The Indian Steel Industry

Market projections and company strategies out to 2015

How much has the Indian steel industry been affected by the
recent global economic downturn?
What is the long-term outlook for the Indian steel industry
and how does this fit within the global market?
Are CEOs in India equipped to seize the right opportunities in
a climate of economic upheaval?
The Indian Steel Industry
Market projections and company strategies out to 2015

Why is this report unique?

Metal Bulletin Research (MBR) has undertaken an in-depth review of the Indian Steel
Industry and its outlook over the next six years. The Indian Steel Industry: Market
projections and company strategies out to 2015 offers over 300 pages of independent
research and analysis including:

• The independent and unrivalled view of • Unique and in-depth insights into the
MBR on the demand, supply and pricing Indian steel market and company strategies
prospects of the Indian steel and raw by MBR consultants and experts, in tandem
materials industry; with Satyabir Bhattacharyya, the former
Director - Corporate Strategy and Business
• Critical raw materials scenario; Excellence in Ispat Industries Limited;

• Detailed strategic recommendations on • The Indian CEO – a simple point plan in

competitive strategies to be adopted by re-defining the role and leadership style
Indian steelmakers and those looking to required to successfully meet the domestic
invest in India, for sustainable and and global challenges ahead.
profitable growth;

The Indian Steel Industry: Market projections and

company strategies out to 2015 is the first report of its
kind to provide independent and on-the-ground research
with unique board-level insights. Amid the challenging
economic climate the report offers strategic
recommendations for those looking to invest, or already
operating, in the Indian steel industry.
Contents

Executive Summary Chapter 5 – Indian Economy and Industry Sectors Outlook

5.1 Indian economy overview
Chapter 1 – Global Steel Industry Overview 5.1.1 Gross domestic product
1.1. Crude steel production 5.1.2 Foreign direct investment
1.1.1 By region 5.2 Indian steel industry growth and opportunities
1.1.2 Top ten crude steel producing countries 5.2.1 Steel growth drivers
1.1.3 Top ten crude steel producers in the world with their installed capacities 5.2.1.1 Automotive industry
1.1.4 Crude steel production by different process routes 5.2.1.2 Construction and infrastructure industry
1.1.5 Regional steelmaking – Historical context and current advantages 5.2.1.2.1 Roads
1.2 Crude steel consumption 5.2.1.2.2 Ports
1.3 Steel trade 5.2.1.2.3 Airports
1.3.1 Top steel importers 5.2.1.2.4 Railways
1.3.2 Top steel exporters 5.2.1.2.5 Power
5.2.1.2.6 Real estate
Chapter 2 - Asian Steel Industry 5.3 Major issues and challenges
2.1 Crude steel production 5.3.1 The challenges
2.2 Crude steel production growth 5.3.2 Strategy for today
5.3.3 Raw material security to drive M&A in the long-term
2.3 Steel trade
5.3.4 The demand-supply gap
2.4 Steel consumption 5.3.5 Concluding remarks
2.5 China steel analysis
Chapter 6 - Major Indian Steel Companies
Chapter 3 - Indian Steel Industry Performance 6.1 Steel Authority of India Limited
3.1 Macro economic environment 6.1.1 The company history and background
3.2 Steel demand and supply analysis 6.1.2 Facilities, locations and installed capacities
3.3 Crude steel production 6.1.3 Process and technologies
3.3.1 Crude steel production by process 6.1.4 Products manufactured and volumes
3.3.2 Crude steel producers 6.1.5 Key customers and markets
3.3.3 Steel production – By Products (DRI and Pig Iron) 6.1.6 Sales volumes and market shares
3.3.4 Production of hot rolled steel products 6.1.7 Cost structure and competitiveness
3.4 Steel consumption 6.1.8 Exports and retail sales
3.4.1 Finished steel consumption 6.1.9 Corporate and product brands
3.4.2 Steel consumption – By Products 6.1.10 Financial performance and profitability
3.4.3 Steel demand pattern – By Industry 6.1.11 Future plans and strategies for growth
6.1.12 Corporate social responsibility (CSR) activities
3.5 Steel trade
3.5.1 Finished steel import 6.2 Tata Steel Limited
3.5.2 Steel import - By Products 6.3 Ispat Industries Limited
3.5.3 Steel import at major ports 6.4 Essar Steel Limited
3.5.4 Finished steel 6.5 JSW Steel Limited
3.6 National steel policy-2005
3.6.1 Background Chapter 7 - Future Outlook and Projections out to 2015
3.6.2 Objective 7.1 Steel consumption
3.6.3 Policy Implications 7.2 Steel production capacity
7.3 Development of the steel industry in the medium to long-term
Chapter 4 – Raw Material Industry Structure
7.4 Steps required to be taken by the Government for the future growth
4.1 Iron ore
4.1.1 Introduction
Chapter 8 – Future Strategies for Indian Steelmakers
4.1.2 Global scenario
4.1.3 Indian iron ore outlook 8.1 Background
4.1.3.1 Resources 8.1.1 Differentiating steel companies – A model
4.1.3.2 Iron ore production and consumption in India 8.1.2 Competitive positioning of Indian steel companies
4.1.3.3 Iron ore prices 8.2 Competitive rivalry among major players
4.1.3.4 Iron ore – Future perspective 8.3 Barriers to entry and critical success factors
4.2 Coking Coal 8.4 Current cost structure vis-à-vis selling price
4.2.1 Coal reserves in India 8.5 Strategies for steelmakers out to 2015
4.2.2 Coke deficit in India (Demand and Supply) 8.5.1 Minimisation of cost per tonne of steel produced
4.2.3 Global coking coal scenario 8.5.1.1 Establishing long-term partnership with key raw material supplier
4.2.4 Coke prices 8.5.1.2 Reducing cost of manufacturing of hot metal
4.2.5 Foreign collaboration 8.5.1.3 Reducing percentage of fines generation in iron ore and coke
4.3 Metallics (Scrap and DRI) 8.5.1.4 Optimising charge mix at electric arc furnaces (EAF)
4.3.1 Global scenario 8.5.1.5 Charging hot DRI into electric arc furnaces (EAF)
4.3.2 Estimated consumption, trade and apparent domestic supply 8.5.1.6 Minimising raw materials usage efficiency variances, yield and
4.4 National mineral policy – 2008 improving conversion efficiency
4.4.1 Background 8.5.1.7 Reducing logistics and handling costs
4.4.2 Objective 8.5.1.8 Improving plant reliability and minimising unplanned
4.4.3 Policy implications breakdowns
 8.5.1.9 Reducing energy costs 9.8.4.2 New generation young leaders view the world differently –
8.5.1.10 Maximising production volumes and plant utilisation Session at WEF, Davos 2008
8.5.1.11 Minimising administrative overhead costs 9.8.4.3 Short-term survival
8.5.1.12 Controlling working capital 9.8.4.4 Long-term success
8.5.2 Selection of appropriate steelmaking and casting technology for quality and 9.8.4.5 A new mindset for extreme conditions
cost- effective production 9.8.5 Shifting strategies
8.5.2.1 Production of clean steel at the steelmaking stage 9.8.5.1 JVs overtake M&A
8.5.2.2 Continuous assessment of current status of technology – process 9.8.5.2 Balancing talent retention and cost reduction
and technological innovation 9.8.5.3 Mitigating risks collaboratively
8.5.2.3 Assessment of promising emerging technologies 9.9 The Indian CEO - Redefined role and leadership style
8.5.3 Focus on building organisational capabilities
8.5.3.1 Securitisation of key bulk raw materials
8.5.3.2 Product development and R&D
8.5.3.3 Manufacturability of various special grade steels
8.5.3.4 Market leadership in key customer segments
8.5.3.5 Build world-class supply chain
8.5.3.6 Service centers and customer relationship management
8.5.3.7 Steel retailing and product branding
Biographies
8.5.3.8 State-of-the-art information technology systems
8.5.4 Focus on growth and capacity expansion – A long-term perspective
8.5.5 Focus on corporate social responsibility (CSR) – Environment protection
and carbon credit
8.6 Concluding remarks

Chapter 9 – Leadership and Management Styles in India

9.1 Challenges faced by CEOs world over in this global economic downturn Satyabir Bhattacharyya
9.2 What it means to operate as a CEO in a more connected world
9.3 Some companies are making the wrong moves – A Global study Satyabir has more than 30 years of rich experience in management
9.3.1 What are those wrong moves? consulting and industry. Until recently he was the Director -
9.3.2 What should the companies do? Corporate Strategy and Business Excellence in Ispat Industries Limited
9.4 The Indian Culture – how it might influence leadership styles in managing business in Mumbai, India. Earlier Satyabir was a partner with Andersen
9.4.1 Socio-demographic features of India
9.4.2 National culture
Business Consulting, KPMG, and Andersen Consulting (now
9.4.2.1 Hofstede’s analysis Accenture). He was also the first Managing Partner and Country
9.4.2.2 Cultural dimensions by Hampden-Turner/Trompenaars Leader at IBM and started the Business Consulting practice in India.
9.4.2.3 The concept of high and low context cultures by Hall
9.4.2.4 The concept of monochromic and polychromic culture by Lewis Satyabir has experience in numerous industries including Steel,
9.4.2.5 Fukuyama: Trust
9.4.3 Business culture
Automotive, Engineering, Oil and Gas, FMCG and White Goods,
9.4.3.1 Values and behaviour in organisations Retail, Pharmaceuticals, Chemicals, Airline and Surface
9.4.3.2 Communication Transportation, and Information Technology. He is a strategy
9.4.3.3 Industry structure
9.4.4 Family culture in India
consultant and also specialises in Supply Chain Management,
9.4.4.1 Leadership style in India – closer to Theory X or Theory Y? Organisation Design, Business Transformation, Change Management
9.4.4.2 Impact of family culture on leadership style and Leadership. He has written several articles and papers in
9.4.4.3 Unique styles of leadership have emerged out of Indian family
culture
management and has delivered several presentations in international
9.5 Leadership style of Indian CEOs and national seminars and conferences.
9.5.1 Focused more on growth
9.5.2 Focused more on tasks and hierarchies Satyabir has a BS honors degree in Mathematics, BS in Electrical
9.5.3 How Indian corporate culture impedes innovation Engineering, MS in Operations Research from the London School of
9.6 Top 12 traits of today’s global CEOs Economics, and MS, DIC in Management from the Imperial College
9.6.1 The traits - highlights
9.6.2 In what ways Indian CEOs are different
Business School, Imperial College of Science, Technology and
9.6.3 Professor CK Prahalad on Indian leadership Medicine, University of London.
9.7 Why do CEOs in India fail?
9.8 Role and challenges for CEOs in the coming years
9.8.1 The immediate CEO challenges for the steel industry in India Brian Levich
9.8.2 The immediate CEO challenges across the world – seven key steps to
weather the economic downturn Head of Research for Metal Bulletin Research, Brian specialises in the
9.8.3 In search for global solutions steel and raw materials sectors. He has written numerous major studies
9.8.3.1 Government action: More of the right kind
9.8.3.2 Climate change: The next global crisis? on the global steel industry and has done extensive consultancy and
9.8.4 Redefining success: CEOs face extreme short-term and long-term challenges market research work for a number of major steel producers,
9.8.4.1 When is a new CEO necessary? consumers and financial institutions.
The Indian Steel Industry: Market projections and
company strategies out to 2015 offers:

• Key long-term supply-demand balances for • Government policies on steel and minerals
steel and raw materials by major product and how these will affect the industry
including: iron ore, DRI, pig iron, coking structure and prices over the next decade;
coal, HR coil/sheet and other products;
• Investment strategies needed to ensure
• Sales volumes and cost structures for the key growth, profitability and sustainability
steelmakers in India; uniquely for the Indian market including
how to build organisational capabilities,
• Key strategic insights in leading steelmakers
select the appropriate steelmaking and
including Tata Steel Limited, Steel Authority
casting technology and achieve cost
of India Limited (SAIL), Ispat Industries
efficiency;
Limited, Essar Steel Limited, JSW Steel
Limited among others; • How best to understand and take advantage
of the Indian steel business culture.
• Consumption drivers of the end-user
industry segments including: construction,
automotive, roads, ports, airports, railways
and power;

Expected Start of Global Economic Recovery Indian Iron Ore production

– Public versus Private sector
Total: All Industries
160
36.8% 140
28.1% 120 Public Sector
23.2% Private Sector
100
MnT

11.9% 80
60
40
20
Most Pessimistic: Construction, Mining
0
86% of the Mining and Construction Industries are affected by the credit crisis
1

8
-0

-0

-0

-0

-0

-0

-0

-0
00

01

02

03

04

05

06

07
20

20

20

20

20

20

20

20

57.1%
Source: Metal Bulletin Research

28.6% Performance of major

Indian Steel makers
14.3% Nine Months ended period (Apr-Dec 08 vs. Apr-Dec 07)
0.0% 35000 50%
45% 31851.17
45%
Net Sales Realisation in INR Crores

30000
26338.9 40%
43%
25000 35%
Most Optimistic: Transport, Energy 32%
INR 4.8 Crores = US$1m

20000 34% 30%

69% of the Transport and Energy Industries are not affected by the credit crisis 24%
17595.43
26% 25%
15000 17% 13806.86 20%
16%
53.9% 10000 7089.02
10726.23
7883.16 15%
6005.13 10%
5000
5%
0 0%
ISPAT ISPAT JSW JSW Tata Tata SAIL SAIL
Steel Steel
23.1%
15.4% Apr-Dec Apr-Dec Apr-Dec Apr-Dec Apr-Dec Apr-Dec Apr-Dec Apr-Dec
08 07 08 07 08 07 08 07
Net Sales EBITA %
7.7%
Growth in EBITDA – Highest Tata Steel (35.08%), Ispat
represents second with 11.69%
1H 2009 2H 2009 1H 2010 2H 2010 & Beyond
Staff and Personnel Cost as % of Sales – Highest SAIL (22.18%),
Ispat represents third with 2.39%.
Source: Global Business Outlook Survey 4th Quarter, 2008 Source: Metal Bulletin Research
The Indian Steel Industry
Market projections and company strategies out to 2015

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