Rishabh Jain

Harvard id- 50945707

ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA

ISSUES FACED BY STEEL RE-ROLLING

MILLS IN INDIA

RISHABH JAIN
HARVARD ID- 50945707

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
INTRODUCTION
First re-rolling mill was set up in India in the year 1928 at Kanpur, Uttar Pradesh.
Since 1928 till today, 1800 re-rolling mills are functioning all over India. Rerolling mills compliments the main steel lines and serve the purpose as the
secondary steel sector.
The steel re-rolling mill is very important segment of the Indian steel industry
and is a key link in the supply chain of iron and steel production in India. The
sector covers long and flat steel products mills with re-heating furnaces and
rolling mills and a few units have completed backward integration by installing
induction furnaces to melt scrap, sponge iron, pig iron and cast them into ingot
or billets.

WHAT IS STEEL RE-ROLLING MILLS?

Rolling Mill is a tandem type mill consists of, Re-heating furnace, Roughing, inter,
and finishing strands. Steel re-rolling mills convert ingots or billets (semifinished steel) into long or flat finished steel products such as tmt (thermo
mechanically treated) bars, angles, beams and etcetera by passing ingots or
billets through various rolling mills stands. Different rolling mills produce
different finished steel products.

PPRODUCTS PRODUCED BY THE ROLLING MILLS

1. Thermo mechanically treated bars (TMT bars)
2. Thin sized strip
3. Flat steel products

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
Angles

Channels

Beams (Girders)

BENEFITS OF STEEL RE-ROLLING MILLS:

Rolling mills has competitive edge due to flexibility in production for

meeting low tonnage requirements in various grades, shapes and sizes to
serve niche market.

They are scattered in India, which helps them to reduce the

transportation cost, which is a major cost component for finished steel.

Rolling mills owners can easily adapt as per the market requirements by
making minimal changes in their plant.

They are self-sufficient in producing various common as well as most

typical steel sections in their mills.

MAJOR REGIONAL TMT BARS MANFACUTURERS IN INDIA:

KAMDHEU GROUP

RATHI GROUP

PRIME GOLD

MONNET STEEL

SCAN GROUP

GOEL TMT

CONCAST TMT

JAI BHARAT STEEL LTD

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
MANUFACTURING PROCESS: -

COMPARATIVE STUDY OF LOCAL BRANDED STEEL RE-ROLLING MILLS WITH

INTERNATIONAL BRANDED STEEL RE-ROLLING MILLS
What is local branded steel re-rolling mills?
These firms are producing and selling their product locally and are thus local
branded steel re-rolling mills. These firms are producing different size of steel
bars (8mm to 32mm) from ingots or billets. Example- Jai Bharat Steel, Amba
Steel, Kamdhenu Steel.

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
What is international branded steel re-rolling mills?
These firms are producing their steel product with international standard and
are exporting their products to different countries and receiving foreign money
through exports. These firms may be called international branded steel re-rolling
mills. Example- Tata Steel, SAIL, JSW Steel

LOCAL BRANDED STEEL RE-ROLLING MILLS

Many local branded steel re-rolling mills are coming up now. The Indian
government both at the center and the state are giving incentive such as tax
exemption, subsidy, and etcetera to the entrepreneurs to start new ventures for
the progress of the country.

Strength

Low pricing in comparison to international branded mills.

High demand in local area because of transportation benefit.

Easily available in the local market

Labor cost arbitrage

Incentive and benefits from Indian Government

Flexibility for expansion

Weakness

Poor brand name and goodwill

No Research & Development department in their re-rolling mills

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
Less efficient lab facility

Less focus on customer trust & faith

Poor sales technique and ability to customize

Less efficient work force

Opportunities

Increasing demand in Indian market

Can enter into international market

Flexibility in future

Benefits from the government

THREATS

Local competition

Non-availability of raw material

Power Shortage

Entrance of foreign steel players

INTERNATIONAL BRANDED STEEL RE-ROLLING MILLS: International branded steel re-rolling mills have an ability to invest in research
and technology. 51% of the installed capacity is with the top 4 steel producers in
India. Thus the industry is high consolidated and international branded steel rerolling mills have a larger share of the pie. However these companies are facing
tough competition in the local market.

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
STRENGTH

Strong brand name & good will

Strong Research & Development wing

Better lab facility

Wide steel ranges and sizes

Highly skilled and dynamic human resource

Scrap availability and ease of scrap transportation

WEAKNESS

Poor distribution network in rural area

High prices

High overhead expenditure

Red tapism

OPPORTUNITIES

High demand in public sector

Good distribution network in cities

Collaboration: win-win thinking

Generate intellectual property

Expansion facility

Untapped rural demand

THREATS

Global competition

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
Less availability of raw material

China becoming net exporter

Dumping by competition

CONCLUSION
It can be concluded that there are more benefits for the international brand in
terms of premium they charge for their goodwill in comparison to local brands.
To some extent, the local brands are good in cost of the production and price of
the finished product. The availability of cheap labor is icing on the cake for the
local branded producers but in terms of quality and strength, international
branded ones are much better. The availabilities of good lab facility, efficiencies
of skilled personalities are found to be much better in international branded
ones. Public departments works are generally given to international branded
companies because departments can easily rely on them. Thus international
branded steel re-rolling mills have an edge over local branded steel re-rolling
mills.

ISSUES FACED BY INDIAN STEEL RE-ROLLING MILLS

1. Power shortages and rupee depreciation: - Most steel mills are running at
less than 75 percent of their capacity because of power shortage. Some rerolling mills are working only single shifts in the region of Punjab in India.
The appreciation of US dollar again Indian rupee has resulted in a
significant increase in the cost of imported steel melting scrap, which is a
major input in secondary steel production which is also hampering the
production.

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
2. Land acquisition and regulatory clearances pose major challenges to new
Greenfield investments: - Regulatory clearances and land acquisition
challenges have affected expansion and modernization of steel plants.
3. Inefficient judicial system: - Although India has consumer courts and
honorable High court and Supreme Court but it takes lot of time and effort
to get the justice in India.
4. Retrospective amendments by the Central Government: - Retrospective
amendment by the income tax department in Vodafone Hutch Essar case
has affected the investment sentiments in India by Indian companies as
well as foreign companies because there is lack of transparency in
government policies.
5. Information asymmetry: - There is difference in knowledge between the
buyer i.e. consumers and sellers i.e. manufacturers as there are very few
reliable source of market information.
6. Corruption: - Corruption is rampant in India, which results in unfair level
playing field for the steel manufacturers and hampers the growth of the
industry.
7. Market competition: - Steel re-rolling mills are facing lot of market
competition which forces them to reduce the final product price which
eventually hurt their bottom line and this also results in consolidation in
the industry.
8. High and different taxes in different states: - There are various taxes on
steel such as excise duty, custom duty, sales tax, value added tax. Value
added tax is different in different states, which makes difficult for the

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
steel manufactures to sell final product in outside their state, as they dont
get Cenvat credit if they sell outside the state.
9. Lack of professionalism: - 80% of businesses in India are owned and run
by close-knit families. Thus most of these businesses lack professionalism.
10. Very less investment in Research & development: - Most of the steel rerolling mills dont invest in research and development and thus following
traditional business practices, which doesnt give them competitive edge.
11. Lack of investment in modernization of steel plant: - Steel re-rolling mills
owner dont invest much in modernization due to lack of funds and hence
are not able to provide better quality steel product at lower price.
12. High cost of capital: - Most of the steel companies have debt on their
books. They are paying 13% interest rate to the bank and just earning net
margins of 2-3% on their turnover.
13. Slow statutory clearance for development of mines: - Slow statutory
clearance is affecting the production of steel re-rolling mills, as there is
shortage of raw material in the market.
14. There is no steel retail chain in the country: - Companies have their own
dealers and distributor network and there is no steel retail chain. Thus
steel sector is highly fragmented and independent in India.
15. Lack of credit to end-users: - Steel companies dont offer any credit facility
to end-users and credit facility is only available to dealers. Thus affecting
end demand of finished steel.
16. Logistic and transportation infrastructure: - Suppliers are available but
their quality and dependability vary greatly. Poor condition of roads in

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
rural area and ports are underdeveloped. On top of it, there is no global
logistic company in India.
17. Availability of finance: - Although banks issue loans to the industry but its
very cumbersome to get loan in India for steel sector and there are lot of
formalities and restriction.
18. Customer feedback and preference: - Its very hard for the steel companies
to obtain data on customer preferences, as there is no institution working
toward it in India.

RECOMMENDATIONS: 1. Understanding buyer values and create differentiated product and service
offerings: - The steel re-rolling mills have to bundle the product with the
value added service to create a differentiated offering in the maket.
2. Accepting leading sales and distribution practices: -The firms have to
become more customer-centric. They have to adapt aspects such as
customer account management, effective sales call processes, and
structured market working across the business-to-business and businessto-consumer and business- to-customers.
3. Enhance pricing capabilities: - The firm need to incorporate leading
practices to maximize pocket margins and reduce revenue leakage
including: aligning price with customer value and improving pricing
discipline to prevent margin leakage.
4. Finish-to-order approach:- Adopt finish-to-order approaches in order to
balance inventory and customer responsiveness.

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
5. Segment customers and products by service levels and align manufacturing
strategy and supply chain to the customer segments: - The companies need
to define customer segments based on size and profitability, service levels
and product specificity and then they need to define the manufacturing
strategy and supply chain for each customer segment.
6. Integrated order management: - The firms should implement integrated
order management, in order to reduce inventory-carrying cost in lower
margin and over supplied market.
7. Demand forecasting technique: - The firms should improve their demand
forecasting techniques as an over-supplied market will enable the
customers to demand lower lead times.
8. Reducing raw material cost: - The firms should focus on reducing raw
material cost by doing backward integration such as investment in mines.
9. Consortium-based approach: - Small players should follow consortiumbased approaches for optimizing their cost.
10. Human capital management: - The firms should focus on human capital
management, as it will help the firms to reduce employee turnover ratio.
11. Innovating to meet customer needs: - Steel re-rolling mill has to innovate
to meet customer needs. For instance, tmt bar manufacturers should start
customizing tmt bars and should do value addition by providing cut and
bend rebars, welded wire mesh.
12. Investing in behavior change: - There is a role for the firms in educating
the people and behavior change, which can encourage more sustainable
behaviors.

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
13. Up gradation of plants: - Steel companies should invest in modernization
of plant as it will help them to provide better quality product and it will
help them to reduce the cost of production.
14. Adopting new technologies: - Installation of coal gasifier plant and doing
online rolling which has been recently developed, will help steel
companies to reduce their cost of production by 10-15%.
15. Good and Service Tax: - Government should introduce good and service
tax, as it will provide level playing field to all the Indian steel players and
it will motivate foreign players to enter the Indian market.
16. Single window clearance: - Government should introduce the concept of
single window clearance to accelerate the investment in the steel sector.
17. Corporate Social responsibility: - Companies should focus on corporate
social responsibility, as it is beneficial for the society as well as the
company.
18. Supply chain & logistics: - Companies should create a network of worldclass warehouses with best-in-class facilities that would further improve
operational efficiency and reduce costs.
19. Strategies to enhance steel consumption

Untapped rural market

I.

Low purchasing power: - Faster implementation of social

welfare schemes.

II.

Poor distribution network: - Strengthening the distribution

network.

III.

Poor infrastructural linkages: - By rapid execution of rural

infrastructural projects.

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
Exhibit 1 DIFFERENT TYPES OF STEEL PRODUCTS: -

TMT BARS

ANGLES

Beams (Girders)

CHANNELS

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
EXHIBIT 2 STEEL RE ROLLING MILLS

INDUCTION FURNACE OR BLAST FURNACE

SEMI FINISED STEEL: - INGOTS/ BILLETS

ROLLING MILLS PROCESS INGOTS OR BILLETS

FINISHED PRODUCT- TMT BARS

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
EXHIBIT 3 TOP 20 TMT BAR MANUFACTURERS IN INDIA

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA
SOURCES

Accenture-Indian steel industry: - An overview and growth

prospects.

Global steel 2013- Ernst & Young

Economictimes.com

Tata steel audit report

www.business-standard.com

C.K kankam, M Adom- Asamoah/ Materials and design

23(2002) 537-545

Winning in emerging markets- Tarun Khanna & Krishna

G.Palepu

Getting China and India Right- Anil K. Gupta and Haiyan Wang

Kamdhenu steel audit report

Rishabh Jain
Harvard id- 50945707
ISSUES FACED BY STEEL RE-ROLLING MILLS IN INDIA

THANK YOU!!!!!