After opening up of the economy and deregulations restructuring has been taken place in steel industry. It has helped to restored the health he alth of the Indian steel industry. Return on Capital has been substantially increased for both Private & Public companies. Today, Tod ay, the Indian steel industry has both the potential and the creditworthiness to fund future plans of expansion through generation of internal resources and by directly raising capital from the market. Steel Industry segmentation: Industry can be classified into the following categories.
Iron Ore
Pig Iron
Sponge Iron
Flat Steel
Long Steel
Alloy Steel
SWOT Analysis
Strengths:
Availability of iron ore and processed inputs like Sponge Iron
Low wage rates
Skilled manpower and managerial capability
On going modernization of existing/older plants and cutting edge technology in the new plants
Regionally dispersed secondary steel makers to cater to local demand d emand 20
Weaknesses:
High cost of energy
Poor infrastructure and high transaction costs
Poor quality of domestic coking coal
Relatively high cost of capital
Rigid Labour Laws and their impact on productivity, costs and investments
Dependence on imports for steel manufacturing equipments and technology
Slow statutory clearance for development of mines
Low R&D investments
Low labour productivity
Cost and time overrun in implementation of projects
Opportunities:
Potentially huge domestic demand for steel-intensive social and economic infrastructure resulting from all round economic development and particularly because of anticipated growth inurbanisation
Demographic conditions that favour Increasing demand for consumer durables
Untapped rural market
Increasing interest of domestic and overseas producers in capacity creation to serve the domestic and overseas markets.
Threats:
Slow growth in infrastructure development
Possibilities of export growth from China
Global economic slow down
Unrestricted export of iron ore and other exhaustible mineral resources.
PEST analysis
PEST analysis of any industry sector investigates the important factors that are affecting the industry and influencing the companies operating in that sector. PEST is an acronym for political, economic, social and technological analysis. Political The suspension of iron ore mining and transportation in Bellary in Karnataka State following the Supreme Court order, would adversely impact the manufacturing activity in iron and steel industry, India, already a net importer of steel, has imported almost 7million tons of steel last year. Import will increase by additional 16 million tons caused by suspension of iron ore production in Karnataka. Some of the important areas, where government support is required, are - providing essential infrastructure facilities and assuring easy availability of critical inputs such as iron ore, coal, gas and power. The Indian government plans to invest over US$350 billion in industries related to infrastructure and construction which will give a fillip to the steel sector. The National Steel Policy has envisaged steel production to reach 110 million tons by 2019-20. Economical: Subsequent to the recent fall in international prices of commodities and to protect Indian producers, the Indian government has announced some changes in customs duty rates, which were effective from November 2008. Though the current market turmoil has dented the growth curve of various industries such as automobile and construction, which, in turn, has hit the Indian steel industry hard, but with the government's plans to boost up the
economy by injecting funds in various industries like infrastructure, construction, automobile and power, the near-term future is expected to see growth. Social: India’s Steel Industry employs over 5 lakh people across different roles. Currently Indian
steel industry enjoys the low labour cost but rigid Labour Laws impacting on productivity. Steel industry has been witnessing social divide around the area in which located. CSR has been identified as an important parameter in the MoUs drawn up by all the PSUs with the Ministry of Steel. CSR activities focusing on environmental care, education, health care, cultural efflorescence and peripheral development, family welfare, social initiatives and other measures are underway in the Steel PSUs. Technological: Blast Furnace based integrated steel plants with incorporations of latest technological innovations are expected to continue to be the main route of steel making throughout the world. While efforts are continuing to improve the already efficient blast furnace iron making process to the state of the art, it still has to depend on metallurgical coke for over 50% of the total fuel requirement. India has to depend mostly on import of coking coal. Moreover, the limited coking coal sources throughout the world are fast depleting. Therefore, globally and particularly for India, techno-economically viable alternative to blast furnace iron making has become imperative.
The greatest downside risks , however, emanate from the possibility of a deceleration in the
growth of domestic steel demand in China and the subsequent net exports from that country. Observers feel that any slow down in the highly steel- intensive ‘Fixed Asset Investments’ in China taking place through massive state -sponsored investment in physical
infrastructure would unleash substantial oversupply of steel within China. The possibility of Chinese supply depressing prices and profits globally is a risk worth noting. Apart from that the 59 potentially tight supply condition of mined raw materials such as coking coal and iron ore, shortage of international bulk carrying capacities and high transportation costs and possibilities of destabilization through rising oil prices and high rates of inflation in the developed country markets- would remain as causes of concern for this cyclic industry.
