100th Annual Report 2006-2007 - Tata Steel

Management Discussion and Analysis
iron ore leases to the Government and the approval process is
in progress.
The Company is also pursuing setting up integrated steel
plants in Chhattisgarh and Jharkhand in phases in the
future.
c) Other Projects in India
The Company is setting up a 1.6 million tonne metallurgical
coke making facility in Haldia to support future enhanced coke
requirement in Jamshedpur. The project cost is estimated at
Rs. 1,150 crores and will be commissioned by March 2008. The
Company has acquired requisite land, completed civil work and
placed orders for major equipments.
2. Primary steel making in countries rich in Iron Ore and / or
Coal / Gas
The Company believes in a de-integrated production
philosophy to maximise value in the steel industry. The
Company has identified possible locations to set up primary
steel making facilities in the long term. These locations
(including India) are attractive by virtue of competitive factors
of production i.e. availability of raw material, energy sources
etc. The Company intends to link low cost steel production
facilities with the most favourable steel consuming markets,
to maximise value creation across the entire value chain. The
Company intends to have a balance between the growing
markets of the developing countries and the mature markets
with high end products and technology. Investments in
NatSteel Asia Pte. Ltd. and Tata Steel (Thailand) Public Co.
Ltd., (erstwhile Millennium Steel) were steps taken in this
direction.
3. Overseas acquisitions in growing and mature markets
For long, the steel industry has been plagued with the
issues of cyclicality, pricing and demand-supply gap. The
steel industry is highly fragmented and the top 5 steel
producers control less than 20% of market share in the world.
However, the mining companies, who are suppliers of raw
materials viz. iron ore and coal to the steel companies and
the automobile companies, who are the major customers
of the steel companies are highly consolidated in their
respective sectors. Consolidation in the steel industry is
likely to address the issues of price stability, foster further
focus on technology and innovation to enable the industry
to serve its customers better with new product offerings and
better supply chain efficiencies. The global steel industry has
started witnessing consolidation moves in the last few years
but these were largely focused on regional consolidation
(see chart below). It is expected that the industry would
witness increased pace of cross border consolidation in the
next few years.
Shares of the Top Five Players in each Region (%)
NORTH AMERICA
EU 15
CHINA
LATIN AMERICA
ASIA
(excluding China)
WORLDWIDE SHARE OF THE
TOP FIVE GLOBAL PLAYERS
94
60
50
40
30
20
10
0
1995 32.1
2000
32.1
47.6
55.5
2005
2006E
70
60
50
40
30
20
10
0
1995 43.3
2000
58.6
58.9
61.3
2005
2006E
40
35
30
25
20
15
10
5
0
1995 34.6
35.7
19.7
24.5
2000
2005
2006E
90
80
70
60
50
40
30
20
10
0
1995 53.7
2000
57.7
80.1
80.1
2005
2006E
60
50
40
30
20
10
0
54.7
54.7
1995 46.1
2000
47.3
2005
2006E
20
16
12
8
4
0
1995 12.9
2000
14.6
2005
17.9
2006E
20.0