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Paper for Strategic manager

Steel Scenario and Future Prospective


Submitted By:

Yuvraj Hedaoo
Ticket No. 499194.
Department: Blast Furnace (Operation)
Designation: Junior Manager.

Manoj Kumar Shrivastav


Ticket No. 499194.
Department: Blast Furnace (Operation)
Designation: Asst. Manager
Steel Scenario and Future Prospective
Abstract:
This article covers the present steel scenario of Indian steel industries and future
prospective. As per the national steel policy 2005, the goal of Indian steel industries is
that India should have a modern and efficient steel industry of world standards, catering
to diversified steel demand. This article will give you a overview of steel sector and some
data.

Introduction:
Indias economic growth is contingent upon the growth of the Indian steel industry.
Consumption of steel is taken to be an indicator of economic development. As the
present per capita consumption in the country is only around 47 kg (2008) against the
world average of 190* kg and that of 400 kg* in developed countries. This study has
been made to estimate the per capita demand for iron and steel in the rural sector of
India and to determine the factors those can contribute to its enhancement.

India was the fifth largest producer of crude steel in the world in 2009, based on rankings
released by World Steel Association. Domestic crude steel production grew at a
compounded annual growth rate (CAGR)of 8.6 per cent during 2004-05 to 2008-09
which is more than the projected growth by National Steel Policy. This growth was driven
by both capacity expansion (from 47.99 million tons in 2004-05 to 66.343 million tons in
2008-09) and improved capacity utilisation. India is expected to become the second
largest producer of steel in the world by 2015-16, provided all requirements for fresh
capacity creation are met. As per official estimates, the Iron and Steel Industry
contributes around 2 per cent of the Gross Domestic Product (GDP) and its weight in the
Index of Industrial Production (IIP) is 6.2 per cent. From a negligible global presence, the
Indian steel industry is now globally acknowledged for its product quality.
* Data taken from Joint Plant Commission (JPC) during the 2008

Production, consumption and growth of steel


The National Steel Policy 2005 had projected consumption to grow at 7% based on a
GDP growth rate of 7-7.5% and production of 110 million tons by 2019-20. These
estimates will be largely exceeded and it has been assessed that, on a 'most likely
scenario' basis, the crude steel production capacity in the country by the year 2011-12
will be nearly 124 million tons.
The table below shows the trend in production for sale, import, export and consumption
of total finished steel (alloy +non-alloy) in the country:

Total Production of Steel( alloy + non alloy) 000tons


Year Production Import Export consumption
for Sale
2004-05 43513 2293 4705 36377
2005-06 46566 4305 4801 41433
2007-08 52529 4927 5242 46783
2008-09 56075 7029 5077 52125
April-Dec 2009-10 43849 5210 2099 40997
Source: JPC; *

Trends in production, private/public sector in India

Indian Crude steel Production (In MT)


2005-06 2006-07 2007-08 2008-09 2009-
10(Apr-Dec)
Public Sector 16.964 17.003 17.091 16.372 12.483
Private sector 29.496 33.814 36.766 42.065 33.292
Total Production 46.460 50.817 53.857 58.437 45.775
% of share of 36.5 33.5 32 28 27
Public Sector
Source: JPC; *=Provisional

Global ranking of Indian steel


Global crude steel production reached 1220 million tons in 2009, a decline of 8 per cent
over 2008. China was the largest crude steel producer in the world with production
reaching 567.8 million tons a growth of 13.5 per cent over 2008. India once again
emerged as the fifth largest producer in 2009 and recorded a growth of 2.7 per cent as
compared to 2008, the only other country in the top 10 bracket to register a positive
growth during 2009. India also emerged as the largest sponge iron producing country in
the world in 2009, a rank it has held on since 2002. If proposed expansions plans are
implemented as per schedule, India may become the second largest crude steel
producer in the world by 2015-16.

World crude steel production in 2009*


Rank Country Production
1 CHINA 567.8
2 JAPAN 87.5
3 RUSSIA 59.9
4 US 58.1
5 INDIA 56.1
6 SOUTH KOREA 48.6
7 GERMANY 32.7
8 UKRAINE 29.8
9 BRAZIL 26.5
10 TURKEY 25.3
Source: World Steel Association; *=Provisional

SWOT ANALYSIS OF THE STEEL INDUSTRY


The strengths, weaknesses, opportunities and threats for the Indian steel industry
have been tabulated below.
Strengths Weaknesses

1. Availability of iron ore and coal 1. Low productivity


2. Low labour wage rates 2. Coking coal import dependence
3. Abundance of quality manpower 3. Low R&D investments
4. Mature production base 4. High cost of debt
5. Inadequate infrastructure

Opportunities Threats

1. Unexplored rural market 1. China becoming net exporter


2. Growing domestic demand 2. Protectionism in the West
3. Exports 3. Dumping by competitors
4. Consolidation

* Data taken from Joint Plant Commission (JPC) during the 2008.
TRADE POLICY
Exports: It is estimated that the country will achieve an export ratio of around 25
percent of the total production in 2019-20 from 11 percent in 2004-05. This is
comparable with a 30 percent share of exports in global production. The Government
will support all efforts to make available export credit, provide trade information, and
cut transaction costs in general. In view of the slow progress of multi-lateral
negotiations, Government would focus on regional trade agreements to broaden the
export base. Exports of value-added steel and steel products, including indirect
export of steel through project exports, would be encouraged.
Imports: Import duty rates have been brought down progressively in the post-
deregulation period. The Indian steel industry has been able to successfully
withstand the competitive pressures of overseas producers. However, integration
with the global economy requires that the industry should be protected from unfair
trade practices, which become common especially during the periods of downturn.
The Government would, therefore, institute mechanisms for import surveillance, and
monitor export subsidies in other countries.