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The steel industry is one of the major industries in India. It is considered as the backbone of the Indian
economy. Various sectors such as automobile, consumer durables and infrastructure depends on steel and hence
it reflects overall growth of an economy. It contributes to 2% of Indias gross domestic product (GDP). It
enjoys cost advantage in terms of availability of raw material and cheap labor. From 2010 to 2014 steel industry
in India has grown by 35% i.e. from 75 million tons per annum to 101.02 million tons per annum. Future of
steel industry in India is also on bright side. Demand is expected to touch 275 million tonnes by 2020. India is
currently worlds fourth largest producer of crude steel and is expected to become the worlds second largest
crude steel producer by 2016. Major producers in steel industry of India include TISCO, SAIL, and JSW.
Market Structure
Steel
Compositio
n
Form
Liquid
Steel
Crude
Steel
Ingots
Finished
Steel
Flat
Alloy
Semis
Stainless
High Speed
Non-alloy
Silicon
Electrical
Low
Carbon
Steel
Medium
Carbon
Steel
High
Carbon
Steel
Non-Flat
End Use
Structural
Steel
Constructio
n Steel
Rail Steel
Source: Report on Indian Steel Industry by the Competition Commission of India, Arcana Research
Industry Analysis
Tata Steel, Jindal power and steel, JSW steel, Essar steel, Rashtriya Ispat Nigam Ltd., Bhusan power and steel
Ltd, Llyods steel, Steel Authority of India Ltd are the major players in Indian steel Industry. Porter five forces
analysis of this industry reveals the following:
Threat of new entrants:
The threat of new entrants in this industry can be termed as High due to following reasons:
1. Steel Industry is capital intensive. It requires huge investments to set up a steel plant.
2. Although government policies are favorable to steel manufactures but still there is discrepancy in
allocation of mines and lands. Regulatory clearances and other legal issues are some of the impediments
to entry in this industry.
3. Cost of basic inputs and services such as electricity is high. This increases the cost of running steel plant.
Threat of substitutes:
Use of various substitutes such as Aluminum, Plastic, Carbon fire are on rise in automobile and consumer
durable sector. But none of them has been able to replace steel completely and also the cost differential is very
high. Based on this we can say that threat of substitutes in India steel industry is low.
Bargaining power of suppliers:
Many steel companies are integrated that is they have their own mines for key raw materials such as iron ore
and coal and hence does not depend on suppliers for its outsourcing. Tata steel is an example of one such
company. Bargaining power of suppliers is thus low in steel industry.
Bargaining power of buyers:
Although Steel neither falls in luxury goods nor the product is highly differentiated but, major players enjoy
premium for their products because of its quality and brand value they have developed over the years. The
product is very important for buyers and hence they end up paying more. Also, India is net importer of steel
which indicates that demand for steel exceeds supply. Hence, we can say that bargaining power of buyers is low
for Indian steel industry.
Intensity of rivalry
Market share of various major players in steel industry is as follows:
Company name
SAIL
RNL
BHUSAN
Share (in %)
18.7
4.3
3.7
Company name
TATA STEEL
JINDAL
ESSAR,JSW,ISPAT
Share (in %)
11
7.7
14
18.7; 19%
SAIL
RNL
BHUSAN
TATA STEEL
40.6; 41%
JINDAL
4.3; 4%
ESSAR,JSW,ISPAT
OTHERS
3.7; 4%
11; 11%
14; 14%
7.7; 8%
Buyers
power
(Low)
Barrier
to entry
(High)
Rival
ry
(High
)
Supplier
s power
(Low)
Threat
of
substitut
es (Low)
There has been a continuous effort to improve the existing steel manufacturing processes along with efforts to
carve out new processes to produce the myriad variety of steels with different compositions. There has been a
shift towards greener way of producing steel than blast furnace. Application of SML (Steel Markup Language)
can also be seen in the industry.
Po litic a l
E c o n o m ic
S o cia l
G o v t a llo w in g
p riv a te
o w n e rs h ip
a n d fo re ig n
in v e s tm e n t
S p e c ia l
E c o n o m ic
Z o n e s w ith
b e n e fi ts lik e
ta x h o lid a y s
N a v r a tn a
s ta tu s fo r
S A IL , R IN L
g iv in g m o re
a u to n o m y
S p e c ia l
In v e s tm e n t
R e g io n s
w h e r e in
in fra s tru c tu r
e is to ta lly
c re a te d b y
govt
D e re g u la tio n
o f p r ic in g
a nd red u ce d
d u tie s o n
im p o rt o f
in p u ts
B o o m in
In fr a s tru c tu r
e s e c to r
s p u rs
dem and
Te c h n o lo g ic a l
In d ia n s te e l
In d u s try
e m p lo y s
m o re th a n 2
m illio n
p e o p le
W o rk in g o n
new er
m e th o d s o f
s te e l
m a n u fa c tu rin
g
A v a ila b ility o f
young,
c o m p e te n t
la b o r
S A IL in ta lk s
w ith K o b e
S te e l o f
Ja p a n a n d
POSCO of
S o u th K o re a
E m p h a s is o n
s a fe ty a t th e
w o rk p la c e
a n d b e n e fi ts
B o th th e s e
te c h n o lo g ie s
a re le s s
e x p e n s iv e
a n d g re e n e r
th a n th e
b la s t fu rn a c e
Conclusion
Various initiatives taken by the Government and the liberalization policy has made it possible for private sector
to enter, participate and grow in steel industry. This has helped the existing units to modernize and expand, also
a number of new steel plants have started in different parts of the country. The following graph shows the
growth in the market value of Indian steel sector:
95.3
100
80
60
40
30.1
43
46.8
36.5
57.8
20
0
2007
2008
2009
2010
Year
2011
2016E
From 2007-11, the steel sectors market value is estimated to have a CAGR of 17.7%. In 2011 the steel sectors
market value was 57.8 USD billion. In 2016 it is estimated to grow to 95.3 USD billion.
Huge growth in steel sector is expected because of relatively low per capita consumption of steel and the
expected increase in steel consumption. This consumption is expected to increase because of increase in
demand from infrastructure, railway and automobile industry. With the increase in global population and
emerging economies, there is a greater need for steel to build public-transport infrastructure, urbanization and
industrialization purposes. It is anticipated that India's steel sector may witness investment of about US$ 33.26
billion in the coming years, as per Tata Steel.