Steel: Broad classifications… - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Steel: Broad classifications…

Dec 13, 2006

Steel has been considered as an important tool for development of any modern economy and the level of per capita consumption of steel is treated as one of the important indicators of socio-economic development and standard of living in any country. The Indian steel industry started in 1907, and at the time of independence there were only three steel plants producing about 1.1 million metric tonnes (MT) of steel. With a view to accelerating the growth of steel sector, the Government of India in the industrial policy of July 1991 opened the iron & steel industry for private investment. With that, the steel industry now has grown approximately to 39 MT of capacity (FY06). India is the eighth largest steel producer in the world and has presence in all the three sectors such as ore miners, integrated producers and other producers. 1. Ore miners: The ore miners are involved in iron ore mining activity and these companies supply raw material to integrated steel producers for manufacturing the end product in different forms. National Mineral Development Corporation (NMDC), Kudremukh Iron Ore Co (KIOCL) Essel Mining & Industries Ltd, and Sesa Goa (Sesa) are the few examples of ore miner producers. Integrated producers like Tata Steel and SAIL have their own captive mines.

2. Producers
A) The main producers are companies that convert ore into steel form. They are further classified on the basis of production and products manufactured by them.

On the basis of production process: There are three types of production process to convert iron ore into steel such as coke oven (blast furnace route), electric arc furnace or corex process.

On the basis of products manufactured: Based on the products manufactured producers can be classified into two broad categories, Long products and Flat products.

  • Long products: Structural products, wire rods, angles, bars and rounds come under the category of Long products. They are used in the construction and heavy engineering. Long products as mentioned above include bars, structural products, wire rods, etc. and mainly used in heavy engineering and construction industries. Apart from the country's two leading steel producers SAIL and Tata Steel, RINL (Rashtriya Ispat Nigam) also has presence in this segment of product manufacturing.

  • Flat products: Flat products include hot rolled coils/sheets (HRC), cold rolled coils/ sheets (CRC) and galvanised sheets. The companies that manufacturer HRC are SAIL, Tata Steel, Ispat industries etc. It is used in automobiles, engineering and consumer durables, and mainly used for further processing to cold rolled coils. Hot rolled sheets are used in auto components, shipbuilding and boilers etc. Apart from the two largest integrated steel producers CRC steel product is also manufactured by Ispat industries, Jindal group of companies, Uttam steel etc. The application of this is mainly in mainly in automotive sector, white goods sector. Galvanised steel on the other hand, is used in fabrication works like car bodies, roofing, consumer durables, etc. The companies that operate in this segment are Uttam Steel, Tata Steel, SAIL, Ispat Industries, etc.

  • Alloy steel: A value added product that has got specific application is being manufactured by companies like SAIL, Tata Steel and Kalyani Steel. Stainless steel is one of the highest value added product. It is used in auto components, ball bearings, engineering items, utensils etc.

B) Secondary producers are the players who manufacture steel by melting scrap or sponge iron or a mixture of the two. These manufacturers melt scrap steel and convert into steel, which is at par in terms of quality standards that is produced by using iron ore. This process saves cost of purchasing iron ore, refining, smelting etc. In case of scrap steel, manufacturers just need to remove impurities to get the pure form of steel.

The end user industries of flat and alloy steel products are growing at a significant rate in India and provide huge opportunities for the companies in this segment. The domestic sales of automobiles have grown at the compounded annual growth rate of around 14% over the past four years, one of the key end user industries of this product. With the growth in the end user industries, there is enough potential in this line of operation.

Over a period of time more importance is been given to value added products like galvanised steel used by automobile industries. The companies have also started branding their products to enhance their realisations. Thus going forward, it will be the demand from the end user industries and their relative cost effectiveness that will determine the shift in demand amongst the various types of steel products. However, integrated players and those having a higher mix of value added products are seen to be the real beneficiaries in the longer term.

Equitymaster requests your view! Post a comment on "Steel: Broad classifications…". Click here!


More Views on News

TATA METALIK Share Price Up by 5%; BSE METAL Index Up 1.5% (Market Updates)

Sep 28, 2020 | Updated on Sep 28, 2020

TATA METALIK share price is trading up by 5% and its current market price is Rs 533. The BSE METAL is up by 1.5%. The top gainers in the BSE METAL Index is TATA METALIK (up 5.3%).

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 28, 2020 (Close)