ABOUT THE INDUSTRY
Steel is the backbone of all industrial and commercial activities. Realizing this, computer’s
planners have been formulating and updating annual plans for production of iron and steel .it
is in this context that a number of steel plans were set up, are still being set up and the
production capacities of the existing ones being expended. Bokaro Steel Plant (BSP) was the
fourth in the row to be set up in public sector. Considering the huge investment in this
venture, it was considered worthwhile to study its economic aspects including the benefits
that have since accrued out of these.
While SAIL and Tata Steel were the main producers, the latter being the only private player.
In 1990, the Indian steel Industry had a production capacity of 23 MT. 1992 saw the onset of
liberalization and the Indian economy was opened to the world. Indian steel sector also
witnessed the entry of several domestic private players and large private investments flowed
into the sector to add fresh capacities. With a current capacity of 35 MT the Indian Steel
Industry is today the 8th largest producer of steel in the world. Today, India produces
international standard steel of almost all grades/varieties and has been a net exporter for the
past few years, underlining the growing acceptability of its products in the global market.
Steel is a highly capital intensive industry and cyclical in nature. Its growth is intertwined
with the growth of the economy at large, and in particular the steel consuming industries such
as manufacturing, housing and infrastructure. Steel, given its backward and forward linkages,
has a large multiplier effect. With capital investments of over Rs 100, 000 crores, the Indian
steel industry currently provides direct/indirect employment to over 2 million people. As
India moves ahead in the new millennium, the steel industry will play a critical role in
transforming India into an economic superpower.
2. IRON AND STEEL INDUSTRY: AN OVERVIEW
In the world as a whole, iron and steel industry has witnessed rapid growth during last 100
years. In 1870the world steel production was merely 10 million tones (mt) which increased
threefold to 28 mt in 1900 and over sevenfold to 73mt in 1920.Therafter in the next 60 years,
the production increased about tenfold 717 mt in 1980; highest production of 747mt was
achieved in 1979.Due to recession, the demand of steel went down after 1979, particularly in
technologically advanced countries. Though it has been steadily increasing since 1983, the
production of steel has been regulated to suit the demand levels.
The last decade saw the Indian steel industry integrating with the global economy and
evolving considerably to adopt world-class production technology to produce high quality
steel. The total investment in the Indian steel since 1990 is over Rs 19,000 crores mostly in
plant equipments, which have been installed after 1990. The steel industry also went through
a turbulent phase between 1997 and 2001 when there was a downturn in the global steel
industry. The progress of the industry in terms of capacity additions, production,
consumption, exports and profitability plateaued off during this phase. But the industry
weathered the storm only to recover in 2002 and is beginning to get back on its feet given the
strong domestic economic growth and revival of demand in global markets.
In the world today new technologies continue to be ushered in to achieve further conversation
of materials and energy to meet the diversified demand of better steel qualities, to exercise
better process control, to preserve the environment, to remain competitive in costs and, in
short, to cater to the challenging conditions of the world in progress. Apart from the spirit of
innovation and mankind’s constant endeavor to excel challenges offered by the changes in
situations motivate the human efforts towards the technology development.
A look at the world steel production shows as if it has reached its zenith. Although the picture
may be so for the developed countries. While the consumption of the steel is stagnating in
most of the developed countries, it is not the same for developing countries. While the
consumption of steel is stagnating in most of developed countries, there has been continuing
growth in steel consumption in developing countries. The per capita consumption of steel by
the steel countries range between 350 kg and 700 kg; but, on the other hand, the developing
countries, with the exception of a few, consume less than 50 kg per head (As in 1990’s). It is,
therefore, anticipated that with the passage of time, the steel consumption of the developing
3. countries will increase to facilitate much needed industrial and economical development of
ANALYSIS OF STEEL ACROSS THE GLOBE
The declining price trend after an unprecedented rise in Q1 of 2005 has taken sheen off the
global steel market. However, there is a widespread perception that in the post Q2 of the
current year the global price are bound to go up. Only this time the rise would be flattened
and not abnormal. The domestic demand in Europe is steel low with industries production
showing a downward trend forcing the major steel producer to call back the price hike
announced earlier. The postponement of purchase by the buyers is likely to result in running
down the current inventories. Data released recently indicate that EU has imported a total of
22.8 million tones including semis; which have gone up by 8 percent in 2004.The import of
CR coil and coated coils were also higher than last year EU exports totaled 245 million tones
Prod in Jan-Mar
Prod in Jan-Mar
2005 (million tones)
2004 (million tones)
4. *Excluding china
Flat price have fallen in North American market by $70-80 per ton in the last two month. The
current HR coil price by US mills is pegged at $615 fob/t with CR price at $695 per ton.
Compared to flat producer the long product market is relatively stable and there is no decline
in the price of structural more due to fall in import volumes. China has also remove a 13
percent rebate on steel billet and slab exporter with effect from 1st April 2005 to enhance
domestic availability this has led to price fall in April. The export rebate on bars and rods has
been reduced from 13 to 10 percent from 1st May. Indian long product market is largely
influenced by global price of semis. The CIS price of billets is currently running at
$370gob/t; which is nearly at the same level as in March. There are reports that Russian steel
producer are expending a major chunk of the equity participation in mills in other countries
as a long term trading ventures.
Crude steel production figure for 2005 released by HIS exhibits a growth of 6.5 percent in the
first three month over the corresponding period in previous year. China remains the leading
steel producer with growth touching 24 percent.
ABOUT COMPANY PROFILE
One of the leading steel producer of in the world and the largest steel maker of the country.
SAIL occupies a prime place in the industrial scenario of India. SAIL, is India’s largest and
one of the World’s leading steel producer with a turnover of around Rs.16500 crores. Quality
steel products from SASIL, have carved a niche for themselves in the global steel market.
The company aims at making its global presence felt through export, joint ventures and
alliance with internationally reputed steel markets.
In a fast changing product market scenario, SAIL has lunched a new strategy for achieving a
turnaround, which includes financial restructuring and business restructuring to focus on core
business of making carbon steel and withdrawing from non-core and non-viable activities.
Making employees focus on market requirement, ensuring greater involvement of plans in
marketing initiative, achieving cost leadership through rigorous cost cutting drive and
rationalizing manpower to bring down the total number of employees to competitive levels
are some other facets of the strategy.
In the new millennium, there is a strong focus on SAIL’s business activities for customer
satisfaction, adopting an approach for increased synergy between production capabilities and
market need’s and ensuring supply of customized products with shorter lead times.
SAIL has been progressively investing in technological up gradation of its plants and
facilities for supporting costs reduction, improving product quality and yields, and for
7. environmental protection. In the new millennium, the accent of SAIL has been to accelerated
the process of change, adapt to emerging competitive business environment and excel as a
business organization both within and outside India.
VISION OF SAIL
To be a respected world Class Corporation and the leader in Indian steel business in quality,
productivity, profitability and customer satisfaction.
MISSION OF SAIL
We build lasting relationships with customers based on trust and mutual benefit.
We uphold highest ethical standards in conduct of our business.
We create and nurture a culture that supports flexibility, learning and is proactive to
We chart a challenging career for employees with opportunities for advancement and
We value the opportunity and responsibility to make a meaningful difference in people’s
BOKARO STEEL PLANT AT A GLANCE
DEVLOPMENT OF BOKARO STEEL PLANT
In September 1955 the Govt. of India decided to develop the Bokaro site for a steel plant.
Accordingly, an initial provision of Rs. 3.75 cr. Was made and Hindustan Steel Limited
(HSL) was asked to take up the preliminary work. HSL appointed M.N.Dastur&Co., the
consultants, for carrying out the feasibility study. The feasibility report, submitted in
December 1959, recommended establishment of a 2 million-tone plant, which was accepted.
M.N.Dastur& Co. was then commissioned to prepare a Detailed Project Report (DPR) in
May 1962. The DPR envisaged 1.5 mt. Plants in stage 1st and 4 mt. Plants in stage 2nd.
Again, on the basis of DPR, Hindustan Steel Works Construction Limited were appointed as
civil contractors to undertake the site work.
started negotiations with
agreed in January 1962
survey would be made by
US Govt. Agency for International Development (US AID). The report, submitted in
December 1962 by US Steel Corporation, who was appointed by USA to conduct the survey,
envisaged a 1.4-mt steel plant, increasing its capacity to 4 mt over of 10 years. However,
there was sharp resistance in August 1963 for providing assistance to state aided project in
India and that ended the scope for American finance.
A global quest for financial aid by any other country was started which ultimately culminated
in the USSR agreeing to finance the project. An agreement was signed with the Soviets on 25
January 1965 for rendering financial assistance and technical collaboration for establishment
of Bokaro Steel Plant. In pursuance to this agreement V/o Tiazpromexport, Moscow,
prepared a DPR for the diverse aspect of works at Bokaro between 1965 and 1969. Bokaro
Steel Plant was originally incorporated as a limited company in Jan. 1964. But, after the
information of Sail in 1973,m it become the wholly owned subsidiary of SAIL in terms of
public Sectors Iron and Steel companies (Restricting and Miscellaneous Provisions Act,
The Plant was conceived as the country’s first SWADESHI steel plant with build with
maximum indigenization going into the going into the equipments, Materials and Know how.
Thus, this project has been a radiant shift from the earlier dependence on foreign sources for
know-how and consultancy, design, and equipment, supervision, erection, etc. to almost a full
measure of self-reliance. It’s first of 1.7 million ton ingot steel commenced on 2nd October.
1972 with the commissioning of the third blast furnace. Except for minor units in cold
Rolling mills, all units of 4 million-tons stages have already been commissioned as on date.
The Plant is designed to produce flat products like Hot Rolled coils, Hot Rolled Plates, Hot
Rolled Sheets, Cold Rolled coils, Cold Rolled Sheets, Galvanized (Plain & Corrugated)
Sheets and Tin Mill Black Plates Linked with major raw materials sources, the supply of Iron
9. Ore and fluxes is ensured from the captive mines of SAIL situated at Kiriburu, Meghataburu,
Bhawanathpur and Kuteshwar. Some more leasehold for limestone/dolomite is being
developed for meeting the future requirements. Washed coal supplied from different
washeries at Dugdha, Kathara, and Giddi, ETC. and raw coals obtained from jharia coalfield.
Thus, most of the coal requirements are met from nearby sources making Bokaro a coalbased steel plant.
ANNUAL RAW MATETIAL CONSUMPTION OF BOKARO STEEL PLANT
4.0 MT stage
Lump Iron Ore
Iron Ore fines
Limestone for sinter plant
Limestone for lime & dolomite shop
Dolomite for lime & dolomite shop
Muddling for thermal power plant
Quartzite sand for foundries
Bokaro Steel Plant is one of the largest integrated steel plants in Asia. BSL mainly produces
Hot rolled sheets, cold rolled sheets, galvanized sheets, corrugated sheets etc. but in the
production of these items, many valuable by products are generated. In order to maximize
10. sale revenue and cut down the cost of main products, these by products are sold, but these by
products being of high market value need special efforts and procedure for selling. Here the
marketing department of BSL plays a major role.
These by products generated in the process of converting coal to coke though of very high
market value cannot compete with similar petroleum products in term of quality.
As a by product selling company cannot become a market leader in those products when
there is the presence of large units selling similar products as their main product so BSL
cannot become market leader.
BSL is not market leader in the field so its prices mainly depend upon the prices set by
market leaders. BSL follows the prices set by the market leaders though there is other factors
also which play a vital part in price determination. These factors are Dispatches of last three
(b) Stock in hand
Besides these factors the market forces decide the price and marketing department meet those
prices. The main objective of the pricing policy of BSL is maximization of sales revenue. The
objective is fulfilled by either increasing the prices when the demand is high or decreasing
the prices when demand is low or giving some turn over discount on its products. The pricing
committee takes all decisions relating to pricing policies.
Generally no discount is offered but in some cases when bulk sale and quick disposal is given
preference then discount is offered. Currently only on ammonium sulphate discount is
offered. These discounts are termed as Turn over discount (TOD). On ammonium sulphate
the discount is as follows 1000 to 1500 metric tone – Rs. 200 per metric ton. <1500 metric
ton – Rs. 350 per metric ton
The revenue maximization team reviews the decision related to pricing policies periodically.
Revenue Maximization team meets once in a month and decides upon the various pricing
criteria of different products of respective steel plants. It plays a major role in price fixation
of different products.
11. CURRENT SCENARIO
The Indian steel industry also went through an extremely turbulent phase in the backdrop of a
global economic slowdown revealing that the industry was now globally linked and was
impacted by developments in international markets. As per the Ninth Plan (1997-2002) steel
production targets the industry had started investing in fresh capacity. While the installed
capacity of the industry went up to 35 MT, a slowdown in almost all industrial segments of
the Indian Economy and depressed global demand resulted in mismatch between installed
capacity and demand. This led to a crash in steel prices, which meant ever-decreasing price
realization for all major steel producers. All major producers barring Tata Steel went into red
and in 1999-2000 questions were being asked whether the steel industry would surivive. Fig
1.shows that the profitability of the Indian Steel Industry had eroded considerably during this
phase. Fig. 2 shows the Return on Net Worth of Indian steel companies during this tough