Indian Steel Industry Report - Steel Sector Research & Analysis in India - Equitymaster
X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.

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 '18 | Prospects | Sector Do's and dont's]

  • 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. The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore is also available in abundant quantities. This provides major cost advantage to the domestic steel industry.
  • 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.
  • In FY18, India's finished steel consumption grew at a CAGR of 5.6% during FY08-FY18 to reach 90.6 MT. India's crude steel and finished steel production increased to 102.3 MT and 104.9 MT in FY18, respectively. In FY18, the country's finished steel exports increased 17% year-on-year to 9.6 million tonnes (MT), as compared to 8.2 MT in FY17. Exports and imports of finished steel stood at 1.3 MT and 1.89 MT, during Apr-Jun 2018.
  • Further, India was the only major steel consuming market globally, which saw a demand escalation. However, the country suffered from an unprecedented inflow of steel imports from China, Japan, South Korea, and Russia. South Korea and Japan benefitted due to the free trade agreement with India. The result was that the domestic industry was forced to take a series of price cuts, leading to a severe margin squeeze for domestic steel companies.
  • 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 '18

  • Total crude steel production in India has increased at a CAGR of 5.4% during FY12–FY18, with country’s output reaching 103.1 million tonnes per annum (MTPA) in FY18.
  • The country remained the third largest crude steel producer in 2017, as large public and private sector players increased steel production in view of rising demand.
  • Moreover, capacity has increased to 138 million tonnes (MT) in FY18 while in the coming ten years the figure is anticipated to rise to 300 MT of steel. Steel demand in the emerging and developing economies excluding China, which accounts for 30% of world total, is expected to grow by 4.9% in FY18.
  • In FY18, the country’s finished steel exports increased 17% year-on-year to 9.6 million tonnes (MT), as compared to 8.2 MT in FY17.
  • During the same period, the country’s finished steel imports rose 3.5% year-on-year to 7.4 MT, as compared to 7.2 MT in FY17.
  • Exports and imports of finished steel stood at 3.7 MT and 4.7 MT during Apr-Oct 2018.

top ↑

Prospects:

  • India is expected to overtake Japan to become the world's second largest steel producer soon. The National Steel Policy, 2017, has envisaged 300 million tonnes of production capacity by 2030.
  • In 2018, steel consumption of the country is expected to grow 5.7% year-on-year to 92.1 MT.
  • Huge scope for growth is offered by India’s comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.
  • Companies in the steel industry are investing heavily in expanding their capacity. Major public and private companies, including Tata Steel, SAIL and JSW Steel, are expanding their production capacity.
  • The capital goods sector accounts for 11% of steel consumption and expected to increase 14-15% by 2025-26 and has the potential to increase in tonnage and market share.
  • The infrastructure sector accounts for 9% of steel consumption and expected to increase 11% 2025-26.
  • In FY18, passenger traffic at Indian airports stood at 308.7 million and number of operational airports stood at 100 in September 2018. Estimated steel consumption in airport building is likely to grow more than 20% over next few years.

top ↑

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

Views on News

TATA METALIK Surges by 5%; BSE METAL Index Up 3.8% (Market Updates)

May 20, 2019 | Updated on May 20, 2019

TATA METALIK share price has surged by 5% and its current market price is Rs 616. The BSE METAL is up by 3.8%. The top gainers in the BSE METAL Index are TATA METALIK (up 5.3%) and JINDAL STEEL & POWER (up 6.3%). The top losers [TOPLOSERS].

JSW STEEL Surges by 5%; BSE METAL Index Up 3.8% (Market Updates)

May 20, 2019 | Updated on May 20, 2019

JSW STEEL share price has surged by 5% and its current market price is Rs 294. The BSE METAL is up by 3.8%. The top gainers in the BSE METAL Index are JSW STEEL (up 5.1%) and JINDAL STEEL & POWER (up 7.3%).

HINDUSTAN COPPER Surges by 5%; BSE METAL Index Up 3.1% (Market Updates)

May 20, 2019 | Updated on May 20, 2019

HINDUSTAN COPPER share price has surged by 5% and its current market price is Rs 43. The BSE METAL is up by 3.1%. The top gainers in the BSE METAL Index is HINDUSTAN COPPER (up 5.5%).

JINDAL STEEL & POWER Surges by 5%; BSE METAL Index Up 3.5% (Market Updates)

May 20, 2019 | Updated on May 20, 2019

JINDAL STEEL & POWER share price has surged by 5% and its current market price is Rs 165. The BSE METAL is up by 3.5%. The top gainers in the BSE METAL Index are JINDAL STEEL & POWER (up 5.1%) and SAIL (up 5.5%).

JSW STEEL Surges by 6%; BSE METAL Index Up 3.9% (Market Updates)

May 20, 2019 | Updated on May 20, 2019

JSW STEEL share price has surged by 6% and its current market price is Rs 293. The BSE METAL is up by 3.9%. The top gainers in the BSE METAL Index are JSW STEEL (up 5.6%) and JINDAL STEEL & POWER (up 6.7%).

More Views on News

Most Popular

These Dividend Stocks Could Boost Your Returns Better Than You Can Imagine(Profit Hunter)

May 7, 2019

The art of dividend investing is a lot more than investing in companies with high dividend payouts or stocks with high dividend yields...

3 Indian Stocks Replicating Amazon's Successful Strategy(The 5 Minute Wrapup)

May 10, 2019

The one critical element that has made Amazon a force to reckon with...

A Simple Checklist for Picking Great Dividend Stocks(Profit Hunter)

May 9, 2019

A filtered, neat list of high-dividend stocks with all this dirty work already done for you.

My Top 7 Stocks to Profit from Sensex 100,000(The 5 Minute Wrapup)

May 16, 2019

Tanushree Banerjee explains everything you need to know about the Rebirth of India and Sensex 100,000.

A 10-Bagger in Just 6 Years! The Rebirth of India Will Create More Big Winners Like This(The 5 Minute Wrapup)

May 7, 2019

How a niche tech startup battled all odds to eventually become a 10 bagger.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE METAL


May 20, 2019 12:31 PM

COMPARE COMPANY

MARKET STATS