Management Discussion & Analysis
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The Management’s discussion on the Steel industry and the Group’s performance are given below:
1. Steel :
a) Global Steel Industry Overview:
The global crude steel production in 2007 was 1,344 million tonnes, showing an increase of 100 million tonnes over the 2006 level of 1,244 million tonnes. The following table shows the crude steel production of the top six crude steel producing nations:
| Countries | 2007 | 2006 |
| China Japan United States Russia India South Korea |
489 120 98 72 53 51 |
423 116 99 71 44 49 |
In the last few years, the primary growth in steel production has been in China from 127 million tonnes in 2000 to 489 million tonnes in 2007. The growth in crude steel production in China is evident from Fig. 1. The global crude steel capacity has increased by 46.9% to 1,564 million tonnes in 2007 from 1,065 million tonnes in 2000 as depicted in Fig. 2. The additions to the capacity over the number of years have ranged from 32 million tonnes in 2002 to 112 million tonnes in 2005 and 108 million tonnes in 2007.
| 2000 | % | 2007 | % | ▲(2001-2007) | ||
| Million tonnes | Share | Million tonnes | Share | Million tonnes | Share | |
| EU-27 Other Europe CIS NAFTA C&S America Africa Middle East Asia (other than ME & CIS) Oceania World |
240 29 121 152 46 23 16 431 9 1065 |
23% 3% 11% 14% 4% 2% 2% 41% 1% 100% |
246 39 137 154 60 29 26 864 9 1564 |
16% 2% 9% 10% 4% 2% 2% 55% 1% 100% |
6 10 16 2 15 6 10 432 0 499 |
1.2% 2.0% 3.3% 0.5% 2.9% 1.3% 2.0% 86.5% 0.1% 100% |
The production and consumption position of steel in World in 2007 is shown below:
China leads in terms of both production as well as consumption of steel globally. China’s production in 2007 was 27 million tonnes higher than that of 2006.
The availability of raw materials at competitive prices continues to be one of the biggest concerns of the Steel industry. The seaborne iron ore demand was higher by 50 million tonnes in 2007 than estimated while increase in supply was 39 million tonnes. The demand of seaborne metallurgical coal in 2007 was in line with the estimates, but the supply was lower than the demand mainly due to supply disruptions, delay in a number of expansion projects, damages from heavy rainfalls. For imported coke, there has been an increase in prices of Chinese coke due to incremental demand, limitation of export licenses and additional export taxes. The increase in coking coal costs also contributed to the increase in the coke prices.
b) European Steel industry overview
EU consumption grew by almost 5% in 2007. The output remained stable throughout 2007, growing only by 2% overall as European Steel producers continued to closely monitor local demand conditions. Steel imports into the EU remained at a high level during 2007. Steel product prices remained broadly stable throughout the period but at a high level historically. Some modest price increases were achieved during the first part of the year, but pressure from imports and related high stocks resulted in reversal of the increase later in 2007. However, in Q4 FY 2007-08, EU demand and supply balance began to tighten supporting
high prices.
c) Indian Steel Industry overview
Indian steel industry experienced a strong growth in demand, propelled particularly by the demand for steel in China. The production of crude steel at 53 million tonnes in 2007 was more than double the production level a decade back in 1998 (23 million tonnes) portraying the significant growth in the Indian Steel Industry. India now ranks fifth in terms of crude steel production among the top six crude steel producing nations in the world, the others being China, Japan, United States, Russia and South Korea. The Finished Steel production in India in the current financial year stands at 48 million tonnes registering an increase of 9% over the previous year. The broad breakup of the production and use of finished steel production in India is
shown below:
Figures in million tonnes
| Production | Consumption | |||||
| Countries | FY08 | FY07 | Change % | FY08 | FY07 | Change % |
| Flat Products Long products |
20 28 |
19 26 |
5% 8% |
21 29 |
18 26 |
16% 12% |
| Total | 48 | 45 | 7% | 50 | 44 | 14% |
The exports out of India had a year on year negative growth of 3% and 36% for Flat products and Long Products respectively. The imports, on the other hand, grew strongly for both the Flat Products (49%) as well as Long Products (46%).
Steel Outlook 2008
According to the International Iron and Steel Institute (IISI), during the period 2008-2010, the world crude steel capacity is going to grow by 322 million tonnes, an increase of 21% over 2007 with a CAGR of 6.4%. While the addition in crude steel capacity in 2007 was 108 million tonnes, 2008 is going to experience an addition of 90 million tonnes. The additions to the global crude steel capacity in 2008 will be mainly in Asia (excluding Middle East and CIS countries): 68 million tonnes (2007: 88 million tonnes), EU (27): 4 million tonnes (2007: 2 million tonnes), CIS countries: 9 million tonnes (2007: 5 million tonnes). In Asia, the biggest additions in the capacity in 2008 will be by China with 60 million tonnes and India with 4 million tonnes.
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