2. *
• Evolution of industry - Kushal Biswas
• Segment of steel industry - – Abhishek Ghosh
• Industry Structure
• Production function
• Economies to scale – Deepak Das
• Indian steel industry
• Growth Prospectus - Abdul Jabbar S.
• Concentration Curve
• H Index
• Demand Curve – Sanjeet Singh Thakur
• SWOT Analysis
• Recommendations – Anirban Mukharjee
3. *
• The Indian iron & steel industry is nearly a century old, with TISCO (Tata
Steel) as the first integrated steel plant set up in 1907 in Jamshedpur.
• First blast furnace of TISCO was blown in on 2nd December 1911, and the first
ingot rolled on 16th February 1912.
• Afterwards a few more steel companies were established namely Mysore Iron
and Steel Company, (later renamed Vivesvaraya Iron & Steel Ltd) in 1923; Steel
Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron & Steel
Ltd) in 1939. All these companies were in the private sector.
• In 1948, A new Industrial Policy Statement states that new ventures in the iron
and steel industry are to be undertaken only by the central government. After
that Hindustan Steel created to oversee the Rourkela , Bhilai, Durgapur &
Bokaro steel plant.
• In 1973, The Steel Authority of India Ltd. (SAIL) is created as a holding
company to oversee most of India's iron and steel production.
• A new industrial policy introduced in the wake of the early 1990s balance of
payments crisis removed many of the restrictions on the steel industry and tariff
barriers were reduced , furthermore, foreign investment in the sector was
permitted, with the steel industry included on the list of ‘high priority’ industries
for automatic approval of up to 51 per cent foreign equity investment.
4. *
* Types of steel – 1) Alloy steel.
2) Non alloy steel.
* In 2010-11 non-alloy steel constituted 96 percent of total finished steel
production and rest was alloy steel.
* The top Six segments are Bars & rods, structural, HR
coil/strips/skelps, CR coils/strips, plates and GC/GP sheets.
* Of total finished (non-alloy) productions of bars & rods (non-flat
product) and hot rolling coils/skelp/strips (flat product) were 37.48
percent and 22.27 percent, respectively. Together these two major
products constituted for 59.75 percent of total finished (non-alloy) steel
production in 2010-11. This trend has been more or less constant for
last five years
5. *
Steel industry shows oligopoly which can be demonstrated by:-
1. Few players controlling the largest chunk of business namely TATA
STEEL, JINDAL, ESSAR and SAIL.
2. Barriers to entry, demonstrated by huge investment and requirement of other
resources in quantity.
3. Interdependence among the players in the industry, as the actions of
few affects the industry on whole.
4. COLLUSIVE nature: - All the firms coming together to protect mutual
interests.
5. Price leadership: - Minimum price ranges of firms is (2-4)%, displaying
the affinity to avoid price wars which may in turn lower profits. Thus, it
can also be conclude that there is evidence of kinked demand curve, as a
rise in price will entice customers to switch to lower price products
6. *
* production function is a function that specifies the output of a firm, an
industry, or an entire economy for all combinations of inputs.
* Mainly two types of input are there
1. Fixed – e.g.. plant and a factory shed.
2. Variable – e.g.. iron ore serves as a variable input
* For a firm minimizing Costs are important.
* Costs associated with inputs are
1. Total cost - cost of producing any given output level.
2. Average Cost - Decreases with increased output.
* Decrease in Average Variable Cost increases Profit.
* Average variable cost shows U shaped curve (first decrease then increase)
Economies to scale
Economies of scale are defined in terms of the average cost
per unit of output produced.
* In oligopoly companies run in economies to scale.
7. INDIAN STEEL INDUSTRY
A BRIGHT FUTURE
RESOURCES
Abundant Iron Ore reserves
Strong Managerial skills in Iron and Steel making
Large pool of skilled Man-power
Established steel players with strong skills in steel making
OPPORTUNITIES
High economic growth driven increasingly by industry
Faster Urbanisation
Increased Fixed Asset Building
Automobiles and component industry growth
POLICY
Pro-active stance of Govt.
Encouragement for overseas investments
8. *
countr 2009 2010 2011
y
world 1219 1425 1490
china 573 626 683
japan 87.5 109.6 107
usa 78.6 80.6 86.2
india 64.6 68.3 72.3
9. * Steel Consuming sectors
Source: CRISIL Research
Construction & infrastructure contribute to >60% of
steel consumption
10. *
Year Per Capita Steel Consumption
2011-12 48
2019-20 80
2024-25 110
2029-30 135
2034-35 175
India’s current population is - 1100 million
It is assumed that till 2051, population would be about : 1.4 bn.
12. *
* Concentration ratio is a measure of the total output produced in an industry by a given number
of firms in the industry.
* The most common concentration ratios are the CR4 and the CR8.
* This ratio shows the degree to which an industry is oligopolistic.
* it can be expressed as
* CRm = s1 + s2 + .... + sm
* where si is the market share and m defines the ith firm
* Concentration ratio of Indian steel industry
Top 4 Companies in India
1. Tata steel – 35.7%
2. SAIL – 23.8%
3. JSW steel – 9.7%
4. RNIL – 8%
5. Others – 22.8%
CR4 = 35.7 + 23.8 + 9.7 + 8
CR4 = 77.8 %
Interpretation - Concentration ratio of industry is 77.8% which means it is an oligopoly situation
and market is dominated by few major players.
13. *
* a measure of the size of firms in relation to the industry.
* an indicator of the amount of competition among companies.
* It is defined as the sum of the squares of the market shares of the 50
largest firms.
* It is expressed as
* H Index for steel industry in India
H = .3572 + .2382 + .0972 + .082 + 15*.222
H = 0.2033
Interpretation:
it implies that competition in steel industry is medium to high and
high concentration.
14. *
* In an oligopoly, firms operate under imperfect competition.
* firms use non-price competition in order to accrue greater revenue and
market share.
* Demand curve of oligopoly is kinked (hypothesized convex bend).
15. * At kink there is the most likely to collusion to take place
16. • There will is price stickiness in oligopolistic markets.
• Firms rely more on non price competition.
17. STRENGHTH:
Increase in demand WEAKNESS:
Availability of labour at low Lack of infrastructure
wage rate Slow decision making
Huge resource of raw material Low labour productivity
Environmental laws Insufficient transport system
SWOT ANALYSIS
THREATS:
Cheap imports.
OPPURTUNITIES:
Slow industry growth
High potential to be tapped.
Technological change
Unexplored rural market.
Price sensitivity and demand
Export market penetration.
volatility
18. FACTORS HOLDING BACK THE INDIAN
STEEL INDUSTRY
Problems procuring raw material inputs.
Inefficient transport system
Technological Innovation
19. RECOMMENDATIONS
R&D focus is to be increased substantially.
Firms must do technological forecasting.
Resource utilization must be more effective to
improve on the productivity
Investment in infrastructure is crucial to step up
demand for steel
