1. Indian economy growing @ 8 to 9 %, is one of the fastest growing economies in the world.

2. Industrial prodn. showing encouraging trends. Index of industrial production for Capital goods is growing @ 8.4% CAGR and growth in index for consumer durables was @10.5% CAGR during 2005-06.

3. The 10th plan investment in infrastructure has been envisaged at around Rs.880,550 crores.

4. The major sector wise anticipated investment is likely to be Rs.292000 crores in Power, Rs.145000 crores in Roads & Bridges, irrigation Rs. 111000 crores.

5. During 11th plan (2007-08 to 2011-12), the projected investment towards infrastructure is likely to be Rs. 2027000 crores, an increase of 180% over 10th plan.

6. Per capita steel consumption at 35 kg low as compared to world average of 150 kg. and 300kg for china.

7. National Steel Policy, as formulated by Indian Ministry of Steel envisages the following -
i.Crude steel production of 110 million tones by 2019-20 at CAGR of 7.1% from 2004-05.

ii.The demand of steel by 2020 is likely to be 90 million tones at CAGR of 6.9% from 04-05.

iii.Steel exports by 2020 are likely to grow at CAGR of 13.3% from 04-05 to 26 million tones.

iv. Steel imports to the country by 2020 shall grow at CAGR of 7.1% from 04-05 to 6 million tones.

8. Lot of steel projects both brownfield and Greenfield likely to come up and are in various stage of execution.

9. As per the newspaper reports (Eco. Times dt.14-11-07), Steel Minister has projected India’s steel production to be around 124 million tones by 2012 and a capacity of around 275 million tones by 2019-20.

10. During the year 06-07, India produced around 49 million tones of finished steel, which was higher by 11 % over 05-06.

11. Imports at 4.1 million tones during 06-07 were higher by 6.5%. Exports at 4.7 million tones grew by 6.1% during 06-07.

12. During 05-06 Iron ore exports at 84 million tones was almost at the previous year’s level of 87 million tones.

13. During April – Sept.’07 following has been the performance-
i. Crude steel prodn. at 25.7 million tones, exhibited a growth of 5 % over corresponding period last year.

ii. Exports at 2.6 million tones shows an increase by around 8% over the same period of last year.

iii. Imports were around 3.2 million tones, which was an increase by 63% over April-Sept’06.

14. Due to infrastructure focus, production of long products is gradually increasing and ratio of flat to long products is narrowing.

15. During Ap-Sept’07 non-flat steel produced at 12.4 million tones showed an increase of around 9% over April-Sept’06.

16. In case of flat products prodn. during April-Sept’07 at 12.2 million tones was almost at same level of last year.

17. Apparent Consumption of steel during April-Sept’07 was 22 million tones, which was an increase by 11 % over April-Sept’06. While long products (excl. semis) at 12.3 million tones registered a growth of 9%, the flat products consumption at 12.5 million tones indicated an increase of 12%.

18. With due focus on infrastructure development and strong economic indicators, the demand for steel in India shall continue to remain robust.

Industry Structure

The Indian steel industry can be divided into two distinct producer groups:

Major producers
Also known as Integrated Steel Producers (ISPs), this group includes large steel producers with high levels of backward integration and capacities of over 1 MT. Steel Authority of India Limited (SAIL), Tata Steel, Rashtriya Ispat Nigam Limited (RINL), Jindal Vijayanagar Steel Limited (JVSL), Essar Steel and Ispat Industries form this group.

SAIL, TISCO and RINL produce steel using the blast furnace/basic oxygen furnace (BF/BOF) route that uses iron ore, coal/coke as the basic input mix for producing finished steel.
Other major producers such as Essar Steel, Ispat Industries and JVSL use routes other than BF/BOF for producing steel. While Essar Steel and Ispat Industries employ Electric Arc Furnace (EAF) route that uses sponge iron, melting scrap or a mix of both as input, JVSL uses COREX, a revolutionary technology for making steel using basically iron-ore and coal.

Other producers
This group consists of smaller stand-alone steel plants that include producers and processors of steel.

o Processors/Rerollers: Units producing small quantities of steel (flat/long products) from materials procured from the market or through their own backward integration system.

o Stand alone units making pig iron and sponge iron.

o Small producers using scrap-sponge iron-pig iron combination produce steel ingots (for long products) using Electric Arc Furnace (EAF) or Induction Arc Furnace (IAF) route.

The Major producers are strategic in nature and account for most of the mild steel production in the country. The group produces most of the flat steel products in the country including Hot Rolled, Cold Rolled and Galvanized steel. The majors also produce a small proportion of Long products and other special steel being produced in the country.

Other producers account for a majority of long products being produced in the country and some of the value added flat steel products like cold rolled steel and galvanized steel.

Way forward for the Indian Steel Industry

The Government envisions India becoming a developed nation by 2020 with a per capita GDP of $1540. For a nation that is economically strong, free of the problems of underdevelopment and plays a meaningful role in the world as befits a nation of over one billion people, the groundwork would have to begin right now. The Indian Steel Industry will be required and is willing to play a critical role in achieving this target.

With abundant iron ore resources and well-established base for steel production in the country, steel is poised for growth in the coming decades. Production has increased from 17 MT in 1990 to 36 MT in 2003 and 66 MT is targeted for 2011. While steel will continue to have a stronghold in traditional sectors such as construction, housing, ground transportation, special steels will be increasingly used in hi-tech engineering industries such as power generation, petrochemicals, fertilisers etc. Steel will continue to be the most popular, versatile and dominant material for wide ranging applications. While India may not become a leader in world steel market, it can become a powerful force.

To help the Indian Steel Industry achieve its potential and play a meaningful role in India’s development some steps need to be taken.

Steel is yet to touch the lives of millions of people in India. Per capita consumption of steel in India is only 29 kg and has to go a long way to reach consumption levels of around 400 kg in developed countries like USA and world average of 140 kg.

There is a need to continue the current thrust on infrastructure related activities and extend them to rural India. Rural Indian today presents a challenge for development of the country and the opportunity to increase usage of steel in these areas through projects such as rural housing etc.

Current shortage of inputs has pushed up the costs for the steel industry. Government should ensure that quality raw material such iron-ore and coke are available to the industry. With Ministry of Steel targeting an output of 100 MT of steel by 2020 there is an urgent need to develop raw material resources for inputs like iron-ore and coal within or outside the country. Countries like Japan have already taken similar steps to safeguard their industries.

Adequate enabling infrastructure such as power, ports, roads, rail transport is pre-requisite for the Indian steel industry to remain competitive.

Government should not regulate prices and free market forces should prevail. Intervention by the Government is only a short-term solution to the issue of steel prices in the country. Once left alone, market dynamics will automatically ensure price corrections and determine the optimum price of steel.

The Indian steel Industry is amongst the least protected in the world. While developed countries have put numerous tariff and non-tariff barriers on steel exports from the country, the domestic industry is exposed to cheaper imports from competing nations. As in case of other important industries, the Government should give reasonable levels of protection to the domestic steel industry, which is just starting to get back on its feet.

Industry should be allowed to have a fair return on investment and contribute to the overall health of the Indian manufacturing segment. The steel industry has invested a capital of over Rs 90, 000 crores. CRISIL in a recent study has concluded that given the large exposure that banks and financial institutions have to the steel industry, a healthy steel sector is in the interest of the economy. Steel industry still continues to be unattractive for investors and a recent study by CRIS INFAC suggests that any new projects with target price below $270/MT will be economically unattractive.

Today, Indian producers employ world-class standards of technology. Steel from Indian finds growing acceptability in international markets. But despite this India’s share in world trade steel is a miniscule 2%. Given the capabilities of the Indian steel industry there is tremendous scope to increase this share further. While the steel industry will continue servicing the domestic demand there is a lot of untapped export potential with the industry. The Government, in line with EXIM policy 2002-07, should take steps to make Indian exports more competitive.

China’s soaring demand (over the past five years China’s demand for flat steel has risen at 17 percent as compared with just 2 percent for the rest of the world: the growth rate in China’s demand for steel is expected to come down to 8 percent during 2003 through 2010) which had revived the long term suffering industry will eventually be satisfied by additional domestic capacity-hardly a long term solution to the fundamental problem of worldwide capacity. The basis for such a conclusion is the estimated lower cost of construction of steel mills in China by some 30 to 50 percent than comparable facilities in the developed world and the fact that currently the global flat steel industry has at least 100 million tons of overcapacity. Add to this the worry of economists of slower economic growth in China and the fact that the country can become a net exporter with telling effects on future international prices. Adequate steps must be taken right now to make the Indian steel industry more competitive in order to meet these challenges. The Indian steel industry may not be able to afford another crisis similar to he one between 1997-2001.

Steel Industry – A Global Perspective

1. During 2006, the world crude steel production reached a level of 1244 Million Tonnes.

2. It shows a growth of 9.0% over 2005 crude steel production level at 1142 Million Tonnes.

3. China retained it’s no. 1.position by producing around 422 Million tonnes, followed by Japan with production of 116 Million Tonnes and USA with production at around 98 Million Tonnes.

4. India with production of 44 Million Tonnes ranked 7th amongst world steel producing countries.

5. China accounted for 34% of world crude steel production where as contributions from rest of the world were at EU 16%, NAFTA 10.5%, CIS 9.6%, JAPAN 9.3% and other ASIA 10.5%.

6. If we look at crude steel equivalent consumption figures during the year 2006 it will be seen that China accounted for 31%, EU 17%, NAFTA 14.5%, CIS 4.7%, JAPAN 6.7% and other ASIA 14% towards crude steel consumption for the world.

7. Apparent finished steel consumption during the year 2006 was around 1113 Million Tonnes as against 1026 Million tonnes during 2005.

8. During the year 2005, total world trade was around 364 million tones.

9. During the year 2005, USA ranked no.1 as net importer country at 20.8 million tones followed by Thailand at 10.8 million tones and Iran at 6.9 million tones.

10. During the year 2005, Japan lead the world steel trade as a net exporter at 26.8 million tones followed closely by CIS and Russia at 26.3 Million tones.

11. During 2007, crude steel production till Sept’07 (Jan-Sept’07) has been around 980 million tones representing an increase of around 7.7% over same period last year (910 million tones).

12. The ocean freight due to high demand for carrying iron ore has increased substantially in the recent period.

The successful investing comes down to a matter of correctly answering these two questions:
§ WHAT to buy and sell.
§ WHEN to buy and sell.

BASIC OF TECHNICAL ANALYSIS

Technical analysis based on three basic beliefs

1) Price discounts every thing.
2) Price tends to move in trends.
3) History tends to repeat itself.

BASIC CHART
Basic chart shows the price range and change in value of any asset instrument plotted with price on Y-axis and Time on X-axis. Normally it is accomplished by volume.
A price chart is a graphic record that depicts the market men psychology of the price of a particular stock, commodity, fund, precious metal, etc.

Establishing Trends
Trends are established by drawing lines on price charts which connect as many highs as possible on one side and as many lows as possible on the other side. These lines, called trend line, are actually price zone. When drawing trend lines, there is need to take precaution to make it as meaningful as possible. In technical analysis, a line based on one peak or one trough means nothing. You require at least two points to draw a meaningful line – anything less is fantasy. Two highs or two lows is the bare minimum. The more points you can connect the more significant the resulting line.

Support and Resistance
Support and resistance represent key junctures where the forces of supply and demand meet. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

Here is an illustration of demand and supply. Imagine that a water purifier of a well-known band is released for Rs.15,000. As the manufacturer analysis showed that consumers would not demand water purifiers at a price higher than Rs.15,000, only ten water purifiers were released because the opportunity cost is too high for suppliers to manufacture more. If, however, the ten water purifiers are demanded by 20 people, the price will subsequently rise because, according to the demand relationship, as demand increases, so does the price. Consequently, the rise in price should prompt more water purifiers to be supplied as the supply relationship shows that the higher the price, the higher the quantity supplied.

If, however, there are 30 water purifiers produced and demand is still at 20, the price will not be pushed up because the supply more than accommodates demand. In fact after the 20 consumers have been satisfied with their water purifier purchases, the price of the leftover water purifiers may drop as water purifier manufacturer attempts to sell the remaining ten water purifiers. The lower price will then make the water purifiers more available to people who had previously decided that the opportunity cost of buying the water purifiers at Rs.15, 000 was too high.

Figure 2. A simple set of trend lines showing support and resistance. The up arrows indicate troughs (points of support) and the down arrows indicate peaks (points of resistance). It is often almost uncanny to see how perfectly the successive highs and lows line up along a developing trend line.

Three Simple Rules
o BUY only when the long term trend is UP.
o SELL only when the long term trend is DOWN.
o STAND ASIDE when the long term trend is SIDEWAYS.

How Technical Indicators work?
Technical Indicators summarize price and volume behavior in different ways to highlight important features. This summarization brings many unique features of data that was earlier invisible. All that an indicator does is to present a particular feature of the data in a more readable format — while eliminating skew ness.
There are dozens of technical indicators like MACD that are just as useful for timing entry and exit points. These sets of tools can make your investment decisions better than the majority of investors.

Figure 3. The MACD indicator and some of its common signals.

Trend indicators such as trend lines, price patterns and moving averages identify a change in trend after it has taken place. Momentum indicators, such as ROC, RSI and MACD, can further help in strong decision-making, often well ahead of the final turning point.

Steps to a Successful Trade
The steps involved in making a successful trade are generally as follows:

o Determine the long-term trend by drawing trend lines on the appropriate price chart. Consider buying or selling only in the direction of this trend.

o Use the analytical tools at your disposal – indicators such as moving averages, MACD, stochastic, RSI, etc, can provide you with excellent signals for positioning your entry and exit points.

o How much are you willing to lose? Pre-calculate acceptable losses before you enter the market. If the market falls, get out when this loss is realized. Don’t hesitate.

o When the long term trend line is broken it’s time to take your profits.

o Wait patiently for the next opportunity. Don’t be in a big hurry to make a fortune.

Conclusion
Price charts and technical analysis can help you make investment decisions more easily and in a more business-like manner. These should be considered as a complete investment tool kit. The biggest benefit of using charts and technical indicators is that they offer an objective framework for evaluating and profiting from an investment. A price chart gives you an immediate graphic record of all factors influencing the historic price of a commodity or security. Indicators can provide very effective tools for determining the best time to buy and sell.