Trade Analytics
Browse

This is the ARCHIVED section of the website. To visit the current content of the website please CLICK here

Steel

Go Back

Steel

January, 2012

Introduction

India is among the top producers of all forms of steel in the world. Easy availability of low cost manpower and presence of abundant reserves make India competitive in the global setup.

The steel industry in India has witnessed an increase in demand due to expanding oil and gas sector, huge spending on infrastructural facilities coupled with growth in housing, consumer durables and auto sectors. According to the World Steel Association (WSA), India was the fourth largest producer of crude steel during January 2010–September 2010 and produced 50.1 million tonne (MT) crude steel during this period. At present, with the Government's increased emphasis on infrastructure, it is estimated that the sector is poised for significant growth.

India has acquired a central position on the global steel map with its giant steel mills, acquisition of global scale capacities by players, continuous modernisation & up gradation of old plants, improving energy efficiency, and backward integration into global raw material sources. Major steel giants from across the world have evinced interest in the industry due to its phenomenal performance.

The economic reforms started by the Government since 1991 have added new dimensions to industrial growth in general and steel industry in particular. Licensing requirement for capacity creation has been abolished, except for for certain locational restrictions. The Indian steel industry has been removed from the list of industries reserved for the public sector. Automatic approval of foreign equity investment up to 100 per cent is now available. Price and distribution controls have been removed from January 1992, with a view to make the steel industry efficient and competitive. Restrictions on external trade, both in import and export have been removed. Import duty rates have been reduced considerably. Certain other policy measures such as reduction in import duty of capital goods, convertibility of rupee on trade account, permission to mobilise resources from overseas financial markets and rationalisation of existing tax structure for a period of time have also benefited the Indian Steel Industry.

A lot of new steel plants have been set up in the country due to huge foreign investments and the state-of-the-art technology. Tata steel was the first steel plant established in the year 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.

Steel producers have signed 222 memorandum of understanding (MoUs) with the State Governments for a planned capacity addition of about 275.7 MT by 2020.

Construction and infrastructure' is the largest consumer of steel in India, accounting for 61 per cent of total consumption in 2010. The Government expects steel production to rise to 100 million tonnes per annum (MTPA) by 2019-20.

Government Initiatives

  • 100 per cent foreign direct investment (FDI) through the automatic route is allowed in the sector
  • Large infrastructure projects in Public-Private Partnership (PPP) mode are being formed
  • Government is encouraging research and development (R&D) activities in the sector
  • Reduced custom duty and other favourable measures
  • Government of India has framed the National Steel Policy (NSP) to encourage the steel industry to reach global benchmarks in terms of quality, cost and efficiency

Market size

The market grew to an estimated US$ 55.1 billion in 2011 from US$ 22.8 billion in 2006. Compound annual growth rate (CAGR) of the market over the period was 19.3 per cent. Steel Authority of India Ltd (SAIL) is the leading player in the Indian steel market with a market share of 20.1 per cent and Tata Steel accounts for 10.2 per cent of the market.

Total demand for steel grew to 65.2 MT during FY11 as against 46.8 MT in FY07. The demand expanded at a CAGR of 8.6 per cent over FY07-11.

Investments

Rashtriya Ispat Nigam Ltd (Visakhapatnam Steel Plant) has announced that Rs 5,000 crore (US$ 970.39 million) worth of new units would come up in the plant as a part of its expansion project. The board's approval includes setting up of a seamless tube mill and installation of a new coke oven battery.

India's largest iron ore miner, National Mineral Development Corporation Limited (NMDC) and Russian steel maker Severstal signed the implementation protocol in Moscow for setting up a joint venture steel plant in Karnataka.

The Steel Authority of India Ltd (SAIL) would be setting up processing units in Barabanki, Lakhimpur Kheri, Gonda and Mirzapur to boost industrial activity in Uttar Pradesh (UP). The Rashtriya Ispat Nigam Ltd, (RINL) would also be setting up steel processing units in rural areas.

Road Ahead

According to a Research report by research firm RNCOS titled "Indian Steel Industry Outlook to 2012" the Indian crude steel production will grow at a CAGR of around 10 per cent during 2010-2013. Additionally, with the proactive incentive plans by the Government to boost economic growth by injecting funds in various industries, such as construction, infrastructure, automobile, and power will drive the growth of steel industry in future.

Exchange Rate Used: INR 1 = 0.01942 as on January 16, 2012

References: RNCOS, media reports, Minsitry of Steel, Equitymaster