The current global steel industry is in its best position in comparing to last decades. The price has been rising continuously.
The demand expectations for steel products are rapidly growing for coming years. The shares of steel industries are also in a high pace.
The subprime crisis has lead to the recession in economy of different countries, which may lead to have a negative effect on whole steel industry in coming years.
However steel production and consumption will be supported by continuous economic growth.
INDIAN STEEL GROWTH Slowly and steadily Controlled Regime Decontrol Stagnation Confidence 1951 1981 2005 Steel industry reforms – particularly in 1991 and 1992 – have led to strong and sustainable growth in India’s steel industry. Since its independence, India has experienced steady growth in the steel industry, thanks in part to the successive governments that have supported the industry and pushed for its robust development.
India’s share in world production of crude steel increased from 1.5% in 1981 to around 7.3% in 2008.
The private sector is considered engine of growth in the steel industry and technological changes and modernization are taking place in both the public and the private sector integrated steel plants in India.
the average cost of production of the firm decreases as the output level increases
the firm would like to be at the minimum average cost point
the average cost is higher in long run than short run and company makes higher profit producing higher and higher levels of outputs .
Average cost output Q Q1 C1 C The increase in output from Q to Q 2 causes a decrease in the average cost of each unit from c to C 1 . Economies of scale are the cost advantages that a business obtains due to expansion.
Suppose in TATA STEEL , the average cost per ton of steel at the minimum average cost point with the larger blast furnace may be 20 percent less than the average cost at the minimum average cost point with smaller blast furnace.
Due to technological constraints the average cost is assumed to start rising at some output level even in the long run—that is, the average cost curve is U-shaped even in the long run.
Concentration ratio of an industry is an indicator of the relative size of firms in relation to the industry as a whole .
The 4 firm concentration ratio of the Iron and Steel Industry is 71%.
Both homogenous product or product differentiation are possible
There is a price war and price rigidity
Price output decisions are very difficult and indeterminate.
This implies that there is oligopoly in the industry as it is dominated by few major players
Export & Import of Steel in India Exports have grown fast and at a rate exceeding 25% per annum between 1991-92 and 2002-03. Thereafter, till 2006-07export levels stagnated at around 4-4.5 Million Tonnes per year. On the other hand, imports followed a different growth path. In spite of progressive reduction in customs duty levels after deregulation, imports remained around 1-2 Million Tonnes per year till 2003-04 and rose rapidly in the last two fiscals .
India does not provide direct subsidies for exports, although indirect subsidies on the nature of exemption from tax and import duty are provided.
The Government of India implements the Export Promotion of Capital Goods (EPCG) scheme which provides for a reduction or exemption of customs duties and an exemption from excise taxes on imports of capital goods. The EPCG scheme has been countervailed in the US, Canada, as well as the EU.
The income-tax benefits-related export activities are incorporated in sections 80HHC, 10A and 10B of the Income Tax Act.
The reserve bank of India has accordingly issued directions to commercial Banks to provide export credit both at pre- and post-shipment stages.
India also administers a number of duty drawback schemes that allow for the remission or drawback of import charges levied on inputs that are consumed in the production of an exported product. Schemes such as duty Entitlement pass book Scheme (DEPB) and Duty free Replenishment certificate (DFRC) fall under this category.
ECONOMIC PARAMETERS ARE FAVOURABLE FUTURE OUTLOOK CURRENT PERFORMANCE BAD GOOD GOOD PERFORMANCE PARAMETERS Fiscal Deficit FDI Inflows Economic reforms inflation New Investment Financial Reforms Overall GDP External Debt Savings Industrial Growth Source : Citigroup estimates Forex Reserve Agricultural Growth Internal Debt Service sector Growth