Sector structure/Market size
The steel industry in India has been moving from strength to strength and according to the Annual Report 2009-10 by the Ministry of Steel, India has emerged as the fifth largest producer of steel in the world and is likely to become the second largest producer of crude steel by 2015-16.
Led by strong demand for autos and engineering services, the domestic steel demand in India remains robust, as per Moody's sectoral analysis on Asia's steel sector. According to the analysis, the outlook for the domestic operating environment is positive, driven by robust growth in infrastructure, autos and construction and constrains on additional supply by 2011.
Recently, Mr Virbhadra Singh, Minister for Steel, said that India will become the world's second-largest steel producer by 2012, with a capacity of 124 million tonnes (MT) as part of the push being given to assist overall infrastructure development.
India's steel production during 2009-10 was 64.88 million tonne (MT), up 11 per cent from a year ago, according to Mr A Sai Pratap, Minister of State for Steel.
During the second quarter ended September 2010, steel majors Tata Steel and Steel Authority of India Ltd (SAIL) reported a high growth in steel sales. SAIL registered sales of 3.17 MT in the period under review, while Tata Steel's total sales for the quarter stood at 1.66 MT which is around 14 per cent higher than the corresponding quarter last year.
Meanwhile, JSW Steel's production during the quarter grew by 8 per cent to 3.14 MT on the back of a steady rise in demand.
The domestic steel consumption grew by 9.8 per cent to 29.82 MT during April-September 2010 over the year-ago period, on the back of steady demand from sectors like automobile and consumer durables. As per the provisional data from the Ministry of Steel, consumption was at 27.15 MT in the same period a year ago. In September 2010, steel consumption rose 4.1 per cent to 4.72 MT, against 4.53 MT in the year-ago period.
A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive huge domestic and foreign investments.
The domestic steel sector has attracted a staggering investment of about US$ 238 billion, according to Mr A Sai Prathap, Minister of State for Steel. This consists of nearly 222 MoUs signed between the investors and various state governments mostly in the states of Orissa, Jharkhand, Chhattisgarh and West Bengal.
Tata Steel plans to invest US$ 226.17 million to commission its proposed ferroalloys plant and bar mill at its industrial park at Gopalpur and a greenfield steel plant at Kalinga Nagar.
Essar Steel plans to expand its exclusive steel showrooms, Hypermart and retail outlet, Expressmart in Madhya Pradesh.
JSW Steel plans to invest US$ 17 billion over the next 10 years to ramp up capacity from 7.8 million tonne per annum (MTPA) to 32 mtpa through greenfield and brownfield projects.
Jindal Steel has completed the acquisition of Oman-based Shadeed Iron and Steel Co LLC for US$ 464 million.
Japan's Nippon Steel will begin a manufacturing operation in India making steel pipes for use in automobiles and plans to invest US$ 37 million on production and sales operations.
As per the Press Information Bureau (PIB), during 2009, the government took a number of fiscal and administrative steps to contain steel prices. Central value added tax (CENVAT) on steel items was reduced from 14 per cent to 10 per cent with effect from February 2009.
Moreover, in the Union Budget 2010-11, the government has allocated US$ 37.4 billion to the infrastructure sector and has increased the allocation for road transport by 13 per cent to US$ 4.3 billion which will further promote the steel industry.
Exchange rate used: 1 USD = 42.21 INR (as on October 2010)