Description
overview of steel industry in India and presents structure conduct performance analysis of steel industry. It includes Tata Steel, SAIL, JSW Steel as a part of analysis.
“SCP Analysis of Indian Steel Industry”
INTRODUCTION
The Indian steel industry has witnessed steady growth, on the back of various initiatives taken by the Government of India. The soaring demand from different sectors, such as, infrastructure, real estate and automobile has put the steel industry in India on the world map. Economic reforms initiated by the government in 1991 have assisted in the growth of steel industry. Prior to the reforms, the steel industry was dominated by the public sector. However, after the reforms this sector became open to private investments and foreign investments. The 1991 reforms allowed for no licenses to be required for capacity creation, except for some locations. A lot of new steel plants have been set up in the country due to huge foreign investments and state-of-the-art technology. Tata Steel was the first steel plant established in 1907 in India. Some of the other steel plants in the country include Bhilai Steel Plant at Chattisgarh, Rourkela Steel Plant at Orissa, Durgapur Steel Plant at West Bengal to name a few. In 2010, India was ranked as the fourth largest producer of steel by the World Steel Association.The Indian steel industry began expanding into Europe during the 21st century. In January 2007, Tata Steel made a successful US$ 11.3 billion offer to acquire European steel maker Corus Group PLC. In 2006, Mittal Steel acquired Arcelor for US$ 38.3 billion to become the world's biggest steel giant. Some of the growth drivers helping the sector to grow are:
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Abundant availability of iron ore in the country with states such as Orissa, Jharkhand and Chhattisgarh are rich in iron ore reserves. The National Minerals Development Corporation (NMDC) plans to expand its iron ore production capacity from its existing capacity of 30 million tonnes per annum (MTPA) to 50 MTPA by 2014–15 through the capacity expansion of current mines as well as by setting up new mines. The country has well established facilities for the production of steel. High GDP growth at target rate of 8-9%
Market Size Steel industry is of great significance to the economic growth of the country. India has been ranked the world?s fifth largest producer of crude steel in 2009 and is projected to become the world?s second largest producer by 2015–2016, with a production volume of 54.5 million tonnes (MT). Various states have signed around 222 memorandums of understanding (MoUs), with a projected capacity of about 275.7 MT and an investment of more than US$ 229 billion. The steel production capacity is likely to reach 124 MT by 2011–12. In 2008–09, the installed capacity for crude steel was estimated at 64.4 MT, while production was estimated at 54.5 MT, resulting in an 85 per cent capacity utilisation. Long-products constituted 57 per cent of the total finished steel consumption, while the remaining 43 per cent was constituted by flat-products in 2007–08. The Eleventh Five Year Plan (2007–2012) has allocated investments worth US$ 490 billion for the infrastructure sector, comprising power, roads, highways, railways, ports, airports, mining and irrigation. Steel giants such as JSW Steel and Tata Steel are investing to enhance the capacities of products such as TMT bars (rebars) and many more.
Investments
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Tata Steel plans to set up a steel plant at Kalinga Nagar, Orissa, which will focus entirely on flat steel products. The first phase is expected to be commissioned by February 2014. The first phase will see an investment of up to Rs 25,000 crore (US$ 5.631 billion), of which the steel maker has already invested over Rs 10,000 crore (US$ 2.252 billion). Recently South-Korean steel company Posco, got permission from the Ministry of Environment and Forest to set up a steel project worth US$ 12 billion in Orissa. Bhilai Steel Plant (BSP) the sole producer of rails in India has recently received another order for exporting rails to Sri Lanka. The order is of about 14,000 tonnes for the UIC-60 grade of rails. Earlier, the company had received an order to supply 6,500 tonnes of rails to Sri Lanka. RINL, the corporate entity that runs the Vizag steel plant, has inaugurated a series of auxiliary units to expand the capacity of the plant to 6.3 MT The project has been executed by Instrumentation Ltd, Kota and associates at a cost of around Rs 10 crore (US$ 2.25 million). Varia Engineering Works Pvt Ltd, Ahmedabad-based rolling mills manufacturing company, is setting up India's first 6-stand continuous cold rolling mill for manufacturing stainless steel. Tata Steel is planning to set up six MTPA plant at Kalinga Nagar, Orissa, which will produce flat products, catering to the needs of the automotive industry and white goods. Phase-I of the plant, at an investment of Rs 25,000 crore (US$ 5.60 billion) is expected to be commissioned by January-February 2014.
Government Initiatives
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The Indian Government has laid more importance on infrastructure development in the Union Budget 2011. This would help in development of highways, ports, power projects, bridges and others, which will therefore increase the demand for steel. With effect from May 24, 1992 steel industry was incorporated in the list of „high priority? industries for automatic approval for foreign equity investment up to 51 per cent. This limit has since been increased to 100 per cent. Import duties on key steel-making raw materials, comprising of mineral products, ores and concentrates have seen noteworthy reductions in successive budgets during the last few years. The government introduced special economic zones (SEZs) in June 2005, with the plan of creating internationally competitive regions. Steel plants operating in SEZs receive some advantages like tax holiday; they can freely source inputs domestically or externally without any specific approval or duty payable.
Indian Steel Industry: Road Ahead The Indian crude steel production will grow at a compound annual growth rate (CAGR) of around 10 per cent during 2010-2013, according to a research report by RNCOS titled, “Indian Steel Industry Outlook to 2012.”Additionally, various initiatives have been taken by the Government to boost economic growth, by injecting funds in industries such as construction, infrastructure, automobile, and power. This will provide an impetus for growth for the steel industry in future. The report also states that steel consumption in India is expected to grow considerably in coming years. Another report by Global Consultancy firm Ernst & Young states that India would have annual production capacity of 101 MT in 201112. Attracted by the growth prospective of the Indian steel industry, numerous global steel players have been planning to enter the market or have announced their expansion plans. For instance, ArcelorMittal and POSCO have planned mega Greenfield projects at various locations in India. Additionally, few other global players have entered into strategic partnerships or joint ventures with Indian steel majors to capitalise on their existing client base in the region.
STRUCTURE CONDUCT PERFORMANCE (SCP) ANALYSIS
According to the structure-conduct-performance approach, an industry's performance (the success of an industry in producing benefits for the consumer) depends on the conduct of its firms, which then depends on the structure (factors that determine the competitiveness of the market). The structure of the industry then depends on basic conditions, such as technology and demand for a product. Components that make up the structure, conduct, and performance model for industrial organization include:
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Basic conditions: consumer demand, production, elasticity of demand, technology, substitutes, raw materials, seasonality, unionization, rate of growth, product durability, location, lumpiness of orders, scale of economies, method of purchase, scope economies Structure: number of buyers and sellers, barriers to entry of new firms, product differentiation, vertical integration, diversification
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Conduct: advertising, research and development, pricing behaviour, plant investment, legal tactics, product choice, collusion, merger and contracts Performance: price, production efficiency, allocative efficiency, equity, product quality, technical progress, profits Government policy: government regulation, antitrust, barriers to entry, taxes and subsidies, investment incentives, employment incentives, macroeconomic policies
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Structure Conduct Performance Paradigm (SCPP) is an industrial organization?s approach, used to analyze the relation among market performance, market conduct, and market structure. The SCPP indicates that market structure determines the market conduct, and thereby sets the level of market performance. Working backward, we find that market performance is determined by market conduct, which in return depends on market structure.
Market structure
The Market structure consists of the relatively stable features of the market environment that influence rivalry among the buyers and sellers operating within this market. The main elements that influence market structure are seller concentration, product differentiation, barriers to entry, barriers to exit, buyer concentration, and the growth rate of market demand. Other elements of market structure exist, but they are usually unstable and therefore ignored either because they can?t be measured or because they are hard to observe. Elements of market structure Seller concentration: It refers to the number and size distribution of firms in the market. The Indian Steel Industry is dominated by a few large players and the industry will remain oligopolistic in the future. TISCO, public sector entities, POSCO, Jindals, Essar, and ArcelorMittal will be among the major players accounting for the bulk of the 100 plus million tons of production in the future. Product differentiation: A differentiation or distinguishing a product from the products of other competing firms. Steel has very low barriers in terms of product differentiation as it doesn?t fall into the luxury or specialty goods and thus does not have any substantial price difference. In steel industry there is little differentiation between competing products. However, certain companies like Tata Steel still enjoy a premium for their products because of its quality and its brand value created more than 100 years back. Barriers to entry: A set of economic forces that create a disadvantage to new competitors attempting to enter the market. Entry barriers are high in steel industry. ? Capital Requirement: Steel industry is a capital intensive business. It is estimated that to set up 1mtpa capacity of integrated steel plant, it requires between Rs 25 bn to Rs 30 bn depending upon the location of the plant and technology used.
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Economies of scale: As far as the sector forces go, scale of operation does matter. Benefits of economies of scale are derived in the form of lower costs, R& D expenses and better bargaining power while sourcing raw materials. It may be noted that those steel companies, which are integrated, have their own mines for key raw materials such as iron ore and coal and this protects them for the potential threat for new entrants to a significant extent.
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Government Policy: The government has a favourable policy for steel manufacturers. However, there are certain discrepancies involved in allocation of iron ore mines and land acquisitions. Furthermore, the regulatory clearances and other issues are some of the major problems for the new entrants
Barriers to exit: A set of economics forces that influence the firm?s decision of exiting the market; such forces make it cheaper for the existing firm to stay in the market than to exit the market. Exit barriers are high in steel industry. The magnitude of exit barriers in an industry depends on three factors: how long gross revenues are expected to cover variable costs, how specific and durable the capital is, and how high closing costs are. The high cost of closing appears to be the most important exit barrier currently in the steel industry. When closing a plant, a firm record a charge for the costs of dismantling the mill, for the operating loss until closing, for losses involved with contract terminations, and for a write-down of the assets. It also records the estimated liability for current and future payments to employees for pensions and insurance benefits. The other exit barrier, the durability of steel industry capital, also works to delay plant closings by allowing the continued operation of aging equipment without major reinvestment. Buyer concentration: The number of buyers in a market. The term was used by Michael E. Porter in 1979 in his “Five Forces Analysis”. Porter?s analysis proposes that in markets with high buyer concentration, the firms earn lower level of profits than in markets with low buyer concentration. In steel industry the buyers have a low to medium bargaining power. Some of the major steel consumption sectors like automobiles, oil & gas, shipping, consumer durables and power generation enjoy high bargaining power and get favourable deals. However, small and retail consumers who are scattered and consume a significant part do not enjoy these benefits. However, the government may curb or put a ceiling on prices if it feels the need to do so. The steel companies either sell the steel directly to the user industries or through their own distribution networks. Some companies also do exports. The growth rate of market demand: In Indian steel industry the demand exceeds the supply and hence India is a net importer of steel. There is soaring demand from different sectors, such as, infrastructure, real estate and automobile.
Bargaining power of suppliers: In Indian steel industry the bargaining power of suppliers is low to medium. The bargaining power of suppliers is low for the fully integrated steel plants as they have their own mines of key raw material like iron ore coal for example Tata Steel. However, those who are non-integrated or semi integrated has to depend on suppliers. An example could be SAIL, which imports coking coal.
Conduct
Conduct means what firms do to compete with each other. It includes pricing, advertising, research and development investment, decisions on product dimensions, merger and acquisition, etc. Conduct also can include collusion both explicit and tacit. Pricing: The domestic prices of iron and steel have been market-determined ever since the de-regulation of prices for integrated steel plants in 1991-92. Market prices remain closely related to international prices, though generally lower. The main policy instrument available to influence prices is the adjustment of the customs and excise duty structure. An important feature of the de-regulated era is that prices of both finished steel and its inputs have risen at a much faster rate and with a lot of volatility, compared to the past. The Indian steel industry experienced a significant slump in prices during the period 1998-99 to 2001-02 in line with global trend, which adversely affected the profitability of domestic steel firms. However, certain steel mills remained profitable during this period due to price control over key inputs such as coal, value addition in the production chain and product diversity by introducing new types of steel meant for specialised usage. Nonetheless the prices have recovered significantly after 2003-04. Table below gives the trend in WPI (with base year 199394=100) for iron and steel between 1990-91 and 2007-08.
Figure: Trend in Wholesale Price Index of Iron and Steel
Research and development investment: Most of the R&D works in steel plants, however, relate to incremental research addressing the day-to-day problems of the steel plants or the industry, and investment in large-scale R&D work for development of path-breaking innovative technologies has been limited. Naturally, R&D investment in steel sector as a whole remains very meagre and the actual investment in different steel companies as percentage of their turnover vary in the range of 0.15% to 0.3%. Merger and acquisition: Steel producers have signed 222 MoUs with various states for a planned capacity of about 275.7 million tonnes. Orissa, Jharkhand, Chhattisgarh, West Bengal, Karnataka, Gujarat and Maharashtra are among the major states attracting investments in the steel sector. The largest inbound deal announced between 1 January 2010 and 30 November 2010 was the 15 per cent acquisition of JSW Steel by JFE Corporation for US$ 1,029 million in July 2010. The largest outbound deal announced was the acquisition of Shadeed Iron & Steel Co LLC by Jindal Steel and Power Ltd for US$ 464 million in May 2010. In the largest domestic deal worth US$ 24.6 million, Shree Global TradefinLtd?s interest in Lloyds Steel Industries Ltd increased from 48.23 per cent to 68.23 per cent.
Performance
Indian Steel industry are making some milestones but unable to make a stand point in the international market. China and Japan steel are preferred by world best companies. So it is expected that TATA Steel, JSW Steel and Sail India would make some global standpoint. STEEL AUTHORITY OF INDIA LIMITED Ranked amongst the top ten public sector companies in India in terms of turnover, Steel Authority of India Limited (SAIL) is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets. Capacity Expansion will ensure volume growth: SAIL is all set to bank on the domestic consumption of steel primarily driven by the ongoing infrastructure development in the country with its ambitious expansion plans which will increase its crude steel capacity to 23.2mt from 14mt currently. Value-added Segment: SAIL is banking on the robust demand witnessed for finished and premium steel segment by expanding its value added steelmaking capacity. The value added or premium segment commands 20-25% premium over semi-finished or crude steel. Strong demand led by domestic consumption: India?s finished steel demand is expected to grow at 12% CAGR over FY 10-13, led by strong demand from Automobiles, consumer durables and Engineering sector. India will remain a net steel importer over FY11-13, as demand is likely to outpace supply. Valuation: At the current price of 188, the stock is trading at just 11.96x and 10.84x times of our estimated FY11E & FY12E earnings. Attractive Dividend Pay-out: SAIL has been rewarding its shareholder by offering regular dividend since 2005. The average dividend yield of the company stood at 2.73%. With huge
cash on the book and being one of the most profitable maharathna in government entities, we believe the management of SAIL would continue to reward its shareholders with higher dividend pay-out. Key strategic alliance to further boost profitability: Company has signed MOU with Kobe Steel, Japan for exploring feasibility of ITmk3 technology for use of lean iron ore fines & non coking coal. Company is in 50-50 JV with NTPC for 250 MW power generations. Due to this JV, company?s power cost will reduce. There is a possibility of joint collaboration with Nippon Steel in the iron and steel area. Company has also proposed owing a port/joint ownership in a port venture in Orissa. This ownership will further reduce logistics cost for the company. Economies of Scale: SAIL has been enjoying the benefit of improved productivity per employee with its workforce came down by ~58% (annualized rate of 5.4%) during the past ten years from 208765 in FY2000 to 114160 at the end of FY10. The company?s employee?s remuneration as a % of net sales saw an improvement, its net employee cost stood at 13.37% for FY10, as against 19.82% in FY09 and 19.91% during FY08. The labour productivity has improved to 228tons of crude steel per labour employed during the H1 of FY11 against 214tons of crude steel produced per labour during FY08.
TATA STEEL LIMITED TATA Steel, the flagship company of Tata group, is among the top ten global steel companies with an annual crude steel capacity of over 28MTPA. It is now the world?s second-most geographically-diversified steel producer with operation in 26 countries and a commercial presence in over 50 countries. Highly Integration levels for TATA Steel to boost Earnings: Tata Steel is in the process of developing a coking coal mine in Mozambique and an iron ore mine in Canada to enhance integration level of TSE. The project is expected to be commissioned by 1QFY12. We expect this backward integration project at Mozambique and Canada to boost Tata Steel?s earnings substantially. Brownfield expansion on track: Tata Steel?s 3mt brown field expansion programme is on track and expected to be commissioned by 2HFY2012. Till September 2010, the company has incurred capex of Rs. 5732cr and plans to incur Rs. 2963cr in 2HFY2011. The product mix constitutes 2.5mt of HRC and 0.3mt of slabs. Escalation prospective from domestic operations: To raise RoE, the company has aggressively expanded domestic capacity even during the downturn witnessed in steel industry during 2008-09. It is on track to add 3mt by Jun ?11, taking domestic capacity to 10mt. Valuation: At the current price of Rs. 660, the stock is trading at just 29.74x and 18.34x times of our estimated FY11E & FY12E earnings. TATA Steel merger with Corus: Corus joined the TATA Steel family in April 2007 in a transaction that created one of the world largest steelmakers, with a major presence in Europe as well as in Asia. Corus is Europe second largest steel producer. Corus supplies steel and related services to the construction, automotive, packaging, mechanical, engineering, and other market worldwide. The combined enterprise has an aggregate crude steel capacity of more than 28mt and approximately 80000 employees across four continents. Robust performance: In FY 2009-10, the steel division of the Indian operations registered an increase of 20% in their saleable steel from 5.37mt to 6.44mt. The production from the larger furnaces were maximized with better productivity and lower coke consumption while increased vessel life in the steel melting area enhanced the production level. There were several best ever performances recorded by many units in the Steel Works of the Company: ? ? The Ferro Alloys and Minerals division registered an increase of 22% in their saleable production (1302K tonnes during 2009-10 over 1064K tones in 2009-09) Chrome Alloys export and Manganese Alloys sales also scaled new peaks during 2009-10
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Sales in the bearing division registered a growth of 23%, while its production increased by 8%.
Expansion project: Tata Steel India is executing its plan to increase its crude steel capacity from 6.8mt per annum to 9.7mt per annum at its Jamshedpur Works by 2011-12. The company has entered into a Memorandum of Understanding with Nippon Steel Corporation (NSC), Japan for setting up a Continuous Annealing and Processing Line at Jamshedpur, India with 0.6mtpa capacity. TATA Steel Europe’s coking coal venture is significant: TATA Steel Europe plans to source coking coal from the Banga Project, joint venture between TATA steel and Riversdal, located in the Tele Province of Mozambique. TATA Steel expects to produce 5.3MT of coal by 2011. The Banga coal has reserves of 502mt and the company is planning to augment production from the Banga project to 20mtpa gradually. The total capex remaining for the Mozambique project Rs 700-800cr Captive iron ore project: TATA Steel has planned to protect raw material supply for its European operation by taking a stake in New Millennium?s Direct Shipping Ore (DSO) projects. Tata Steel owns 27.4% share in New Millennium mining company. Project has probable mineral reserve of 64.1mt for the DSO project and the production is expected to commence in 2011. The company would have 100% off-take rights to the produce of the mine of a specified quality. The iron ore from the project will be supplied to Tata steel group?s facilities located in Europe. This project will involve capex of CAD 350mn. It is expected that the European operations would secure 20-25% backward integration by the end of FY12. Value Creation Strategy: The element of its value creation strategy is selective growth in emerging markets where the group has a competitive advantage. The Group therefore continues of selectively invest for the future with an aim to strengthen its position in emerging markets like India and increase the level of raw material integration and energy self-sufficiency across the Group. The company has also increased its focus on finished or premium steel segment; its currently enjoys 40% of the autograde steel and is setting up a continuous annealing line in a joint venture with its long standing technical partner Nippon Steel of Japan. JSW STEEL LIMITED JSW Steel Limited (JSWSL) is the second largest private sector steel maker in India. The company provides for a broad range of products which include Hot Rolled Product, Cold Rolled Product, Galvanized Product and Pre-painted Galvanized Product. The company consists of the most modern, eco-friendly steel plants with the latest technologies for both upstream & downstream processes. Leading Player in Steel Manufacturing: JSW Steel, the flagship company of the JSW Group, is the largest integrated private steel manufacturer in India in terms of installed
capacity. It is the leading manufacturer of cold rolled, galvanized and colour coated steel with manufacturing facilities at Vasind & Tarapur in Maharashtra. JSW Steel is the largest manufacturer and exporter of galvanized steel in India with its products exported to more than 100 countries. Strong growth expected in Steel Industry: The industry is expected to grow at a pace of 9.1% till FY15 considering the scenario that Indian Infrastructure and other Industries are going to absorb the supply and also considering international demand to increase mainly due to increase in prices in China. Expansion to facilitate growth: JSW steel has entered into a joint venture with UK?s Severfield and has launched a new plant which will have an annual capacity of 35,000 tonnes of fabricated steel. The company has also recently sought a new coking coal mine in Jharkhand for its new steel plant which would be set up in the same state and would have an annual capacity of 10mt. Valuation: At the current price of Rs. 1165, the stock is trading at just 15.14x and 9.91x times of our estimated FY11E & FY12E earning. Additional capacity to improve growth prospects: The company has successfully commissioned the Phase I (3.5 Mtpa) of one of the largest new Hot Strip Mill at Vijaynagar. The mill has initiated commercial production on April 10, and it would enable the company to convert all slabs into value added HR Coils on its stabilization. On completion of Phase II, the capacity of mill will go up to 5Mtpa. The expansion project execution work is progressing in full swing to expand the crude steel capacity to 10Mtpa by 2020. JSW Steel plans to set up a 300MW power plant at Vijaynagar. The procedure for which is expected to be commissioned in FY 2011. The company also expects initial production of 1mt in first year (2010-11) which can be ramped up to 3mt by 3rd year. The first year of production has already started in Oct 2010. Additional capex is expected to be Rs 500cr for ramping up. Thus JSW Steel is expected to generate huge revenues once the mining starts initial production. Reduction in Debt to improve overall growth: JSW Steel has tied-up with JFE Corporation of Japan and will be setting up an auto steel line at its Vijayanagar steel plant. After selling a portion of its equity to Japanese steel maker JFE, JSW?s balance sheet has improved significantly mainly because of the repayment of debt which has resulted in the reduction of debt of the company considerably. The company has repaid Rs 2600cr of debt in the September quarter, which reduced its debt-equity ratio to 0.8 from 1.6 in the previous quarter. Interest cost was down 13% in the quarter and is expected to remain lower as the company has repaid a significant amount of its high-cost debt.
Value-added segment to improved Realization: The future growth of JSW will largely be fuelled by the current capacity expansion plans. Its 3.2mt expansion project at Vijaynagar is on the verge of completion, which will increase the company?s steel production capacity to 11MTPA by March 2011. JSW Steel?s board approved implementation of the West Bengal Project comprising 4.5mtpa Steel plant, 660MW power plant and development of coal and coking coal mines with a project cost of Rs16000cr. This project is planned to be completed by FY14. This would result in company?s growth not only in steel production but also in power and coal mines.The company is slowly ramping up its value–added steel production in the H1 of FY11. The company sold 20% more of its flat-rolled steel and fla posted 52% jump in sales for its long rolled steel, both part of the finished steel category. Cost reduction through acquisition of coal mines: The company has recently acquired coking coal assets in USA in West Virginia along with Railway Load out and barge facility and has finalized the acquisition of the mine, where the likely resources is around 123mt. One of the mine is operational and others to be operational over 24 months. The total coking coal requirement of the company is estimated at 5mt per company annum at current capacity. The proposed coking coal from US will give integration to the extent of 20% in the first year and goes further at enhanced capacity of 11mt to 35%. We expect with 20-25% interaction of coking coal would improved its 25% EBIDTA margins by 125-150bps, thereby resulting in improved earning 150bps, visibility in near future. JSW-Severfield have joined hands for India?s first fabricated steel Severfield plant Considering the huge potential in the infrastructure growth in India especially in the structural steel space JSW Steel and UK?s top steel Severfield have launched a new plant which will have investments of almost Rs 1000cr in two years. The annual capacity of the 50-50 JV is 50 expected to be 35,000mtpa. The JSW- Severfield project would be financed in the 2:1 debt-equity ratio and is expected to generate equity annual revenue of around Rs 400cr. The target market will initially be commercial structures and simple highway bridges.
References
http://en.wikipedia.org/wiki/Industrial_organization http://www.ibef.in/industry/Steel.aspx http://www.equitymaster.com/budget2011/sectors/steel.asp http://www.indianconstructionindustry.com/indian_steel_industry/indian_steel_industry.html http://www.livemint.com/2010/12/22212345/2011-critical-year-for-steel-i.html http://moneymatters.blog.com/top-indian-steel-companies/ http://www.equitymaster.com/research-it/sector-info/steel/ http://www.cci.gov.in/images/media/completed/Indicussteel_20090420151842.pdf http://www.mckinseyquarterly.com/Enduring_ideas_The_SCP_Framework_2169 www.oecd.org/dataoecd/28/12/38798466.pdf http://www.smera.in/smera_pdf/RATING%20CRITERIA%20FOR%20DIFFERENT%20IN DUSTRY/RATING%20CRITERIA%20FOR%20STEEL%20INDUSTRY.pdf http://www.ibef.org/download/Steel_270111.pdf http://www.mu.ac.in/arts/social_science/eco/pdfs/depart/dwp54.pdf
doc_617860424.docx
overview of steel industry in India and presents structure conduct performance analysis of steel industry. It includes Tata Steel, SAIL, JSW Steel as a part of analysis.
“SCP Analysis of Indian Steel Industry”
INTRODUCTION
The Indian steel industry has witnessed steady growth, on the back of various initiatives taken by the Government of India. The soaring demand from different sectors, such as, infrastructure, real estate and automobile has put the steel industry in India on the world map. Economic reforms initiated by the government in 1991 have assisted in the growth of steel industry. Prior to the reforms, the steel industry was dominated by the public sector. However, after the reforms this sector became open to private investments and foreign investments. The 1991 reforms allowed for no licenses to be required for capacity creation, except for some locations. A lot of new steel plants have been set up in the country due to huge foreign investments and state-of-the-art technology. Tata Steel was the first steel plant established in 1907 in India. Some of the other steel plants in the country include Bhilai Steel Plant at Chattisgarh, Rourkela Steel Plant at Orissa, Durgapur Steel Plant at West Bengal to name a few. In 2010, India was ranked as the fourth largest producer of steel by the World Steel Association.The Indian steel industry began expanding into Europe during the 21st century. In January 2007, Tata Steel made a successful US$ 11.3 billion offer to acquire European steel maker Corus Group PLC. In 2006, Mittal Steel acquired Arcelor for US$ 38.3 billion to become the world's biggest steel giant. Some of the growth drivers helping the sector to grow are:
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Abundant availability of iron ore in the country with states such as Orissa, Jharkhand and Chhattisgarh are rich in iron ore reserves. The National Minerals Development Corporation (NMDC) plans to expand its iron ore production capacity from its existing capacity of 30 million tonnes per annum (MTPA) to 50 MTPA by 2014–15 through the capacity expansion of current mines as well as by setting up new mines. The country has well established facilities for the production of steel. High GDP growth at target rate of 8-9%
Market Size Steel industry is of great significance to the economic growth of the country. India has been ranked the world?s fifth largest producer of crude steel in 2009 and is projected to become the world?s second largest producer by 2015–2016, with a production volume of 54.5 million tonnes (MT). Various states have signed around 222 memorandums of understanding (MoUs), with a projected capacity of about 275.7 MT and an investment of more than US$ 229 billion. The steel production capacity is likely to reach 124 MT by 2011–12. In 2008–09, the installed capacity for crude steel was estimated at 64.4 MT, while production was estimated at 54.5 MT, resulting in an 85 per cent capacity utilisation. Long-products constituted 57 per cent of the total finished steel consumption, while the remaining 43 per cent was constituted by flat-products in 2007–08. The Eleventh Five Year Plan (2007–2012) has allocated investments worth US$ 490 billion for the infrastructure sector, comprising power, roads, highways, railways, ports, airports, mining and irrigation. Steel giants such as JSW Steel and Tata Steel are investing to enhance the capacities of products such as TMT bars (rebars) and many more.
Investments
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Tata Steel plans to set up a steel plant at Kalinga Nagar, Orissa, which will focus entirely on flat steel products. The first phase is expected to be commissioned by February 2014. The first phase will see an investment of up to Rs 25,000 crore (US$ 5.631 billion), of which the steel maker has already invested over Rs 10,000 crore (US$ 2.252 billion). Recently South-Korean steel company Posco, got permission from the Ministry of Environment and Forest to set up a steel project worth US$ 12 billion in Orissa. Bhilai Steel Plant (BSP) the sole producer of rails in India has recently received another order for exporting rails to Sri Lanka. The order is of about 14,000 tonnes for the UIC-60 grade of rails. Earlier, the company had received an order to supply 6,500 tonnes of rails to Sri Lanka. RINL, the corporate entity that runs the Vizag steel plant, has inaugurated a series of auxiliary units to expand the capacity of the plant to 6.3 MT The project has been executed by Instrumentation Ltd, Kota and associates at a cost of around Rs 10 crore (US$ 2.25 million). Varia Engineering Works Pvt Ltd, Ahmedabad-based rolling mills manufacturing company, is setting up India's first 6-stand continuous cold rolling mill for manufacturing stainless steel. Tata Steel is planning to set up six MTPA plant at Kalinga Nagar, Orissa, which will produce flat products, catering to the needs of the automotive industry and white goods. Phase-I of the plant, at an investment of Rs 25,000 crore (US$ 5.60 billion) is expected to be commissioned by January-February 2014.
Government Initiatives
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The Indian Government has laid more importance on infrastructure development in the Union Budget 2011. This would help in development of highways, ports, power projects, bridges and others, which will therefore increase the demand for steel. With effect from May 24, 1992 steel industry was incorporated in the list of „high priority? industries for automatic approval for foreign equity investment up to 51 per cent. This limit has since been increased to 100 per cent. Import duties on key steel-making raw materials, comprising of mineral products, ores and concentrates have seen noteworthy reductions in successive budgets during the last few years. The government introduced special economic zones (SEZs) in June 2005, with the plan of creating internationally competitive regions. Steel plants operating in SEZs receive some advantages like tax holiday; they can freely source inputs domestically or externally without any specific approval or duty payable.
Indian Steel Industry: Road Ahead The Indian crude steel production will grow at a compound annual growth rate (CAGR) of around 10 per cent during 2010-2013, according to a research report by RNCOS titled, “Indian Steel Industry Outlook to 2012.”Additionally, various initiatives have been taken by the Government to boost economic growth, by injecting funds in industries such as construction, infrastructure, automobile, and power. This will provide an impetus for growth for the steel industry in future. The report also states that steel consumption in India is expected to grow considerably in coming years. Another report by Global Consultancy firm Ernst & Young states that India would have annual production capacity of 101 MT in 201112. Attracted by the growth prospective of the Indian steel industry, numerous global steel players have been planning to enter the market or have announced their expansion plans. For instance, ArcelorMittal and POSCO have planned mega Greenfield projects at various locations in India. Additionally, few other global players have entered into strategic partnerships or joint ventures with Indian steel majors to capitalise on their existing client base in the region.
STRUCTURE CONDUCT PERFORMANCE (SCP) ANALYSIS
According to the structure-conduct-performance approach, an industry's performance (the success of an industry in producing benefits for the consumer) depends on the conduct of its firms, which then depends on the structure (factors that determine the competitiveness of the market). The structure of the industry then depends on basic conditions, such as technology and demand for a product. Components that make up the structure, conduct, and performance model for industrial organization include:
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Basic conditions: consumer demand, production, elasticity of demand, technology, substitutes, raw materials, seasonality, unionization, rate of growth, product durability, location, lumpiness of orders, scale of economies, method of purchase, scope economies Structure: number of buyers and sellers, barriers to entry of new firms, product differentiation, vertical integration, diversification
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Conduct: advertising, research and development, pricing behaviour, plant investment, legal tactics, product choice, collusion, merger and contracts Performance: price, production efficiency, allocative efficiency, equity, product quality, technical progress, profits Government policy: government regulation, antitrust, barriers to entry, taxes and subsidies, investment incentives, employment incentives, macroeconomic policies
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Structure Conduct Performance Paradigm (SCPP) is an industrial organization?s approach, used to analyze the relation among market performance, market conduct, and market structure. The SCPP indicates that market structure determines the market conduct, and thereby sets the level of market performance. Working backward, we find that market performance is determined by market conduct, which in return depends on market structure.
Market structure
The Market structure consists of the relatively stable features of the market environment that influence rivalry among the buyers and sellers operating within this market. The main elements that influence market structure are seller concentration, product differentiation, barriers to entry, barriers to exit, buyer concentration, and the growth rate of market demand. Other elements of market structure exist, but they are usually unstable and therefore ignored either because they can?t be measured or because they are hard to observe. Elements of market structure Seller concentration: It refers to the number and size distribution of firms in the market. The Indian Steel Industry is dominated by a few large players and the industry will remain oligopolistic in the future. TISCO, public sector entities, POSCO, Jindals, Essar, and ArcelorMittal will be among the major players accounting for the bulk of the 100 plus million tons of production in the future. Product differentiation: A differentiation or distinguishing a product from the products of other competing firms. Steel has very low barriers in terms of product differentiation as it doesn?t fall into the luxury or specialty goods and thus does not have any substantial price difference. In steel industry there is little differentiation between competing products. However, certain companies like Tata Steel still enjoy a premium for their products because of its quality and its brand value created more than 100 years back. Barriers to entry: A set of economic forces that create a disadvantage to new competitors attempting to enter the market. Entry barriers are high in steel industry. ? Capital Requirement: Steel industry is a capital intensive business. It is estimated that to set up 1mtpa capacity of integrated steel plant, it requires between Rs 25 bn to Rs 30 bn depending upon the location of the plant and technology used.
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Economies of scale: As far as the sector forces go, scale of operation does matter. Benefits of economies of scale are derived in the form of lower costs, R& D expenses and better bargaining power while sourcing raw materials. It may be noted that those steel companies, which are integrated, have their own mines for key raw materials such as iron ore and coal and this protects them for the potential threat for new entrants to a significant extent.
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Government Policy: The government has a favourable policy for steel manufacturers. However, there are certain discrepancies involved in allocation of iron ore mines and land acquisitions. Furthermore, the regulatory clearances and other issues are some of the major problems for the new entrants
Barriers to exit: A set of economics forces that influence the firm?s decision of exiting the market; such forces make it cheaper for the existing firm to stay in the market than to exit the market. Exit barriers are high in steel industry. The magnitude of exit barriers in an industry depends on three factors: how long gross revenues are expected to cover variable costs, how specific and durable the capital is, and how high closing costs are. The high cost of closing appears to be the most important exit barrier currently in the steel industry. When closing a plant, a firm record a charge for the costs of dismantling the mill, for the operating loss until closing, for losses involved with contract terminations, and for a write-down of the assets. It also records the estimated liability for current and future payments to employees for pensions and insurance benefits. The other exit barrier, the durability of steel industry capital, also works to delay plant closings by allowing the continued operation of aging equipment without major reinvestment. Buyer concentration: The number of buyers in a market. The term was used by Michael E. Porter in 1979 in his “Five Forces Analysis”. Porter?s analysis proposes that in markets with high buyer concentration, the firms earn lower level of profits than in markets with low buyer concentration. In steel industry the buyers have a low to medium bargaining power. Some of the major steel consumption sectors like automobiles, oil & gas, shipping, consumer durables and power generation enjoy high bargaining power and get favourable deals. However, small and retail consumers who are scattered and consume a significant part do not enjoy these benefits. However, the government may curb or put a ceiling on prices if it feels the need to do so. The steel companies either sell the steel directly to the user industries or through their own distribution networks. Some companies also do exports. The growth rate of market demand: In Indian steel industry the demand exceeds the supply and hence India is a net importer of steel. There is soaring demand from different sectors, such as, infrastructure, real estate and automobile.
Bargaining power of suppliers: In Indian steel industry the bargaining power of suppliers is low to medium. The bargaining power of suppliers is low for the fully integrated steel plants as they have their own mines of key raw material like iron ore coal for example Tata Steel. However, those who are non-integrated or semi integrated has to depend on suppliers. An example could be SAIL, which imports coking coal.
Conduct
Conduct means what firms do to compete with each other. It includes pricing, advertising, research and development investment, decisions on product dimensions, merger and acquisition, etc. Conduct also can include collusion both explicit and tacit. Pricing: The domestic prices of iron and steel have been market-determined ever since the de-regulation of prices for integrated steel plants in 1991-92. Market prices remain closely related to international prices, though generally lower. The main policy instrument available to influence prices is the adjustment of the customs and excise duty structure. An important feature of the de-regulated era is that prices of both finished steel and its inputs have risen at a much faster rate and with a lot of volatility, compared to the past. The Indian steel industry experienced a significant slump in prices during the period 1998-99 to 2001-02 in line with global trend, which adversely affected the profitability of domestic steel firms. However, certain steel mills remained profitable during this period due to price control over key inputs such as coal, value addition in the production chain and product diversity by introducing new types of steel meant for specialised usage. Nonetheless the prices have recovered significantly after 2003-04. Table below gives the trend in WPI (with base year 199394=100) for iron and steel between 1990-91 and 2007-08.
Figure: Trend in Wholesale Price Index of Iron and Steel
Research and development investment: Most of the R&D works in steel plants, however, relate to incremental research addressing the day-to-day problems of the steel plants or the industry, and investment in large-scale R&D work for development of path-breaking innovative technologies has been limited. Naturally, R&D investment in steel sector as a whole remains very meagre and the actual investment in different steel companies as percentage of their turnover vary in the range of 0.15% to 0.3%. Merger and acquisition: Steel producers have signed 222 MoUs with various states for a planned capacity of about 275.7 million tonnes. Orissa, Jharkhand, Chhattisgarh, West Bengal, Karnataka, Gujarat and Maharashtra are among the major states attracting investments in the steel sector. The largest inbound deal announced between 1 January 2010 and 30 November 2010 was the 15 per cent acquisition of JSW Steel by JFE Corporation for US$ 1,029 million in July 2010. The largest outbound deal announced was the acquisition of Shadeed Iron & Steel Co LLC by Jindal Steel and Power Ltd for US$ 464 million in May 2010. In the largest domestic deal worth US$ 24.6 million, Shree Global TradefinLtd?s interest in Lloyds Steel Industries Ltd increased from 48.23 per cent to 68.23 per cent.
Performance
Indian Steel industry are making some milestones but unable to make a stand point in the international market. China and Japan steel are preferred by world best companies. So it is expected that TATA Steel, JSW Steel and Sail India would make some global standpoint. STEEL AUTHORITY OF INDIA LIMITED Ranked amongst the top ten public sector companies in India in terms of turnover, Steel Authority of India Limited (SAIL) is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets. Capacity Expansion will ensure volume growth: SAIL is all set to bank on the domestic consumption of steel primarily driven by the ongoing infrastructure development in the country with its ambitious expansion plans which will increase its crude steel capacity to 23.2mt from 14mt currently. Value-added Segment: SAIL is banking on the robust demand witnessed for finished and premium steel segment by expanding its value added steelmaking capacity. The value added or premium segment commands 20-25% premium over semi-finished or crude steel. Strong demand led by domestic consumption: India?s finished steel demand is expected to grow at 12% CAGR over FY 10-13, led by strong demand from Automobiles, consumer durables and Engineering sector. India will remain a net steel importer over FY11-13, as demand is likely to outpace supply. Valuation: At the current price of 188, the stock is trading at just 11.96x and 10.84x times of our estimated FY11E & FY12E earnings. Attractive Dividend Pay-out: SAIL has been rewarding its shareholder by offering regular dividend since 2005. The average dividend yield of the company stood at 2.73%. With huge
cash on the book and being one of the most profitable maharathna in government entities, we believe the management of SAIL would continue to reward its shareholders with higher dividend pay-out. Key strategic alliance to further boost profitability: Company has signed MOU with Kobe Steel, Japan for exploring feasibility of ITmk3 technology for use of lean iron ore fines & non coking coal. Company is in 50-50 JV with NTPC for 250 MW power generations. Due to this JV, company?s power cost will reduce. There is a possibility of joint collaboration with Nippon Steel in the iron and steel area. Company has also proposed owing a port/joint ownership in a port venture in Orissa. This ownership will further reduce logistics cost for the company. Economies of Scale: SAIL has been enjoying the benefit of improved productivity per employee with its workforce came down by ~58% (annualized rate of 5.4%) during the past ten years from 208765 in FY2000 to 114160 at the end of FY10. The company?s employee?s remuneration as a % of net sales saw an improvement, its net employee cost stood at 13.37% for FY10, as against 19.82% in FY09 and 19.91% during FY08. The labour productivity has improved to 228tons of crude steel per labour employed during the H1 of FY11 against 214tons of crude steel produced per labour during FY08.
TATA STEEL LIMITED TATA Steel, the flagship company of Tata group, is among the top ten global steel companies with an annual crude steel capacity of over 28MTPA. It is now the world?s second-most geographically-diversified steel producer with operation in 26 countries and a commercial presence in over 50 countries. Highly Integration levels for TATA Steel to boost Earnings: Tata Steel is in the process of developing a coking coal mine in Mozambique and an iron ore mine in Canada to enhance integration level of TSE. The project is expected to be commissioned by 1QFY12. We expect this backward integration project at Mozambique and Canada to boost Tata Steel?s earnings substantially. Brownfield expansion on track: Tata Steel?s 3mt brown field expansion programme is on track and expected to be commissioned by 2HFY2012. Till September 2010, the company has incurred capex of Rs. 5732cr and plans to incur Rs. 2963cr in 2HFY2011. The product mix constitutes 2.5mt of HRC and 0.3mt of slabs. Escalation prospective from domestic operations: To raise RoE, the company has aggressively expanded domestic capacity even during the downturn witnessed in steel industry during 2008-09. It is on track to add 3mt by Jun ?11, taking domestic capacity to 10mt. Valuation: At the current price of Rs. 660, the stock is trading at just 29.74x and 18.34x times of our estimated FY11E & FY12E earnings. TATA Steel merger with Corus: Corus joined the TATA Steel family in April 2007 in a transaction that created one of the world largest steelmakers, with a major presence in Europe as well as in Asia. Corus is Europe second largest steel producer. Corus supplies steel and related services to the construction, automotive, packaging, mechanical, engineering, and other market worldwide. The combined enterprise has an aggregate crude steel capacity of more than 28mt and approximately 80000 employees across four continents. Robust performance: In FY 2009-10, the steel division of the Indian operations registered an increase of 20% in their saleable steel from 5.37mt to 6.44mt. The production from the larger furnaces were maximized with better productivity and lower coke consumption while increased vessel life in the steel melting area enhanced the production level. There were several best ever performances recorded by many units in the Steel Works of the Company: ? ? The Ferro Alloys and Minerals division registered an increase of 22% in their saleable production (1302K tonnes during 2009-10 over 1064K tones in 2009-09) Chrome Alloys export and Manganese Alloys sales also scaled new peaks during 2009-10
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Sales in the bearing division registered a growth of 23%, while its production increased by 8%.
Expansion project: Tata Steel India is executing its plan to increase its crude steel capacity from 6.8mt per annum to 9.7mt per annum at its Jamshedpur Works by 2011-12. The company has entered into a Memorandum of Understanding with Nippon Steel Corporation (NSC), Japan for setting up a Continuous Annealing and Processing Line at Jamshedpur, India with 0.6mtpa capacity. TATA Steel Europe’s coking coal venture is significant: TATA Steel Europe plans to source coking coal from the Banga Project, joint venture between TATA steel and Riversdal, located in the Tele Province of Mozambique. TATA Steel expects to produce 5.3MT of coal by 2011. The Banga coal has reserves of 502mt and the company is planning to augment production from the Banga project to 20mtpa gradually. The total capex remaining for the Mozambique project Rs 700-800cr Captive iron ore project: TATA Steel has planned to protect raw material supply for its European operation by taking a stake in New Millennium?s Direct Shipping Ore (DSO) projects. Tata Steel owns 27.4% share in New Millennium mining company. Project has probable mineral reserve of 64.1mt for the DSO project and the production is expected to commence in 2011. The company would have 100% off-take rights to the produce of the mine of a specified quality. The iron ore from the project will be supplied to Tata steel group?s facilities located in Europe. This project will involve capex of CAD 350mn. It is expected that the European operations would secure 20-25% backward integration by the end of FY12. Value Creation Strategy: The element of its value creation strategy is selective growth in emerging markets where the group has a competitive advantage. The Group therefore continues of selectively invest for the future with an aim to strengthen its position in emerging markets like India and increase the level of raw material integration and energy self-sufficiency across the Group. The company has also increased its focus on finished or premium steel segment; its currently enjoys 40% of the autograde steel and is setting up a continuous annealing line in a joint venture with its long standing technical partner Nippon Steel of Japan. JSW STEEL LIMITED JSW Steel Limited (JSWSL) is the second largest private sector steel maker in India. The company provides for a broad range of products which include Hot Rolled Product, Cold Rolled Product, Galvanized Product and Pre-painted Galvanized Product. The company consists of the most modern, eco-friendly steel plants with the latest technologies for both upstream & downstream processes. Leading Player in Steel Manufacturing: JSW Steel, the flagship company of the JSW Group, is the largest integrated private steel manufacturer in India in terms of installed
capacity. It is the leading manufacturer of cold rolled, galvanized and colour coated steel with manufacturing facilities at Vasind & Tarapur in Maharashtra. JSW Steel is the largest manufacturer and exporter of galvanized steel in India with its products exported to more than 100 countries. Strong growth expected in Steel Industry: The industry is expected to grow at a pace of 9.1% till FY15 considering the scenario that Indian Infrastructure and other Industries are going to absorb the supply and also considering international demand to increase mainly due to increase in prices in China. Expansion to facilitate growth: JSW steel has entered into a joint venture with UK?s Severfield and has launched a new plant which will have an annual capacity of 35,000 tonnes of fabricated steel. The company has also recently sought a new coking coal mine in Jharkhand for its new steel plant which would be set up in the same state and would have an annual capacity of 10mt. Valuation: At the current price of Rs. 1165, the stock is trading at just 15.14x and 9.91x times of our estimated FY11E & FY12E earning. Additional capacity to improve growth prospects: The company has successfully commissioned the Phase I (3.5 Mtpa) of one of the largest new Hot Strip Mill at Vijaynagar. The mill has initiated commercial production on April 10, and it would enable the company to convert all slabs into value added HR Coils on its stabilization. On completion of Phase II, the capacity of mill will go up to 5Mtpa. The expansion project execution work is progressing in full swing to expand the crude steel capacity to 10Mtpa by 2020. JSW Steel plans to set up a 300MW power plant at Vijaynagar. The procedure for which is expected to be commissioned in FY 2011. The company also expects initial production of 1mt in first year (2010-11) which can be ramped up to 3mt by 3rd year. The first year of production has already started in Oct 2010. Additional capex is expected to be Rs 500cr for ramping up. Thus JSW Steel is expected to generate huge revenues once the mining starts initial production. Reduction in Debt to improve overall growth: JSW Steel has tied-up with JFE Corporation of Japan and will be setting up an auto steel line at its Vijayanagar steel plant. After selling a portion of its equity to Japanese steel maker JFE, JSW?s balance sheet has improved significantly mainly because of the repayment of debt which has resulted in the reduction of debt of the company considerably. The company has repaid Rs 2600cr of debt in the September quarter, which reduced its debt-equity ratio to 0.8 from 1.6 in the previous quarter. Interest cost was down 13% in the quarter and is expected to remain lower as the company has repaid a significant amount of its high-cost debt.
Value-added segment to improved Realization: The future growth of JSW will largely be fuelled by the current capacity expansion plans. Its 3.2mt expansion project at Vijaynagar is on the verge of completion, which will increase the company?s steel production capacity to 11MTPA by March 2011. JSW Steel?s board approved implementation of the West Bengal Project comprising 4.5mtpa Steel plant, 660MW power plant and development of coal and coking coal mines with a project cost of Rs16000cr. This project is planned to be completed by FY14. This would result in company?s growth not only in steel production but also in power and coal mines.The company is slowly ramping up its value–added steel production in the H1 of FY11. The company sold 20% more of its flat-rolled steel and fla posted 52% jump in sales for its long rolled steel, both part of the finished steel category. Cost reduction through acquisition of coal mines: The company has recently acquired coking coal assets in USA in West Virginia along with Railway Load out and barge facility and has finalized the acquisition of the mine, where the likely resources is around 123mt. One of the mine is operational and others to be operational over 24 months. The total coking coal requirement of the company is estimated at 5mt per company annum at current capacity. The proposed coking coal from US will give integration to the extent of 20% in the first year and goes further at enhanced capacity of 11mt to 35%. We expect with 20-25% interaction of coking coal would improved its 25% EBIDTA margins by 125-150bps, thereby resulting in improved earning 150bps, visibility in near future. JSW-Severfield have joined hands for India?s first fabricated steel Severfield plant Considering the huge potential in the infrastructure growth in India especially in the structural steel space JSW Steel and UK?s top steel Severfield have launched a new plant which will have investments of almost Rs 1000cr in two years. The annual capacity of the 50-50 JV is 50 expected to be 35,000mtpa. The JSW- Severfield project would be financed in the 2:1 debt-equity ratio and is expected to generate equity annual revenue of around Rs 400cr. The target market will initially be commercial structures and simple highway bridges.
References
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