NITIN PROJECT

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PREFACE

Preparing a project of this nature is an arduous task and I was

fortunate enough to get support from a large number o persons. I

wish to express my deep sense of gratitude to all those who

generously helped in successful completion of this report by sharing

their invaluable time and knowledge.

It is my proud and previledge to express my deep regards to

Respected HOD Dr.Pramesh Gautam, Head of Department of

Business ManagementSVNU, SAGARfor allowing me to undertake

this project.

I feel extremely exhilarated to have completed this project

under the able and inspiring guidance of Mr. Neeraj Topkhane she

rendered me all possible help me guidance while reviewing the

manuscript in finalising the report.

I also extend my deep regards to my teachers , family

members , friends and all those whose encouragement has infused

courage in me to complete to work successfully.

BRAJESH TAMRAKAR

MBA IST SEM.


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ACKNOWLEDGEMENT

Preparing a project of this nature is an arduous task and I was fortunate

enough to get support from a large number o persons. I wish to express my

deep sense of gratitude to all those who generously helped in successful

completion of this report by sharing their invaluable time and knowledge.

It is my proud and previledge to express my deep regards to Respected ,

Head of Department Dr.Pramesh Gautam, Department of Business

Management ,SVNIT, SAGARfor allowing me to undertake this project.

I feel extremely exhilarated to have completed this project under the able

and inspiring guidance of He rendered me all possible help me guidance while

reviewing the manuscript in finalising the report.

I also extend my deep regards to my teachers , family members , friends

and all those whose encouragement has infused courage in me to complete to

work successfully.

BRAJESH TAMRAKAR

MBA IST SEM.


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DELCLARATION BY THE CANDIDATE

Date :

I declare that the project report titled"

" on Market Segmentation is nay own work conducted under the supervision of MR.

NEERAJ GOUTAM Department of Business Management ,SVNIT, SAGARTo the

best of my knowledge the report does not contain any work , which has been submitted for

the award of any degree , anywhere.

BRAJESH TAMRAKAR

MBA IST SEM.


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CERTIFICATE

The project report titled titled"

" been prepared byBRAJESH TAMRAKAR MBA IST Semester, under the

guidance and supervision of MR. NEERAJ TOPKHANEfor the partial

fulfillment of the Degree of B.B.A.

Signature of the Signature of the Signature of the

Supervisor Head of the Department Examiner

INTRODUCTION

INTRODUCTION


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World Iron & Iron industry: An overview

Iron & Iron , the recycled material is one of the top products in the

manufacturing sector of the world.

The Asian countries have their respective dominance in the production of the

Iron all over the world. India being one among the fastest growing economies of the

world has been considered as one of the potential global Iron hub internationally.

Over the years, particularly after the adoption of the liberalization policies all over

the world, the World Iron industry is growing very fast.

Iron Industry is a booming industry in the whole world. The increasing demand

for it was mainly generated by the development projects that have been going on

along the world, especially the infrastructural works and real estate projects that has

been on the boom around the developing countries. Iron Industry was till recently

dominated by the United Sates of America but this scenario is changing with a rapid

pace with the Indian Iron companies on an acquisition spree. In the last one year,

the world has seen two big Mergers & Acquisitions deals to take place:-

The Mittal Iron , listed in Holland, has acquired the world's largest Iron

company called Arcelor Iron to become the world's largest producer of Iron

named Arcelor-Mittal.

Tata Iron of India or TISCO (as listed in BSE) has acquired the world's fifth

largest Iron company, Corus, with the highest ever stock price.

It has been observed that Iron Industry has grown tremendously in the last

one and a half decade with a strong financial condition. The increasing needs of Iron

by the developing countries for its infrastructural projects have pushed the

companies in this industry near their operative capacity.

The most significant growth that can be seen in the Iron Industry has been

observed during the period 1960 to 1974 when the consumption of Iron around the

whole world doubled. Between these years, the rate at which the Iron Industry grew

has been recorded to be 5.5 %. This roaring market saw a phase of deceleration


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from the year 1975 which continued till 1982. After this period, the continuous fall

slowed down and again started its upward movement from the early 1990s.

Iron Industry is becoming more and more competitive with every passing day.

During the period 1960s to late 1980s, the Iron market used to be dominated byOECD (Organization for Economic Cooperation and Development) countries. But

with the fast emergence of developing countries like China, India and South Korea

in this sector has led to slipping market share of OECD countries. The balance of

trade line is also tilting towards these countries.

The main demand creators for Iron Industry are Automobile industry,

Construction Industry, Infrastructure Industry, Oil and Gas Industry, and ContainerIndustry.

New innovations are also taking place in Iron Industry for cost minimization

and at the same time production maximization. Some of the cutting edge

technologies that are being implemented in this industry are thin-slab casting,

making of Iron through the use of electric furnace, vacuum degassing, etc.

In the year 2004, the global Iron production has made a record level by

crossing the 1000 million tones. Among the top producers in the Iron production,

China ranked 1 in the world.

Indian Iron & Iron Industry

Iron and Iron , is vital to the Indian economy for economic growth and

economic well-being. No practical substitutes exist on a large scale for iron and Iron

because of the relatively high cost of alternative materials.

Worldwide, there are broadly two major categories of Iron playersIntegrated

Iron producers (ISPs) and mini-mills/secondary producers, although variations and

combinations of the two exist. The key difference between the two is the type of iron

bearing feedstock they consume. In an integrated mill, this is predominantly iron ore,

with a smaller quantity of Iron scrap. A mini-mill produces Iron uses mainly Iron

scrap, or increasingly, other sources of metallic iron such as directly reduced iron

(DRI)/hot briquette iron (HBI).


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The iron and Iron industry not only directly accounts for about 2% of GDP, it

also has a bearing on how the consumer goods and downstream infrastructure

sectors develop. Further, with a share of approximately 10%, the sector is amongst

the largest contributors to the central excise. India accounted for 3.4% of the

estimated world Iron production of 1,129 million tonnes (mt) during 2005. Atpresent, India is the 7th largest crude Iron producing country in the world.

In 2006-07, production of Finished (Carbon) Iron was 49.350 million tonnes

(Prov). Production of Pig Iron in 2006-07 is estimated to be 4.960 Million Tonnes

(Prov). The share of Main Producers (i.e SAIL, RINL and TSL) and secondary

producers in the total production of Finished (Carbon) Iron was 35% and 65%

respectively during the period of April-December, 2006.

Size of Industry-

India is among the top 10 global suppliers of Iron in the world.

More than 35 million tonnes of Iron is produced in India per annum.

India is also the largest producer of sponge iron in the world.

This sector represents around Rs. 1 trillion of capital investments, and

directly provides employment to around 0.5 million, with the integrated Iron

plants accounting for a 40% share.

The iron and Iron sector also contributes around 6.2% of Indias

manufactured goods exports and 4.6% of total exports by value.

Structural Characteristics of Indian Iron Industry-

The industry is dominated by large integrated players like SAIL and Tata Iron

in Iron .

The Public sector has a significant presence in this industry, Iron Authority of

India Ltd. (SAIL) has 32% of Indias installed capacity of crude Iron .

Tata Iron and Essar Iron are the major private players in the industry.


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The industrys fortunes depend on general global economic conditions but it

is particularly sensitive to the performance of the automotive, construction,

durable equipment, and other industrial products industries. The trend in the

last few years in Iron prices shows that the Iron industry is cyclical.

The global (and Indian) Iron industry also suffers from cycles of over

capacity and shortages. This too leads to cyclically falling/rising prices and

industry losses/profits.

Integrated Iron producers (ISPs)Tata Iron and SAILface high fixed

costs, and thus in a downturn, the percentage profit margins come down

significantly. The downturn phases have witnessed depressed prices at the

firm level and widespread operating losses.

Economic logic differs for mini mills that can vary output more quickly when

prices fall.

What is Private Limited and Public limited?

Now lets first understand the meaning and difference between Public Sector

Company and Private Sector Company. The term Private Company refers to

ownership of a business company in two different ways First, referring to

ownership by non-governmental organizations; and second, referring to ownership

of the company's stock by a relatively small number of holders who do not trade the

stock publicly on the stock market.

In countries with public trading markets, a privately held business company is

generally taken to mean one whose ownership shares or interests are not publicly

traded. Often, privately held companies are owned by the company founders and/or

their families and heirs or by a small group of investors. Sometimes employees also

hold shares of private companies. Most small businesses are privately held.

Private companies may be called corporations, limited liability companies,

partnerships, sole proprietorships, business trusts, or other names, depending on

where and how they are organized.
http://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Limited_liability_companyhttp://en.wikipedia.org/wiki/Partnershipshttp://en.wikipedia.org/wiki/Sole_proprietorshiphttp://en.wikipedia.org/wiki/Sole_proprietorshiphttp://en.wikipedia.org/wiki/Sole_proprietorshiphttp://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Limited_liability_companyhttp://en.wikipedia.org/wiki/Partnershipshttp://en.wikipedia.org/wiki/Sole_proprietorshiphttp://en.wikipedia.org/wiki/Company_(law)


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The term "Public Company" thus refers to a government-owned corporations.

and the ownership of assets and interest is shared by people. Normally, the shares

of a public company are owned by many investors. However, a company with many

shareholders is not necessarily a public company.The shares of a public company

are often traded on a stock exchange. The value or "size" of a public company iscalled its market capitalization

It is able to raise funds and capital through the sale of its securities. This is the

reason why public corporations are so important: prior to their existence, it was very

difficult to obtain large amounts of capital for private enterprises. In addition to being

able to easily raise capital, public companies may issue their securities as

compensation for those that provide services to the company, such as their

directors, officers, and employees.

Private Sector companies in India

The private sector of the Iron Industry is currently playing an important and

dominant role in production and growth of Iron industry in the country. During the

period (April-December 2006), 20.5 million tonne of Iron was produced by PrivateSector Iron units, out of the total production of 33.15 million tonne in the country.

The private sector units consist of major Iron producers in one hand and relatively

smaller & medium units such as Sponge iron plants, Re-rolling mills, Electric Arc

Furnaces and Induction Furnaces on the other. They not only play an important role

in production of primary and secondary Iron , but also contribute substantial value

addition in terms of quality, innovation and cost effectiveness.

TATA Iron :

Tata Iron is India's largest integrated private sector Iron company. Established

in 1907, The Company is backward integrated with owned iron ore mines and

collieries. Tata Iron has an integrated Iron plant, with an annual crude Iron making

capacity of 5 million tonne, located at Jamshedpur, Jharkhand.
http://en.wikipedia.org/wiki/Government-owned_corporationhttp://en.wikipedia.org/wiki/Publichttp://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Government-owned_corporationhttp://en.wikipedia.org/wiki/Publichttp://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Capital_(economics)


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The Iron works is situated at Jamshedpur in the state of Jharkhand, India. The

factory covers 800 hectares of land. West Bokaro sub division in Hazaribagh district

overs 2000 hectares of land in which mining and coal beneficiation activities are

performed. Jharia Division occupies 2500 hectares of land for its industrial, mining

and domestic activities in the district of Dhanbad both in the state of Jharkhand. Theiron ore and dolomite mines are located at Noamundi in the state of Jharkhand and

at Joda, Kalamati, Khondbond and Gomardih in the state of Orissa.

Over the years, Tata Iron has emerged as a thriving, nimble Iron enterprise

due to its ability to transform itself rapidly to meet the challenges of a highly

competitive global economy and commitment to become a supplier of choice.

Constant modernization and introduction of state-of-the-art technology at Tata Iron

has enabled it to stay ahead in the industry.

Tata Iron has completed the first nine months of fiscal 2006-07 with

impressive increase in its production and sales volumes. The hot metal production

at 4.1 million tonne is 8.2% more compared to the last year in the corresponding

period and crude Iron production at 3.7 million tonne is higher by 7.9% compared to

the last year in first three quarters.

The saleable Iron production at 3.7 million tonne registered a significant

increase of 11%. The total sales of 3.53 million tonne has grown by 11.7% over last

financial year in the corresponding period. The domestic sale of long products has

increased by 30%.

Tata Iron is continuing with its programme of expansion of Iron making

capacity by 1.8 million tonne to reach the rated capacity of 6.8 million tonne in fiscal

2007-08 and thereafter to 10 million tonne by fiscal 2010.

Tata Iron s greenfield projects in Orissa and Chhattisgarh are progressing on

schedule with placement of equipment order for Kalinganagar project in Orissa and

commencement of the land acquisition process. Jharkhand project is waiting

announcement of R & R policy of the state Government. The construction work of

ferrochrome project in South Africa is in full swing.

Acquisition of Corus: Recently Tata Iron acquired the Anglo-Dutch Iron maker

Corus, thus emerging as the fifth largest Iron producer in the world.


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The Iron major has won the Prime Minister's Trophy four times. This award is

instituted by the Indian ministry of Iron and awarded to the country's best integrated

Iron plant. In 2000, it became the first Tata company to win the JRD Tata QV

award, given to the company with 'world class' operations under the Group's Tata

Business Excellence Model

Areas of business

Apart from the main Iron division, Tata Iron 's operations are grouped under

strategic profit centres like tubes, growth shop (for its Iron plant and material

handling equipment), bearings, ferro alloys and minerals, rings, agrico and wires.

Tata Iron 's products include hot and cold rolled coils and sheets, tubes, wirerods, construction bars, structurals, forging quality Iron , rings and bearings. In an

attempt to 'decommoditise' Iron , the company has recently introduced brands like

Tata Iron ium (India's first branded cold rolled Iron ), Tata Shaktee (galvanised

corrugated sheets), Tata Tiscon (re-rolled bars), Tata pipes, Tata bearings, Tata

Wiron (galvanised wire products) and Tata Agrico (hand tools and implements).

Tata Iron is also exploring opportunities in the ferro-chrome and titanium

businesses.

Iron& Steel plants and related companies
http://www.tata.com/0_our_commitment/corporate_governance/quality/tbem_tqms.htmhttp://www.tata.com/0_our_commitment/corporate_governance/quality/tbem_tqms.htmhttp://www.tata.com/0_our_commitment/corporate_governance/quality/tbem_tqms.htmhttp://www.tata.com/0_our_commitment/corporate_governance/quality/tbem_tqms.htm


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Bharat Refractories Limited (BRL)

Hindustan Iron Works Construction Limited (HSCL)

Jindal Iron & Power Ltd.

Kudremukh Iron Ore Company Limited (KIOCL)

Manganese Ore (India) Limited (MOIL)Metal Scrap Trade Corporation Limited (MSTC)

Metallurgical & Engineering Consultants(India) Limited (MECON)

National Mineral Development Corporation Limited (NMDC)

Rashtriya Ispat Nigam Limited (RINL)

Sponge Iron India Limited (SIIL)

Iron Authority of India Limited (SAIL)

Tata Iron & Iron Company (TISCO)

Role of Iron and Steel Industry in India GDP

The role of Iron and Iron Industry in Indias GDP is very important for the

development of the country. Iron and Iron are the vital components required for the

infrastructure development in the country.

From the trifle one million tonne capacity status at the time of independence, India has

now achieved the 5th largest crude Iron producer in the world and the largest producer of

this segment is made up of the mini mills sponge iron. According to the official estimates,

the Iron and Iron Industry contributes around 2 per cent of the Gross Domestic Product

(GDP) and its weight in the Index of Industrial Production (IIP) is 6.2 per cent. In contrast to

a negligible global presence, the Indian Iron industry, presently, is globally acknowledged

for its product quality. The National Iron Policy of 2005 had anticipated consumption to

grow at 7% based on a GDP growth rate of 7-7.5% and production of 110 million tonne by

2019-20. These estimates will be, by and large, exceeded and it has been gauged that, on a

'most likely scenario' basis, the crude Iron production capacity in the country by the year

2011-12 will be nearly 124 million tonne.

For the 11th Five Year Plan (2007-12), the Planning Commission has granted a total

outlay of Rs. 45607.08 crore (i.e. Internal and Extra Budgetary Resources [I&EBR] of Rs.

45390.08 crore and Gross Budgetary Support [GBS] of Rs. 217 crore).
http://www.indiaonestop.com/iron&steel.htm#BRLhttp://www.indiaonestop.com/iron&steel.htm#HSCLhttp://www.indiaonestop.com/iron&steel.htm#Jindal%20Steel%20&%20Power%20Ltd.http://www.indiaonestop.com/iron&steel.htm#Jindal%20Steel%20&%20Power%20Ltd.http://www.indiaonestop.com/iron&steel.htm#KIOCLhttp://www.indiaonestop.com/iron&steel.htm#MOILhttp://www.indiaonestop.com/iron&steel.htm#MSTChttp://www.indiaonestop.com/iron&steel.htm#MECONhttp://www.indiaonestop.com/iron&steel.htm#NMDChttp://www.indiaonestop.com/iron&steel.htm#RINLhttp://www.indiaonestop.com/iron&steel.htm#SIILhttp://www.indiaonestop.com/iron&steel.htm#(SAIL)http://www.indiaonestop.com/iron&steel.htm#Tatahttp://www.indiaonestop.com/iron&steel.htm#BRLhttp://www.indiaonestop.com/iron&steel.htm#HSCLhttp://www.indiaonestop.com/iron&steel.htm#Jindal%20Steel%20&%20Power%20Ltd.http://www.indiaonestop.com/iron&steel.htm#KIOCLhttp://www.indiaonestop.com/iron&steel.htm#MOILhttp://www.indiaonestop.com/iron&steel.htm#MSTChttp://www.indiaonestop.com/iron&steel.htm#MECONhttp://www.indiaonestop.com/iron&steel.htm#NMDChttp://www.indiaonestop.com/iron&steel.htm#RINLhttp://www.indiaonestop.com/iron&steel.htm#SIILhttp://www.indiaonestop.com/iron&steel.htm#(SAIL)http://www.indiaonestop.com/iron&steel.htm#Tata


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Indian Iron industry has recently recovered out of the slowdown that affected its

performance during 2008-09. On the domestic front, 2009 ended on a relatively better and

encouraging note, with the CSO reporting an overall improvement of economic situation

through its GDP data, which showed a robust 7.9 per cent growth during July-September

2009-10. IIP too had registered a strong 7.6 per cent growth during April-November 2009-

10, further augmenting the idea that the demand side is back on stable footing. For Iron , this

is of paramount importance and the growth rates registered for leading end-use segments like

manufacturing, consumer durables, construction, the stable growth of the service sector and

agriculture sector spell good news. April-December 2009 provisional data released by JPC

indicates a 7.8 per cent rise in consumption of total finished Iron . Globally also there are

indicators of improvement in economic conditions and firming up of demand and prices.

OBJECTIVE OF THE STUDY


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To compare Private and Public Iron sector with refrence to TATA Iron and

Iron Authority Of India.

To analyse potential of the companies

To analyse measures taken by Indian government to improve the industry

and study the National Iron & Iron Policy 2005

To analyse the future of Indian Iron industry.

RESEARCH METHODOLOGY


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According to Green and Tall A research design is the specification of the

methods and procedures for acquiring the information needed. It is the overall

operational pattern or framework of the project that stipulates which

information is to be collected, from where it is to be collected and by what

procedures

This research process based on primary data analysis and secondary data

analysis will be clearly defined to meet the objectives of the study.

I chose the primary sources to get the data. A questionnaire was designed

in accordance with our mentor in Ketchup. I chose a sample of about 30

corporate customers

I collected some data from the secondary sources like published

Company documents, internet etc.

Research Design

A research design is the arrangement of conditions for collections and analysis

of data in a manner that aims to combine relevance to the research purpose with

economy in procedures. It is a descriptive cross sectional design .It is the

conceptual structure with in which research is conducted; it constitutes the

blueprint for the collection, measurement and analysis of data.

It is needed because it facilitates the smooth sailing of the various research

operations, thereby making research as efficient as possible yielding maximal

information with minimal expenditure of effort, time and money.

In the preliminary stage, my research stage constituted of exploratory study

by which it is clear that the existence of the problem is obvious .So, I can

directly head for the conclusive research.

Sampling Plan

Sampling plan is a distinct phase of research process. In this stage I have to

determine who is to be sampled, how large should be the needed sample and

how sampling unit is to be selected.


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Population

In my research, I have defined my population as a complete set of customers of

Sagar City.

Sample Survey

As compared to census study, a sample study has been conducted by us

because of:

Wide range of population, it was impossible to cover the whole

population

Time and money constraints.

Sample Unit

In this survey I took the list of customers from the dealers of Ketchup

Sampling Technique

Sampling technique implies the method of choosing the sample items, the two

methods of selecting sample are:

Probability method.

Non-probability method.

Probability method is those in which every item of the universe has an equalchance of the inclusion in the sample. Non-probability methods are those thatdo not provide every item in the universe with known cause of being includedin the sample. The selection process is partially subjective.For my study, I employed the Non-probability sampling technique, in which I

got the data of the customers from the dealer of Ketchup.

Instrument of collection of data

I have used one set of questionnaire to collect data from the customers. This

questionnaire is structured and highly ordered. This includes both close ended

and open ended questions. The close ended questions included both

dichotomous and multiple choice questions.

MARKET ANALYSIS

3.1: Market Overview


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The Iron market mainly consists of the crude Iron production in the stated country or

region. Crude Iron Production is the production of solid Iron product, after the

solidification of liquid Iron . It includes Ingots (from conventional mills) and Semis (from

modern mills with continuous casting facility).

Crude Iron also consists of liquid Iron which goes into production of Iron castings.

Market share represent volumes of Iron produced by a company in respective market. In this

report, both Global and Asia-Pacific Iron market is considered, in which Asia-Pacific

comprises Australia, China, India, Japan, Singapore, South Korea, and Taiwan.

The Indian Iron market had total revenue of $32.9 billion in 2009, which represented a

compound annual growth rate of 12.8% for the period spanning 2005-2009.Iron productionvolumes in the market increased with a CAGR of 5.5% between 2005 and 2009, to reach a

total of56,608 thousand metric tons in 2009.

The performance of the market is forecasted to accelerate, with an anticipated

compound annual growth rate (CAGR) of 20.3% for the five-year period from 2009-2014,

which is expected to propel the market to a value of $82.8 billion by the end of 2014.

Market Exploration

The Indian Iron market experienced strong growth until 2009, after which it fell into a

steep decline. Recovery to double-digit growth is expected in 2010, followed by deceleration

during the forecast period, although the market will maintain strong growth levels

throughout this time.

The Indian Iron market had total revenue of $32.9 billion in 2009, which represented a

compound annual growth rate (CAGR) of 12.8% for the period spanning 2005-2009. In

comparison, the Chinese market increased with a CAGR of 12%, and the Japanese market

declined with a compound annual rate of change (CARC) of -6%, over the same period, to

reach respective values of $329.8 billion and $50.8billion in 2009.

Market production between 2005 and 2009 volumes increased with a CAGR of 5.5%,

to reach a total of56,608 thousand metric tons in 2009.By the end of 2014,the market's

volume is expected to rise to 86,632.5 thousand metric tons, representing a CAGR of 8.9%

for the 2009-2014 period.


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The performance of the market is forecasted to accelerate, with an anticipated CAGR

of 20.3% for the five year period 2009-2014, which is expected to drive the market to a

value of $82.8 billion by the end of2014.

Comparatively, the Chinese and Japanese markets will grow with CAGRs of 11.9%

and 13.6%respectively, over the same period, to reach respective values of $579 billion and

$96.2 billion in 2014.

Market Value and Volume

The Indian Iron market has amplified in terms of its market value from 2005 to 2009.

The industry boosted by about 51.4% in 2008 indicating to the fact that India was growing as

one of the top 5 Iron manufacturers in the world. However, in the consequent year, the

industry saw a plunge in the growth rate by about 14.8%. A probable reason for this decline

may be the financial meltdown that the globe witnessed. Falling prices in the backdrop of

economic slowdown have spelt turmoil in the industry the world over. The compound annual

growth rate of the market was 12.8% during the period 200509 and this sends out a positive

signal regarding the industry.


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The Indian Iron market shrank by 2% in 2009 to reach a volume of 56.6 million

metric tons. The compound annual growth rate of the market in the period 200509 was5.5%.


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Global ranking of Indian Iron

Global production of crude Iron is 1220 million tonne in 2009, but as compared to

2008, production of crude Iron has decline by 8%. China is the largest crude Iron producer

in the world.

It has achieved a production level of 567.8 million tonne in 2009, but in comparison

with the last year China reported a significant growth of 13.5% in crude Iron production.

India once again evolved as the fifth largest producer in 2009 and recorded a growth of 2.7

per cent as compared to previous year, 2008, the only other country in the top 10 bracket to

register a positive growth during 2009.

India also evolved as the largest sponge iron producing country in the world in 2009, a

rank it has achieved since 2002. If as per schedule proposed expansions plans are

implemented, India may become the second largest crude Iron producer in the world

by2015-16.

Table 3.3 : World Crude Iron Production 2009

Rank Country Production(million tonne)

1 China 567.8

2 Russia 87.5

3 Japan 59.9

4 US 58.1

5 India 56.6

6 South Korea 48.6

7 Germany 32.78 Ukraine 29.8

9 Brazil 26.5

10 Turkey 25.3

Source : World Iron Association


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CONSUMER BEHAVIOUR

Economical Factors:

The Ministry of Steel is expected to play a crucial role in ensuring harmonious andintegrated

growth of the Steel Sector in India. Being a core sector, steel sectors sustainedgrowth is aprerequisite for attaining the level of GDP growth envisaged in the 11th FiveYearPlan.Escalating raw materials and energy costs are adversely affecting the balance sheets ofmanycompanies in the steel sector. There is also a need for a sustained level of privateinvestmentin the sector.The Indian steel sector was the first core sector to be completelyfreed from the licensingregime and pricing and distribution controls. This wasdone primarily because of theinherent strengths and capabilities demonstrated by the Indianiron and steel industry. Theeconomic reforms and the consequent liberalization of the ironand steel sector which startedin the early 1990s resulted in substantial growth in the steelindustry and green field steel plants were set up in the private sector. This sector representsover Rs.90,000 crore of capitaland directly provides employment to over 5 lakh people. The

production of finished steelduring the year 2006-07 was 50.20 million tones with annualgrowth rate of 12.87% over the previous year. The production of finished carbon steel duringthe current year 2007-08(April-December) at 38.09 million tones (Prov.) was up by 5.6%over the corresponding period of previous year. Current GDP per capita is USD 2500.Theannual growth rate of finished steel production in India during 2002-2003 was 9.9%.The

production of finished steel during 2003-2004 was 36.957 million tones. The annualgrowthrate of finished steel production in India during 2003-2004 was 9.7%. The Finished(Carbon)Steel production during the current year (April-October 2004) at 21.681 MT (Prov)was up

by 3.5% over the corresponding period of the pervious year.(10) Duties on raw materials for steel production were reduced. These measures reducedthecapital costs and production costs of steel plants.TIMS14

Tata Iron & Steel CompanyFreight equalization Scheme was withdrawn in January, 1992.However, with the coming upof new steel plants in different parts of the country, iron andsteel products are freelyavailable in the domestic market.Recent years have witnessedunprecedented turmoil in the global steel market. The crisisinthe international steel market might be attributed to the misbalance between capacity,demand and production and consequent drop in prices. Throughout the world there isanapparent over capacity (estimated to be between 100 Mt-150 Mt) in the steel sector.According to the IISI, the companies have been selling their products below costs tosurvivein global competition.Since 2001, while growth has been negative in most maturemarkets, Asia has maintained asteady growth rate. The Asian production growth has mainly

been driven by the surge insteel demand and production in China. The huge Chinese appetitefor steel has led the 10.2%surge in output. The growth in Chinese steel demand, generatedmainly by demand frominfrastructure sector is a beacon for Indian steel since both thenations are comparable onmany counts.The Indian steel manufacturers are faced with some major problems and concerns,whichwork as inhibiting factors to their effort towards gaining the competitive edge. A fewof these are:Unremunerative Prices:

Stagnating demand, domestic oversupply and falling prices in thelast few years have hitIndian steel makers. Barring the sporadic rise in demand in the recentmonths, it has suffered

from unremunerative prices to the extent that companies have beenfinding it difficult tomaintain capital costs.Stagnating Demand for Steel:


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According to Mc-Kinsey and Co the domestic steel industryis set to witness a 33% overcapacity in the hot rolled coil sector by the year 2003 when thedomestic capacity currently at45%, in long products and semis is expected to drop at 22% by that year. The non-flat

products are also likely to face an over capacity of over 21.4%.Lower Consumption:

Steel consumption in India over a period of time has exhibited astrategy correlation to GDPgrowth (correlation coefficient of 0.9855 between 1960-1961and 1996-1997) and grossdomestic capital formation (0.981).The correlation with GDCF has been 1.0 for the periodFY 1994 to 1999. As investmentsdeclined from 1996-1997 onwards, steel consumption alsodecreased. Failure to DevelopTrade Especially International Trade.The countries which have achieved major growthincluding growth in steel industry, likeJapan, China and South Korea have largely used their trading houses to develop theirmarkets abroad. In India, they have singularly failed to do so.As a result, Indian steelindustry does not have a major presence even in the neighboringcountries.The reasons forthe same include lack of profit motive, wrong scale of assets, little or no co-ordination

between plants and markets, inappropriate logistics/locations, over-manning,poor investment decisions, lack of innovation and inadequate investment in requisite areas.Slow Industry Growth:The linkage between the economic growth of a country and thegrowth of its steel industry isstrong. The Indian steel industry is no exception. The growthof the domestic steel industry

between 1970 and 1990 was similar to the growth of theeconomy, which as a whole wassluggish. This sluggish growth in the steel industry hasresulted in enhanced rivalry amongexisting firms. As the industry is not growing the onlyother way to grow is by increasingone.s market share. Consequently, the Indian steelindustry has witnessed spurts of price warsand heavy trade discounts, which has doneIndian steel industry no good as a whole


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PRODUCT PROFILE

TATA Steel:

Tata Steel is India's largest

integrated private sector steel

company. Established in 1907,

The Company is backward

integrated with owned iron ore

mines and collieries. Tata Steel

has an integrated steel plant, with

an annual crude steel making

capacity of 5 million tonne, located at Jamshedpur, Jharkhand.

The steel works is situated at Jamshedpur in the state of Jharkhand, India. The

factory covers 800 hectares of land. West Bokaro sub division in Hazaribagh district

overs 2000 hectares of land in which mining and coal beneficiation activities are

performed. Jharia Division occupies 2500 hectares of land for its industrial, mining

and domestic activities in the district of Dhanbad both in the state of Jharkhand. The

iron ore and dolomite mines are located at Noamundi in the state of Jharkhand and

at Joda, Kalamati, Khondbond and Gomardih in the state of Orissa.

Over the years, Tata Steel has emerged as a thriving, nimble steel enterprise

due to its ability to transform itself rapidly to meet the challenges of a highly

competitive global economy and commitment to become a supplier of choice.

Constant modernization and introduction of state-of-the-art technology at Tata Steel

has enabled it to stay ahead in the industry.

Tata Steel has completed the first nine months of fiscal 2006-07 with

impressive increase in its production and sales volumes. The hot metal production

at 4.1 million tonne is 8.2% more compared to the last year in the corresponding

period and crude steel production at 3.7 million tonne is higher by 7.9% compared to

the last year in first three quarters.


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The saleable steel production at 3.7 million tonne registered a significant

increase of 11%. The total sales of 3.53 million tonne has grown by 11.7% over last

financial year in the corresponding period. The domestic sale of long products has

increased by 30%.

Tata Steel is continuing with its programme of expansion of steel making

capacity by 1.8 million tonne to reach the rated capacity of 6.8 million tonne in fiscal

2007-08 and thereafter to 10 million tonne by fiscal 2010.

Tata Steels greenfield projects in Orissa and Chhattisgarh are progressing on

schedule with placement of equipment order for Kalinganagar project in Orissa and

commencement of the land acquisition process. Jharkhand project is waiting

announcement of R & R policy of the state Government. The construction work of

ferrochrome project in South Africa is in full swing.

Acquisition of Corus: Recently Tata Steel acquired the Anglo-Dutch steel

maker Corus, thus emerging as the fifth largest steel producer in the world.

The steel major has won the Prime Minister's Trophy four times. This award is

instituted by the Indian ministry of steel and awarded to the country's best integrated

steel plant. In 2000, it became the first Tata company to win the JRD Tata QV

award, given to the company with 'world class' operations under the Group's Tata

Business Excellence Model

Areas of business

Apart from the main steel division, Tata Steel's operations are grouped under

strategic profit centres like tubes, growth shop (for its steel plant and material

handling equipment), bearings, ferro alloys and minerals, rings, agrico and wires.

Tata Steel's products include hot and cold rolled coils and sheets, tubes, wire

rods, construction bars, structurals, forging quality steel, rings and bearings. In an

attempt to 'decommoditise' steel, the company has recently introduced brands like

Tata Steelium (India's first branded cold rolled steel), Tata Shaktee (galvanised

corrugated sheets), Tata Tiscon (re-rolled bars), Tata pipes, Tata bearings, Tata

Wiron (galvanised wire products) and Tata Agrico (hand tools and implements).
http://www.tata.com/0_our_commitment/corporate_governance/quality/tbem_tqms.htmhttp://www.tata.com/0_our_commitment/corporate_governance/quality/tbem_tqms.htmhttp://www.tata.com/0_our_commitment/corporate_governance/quality/tbem_tqms.htmhttp://www.tata.com/0_our_commitment/corporate_governance/quality/tbem_tqms.htm


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Tata Steel is also exploring opportunities in the ferro-chrome and titanium

businesses.

Joint ventures, associates and subsidiaries

Tata Steel has numerous joint ventures and subsidiaries. Among them are:

Tinplate Company of India

Tayo Rolls

Tata Ryerson

Tata Refactories

Tata Sponge Iron

Tata Metaliks Tata Pigments

Jamshedpur Injection Powder (Jamipol)

TM International Logistics

mjunction services

TRF

Jamshedpur Utility and Service Company (JUSCO)

The Indian Steel and Wire Products(ISWP)

Lanka Special Steel

Sila Eastern Company


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ESSAR STEEL LTD.

Essar Steel is an int egrated steel producer,

with operations all along the value chain. Essar

Steel produces some of the worlds best steel at

its state-of-the-art steel complex at Hazira,

Gujarat. It is also Indias largest exporter of flat

products, sending half of its production abroad, mainly to the highly demanding

markets of the west, and the growth markets of South East Asia and Middle East.

Essar ensures excellent customer services through a modern distribution network.

Essar Steels core manufacturing facilities are located at its steel complex in

Hazira, Gujarat. The Hazira complex includes a 5.5 million tonne per annum Hot

Briquetted Iron (HBI) plant, a 4.6 mtpa continuous caster slab facility, a 3.6 million

tonne per annum Hot Rolled Coils (HRC) and a 1.2 mtpa cold roll mill complex with

all down stream facilities. The facilities are complemented by its own 8.0 mtpa pellet

plant at Vishakapatnam and 0.4 million tonne per annum cold rolled coil plant at

Indonesia.

Expansion

Presently Essar Steel has embarked upon a capacity expansion for

enhancement of its production capacity from 4.6 million tonne per annum to 7.6

million tonne per annum. The capacity expansion programme will consist of 2 units

of Corex units of 1.5 million tonne per annum each. Further value addition will be

carried out by Continuous Strip Caster Mill, conventional Slab Caster Mill and a 5.2meter Wide Plate Mill.

Products

All Essar Steels products are world class, meeting the highest international

standards, supported by excellent marketing and service.


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JSW STEEL LTD.

JSW Steel Ltd. is a 3.8

million tonne per annum

integrated steel plant,having a process route

consisting broadly of iron

ore beneficiation

pelletisation sintering

coke making iron making

through blast furnace as well

as Corex process steel

making through BOFcontinuous casting of slabs hot strip rolling. The production

facilities include 3.0 million tonne per annum iron ore beneficiation unit, 5.0 million

tonne per annum pellet plant, 3.2 million tonne per annum sinter plant, 1.2 million

tonne per annum coke ovens, 0.9 + 1.3 million tonne per annum blast furnaces, two

Corex units of 0.8 million tonne per annum each, 3 X 130 t converters, three slab

casters, and a 2.5 million tonne per annum hot strip mill with state-of-the-art coil box

technology.

JSW Steel has a distinction of being certified to ISO-9001:2000 Quality

management system, ISO-14001:1996 environment management system and

OHSAS 18001:1999 occupational health and safety management system.

During this year, JSW Steel has also been conferred with a number of awards.

Production Performance

(in million tonne)

Items 2003-04 2004-05 2005-06 April-Dec.06

Pellets 3.25 3.61 3.80 2.93

Hot Metal 1.63 1.96 2.40 2.19

Slabs 1.61 1.87 2.25 1.95

Hot Rolled Coils 1.54 1.78 2.10 1.48


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JINDAL STEEL AND POWER LTD. (JSPL)

Jindal Steel and Power Ltd.

(JSPL), part of the $4 billion Jindal

Organisation, has business interests

in steel, power generation, mining

iron ore, coal and diamond

exploration/mining. The current tur

nover of the company is over Rs. 3,000 crore. JSPL is the worlds largest producer

of coal based sponge iron. The product range encompasses 27 steel slabs, rounds,

blooms and beam blanks. JSPL is producing rails and H beams and columns in

technical collaboration with JFE Corporation, Japan. These H-beams are the most

desired option of structural engineers worldwide. JSPL is the largest private sector

investor in the state of Chhattisgarh with a total investment commitment of more

than Rs. 10,000 crore. The company is also setting up a 6 million tonne steel plant

in Orissa with an investment of Rs. 13,500 crore and a 5 million tonne steel plant in

Jharkhand with an investment of Rs 11,500 crore.

Jindal Power Ltd., wholly-owned subsidiary of JSPL, is setting up a 1000 mega

watt O.P. Jindal super thermal power plant at Raigarh, with an investment of overRs. 4,500 crore. JSPL has been rated as one of the best environmentally managed

companies in India and committed to environment protection as an integral part of

their business activities.


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ISPAT INDUSTRIES LTD. (IIL)

Ispat Industries Ltd. (IIL) has set up

integrated steel plants at Dolvi (district Raigad),

a backward region of Maharashtra, with a

capacity of 3 million tonne of hot rolled coils per

annum. The plant has got a 2.24 million tonne

per annum sintering plant, 2 million tonne per

annum blast furnace and 1.6 million tonne per

annum gas based sponge iron plant. IIL have

uniquely combined the usage of hot metal and sponge iron in the electric arc

furnace for production of liquid steel for the first time in India. IIL have also adopted

the state-of-art technology called Compact Strip Production (CSP) process, which

has been installed for the first time in India and produces high quality and very thin

gauges of Hot Rolled Coils (HRC). The IILs products are accepted in the domestic

and international market.

The production performance of IIL during last three years has been as follows:

(in million tonne)

Items 2003-04 2004-05 2005-062006-07

(Up to Dec06)

Hot Metal 1.29 1.40 1.42 1.14

Sponge Iron 1.06 1.05 0.89 0.85

Hot Rolled Coils 1.62 1.97 2.15 1.97

The two thin slab casters each with designed capacity to cast 55 and 60 mm slabs

with Iiquid Core Reduction (LCR) features available. Ispats casters have achieved

global benchmark in annual production, as confirmed by Steel Melting Shop (SMS)

Demag, the technology supplier.


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MARKETING STRATEGIES

1. PRODUCT:

The Companys products consist of TSL products, produced by the Companys Indian

operations and its NatSteel and Tata Steel Thailand operations, and Corus products, and

produced in the United Kingdom and The Netherlands. TSLs products can be divided into

three main categories:

1. Finished and semi-finished steel products;

2. Ferro alloys products; and

3. Other products and services, including tube products, bearing products, refractory

products, pigments, municipal services and investment activities.

Corus has four main product segments: (1) strip products; (2) long products; (3) distribution

and building systems; and (4) aluminum.

PRICE:

Pricing is one of the most crucial elements behind a successful product. It is more pragmaticand fact oriented in industrial marketing as compared to pricing for consumer products.Pricing in industrial marketing is closely related to the firms product, distribution andcommunication strategies.

Factors Influencing Pricing Strategy in Steel Industry

The most important factors which affect pricing strategies in steel industry are:1. Production Costs

2. Market demand (derived in nature)

3. Competition

4. Government regulations

Production Costs

Tata Steel is the lowest cost manufacturer of steel and keeping production costs low haveplayed a major role in achieving that. The following measures have helped Tata Steel inmaintaining cost leadership:

1. Acquiring sources of raw materials in India and globally: Tata Steel has captive coal

mines in West Bokaro and Jharia. The mines in Bokaro have reserves of over 196

million tones and the coke mine in Jharia can produce 1.9 million tones of raw coal

annually. Its iron ore mines are located in Noamundi and Joda and chromite mines at

Sukinda contribute to raw materials for Tata Steel.


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Internationally, Tata Steel has 5% interest in the Carborough Downs Coal Project

located in Queensland Australia for low ash coal. The Sila Eastern Company has

been established to develop limestone mines in Thailand mainly for the captive use

of Tata Steel.

2. Capacity expansion : With the expansion of its Jamshedpur plant by 2012 and

Greenfield units in Orissa and Chhattisgarh becoming operational in 3-4 years, its

manufacturing capacity will jump to 21 mtpa. Acquisition of Corus has made Tata

Steel one of the largest manufacturers of steel.

3. Technology : Tata Steel has developed several technologies that help in keeping

production costs low. Some of them are:

- Process innovation and use of blue dust in sinter plants increased productivity by

60%.

- Stamp charging technology was indigenously developed to convert low quality

coal to high quality coking coal. This reduced the import of coking coal.

Market Demand:

Demand for steel is derived in nature since it is majorly used as an input. The following factsand figures suggest that there exist healthy demand in market for Tata Steel to serve.

- World consumption of steel is expected to be 1.23 billion tonnes in 2010registering a growth of 10% over 2009. The exports during 2010 are expected to

be higher by around 4% as compared to 2009.

- In India, apparent consumption is expected to increase by more than 10% in FY

11 buoyed by expected strong performances from consuming segments like

automotive, construction, infrastructure and capital goods.

Distribution

JSW Steel has launched JSW Shoppe to markets its steel products as compared to Mjunction

launched by TATA Steel. The exclusive JSW showrooms retail all types of JSW steel,ranging from HR coil to colour-coated steel."JSW is looking at opening 600 retail outlets in the next two years time to market steel in thecountry. The reason for such openings is to keep a check on the variation in steel prices fromcompany to company," JSW Vice Chairman and Managing Director Sajjan Jindal told in a

press interview.

JSW aims to provide a unique experience of buying steel products through brandeddistribution channels. It started off with an idea to give a different feel and ambience to steelretail. JSW Steel wanted to give a feel of a mini-departmental store or a mall, which wouldhave the same format, same look and feel wherever the buyer goes in the country. So, it will

give a branding to the distribution channel. It will also display all the products in one placeso that the customer gets a touch and feel of what the steel looks like. The smaller towns will

be focus areas. The bigger towns and metros will also have shops, but their focus is on tier 2


32/46

and 3 cities. If this takes off properly, they propose to target 600 Shoppes in 2012. This willenable them to sell 600,000 tonnes a month, which comes to 7.2 million tonne a year (whenthe company opens 600 stores by 2012). By 2012, they are targeting at least 50% of salesthrough the Shoppes.

Comparison of distribution Channels of TATA Steel Vs JSW Steel

As compared to TATA Steel,JSW Steel does not sell its products online.It is here that TATASteel has a competitive advantage.According to reports TATA Steel sell over 50% of its

products through Mjunction.The revenues through Mjunction has crossed 450 crores(INR) inthe year 2009-10.As a result it serves as a huge platform for TATA Steel to sell its productswithout incurring distribution costs.Its margins has therefore shown an upward trend in the

past six years.JSW Shoppe,the retail outlet opened by JSW Steel has started its operations in 2007 and yetto penetrate the market whereas Steel Junction,the retail outlet of TATA Steel has alreadyopened its outlets in many places including semi-urban and rural areas.

PROMOTION:

In B2B marketing advertising, promotions and publicity plays an important role in thecommunication strategies. Hence, to contribute to the overall effectiveness of the

promotional strategies utmost care must be taken by the companies.B2B promotion is used to create awareness of the company, to increase the sales of the

product and to increase the overall effectiveness of the selling efforts. The promotionalprogramme begins with carefully developed advertising objectives that must be formulatedfrom corporate and marketing objectives in such a manner as to set the direction for creating,co-coordinating, and evaluating entire promotional programme.


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ABOUT COMPETITORS

Competition inIndian Steel & Iron Industry

The Indian steel industry mainly consists of the producers of finished steel, semi-

finished steel, stainless steel and pig iron. Indian steel industry, having contribution from

both public sector and private sector companies, is one of the fastest growing markets for

steel and is also increasingly looking towards exports, thus driving the growth of the

industry. The nature of competition in the steel market is far more complex especially when

examined for each product separately. Due to the specific characteristics of the steel

products and the consumer profile, competition for each gets confined only to smaller

number of players.

Flat Products: Flat products are rolled mostly from semi-finished forms called slabs. There

are two streams of flat products which are either produced from a plate mill (Plates) or a hot

strip mill (HR coils). In 2007-08, the five major companies, SAIL, Tata Steel, Essar, Ispat

and JSW together had a share of about 92.4 per cent in total production in the country. While

with the entry of few more companies in the narrow segment of the market, the competition

seems to be increasing, but no such changes have been visible in the wider segment. The

wider HR coils dynamics have also changed alarmingly as all the erstwhile merchant

producers of HR coils have added downstream cold rolling capacities. This has, in fact,

substantially reduced the merchant HR coils supplying the local market.

Since, there are no formal controls or regulations on steel prices; they are to be driven

by the market. However, there seems to be market imperfections and which may give rise to

possible cartelisation and which in turn has provided the producers of HR Coils greater

degree of market power vis--vis the buyers.

Other steel products: Other steel products such as bars and rods, structurals, plates, CR

coils and sheets, GP/GC sheets etc. have not caught much attention of the public from the

competition perspectives.. In 2007-08, SAIL accounted for about 93 per cent of the total

plates production, which dipped to 88 per cent the next year. Others were small players and

were not competing with SAIL on size and grades. SAIL continued with its monopoly

position till it met with some competition from plates produced from hot strip mills and

expanded capacity from others.

Market Sharing and Collusion


34/46

The very fact that the Indian steel industry, even in the bad times, was out of the

consolidation process, always lends support to the hypothesis that the industry instead had

chosen to collude rather than consolidate through mergers and acquisitions.

However, the major steel producers have substantial pricing power in the market and

that they can be expected to act in phase with substantial net impact on the market to move

the trends in the desired direction. In fact, although the government action is appeared to

correct market imperfection, it has at the same time given rise to competition issues in the

market. For example, the governments action to restrict prices, through the low cost

producers, while at the same time not taking similar action for reduction of prices of sponge

iron and steel scrap, has put the small and medium size induction furnace based steel

production at jeopardy as they find their output prices not increasing in proportion to their

costs.

The other major Private steel companies are

JISCO.

Saw Pipes.

Uttam Steels Ltd.

Mukand Ltd.

Mahindra Ugine Steel Company Ltd.

Usha Ispat Ltd.

Kalyani Steel Ltd

Electro Steel Castings Ltd.

Sesa Goa Ltd.

NMDC.

Lloyds SteeI Industries Ltd.


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DATA ANALYSIS AND INTRERPRETATION

The government plans to raise infrastructure spending from the current 5% of the GDP

to 10% by 2017. Given Indias double-digit energy deficit, one third of the allocated amount

or infrastructure spending is directed towards power sector. The Indian power sector may

expect orders for over 100 giga watts, worth Rs 1.1 lakh crore over the next 2-3 years.

Besides power plant construction, steel will also be extensively used in making pipelines and

power equipment.

For the roads and bridges sector, the 11th five year plan envisages a total investment of

approximately Rs 1.6 lakh crore. Construction of new ports, new terminals in existing ports,expanding the railway network and building new roads, especially ones involving bridges,

will be the key drivers of steel demand. A scheme for promotion of research and

development in iron and steel sector in the 11th five year plan has been approved with a

stipulated spending of Rs 118 crore.

Finance minister Pranab Mukherjee provided Rs 1,73,552 core -- constituting over

46% of the total planned allocation -- for infrastructure development in Budget 2010.

The steel ministry has stated that, going by MoUs signed by private producers with

various state governments over the past few years, Indias capacity could potentially go up to


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293 million tonnes by 2020. However, the National Steel Policy 2005 seems to be a bit more

realistic with steel production target of only 110 million tonnes by 2019-20.

Currently, import duty on steel items is 5%. There is none on raw materials such as

scrap or coking coal. But, to protect long-term interests of domestic industry, the

government recently hiked export duty on iron ore fines to 15%.

Of the total outlay of around Rs 17,200 crore in Budget 2010 for the ministry of steel,

Rs 12,254 crore(around 70%) has been provided for the Steel Authority of India (SAIL).

SAIL, which at 13mtpa production capacity is the biggest domestic steel player, is all set for

major expansion and technology upgrades to make it more efficient and world class.

The Indian steel industry has many growth drivers such as easy availability of raw

material and workforce.

The growth of the construction industry, which is growing at a rate of around 8-9% is

one of the major consumers of steel in the country. The eleventh five year plan (2007-2012)

by the Indian government, has allocated investment of USD$ 490 billion for the core

infrastructure sector, comprising power, roads, railways, ports, airports, which are some of

the major consumers of steel. The expansions in the Indian automotive industry and the oil

and gas sector.

India is largely sufficient in raw materials for Iron and Steel Industry. 25 billion tonnes

of iron ore reserves - the fifth largest reserve base in the world. 253 billion tonnes, (96

billion tonnes proven reserves) Coal- 4th largest proven coal reserves in the world

India also has worlds 2nd largest Mn reserves (240 million tonnes), 3rd largest Cr

reserves (57 million tonnes) and 4th largest bauxite reserves (2.4 billion tonnes).


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3.11.2 : Factors Holding Back The Indian Steel Industry

The growth of the Indian steel industry and its share of global crude steel production

could be even higher if they were not being held back by major deficiencies in fundamental

areas. Investment in infrastructure is rising appreciably but remains well below the target

levels set by the government due to financing problems.

Energy supply: Power shortages hamper production at many locations. Since 2001 the

Indian government has been endeavouring to ensure that power is available nationwide by

2012. The deficiencies have prompted many firms with heavier energy demands to opt for

producing electricity with their own industrial generators. India will rely squarely on nuclear

energy for its future power generation requirements. In September 2005 the 15th and largest

nuclear reactor to date went on-line. The nuclear share of the energy mix is likely to rise toroughly 25% by 2050. Overall, India is likely to be the worlds fourth largest energy

consumer by 2012 after the US, China and Japan.

Problems procuring raw material inputs and raising costs: Since domestic raw material

sources are insufficient to supply the Indian steel industry, a considerable amount of raw

materials has to be imported. For example, iron ore deposits are finite and there are problems

in mining sufficient amounts of it. Indias hard coal deposits are of low quality. For this

reason hard coal imports have increased in the last five years by a total of 40% to nearly 30

million tons. Almost half of this is coking coal (the remainder is power station coal). India is

the worlds sixth biggest coal importer.

Rising raw material prices had become a concern for steelmakers worldwide, including

in India. Spot prices of iron ore and coking coal had risen by almost 60-70% from the 2009

levels. Indias largest iron ore producer, National Mineral Development Corp (NMDC), has

already announced a provisional hike of 34-56% in base prices in April 2010.

While for iron ore fines, the hike is 34% to Rs 2,600 a tonne, for calibrated lump ore it

is 46% to Rs 3,800. In March 2010, coking coal prices were hiked by almost 55% to

$220/tonne for all long-term contracts. This will increase the cost pressure on companies.

The recent demand softening and easing of steel prices have put pressure on raw material

prices as well. Spot prices of iron ore fines have dropped about $60 a tonne and that of

coking coal by $20 a tonne.

Ore prices are currently hovering at $120 a tonne and coking coal at $200 a tonne. The

recent plunge in iron ore prices has been mainly driven by recent expectations of production

cut in China as per the Steel Business Briefing survey.


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Inefficient transport system: In India, insufficient freight capacity and a transport

infrastructure that has long been inadequate are becoming increasingly serious impediments

to economic development. Although the country has one of the worlds biggest transport

networks the rail network is twice as extensive as Chinas its poor quality hinders the

efficient supply of goods. The story is roughly the same for port facilities and airports. In the

coming years a total of USD 150 bn is to be invested in transport infrastructure, which offers

huge potential for the steel industry. In the medium to long term this capital expenditure will

lay the foundations for seamless freight transport.

Financing Capacity Expansion: Steel is a capital intensive industry with high fixed cost.

To reach the projected CAGR of 7.3%, projects of around 60mtpa will be needed to be

commissioned in the next 3-4 years. Such large projects will need an investment of Rs 2.5lakh crore. Profitability of domestic producers weakened in the second half of FY09. It has

picked up in the last 3-4 quarters.

Still, internal accruals of manufacturers would be low compared to the estimates at the

time of announcement of projects. With a steep hike in raw materials, profit margins will

also be under severe pressure. So, dependence on external sources to finance the capital

expenditure be larger.

Although the Indian equity market has recovered in recent times, its ability to fund

such large projects remains uncertain given the scale of government borrowing scheduled for

2010-11.

Bank financing, however, remains a possibility since the Indian banking system still

has some liquidity buffer at present. There could be uncertainty over the lenders willingness

to finance such large-scale projects in the event of steel prices falling again in future. The

capital structure of the steel makers can deteriorate due to lower internal accruals and heavy

capital expenditure.

In the post-de-regulation period, the role of the Ministry of Steel has primarily been

that of a facilitator for the Indian steel industry, being responsible for the planning and

development of the iron and steel industry, development of essential inputs such as iron ore,

limestone, dolomite, manganese ore, chromites, ferro alloys, sponge iron, and other related

functions. In its present day role, the Ministry of Steel is extending all possible support for

the development of the Iron and Steel Industry in the country, in matters like:

Facilitating expedited growth of steel capacity investments through active

coordination and formulation of right policy directives. An Inter-Ministerial Group


39/46

(IMG) is functioning in the Ministry of Steel, under the Chairmanship of Secretary

(Steel) to monitor and coordinate major steel investments in the country.

Providing linkage for raw materials, rail movement clearance etc. for new plants and

expansion of existing ones.

Facilitating movement of raw materials other than coal through finalisation of wagon

requirements and ensuring an un-interrupted supply of raw materials to the

producers.

Regular interactions with entrepreneurs proposing to set up new ventures, to review

the progress of implementation and assess problems faced.

Identification of infrastructural and related facilities required by the steel industry,

and coordination of infrastructure requirement of steel sector with the concern

Ministries/Department.

Promoting, developing and propagating the proper and effective use of steel and

increasing the intensity of steel usage, particularly in the construction sector in rural

and semi urban areas, through "Institute for Steel Development and Growth

(INSDAG)" in Kolkata.

Encouraging research and development activities in the steel sector. An Empowered

Committee under the Chairmanship of Secretary (Steel) provides overall direction to

research efforts on iron and steel in the country and approves specific research

projects placed before it for funding, fully or partially, from the Steel Development

Fund.

Efforts are being made to further augment R&D activities in the country with

Government budgetary support during the 11th plan period.

While exports of finished steel were sustained at a level of 4-5 million tonne per

annum during the 10th Plan, imports sharply increased from about 1.75 million tonne in

2003-04 to 5.21 million tonne in April-December 2009 (provisional data), not because of fallin competitiveness but to fill up supply-demand gap in the domestic market.

Once these challenges are met and with proper support from the government to

minimize the current issues, the Indian steel production can race ahead and produce more

Iron and steel. Indias capacity could potentially go up to 293 million tonnes by 2020.


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Comparison with China and Other Countries

All the major Iron and Steel producing countries and regions showed double-digit

growth in 2010. The European Union and North America had higher growth rates due to the

lower base effect from 2009 while Asia and the CIS recorded relatively lower growth.

In December 2010, world crude steel production for the 66 countries reporting to the

World Steel Association was 116.2 mmt(report as of 21 Jan 2011), an increase of 7.8%

compared to December 2009. The crude steel capacity utilisation ratio of the 66 countries in

December 2010 declined slightly to 73.8% compared to 75.2% in November 2010.

Compared to December 2009, the utilisation ratio in December 2010 is 1.1 percentage points

higher.


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Top 10 steel-producing countries

Rank Country 2010 2009 %2010/2009

1 China 626.7 573.6 9.3

2 Japan 109.6 87.5 25.2

3 US 80.6 58.2 38.5

4 Russia 67.0 60.0 11.7

5 India 66.8 62.8 6.4

6 South Korea 58.5 48.6 20.3

7 Germany 43.8 32.7 34.1

8 Ukraine 33.6 29.9 12.4

9 Brazil 32.8 26.5 23.8

10 Turkey 29.0 25.3 14.6

Source: World Steel Association (worldsteel)Annual production for Asia was 881.2 mmt of crude steel in 2010, an increase of

11.8% compared to 2009. Its share of world steel production increased to 65.5% in 2010

from 63.5% in 2009. China's crude steel production in 2010 reached 626.7 mmt, an increase

of 9.3% on 2009. China's share of world crude steel production declined from 46.7% in 2009

to 44.3% in 2010. Japan produced 109.6 mmt in 2009, 25.2% higher than 2009. In 2010,

South Korea's crude steel production was 58.5 mmt, a 20.3% growth compared to 2009.

The EU recorded an increase of 24.5% compared to 2009, producing 172.9 mmt of

crude steel in 2010. However, crude steel production in the UK and Greece continued to

decline in 2010.

In 2010, crude steel production in North America was 111.8 mmt, an increase of

35.7% on 2009. The US produced 80.6 mmt of crude steel, 38.5% higher than 2009.

The CIS showed an increase of 11.2% in 2010, producing 108.4 mmt of crude steel.

Russia produced 67 mmt of crude steel, an 11.7% increase on 2009 and Ukraine recorded an

increase of 12.4% with a year-end figure of 33.6 mmt.


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of world crude steel production 2009, 2010

Source: World Steel Association (worldsteel)

Global Crude Steel production


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YoY(%) growth in crude steel production- India and China


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LIMITATION

However, the public sector is expanding its capacities but, it has more

potential lies within to perform more than that.

Utilization of capacities in public sector is more than that of private sector but

the performance still has to be improved.

Public sector has increased its profit over the year particularly in 2006-07.

Both the companies are planning to adopt modern technology which is going

to help them to compete in world market but they need to be less dependent

on state of art technology and coal for long term prospects.

Public sector has undergone retrenchment for the employees and improved

has its lobour productivity but it is still lacking behind as compared to private

sector.

SAIL has reduced the no. of accidents due to improper handling of machinery

still no of accidents are more than that of TATA Steel.

Most of the plans to achieve the significant position in world market will

remain on paper unless adequate attention is given to augmentation of

infrastructure i.e. roads, ports, railways, power, etc.

These areas are of prime concern and the policy envisages a High Level

Monitoring Group which will not only prepare action plans in consultation with the

concerned Ministries but also coordinate development of the required facilities.

There are tremendous challenges ahead of us but these have to be metcomprehensively if we are to take our legitimate place in the world as a

developed nation by 2020.


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Conclusion

It is globally recognised hat Indian economy is growing at a very high rate presently

and the demand for steel is also showing an upward trend. As of 2010 Indian steel Industry

is 5th largest in the world, with the kind of investment in this sector it is projected that Indian

steel industry iwill be 2nd largest in the world. So, we believe, for the sake of nation and

economic growth, growth of Indian iron and steel industry is a must. This is possible only

with the active support of the Government with the effort to make this sector grow and make

it more eco-friendly, which will help the sectors to meet success only if competent

authorities take up the developmental jobs in proper spirit.


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BIBLIOGRAPHY

1. Ministry Of Steel(2009-10) Annual Report Iron and Steel Industry

2. Narayanswamy A Managerial Perspective Financial Accounting

3. Iron and Steel Review (1998)

4. Market segmentation Online Magazine Metal Bulletin

5. www.Capitaline.com

6. www.MySteel.com

7. www.sail.com

8. www.SteelWorld.com

9. www.steel.nic.in

10. www.worldsteel.org

11.http://planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_stee

l.pdf
http://www.capitaline.com/http://www.mysteel.com/http://www.sail.com/http://www.steelworld.com/http://www.steel.nic.in/http://www.worldsteel.org/http://www.capitaline.com/http://www.mysteel.com/http://www.sail.com/http://www.steelworld.com/http://www.steel.nic.in/http://www.worldsteel.org/

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