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INTRODUCTION
The Indian Steel Industry today is facing a threat of rising steel prices. Thus the objective of this research is to identify the reason behind such rise. This rise in price effects the business decisions and the industry as a whole. This research throws light on the factors which are responsible for such rise in price.
OBJECTIVE
As the Indian Steel Industry is one of the main industries in India looking into its problem of rising prices will fix or reduce the problems faced by the stakeholders and companies of this Industry. The rise in the steel price has direct correlation with industries such as automobile, construction, infrastructure, consumer goods such as pipes, furniture & fittings etc. The rise in the price of steel, which is one the important raw material in the mentioned industries, has a certain impact on their share price including the price of steel stocks as well.
This research aims to identify the factors that are leading to the rise in price of steel and the effect of this price rise on the share price of steel stocks and related industry stocks.
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Cause 1: Chinese Consumption Cause 2: Raw Materials Cause 3: Shipping Cause 4: Global Pressure Cause 5: Rise in demand for Automobile Cause 6: Infrastructural Growth
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Newly developing countries do not have old scrap. Most countries in the world simply do not consume enough steel objects to generate significant quantities of scrap.
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The result of this shortage in scrap has been an unprecedented run-up in scrap prices. Scrap prices have always been volatile, but the variation has been around a much lower price trend. The imbalance between production from the basic oxygen furnace and electric furnace production is going to continue to put pressure on the scrap supply.
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Cause 3: Shipping
Other industries also are experiencing a problem with shipping capacity. One of the reasons international trade grew so much over the past decade is that shipping costs went down.
However, trade has grown so much that there is now a shortage of shipping. The higher cost of shipping is keeping some steel from being exported to the U.S. and is hampering the movement of raw materials around the globe.
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RESEARCH METHODOLOGY
As stated by Bruce W. Tuckman (1978), research is a systematic attempt to provide answers to the questions. Research is the original contribution to existing stock of knowledge for its advancement. It is a systematic method consisting of enunciating the problem, formulating a hypothesis, collecting of factors or data and reaching to certain findings and conclusion. It is more of a formal, systematic and intensive procedure being carried on the scientific method of analysis.
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Where: x and y are the sample means of X and Y sx and sy are the sample standard deviations of X and Y.
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SUMMARY OF FINDINGS
Amongst the nine factors that have been considered in this project six of them can be held considerably correlated to the rise in the steel price whereas the other four do not seem to be contributing much to the problem of rise in the price of steel. The six factors that can be held highly responsible are: 1) Production of Sponge iron, which is correlated to steel price by 1 2) Pig Iron Price, which is correlated to steel price by 0.68 3) Iron Ore Price, which is correlated to steel price by 0.96 4) Furnace Oil prices which is correlated to steel price by 0.97 5) Coke Price which is correlated to steel price by 0.98 6) Shipping.
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SUMMARY OF FINDINGS
Rest three factors that cannot be held responsible confidently are: 1) Import of scrap is correlated to steel price by 0.25 2) Export of steel is correlated to steel price by 0.23 3) Pig iron Production is correlated to steel price by 0.45 Steel price fluctuation has had the most impact on the share prices of the: 1)Steel industry 2)Automobile industry 3)Construction industry
Steel price fluctuation has had fairly low impact on the share prices of the Consumer Goods industry.
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CONCLUSION
In conclusion, it can be said through research that the price of steel has been gradually rising over the years and a number of factors can be held responsible for it. From this study we can conclude that of the nine factors considered for the rise in steel price only six have a considerable impact on it. Also, share price are directly correlated with the steel price, which is a leading raw material in many sectors. Steel share, automobile shares and real estate share are the most affected by this price fluctuation. Steel prices are likely to go up further in the coming months on the back of higher prices of coking coal and iron ore that mining companies are now demanding. As a result, the government is reported to be considering imposing a provisional safeguard duty on some of these items after it is established that the value of these goods is lower than the normal parameter and is harming Indian industry.
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RECOMMENDATION
Sponge and pig iron are a major material for the production of steel and the raw materials are abundantly present in India, but there is a major problem in the mining of such raw materials due to the bureaucracy and corruption present in India. The industrialists in India have to comply with a lot of legal formalities and compliances of the Government which takes a huge amount of time for the mines to operate.
India being a mineral rich country all the minerals are present in India in large resources. If Government helps in mining all the minerals which will help in the increase of production and ultimately it will help in controlling the rising price of steel due to low production and high raw material prices
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RECOMMENDATION
This will also help India to earn foreign exchange by cutting on its imports from the other part of the world thus increasing domestic production and controlling the price of the raw materials. Government should provide subsidiaries to Industries for optimum consumption of raw materials and hence optimum production of sponge iron which in turn will increase the domestic supply in India, hence, controlling the effect of inflation which can also be cited as one of the reasons behind the rise in price of steel.
Government should keep a tab on the demand of Infrastructure and automobile and then accordingly look into optimum production of raw materials of steel according to the demand.
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THANK YOU
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