society and for the community is required to be analyzed.
Steel Industry is committed to the task of ensuring the safety and safeguarding the health of all its employees under various companies. In the company like Tata Steel, Importance will be given to continuous training for promoting safety consciousness among all employees. Joint committees of executives and employees’ representatives will supervise the Company’s safety measures. Company is accountable for:
Establishing safe and healthy work environment.
Ensuring compliance with mandatory safety and health requirements.
Proper maintenance and orderly house keeping, to control the risk of damage to plant and equipment.
Insisting on safe work procedures being followed by employees, contractors and visitors.
Steel Industry shall continually tried hard to improve the quality of life of the communities industry serve with excellence in all facets of its activities. They are committed to create value for all their stakeholders by continually improving their systems and processes through innovation. The policy has reviewed to