STEEL INDUSTRY

Introduction:
Steel plays a vital role in accelerating growth and development of a nation. It is
used as a basic material in the manufacture of metal products, electrical machinery,
transport equipment, textile, etc and thus considered to be the backbone of the human
civilization. It is a product of large and technologically advanced industry having strong
forward and backward linkages in terms of material flow and income generation. In
other words, the production and per capita consumption of steel is a major contributor to
a countrys gross domestic product (GDP) and an indicator of its industrial and
economic strength. Iron ore, manganese ore and chrome ore are the critical raw
material inputs for the steel industry. Their timely and assured availability in adequate
quantity and quality, on long term basis, is a prerequisite for the rapid and orderly
growth of the sector.
India is the eighth largest crude steel producing country in the world. It is endowed with
richest iron and coal ore mines. Its cost of production of steel is comparatively much
lower than that in other countries. It has several advantageous features which gives the
dominant position to its steel industry on the world map. Some of these are:-
I. Establishment of new state-of-the-art steel plants in the country with lesser
dependence on external aid
II. Continuous modernization as well as implementation of de-bottlenecking and
technology upgradation schemes in the older plants
III. Improvement in energy efficiency of the plants in terms of coke rate and power
consumption
IV. Utilization of better quality raw materials, such as imported coking coal, accessed
from global sources
V. Optimum processing of raw materials like washing of coal, beneficiation and
sintering of iron ore etc.
Market Scenario:
After liberalization, there have been no shortages of steel materials in the
country.
Apparent consumption of finished (carbon) steel increased from 14.84 Million
Tonnes in 1991-92 to 43.471 million tonnes (Provisional) in 2006-07. During
April-June, 2007, apparent consumption of finished (carbon) steel was 10.103
million tonnes(Provisionally estimated)
Steel industry that was facing a recession for some time has staged a turnaround
since the beginning of 2002.
Efforts are being made to boost demand.
China has been an important export destination for Indian steel.
The steel industry is buoyant due to strong growth in demand particularly by the
demand for steel in China.
Global Scenario:

The Asian countries have their respective dominance in the production of the
steel all over the world. India being one among the fastest growing economies of the
world has been considered as one of the potential global steel hub internationally. Over
the years, particularly after the adoption of the liberalization policies all over the world,
the World steel industry is growing very fast.

Steel Industry is a booming industry in the whole world. The increasing demand for it
was mainly generated by the development projects that have been going on along the
world, especially the infrastructural works and real estate projects that has been on the
boom around the developing countries. Steel Industry was till recently dominated by the
United Sates of America but this scenario is changing with a rapid pace with the Indian
steel companies on an acquisition spree. In the last one year, the world has seen two
big M&A deals to take place :-


The Mittal Steel, listed in Holland, has acquired the world's largest steel company called
Arcelor Steel to become the world's largest producer of Steel named Arcelor-Mittal.
Tata Steel of India or TISCO (as listed in BSE) has acquired the world's fifth largest
steel company, Corus, with the highest ever stock price.
It has been observed that Steel Industry has grown tremendously in the last one and a
half decade with a strong financial condition. The increasing needs of steel by the
developing countries for its infrastructural projects have pushed the companies in this
industry near their operative capacity.


The most significant growth that can be seen in the Steel Industry has been observed
during the period 1960 to 1974 when the consumption of steel around the whole world
doubled. Between these years, the rate at which the Steel Industry grew has been
recorded to be 5.5 %. This roaring market saw a phase of deceleration from the year
1975 which continued till 1982. After this period, the continuous fall slowed down and
again started its upward movement from the early 1990s.

Steel Industry is becoming more and more competitive with every passing day. During
the period 1960s to late 1980s, the steel market used to be dominated by OECD
(Organization for Economic Cooperation and Development) countries. But with the fast
emergence of developing countries like China, India and South Korea in this sector has
led to slipping market share of OECD countries. The balance of trade line is also tilting
towards these countries.

The main demand creators for Steel Industry are Automobile industry, Construction
Industry, Infrastructure Industry, Oil and Gas Industry, and Container Industry.

New innovations are also taking place in Steel Industry for cost minimization and at the
same time production maximization. Some of the cutting edge technologies that are
being implemented in this industry are thin-slab casting, making of steel through the use
of electric furnace, vacuum degassing, etc.

The Steel Industry has enough potential to grow at a much accelerated pace in the
coming future due to the continuity of the developmental projects around the world. This
industry is at present working near its productive capacity which needs to be increased
with increasing demand.

The following table gives a clear picture upon the major crude steel producers in the
world as of the year 2004.

Country Crude Steel Production (mtpa)
China 272.5
Japan 112.7
United State 98.9
Russia 65.6
South Korea 47.5
F.R.Germany 46.4
Ukraine 38.7
Brazil 32.9
India 32.6
Italy 28.4

In the year 2004, the global steel production has made a record level by crossing the
1000 million tones. Among the top producers in the steel production, China ranked 1 in
the world.
Production of steel in the 25 European Union countries was at 16.3 mmt in January
2005. Production in Italy increased by 11.5 per cent in comparison to the same month in
2004. Italy produced 2.5 mmt of crude steel in January 2005. Austria produced 646,000
metric tones. In Russia it increased by 4.0 per cent to reach at 5.5 mmt in January. In
case of the North America region particularly in Mexico it was 1.5 mmt of crude steel in
January 2005, up by 8.0 per cent compared to the same month in 2004. Production in
the United States was 8.3 mmt. Brazil had produced 2.6 mmt of crude steel in January
2005. In South America region it was 3.7 mmt for January 2005.
According to rating made by the World Steel Dynamics", Indian HR Products are
categorized in the Tier II category quality of products. Both EU and Japan have ranked
the top. USA and South Korea comes as like India.
Major Players:
Steel Authority of India Limited (SAIL) is the leading steel-making company in India.
It is a fully integrated iron and steel maker, producing both basic and special steels for
domestic construction, engineering, power, railway, automotive and defense industries
and for sale in export markets. The Government of India owns about 86% of SAIL's
equity and retains voting control of the Company. However, SAIL, by virtue of its
"Navratna" status, enjoys significant operational and financial autonomy. Major units of
SAIL are as under:
Integrated Steel Plants
Bhilai Steel Plant (BSP) in Chhattisgarh
Durgapur Steel Plant (DSP) in West Bengal
Rourkela Steel Plant (RSP) in Orissa
Bokaro Steel Plant (BSL) in Jharkhand
Special Steel Plants
Alloy Steels Plants (ASP) in West Bengal
Salem Steel Plant (SSP) in Tamil Nadu
Visvesvaraya Iron and Steel Plant (VISL) in Karnataka
Subsidiaries
Indian Iron and Steel Company (IISCO) in West Bengal
Maharashtra Elektrosmelt Limited (MEL) in Maharashtra
Bhilai Oxygen Limited (BOL) in New Delhi
Joint Venture
SAIL has promoted joint ventures in different areas ranging from power plants to
e-commerce.

NTPC SAIL Power Company Pvt. Ltd
Set up in March 2001, this 50:50 joint venture between SAIL and the National Thermal
Power Corporation (NTPC) operates and manages the Captive Power Plants-II of the
Durgapur and Rourkela Steel Plants which have a combined capacity of 240 MW.

Bokaro Power Supply Company Pvt. Limited
This 50:50 joint venture between SAIL and the Damodar Valley Corporation formed in
January 2002 is managing the 302-MW power generation and 1880 tonnes per hour
steam generation facilities at Bokaro Steel Plant.
.
Bhilai Electric Supply Company Pvt. Limited
Another SAIL-NTPC joint venture on 50:50 basis formed in March 2002 manages the 74
MW Power Plant-II of Bhilai Steel Plant which has additional capacity of producing 150
tonnes of steam per hour.

UEC SAIL Information Technology Limited
This 40:60 joint venture between SAIL and USX Engineers & Consultants, a subsidiary
of the US Steel Corporation, promotes information technology in the steel sector.

Metaljunction.com Private Limited
A joint venture between SAIL and Tata Steel on 50:50 basis, this company promotes e-
commerce activities in steel and related areas.

SAIL-Bansal Service Center Pvt. Ltd.
SAIL has formed a joint venture with BMW industries Ltd. on 40:60 basis to promote a
service centre at Bokaro with the objective of adding value to steel.

North Bengal Dolomite Limited
A joint venture between SAIL and West Bengal Mineral Development Corporation ltd on
50:50 basis was formed for development of Jayanti Dolomite Deposit, Jalpaiguri for
supply of Dolomite to DSP and other plants.

Romelt-SAIL (India) Ltd
A joint venture between SAIL, National Mineral Development Corporation (NMDC) and
Russian promoters for marketing Romelt Technology developed by Russia for reducing
of iron bearing materials, which is carried out with carbon in single stage reactor with
the use of oxygen.

Others major steel producers are:
Tisco ( Tata Iron and Steel Corporation ltd)
Essar Steel
Jindal Vijaynagar Steels Ltd
Jindal Strips Ltd
JISCO
Saw Pipes
Uttam Steels Ltd
Ispat Industries Ltd
Mukand Ltd
Mahindra Ugine Steel Company Ltd
Tata SSL Ltd
Usha Ispat Ltd
Kalyani Steel Ltd
Electro Steel Castings Ltd
Sesa Goa Ltd
NMDC
Lloyds SteeI Industries Ltd
Pricing Strategy:

Rise in steel prices for the past two years has been the cause of concern of
many user industries. Particularly, in some of the direct users and downstream
segments where steel component is high, the impact is a little harsh. Generally these
fall under the category of building and other steel-structured construction, tube-making,
heavy machineries, bicycles, auto-components steel furniture etc. The ability to absorb
the increased cost of raw materials depends on the individual market competitiveness,
which is characterized by excess capacity, demand growth, export opportunities and
other relevant factors. The construction sector, however, is guided by the escalation
clauses in the tenders, which may absolve the individual bidders to get away with
equivalent compensation. In India these clauses are anarchic, to say the least, and
therefore the impact of rise in raw material expenses is felt heavy in construction. That
brings us to the issue of retardation of investment in construction. Has the rise in steel
cost led to a diversion of investment from construction sector to other areas? The
answer is negative. A comparison of Gross Capital Formation in Construction and also
in Machinery and Equipment with steel price movement in the past years would show
that there exists no negative relation between the two. The availability of any basic input
at a low price always results in overuse of the material. Abundant availability of steel in
Russia in 60s and 70s brought about an overdose of steel use in many applications
leading to overweight and more use of energy. When the prices rose, some amount of
substitution took place. In India the emergence of plastic and PVC in place of
galvanized sheets and hot rolled coils in drums, buckets and pipes, aluminum in place
of cold rolled sheet in bus bodies, bumpers, auto-components, asbestos in place of
galvanized corrugated sheets for roofing, point out the similar phenomenon. The current
price increase in steel may only strengthen this trend. Apart from substitution effect, one
positive fallout of price rise is the more parsimonious use of steel in various
applications, which has made the user segment more quality-conscious.

Lot has been discussed on the probable reasons for steel price rise. This range from
global price trend which shot up regularly since Q2 2003, the increased cost of inputs
for steel making like coking coal, coke, iron ore and power, enhanced transportation
cost resulting from rail freight and diesel price rise and burgeoning port handling
charges - all leading to a higher cost of steel to the consumer. Price of steel went down
sharply in 2001 and 2002. It had severely affected prospective investment in the sector
and almost dubbed the sector as dying. Indian financial Institutions including
government-controlled banks were genuinely perturbed over massive NPAs and debt-
restructuring exercise became the only mode of interaction between these institutions
and steel-producing units. A look at some of the financial figures during the past few
years for steel companies along with a few consuming units as compiled by CMIE show
interesting facts.
Financial performance of Steel and a few related Industries
Segment 1997-98 2001-02 2002-03 2003-04
A) Steel
Value of output (Rs.cr) 40944.9 49534.2 64934.6 76822.0
% Rise in raw material & stores expenses (%) 0.9 1.6 21.4 18.1
Interest Payments(Rs.cr) 4165.9 5367.0 5032.7 3944.9
Profits after tax(Rs.cr) (-) 1228.2 (-) 5706.4 (-) 466.8 4741.6
Total Borrowings(Rs.cr) 46461.8 51348.1 50967.6 45065.9
Investments(Rs.cr) 2558.0 4062.5 4294.6 5320.1
B) Steel Wires
Value of output(Rs.cr) 1210.0 1496.9 861.5 1003.8
% rise in raw material & stores expenses (%) 12.7 6.7 (-) 1.1 29.4
Interest Payments(Rs.cr) 77.6 80.9 45.3 41.7
Profits after tax(Rs.cr) (-) 31.2 (-) 79.4 (-) 49.8 (-) 38.5
Total Borrowings(Rs.cr) 516.9 697.1 446.8 397.9
Investments(Rs.cr) 7.0 10.0 11.1 7.2
C) Machinery
Value of output(Rs.cr)rrr 63545.2 77298.2 76564.6 82047.4
% rise in raw material & stores expenses (%) 3.8 (-) 1.3 (-) 1.3 7.8
Interest Payments(Rs.cr) 3961.4 4227.9 3746.4 3266.8
Profits after tax(Rs.cr) 873.3 (-) 61.2 (-) 529.4 (-) 303.8
Total Borrowings (Rs.cr) 25744.8 30030.2 28248.6 27273.8
Investments(Rs.cr) 5315.3 8429.5 8098.7 8342.8
D)Air conditioners & Refrigerators
Value of output(Rs.cr) 2544.9 3267.8 2823.7 2844.5
% Rise in raw material & stores expenses (%) 5.6 4.4 (-) 0.1 (-) 2.9
Interest Payments(Rs.cr) 160.4 181.1 109.0 80.9
Profits after tax(Rs.cr) (-) 133.4 (-) 234.5 (-) 229.3 (-) 225.1
Total Borrowings(Rs.cr) 1147.3 1250.2 862.0 1066.2
Investments(Rs.cr) 95.9 55.6 38.9 41.5
E) Automobile
Value of output (Rs.cr) 33385.6 42321.9 46540.5 56957.2
% Rise in raw material & stores expenses (%) (-) 7.6 0.3 10.4 24.3
Interest Payments (Rs.cr) 1342.5 1447.8 1224.3 862.4
Profits after tax(Rs.cr) 1796.9 380.2 1315.0 3084.7
Total Borrowings(Rs.cr) 13142.7 14635.3 12466.5 7959.4
Investments(Rs.cr) 4190.0 5532.8 6949.3 12187.8

Keeping in view the problem of averaging in making industry-wise analysis, where, for
instance, mild carbon steel producers could have been clubbed with alloy and stainless
steel producers, the above analysis throws many interesting highlights.

High growth in value of output in steel in 02-03 and 03-04 reflects volume growth as
prices were depressed, while rise in input cost for steel was substantial. This was
reflected in negative PAT in 02-03 and nominal profits in 03-04, which could happen
due to remunerative prices in Q3/Q4 of 03-04. As borrowings maintained a significantly
higher level, it is no wonder that interest accruals were quite high. It goes to the credit of
the steel industry that investments were sustained at a reasonably high level. In steel
wire sector the negative growth in value of output reflects a recessionary condition in
the end product market as rise in input cost was also negative in 02-03 which, however,
went up sharply in 03-04 and steel cost may be one of them. The Machinery sector
went through a near recessionary condition in 02-03 when value of output dipped with
negative growth in raw material prices including steel. The negative PAT since 01-02
signifies constraints in the end user segments. Air conditioner and Refrigerator segment
has not been affected much by input cost rise as shown by negative growth in raw
material cost in 02-03/03-04. In fact in whole of 02-03 and 03-04 the growth in
consumer durable segment was less impressive and this was mostly due to excess
supply resulting from emergence of new players coupled with lack of consumer
demand. Conversely the automobile segment had witnessed a significant rise in raw
material cost in 02-03/03-04, which, apart from rise in steel cost may emanate from rise
in cost of auto ancillaries. As PAT of auto-ancillaries has gone up by 8.8 and 14.6 per
cent in 02-03 and 03-04 respectively, it is logical to assume that increased cost of input
(steel) has been passed on, at least large part of it, on the finished products. It may be
mentioned that value of output of auto-ancillaries went up by an average 20 per cent
during 01-02 to 03-04.

When the financial results of 04-05 would be available, the rise in raw material cost
including steel, in the user segments may exhibit a higher growth. To what extent it
affects the bottom line of these industries, would be determined by the nature of
competitiveness in each industry. The prices of almost all end products are increasing
and this reflects the low price elasticity of demand in the presence of a positive income
effect.

The purpose of this analysis is not to list out reasons justifying increase in steel price.
As a basic input for industrialization the affordable steel price facilitates growth of all
end-using industries. But a high capital-intensive industry like steel must fetch a
remunerative price to become self-sustaining and not to become a drag on national
economy and a scare-field for the prospective investors.

Important Policy Measures:
i. In the new Industrial Policy announced in July, 1991 Iron and Steel industry,
among others, was removed from the list of industries reserved for the public
sector and also exempted from the provisions of compulsory licensing under the
Industries ( Development and Regulation) Act, 1951.
ii. With effect from 24.5.92, Iron and Steel industry has been included in the list of
`high priority' industries for automatic approval for foreign equity investment upto
51%. This limit has been recently increased to 74%.
iii. Price and distribution of steel were deregulated from January, 1992. At the same
time, it was ensured that priority continued to be accorded for meeting the
requirements of small scale industries, exporters of engineering goods and North
Eastern Region of the country, besides strategic sectors such as Defense and
Railways
iv. The trade policy has been liberalized and import and export of iron and steel is
freely allowed. There are no quantitative restrictions on import of iron and steel
items, covered under Chapter No. 72 of the ITC (HS) Code. The only mechanism
regulating the imports is the tariff mechanism. Tariffs on various items of iron and
steel have drastically come down since 1991-92 levels and the government is
committed to bring them down to the international levels.
v. Freight equalization scheme was modified in January'92, removing freight
disadvantage to states located near steel plants in the country. At the same time,
it was ensured that far-flung areas and distant states were protected by
stipulating that the main producers charge either actual freight or freight element
existing prior to withdrawal of the scheme, whichever is less.
vi. Levy on account of Steel Development Fund was discontinued from April'94
providing greater flexibility to main producers to respond to market forces.
vii. Iron & Steel are freely importable as per the Extant Policy
viii. To check unbridled cheap imports of steel the Government has fixed floor prices
for seven items of finished steel viz. HR coils, HR sheets, CR coils, Tinplates,
CRNO and ASBR.
ix. Iron & Steel are freely exportable.
x. Advance Licensing Scheme allows duty free import of raw materials for exports.

Duties & Levies on Steel
Customs Duty
- Peak rate for non-agricultural products reduced from 15 % to 12.5 %.
- Customs Duty on stainless steel and other alloy steel has been reduced from 10 % to
7.5 %. Duty on non- alloy steel remains unchanged at 5%.
- Duty on steel melting scrap has been raised to 5%.
- Duty on refractories reduced to 7.5 %. Duty most of the raw material for manufacture
of refractories has also been reduced to 7.5%.
- Duty on ores and concentrates reduced from 5 % to 2 %. In respect of Ministry of Steel
this would mean a reduction in duty of 3% on iron ore, manganese ore and chrome ore.
- The Special Countervailing Duty (CVD) of 4 % to be imposed on all imports with a few
exceptions viz. ships for breaking, coal and coke etc. Full credit to be allowed to
manufacturers of excisable goods.


Service tax:
Service tax rate increased from 10% to 12%.
Direct Taxes:
No change in rates of personal income tax or corporate income tax. No new taxes are
also being imposed.
Levies on Steel
SDF LEVY- This was a levy started for funding modernization, expansion and
development of steel sector.
The Fund, inter-alia, supports :
1) Capital expenditure for modernization, rehabilitation, diversification, renewal &
replacement of Integrated Steel Plants.
2) Research & Development
3) Rebates to SSI Corporations
4) Expenditure on ERU of JPC
SDF levy was abolished on 21.4.94
Cabinet decided that corpus could be recycled for loans to Main producers
Interest on loans to Main Producers is set aside for promotion of R&D on steel
etc.
An Empowered Committee has been set up to guide the R&D effort in this sector.
EGEAF Was a levy started for reimbursing the price differential cost of inputs
used for engineering exporters. Fund was discontinued on 19.2.96.

FDI Rule & Competitors

The NSP has been approved by the Cabinet on3rd November, 2005. The Policy inter
alia seeks to enhance the indigenous production to 110 million tones per annum by
2019-20 from the present level of 38 million tones, implying a compound annual growth
rate of 7.3%. This requires additional investment of about Rs. 2,30,000 crores. This is
expected to generate additional employment of around 1 million by 2020.

The basic objective is to ensure that India has a modern, efficient and globally
competitive steel industry of world standards catering to diversified steel demand. On
the demand side, the Policy seeks to enhance steel usage at various levels of the
economy. On the supply side, the Policy proposes to adopt measures for removing
major supply side bottlenecks like improving the availability of critical raw materials.

With the upturn in the steel industry, the foreign companies/investors have started
showing interest in the investment by way of investing in the existing company or in
setting up of Greenfield steel projects. In addition to above, POSCO, South Korea has
proposed to set up a 12 million tonne steel plant in the state of Orissa involving an
investment of US$ 12 billion.Mittal Steel Company has also entered into a MoU with
Government of Jharkhand for setting up a 12 million tonne steel plant involving an
investment of US$ 9 billion.

FII in Steel Sector
Foreign institutional investors (FIIs) raised their stakes in most of the steel companies
while individual investors sold a substantial chunk of their holdings in the big steel
companies in January-June 2007.

Individual investors, particularly the small shareholders having less than Rs 1 lakh
investments, have sold heavily booking profits.
According to analysts, this trend is an outcome of difference of perceptions between the
two groups of investors, one is the retail segment and the other is institutional buyers.

FII holding in Steel Authority of India has gone up from 5.6 per cent in the beginning of
January to 6.39 per cent by June-end during which the holding of individuals has come
down from 2.28 per cent to 1.89 per cent.

Similarly, in the case of Tata Steel, the FII holding has gone up from 18.11 per cent to
22.65 per cent during January-June, while individual holding has come down from 24.74
per cent to 22.2 per cent.

In Jindal South West too, the FIIs have raised their stakes from 18.21 per cent to 21.17
per cent during the first six months while individual holding has come down from 13.89
per cent to 11.51 per cent.

Exception

However, an exception is Essar Steel where FII holding remained static at 2.04 per cent
throughout the six months while there had been a marginal increase of 0.01 per cent in
the case of Ispat Industries.

Individual holding has come down in both these companies. Interestingly, while all the
small shareholders have been consistent in selling, large individual shareholders have
raised their stakes in Essar in tandem with mutual funds and also in Ispat Industries
where corporate bodies too have raised their stake.

According to Mr. P.K. Choudhury, Managing Director of credit rating agency ICRA Ltd,
:the small investors have exited at what they thought was the right price and many of
them had actually purchased the shares at the time of public issue.

On the other hand the institutions, who buy the shares after proper analysis of the
economic fundamentals, are still seeing better prospect for the Indian steel industry.
The difference of perception is because the retail investors have opted for short-term
gains while the institutions have taken their stand for the medium-term, Mr. Choudhury
said.

Role of Government:
The economic reforms initiated by the Government since 1991 have added new
dimensions to the industrial growth in general and the steel industry in particular.
Accordingly, several policy changes have been announced for the sector, from time to
time, by the Government of India. The major being, the New Industrial policy which had
opened up the iron and steel sector for private investment by:-
I. Removing it from the list of industries reserved for public sector
II. Exempting it from compulsory licensing.
Since then, the private sector has been playing an important and dominant role in
production and growth of the steel industry. They not only enhance the productive
capacity of primary and secondary steel, but also contribute substantial value addition in
terms of quality, innovation and cost effectiveness. During the period April-December,
2006, 20.5 million tonnes of steel has been produced by private sector steel units, out of
the total production of 33.15 million tonnes in the country. The private sector units
consist of major steel producers like Tata Steel Ltd., Essar Steel Holdings Ltd., Jindal
Steel and Power Ltd. (JSPL), Ispat Industries ltd. (IIL) etc. as well as relatively smaller
and medium units such as sponge iron plants, re-rolling mills, electric arc furnaces and
induction furnaces.
Under the industrial policy, iron and steel has been made one of the high priority
industries. Price and distribution controls have been removed as well as foreign direct
investment upto 100% (under automatic route) has been permitted, with a view to make
the steel industry efficient and competitive. The trade policy has been liberalized making
import and export of iron and steel items freely allowable, with almost no quantitative
restrictions on them. Other policy measures such as convertibility of rupee on trade
account, permission to mobilize resources from overseas financial markets and
rationalization of existing tax structure have also benefited the Indian steel industry.
Apart from this, the Government has envisaged considerable additions to capacity in the
steel sector specially from the sponge iron segment. It has also given licenses for
setting up electric arc furnace units (mini steel plants), which account for 30% of the
steel production in the country, producing mild steel as well as alloy steel. Further, all
efforts are being made to ensure that the sector continues to meet the requirements of
small scale industries, exporters of engineering goods and North-Eastern region of the
country, as well as that of strategic sectors such as defense and railways.
Another important initiative, undertaken by the Ministry, has been the announcement of
the 'National Steel Policy' in 2005 which set out the Government's vision for future
growth of the sector. The policy largely aims to develop a modern and efficient steel
industry of world standards, catering to the diversified steel demands. It focuses on
achieving global competitiveness not only in terms of cost, quality and product-mix, but
also in terms of global benchmarks of efficiency and productivity. It seeks to enhance
indigenous production of steel to 110 million tonnes (mT) per annum by 2019-20 from
the 2004-05 level of 38 mT. This implies a compounded annual growth of 7.3 percent
per annum.
The increasing presence of the Indian steel companies in the world market with a wide-
ranging export basket, including technologically sophisticated products, is a pointer to
the enhanced competitiveness of this industry. They are having an efficient and strong
base, with rising level of per capita consumption, which is promoting massive
industrialization in the country as well as improving standard of living of the people.
Further, there has been an increase in the research, design and development activities,
largely carried out by the existing iron and steel plants; national research laboratories;
academic institutions; etc. The significant improvements have been made in the areas
of iron and steel making processes, upgradation of raw materials, product development,
and increase in productivity as well as reduction in energy consumption. All this shows
that there exists innumerable investment opportunities in the sector both for domestic
and foreign investors.
Steps taken to boost steel industry:
In budget 2004-05, the customs duty on non-alloy steel was reduced from 15 % to 10
per cent and on alloy steel from 20 per cent to 15 per cent. In August 2004, the customs
duty on non-alloy steel was further reduced from 10 per cent to 5 per cent; on melting
scrap from 5 per cent to 'zero' and on ships for breaking from 15 per cent to 5 per cent.
Further, customs duty on several raw materials used by the steel sector like non-coking
coal, met coke and nickel has been reduced to 5 per cent and on coking coal to 'zero'.
To bring down the prices of steel, the excise duty on steel products was reduced from
16 per cent to 8 per cent with effect from February 28, 2004 with a caveat that the duty
regime will be reviewed. Budget 2004-05 revised this partially by increasing the duty
from 8 per cent to 12 per cent, as the intended impact of duty cut on moderating prices
was not achieved.
What is further needed:
While the increase in the domestic prices of steel because of an increase in
international demand cannot be avoided, attention needs to be paid to the problem of
adequate and reliable supply of coal to the steel industry. Efforts are required for
securing assured linkages of coking coal from overseas sources.
Furthermore, cross-border investment in captive coal mines, especially for coking
coal, in major source countries as well as investment for developing coal mines in India,
needs to be encouraged. Further, the movement of raw materials and finished steel
would need good rail and road network as well as substantial improvement in port
handling, storage and haulage facilities.
Opportunities for growth
The New Industrial Policy Regime
The New Industrial policy has opened up the steel sector for private investment by
(a) removing it from the list of industries reserved for public sector and (b) exempting it
from compulsory licensing. Imports of foreign technology as well as foreign direct
investment are freely permitted up to certain limits under an automatic route. Ministry of
Steel plays the role of facilitator, providing broad directions and assistance to new and
existing steel plants, in the liberalized scenario.
The Growth Profile
The liberalization of industrial policy and other initiatives taken by the Government have
given a definite impetus for entry, participation and growth of the private sector in the
steel industry. While the existing units are being modernized/expanded, a large number
of new/greenfield steel plants have also come up in different parts of the country based
on modern, cost effective, state of-the-art technologies.
At present, total (crude) steel making capacity is over 34 million tonnes and India, the
8
th
largest producer of steel in the world, has to its credit, the capability to produce a
variety of grades and that too, of international quality standards. As per the ratings of
the prestigious "World Steel Dynamics", Indian HR Products are classified in the Tier II
category quality products a major reason behind their acceptance in the world market.

Steel Industry in India
Introduction:
Iron and Steel Industry in India is on an upswing because of the strong global
and domestic demand. India's rapid economic growth and soaring demand by sectors
like infrastructure, real estate and automobiles,at home and abroad, has put Indian steel
industry on the global map. According to the latest report by International Iron and Steel
Institute (IISI), India is the 4th largest steel producer in the world.
History of Iron and Steel Industry in India
Iron and Steel industry in the country has experienced a sustainable growth since
the independence of the country. A humble beginning of the modern steel industry was
reached in India at Kulti in West Bengal in the year 1870. But the outset of bigger
production became noticeable with the establishment of a steel plant. It started plant in
Jamshedpur in Bihar in 1907. it started production in 1912. The new township was
named after Jamshed ji Tata. It was, however, only after Independence that the steel
industry was able to find a strong foothold in the country. Excluding the Jamshedpur
plant of the Tatas, all are in the public sector and looked after by Steel Authority of India
Ltd. (SAIL).
Some other Industries:
Bhilai and Bokaro Steel plant were set up with Soviet alliance. Durgapur and
Rourkela came up with British and West German technical expertise, respectively.



The present scenario of the industry
India has one of the richest reserves of all the raw materials required for the
industry, namely land, capital, cheap labour, iron ore, power, coal etc. Yet we are 4th in
the world ranking for production of steel. We produced 66.8 million tonnes in 2010-11,
while China, at the top of the list, produced 626.7 million tonnes. Our per capita
consumption of steel in India (at 50 kg per annum) is well below the world average (at
about 200 kg per annum) and much below that of the developed world (around 350 kg
per annum).
Vision 2020 of the Steel Industry in India
The National Steel Policy 2005 aims at increasing the total steel production of
the country to 110 million tonnes per year (in 2019-20) from 38 million tonnes (in 2004-
05). This was supposed to require a compounded annual growth of about 7.3%. The
total production in 2010 was 66.8 million tonnes. The compounded annual growth from
2005 to 2010 has been more than 9% which is better than the expected growth. But
most of these are a result of the brownfield expansion projects of the existing steel
companies. But to continue with the same growth rate, we need new Greenfield
projects.
Indias export of Iron and Steel



Imports:

Iron & steel are freely importable as per the extant policy.
Last five years import of total finished steel (alloy + non alloy) is given below:-
Indian steel industry : Imports (in million tonnes)
Category 2007-08 2008-09 2009-10 2010-11 2011-12*
Total Finished Steel (alloy + non alloy) 7.03 5.84 7.38 6.66 6.83
Source: Joint Plant Committee; *provisional


Tata Steel
Tata Steel is a top ten global steel maker and the worlds second most
geographically diversified steel producer. Tata Steel was founded in India in 1907.
Since 2004 the Company has expanded globally, acquiring Asian steel producers
NatSteel and Millennium Steel (now called Tata Steel Thailand) as well as Europes
second largest steel producer Corus (now called Tata Steel Europe Limited). Tata Steel
is part of the Tata Group, Indias largest industrial conglomerate. Both Tata and Tata
Steel have a long history of charitable donations and social responsibility, with Tata
spending approximately 4% of the Companys profit after tax on corporate social
responsibility initiatives. Tata Steel endeavors to improve the quality of life in the
communities in which the Company operates. Tata Steels charitable projects have
touched the lives of over 800,000 people in India.
Facts about Tata Steel
Tata Steel is the world's 6th largest steel company.
An existing annual crude steel capacity of 28 million tons.
Asia's first integrated steel plant and
India's largest integrated private sector steel company is now the world's second
most geographically diversified


Steel Producer
Tata Steel plans to grow and globalise through organic and inorganic routes.
Its 5 million tonnes per annum (MTPA) Jamshedpur Works plans to double its
capacity by 2010.
Industry structure
The Iron and steel Industry in India has 2separate divisions:
Integrated producers
Secondary producers
Integrated Producers: Amongst the Integrated producers, the major producers
include Tata Iron and Steel Company Limited (TISCO), Rashtriya Ispat Nigam
Limited (RINL) and Steel Authority of India Limited (SAIL), who generate steel by
converting iron ore.

Secondary Producers:
The Secondary producers like Ispat Industries, Lloyds steel and Essar Steel, create
steel through the process of melting scrap iron. These are mainly small steel plants
and produce steel in electric furnaces, using scrap and sponge iron. They produce
both mild steel and alloy steel of given specifications.
II World War impact on Steel Industries
sharply because of steel's importance to war mobilization.
Some of tDuring World War II, industry production increased his increase was a
result of production returning to full capacity after the depression.
India pushed forward for making Iron and Steel for Japanese Army.
Meanwhile, the United States controlled 60 percent of the world's steelmaking
potential.
The problems faced by the industry in present times
Many steel giants signed for opining new industries with several state
governments (especially Jharkhand, Orissa, Chattishgarh and West Bengal) for new
projects but none of them have materialised. It has taken 5 long years for Tata Steels
Kalinganagar (Orissa) project to complete the rehabilitation and resettlement process.
JSWs proposed Salboni plant (W.B) hasnt been allotted the required amount of land,
and moreover the government, recently, took control over about 400 acres of land
bought by the company because of a state rule that any outsider cant buy more than 24
acres of village land. POSCO is facing massive resistance from the natives of
Jagatsinghpur (Orissa) for land acquisition while many other steel plants are awaiting
aid from the government in terms of either land or infrastructure

The problems faced by the industry in present times
MINING
Mining is the first step in the production of iron and steel.
Earth is excavated deep in search of iron ore.
Breaking and cutting of iron ore takes place to receive raw iron.
Raw Materials from the iron ore are put in a particularly hot fire lead in the
embers of the fire.
This is done to get the mixture of Iron Ore and Charcoal that is burnt with the
help of a blast of air from hand worked bellows.

Conclusion :
We develop economic as well as engineering indicators for productivity growth,
technical change and energy consumption that allow us to investigate savings
potentials in specific energy use as well as carbon dioxide emissions. We
discuss our findings within a broader context of structural and policy changes in
the sector. The economic analysis shows that productivity has been decreasing
over time. The decline in productivity was caused largely by government
protection regarding prices and distribution of steel and by inefficiencies in
integrated steel plants that were reserved to the public sector. With liberalization
of the iron and steel industry productivity increased substantially to positive
growth rates.
We further introduce cost effective and low cost potentials for reducing energy
consumption as well as carbon emissions. In comparing Indian energy
consumption to best practice energy consumption we show that energy savings
of about 50% could be achieved. However, the implementation of initiatives
towards energy efficiency is being hampered by barriers both of general and
process specific nature occurring at the macro and micro level of the economy.







Flow chart of steel manufacturing



SINTER PLANT



COKE PLANT