Steel industry PESTEL Analysis .Assingment

Business Environment 2th Assignment CourseCode: MGN303 Business Environment Course Instructor: Dr. Sandeep Singh chil Academic Task No.: 2 industry Date ofAllotment: 21/9/2015 19/10/2015 Student’s Rollno: A-24 11312430

CourseTitle:

Academic Task Title: Steel Date ofsubmission: Studen t’s Reg. no:

LearningOutcomes: I have learned from this assignment about the Steel industry in india, the Global Scenario of steel ,the contribution of steel , Future prospect, SWOT analysis of steel industry in india, PESTEL Analysis and Future outlook of steel industry in india. Declaration: I declare that this Assignment is my individual work . I have not copied it from any other student’s work or from any other source except where due acknowledgement is made explicitly in that ext, nor has any part been written form by any other person. Student signature: Evaluator’scomments(For Instructor’s use only) GeneralObservations Bestpartofassignment

Suggestionsfor Improvement

Evaluator’sSignatureandDate:

Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment Marks Obtained:

Max.Marks: …………………………

Contents:

1. Introduction of Steel sector………………………………………….1-4 1.1 History of sector…………………………………....2-2 1.2 The Global Industry………………………………..2-3 1.3 Current Global Scenario industry…………….…3-4 1.4 Contribution of countries to Industry……....3-4

steel Steel In

Steel

Global

Steel

2. Steel Industry In India ………………………………………………...57 2.1 Future Prospects of Steel industry in India ……………….5-6 2.2 SWOT Analysis Of Indian Steel industry………………...6-7 2.3 Tata Steel Industry………………………………………...7-7

3. Environmental Analysis and illustration………………..…………… 8-10 3.1 Economic ………………………………………………….8-8 3.2 Political …………………………………………………….9-9 3.3 Social …………………………………………….. ……….9-10 3.4 Legal……………………………………………………… 10-10

4. Future outlook of Steel industry……………………………………...10-11 5. Conclusion…………………………………………………….……….1111 6. References………………………………………………………………1212


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Business Environment 2th Assignment

INTRODUCTION Steel is crucial to the development of any modern economy and is considered to be the backbone of human civilization. The level of per capita consumption of steel is treated as an important index of the level of socioeconomic development and living standards of the people in any country. It is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flows and income generation. All major industrial economies are characterized by the existence of a strong steel industry and the growth of many of these economies has been largely shaped by the strength of their steel industries in their initial stages of development. Steel industry was in the vanguard in the liberalization of the industrial Sector and has made rapid strides since then. The new Greenfield plants represent the latest in technology. Output has increased, the industry has moved up i n the value chain and exports have raised consequent to a greater integration with the global economy. The new plants have also brought about a greater regional dispersion easing the domestic supply position notably in the western region. At the same time, the domestic steel industry faces new challenges. Some of these relate to the trade barriers in developed markets and certain structural problems of Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment the domestic industry notably due to the high cost of commissioning of new projects. The domestic demand too has not improved to significant levels. The litmus test of the steel industry will be to surmount these difficulties and remain globally competitive.

HISTORY OF STEEL: Steel was discovered by the Chinese under the reign of Han dynasty in 202 BC till 220 AD. Prior to steel, iron was a very popular metal and it was used all over the globe. Even the time period of around 2 to 3 thousand years before Christ is termed as Iron Age as iron was vastly used in that period in each and every part of life. But, with the change in time and technology, people were able to find an even stronger and harder material than iron that was steel. Using iron had some disadvantages but this alloy of iron and carbon fulfilled all that iron couldn‘t do. The Chinese people invented steel as it was harder than iron and it could serve better if it is used in making weapons. One legend says that the sword of the first Han emperor was made of steel only. From China, the process of making steel from iron spread to its south and reached India. High quality steel was being produced in southern India in as early as 300 BC. Most of the steel then was exported from Asia only. Around 9th century AD, the smiths in the Middle East developed techniques to produce sharp and flexible steel 26 blades. In the 17th century, smiths in Europe came to know about a new process of cementation to produce steel. Also, other new and improved technologies were gradually developed and steel soon became the key factor on which most of the economies of the world started depending.

THE GLOBAL STEEL INDUSTRY: Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment The current global steel industry is in its best position in comparing to last decades. The price has been rising continuously. The demand expectations for steel products are rapidly growing for coming years. The shares of steel industries are also in a high pace. The steel industry is enjoying its 6th consecutive years of growth in supply and demand. And there is many more merger and acquisitions which overall buoyed the industry and showed some good results. The supreme crisis has lead to the recession in economy of different countries, which may lead to have a negative effect on whole steel industry in coming years. However steel production and consumption will be supported by continuous economic growth.

CURRENT GLOBAL SCENARIO IN STEEL INDUSTRY: Globally steel output trends remained on a firm upward path. The rising demand has primarily been fueled by the increased demand from China. The favourable trends in the international markets promise to continue for some more time as the US and some of the leading European economies are showing early signs of recovery. In May 2004 ten new nations joined the European Union (EU), making it the world’s largest trading block. For the global steel industry, this is an important development since the new member countries are expected to add about 15% to the enlarged EU’s total crude steel output. The per capita consumption level is low in most of the new member countries, leaving much room for growth. Steel demand in EU therefore has likelihood of recording growth in the days to come and may very well spruce up global steel demand in a world reliant on China to show the way. World crude steel production for the 62 countries reporting to the International Iron and Steel Institute stands at 763.0 million tonnes for the first nine months of 2004 (i.e. Jan to Sept). This is 8.7% higher than the corresponding period of 2003. The world production of crude steel in 2003 was 965 million metric tonnes, which was almost 7% higher than that of the previous year. China continued to remain the largest consumer (262.48 million metric tonnes) as well as the largest producer (220.1 million tmetric tonnes) of crude steel. India was the 8th largest producer of crude steel in 2003 with a production of 31.8 million metric tonnes. Among other significant developments in the global scenario was the commencement of Market Access negotiations on Non-agricultural Products in the World Trade Organisation (WTO) following the mandate given by the Fourth WTO Ministerial Conference held in Doha in November, 2001. The aim of the negotiations was to reduce or eliminate tariffs in particular on products of export interest to developing countries. All steel items are bound at 40% Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment level. Ministry of Steel has suggested that while arriving at new bound rates through application of a formula, the high price elasticity of import in case of steel should be kept in view and maximum possible value of the coefficient, to be adopted, should be taken. The Ministry also suggested that in order to implement the Doha mandate of ‘less than full reciprocity’ for the developing countries in letter and spirit, it would be best if a separate formula could be proposed for the developing countries. In the meeting of the General Council of WTO held in Geneva during July 27-29, 2004, Members agreed that special and differential treatment for developing Members would be an integral part of all elements in the negotiations. They also agreed that tariff 10 reductions be made through a tiered formula that would take into account the different tariff structures of the developed and developing countries. The deliberations, being held under the aegis of OECD, for a proposed Steel Subsidy Agreement (SSA) to strengthen disciplines in world steel trade, continued and the last meeting of the OECD High Level Group on Steel was held in June 2004. The main objective of the meeting was to take stock of the ongoing SSA negotiations and to provide guidance for future work. The participants agreed that more time was needed to explore ways to resolve their differences on various provisions of the SSA.

CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL INDUSTRY: The countries like China, Japan, India and South Korea are in the top of the above in steel production in Asian countries. China accounts for one third of total production i.e. 419m ton, Japan accounts for 9% i.e. 118 m ton, India accounts for 53m ton and South Korea is accounted for 49m ton, which all totally becomes more than 50% of global production. Apart from this USA, BRAZIL, UK accounts for the major chunk of the whole growth.


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STEEL INDUSTRY IN INDIA Steel has been the key material with which the world has reached to a developed position. All the engineering machines, mechanical tools and most importantly building and construction structures like bars, rods, channels, wires, angles etc are made of steel for its feature being hard and adaptable. Earlier when the alloy of steel was not discovered, iron was used for the said purposes but iron is usually prone to rust and is not so strong. Steel is a highly wanted alloy over the world. All the countries need steel for the infrastructural development and overall growth. Steel has a variety of grades i.e. above 2000 but is mainly categorized in divisions – steel flat and steel long, depending on the shape of steel manufactured. Steel flat includes steel products in flat, plate, sheet or strip shapes. The plate shaped steel products are usually 10 to 200 mm and thin rolled strip products are of 1 to 10 mm in dimension. Steel flat is mostly used in construction, shipbuilding, pipes and boiler applications. Steel long Category includes steel products in long, bar or rod shape like reinforced rods made of sponge iron. The steel long products are required to produce concrete, blocks, bars, tools, gears and engineering products. After independence, successive governments placed great emphasis on the development of an Indian steel industry. In Financial Year 1991, the six major plants, of which five were in the public sector, produced 10 million tons. The rest of India steel production, 4.7 million tons, came from 180 small 29 plants, almost all of which were in the private sector. India's Steel production more than doubled during the 1980s but still did not meet the demand in the mid-1990s, the government was seeking private-sector investment in new steel plants. Production was projected to increase substantially as the result of plans to set up a 1 million ton steel plant and Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment three pigiron plants totaling 600,000 tons capacity in West Bengal, with Chinese technical assistance and financial investment. The commissioning of Tata Iron & Steel Company's production unit at Jamshedpur, Bihar in 1911-12 heralded the beginning of modern steel industry in India. At the time of Independence in 1947 India's steel production was only 1.25 Mt of crude steel. Following independence and the commencement of five year plans, the Government of India decided to set up four integrated steel plants at Rourkela, Durgapur, Bhilai and Bokaro. The Bokaro plant was commissioned in 1972. The most recent addition is a 3 Mt integrated steel plant with modern technology at Visakhapatnam. Steel Authority of India (SAIL) accounts for over 40% of India's crude steel production. SAIL comprises of nine plants, including five integrated and four special steel plants. Of these one was nationalized and two were acquired; several were set up in collaboration with foreign companies. SAIL also owns mines and subsidiary companies.

Future Prospects: With the liberalisation and globalisation of Indian economy, the steel industry has to gear-up, not only to domestic competition, but also to global competition in terms of product range, quality and rice. The growth of the steel sector is intricately linked with the growth of the Indian economy and especially the growth of the steel consuming sectors. India has become selfsufficient in iron and steel materials in the last 3-4 years. Exports have been rising. Production and production capacities are increasing. The position needs to be further consolidated and issues affecting production and consumption need to be resolved on a continued basis. At the same time, productivity of our steel plants must be maintained at levels close to international standards. The Ministry of Steel continues to play a proactive role in helping the steel industry to overcome bottlenecks in the growth of this sector.

SWOT Analysis Of Indian Steel industry: SWOT analysis is done for a company, to find out its overall Strengths,Weaknesses,Threats and opportunities leading to gauging the competitive potential of the company. The SWOT Analysis enables a company to recognize its market standing and adopt strategies accordingly. Here SWOT analysis of ICICI bank is made to understand the positioning of the bank better: Prepared by: Attaullah Hazrat

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External Environmental Analysis PEST Analysis

Mergers and acquisitions are taking place especially in the past few years as a growth strategy as well as to capitalize Government(s) plays a very important role in steel industry by two ways. First, it imposes tariffs and trade barriers when local manufacturers need protection. However, with Free Trade Agreements signed, this role is reduced. Government(s) also provides tax breaks(and subsidies in some countries) to support industry growth. Second, it enforces international and local environmental laws to reduce pollution and protect the environment. High population or economic growth especially in India, China, Brazil and Russia has increased demand for new buildings, vehicles and other infrastructures which in turn increases the overall demand for steel and steel based products. Steel industries are intensive energy users and the ever increasing fuel price is pushing the manufacturers to keep on finding for and adopting a more efficient steel manufacturing technology and process. Technology is also used to produce higher quality steel products. on economics of scale during purchasing and production thus becoming more cost competitive in this industry where there is not much differentiation and competition is basically based on price. Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment Recycling plays an important part in this industry and with scrap metals prices increasing manufacturers are working on joint ventures to source for cheaper sources. A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors: • Political •Economic • Social • Technological

Political Factor The role of the government is crucial, both as a supplier and as a customer, and also as the supra environment for business, creating the rules for competition. It creates boundaries within which the steel industry must operate. In the case of the Indian steel industry, the government directly or indirectly controls the finance and many of the inputs - both raw material and services. The government has opened the field for private power plants. This is, in the long run, expected to improve the power situation in the country, to the benefit of the steel industry. The government as a buyer is very important for the steel industry. The government investments in infrastructure such as rail, highways, dams, power plants and ports are critical prime movers for steel demand. In fact, government spending on infrastructure spurs the demand for long products, which is followed, with a time lag, by a demand for flat products. The demand for long products tapers off with a saturation of infrastructure development. This is expected to provide the necessary fillip to the stagnant steel demand. Environmental norms imposed by the government from time to time have a significant impact, estimated to be around l5%o of project cost. Government regulations and concerns regarding discharges from steel plants could become one of the major forces driving development of new technologies. Government also, helps to steel industry for surviving in the current crisis. It recently removed export taxes on semi finished and longs so that domestic prices stay competitive with falling global prices

Economical Factor Steel industry is affected by current economic crisis. The steel companies also provided losses of Rs. 1424 crores on account of currency fluctuation INDIA'S steel exports registered impressive growth in 2002-03. Provisional Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment figures suggest that exports stood at highest level, against last five years. The steel industry was finally showing signs of recovery. Major producers started to export to capitalize on rising international prices and to boost bottom lines that had rusted in 1998-99. However, yet again, 40 the good times comes for steel players. Indian economy become the strongest than it is comparing since last many years, it is absolutely good time for Indian steel industry. The analysis shows that the Indian steel industry suffers from low productivity of labour but high capital, energy and transportation cost. The steps needed to enhance competitiveness of the Indian steel to industry include investment towards technology up gradation. There is also a vast scope for quality up gradation. Quality monitoring. Inspection and control measure have also to be introduced at all stages of operation as well as technical discipline. Automation in process routes, optimum capacity utilization, improved maintenance practices, extensive mechanization in all possible areas as well as pollution control measures need to be implemented. The Indian steel industry is at crossroad. It needs to step up values-addition to ensure that the wide fluctuations in HR prices are moderated with greater share of value-added products. Further, it has to modernize itself to bring down production costs. China makes strong impact in Indian economy. Various steel majors are planning to exports in millions of tones to china this year. So Overall there is a good and grooming economy for Indian steel industry.

Social factor In Social point of view, The responsibility of various steel companies towards society and for the community is required to be analyzed. Quality

Steel Industry (company) shall constantly strive to improve the quality of life of the communities it serves through excellence in all facets of its activities. They are committed to create value for all their stakeholders by continually improving their systems and processes through innovation. The policy will be reviewed to align with business direction and to comply with all the requirements of the Quality Management Standard. Safety

Steel Industry is committed to the task of ensuring the safety and safeguarding the health of all its employees under various companies. In the company like Tata Steel, Importance will be given to continuous training for promoting safety consciousness among all employees. Joint communities of


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Business Environment 2th Assignment executives and employees' representatives will supervise the Company's safety measures. Company is accountable for: 1. Establishing safe and healthy work environment. 2. Ensuring compliance with mandatory safety and health requirements. 3. Proper maintenance and orderly house keeping, to control the risk of damage to plant and equipment. 4. Insisting on safe work procedures being followed by employees, contractors and visitors. Alcohol and Drugs Companies like SAIL & Tata Steel believe that the loyalty and commitment of its employees depends upon the quality of life they are offered at work and at home. They recognize that indiscriminate use of alcohol and drugs is injurious to the well-being of individuals, their families and the community as a whole. We acknowledge that the misuse of these psychoactive substances is a major health and safety hazard. Companies are committed to creating an alcohol and drug-free environment at the work place by: 1. Raising awareness, through the dissemination of information, education and training and by promoting healthy life styles among our employees and their families. 2. Motivating those employees who have an alcohol/drug problem, to seek assistance, while maintaining confidentiality about such cases. Environmental Policy In overall Steel Industry companies are commitment to minimize the adverse impact of its operations on the environment. Towards this end, it shall endeavor to: 1. Set sound environmental objectives and targets, and integrate a process of review, as essential elements of corporate management. 2. Install, maintain and operate facilities to comply with applicable Environmental Laws, statutes and other regulations. 3. Conserve natural resources and energy by constantly seeking to reduce consumption and wastage. 4. Minimize process waste, and promote the recovery and recycling of materials. 5. Phase out pollution-prone processes and install state-of-the-ar1 technology for pollution prevention, and continual improvement, in environmental performance. Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment 6. Develop and rehabilitate waste dumps through a forestation and landscaping. Human Resource In this tight competitive environment Steel companies recognize that its people are the primary source of its competitiveness. It is committed to equal employment opportunities for attracting the best available talent and ensuring a cosmopolitan workforce. It will pursue management practices designed to enrich the quality of life of its employees, develop their potential and maximize their productivity.

Technological Factor Technological changes can alter the balance of the five forces and may force changes in the industry structure. For example, with the advent of Midrex and Corex processes of iron making, which use non-coking coal, the requirement for coking coal will drop drastically, as non-coking coal is abundant in India. This will diminish the bargaining power of coal suppliers. With the introduction of continuous strip processing (CSP) the cost of production of cold rolled sheet will reduce significantly, due to elimination of intermediate steps and improvement of yield and price performance ratio. These and many upcoming technologies will shift the balance of power away from the integrated manufacturers and reduce the entry barrier. The convergence of IT with steel may change the marketing of steel fundamentally. For the steel producers, e-commerce may help reduce direct and indirect sales costs, keep control over the sales channel and enhance reach. In India, two steel majors, Tata steel and SAIL 43 along with kalyani Steel have participated in the formation of a steel portal named Metaljunction.co. Buyer's bargaining power may increase with access to competitive price information, and thereby exert downward pressure on steel prices.

Future outlook Currently, the global steel industry is going through unprecedented times. The steel demand is strong with over 6% growth year on year over the last seven years – unseen in the last several decades, primarily driven by robust growth in China, India, South East Asia, Middle East, Russia and Brazil. The iron ore and coking coal prices are at a record high both due to insufficient capacity creation for these and the heavy consolidation of minerals companies. Oil prices and ocean freight rates are at an all-time high. The combined effect of all these have driven steel prices to a level higher than Prepared by: Attaullah Hazrat

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Business Environment 2th Assignment ever before – though there is increasing pressure on margins of steel companies due to very high input costs.The new scenario – both external, due to high raw material and freight costs and internal, called for a new Vision, strategies and action plans. The Company has co-created a shared Vision with its employees of becoming a global benchmark in Value Creation and Corporate Citizenship. Company has set goals for 2012 in terms of Returns on Invested Capital, Safety, Carbon dioxide emissions and of becoming the employer of choice in the industry. The integration with Corus is proceeding smoothly and is yielding better than the predicted results. Continuous improvement projects are being given focus in all companies’ sites and businesses. Greenfield projects in India are progressing, though somewhat slower than planned. Company’s effort to enhance their raw material security has yielded positive results in Ivory Coast for iron ore, in Mozambique for coal and in Oman for limestone. There is greater emphasis on safety. They have well laid out plans to reduce CO2 emissions to benchmark levels. The Tata Steel Group will pursue strategic growth through capacity expansions and securing access to raw materials. The Group is expanding its capacity in India through the expansion of its operations in Jamshedpur to 10 million tons per annum and through the construction of a 6 million tons per annum ‘greenfield’ site in Orissa. Other Greenfield opportunities in India and across Asia are being assessed. The Group is also looking at further integration upstream in raw materials with an ambition to achieve 100% self-sufficiency in India and around 50% selfsufficiency in Europe over time. Agreements for the exploration of iron ore in the Ivory Coast, coal in Mozambique and limestone in Oman have already been signed and opportunities are under review in India to support the Indian Greenfield projects; and in Africa and South America, primarily to support its European steelmaking assets Climate change is probably the biggest challenge ever to confront the steel industry. In response to this challenge, the Tata Steel Group will be part of the solution and is committed to minimising the environmental impact of its operations and its products. It has a goal to reduce its CO2 footprint by at least 20% by 2020 compared to 1990. To meet this objective, the Group will, for example, continue to improve its current processes, invest in breakthrough technologies and develop new products and services that reduce the environmental impact over the product lifecycle. To improve its processes, priority is given to energy conservation schemes; in technology break-through such as Ultra


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Business Environment 2th Assignment Low Carbon Steel making and in other innovative projects where the Group has proprietary technology.

CONCLUSION Today Indian steel industry’s prospects are primarily determined by market forces but given the structural constraints faced by the sector (need for raw material access , infrastructure support etc.) Ministry of Steel will continue to play an important role as a facilitator. With global relocation and world-wide restructuring the focus of the industry has now shifted to countries like India which have the key raw materials, low cost labour, the requisite technical manpower, a high potential for technology absorption and last but not least a rapidly growing domestic market. India therefore has the potential to emerge as a global steel player if the inherent advantages available are leveraged properly and special attention given to areas where achievements are likely to fall short of expectations. This is the basic premise on which the strategy options for the sector will have to be explored and finalised before implementation.

References 1. http://www.ehow.com/facts_7621882_swot-analysis-tata-steel.html 2. http://www.tatasteel.com/ 3. http://en.wikipedia.org/wiki/Tata

4. http://www.tatasteel100.com/story-of-steel/index6.asp 5. http://steel.gov.in/Performance%20Budget%20(2005-06)/English/chap2.PDF 6. http://shodhganga.inflibnet.ac.in/bitstream/10603/723/7/07_chapter2.pdf


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Steel industry PESTEL Analysis .Assingment

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