STEEL NOVEMBER 2016 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 NOVEMBER 2016 For updated information, please visit www.ibef.org 2 STEEL EXECUTIVE SUMMARY • Total finished steel production in India has increased at a CAGR of 7.65 per cent during FY11–15, with country’s steel production reaching to 92.16 million tonnes per annum (MTPA) in FY15 and 67.71 MTPA in FY16(1). The country became the third-largest crude steel producer in 2015 and is expected to become the third-largest crude steel producer in Third-largest producer 2016, as large public and private sector players strengthen steel production capacity in of crude steel view of rising demand. Moreover, capacity is also expected to increase from 100 million tonnes (MT) in FY15 to 112.5 MT by FY16 while in the coming 10 years the country is anticipated to produce 300 MT of steel • During FY15, total steel production was 91.46 MT • Huge scope for growth is offered by India’s comparatively low per capita steel Strong growth consumption and the expected rise in consumption due to increased infrastructure opportunities construction and the thriving automobile and railways sectors • In 2015, 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 know how and more investments competitive industry dynamics Source: World Steel Association, Ministry of Steel, TechSci Research Note: (1) April-December 2015 NOVEMBER 2016 For updated information, please visit www.ibef.org 3 STEEL ADVANTAGE INDIA STEEL ADVANTAGE INDIA Increasing investments 2015 GrowingRobust demand demand 2025E • To achieve steel capacity build-up of 300 • Demand would be supported by growth million tonnes per annum (MTPA) by 2025, Market in the domestic market India would need to invest USD210 billion Market size: 91.46 • Infrastructure, oil & gas and over the next decade size: 300 million automotives would drive the growth of • 301 MoUs have been signed with various million tonnes the industry states for planned capacity of about 486.7 tonnes • Lower per capita consumption MT. In 2015, 4 MOU’s were signed at compared to international average Dantewada • 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 • India is the world’s third-largest route is allowed . Large infrastructure producer of crude steel (up from projects in the PPP mode are being eighth in 2003); the country is formed expected to become the second- • National Steel Policy (NSP) implemented largest producer of steel by 2016 to encourage the industry to reach global • Easy availability of low-cost benchmarks manpower and presence of abundant • Policy clarity and stability expected in iron ore reserves make India respect of mining leases and forest competitive in the global set up clearances Source: Metallurgical & Materials Engineering Division Board, TechSci Research Notes: FDI - Foreign Direct Investment, MT - Million Tonnes, E- Estimated MoUs - Memorandum of Understanding, 2016E - Estimated figure for the year 2016; These estimates are from Data monitor, PPP - Public-Private Partnership NOVEMBER 2016 For updated information, please visit www.ibef.org 5 STEEL MARKET OVERVIEW & TRENDS 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 third created in 1973 largest crude steel 1907–1918 • No license for initial set up or • Hindustan Steel as a holding producer in the requirement for expansion of iron ore Ltd and Bokaro company to world, leaving capacity creation pellet plants & iron Steel Ltd were oversee most of ore beneficiation behind United India's iron and • Imposition of export States. • Mysore Iron setup in 1954 and plants, to encourage 1964, respectively steel production duty on iron ore, to and Steel focus more on beneficiation and • In the early 1990s, • In 1989, SAIL • Production Company was catering growing pelletisation of iron • The total finished the public sector acquired of steel set up in 1923 domestic demand ore fines in the steel production in dominated steel Vivesvata Iron country FY16(1) stood at started in • According to • Decontrol of production and Steel Ltd 67.711 MT India (TISCO the new domestic steel • Government is • Private players • In 1993, the was setup in Industrial Policy prices implementing many 1907) Statement were in government set infra projects such (1) • Launch of Scheme • During FY16 , downstream plans in motion as construction of • IISC was set (1948), new for promotion of 8.39 million tonnes production mainly to partially ports, freight up in 1918 to ventures were Research and of finished steel producing finished privatise SAIL corridors etc which compete only Development in was imported into steel using crude would boost steel with TISCO undertaken by Iron & Steel sector India the central steel products industry government Notes: TISCO - Tata Iron and Steel Company; IISC - Indian Iron & Steel Company; SAIL - Steel Authority of India Ltd FY16 (1) - April to December 2015 NOVEMBER 2016 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 NOVEMBER 2016 For updated information, please visit www.ibef.org 8 STEEL STEEL PRODUCTION IN INDIA HAS BEEN GROWING AT A FAST PACE In FY16, crude steel production in India was 89.8 MT, with the total crude steel production growing at a CAGR of 12.61 per cent over the last five years and reached 88.98 MT in FY15 Crude steel production by private sector grew at a CAGR of 7.87 per cent between FY15-16 Finished steel production increased at a YoY of 5.11 per cent from 87.68 MT in FY14 to 92.16 MT in FY15; 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 per cent to the GDP of the nation and provides 6 lakh jobs in the country In September 2016, steel production in India grew by 8.5 per cent to 7.8 MT as compared to 7.2 MT in the same month last year Total crude steel production (million tonnes) Total finished steel production (million tonnes) 71.77 79.34 74.24 64.92 61.94 68.86 57.81 63.18 53.68 49.13 55.37 53.74 58.49 16.71 16.99 16.48 16.48 16.77 17.21 13.34 13.25 12.52 12.82 13.44 12.83 9.23 ⁾ ⁾ ¹ ¹ ⁽ ⁽ FY15 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY16 Public Sector Private Sector Public Sector Private Sector Source: Ministry of Steel Annual Report, TechSci Research; Notes: FY - Indian Financial Year (April – March), MT - Million Tonnes, CAGR - Compound Annual Growth Rate; (1) - April to December 2015 , Figures mentioned are as per latest data available NOVEMBER 2016 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(2) by the private investors is expected to rise by 76.8 MT As of FY16(1), SAIL was the leader in India’s steel sector with the company accounting for 13 per cent of country’s finished steel production and 15.8 per cent of country’s crude steel production. Tata Steel, another household name in the country, leads private sector activity in the steel sector. During FY16(1), the firm accounted for 10.33 per cent of finished steel production and 11.03 per cent of the country’s crude steel production (1) India’s crude steel market share by production – FY16(1) India’s finished steel market share by production – FY16 13% 15.8% SAIL SAIL 10.33% 11.03% Tata Steel 3.73% TATA 4.08% RINL RINL 69.09% 72.94% Other OTHERS Source: Ministry of Steel Annual Report 2015, TechSci Research Notes: RINL - Rashtriya Ispat Nigam Limited, (1) - April to December 2015; (2) - Provisional Figures mentioned are as per latest data available NOVEMBER 2016 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