|
The Indian steel industry (mainly the Integrated Steel Producers) is globally competitive. This is largely due to low material costs and labour costs. SAIL and TISCO (which enjoy the benfits of captive ore mines) are among the lowest cost producers of steel in the world.
|
|
India has rich reserves of iron ore and is self-sufficient. The ore is of good quality with an average iron content of 63%-65%.
|
|
The coal available in the country is of low quality with high ash content of 20%-25%. Most producers are forced to import coking coal and are exposed to international price fluctuations.
|
|
Indian labour costs at around US$ 1.2 per hour is the lowest in the world. However the ISPs are straddled with huge forces; SAIL employs over 170,000 people and TISCO has a work force of over 52,000 employees. As a result labour productivity has remained low. Despite this low productivity, Indian steel companies have lower wage outgo as a percentage of sales only due to the abundance of cheap labour.
|
|
Power is unreliable and expensive. Power costs in India are amongst the highest in the world (US$ 0.08/KW as against 0.03 in US and 0.05 in Korea) and are growing at the rate of 10% per annum. Power is a major input for EAF steel producers, accounting for 20% of variable production costs. While BOF users consume just 100-150 KW/ton, the EAF route consumes as much as 600-700 KW/ton. This has prompted many BOF and EAF users to set up captive power plants to reduce the cost of power.
|
|
The benefits accruing to Indian steel companies on account of captive mines and cheap labour is eroded by high power and fuel costs. Besides the depreciation of the rupee causes a dent in the import bill for coal and machinery.
|
