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INTRODUCTION AND RESEARCH METHODOLOGY

INTRODUCTION

Steel crucial to the development of any modern economy and is considered to backbone of human civilization. It is a product of technologically complex industry having strong forward and backward linkages in terms of material flows and income generation.

Literature Review Indias economic growth is contingent upon the growth of the Indian steel industry. Consumption of steel is taken to be an indicator of economic development. While steel continues to have a stronghold in traditional sectors such as construction, housing and ground transportation, special steels are increasingly used in engineering industries such as power generation, petrochemicals and fertilizers. India occupies a central position on the global steel map, with the establishment of new state-of-the-art steel mills, acquisition of global scale capacities by players, continuous modernization and up gradation of older plants, improving energy efficiency and backward integration into global raw material sources. Objectives of the Study:

1. To study the global as well as domestic production and consumption patterns.

2. To study the type of Indian Primary markets and its key player.

3. To analyze the recent trends in Indian steel industry.

4. To study the scope for Indian steel industry.

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2. PROFILE OF THE INDUSTRY

Steel

Iron is one of the oldest inventions in the world with its first usage reportedly dating back to 4000 BC. Steel is crucial to the development of any modern economy and is considered to be the backbone of the human civilization. Today Steel (the carbon alloy of Iron) finds application in every imaginable facet of our life. The global steel industry has been witnessing many interesting events that have influenced market dynamics in the last ten years.

Steel is an alloy consisting mostly of iron, with carbon content between 0.2% and 2.14% by weight, depending on grade. Carbon is the most cost-effective alloying material for iron, but various other alloying elements are used such as manganese, chromium, vanadium, and tungsten. Carbon and other elements act as a hardening agent, preventing dislocations in the iron atom crystal lattice from sliding past one another. Varying the amount of alloying elements and form of their presence in the steel (solute elements, precipitated phase) controls qualities such as the hardness, ductility, and tensile strength of the resulting steel. Steel with increased carbon content can be made harder and stronger than iron, but is also more brittle. The maximum solubility of carbon in iron (as austenite) is 2.14% by weight, occurring at 1149 C;
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higher concentrations of carbon or lower temperatures will produce cementite. Alloys with higher carbon content than this are known as cast iron because of their lower melting point and capability. Steel is also to be distinguished from wrought iron containing only a very small amount of other elements, but containing 13% by weight of slag in the form of particles elongated in one direction, giving the iron a characteristic grain. It is more rust-resistant than steel and welds more easily. It is

common today to talk about 'the iron and steel industry' as if it was a single entity, but historically they were separate products. Though steel had been produced by various inefficient methods long before the Renaissance, its use became more common after more efficient production methods were devised in the s 17th century. With the invention of the Bessemer process in the mid-19th century, steel became a relatively inexpensive mass-produced good. Further refinements in the process, such as basic oxygen steelmaking, further lowered the cost of production while increasing the quality of the metal. Today, steel is one of the most common materials in the world and is a major component in buildings, infrastructure, tools, ships, automobiles, machines, and appliances. Modern steel is generally identified by various grades of steel defined by various standards organizations. There are more than 3500 grades of steel available today; with about 75% of these developed in the last twenty years. Finished steel products can be broadly classified into flats and longs. Longs are used in construction, infrastructure and heavy engineering. Flats are mainly used in making automobiles, commercial vehicles and consumer durables. Hot rolled (HR) steel and Bar & Rods are the most popular varieties of steel produced in India. HR coil and sheets are used in making cold rolled products, pipes and tubes, automobile components, electronic equipment like fridges and for construction purposes. Currently HR Coils and Sheets account for about 26% of the total domestic production and its share has been gradually rising over time. Bars and rods are typically used more extensively in the construction and engineering sectors.

HISTORY:

Steel was discovered by the Chinese under the reign of Handy nasty in 202 BC till 220 AD. Prior to steel, iron was a very popular metal and it was used all over the globe. Even the time period of around 2 to 3 thousand years before Christ is termed as Iron Age as iron was vastly used in that period in each and every part of life. But, with the change in time and technology, people were able to find an even stronger and harder material than iron that was steel. Using iron had some disadvantages but this alloy of iron and carbon fulfilled all that iron couldnt do. The Chinese people invented steel as it was harder than iron and it could serve better if it is used in making weapons. One legend says that the sword of the first Han emperor was made of steel only. From China, the process of making steel from iron spread to its south and reached India. High quality steel was being produced in southern India in as early as 300 BC. Most of the steel then was exported from Asia only. Around 9thcentury AD, the smiths in the Middle East developed techniques to produce sharp and flexible steel blades. In the17th century, smiths in Europe came to know about a new process of cementation to produce steel. Also, other new and improved technologies were gradually developed and steel soon became the key factor on which most of the economies of the world started depending.

3. GLOBAL STEEL INDUSTRY

Growth of the industry

Since 19th century to early 20th centuries major steel demand was from munitions and was controlled by wealthy steel dynasties with political influence. During 1950-1970, steel industry was highly subsidized, exempted and received many other favours from the national government. This led to many new investments in big integrated steel plants. During 1960-1990 was the period of nationalization and increase in state control because of the excess capacity and inefficiency. Till 1980s most of the steel plants were state owned either partly or wholly. 1980s to 2000 was the era of re-privatization of the steel industry. This was done in order to improve the efficiency and competitive position of the steel companies and to fund economic reforms and improve the financial scenario. Many steel companies were privatized. Some of them have been included in the table below

Company British Steel SSAB (Sweden) Ilva (Italy) Usinor-sacilor (France) SN (Portugal) Voestalpine (Austria) Aceralia (Spain)

Privatization Year 1987 1989 1992-1995 1995 1995-1996 1995-2003 1997

Even After re-privatization steel industry was controlled by government. Subsidies and tariffs were tools that government used in order to control and protect the domestic steel industry. For example, in March 2001, US government imposed an import tariff of 30 percent in order to protect its domestic steel industry. Whereas Chinese government introduced number of subsidies in order to boost its steel industry.
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This consequently lifted global steel industry to a new height. 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 steel industry is enjoying its 6th consecutive years of growth in supply and demand. And there is many more merger and acquisitions which overall buoyed the industry and showed some good results. 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.

CONTRIBUTIONS OF COUNTRIES TO GLOBAL INDUSTRY:

The countries like China, Japan, South Korea and India countries are in the top of the above steel production in Asian countries. China accounts for one third of total production i.e. 419 million ton. Japan accounts for 9% i.e. is 118 million ton. India account for 53 million ton and South Korea is accounted for 49 million ton. Which all totally becomes more than 50% of world production. Apart from this usa, brazil, uk are major chunk of the whole growth.

Economic trends
During the 20th century, steel industry grew from just 28 million tons (MT) to 789 MT as shown in the above graph. The steel industry has always been a cyclical business. Steel industry grew from 189 million metric tonnes to 684 million metric tonnes in just 25 years. But in 1975, the European, American and Japanese economy stabilized which led to the flattening of demand. This led reduction in demand from these major steel consuming countries as compared to the supply. In this period capacity utilization was fluctuating between 70 to 80 percent. During this time, demand from the developing countries started increasing but was not sufficient to meet the supply. Another difficult phase for the steel industry was between 1997 to 2001 due to financial crisis in Asia and severe recession in the global economy. This led to the imbalance between demand and supply. Steel prices went down 20 year low in this period and new capacities became uneconomical. In order to fight this recession, steel industry was ignited with mergers and acquisitions since 1997.Steel industry again showed a sign of recovery in 2002. This happened due to increase in demand from China and other South Asian countries like India, as these countries were growing and focused on infrastructure development. Even sectors like housing, construction and automobiles showed recovery. Most of the steel companies in the period of 2002 to 2006 have shown recovery and growth in profits. Many of the steel companies in Asia pacific regions have added capacity in this boom period.

4. SNAPSHOT OF INDIA
India, officially the Republic of India (Bhrat Gaarjya), is a country in South. It is the seventh-largest country by area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world. Bounded by the Indian Ocean on the south, the Arabian Sea on the south-west, and the Bay of Bengal on the south-east, it shares land borders with Pakistan to the west; China, Nepal and Bhutan to the north-east; and Burma and Bangladesh to the east. In the Indian Ocean, India is in the vicinity of Sri Lanka and the Maldives; in addition, Indias Andaman shares a maritime border with Thailand and Indonesia. The Indian economy is the world's tenth-largest by nominal GDP and third-largest by purchasing (PPP). Following market-based

economic reforms in 1991, India became one of the fastest-growing major economies; it is considered a newly industrialized country. However, it continues to face the challenges of poverty, illiteracy, corruption, malnutrition, inadequate public healthcare,

and terrorism. A nuclear weapons state and a regional power, it has the third-largest standing army in the world and ranks seventh among nations. India is a federal republic governed under a parliamentary system consisting of 28 states and 7 union territories. India is a pluralistic, multilingual, and multiethnic society.

The GDP of India is $1.946 Trillion (nominal), $4.825 Trillion (PPP). Economic growth rate stood at around 5.3% for the 201213 fiscal years.

 Indias fiscal year is from 1 April to 31 March. The country is one of the G-20 major economies and a member of BRICS. India is the nineteenth largest exporter and tenth largest importer in the world. Indias Share in World Trade is about 2%. Indian imports were about $461.4 billion. Indian exports were about $299.4 billion. The main exports of India are petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparel. The main export partners of India are UAE 13%, US 11.4%, China 6.3%, Singapore 5.3% Indian imports were about $461.4 billion. The main imports are crude oil, raw precious stones, machinery, fertilizer, iron and steel, chemicals. Main import partners of India are China 12.1%, UAE 8.3%, Saudi Arabia 5.8%, US 5.1%, Switzerland 4.7% . The credit rating of India is BBB-, economy is Stable. The foreign reserves of India are $295.29 billion. The main industries in India are Textiles, Chemicals, Processing, Steel, Transportation Equipment, Cement, Mining, Petroleum, Machinery, Software, Pharmaceuticals.

5. STEEL INDUSTRY IN INDIA

The establishment of Tata Iron and Steel Company (TISCO) in 1907 was the starting point of modern Indian steel industry. 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 1923; and Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron and Steel Co) in 1939. All these companies were in the private sector

Key Events

1907*: Tata Iron and Steel Company set up.

1913: Production of steel begins in India.

1918: The Indian Iron & Steel Co. set up by Burn & Co. to compete with Tata Iron and Steel Co.
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1939*: Steel Corporation of Bengal set up.

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.

1954: Hindustan Steel is created to oversee the Rourkela plant.

1959: Hindustan Steel is responsible for two more plants in Bhilai and Durgapur.

1964: Bokaro Steel Ltd. is created.

1973: The Steel Authority of India Ltd. (SAIL) is created as a holding company to oversee most of India's iron and steel production.

1989: SAIL acquired Vivesvata Iron and Steel Ltd.

1993: India sets plans in motion to partially privatize SAIL.

At the time of independence, India had a small Iron and Steel industry with production of about a million tonnes (mt). In due course, the government was mainly focusing on developing basic steel industry, where crude steel constituted a major part of the total steel production. Many public sector units were established and thus public sector had a dominant share in the steel production till early 1990s. Steel has been the key material with which the world has reached to a developed position. All the engineering machines, mechanical tools and most importantly building and construction structures like bars, rods, channels, wires, angles etc are made of steel for its feature being hard and adaptable. Earlier when the alloy of steel was not discovered, iron was used for the said purposes but iron is usually prone to rust and is not so strong.

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Steel is a highly wanted alloy over the world. All the countries need steel for the infrastructural development and overall growth. Steel has a variety of grades i.e. above 2000 but is mainly categorized in divisions steel flat and steel long, depending on the shape of steel manufactured. Steel flat includes steel products in flat, plate, sheet or strip shapes. The plate shaped steel products are usually 10 to 200 mm and thin rolled strip products are of 1 to 10 mm in dimension. Steel flat is mostly used in construction, ship building, pipes and boiler applications. Steel long Category includes steel. products in long, bar or rod shape like reinforced rods made of sponge iron. The steel long products are required to produce concrete, blocks, bars ,tools, gears and engineering products. After independence, successive governments placed great emphasis on the development of an Indian steel industry. In Financial Year1991, the six major plants, of which five were in the public sector, produced 10 million tons. The rest of India steel production, 4.7 million tons, came from 180 small plants, almost all of which were in the private sector. India's Steel production more than doubled during the 1980s but still did not meet the demand in the mid-1990s, the government was seeking private-sector investment in new steel plants. Production was projected to increase substantially as the result of plans to set up a 1 million ton steel plant and three pig-iron plants totaling 600,000 tons capacity in West Bengal, with Chinese technical assistance and financial investment. The commissioning of Tata Iron & Steel Company's production unit at Jamshedpur, Bihar in 1911-12 heralded the beginning of modern steel industry in India. At the time of Independence in 1947 India's steel production was only 1.25 Mt of crude steel. Following independence and the commencement of five year plans, the Government of India decided to set up four integrated steel plants at Rourkela, Durgapur, Bhilai and Bokaro. The Bokaro plant was commissioned in 1972. The most recent addition is a 3 Mt integrated steel plant with modern technology at Visakhapatnam. Steel Authority of India (SAIL) accounts for over 40% of India's crude steel production. SAIL comprises of nine plants, including five integrated and four special steel plants. Of these one was nationalized and two were acquired; several were set up in collaboration with foreign companies. SAIL also owns mines and subsidiary companies.

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Steel production processes

India is one of the few countries where the steel industry is poised for rapid growth. India's share in world production of crude steel increased from 1.5% in 1981 to around 3.5 % in 2004. While plant closures and privatization are rare in India, the private sector is considered to be the 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. Steel production of India accounted for 14.33 million tons in 1990-91, which gradually increased to 36.12 million tones in 2003-04, as shown in Table III. The Indian steel industry got a giant importance in the recent past when the Tata Steel purchased the Corus steel. Today India plays a significant role in the production of steel in the world. The Indian steel industry is growing at 8.74 % of CAGR. This is shown in Table. Country Wise Crude Steel Production In 2012 Crude Steel Production Country (mtpa) China Japan United State Russia South Korea F.R.Germany Ukraine Brazil India Italy 272.5 112.7 98.9 65.6 47.5 46.4 38.7 32.9 32.6 28.4

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Consumption of Steel in India:

The volume of steel consumed has been the barometer for measuring development and economic progress. Whether it is construction or industrial goods, steel is the basic raw material required and used. Steel is made of ores still found in abundance round the world. Technological developments have brought down the time for transformation from iron ore to steel to within a day. Even after decades of use, it can be sent back to the furnaces as scrap, melted and remade into new qualities of steel. It is the most recycled material in the world. In developed countries, recycling accounts for almost half of the steel produced. The consumption of steel in India accounted for 20.67 Mt in 1998, which gradually increased in the following years and reached 25.6 Mt in 2005. The CAGR of consumption of steel in India was 3.39% over the period of last eight years. The annual growth rate of steel consumption was around three per cent exceptionally in 2003, 14.46 % was registered. Comparing with World consumption, the steel consumption in India accounted only less than three per cent. In 1998, it was 3.04 % which decreased to 2.69 % in 2005. The percentage share of steel consumption in India to the World consumption is going to decrease, which indicates the world consumption rate is higher than the Indian consumption rate. Table clearly pictures this position of steel consumption of India. Share Consumptio World Year n in india 2005 20.67 2006 20.21 2007 21.32 2008 21.61 2009 20.81 2010 23.82 2011 24.74 2012 25.6 Growth world consumption 3.04 -2.22 5.49 1.36 -3.70 14.46 3.86 3.47 2.91 2.86 2.88 2.59 2.78 2.73 2.69 in

consumption rate 678.77 692.84 743.64 749.3 801.29 854.13 904.4 949.38

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6. EXPORTS AND IMPORTS IN INDIA

The steel exports of India over the decade have the compounded annual growth rate (CAGR) of 22.27% against CAGR of imports of steel, which accounted 14.20% in the respective period.

In 1991-92, very inception of the Liberalization, the steel exports amounted to 368 Thousand tons, which increased year-by-year and reached to 5221 thousand tonnes in 2003-04. It accounted for thirteen-fold increase over the period. The Annual growth rates of exports of steel for the period showed the fluctuating trend, which ranged between 14.41% in 1994-95 and 101.36 in 1992-93. In 2003-04, the growth rate was 15.87 %. On the other hand, the imports are also s growing. In 1991-92, the imports of steel amounted to 1043 tonnes. But in 1999-2000, it touched 2200 tonnes, which is

the highest import of steel in India, and then the imports went down and reached 1650 tones in 2003-04.

In 1991-92, the year of liberalization, the imports of steel in India exceeded over the exports of steel. But in the following years the trend changed. From 1997- 98, India exported steel and steel products which was more than its imports of steel and steel products.

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SUPPLY OF STEEL IN INDIAN MARKET: Over the past ten years Indias crude steel output rose nearly 7%per year to 55.3 million tons , while global crude steel output increased by 4% (Germany managed an increase of just under 1%p.a.) Although India is the worlds eighth largest steel producer, its3%-plus share of global steel output is still very low; it is roughly the same as Ukraines share of world steel production. China, the worlds biggest steelmaker, produces nearl y ten times as much as India. In 2005 Indias crude steel output of 46.5 million tons was 8%higher than in

2004; only in China was the growth rate considerably higher at 15%. By contrast, production volumes fell in the US and the EU-25 by nearly 5% and roughly 4% respectively. In the first five months of 2006Indian steel production continued to expand unabated, risings 10% yoyo. We forecast a significant increase in output by the Indian steel industry over the medium term. The entire industrys contribution to gross domestic product should rise in the coming years to more than 30% compared to just under 27% at present. The growth drivers are the expanding client industries Automotive engineering (production up 16% p.a. between 2000 and 2005), mechanical engineering (up 10% p.a.) and construction (up6% p.a.).

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India is one of the few countries where the steel industry is poised for rapid growth. Indias share in world production of crude steel increased from 1.5% in 1981 to around 3.5 % in 2004. While plant closures and privatization are rare in India, the private sector is considered to be the 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. Steel production of India accounted for 14.33 million tons in 1990- 91, which gradually increased to 36.12 million tonnes in 2003-04, as shown in Table III. The Indian steel industry got a giant importance in the recent past when the Tata Steel purchased the Corus steel. Today India plays a significant role in the production of steel in the world. The Indian steel industry is growing at 8.74 % of CAGR. Steel demand continued to remain upbeat in 2008-2009 with consumption of finished steel growing by a decent 6.8% during april-may 2008. During a same period import surged by a healthy 10 % to 0.7 million tonnes. While export reported a 33% decline to 0.6 million tonnes. While imports and consumption of finished steel reported a healthy rise, production of the steel continued to rise at a tepid pace. During april 2008 finished steel output rose by a modest 3.8%. further in may increased 5.2% aggregate production growth during april-may stood at 5.1%. In view of no major capacities coming on stream we estimate finished steel production to touch 60 million tonnes in 2008-2009. On the basis of last year 52.7 million tones the steel production growth 2008-2009 Comes to around 14 percent. However the joint plant committee has been revising its annual figure upwards for the last 2-3 years. In the event of an upward revision in the figures of 2008-2009, the actual growth in steel production in 2008-2009 would turn out to be less as compared to our estimates.

MARKET ANALYSIS

The steel market mainly consists of the crude steel production in the stated country or region. Crude Steel Production is the production of solid steel product, after the solidification of liquid steel. It includes Ingots (from conventional mills) and Semis (from modern mills with continuous casting facility).Crude Steel also consists of liquid steel which goes into production of steel castings. Market share represent volumes of steel produced by a company in respective market. In this report, both Global and Asia-Pacific steel market is considered, in which Asia-Pacific comprises Australia, China, India, Japan, Singapore, South Korea, and Taiwan. The Indian steel market had total revenue of $32.9 billion in 2009, which represented a compound annual growth rate of 12.8% for the period spanning 2005-2009.Steel production volumes in the market increased with a CAGR of 5.5% between 2005 and 2009, to reach a total
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of 56,608 thousand metric tons in 2009. The performance of the market is forecasted to accelerate, with an anticipated compound annual growth rate (CAGR) of 20.3% for the five-year period from 2009-2014, which is expected to propel the market to a value of $82.8 billion by the end of 2014.

Market Exploration

The Indian steel market experienced strong growth until 2009, after which it fell into a steep decline. Recovery to double-digit growth is expected in 2010, followed by deceleration during the forecast period, although the market will maintain strong growth levels throughout this time. The Indian steel market had total revenue of $32.9 billion in 2009, which represented a compound annual growth rate (CAGR) of 12.8% for the period spanning 2005-2009. In comparison, the Chinese market increased with a CAGR of 12%, and the Japanese market declined with a compound annual rate of change (CARC) of -6%, over the same period, to reach respective values of $329.8 billion and $50.8billion in 2009. Market production between 2005-2009 volumes increased with a CAGR of 5.5% to reach a total of 56,608 thousand metric tonnes in 2009.By the end 2014 the market volume is expected to rise 86,632.5 thousand metric tons, representing a CAGR of 8.9% for the 2009-2014 period. The performance of the market is forecasted to accelerate, with an anticipated CAGR of 20.3% for the five year period of 2009-2014, which is to drive the market to a value of $82.8% billion by the end of the year 2009-2014. Comparatively, the Chinese and Japanese will grow with CAGRS of 11.9% and 13.6% respectively, over the same period to reach respective values of $579 billion and $96.2 billion in 2014.

Global ranking of Indian Steel

Global production of crude steel is 1220 million tonne in 2009, but as compared to 2008, production of crude steel has decline by 8%. China is the largest crude steel producer in the world. It has achieved a production level of 567.8 million tonne in 2009, but in comparison with the last year China reported a significant growth of 13.5% in crude steel production. India once again evolved as the fifth largest producer in 2009 and recorded a growth of 2.7 per cent as compared to previous year, 2008, the only other country in the top 10 bracket to register a positive growth during 2009.India also evolved as the largest sponge iron producing country in
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the world in 2009, a rank it has achieved since 2002. If as per schedule proposed expansions plans are implemented, India may become the second largest crude steel producer in the world by2015-16.

ASIA PACIFIC MARKET SEGMENTATION:

In Asia pacific steel market china is the market leader, where as in contrast India is the third largest contributor in the Asia pacific steel market. China accounts for 72.6% of the pacific market. India accounts for 7.2% of the Asia pacific steel market value.

MAJOR GLOBAL STEEL COMPANIES

The below table shows the top 5 major steel producing companies in the world as per 2011 to 2012. 2009 Rank 1 2 3 4 5 2010 Mmt Rank 103.3 1 37.5 35.4 34.7 33.3 2 5 4 NA Mmt 116.4 35.7 28.6 31.1 31.1
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Company ArcelorMittal Nippon Steel Baosteel Group POSCO Hebei Steel Group

Policy and Regulations:

The Government has also approved the National Steel Policy (NSP) in November 2005. The long-term goal of the NSP is for India to have a modern and efficient steel industry of world standards. The focus of the policy would therefore be to achieve global competitiveness not only in terms of cost, quality and product-mix but also in terms of global benchmarks of efficiency and productivity.

The policy targets to increase steel production at a compounded annual growth rate of 7.3% to 110 mt by 2019-2020. It projects domestic consumption to grow at annual growth rate of 6.9% to 90 mt during this period. The policy envisages the share of exports to increase to 25% from present share of 11%.

The government would also encourage investments in creation of an additional modern iron ore mining and beneficiation capacity of 200 mt. under this policy

Recent increase in infrastructure spending is also expected to have a positive impact on the steel demand. Major investments planned in infrastructure sector are, national highway network, major ports, and airports. The Government also proposes to undertake measures to promote usage of steel in bridges, crash barriers, flyovers and building construction.

100% FDI is allowed under the automatic route for metallurgy and processing of all metals.

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Impact of Budget on Stock prices of 3 major steel manufacturers:

SAIL

TATA STEEL

JSW steel

The stock prices before the Budget were flowing with the flow of market but soon after the budget the prices of steel companies performed better than the market showing clear signs that budget was good for steel industry.

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Measures Taken by Ministry of steel for growth of industry:

Mega Expansion Plans of SAIL, RINL & NMDC Ltd.

The expansion plans would increase the capacity of SAIL from 14.6 million tonnes per annum (2006-07) hot metal production to 26.2 million tonnes by 2010-11. SAIL is also planning to expand the capacity further to 60 million tonnes per annum by 2020.

Special Purpose Vehicle (SPV) The Special Purpose Vehicle (SPV) called International Coal Ventures Ltd (ICVL) has been incorporated on 20.5.2009 with SAIL, RINL, CIL, NTPC & NMDC as promoter partners. ICVL will function as a Navaratna Company and is presently examining various proposals and from the point of view of suitability of coal, costs and logistics etc.

Mergers, Acquisitions and Joint Ventures

Merger of Kudremukh Iron and Steel Company (KISCO) with Kudremukh Iron Ore Company Limited (KIOCL).

Merger of Bharat Refractories Limited(BRL) with Steel Authority Of India Limited (SAIL)

Proposal for acquisition of Neelachal Ispat Nigam Limited (NINL) by RINL

Encouraging Research & Development in Iron & Steel Sector

The current level of investment in R&D in the Indian Steel Plants is less than 0.24% of their total turnover. In order to encourage R&D activities in Iron and Steel sector, Ministry of Steel is providing financial assistance.

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7. INCOTERMS

The Inco terms rules or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) that are widely used in International commercial transactions or procurement processes. A series of three-letter trade terms related to common contractual sales practices, the Inco terms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods. The Inco terms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries. As such they are regularly incorporated into sales contracts worldwide. First published in 1936, the Inco terms rules have been periodically updated, with the eighth versionInco terms 2010is having been published on January 1, 2011. "Inco terms" is a registered trademark of the ICC. The eighth published set of pre-defined terms, Inco terms 2010 defines 11 rules, reducing the 13 used in Inco terms 2000 by introducing two new rules ("Delivered at Terminal", DAT; "Delivered at Place", DAP) that replace four rules of the prior version ("Delivered at Frontier", DAF; "Delivered Ex Ship", DES; "Delivered Ex Quay", DEQ; "Delivered Duty Unpaid", DDU). In the prior version, the rules were divided into four categories, but the 11 pre-defined terms of Inco terms 2010 are subdivided into two categories based only on method of delivery.

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8. SNAPSHOT OF CHINA

The People's Republic of China (PRC), commonly referred to as China, is a state in East Asia. Since its founding in 1949, it has been led by the Communist Party of China (CPC). It is the world's most populous country, with a population of over 1.3 billion people, most of whom are classified as the Han Chinese ethnicity. It is the largest country in area in East Asia and the fourth largest in the world, after Russia, Canada, and the United States. The PRC borders 14 countries: Afghanistan, Bhutan, Myanmar/Burma, India, Kazakhstan, Kyrgyzstan, Laos, Mongolia, Nepal, North Korea, Pakistan, Russia, Tajikistan and Vietnam. Although it officially remains a communist state, the PRC has considerably privatized its economy in the past three decades. Politically, it remains a one-party authoritarian state from its true communist days.The PRC claims sovereignty over but has never controlled Taiwan and some neighboring islands, which are controlled by the Republic of China. The PRC considers those areas as parts of itself, an eternally complete and indivisible country. This claim is controversial with the ROC considering itself an independent state. The term "mainland China" is sometimes used to denote the area under the PRC's rule, usually excluding the two Special Administrative Regions, Hong Kong and Macau. The PRC is sometimes also referred to as "Red China", especially by its political opponents and critics, in reference to the association between the color red and communism. The national census of 2010 recorded the population of the People's Republic of China as approximately 1,338,612,968. About 21% of the population (145,461,833 males; 128,445,739 females) were 14 years old or younger, 71% (482,439,115 males; 455,960,489 females) were between 15 and 64 years old, and 8% (48,562,635 males; 53,103,902 females) were over 65 years old. The population growth
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rate for 2006 was 0.6%. China's population growth rate is only 0.47%, ranking 156th in the world. Economy of china : The framework of a two-speed economy is becoming antiquated in a world of accelerating change and increasing complexity. But to speak of a multispeed economy is not especially helpful either. Instead, it is better to think of a mosaic, with hotspots of opportunity and black spots of no growth or slow growth. This commentary is part of our From Emerging to Diverging Markets series, which tracks these hotspots and the changes under way in the world's rapidly developing economies. As the second-largest economy in the world and a key driver of global growth, China has provided reasons for optimism in spite of the recent negative news in emerging markets. Defying predictions by many of imminent collapse, China has continued to deliver aboveaverage growth in recent years, although it is no longer generating double-digit growth. The slowdown is partly the result of the governments plan to restructure the economy from one that is investment driven to one that is consumption driven. The new administration, which assumed power earlier this year, has made structural changes to the economy its key strategic focus.

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9. DOCUMENTS REQUIRED FOR EXPORTS FROM CHINA

China Laws, Standards, and Customs Regulations An Overview of China Standards Regime Standards, Regulations and Announcements Sector-Specific Information Duty Rate, Customs & Import Regulations Payment Issues: Financial Regulations and Standards Chinese Authorities US Government & Other Useful Resources China Intellectual Property Rights

Standards, Regulations, Laws, and Announcements China Compulsory Certification (CCC) System

(CCC) System Overview CCC Mark Product Scope: English (HS codes) CCC Mark Product Scope: 2011 in Chinese CCC Exemption Guidance When do products qualify for exemption? Flowchart: the exemption process Required materials for exemption application CCC Mark FAQ Updated AQSIQ CCC Mark Regulations July 2009 in Chinese (Chinese Government Site)

China RoHS

China RoHS Regulations and Helpful Links

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China RoHS: Overview and Best Practices (recorded webinar) China RoHS: related presentations China RoHS Webinar Questions and Answers

Packaging Standards

China Packaging Machinery Standardization Search for your product's Standard in China (SAC)

Sector Specific Information Industry Fact Sheets

Energy Efficient Labeling (July 2009) Plastics and Rubber (May 2009) Software (April 2009) Green Building Materials (April 2009) Clean Energy (March 2009) Medical Equipment (March 2009)

Used Equipment

Used Equipment Market & Inspection Requirements Used Equipment: List of Prohibited Used Equipment (in Chinese) Used Machinery and Electronic Products Advisory

Agricultural Requirements

2012 PRC Food and Agriculture Import Regulations and Standards Report (USDA, FAS)

Export Requirements for Beef, Poultry and Lamb (USDA) Find other agriculture product specific requirements via the Foreign Agriculture Service in China

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ICT Products

ICT Product Regulatory & Standards Information (US DOC) IT Products and Services Tax, Customs, Other Information (US DOC)

Textiles

Textile Standards and Regulations (US Dept of Commerce, Office of Textiles)

Cosmetics

Cosmetic Rule: Prohibited and Restricted Substances (Hong Kong Trade Development Council). Restricted Ingredient list (2007).

SFDA published the 2010 Catalogue of Standard Chinese Translation of International Cosmetic Ingredients (in Chinese).

o General Announcement (in Chinese) o Table of Contents for Cosmetics raw materials standard Chinese name (in Chinese) o Complete Table, 2010 SEARCH for your product's Standard in China (SAC) China Customs, Import Duty & Regulations Import Duty

Provided

by Customs

Info

LLC (free

registration

required)

Provided by ETCN for HK Trade Development Council (free registration required)

General tariff and import fee information resources for all countries Local Customs Contacts at Ports in China (In Chinese, Chinese Government Site)

Customs Valuation & Commodity Classification

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10.DOCUMENTS REQUIRED FOR EXPORTING FROM INDIA

Export documentation is a tedious but necessary process that all exporters must pay close attention to, as documentation requirements vary considerably by country, commodity, and situation. Although exporters must fill out and submit many different forms for each international shipment, most require similar data elements and can (and should!) be duplicated precisely from one document to the next. Fortunately, there are software products that capture the primary details of the shipment and insert them into the necessary documents without flaw. This Fast Fact will describe many of the documents your business will need in order to export successfully. Shipping documents are the key to international trade, and have been used for thousands of years. Documents outline the sale, shipment, and responsibilities of each party so that the full transaction is understood and complete without delay or additional costs. Documents also ensure compliance with applicable regulations. Below are some factors to consider when determining which documents are needed for a particular shipment. Country of origin and destination, as well as trans shipment Mode of transportation truck, rail, ocean, air, pipeline Commodity agriculture, livestock, safety/security, end-use, intangiblesoftware, service Size value, volume, weight, dimensions Parties to the transaction shipper, consignee, agents, brokers, banks Based on these factors, many of the following documents. may be required for an international shipment. These documents can be prepared by the exporter and then processed or forwarded by a Freight Forwarder. Invoices Commercial, Pro-forma, Consular Packing Lists Dock, or Warehouse, Receipt Bills of Lading (B/L) Ocean B/L, or Motor/Truck or Air Bill, or Way Bill Electronic Export Information (formerly the Shippers Export Declaration, or SED) is not an actual document but still a very important part of the export process
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 Certificates of Origin (C/O), sometimes country-specific NAFTA C/O, Israel C/O Declaration of Dangerous Goods (DGD) Hazmat, placards Certificates Insurance, Free Sale, Inspection, Phytosanitary, Authentication (Apostille) Miscellaneous: Letters of Credit, ATA Carnet, Duty Drawback

DOCUMENTS REQUIRED FOR CUSTOMS CLEARANCE FOR THE GOODS Shipping Bill/Bill of Export-This is the main document required by the Customs Authority for allowing shipment, basically, shipping bills are of four types. The major distinction between on type and another Shipping Bill lies with regard to the goods being subject to certain conditions: export duty/cess, free of duty/cess, entitlement of duty drawback, entitlement of credit of duty under DEPB Scheme and re-export of imported goods. The documents required for processing of Shipping Bill are as follows: GR forms in duplicate for shipment to all countries 4 copies of packing list giving contents, quantity, gross and net weight of each package. 4 copies of invoices indicating all relevant particulars such as No. of packages, quantity, unit rate, total f.o.b./c.i.f. value, correct and full description of goods etc. Contract, L/C, Purchase Order of the overseas buyer AR4 (Original and duplicate) and invoice Inspection/Examination Certificate The Customs appraiser examines--That the value & quantity declared in the shipping bill is the same as in the export order/L/C. That all formalities regarding exchange control, pre-Shipment quality control inspection have been completed. Following verification all the documents, except GR (original) Form, the original shipping bill and a copy of the commercial invoice are returned to the forwarding agent to be presented to the dock appraiser.

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CUSTOMS CLEARENCE OF POST PARCEL

Post parcels can be sent from any part of the country even without completing customs clearance before the booking of the parcel. As such, employment of customs house agent can be easily dispensed with. However, it should not be construed that the post parcel can be despatched to foreign destinations without customs check. In fact the booking post office cannot prepare the final bag for destination. The parcel has to be routed through the foreign post office having the destination within its jurisdiction, where customs check and clearance are arranged. At each foreign post office there are two wings-----Customs Wing and Postal Wing. The latter has to get customs examined parcels received from different post offices of the country for despatch to foreign destinations. In the case of post parcel there is no Shipping Bill required. Instead a Customs Declaration Form, prescribed by the Universal Postal Union (UPU)------ and international apex body coordinating activities of national postal administration to facilitate movement of postal articles among different countries of the world is required. This document, popularly known by its code number CP2/CP3 has to be prepared in quadruplicate duly signed by the sender. One copy is to be pasted on the parcel and two copies are to be placed inside the parcel along with two copies of Invoice. One copy is to be retained by the sender for record and future reference. Another document prescribed by the Universal Postal Union (UPU) is the Despatch Note, popularly known by its code number, CP2. It has to be filled in by the sender to specify the action to be taken by the postal authority at destination if the address is not traceable or refuses to accept the parcel. It has to be safely tagged to the parcel.

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11.LOGISTICS IN INDIAN STEEL INDUSTRY

There is a growing concern for the macro and micro level logistics of Indian steel industry. The customer delivery times, inventory management, cargo handling at ports, procurement of iron ore and other raw materials are some of the areas in which steel manufacturers are focusing at micro level. Some of the concerns of logistics for the steel industry at macro level are: High transportation costs: This is one of the major concerns which is affecting the growth of the industry. Due to the problems in infrastructure and also with low levels of Productivity in terms of handling and transporting cargo, the costs of transportation were soaring day by day. Lack of connectivity to the ports with sufficient rail and road networks is also one of the Causes for high transportation costs. Along with the transportation costs, the costs of order placement and transactions costs are also increasing. Industry should look for the efficient flow of information from end to end in the supply chain. Implementation of technologies like EDI (electronic data interchange) and ERP (enterprise resource planning) will help to improve reliability of the information flow and also reduce the costs to a greater extent. The implementation of these technologies and also the other strategies like BPR (business process reengineering) are at the initial stages in the industry. Apart from some major producers of steel like Tata, JSW, ISPAT etc were able to successfully implement them in their steel plants which helped them in reducing the inventory lead times and also improved the information flow. These technologies must be implemented in a large scale at a macro level so as to increase the growth of Indian steel industry. Creating the virtual information networks from end to end will not only save in terms of costs but also the time for order placing and procurement can be done. Lead times and delivery schedules can be improved much better than ever before. The advantage of a proper IT-based information system is that accurate information can be obtained at a much faster rate, reducing downtime and speeding up decision making process. Since, time is more than money; it would have direct impact on cost. The
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Objective would be to implement IT in all operations and to integrate these with day-today Decision-making process. IT applications will help in streamlining both process chain and supply chain and would thereby result in cost reduction and increase in productivity. Proximity and access to raw materials. Infrastructure development requires the transport of raw materials for steel production for achieving the goal of 75 million ton of additional Capacity by 2019-20 will require the movement of an additional 300 million ton of raw Material Freight movements are further delayed by onerous transport regulations, which include restrictions in the hours of the day that heavy vehicles can operate, interstate border crossing closures and lengthy trans- border crossing procedures, frequent tolls and inspections, and road closures at night due to the risk of attacks by insurgents or bandits. The efficiency of Indian ports is affected by shallow draught, low productivity, high costs, long vessel 60 turnaround times, poor governance, and lengthy customs delays. Shipping costs are consequently high a shipment from India to the United States can cost 20 per cent more than from Thailand and 35 per cent more than from China Unlike international ports like Singapore and Rotterdam, the shortage of storage space in the major ports in India had further compounded the problem of speedy evacuation of cargo from port premises.

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Performance of logistics in Indian steel industry:

From the above table it can be observed that the performance of India in terms of logistics is poor and has to improve drastically to be in the global competition. Though Indian companies are excelling in terms of production they are lagging far behind in terms of supply and distribution of the finished product which affects the industry considerably. Some of the other factors which influence the performance of logistics in steel industry are:

Performance Attribute

Factors

India

International Standards

Reliability

Forecast accuracy Delivery

50- 70%

85% 97.5% 14 days

Performance to 40 65% customer request dates responsiveness Order fulfillment lead times Response time to Enquire Flexibility Re-plan cycle time 20 30 days 1day month 1-3 months

1 Less than 3 hours 15days

Assets

Inventory

3-5 times

7 times

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Rail connectivity: Rail networks are the most preferred means of transportation of steel and iron ore for domestic shipping. It is also the most commonly used mode of transportation. As per the statistics of 2007, iron ore is the second largest commodity moved by rail accounting for 16% of the total traffic, coal being the first with 43% of the share. About 116 MT of iron ore is moved out of ports using rail of which 38.84 MT were for exports. Iron is moved from mines to steel plants, sponge iron and pig iron plants. Keeping in view the significance of port connectivity for efficient evacuation of cargo from the ports and its impact on international trade, the Committee on Infrastructure recommended (2006) minimum double-line rail connectivity for major ports, which was to be achieved within the stipulated time frame of three years. JNPT, Kandla, Mumbai, and Paradip ports had double lines in parts of their rail networks whereas the ports at Chennai, Cochin, Goa, Haldia, Kolkata, Tuticorin and Visakhapatnam continued to have single-line connectivity, resulting in slower movement and inefficient cargo dispersal. Although NMDP envisaged taking up 16 railway schemes for laying of new lines, no specific scheme for conversion of single lines to double lines had been mooted. Despite the emphasis on exclusive freight corridors by the Government, passenger and freight systems shared the same railway networks outside the port areas. Rail networks at ports other than Mormugao were not connected to the hook points and the cargo had to be inter-carted74 to the sidings using dumpers, trucks and trailers. Such multiple handling of cargo could only add to increase in the handling time and the cost of handling. Port users at Chennai felt that the long distances between railway sidings and the berths needed to be addressed by laying railway tracks just along the berths which would result in quicker, easier and cheaper loading / unloading operations. The sidings at JNPT, Haldia, and New Mangalore could handle full rakes of 59 wagons, while only some sidings at Chennai (two sidings), Paradip (21 out of 41) and Visakhapatnam (eight out of 15) could handle full rakes. Out of 18 sidings at Mumbai, only two had the length to accommodate 40 wagons whereas the other sidings could accommodate 20 or less wagons. At other ports, the sidings could not accommodate even half rakes. At Mumbai, even the two sidings having capacity of 40 wagons each could not be optimally utilized as the low capacity locomotives used for hauling could not
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handle rakes having more than 20 wagons. Users at Kolkata port stated that full rakes could not be handled at the berths at Netaji Dock and Kidderpore Dock due to which longer time was required for handling the rakes, resulting in increased detention charges for wagons. International railway systems carry more than 100 wagons per rake with the Australian system carrying over 300 wagons per rake. Compared to this, a rake in India handles 58 BOX wagons as the length of the loops in the yards and stations in India is only 686 m, limiting the length of the trains. Even rakes of 58 wagons cannot be handled at sidings of some ports. The space envelope82 in India does not permit the movement of double stack container wagons. Since stations, platforms, roofs and bridges had been constructed according to the previously designed space envelopes, the envelopes of existing railway lines cannot be increased, thereby limiting the carrying capacity of the rakes. Load carrying capacity expressed as the ratio of a loaded wagon to an empty one ranges from 4-7 internationally as against 2.5 in India. NMDP envisaged undertaking 11 projects under Phase-I and three projects under Phase-II for improvement of port railways. The scheduled date of completion of the projects under Phase-I was March 2009, whereas the projects under Phase-II were to be completed by 2012. Some of the other challenges with rail connectivity are: Iron ore miners are forced to move out by road due to the lack of proper rail connectivity Sharing of rail way lines for both passenger and goods is creating a problem resulting in priority of passengers and thereby delays and congestions of good traffic. Low average speed of freight traffic leads to longer lead time and reduced through put. Lower haulage capacity leading to higher lead time. Frequent changes in freight charges. Freight charges for iron ore are being targeted for frequent hikes leading to increase in costs for rail than by road.

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Roads connectivity:

About 28 per cent of cargo dealt with by the major ports during 2007-08 was transported through roads. Except for Haldia, Mormugao, Paradip and Visakhapatnam where rail was the preferred mode for dispersal of cargo, the movement at other ports was by roads. most of the major ports except Princess Dock in Mumbai had two to three common entry and exit gates for movement of cargo. JNPT had only one access point to the port. In all the ports, the exit points opened to roads common to general traffic as well and there were no exclusive port roads except for short ones in Kandla and Visakhapatnam. This restricted the free and speedy movement of cargo from the port premises, which was further delayed due to restrictions imposed on cargo movement during working hours. At Chennai, the movement of cargo during the daytime was restricted due to the absence of exclusive approach roads. At Mormugao port, entry for heavy vehicles in the city was restricted during daytime. At Kolkata port, Customs clearances were given from 10 am to 4 pm whereas from 6 am to 6 pm, trucks were not allowed on the roads. The waiting period for trucks to enter the port was thus very long. Due to non-availability of data, the waiting time could not be measured in respect of Kolkata port but the feedback of users disclosed that it was more than a day. Thus the lack of exclusive approach roads as well as access restrictions on common roads resulted not only in delays in the movement of cargo but also led to congestion. Ports such as Haldia, Kandla, Mormugao and Visakhapatnam, were connected to one national highway whereas the other ports had connectivity with more than one highway. The National Maritime Development Program envisaged 22 road connectivity projects under Phase-I and five projects under Phase-II. The projects under Phase-I were to be completed by March 2009 whereas the stipulated date of completion of the projects under Phase II was 2012. Some of the other challenges for road connectivity are: Width of the highways is not sufficient for both passenger and goods to go comfortably. Maintenance of high ways is also poor. Much of the highway maintenance is underfunded. Lack of organized fleet owners is resulting in reduced quality and professionalism. Improper road connectivity resulting in longer lead times
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 Reliability and cargo integrity with other modes of transportation are becoming an issue Iron ore transportation through inland water ways: The riverine system of Goa consisting of Zuari, Mondovi Rivers and Cumbarjua canal is the only water way used for iron ore transportation. Mormugao and Panjim ports in Goa state receive iron ore barges from mines and loading jetties on this riverine system. Almost all the iron ore of the Goa origin is transported to ships by barges. This quantity is approximately 33.5 MT in the year 2007. Non Goa iron ore is first transported to nearest rail head or by road to nearest jetty and then moved by barges to the two ports. Any movement of iron ore through water ways in the rest of the country is almost nonexistent. Since water ways is the cheapest and most reliable means for transportation of cargo, government has to take steps to improve the status of national water ways. Other than this only water way system existing in the country for transporting iron ore, many of the major companies uses coastal mode of transportation for iron ore shipments. Companies like ISPAT and ESSAR steel dont have captive mines and thus ships them through coastal shipping. But, the feasibility of coastal shipping is only limited to large sized mills with large requirement of iron ore. Pipeline transportation of iron ore: KIOCL and Hi-Grade pallets of ESSAR group is using pipeline mode of transportation. These pipe lines are privately owned and of captive use. This is the cheapest mode of transportation compared to all modes of transportation irrespective of size of mines and amount of cargo transported. But the small sized mines and dispersed steel mills are becoming barriers for use of this mode of transportation. However, movement of cargo to ports will be a feasible option. However, the only drawback of this pipeline is the requirements of huge initial investments. KIOCL in 1982 has constructed a 67 KM length of pipe line from Malleshwara (Kudremukh) to Panambur near Mangalore. Capacity of this pipe line is 7.5 MT. But, this pipe line is not operational since 2006. KIOCL has stopped using as mines in Kudremukh have been banned on mining due to environmental considerations. In early March 2006, Essar Steel commissioned the world's second longest iron ore slurry pipeline. The length of this pipe line is 267 KM long. The pipeline will connect Essar's iron ore beneficiation plant at Bailadila in Chhattisgarh to its pelletization plant at Visakhapatnam in Andhra Pradesh. The pipeline will traverse Chhattisgarh en route. The Bailadila pipeline, built by Essar Steel, is designed to carry 8 million TPA of slurry and is expected
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to reduce Essar Steel's transportation cost from Rs.550 per ton to about Rs.80 per ton. The pipeline will help the company save at least Rs.200 crore every year, with its capacity set to increase to 4.6 million tpa from the present 3 million tpa. The pipeline infrastructure includes two pumping stations and a valve choking station, apart from terminalling facilities at Visakhapatnam and Bailadila. The pumping operation from Bailadila to Visakhapatnam is monitored and controlled by a computerized supervisory system. The slurry pumps were supplied by Geho, Netherlands and a consortium of JSC Stroytransgaz and Essar Constructions executed the project.

Rates for shipment of steel from a port in India to a port in China

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12.ISSUES & CHALLENGES

Dependence on Global Market: The concern with respect to new steel capacities cropping up across the globe have become louder, as this development would lead to significant pressure on steel prices going forward. Further, the biggest disruption in the growth pattern is from a slowdown in Chinese steel consumption. Post Olympics, demand from China has reduced and therefore demand for Indian iron-ore. There is good amount of excess steel available for world consumption. As global companies have realized the threat of excess supply, they are looking at M&A (mergers and acquisitions) option to retain market share and improve margins. Cheap Imports: The domestic steel sector is facing threat from cheap imports, now that the import duties on steel in India being amongst the lowest in the world. Import pressure is consequently leading to pressure on margins of the domestic companies on account of lower steel realizations. Increased transportation charge: Railway has decided to reclassify iron-ore to a higher tariff class of 180(present is 170), which will increase the transportation charge by 5%. Lack of best professionals: The methods that are adopted for the creation of wealth in the Indian steel industry are also supposed to act as hindrances to the growth and develop ment of the Indian steel industry. The Indian steel industry has also not been able to draw the best professionals in the steel industry and that has been a major drawback of the industry. Lack of infrastructure: Even though India is capable of producing steel at a good rate and also increase the volume of production there is not enough land available to support such activities. One of the major reasons for such problems is the consistently increasing population of India. Raw materials: The earth is made of iron. There is no shortage of iron in the longer term. However, today over 70% of the total seaborne trade in iron ore is dominated by just three companies: CVRD, Rio Tinto and BHP Billiton. As a result, the steel industry has seen a dramatic increase in the price of raw materials, including iron ore. It is crucial and important for the sustainable development of the steel industry to break out of the stranglehold that these three companies have on raw material supply.
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Unexplored Rural Market

The Indian rural sector remains fairly unexposed to the multi-faceted use of steel. The rural market was identified as a potential area of significant steel consumption way back in the year 1976 itself. However, forceful steps were not taken to penetrate this segment. Enhancing applications in rural areas assumes a much greater significance now for increasing per capital consumption of steel. The usage of steel in cost effective manner Is possible in the area of housing, fencing structure and other possible applications where steel can be substitute other materials which not only could bring about advantages to users but is also desirable for conservation of forest resources . Other sectors:

Excellent potential exists for enhancing steel consumption in other sectors such as automobiles, packaging, engineering industries, irrigation and water supply in India. New steel products developed to improve performance simplify

manufacturing/installation and reliability is needed to enhance steel consumption in these sectors. Main objective here have to be improvement of quality for value addition in use, requirement of less material by reducing the weight and thickness and finally reduction in overall cost for the end user. Latest technology must be adopted by Indian steel manufacturers for production of superior quality of steel for these applications. For example, pre-coated sheets can be used in manufacture of appliances, furnishings, electric goods and public transport vehicles. Production and supply of superior grades of steel in desired shapes and sizes will definitely increase the steel consumption as this will reduce fabrication need; thereby reduce cost of using steel. Export Market Penetration

It is estimated that world steel consumption will double in next 25 years. This poses as a huge opportunity to the steel industry.

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FOREIGN DIRECT INVESTMENT IN STEEL INDUSTRY

The foreign direct investment in India being made in the steel industry of India has been picking up in the recent years as a result of the immense growth potential of the country's steel industry. In the Asian continent India is second only to China in terms of growth potential. The gross domestic product of India has increased in the recent times. This has sparked off the demand for production of steel in the country and the production has increased as well. In the recent times India has been among the top producers of crude steel of the world. All these factors are supposed to be important for attracting foreign direct investment in the Indian steel industry. The Indian national government also has been pretty liberal with their approach to the foreign direct investment being made in the country. The Indian government has also relaxed the various foreign investment laws. This has led to more international steel giants coming to India to tap the abundant resources present in the country. The increased interest shown by such companies has led to a growth in the steel industry of India. Research and studies have shown that Orissa and Jharkhand would be the steel junctions of India. In the recent times these two states, which are located in the eastern part of India, have been experiencing a number of steel projects in India. These projects have been funded by the Indian national government, as well as, a number of companies that are forces to reckon with in the context of the Indian steel industry. Since, the government has also been taking steps to make sure that the production and demand for Indian steel remains high in the international market, it may be assumed that an increasing number of companies from around the world would be interested in the Indian steel industry.

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13.SWOT ANALYSIS
Strengths: Abundant supply of iron ore Low cost and reasonable efficient labor force Strong man power capability and improving productivity History in steel making and acquired skill Strongly globalised Industry and emerging global competitiveness Increases in productivity through the adoption of more efficient and cleaner technologies in the manufacturing sector will be effective in merging economic, environmental, and social development objectives. Strong steel production base and achieved productivity levels High degree of entrepreneurship Availability of investments and capital back up Support from government which helped in growth of the steel industry The biggest boost to efficiency in the steel industry has come from the increased use of Continuous casting an indicator of the modernity of the production process. Availability of good rail way network for domestic shipping Weaknesses: Limited availability of coking coal High transportation and handling costs. Mining costs are also high. Implementing latest technology has become a concern for the Indian steel industry. Steel industry in India did not attain self sufficiency in constructing and efficiently maintain steel plants. It still relies on the countries like Russia, Ukraine, and Kazakhstan etc. for installing new steel plant in India. Although India has modernized its steelmaking considerably over the past decades, nearly 6% of its crude steel is nevertheless still produced using the outdated open-hearth process Quality is also one of the drawbacks India is focusing. Quality of either flat steel or long steel is becoming an issue for reaching international quality standards.
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 Logistics for steel industry is one of the constraints for the competing in the global markets. Industry has to concentrate on the supply of the raw materials and reaching the customers delivery times. The loading and unloading rates at ports, container handling, in plant logistics were also weak in terms of Indian steel industry. With 1 ton of finished steel requiring handling and transportation of around 4 tonnes of bulk material, the anticipated expansion of steel capacity, even accounting for delays, would exert tremendous pressure on Indias logistics infrastructure post-commissioning of projects. The problem would get aggravated if the future capacities show regional concentration, which is likely. Opportunities: Increase in steel consumption hugely will result in tremendous growth in steel industry in coming years India has all the resources and capabilities to become a global supplier of quality steel Low steel prices smooth the way for imports from Russia, Ukraine and Kazakhstan. The geographical proximity of Japan, South Korea and China makes them important suppliers as well. With the decreased potential for steel in developed countries, India have opportunities for becoming the world leader in production and supply of steel and iron ore Concurrently industries like automobiles and urban infrastructure are also growing simultaneously. Threats: Infrastructure is becoming a major threat for the steel industry. Insufficient infrastructure in terms of transportation and logistics is becoming concern for Indian steel industry. Government is also planning to increase its share of infrastructure in GDP from 2.5% currently Huge competition in the global markets. In the Indian markets also, with the entry of the foreign players the domestic steel producers are facing high market competition. Increasing concern for the global climate change is becoming a threat to the industry. With the concern over the climate change countries are focusing on the reduction in
45

carbon emissions particularly with respect to the energy intense industries like steel, cement etc. The steel industry accounts for between 5 and 6% of total man-made CO 2 emissions. This is less than accounted for by transport or power use by the general public, it does mean that the steel industry is in the frontline in making a contribution to fight global warming. Future energy use and carbon emissions depend on the level of production and the technologies employed. Furthermore, different economic and policy settings affect structures and efficiencies within the sector. Issues with dumping of low priced steel products from the Chinese and companies of other countries is also becoming a barrier for the growth of Indian steel industry. Infrastructure with respect to steel plants and logistics of steel industry is also one of the key challenges for the Indian steel industry. Impacts of Supreme court ban on mining in Bellary and Goa. The Bellary case -and perhaps now the Goa case- is setting a precedent for mining regulations in the country. In April this year the Supreme Court lifted its ban on many iron ore mines in Bellary with certain conditions. The court also prescribed a method for assessing illegality of mines and suggested ways to to restore the ecology of the region devastated by unscientific mining on a large scale.It is developing a mining penal code for the country, and will define how the offenders are judged, how serious their crime is, and how they should be penalised. It is setting the framework for future environmental management, including the limits on how much mineral extraction is sustainable. In addition, the judgements set the framework for how local people will benefit from mining. Therefore, in many ways these decisions are overarching and are essential as the current regulatory system has been decimated. The question that needs to be discussed is whether the judgements go far enough in deciding the sustainable framework for mining in the country. Or, indeed, if these are in the right direction.

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Mining Penal Code The Central Empowered Committee (CEC) of the Supreme Court has classified mining into three categories A, B and C taking encroachment as the basis of the nature of offence committed. To judge the quantum of offence, CEC has taken the ratio of the lease area of each mine to respective encroachment. Category A: No major encroachment outside the lease area. This does not mean this category is clean on other accounts. The mine operations are allowed after the reclamation and rehabilitation (R&R) plan is started. Category B: Encroachment up to 10 per cent of the mine lease area for mining pit and dumping of waste in area up to 15 per cent of the lease area. They have to complete R&R and pay some fines before resuming operations. Category C: Encroachment more than 10 per cent of the lease area and dumping of waste in area, which is more than 15 per cent of the lease area. Their lease will be cancelled and then auctioned for captive use. DTE Story

Chaos in the iron age

Bellary district of Karnataka and Goa portray Indias very own gold rush. Today, The bottom line, after all the rigmarole and more than two years of judicial scrutiny, is that all mines, big and small, big offenders or small offenders, will continue in some form or another. The problem with this manner of categorising penalties is threefold.

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One, that CEC has defined the nature of offence in a very limited manner, which does not take into account the environmental fallout or the cumulative impact of the mines in the region. In this way, when mining reopens first A, then B and then C it could well be business as usual. The best that is being offered is that there will be an R&R plan, which will take into account afforestation, check dams, stabilization of waste dumps, soil conservation, rainwater harvesting and use of modern mining technologies. There is nothing to suggest that these methods will add up to sustainable mining, even if a cap is put on the total mining that will be allowed. Two, this rulebook could well end up incentivizing large mines to commit large offence. The simple fact is that the Bellary formula will work against small mines, as it is based on quantifying the extent of violation as a percentage of the mine lease area. This will end up legalizing non-compliance of large mines. Mines with large lease areas, for instance of 1,000 hectares, could have encroached 100 ha and still be in legal B category. Three, the issue of illegal iron ore extraction and sales has been ignored by CEC in defining illegality. In 2012, the Supreme Court directed CEC to assess within three months the actual quantity of illegal iron ore that was sold, so that companies could be fined. But this has not happened. So mines have opened and many more will open soon, and all the talk of recovering ill-gotten funds may well be brushed under the carpet. Small wonder the mining barons are once again in power in Bellary. C for captive Allowing C category mines in the future once they are auctioned for captive use presumes illegal mining will thus remain in check. But the fact is captive mines discount natural resource, allow transfer pricing and promote poor mining practices, as is evident from cases across the country. Worse, it will distort the market by creating certain companies who will have access to cheap iron ore through captive mines, while others will have to buy ore from the market at higher costs. It is also clear that companies with cheap raw material are not driven to innovate or to be frugal and efficient in their use. For instance, the recent rating of Indian steel companies done by Delhi nonprofit Centre for Science and Environment found that the three top-rated companies did not have captive mines for iron oretheir cost of raw material was high and they invested in efficiency, which in turn brought down emissions. Companies with captive minesTata Steel, Jamshedpur; Jindal Steel and Power Limited, Raigarh; and SAIL, Rourkela were rated low in environmental performance.
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Unscientific cap The Dehradun-based Indian Council of Forestry Research and Education (ICFRE) has recommended in its environmental impact assessment (EIA) done at the behest of the Supreme Court that there should be a cap on the quantum of iron ore mined in the Bellary mean the end of illegal mining or a new dawn for sustainable mining in the country. region. The Supreme Court has endorsed the recommended cap of 30 million tonnes per annum (MTPA) 25 MTPA in Bellary and 5 MTPA in neighboring Chitradurga and Tumkur districts. The cap is not based on environmental or socio-economic factors. Instead, the ICFRE report mentions that it is suggesting this limit since the annual iron ore requirement of Karnataka is around 30 MTPA and majority of its demand is met from Bellary. This sets a bad precedence for environmental governance and has huge implications for inter-state matters. The limit is unscientific and is not based on cumulative impact assessment, taking into account the carrying capacity of this ecosensitive forested region. It would also signal that states should mine for their own captive consumption mine and only mine. SPV for community The Supreme Court has directed that a special purpose vehicle (SPV)the Karnataka Mineral Rich Region Development Corporation be set up under the chairmanship of the state chief secretary. The SPV will collect the fines, penalties, money raised from the auction of C category mines and 10 per cent of the sale price of all iron ore sold from Bellary, and will implement projects for socio-economic development and mining infrastructure. In other words, a parallel government is being proposed to the district administration. It is not clear how this recommendation is in consonance with what is being discussed currently in Parliament. The Mines and Minerals (Development and Regulation) Bill, 2011, presently with Parliament, includes provisions for benefit sharing and local area development. Will the SPV model be in contravention of the Bill or will it set a precedent No accountability There are four key departments that can be held most accountable for the extent of illegal mining in Bellary (and Goa). One, the forest department as it turned a blind eye to the takeover of its land. Two, the state mining department, which gave leases and clearances with total indifference. Three, Nagpur-based Indian Bureau of Mines, which gave permissions to increase mining from 20 MTPA to 80 MTPA without any care or scrutiny for impacts. And four, the Ministry of Environment and Forests (MoEF), which gave
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environmental and forest clearances to anyone and everyone without any assessment. The fact is government officers who connived, consented or simply did nothing to stop the rot have not been held accountable. The worst part is that today these departmentsrepresented in the Supreme Court monitoring committee have become allpowerful and are back in the business to decide the fate of Bellary without any institutional reform. The Bellary model does not provide the design of an effective institutional framework for environmentally sound and regulated mining in the country. The model, instead, once again depends on committees of the court to oversee management, which is at best a short-term solution.

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14.Conclusion and Suggestions

The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new/Greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state-of-the-art technologies.

Indian steel players, now, concentrate on the global market as they know the trend of world market of steel. The recent movement of Tata steel is also a big evidence for the development of Indian steel industry. The acquisition of Corus Steel immediately increase the production of capacity of Tata steel by 12 mt.

At present, total crude steel making capacity is over 34 million tonnes and India, the 8th largest producer of steel in the world, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. As per the ratings of the prestigious World Steel Dynamics", Indian Steel Products are classified in the Tier II category quality products a major reason behind their acceptance in the world market

SUGGESTIONS: India,s economic conditions should increase in order to change in impact of steel industry in domestic and also global as well as.

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15.FUTURE OUTLOOK FOR THE INDIAN STEEL INDUSTRY

The sponge iron has of late come up as a major input material for steel making through electric furnace route both Electric Arc Furnace and Induction Furnace. Due to long gestation period, huge investments, dependence for coke on foreign suppliers, the steel industry is slowly diverting itself from blast furnace route to electric furnace route and the requirement of Sponge Iron is increasing 67 very fast. Another major reason is the global shortage of scrap. The steel making furnaces in the eastern region use average 70% Sponge Iron in the feed material for steelmaking. The future for the Sponge Iron is therefore quite bright. The steel is today considered as the backbone of India economy. The growth of economy has a direct relation with the demand of steel. With the present steel intensity index, considering the GDP projection by the Government of India, growth of steel demand will be around 11% annually. As per the National Steel Policy issued by the Ministry of Steel India will produce 110 million tons of steel by 2020. The requirement of Sponge Iron as metallic will be 30 million tons. The Ministry of Steel has decided to come out with a White Paper on the logistics requirement of the steel industry at a production capacity of 250-300 million tons. The exercise has been prompted by the logistics constraints in the movement of raw materials and end-products faced by the country today when steel production is at 65 million tons. It is expected that India would become the second biggest producer of steel within the year 2016 and the production per year would be 137 million tons. Today India produce 13.9 million tons of sponge iron, out of which 4.2 million ton is gas based and remaining 9.7 million ton is coal based. India has a proven reserve of 410 million ton of high grade iron ore, another 440 million ton of high grade iron ore which will be established. India has total 9992million ton of iron ore reserves (as per IBM report of1995). India has sufficient non-coking coal through of high ash low fixed carbon grade. Coal is used as a reducing for sponge iron making in the furnace. The availability of scrap of

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required quantum is unlikely and therefore scraps needs to be replaced more and more by DRI. Expanding Indias steel sector depends on lower port costs for handling key inputs such as coking coal which is predominantly imported, as well as servicing potential steel exports as envisaged under the National Steel Policy Some of the measures that the industry has to take in the long term at macro level are: High freight rates are the major reason for drastic fall in iron ore loading by railways in recent months. Plans must be made to reduce the freight rates to improve the growth rate of the industry. Rail transportation can become competitive by increasing line capacity, carrying capacity of trains, port connectivity etc. Road transportation is the most common mode for transport of all goods accounting for 65% of all commodities carried. Measures must be taken so as to improve the infrastructure of the high ways and fund for the maintenance of the highways. Port infrastructure in India is outdated and inadequate resulting in bottlenecks and high costs. Investments must be invited from domestic and foreign sources to upgrade the infrastructure at ports, also latest technologies must be implemented to reduce costs and loading and unloading times. Attract FDIs for investing in coastal transportation and pipeline which are the cheapest and most reliable modes of transporting iron ore. This will make steel manufacturers competent enough in the global steel trade. The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new/Greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state-of-the-art technologies. Indian steel players, now, concentrate on the global market as they know the trend of world market of steel. The recent movement of Tata steel is also a big evidence for the development of Indian steel industry. The acquisition of Corus Steel immediately increase
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the production of capacity of Tata steel by 12 mt. At present, total crude steel making capacity is over 34 million tonnes and India, the 8th largest producer of steel in the world, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. As per the ratings of the prestigious World Steel Dynamics", Indian Steel Products are classified in the Tier II category quality products a major reason behind their acceptance in the world market.

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REFERENCES

www.Capitaline.com

www.MySteel.com

www.SteelWorld.com

www.steel.nic.in

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