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

  • MyStocks

MEMBER'S LOGINX

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

Steel Sector Analysis Report 

[Key Points | Financial Year '19 | Prospects | Sector Do's and dont's]

Just Released: The No. 1 Stock to Buy in 2020

  • Being a core sector, steel industry tracks the overall economic growth in the long term. Also, steel demand, being derived from other sectors like automobiles, consumer durables and infrastructure, its fortune is dependent on the growth of these user industries. This provides major cost advantage to the domestic steel industry.
  • India was the world’s second-largest steel producer with production standing at 106.5 MT in 2018. The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to India’s manufacturing output.
  • The Indian steel industry is largely iron-based through the blast furnace (BF) or the direct reduced iron (DRI) route. Indian steel industry is highly consolidated. About 60% of the crude steel capacity is resident with integrated steel producers (ISP). But the changing ratio of hot metal to crude steel production indicates the increasing presence of secondary steel producers (non-integrated steel producers) manufacturing steel through scrap route, enhancing their dependence on imported raw material.
  • Steel is crucial to the development of any modern economy and is considered to be the backbone of human civilization. The level of per capita consumption of steel is treated as an important index of the level of socio-economic development and living standards of the people in any country. It is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flows and income generation.
  • Steel prices are now increasingly aligning to global export prices as markets strike a balance between imports and domestic demand. China's waning demand and resultant rise in exports poses a risk to leveraging improving domestic demand in South Asia and Europe. Further, movement of currencies against the US dollar would also have a significant impact on the movement of global steel and raw material prices.

How to Research the Steel Sector (Key Points)

  • Supply
  • With trade barriers, having been lowered over the years, imports play an important role in the domestic markets.
  • Demand
  • The demand is derived from sectors that include infrastructure, consumer durables, and automobiles.
  • Barriers to entry
  • High capital costs, technology, economies of scale, government policy.
  • Bargaining power of suppliers
  • Low for fully integrated players who have their own mines for raw materials. High, for non-integrated players who have to depend on outside suppliers for sourcing raw materials.
  • Bargaining power of customers
  • High, presence of a large number of suppliers and access to global markets.
  • Competition
  • High, presence of a large number of players in the unorganized sector, imports from China, Russia and FTA Countries such as Japan and South Korea.

top ↑

Financial Year '19

  • According to the World Steel Association (‘WSA’), global crude steel production reached 1,808.6 million tonnes (MT) in 2018, an increase of 4.6% over 2017. This increase is primarily due to growth in steel consumption in infrastructure, automotive, manufacturing and equipment sectors. China continued to be the world’s largest crude steel producer, contributing to 51.3% of the global crude steel production.
  • Despite slowdown in the economy, global steel demand increased by 2.1% in 2018. The marginal increase over 2017 was mainly supported by government stimulus in China and better than expected economic activity. However, steel demand in developed economies slowed to 1.8% in 2018 as compared to 3.1% in 2017.
  • In FY19, India produced 131.6 million tonnes (MT) and 106.6 MT of gross finished steel and crude steel, respectively. Exports and imports of finished steel stood at 4.02 MT and 3.94 MT, respectively, in FY20 (up to September).
  • Steel industry and its associate mining and metallurgy sectors have seen many major investments and developments in the recent years. According to data released by Department for Promotion of Industry and Internal Trade, the Indian metallurgical industries attracted Foreign Direct Investment to the tune of US$ 11.3 billion in the period April 2000–March 2019.
  • The Government of India raised import duty on most steel items twice, each time by 2.5% and imposed measures including anti-dumping and safeguard duties on iron and steel items. An export duty of 30% has been levied on iron ore (lumps and fines) to ensure supply to domestic steel industry.

top ↑

Prospects:

  • Steel demand in India is expected to grow at 7% in 2020. Steel demand in India will be driven by broad based growth across sectors. Construction is expected to grow boosted by government spending on infrastructure.
  • The Government has launched the National Steel Policy 2017 that aims to increase the per capita steel consumption to 160 kgs by 2030-31. The government has also promoted Policy which provides a minimum value addition of 15% in notified steel products which are covered under preferential procurement.
  • The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of US$ 30 million.
  • National Mineral Development Corporation is expected to invest US$1 billion on infrastructure in next three years to boost iron production. As per Economic survey, steel production will touch 128.6 million tonnes by 2021.
  • The Indian Economy is expected to continue to do reasonably well in the long run which augurs well for the Steel Industry, as the two enjoy a strong correlation.
  • With improvements expected in the second half of 2019, global economic growth in 2020 is projected to return to 3.6%. Beyond 2020 growth will stabilize at around 3½%, bolstered mainly by growth in China and India and their increasing weights in world income.
  • Industry consolidation through the Insolvency and Bankruptcy Code, 2016, is expected to lead to improved discipline in the marketplace and stable pricing. Change of ownership will also lead to improved capacity utilisation levels over the next 1-2 years.

top ↑

Related Links for Steel Sector
Quarterly Results | Sector Quote | Over The Years

Views on News

JINDAL STEEL & POWER Plunges by 5%; BSE METAL Index Down 2.6% (Market Updates)

Jan 27, 2020 | Updated on Jan 27, 2020

JINDAL STEEL & POWER share price has plunged by 5% and its current market price is Rs 185. The BSE METAL is down by 2.6%. The top gainers in the BSE METAL Index [TOPCOMPANY]. The top losers is JINDAL STEEL & POWER (down 5.1%)..

KIOCL Surges by 6%; BSE METAL Index Down 2.4% (Market Updates)

Jan 27, 2020 | Updated on Jan 27, 2020

KIOCL share price has surged by 6% and its current market price is Rs 125. The BSE METAL is down by 2.4%. The top gainers in the BSE METAL Index is KIOCL (up 5.7%). The top losers are COAL INDIA (down 0.2%) and NALCO (down 1.2%).

The BSE METAL Index Down 2% ; JSW STEEL Among Top Losers (Market Updates)

Jan 27, 2020 | Updated on Jan 27, 2020

The BSE METAL Index Down at 10,254 (down 2.3%). Among the top losers in the BSE METAL Index today are JSW STEEL, JINDAL STEEL & POWER and TATA STEEL. Meanwhile, the BSE Sensex has plunged 0.6% to 41,511.

More Views on News

Most Popular

Bet on These Smallcap Stocks for Success in 2020 (Profit Hunter)

Jan 14, 2020

The smallcap rebound finally seems to here... Make sure you aren't too late to make the most of the biggest wealth making opportunity in a decade.

Guess Which Stocks Are Rising at Double the Speed of Sensex (Profit Hunter)

Jan 15, 2020

These stocks can move twice as fast as the Sensex - to take advantage of their money multiplying power get in now as the rally is still just taking shape.. read more to not miss out.

How to Buy the Best Safe Stocks in 2020 (The 5 Minute Wrapup)

Jan 17, 2020

Don't fall for the safe stocks narrative going around in the stock market these days.

For 1,000%+ Gains, Follow the 8-Year Cycle in the Stock Market (Fast Profits Daily)

Jan 17, 2020

This is how the biggest trading profits are made.

What the Infosys Results Tell Us About the Next Infosys (The 5 Minute Wrapup)

Jan 15, 2020

If you're interested in the next Infosys, I'll tell you where to look.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get our special report, Secret to Increasing Your Trading Profits Today Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE METAL


Jan 27, 2020 12:35 PM

COMPARE COMPANY

MARKET STATS