100th Annual Report 2006-2007 - Tata Steel

Management Discussion and Analysis
controlling inflationary pressures may be a challenge for the
Indian Government.
The International Iron and Steel Institute (IISI) forecasts global
steel consumption to grow by 5.9% in 2007 and 6.1% in 2008,
driven by strong demand from Asia, Africa and South America.
The apparent steel demand is likely to increase by 65 million
tonnes in 2007 and 72 million tonnes in 2008 to reach a level
of 1,250 million tonnes in 2008. China is expected to remain
the largest market with steel demand likely to increase by 13%
(46 million tonnes) in 2007, which represents 71% of global
steel consumption growth in 2007.
Apparent Steel Demand Growth
2006 2007(F) 2008(F) 2006/07 2007/08
European Union (25) 184.7 187.4 191.0 1.5% 1.9%
Other Europe 27.9 29.8 31.7 6.5% 6.4%
C.I.S. 48.4 51.4 54.4 6.1% 6%
N.A.F.T.A. 154.9 150.1 156.6 -3.1% 4.3%
Central & South America 36.0 38.2 40.5 6.1% 6%
Africa 21.6 23.1 24.9 6.95 7.8%
Middle East 36.8 40.2 43.6 9.1% 8.4%
China 356.2 402.5 442.8 13% 10%
India 43.1 47.5 52.8 10.2% 11.2%
Asia excl. India & China 195.6 200.5 204.4 2.5% 1.9%
Oceania 7.9 8.0 8.0 1.8% 0%
World 1113.2 1178.7 1250.6 5.9% 6.1%
World exc. China 756.9 776.1 807.8 2.5% 4.1%
Source: IISI, March 2007
The Committee on Infrastructure in India constituted under the
Chairmanship of the Prime Minister in August 2004 planned
for an expenditure of approximately Rs. 14,50,000 crores
(USD 320 billion) in the 11th Five Year Plan (2007-2012) on
Irrigation, Urban Infrastructure, Power, Roads, Railways, Ports,
Airports, Telecom projects etc. This may lead to increased steel
consumption in foreseeable future. India’s steel consumption is
expected to increase to 65 million tonnes by FY 2009-10 and
over 125 million tonnes by FY 2014-15.
D) Tata Steel’s Growth Strategy
During the 1990s, the Company re-engineered its business
processes, established its cost leadership in a liberalised
scenario and modernised its operations to become one of
the most efficient steel producers in the world. After a period
of recessionary conditions in the early part of the century, the
steel industry scenario changed dramatically in 2003 led by
the strong growth in China. The Company was prepared to
participate in this opportunity and set out on the growth and
globalisation path in the 21st century.
The Company realised the need to grow in size and regional
diversity to match global players. In 2005, the Company made
long term plans of becoming a 50 million tonne steel producer
by 2015 having multi-locational manufacturing facilities
with strong regional presence focusing mainly on auto,
packaging and construction sectors across the global markets.
The long term growth plans of Tata Steel are focused on the
following levers:
The Indian Steel Industry is now believed to be
at an inflexion point. It is poised for a demand
growth of 10% in FY 2007-08. Demand for flat
products and long products is expected to
grow by 12% and 9% respectively.
Rise in personal disposable incomes and
easy access to funds from banks has led to
new housing projects in last 3-5 years. The
Automotive sector also grew at a significant
rate of over 15% due to easy availability of
consumer finance, excise duty reduction and
higher disposal income with households.
Recent increase in interest rates is likely to
dampen this sentiment somewhat, but the
growth rate is likely to remain robust.
• Single
Location
• World
class
• Small in
size
2005
• 5 mtpa
• Dominant
in selected
domestic
markets
• EVA +
Strong Base in India
Primary steel making in countries
rich in Iron Ore and/or Coal/Gas
Overseas acquisitions in
growing & mature markets
Ownership of strategic raw materials
More from Steel and Branding
Control over Logistics
Participation in Alternate Technology
World Class Organisation/Structure
• Multi
Location
• Strong
regional
presence
• Auto &
Packaging &
Construction
led
2015
• 50 mtpa
capacity
• De-integrated
production
• Strong
Brands
• EVA +
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