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Indian Steel Industry

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SWOT Analysis of Indian steel on the basis of statistics available till March 2008.

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Indian Steel Industry

  1. 2. <ul><li>173 players in Indian finished steel industry. </li></ul><ul><li>From 2006, India has emerged as 5 th largest crude steel producer in world. </li></ul><ul><li>India is likely to achieve steel production capacity of nearly 124 million tones by the year 2011-12. </li></ul><ul><li>Steel consumption in India (2006-07): 46.14 Mt. Consumption has grown by 12.5% during last three years. </li></ul><ul><li>Exports have increased by 6.26% in 2006-07 over 2005-06 to touch 4.75 Mt. </li></ul><ul><li>India has 13 billion tons of iron ore deposits. </li></ul>Copyright©: IAME 2008; Anand Choudhary /15
  2. 3. Copyright©: IAME 2008; Anand Choudhary /15 <ul><li>Abundance of iron ore & coal </li></ul><ul><li>Endemic deficiencies </li></ul><ul><li>4 th largest iron ore reserves (13 Bt) </li></ul><ul><li>Systematic deficiencies </li></ul><ul><li>3 rd largest pool of technical manpower </li></ul><ul><li>Low unit labour cost </li></ul><ul><li>Unexplored rural market </li></ul><ul><li>Slow Industrial Growth </li></ul><ul><li>Other sectors </li></ul><ul><li>Threats of Substitute </li></ul><ul><li>Export market penetration </li></ul><ul><li>Technological change </li></ul><ul><li>Price Sensitivity and Demand Volatility </li></ul>STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
  3. 4. <ul><li>Abundance of iron ore and coal. </li></ul><ul><li>Fourth largest iron ore reserves (13 b tones) </li></ul><ul><li>Third largest pool of technical manpower </li></ul><ul><li>Low unit labour cost. </li></ul>Copyright©: IAME 2008; Anand Choudhary /15
  4. 5. <ul><li>Endemic deficiencies </li></ul><ul><ul><li>High ash content of indigenous coking coal </li></ul></ul><ul><ul><li>High basicity index in iron ore. </li></ul></ul><ul><ul><li>Certain key ingredients e.g. nickel, ferro-molybdenum are unavailable. </li></ul></ul><ul><li>Systematic deficiencies </li></ul><ul><ul><li>High cost of capital </li></ul></ul><ul><ul><ul><li>Steel companies are charged interest rate of around 14% on capital in India compared to 2.4% in Japan and 6.4% in USA </li></ul></ul></ul>Copyright©: IAME 2008; Anand Choudhary /15
  5. 6. <ul><li>Low labour productivity </li></ul><ul><ul><li>SAIL & Tata Steel is 75 & 100 t/man year, for POSCO, Korea & NIPPON, Japan its 1345 & 980 t/man year </li></ul></ul><ul><li>High cost of basic Inputs and Services </li></ul><ul><ul><li>E.g. Cost of electricity is 3 cents in USA compared to 10 cents in India. </li></ul></ul><ul><li>Other systematic deficiencies include: </li></ul><ul><ul><li>Poor quality of basic infrastructure like road, port, etc. </li></ul></ul><ul><ul><li>Lack of expenditure in research and development </li></ul></ul><ul><ul><li>Delay in absorption in technology by existing units </li></ul></ul><ul><ul><li>Limited access of domestic producers to good quality of iron ores which are normally earmarked for exports. </li></ul></ul>Copyright©: IAME 2008; Anand Choudhary /15
  6. 7. <ul><li>Unexplored rural market </li></ul><ul><li>Other sectors </li></ul><ul><li>Export market penetration </li></ul>Copyright©: IAME 2008; Anand Choudhary /15
  7. 8. <ul><li>Unexplored Rural Market </li></ul><ul><ul><li>Usage in cost effective manner </li></ul></ul><ul><ul><ul><li>Housing </li></ul></ul></ul><ul><ul><ul><li>Fencing </li></ul></ul></ul><ul><ul><ul><li>Structure </li></ul></ul></ul><ul><ul><ul><li>Agriculture machineries </li></ul></ul></ul><ul><ul><ul><li>furniture </li></ul></ul></ul>Copyright©: IAME 2008; Anand Choudhary /15
  8. 9. <ul><li>Other Sectors </li></ul><ul><ul><li>Automobiles </li></ul></ul><ul><ul><li>Packaging </li></ul></ul><ul><ul><li>Engineering industries </li></ul></ul><ul><ul><li>Irrigation and water supply </li></ul></ul><ul><li>Export Market Penetration </li></ul><ul><ul><li>World steel consumption will double in next 25 years </li></ul></ul><ul><ul><li>Low production cost advantage </li></ul></ul><ul><ul><li>Need Quality improvement </li></ul></ul>Copyright©: IAME 2008; Anand Choudhary /15
  9. 10. <ul><li>Slow Industrial Growth </li></ul><ul><li>Threats of Substitutes </li></ul><ul><li>Technological change </li></ul><ul><li>Price Sensitivity and Demand Volatility </li></ul>Copyright©: IAME 2008; Anand Choudhary /15
  10. 11. <ul><li>Slow Industrial Growth </li></ul><ul><ul><li>Strong linkage between economic growth of country and growth of steel industry </li></ul></ul><ul><ul><li>1970-90 a sluggish growth period for domestic steel industry </li></ul></ul><ul><ul><li>Increase market share was only way to grow </li></ul></ul><ul><ul><li>Consequence: price war and heavy trade discounts </li></ul></ul>Copyright©: IAME 2008; Anand Choudhary /15
  11. 12. <ul><li>Threats of Substitutes </li></ul><ul><ul><li>Plastics and composites </li></ul></ul><ul><ul><li>Aluminium </li></ul></ul><ul><ul><li>Already replaced: </li></ul></ul><ul><ul><ul><li>Large diameter water pipers (RCC pipes) </li></ul></ul></ul><ul><ul><ul><li>Small diameter pipes (PVC pipes) </li></ul></ul></ul><ul><ul><ul><li>Domestic water tanks (PVC tanks) </li></ul></ul></ul>Copyright©: IAME 2008; Anand Choudhary /15
  12. 13. <ul><li>Technological change </li></ul><ul><ul><li>Change industrial structure </li></ul></ul><ul><li>Price Sensitivity and Demand Volatility </li></ul><ul><ul><li>Inability to tune production in line with the market demand fluctuations </li></ul></ul><ul><ul><li>Other threats: </li></ul></ul><ul><ul><ul><li>Ever decreasing import duty on steel </li></ul></ul></ul><ul><ul><ul><li>Dumping of steel by developed countries </li></ul></ul></ul><ul><ul><ul><li>High quality products from developed countries available for import at very competitive prices </li></ul></ul></ul>Copyright©: IAME 2008; Anand Choudhary /15
  13. 14. Copyright©: IAME 2008; Anand Choudhary /15 Survival Strategy Growth Strategy
  14. 15. <ul><li>Today steel industry operate at high levels business complexity. Today there is need that they eliminate all unnecessary complexity and segregate their focus on selected products and markets to achieve as in many other industries. </li></ul>Copyright©: IAME 2008; Anand Choudhary /15