Industry Awareness Steel

Section E - Group 7
Presented By: Aravind | Ashish | Manish | Manko Mohit | Sakthivell | Sankalp | Supreeth

Agenda
Introduction Evolution of Steel Industry Major National Players Major Global Players

Introduction
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight Principal Applications: Home Travel and Transport Construction Packaging Power and Energy Electrical and Magnetic Yellow Goods Agriculture and Industry Facts: Backbone of all industries Basic ingredients of growth & development Most commonly traded commodity across the globe. Categories of Steel: Carbon Steel Iron + Carbon constitute 90% of composition. Mild Steel most widely used. Alloy steel Iron + Carbon + Alloying elements. Stainless Steel most widely used. Types of Steel Products: Flat Steel Long Steel

Steel over the last few years

Evolution of the Steel Industry [1/2]

Pre-liberalization Scenario
The Indian Steel industry is over 135 years old. The first Steel plant was set up in 1870, however, large scale production only commenced in 1907 when TISCO set up its steel plant at Jamshedpur. Post independence, economic self-reliance and balanced regional development led to the regulation of steel and user industries. Excessive regulations lessened domestic productivity as compared with global standards
Public sector units had a strong commitment towards social development

As industry was highly regulated, market forces had no role to play to encourage competition

Evolution of the Steel Industry [2/2]

Dawn of liberalization in 1991
In 1991, the steel industry was de-licensed and private players were encouraged to manufacture steel Liberalization improved competition and encouraged higher private participation
Price and distribution controls were removed Iron and Steel sector received high priority for automatic approval of Foreign Direct Investment (FDI)
Share of public and private sector between 1991-92 to 2000-01

India is the 5th Steel producer , China and Japan being the 1st & 2nd respectively
SAIL Tata Steel Ltd.

Major National Players [1/3]

Share of Promoter & Non Promoter

Product Mix

86:14

34:66

Hot & Cold rolled sheets & Coils, Galvanised Sheets, Structural, Railways products, bars, plates &Rods 13,044 7 (Bokaro,Bhillai,Salem,Rourkela)

Long and Flat products segment. Value added steel products such as Coils, strips, bars, rods & structurals 4858 6 (Jamshedpur, Kharagpur)

Production (in 000 tonnes) Location

Major National Players [2/3]

ESSAR Ispat Industries Ltd.

Share of Promoter & Non Promoter

Product Mix Hot & Cold rolled Products Galvanised Products, Iron-ore pellets and flat products 12,911 1 (Hazira)

41.1:58.9

Hot & Cold rolled coils,Galvanised sheets, Hot metal and sponge iron

Production (in 000 tonnes) Location

6045 2 (Dolvi in Raigad & Kalmeshwar in Nagpur)

Major National Players [3/3]

JSW Rashtriya Ispat Nigam Ltd.

Share of Promoter & Non Promoter

Product Mix

45:55

Majority Govt. Holding

HR Coils,Mild steel HR Plates and sheets,Cold rolled sheets and coils,Galvanised sheets 8069 4(Belllary,Vijaynagar,Vasind, Tarapur)

Wire rods,rounds,angles,channels,beam s, billets 2656 1 (Vizag)

Production (in 000 tonnes) Location

Major Global Players

1. ArcelorMittal
-Market leader in steel for use in automotive, construction, household appliances and packaging. -Revenues of $65.1 billion and crude steel production of 73.2 million tons. -Around 8% of the world steel output. -On 30 June 2010, the European Commission fined 17 steel producers a total of 518M for running a price fixing cartel, with ArcelorMittal being hit the hardest. -The composition of ArcelorMittal's Group Management Board is as follows: Lakshmi N. Mittal (Chairman and CEO), Aditya Mittal (CFO), Michel Wurth, Gonzalo Urquijo, Sudhir Maheshwari, Christophe Cornier, Davinder Chugh and Peter Kukielski.

2. POSCO
-The Pohang Iron and Steel Company, or POSCO is the world's second largest steel maker by market value. -Annual production around 31 million tons -Key people: Park Tae-Joon,Founder and Honorary Chairman Chung Joon-Yang,Chief Executive Officer

3. Baosteel
-Baosteel is the largest Chinese iron and steel conglomerate. It is a state-owned enterprise, headquartered in Shanghai. -Annual production capacity around 30 million tons.

Key drivers of Growth, Profitability and Cost

Key drivers of growth

Key drivers of profitability and cost Steel prices Material cost Export Domestic demand

Construction Automobile Auto components industry Infrastructure Consumer durables Oil and gas industry

Key Financial Performance Indicators

Rs million Gross sales PBDIT PAT/loss Gross fixed assets Operating profit margin(%) RONW ROCE Debt-equity ratio(times) Interest cover(times) Current ratio(times) Mar 2004 574827.9 137299.6 67424.9 756294 26.7 33.2 14.7 2.2 3.2 0.8 Mar 2005 812874.3 274957.1 151246 815137.2 37.2 44.4 27.1 1.0 8 1.2 Mar 2006 833110.2 215147.1 100731.5 988627.1 29.5 23 14.4 0.9 5.5 1.1 Mar 2007 1030919 299097.4 145230.8 1100840.6 32.9 25.3 17.8 0.8 7 1.4

Impact of Government Policies

To increase the usage and demand of steel in domestic market To improve the distribution to SSI (Small Scale Industry) units National Steel Policy 2005
Production
2019-20 2004-05 CAGR 110 38 7.3%

Imports
6 2 7.1%

Exports
26 4 13.3%

Consumption
90 36 6.9%

*Consumption of steel in world has grown at rate of 2% for the last 15 years and is expected to grow at rate of 3% till 2015 **Source: National Steel Policy Document by Ministry of Steel

International Treaties Cooperation in development of Industrial sector FDI related clauses Mining and energy Impact POSCO steel plant issue due to India-Korea Comprehensive Economic cooperation agreement (CECA)

IMPACT OF UNION BUDGET 2010-2011 FOR THE STEEL INDUSTRY

Increased focus on Infrastructure development through allocation of US $37.4 billion will increase demand for steel Allocation for Road Transport is increased by 13% to US $ 4.3 billion will promote steel industry Increased spending on government programs like JNNURM will result in higher steel consumption Incentives to individuals to invest in infrastructure bonds will spurt steel demand More disposable income in the hands of consumers will boost demand for consumer durables which use value added steels Allocation of funds for railways, focus on power sector growth and augurs well for steel industry Reduction in home finance rates for loans up to Rs.10 lakhs will benefit housing sector thus increasing the consumption of steel Increase in excise duty of steel makes steel costlier which finally passes on to consumers

Trends in last few years

Continuous shift of the industry both in terms of production and consumption from the West towards the East. China has emerged as a major producer and consumer. Ensuring control over raw materials has become a very important component of steel business strategy in the aftermath of tight supply conditions and inflated prices caused by Chinas entry into the raw materials market. Significant increase in the market valuation of the steel companies worldwide resulting from rising prices and successful cost reduction efforts. Lighter metals and stronger alloys have been developed. Plastics and synthetics have replaced steel in many areas. Technological developments have brought down the time for transformation from iron ore to steel to within a day. In India, In the National Steel Policy 2005, a target has been kept for increasing the per capita steel consumption in rural areas from 2 Kg per capita per annum to 4 Kg per capita per annum by 2019-20 through active focus on opening of new rural sales outlets along with promotional efforts to increase demand

Thank You