Steel Secto,An overview

Steel Sector in India Indian iron and steel industry is nearly a century old with TISCO (Tata Iron and Steel Company) being the first integrated steel plant to be set up in Jamshedpur in 1907. Steel industry is the first core sector in India which is exempted from the Licensing Raj (1990-91). Since after economic liberalization in India, Steel sector grew by leaps and bounds because of development in Asian economies and perennial demand of steel from construction sector, automobile sector, aviation sector and other industrial sector. The new industrial policy of the GOI opened this sector for FDI and private investment as government exempted it from the list of industries reserved for public investment only. With the government backup, the existing units are modernizing and several green field projects are coming up in India at various locations. The steel sector has seen some the largest mergers and acquisitions which includes Tata-Corus, Arcelor- Mittal. Consumption:- Indian steel consumption i.e. at 14% is higher than world average of 6% in the last 15 years. Production and Consumption pattern in india in total finished market The steel consumption growth in the last 5 years was in the range of 9 to 13%. The per capita steel consumption is 53 kg in 2010 as compared to 35 kg in 2005. Steel Consumption intensity per capita (India) In India, the per capita crude steel consumption has increased from the last decade. It is also aligning with the per capita Gdp growth rate. With annual CAGR of 10% till 2013, the prospect seems fruitful for investing in steel sector. GDP Growth rate:- With the RBI strict policy rates and Global slowdown, inflation GDP got hit as it is now around 6.4 % to 6.7%. It is projected to grow by 7 to 8 % in the coming months. Industry Structure:- Indian iron and steel industry can be divided into two main sectors i.e. Public and Private sector. Public Sector industry includes SAIL and Vijag steel. Private sector industry includes Tata Steel, Jindal Steel, and Essar Steel. Further, based on the routes of production, the Indian steel can be divided into two types. These are integrated produces and Secondary Producers. Integrated Producers: - These are those producers who convert iron ore into steel. The three major players are SAIL, TATA Steel and RINL. Secondary Producers: - These are those producers who convert scrap and sponge iron to iron by melting. The major players are Essar Steel, Ispat Industries and Lloyd’s steel. Top 10 steel producers in the world:- Rank 2001 2010 1 Arcelor Arcelor Mittal 2 Posco Baosteel 3 Nippon Steel Posco 4 Ispat International Nippon Steel 5 Shangai Baosteel JFE 6 Corus Jiangsu Shagang 7 ThyssenKrupp Tata Steel 8 Riva U.S Steel 9 NKK An steel 10 Kawasaki Gerdau Source: - World Steel Association Production of steel:- The growth of steel was mainly comprised of expansion from 47.99 million tons per annum to 75.463 million tons per annum in 2010-2011. India is the fourth largest crude steel producer in the world. India is the largest producer of sponge iron in the world with the coal based route. After the delicensing and decontrolling in 1991 and 1992 respectively, Indian steel industry grew significantly. The pig iron production grew from 4.93 MT in 2006-07 to 5.54 in 2010-11. The sponge iron grew by 18.34 in 2006-07 to 26.71 MT in 2010-11. The total finished steel grew by 52.53 MT to 66.01 in 2010-11. Export and Import of steel An important point to be noticed regarding steel sector is that iron and steel are freely importable and freely exportable. Advance Licensing policies effectively helped the sector in free export and import. From the export and import data across the year, it can be seen that the India export import deficit is widening as the current consumption is outpacing the current production. Regulatory environment The central goal of steel industry is the creation of 110 MT of capacity and 100 MT of production by 2019-20 implying an average growth of nearly 7 percent a year. With this goal in mind, Indian ministry of steel came out with National Steel Policy, 2005. The national steel policy incorporates the creation of additional capacity, expansion of existing plants, removal of procedural-policy bottlenecks that affect the availability of production inputs, huge emphasis on research and development. The policy focuses on domestic sector. With the implementation of national steel policy, government allowed private owned and foreign investment in this sector. Government also improved intellectual property laws, deregulated pricing and distribution of steels. Government significantly reduced the custom duty payable on inputs to steel production. Global Outlook and Forays With the slowdown in global economy, Euro crisis, Slow down in US Economy, slow GDP growth of India and China, the outlook for 2012 remains cautious. Despite a good start in 2011, the global economy entered into vicious cycle of inflation and recession in the 2nd half of the year. However, with the revival of growth in India and china in the first few months of 2012, one can keep his figure crossed. .Steel demand will depend majorly on the growth aspect of BRICS Nations. According to World steel Association, in 2012, global steel consumption is estimated to increase at approximately 5.0% to reach 1.4 billion tones, after increasing at around 6.0 % in 2011. ------