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AUGUST 2015 for Updated Information, Please Visit 1 STEEL STEEL AUGUST 2015 For updated information, please visit www.ibef.org 1 STEEL Executive Summary………………………….3 Advantage India……………………………...4 Market Overview and Trends……………….6 Porter’s Five Forces Analysis……….…….19 Strategies Adopted……………….…………21 Growth Drivers……………………..……….23 Opportunities……………………..…………33 Success Stories………………….………….36 Useful Information…………….……………49 AUGUST 2015 For updated information, please visit www.ibef.org 2 STEEL EXECUTIVE SUMMARY • Total Finished Steel production in India has increased at a CAGR of 7.45 per cent over FY011–15 to 91.46 million tonnes per annum (MTPA). The country has become the third- largest crude steel producer in 2015, as large public and private sector players strengthen steel production capacity in view of rising demand. Moreover, capacity is also expected to Third-largest producer increase from 100 million tonnes (MT) to 112.5 MT by FY16 while in the coming 10 years of crude steel the country is anticipated to produce 300 MT of steel • During the period of January to November 2014, total steel production was 76.2 MT • Huge scope for growth is offered by India’s comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure Strong growth construction and the thriving automobile and railways sectors opportunities • In 2014, India’s per capita consumption of steel was ~60 kg, which is close to one fourth of the international average, indicating strong growth opportunity • National Mineral Development Corporation is expected to increase the iron ore production 75 MTPA until 2021 indicating new opportunities in the sector Technological • Increased government and corporate sector focus on using innovative production advancements techniques for enhancing operational as well as financial performance is a positive Rising domestic and • Domestic players’ investments in expanding and upgrading manufacturing facilities are expected to reduce reliance on imports. In addition, the entry of international players international would provide benefits in terms of capital resources, technical knowhow and more investments competitive industry dynamics Source: World Steel Association, Ministry of Steel, TechSci Research AUGUST 2015 For updated information, please visit www.ibef.org 3 STEEL ADVANTAGE INDIA AUGUST 2015 STEEL ADVANTAGE INDIA Increasing investments 2014 RobustGrowing demand demand 2025E • To achieve steel capacity build-up of 300 million • Demand would be supported by growth in tonnes per annum (MTPA) by 2025, India would Market the domestic market need to invest USD210 billion over the next Market value: decade value: USD81 • Infrastructure, oil & gas and automotives USD300 would drive the growth of the industry • 301 MoUs have been signed with various states billion for planned capacity of about 486.7 MT. In billion 2015, 4 MOU’s were signed at Dantewada • Lower per capita consumption compared to international average • Ministry of Steel plans to set up Steel Research and Technology Mission in India to promote R&D activities in the sector Advantage India Policy support Competitive advantage • 100 per cent FDI through the automatic route • India is the world’s Third-largest producer is allowed . Large infrastructure projects in the of crude steel (up from eighth in 2003); the PPP# mode are being formed country is expected to become the second-largest producer of steel by 2016 • National Steel Policy (NSP) implemented to encourage the industry to reach global • Easy availability of low-cost manpower benchmarks and presence of abundant iron ore reserves make India competitive in the • Policy clarity and stability expected in respect global set up of mining leases and forest clearances Source: TechSci Research Notes: FDI - Foreign Direct Investment, MT - Million Tonnes, MoUs - Memorandum of Understanding, 2016E - Estimated figure for the year 2016; These estimates are from Data monitor, #PPP - Public-Private Partnership AUGUST 2015 For updated information, please visit www.ibef.org 5 STEEL MARKET OVERVIEW & TRENDS AUGUST 2015 STEEL EVOLUTION OF INDIAN STEEL SECTOR 1993–2014 2015 1973–1992 1954–1964 1923–1948 • Reduction in basic • Foreign players custom duty on the began entering the plants and • In 2015, India • SAIL was Indian steel market equipments required ranked as the created in 1973 third largest 1907–1918 • No license for initial set up or • Hindustan Steel as a holding crude steel requirement for expansion of iron ore Ltd and Bokaro company to producer in the capacity creation pellet plants & iron Steel Ltd were oversee most of ore beneficiation world, leaving India's iron and • Imposition of export behind United • Mysore Iron setup in 1954 and plants, to encourage 1964, respectively steel production duty on iron ore, to States. The total and Steel focus more on beneficiation and • In the early 1990s, • In 1989, SAIL Finished steel • Production Company was catering growing pelletisation of iron the public sector acquired production of of steel set up in 1923 domestic demand ore fines in the dominated steel Vivesvata Iron country steel in the same started in • According to • Decontrol of year was 91.46 production and Steel Ltd • Government is India (TISCO the new domestic steel MT • Private players • In 1993, the was setup in Industrial Policy prices implementing many 1907) Statement were in government set infra projects such • Launch of Scheme downstream plans in motion as construction of • IISC was set (1948), new for promotion of production mainly to partially ports, freight up in 1918 to ventures were Research and producing finished privatise SAIL corridors etc which compete only Development in steel using crude would boost steel with TISCO undertaken by Iron & Steel sector the central steel products industry government Notes: TISCO - Tata Iron and Steel Company; IISC - Indian Iron & Steel Company; SAIL - Steel Authority of India Ltd AUGUST 2015 For updated information, please visit www.ibef.org 7 STEEL STRUCTURE OF THE STEEL SECTOR Steel Form Composition End use Non-alloy Structural Liquid steel Crude steel Finished steel Alloy steel steel Stainless Low carbon steel Construction steel Ingots Flat Silicon Medium electrical carbon steel Rail steel Semis Non-flat High carbon High speed steel Source: Report on Indian steel industry by Competition Commission of India, TechSci Research AUGUST 2015 For updated information, please visit www.ibef.org 8 STEEL STEEL PRODUCTION IN INDIA HAS BEEN GROWING AT A FAST PACE In 2015, crude steel production in 2015 was 62.39 (April to December) .Total crude steel production rose at a CAGR of 5.54 per cent over the last five years to reach 81.69 MT in FY14 Private sector’s production of crude steel grew at a CAGR of 7.22 per cent between 2010-15 Finished steel production increased 7.72 per cent from 85.0 MT to 91.46 MT in FY14; analysts expect production figures to improve rapidly over the next five years, with the Ministry of Steel forecasting production levels at 115.3 MT by FY17 The steel sector contribute 2% to the GDP of the nation and provides 6 lakh jobs in the country Total crude steel production (million tonnes) Total finished steel production (million tonnes) 64.92 57.81 61.94 49.13 53.68 68.863 74.236 49.79 63.175 55.371 55.815 16.71 16.99 16.48 16.48 16.77 12.6 13.249 12.523 12.819 13.439 9.381 FY10 FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14 Public Sector Private sector December) December) FY15 (April- Public Sector Private Sector FY15 (April- Source: Ministry of Steel Annual Report 2014, TechSci Research; Notes: FY - Indian Financial Year (April – March), MT - Million Tonnes, CAGR - Compound Annual Growth Rate, FY14*: Provisional Data AUGUST 2015 For updated information, please visit www.ibef.org 9 STEEL SHARES IN PRODUCTION: SAIL AND TATA LEAD THE WAY In 2014, India stood as the largest Sponge iron producer in the world, while the total proposed crude steel capacity during 2016-17* by the private investors is expected to rise by 76.8 MT SAIL is the leader in India’s steel sector; in FY14, the company accounted for 12 per cent of the country’s finished steel production and 16.7 per cent in the country’s crude steel production Tata Steel, another household name in the country, leads private sector activity in the steel sector. During 2014, the firm accounted for 9 per cent of finished steel production and 11.2 per cent in the country’s crude steel production India’s crude steel market share by production – FY15* India’s finished steel market share by production – FY15* 2.8% 11.05% 10.1% 0.6% 3.84% Tata Steel 16.32% Tata Steel RINL RINL SAIL SAIL Other 68.79% Other 86.5% Source: Ministry of Steel Annual Report 2015, TechSci Research Notes: RINL - Rashtriya Ispat Nigam Limited, * - April to December 2014 AUGUST 2015 For updated information, please visit www.ibef.org 10 STEEL GROWTH IN MARKET VALUE OF THE INDIAN STEEL SECTOR HAS ALSO BEEN STRONG In 2014, the Indian steel sector’s total market value was Market value of the Indian steel sector USD81 billion (USD billion) The sector has benefitted from hike in prices and 95.3 CAGR: 13.7% production, especially since the beginning of the 81 millennium 57.8 43 46.8 Over 2007–16(E), the sector’s market value is estimated to 36.5 have posted a strong CAGR of 13.7 per cent 30.1 Market value of Indian Steel sector is expected to reach USD95.3 billion by FY16 FY07 FY08 FY09 FY10 FY11 FY14 FY16E Source: Ministry of External Affairs, TechSci Research Note: E - Estimates AUGUST 2015 For updated information, please visit www.ibef.org 11
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