FOREIGN EXCHANGE SERVICES

Agenda

Introduction to PEST analysis

Impact on steel industry

Conclusion

Introduction

PEST analysis stands for

Political analysis

Economical analysis

Social analysis

Technological analysis

Political Factors - Challenges

The 5 major challenges (listed below) facing the iron and steel industry have their genesis in the political environment in the country.

Availability of raw materials Ban imposed by the Supreme Court on mining in Goa, partial ban in Karnataka, and Odisha constrain resource availability. Iron ore production had declined from 218 MT in 2009-10 to 140 MT in 2012-13

Impending policies Draft Steel Policy 2012 not yet finalised. Delay in consolidating the mining laws.

Political Factors - Challenges

Long and complex regulatory clearances - 3-7 years to set up a greenfield project including land acquisition, rehabilitation, environmental clearances and tying up mineral supplies. Industry experts believe that this time period could be easily reduced to half if the procedures were to be streamlined

Land Acquisition Passing of land acquisition bill has made acquisition of land difficult and expensive. Consent of 70% for PPP and 80% for private acquisitions.

Slowdown in demand growth Caused by delay in awarding infrastructure projects and falling significantly short of set targets

Political Factors- Favorable

Resource Security and Development Plan as envisaged in the National Steel Policy 2012 is likely to resolve availability of raw materials

The Mines and Minerals (Development) Bill 2011 is set to consolidate mining related laws in a single place in the Parliament

Increase in export duties on iron ore will make larger share available to domestic steel manufacturers

Creation of Cabinet Committee on Investment to expedite clearances to large infrastructure projects

Economic Factors

Steel is the back bone of human civilization, it is very crucial in development of a modern economy. The per capita consumption of steel shows the living standard of people in any country.

Steel consumption increases when economies are growing, as governments invest in infrastructure and transport, and build new factories and houses. Economic recession meets with a dip in steel production as such investments falter.

The steel industry of India has capital investments Of more than Rs 100, 000 crores. The total employment in the industry is more than two million.

Global Scenario

In 2012 the World Crude Steel output reached 1547.8 thousand metric tons and showed a growth of 4% over the previous year. It is the third consecutive year that world crude steel production grew by more than 4%.

China remained the worlds largest Crude Steel producer in 2012 also (716.5 thousand metric tons) followed by European Nations (169.4 thousand metric tons).India occupied the 4th position (76.7 thousand metric tons).

it is forecast that world steel demand will grow further by 4% and will reach 1,600 Mt.The National Steel Policy has estimated steel production to reach 110 million tonnes by 2019-20.

Economic Factors-Demand & Supply

The demand is derived from sectors that include infrastructure, consumer durables and automobiles.

With trade barriers having been lowered over the years, imports play an important role in the domestic markets.

Steel industry shows oligopoly Market

FDI in steel industry

Economic Factors

In the current scenario there is RBI is Increasing repo rates so capital would be available at higher cost and decrease their production.

The exchange rates play a major role in EXIM trade.

Inflation: the inflation has grown to about 9.84 percent so there is rise in price of all the goods, and also production efficiency has decreased.

Price sensitivity &Demand volatility: The demand for steel is derived demand and thepurchase quantity depends on end-use requirements. The traders are price sensitive andbuy when there are discounts

Social Factors

Increase in Urbanization

27.81% in 2001 Census to 31.16% in 2011 Census

Increase in disposable income results into increase in consumerism. PCI has grown by 6.7% during 2006 to 2012

Social Factors

Land acquisition difficulties eg POSCO

Environmental issues- air (1 ton primary steel results into 2 tons of CO2), water and noise pollution. Health issues like -Asthma

Social Factors

Rehabilitation and resettlement issues, eg- Bokaro steel city

Change in workforce preferences from core sectors to services sectors.

Technology Factors

With globalization and an increasing scale ofoperations, technological self-reliance has become a necessity.

Research & Development Funding in the industry by government.

Focus on technology aimed at emission reduction and compliance to changing environment norms

Technology Factors

Investment in Breakthrough technologies for long term solutions . For ex Tata Steel multi million dollar investment in a project aimed at reduction of ash content in Indian coal from present 35 % to around 7-8%

Easy of technology transfer and entry of foreign players . For ex. JSW getting into a technology agreement with Japanese firm JFE for manufacturing of electrical grade steel.

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