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Steel

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Steel

July, 2011

Introduction: Indian Steel Industry

The Indian steel industry has witnessed steady growth, on the back of various initiatives taken by the Government of India. The soaring demand from different sectors, such as, infrastructure, real estate and automobile has put the steel industry in India on the world map.

Economic reforms initiated by the government in 1991 have assisted in the growth of steel industry. Prior to the reforms, the steel industry was dominated by the public sector. However, after the reforms this sector became open to private investments and foreign investments. The 1991 reforms allowed for no licenses to be required for capacity creation, except for some locations. A lot of new steel plants have been set up in the country due to huge foreign investments and state-of-the-art technology. Tata Steel was the first steel plant established in 1907 in India. Some of the other steel plants in the country include Bhilai Steel Plant at Chattisgarh, Rourkela Steel Plant at Orissa, Durgapur Steel Plant at West Bengal to name a few. In 2010, India was ranked as the fourth largest producer of steel by the World Steel Association.

The Indian steel industry began expanding into Europe during the 21st century. In January 2007, Tata Steel made a successful US$ 11.3 billion offer to acquire European steel maker Corus Group PLC. In 2006, Mittal Steel acquired Arcelor for US$ 38.3 billion to become the world's biggest steel giant.

Some of the growth drivers helping the sector to grow are:

  • Abundant availability of iron ore in the country with states such as Orissa, Jharkhand and Chhattisgarh are rich in iron ore reserves. The National Minerals Development Corporation (NMDC) plans to expand its iron ore production capacity from its existing capacity of 30 million tonnes per annum (MTPA) to 50 MTPA by 2014–15 through the capacity expansion of current mines as well as by setting up new mines.
  • The country has well established facilities for the production of steel.

Market Size

Steel industry is of great significance to the economic growth of the country. India has been ranked the world’s fifth largest producer of crude steel in 2009 and is projected to become the world’s second largest producer by 2015–2016, with a production volume of 54.5 million tonnes (MT). Various states have signed around 222 memorandums of understanding (MoUs), with a projected capacity of about 275.7 MT and an investment of more than US$ 229 billion.

The steel production capacity is likely to reach 124 MT by 2011–12. In 2008–09, the installed capacity for crude steel was estimated at 64.4 MT, while production was estimated at 54.5 MT, resulting in an 85 per cent capacity utilisation. Long-products constituted 57 per cent of the total finished steel consumption, while the remaining 43 per cent was constituted by flat-products in 2007–08.

The Eleventh Five Year Plan (2007–2012) has allocated investments worth US$ 490 billion for the infrastructure sector, comprising power, roads, highways, railways, ports, airports, mining and irrigation. Steel giants such as JSW Steel and Tata Steel are investing to enhance the capacities of products such as TMT bars (rebars) and many more.

Investments

  • Tata Steel plans to set up a steel plant at Kalinga Nagar, Orissa, which will focus entirely on flat steel products. The first phase is expected to be commissioned by February 2014. The first phase will see an investment of up to Rs 25,000 crore (US$ 5.631 billion), of which the steel maker has already invested over Rs 10,000 crore (US$ 2.252 billion).
  • Recently South-Korean steel company Posco, got permission from the Ministry of Environment and Forest to set up a steel project worth US$ 12 billion in Orissa.
  • Bhilai Steel Plant (BSP) the sole producer of rails in India has recently received another order for exporting rails to Sri Lanka. The order is of about 14,000 tonnes for the UIC-60 grade of rails. Earlier, the company had received an order to supply 6,500 tonnes of rails to Sri Lanka.
  • RINL, the corporate entity that runs the Vizag steel plant, has inaugurated a series of auxiliary units to expand the capacity of the plant to 6.3 MT The project has been executed by Instrumentation Ltd, Kota and associates at a cost of around Rs 10 crore (US$ 2.25 million).
  • Varia Engineering Works Pvt Ltd, Ahmedabad-based rolling mills manufacturing company, is setting up India's first 6-stand continuous cold rolling mill for manufacturing stainless steel.
  • Tata Steel is planning to set up six MTPA plant at Kalinga Nagar, Orissa, which will produce flat products, catering to the needs of the automotive industry and white goods. Phase-I of the plant, at an investment of Rs 25,000 crore (US$ 5.60 billion) is expected to be commissioned by January-February 2014.