INDUSTRIAL ANALYSIS- STEEL INDUSTRY by RAKHEE S

INDUSTRIAL ANALYSIS- STEEL INDUSTRY

SUBMITTED BY
RAKHEE S
I SEMESTER MBA






SUBMITTED TO
JAYMOHAN NAIR








INSTITUTE OF COOPERATIVE MANAGEMENT
POOJAPPURA



CHAPTER 1
1.1 Introduction

Steel Industry is a booming industry in the whole world. The increasing demand for it was mainly generated by the development project that has been going on along the world, especially the infrastructural works and real estate projects that has been on the most significant growth that can be seen in the Steel Industry has been observed during the period 1960 to 1974 when the consumption of steel around the whole world doubled. Between these years, the rate at which the Steel Industry grew has been recorded to be 5.5 %. This roaring market saw a phase of deceleration 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.

Steel Industry was till recently dominated by the United Sates of America but this scenario is changing with a rapid pace with the Indian steel companies on an acquisition spree. In the last one year, the world has seen two big M&A deals to take place:-
• The Mittal Steel, listed in Holland, has acquired the world's largest steel company called Arcelor Steel to become the world's largest producer of Steel named Arcelor-Mittal.
• Tata Steel of India or TISCO (as listed in BSE) has acquired the world's fifth largest steel company, Corus, with the highest ever stock price.
It has been observed that Steel Industry has grown tremendously in the last one and a half decade with a strong financial condition. The increasing needs of steel 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 Steel Industry has been observed during the period 1960 to 1974 when the consumption of steel around the whole world doubled. Between these years, the rate at which the Steel Industry grew has been recorded to be 5.5 %. This roaring market saw a phase of deceleration 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.






CHAPTER 2
2.1 History
Steel was known in antiquity, and may have been produced by managing the bloomery so that the bloom contained carbon.[16] The earliest known production of steel is a piece of ironware excavated from an archaeological site in Anatolia and is about 4,000 years old. Other ancient steel comes from East Africa, dating back to 1400 BC. In the 4th century BC steel weapons like the Falcata were produced in the Iberian Peninsula, while Noric steel was used by the Roman military. The Chinese of the Warring States (403–221 BC) had quench-hardened steel, while Chinese of the Han Dynasty (202 BC – 220 AD) created steel by melting together wrought iron with cast iron, gaining an ultimate product of a carbon-intermediate—steel by the 1st century AD.

2.1.1 Ancient steelmaking
Steel was known in antiquity, and may have been produced by managing the bloomery so that the bloom contained carbon. The earliest known production of steel is a piece of ironware excavated from an archaeological site in Anatolia and is about 4,000 years old. Other ancient steel comes from East Africa, dating back to 1400 BC.In the 4th century BC steel weapons like the Falcata were produced in the Iberian Peninsula, while Noric steel was used by the Roman military. The Chinese of the Warring States (403–221 BC) had quench-hardened steel, while Chinese of the Han Dynasty (202 BC – 220 AD) created steel by melting together wrought iron with cast iron, gaining an ultimate product of a carbon-intermediate—steel by the 1st century AD.
 Wootz steel and Damascus steel
Evidence of the earliest production of high carbon steel in the Indian Subcontinent was found in Samanalawewa area in Sri Lanka. Wootz steel was produced in India by about 300 BC.Along with their original methods of forging steel; the Chinese had also adopted the production methods of creating Wootz steel, an idea imported from Indiato China by the 5th century AD. This early steel-making method in Sri Lanka employed the unique use of a wind furnace, blown by the monsoon winds and produced almost pure steel. Also known as Damascus steel, wootz is famous for its durability and ability to hold an edge. It was originally created from a number of different materials including various trace elements. It was essentially a complicated alloy with iron as its main component. Recent studies have suggested that carbon nanotubes were included in its structure, which might explain some of its legendary qualities, though given the technology available at that time, they were produced by chance rather than by design.Natural wind was used where the soil containing iron was heated up with the use of wood. The ancient Sinhalese managed to extract a ton of steel for every 2 tons of soil, a remarkable feat at the time. One such furnace was found in Samanalawewa and archaeologists were able to produce steel as the ancients did long ago.
2.1.2 Modern steelmaking
1. Processes starting from bar iron
In these processes pig iron was fined in a finery forge to produce bar iron (wrought iron), which was then used in steel-making.
The production of steel by the cementation process, was described in a treatise published in Prague in 1574 and was in use in Nuremberg from 1601. A similar process for case hardening armour and files was described in a book publihsed in Naples in 1589. The process was introduced to England in about 1614. It was produced by Sir Basil Brooke at Coalbrookdale during the 1610s. The raw material for this were bars of wrought iron. During the 17th century it was realised that the best steel came from oregrounds iron from a region of Sweden, north of Stockholm. This was still the usual raw material in the 19th century, almost as long as the process was used.
Crucible steel is steel that has been melted in a crucible rather than being forged, with the result that it is more homogeneous. Most previous furnaces could not reach high enough temperatures to melt the steel. The early modern crucible steel industry resulted from the invention of Benjamin Huntsman in the 1740s. Blister steel (made as above) was melted in a crucible or in a furnace, and cast (usually) into ingots.
2. Processes starting from pig iron
The modern era in steelmaking began with the introduction of Henry Bessemer's Bessemer process in 1858. His raw material was pig iron. This enabled steel to be produced in large quantities cheaply, so that mild steel is now used for most purposes for which wrought iron was formerly used. The Gilchrist-Thomas process (or basic Bessemer process) was an improvement to the Bessemer process, because it lined the converter with a basic material to remove phosphorus. Another improvement in steelmaking was the Siemens-Martin process, which complemented the Bessemer process.
These were rendered obsolete by the Linz-Donawitz process of basic oxygen steelmaking, developed in the 1950s, and other oxygen steelmaking processes. Basic oxygen steelmaking is superior to previous steelmaking methods because the oxygen pumped into the furnace limits impurities. Now, electric arc furnaces are a common method of reprocessing scrap metal to create new steel. They can also be used for converting pig iron to steel, but they use a great deal of electricity (about 440 kWh per metric ton), and are thus generally only economical when there is a plentiful supply of cheap electricity.

2.2 Recycling


A pile of steel scrap in Brussels, waiting to be recycled
Steel is one of the most recycled materials in the world, and, as of 2007, more than 78% of steel recycled. In the United States it is the most widely recycled material; in 2000, more than 60 million metric tons were recycled.
The most commonly recycled items are containers, automobiles, appliances, and construction materials. For example, in 2007, more than 97% of structural steel and 110% of automobiles were recycled A typical appliance is about 75% steel by weight and automobiles are about 65% steel and iron.
The steel industry has been actively recycling for more than 150 years, in large part because it is economically advantageous to do so. It is cheaper to recycle steel than to mine iron ore and manipulate it through the production process to form new steel. Steel does not lose any of its inherent physical properties during the recycling process, and has drastically reduced energy and material requirements compared with refinement from iron ore. The energy saved by recycling reduces the annual energy consumption of the industry by about 75%, which is enough to power eighteen million homes for one year.
The BOS steelmaking uses between 25 and 35% recycled steel to make new steel. BOS steel is more malleable than EAF steel so it is often used to make automotive fenders, soup cans, and industrial drums. EAF steelmaking uses almost 100% recycled steel. This steel is stronger than BOS steel so it is used to make structural beams, plates, and rebar. Recycling one ton of steel saves 1,100 kilograms of iron ore, 630 kilograms of coal, and 55 kilograms of limestone.
Because steel beams are manufactured to standardized dimensions, there is often very little waste produced during construction, and any waste that is produced may be recycled. For a typical 2,000-square-foot (200 m2) two-story house, a steel frame is equivalent to about six recycled cars, while a comparable wooden frame house may require as many as 40–50 trees.
2.3 Contemporary steel
Modern steels are made with varying combinations of alloy metals to fulfill many purposes Carbon steel, composed simply of iron and carbon, accounts for 90% of steel production. High strength low alloy steel has small additions (usually < 2% by weight) of other elements, typically 1.5% manganese, to provide additional strength for a modest price increase. Low alloy steel is alloyed with other elements, usually molybdenum, manganese, chromium, or nickel, in amounts of up to 10% by weight to improve the hardenability of thick sections. Stainless steels and surgical stainless steels contain a minimum of 11% chromium, often combined with nickel, to resist corrosion (rust). Some stainless steels are magnetic, while others are nonmagnetic.
Some more modern steels include tool steels, which are alloyed with large amounts of tungsten and cobalt or other elements to maximize solution hardening. This also allows the use of precipitation hardening and improves the alloy's temperature resistance. Tool steel is generally used in axes, drills, and other devices that need a sharp, long-lasting cutting edge. Other special-purpose alloys include weathering steels such as Cor-ten, which weather by acquiring a stable, rusted surface, and so can be used un-painted.
Many other high-strength alloys exist, such as dual-phase steel, which is heat treated to contain both a ferritic and martensitic microstructure for extra strength. Transformation Induced Plasticity (TRIP) steel involves special alloying and heat treatments to stabilize amounts of austentite at room temperature in normally austentite-free low-alloy ferritic steels. By applying strain to the metal, the austentite undergoes a phase transition to martensite without the addition of heat. Maraging steel is alloyed with nickel and other elements, but unlike most steel contains almost no carbon at all. This creates a very strong but still malleable metal. Twinning Induced Plasticity (TWIP) steel uses a specific type of strain to increase the effectiveness of work hardening on the alloy. Eglin Steel uses a combination of over a dozen different elements in varying amounts to create a relatively low-cost metal for use in bunker buster weapons. Hadfield steel (after Sir Robert Hadfield) or manganese steel contains 12–14% manganese which when abraded forms an incredibly hard skin which resists wearing. Examples include tank tracks, bulldozer blade edges and cutting blades on the Jaws of Life.
Most of the more commonly used steel alloys are categorized into various grades by standards organizations. For example, the Society of Automotive Engineers has a series of grades defining many types of steel. The American Society for Testing and Materials has a separate set of standards, which define alloys such as A36 stel, the most commonly used structural steel in the United States.
Though not an alloy, galvanized steel is a commonly used variety of steel which has been hot-dipped or electroplated in zinc for protection against rust.







CHAPTER 3
3.1 Steel production
When iron is smelted from its ore by commercial processes, it contains more carbon than is desirable. To become steel, it must be melted and reprocessed to reduce the carbon to the correct amount, at which point other elements can be added. This liquid is then continuously cast into long slabs or cast into ingots. 96% of steel is continuously cast, while only 4000 ingots are cast per year. The ingots are then heated in a soaking pit and hot rolled into slabs, blooms, or billets. Slabs are hot or cold rolled into sheet metal or plates. Billets are hot or cold rolled into bars, rods, and wire. Blooms are hot or cold rolled into structural steel, such as I-beams and rails. In modern foundries these processes often occur in one assembly line, with ore coming in and finished steel coming out. Sometimes after a steels final rolling it is heat treated for strength, however this is relatively rare.

3.2 Uses
Iron and steel are used widely in the construction of roads, railways, infrastructure, and buildings. Most large modern structures, such as stadiums and skyscrapers, bridges, and airports, are supported by a steel skeleton. Even those with a concrete structure will employ steel for reinforcing. In addition to widespread use in major appliances and cars (Despite growth in usage of aluminum, it is still the main material for car bodies.), steel is used in a variety of other construction-related applications, such as bolts, nails, and screws. Other common applications include shipbuilding, pipeline transport, mining, offshore construction, pipeline transport, aerospace, white goods (e.g. washing machines), heavy equipment (e.g. bulldozers), office furniture, steel wool, tools, and armour in the form of personal vests or vehicle armour (better known as rolled homogeneous armour in this role).

3.3 Growth of the industry
Global steel production grew enormously in the 20th century from a mere 28 million tonnes at the beginning of the century to 781 million tonnes at the end. (For elaboration see That was the period when the steel industry developed in Western Europe and the USA followed by the Soviet Union, Eastern Europe and Japan. However, steel consumption in the developed countries has reached a high stable level and growth has tapered off. After being in the focus in the developed world for more than a century, attention has now shifted to the developing regions. In the West, steel is referred to as a sunset industry. In the developing countries, the sun is still rising, for most it is only a dawn.
Towards the end of the last century, growth of steel production was in the developing countries such as China, Brazil and India, as well as newly developed South Korea. Steel production and consumption grew steadily in China in the initial years but later it picked up momentum and the closing years of the century saw it racing ahead of the rest of the world. China produced 220.1 million tonnes in 2003, 272.2 million tonnes in 2004 and 349.36 million tonnes in 2005. That is much above the production in 2005 of Japan at 112.47 million tonnes, the USA at 93.90 million tonnes and Russia at 66.15 million tonnes. For details of country-wise steel production see Steel production by country.





















CHAPTER 4

4.1 Sector structure/ Market size

The Indian steel industry entered into a new development stage from 2005–06, resulting in India becoming the 5th largest producer of steel globally. Producing about 53 million tonnes (MT) of steel a year, today India accounts for a little over 7 per cent of the world's total production. India is the only country worldover to post a positive overall growth in crude steel production at 1.01 per cent for the January-March period of 2009. The recovery in steel production has been aided by the improved sales performance of steel companies.
According to a report from Barclays Capital, China and India are going to provide the impetus for steel demand for the next few year s.
4.4.1 Production
Steel production grew at 1.2 per cent in the January-March quarter of 2008-09 over the same period last year. The fourth quarter saw most of the large steel companies such as SAIL, Tata Steel, Essar and JSW operating at full capacity.
The National Steel Policy has a target for taking steel production up to 110 MT by 2019–20. Nonetheless, with the rate current of ongoing greenfield and brownfield
projects, the Ministry of Steel has projected India's steel capacity is expected to touch 124.06 MT by 2011–12. In fact, based on the status of Memoranda of Understanding (MOUs) signed by the private producers with the various state governments, India's steel capacity is likely to be 293 MT by 2020.
Steel Minister, Ram Vilas Paswan, has said that an investment worth US$ 176.49 billion is likely to go into the steel sector by 2020.
In the first 10 months of 2008-09, India's steel production went up to 46.8 MT up by 1.1 per cent from last year.
4.4.2 Consumption
India is the fifth-largest consumer of steel in the world. It consumes about 1.5 MT of stainless steel a year with around 70 per cent accounting for kitchenware. However, its use in railway coaches, wagons, airports, hotels and retail stores is growing immensely. Demand for steel in India is likely to grow at around 12 per cent against the global average of 5–6 per cent. Steel consumption grew at 3.8 per cent in the January-March quarter of 2008-09 over the same period last year.
A Credit Suisse Group study states that India's steel consumption will continue to grow by 16 per cent annually till 2012, fuelled by demand for construction projects worth US$ 1 trillion. The scope for raising the total consumption of steel is huge, given that per capita steel consumption is only 35 kg – compared to 150 kg across the world and 250 kg in China.
4.4.3 Exports
Out of India’s annual iron ore production of more than 200 MT, about 50 per cent is exported.
Iron ore exports increased 17 per cent to 12.6 MT in February 2009 from 10.8 MT in the same month a year ago, owing to a moderate revival in demand from Chinese steel producers, as per the latest data compiled by a group of top Indian mining firms.
Earlier, according to a study, with the rise in demand for steel in China, India’s iron ore exports went up by 38 per cent to reach 13.6 MT in December 2008 against 9.8 MT in December 2007. Around 50-60 per cent of India’s iron ore is exported to China.
India’s exports during April-December 2008 were 64.4 MT. The government has reduced export duty on iron ore lumps from 15 per cent to 5 per cent, which has given a further fillip to exports. Further, the reduction in railway freight has also benefitted the domestic iron ore miners.

4.4.4 Investments
A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive hugedomestic and foreign investments.
• According to the Investment Commission of India investments of over US$ 30 billion in steel are in the pipeline over the next 5 years.
• Japan's Sumitomo Metal Industries is planning to build a blast furnace steel plant in India with mid-tier producer Bhushan Steel, investing as much as US$ 3 billion.
• Arcelor-Mittal, the largest steel maker of the world, is planning to set up a captive port near Paradip in Orissa. The port will be used to serve two mega integrated steel plants of the company proposed in Orissa and Jharkhand.

4.4.5 Government Initiative
Subsequent to the recent fall in international prices of commodities and to protect Indian producers, the Indian government has announced some changes in customs duty rates, which were effective from November 2008.
The government has removed full exemption of customs duty on some industrial and agricultural commodities. Iron and steel products like pig iron, spiegeleisen, semi-finished products, flat products and long products are now subject to a basic custom duty of 5 per cent ad valorem.
The Indian government plans to invest over US$ 350 billion in industries related to infrastructure and construction which will give a fillip to the steel sector.
4.4.6 Road ahead
While the demand for steel will continue to grow in traditional sectors such as infrastructure, construction, housing automotive, steel tubes and pipes, consumer durables, packaging, and ground transportation, specialised steel will be increasingly used in hi-tech engineering industries such as power generation, petrochemicals, fertilizers, etc. The new airports and railway metro projects will require a large amount of stainless steel.
According to an estimate, with the growing need for oil and gas transportation infrastructure, a US$ 118 billion opportunity is waiting to be tapped by steel manufacturers in the next five years. Indian steelmakers are set to make the most of booming global demand for steel pipes and tubes with the government withdrawing the 10 per cent duty on the exports of these products. According to a study by ICICI Direct, Indian steel companies are likely to get 19 per cent of the total global demand in the years to come.































CHAPTER 5
5.1 Indian steel industries

The different steel manufacturing plants under the India steel industry:
• Integrated steel plants
 Durgapur steel plant (DSP) in West Bengal
 Bhilai steel plant (BSP) in Chhattisgarh
 Bokaro steel plant (BSL) in Jharkhand
 Rourkela steel plant (RSP) in Orissa

• Special steel plants
 Alloy steels plants (ASP) in West Bengal
 Visvesvaraya iron and steel plant (VISL) in Karnataka
 Salem steel plant (SSP) in Tamil Nadu

• Subsidiaries
 Indian iron and steel company (IISCO) in West Bengal
 Bhilai oxygen limited (BOL) in New Delhi
 Maharashtra Elektrosmelt limited (MEL) in Maharashtra

• Others major steel producers
 Tata iron and steel corporation ltd (TISCO)
 Essar steel
 Jindal Vijaynagar steels ltd
 Ispat industries ltd
 Jindal strips ltd
 Mahindra Ugine steel company ltd
 JISCO
 Lloyds steel industries ltd
 Electro steel castings ltd
 Saw Pipes
 Uttam steels ltd
 Mukand ltd
 Tata SSL ltd
 Usha Ispat ltd
 Kalyani steel ltd
 Sesa Goa ltd


CHAPTER 6

6.1 Premier steel plants in India

The following are the premier steel plants operating in India:

Salem Steel Plant at Tamil Nadu
Bhilai Steel Plant at Chattisgarh
Durgapur Steel Plant at West Bengal
Alloy Steel Plants at West Bengal
Visvesvaraya Iron and Steel Plant in Karnataka
Rourkela Steel Plant at Orissa
Bokaro Steel Plant at Jharkhand




 Employment in the steel industry 1974, 1990 and 1996-2000
Thousand at end of year
Country
1974
1990
1996
1997
1998
1999
2000

Austria 44 21 13 12 12 12 12
Belgium 64 26 23 21 20 20 20
Denmark 2 1 1 1 1 1 1
Finland 12 10 7 7 8 7 8
France 158 46 39 38 38 38 39
FR Germany (1) 232 125 86 82 80 78 77
Greece 0 3 2 2 2 2 2
Ireland 1 1 0 0 0 0 0
Italy 96 56 39 37 39 39 39
Luxembourg 23 9 5 5 4 4 4
Netherlands 25 17 12 12 12 12 12
Portugal 4 4 2 2 2 2 2
Spain 89 36 24 23 22 22 22
Sweden 50 26 14 14 14 13 13
United Kingdom 197 51 37 36 34 31 29
European Union 996 434 306 293 290 280 278
Yugoslavia (2) 42 69 17 17 17 15 15E
Canada 77 53 53 53 55 57 56
United States 521 204 167 163 160 153 151
Brazil 118 115 79 74 63 59 63
South Africa 100 112 71 70 61 54 56
Japan 459 305 240 230 221 208 197
Republic of Korea n/a 67 66 64 59 58 57
Australia 42 30 21 20 20 24 21E
World Production 644 (3) 770 750 799 777 789 848
 Current prices & historic pricing levels.

World Carbon Steel Transaction Prices
World Steel Prices
US $/tonne Hot Rolled
Steel Coil Hot
Rolled
Steel Plate Cold
Rolled
Steel Coil Steel Wire
Rod Medium Steel
Sections
Jan 2008 639 847 716 621 871
Feb 2008 699 887 772 687 905
Mar 2008 800 978 890 758 970
Apr 2008 915 1065 985 852 1042
May 2008 998 1160 1080 920 1105
Jun 2008 1073 1225 1144 1005 1184
Jul 2008 1099 1307 1186 1067 1234
Aug 2008 1093 1300 1179 1062 1227
Sep 2008 973 1243 1046 977 1154
Oct 2008 865 1150 940 811 1045
Nov 2008 716 1000 802 676 898
Dec 2008 565 901 659 609 780
Jan 2009 575 806 666 626 791
Feb 2009 556 719 637 574 753
Mar 2009 505 643 594 526 714


CHAPTER 7
7.1 Conclusion
The India steel industry is one of the major industries in India and the Indian government plays a very important role in the development of the steel industry in India.

The India steel industry is experiencing a slow but steady growth. The steel industry in India has huge scopes in the future with massive scale of infrastructural development happening all across the country. The India steel industry caters to many other industrial sectors such as construction industry, mining industry, transportation industry, automobile industry, engineering industry, chemical industry, etc.

The India steel industry has further plans of development. Plans are being chalked out for setting up of 3 pig iron manufacturing units of a combined capacity of 6 lakh tons per year and a steel manufacturing unit of the capacity of producing 1 million tons yearly in West Bengal, with the technical and financial support of China. With all these developments, India steel industry is all set to become one of the most reputed industries not only in India but also in the international market.