Steel
India is expected to become the second-largest steel producer in the world by 2016.

Steel Industry in India

Latest update: October, 2014

Market value of the Indian steel sector

In 2011, the Indian steel sector's total market value was US$ 57.8 billion.

Market value of the Indian steel sector

Steel exports from India

Exports of steel from India has crossed 7 million tonnes mark during FY13.

Steel exports from India

Value of India's metals and mining industry

India's metals and mining industry recorded a strong 19.8 per cent expansion in 2011 to touch US$ 141.9 billion.

Value of India's metals and mining industry

Shares in India's metals and mining sector

Iron and steel is the largest segment of the Indian metals and mining industry, accounting for 73.8 per cent of the overall industry value.

Shares in India's metals and mining sector

Updated: October, 2014

SECTORAL REPORT | October, 2014

METALS AND MINING SECTOR REPORT | October, 2014

Introduction

The steel sector is one of the most crucial sectors in the development of a nation and is considered as the backbone of civilisation. The level of per capita consumption of steel is an important determinant of the socio-economic development of the country.

The Indian steel industry has entered a new development stage since 2007–08 and is riding on the resurgent economy and the growing demand for steel. India’s 33 per cent growth in steel production in the last five years was second only to China among the top five steel producing nations, according to data by World Steel Association (WSA).

India is the fourth largest producer of crude steel and the largest producer of soft iron in the world. Presently, the Indian steel industry employs around 500,000 people while the per capita consumption in 2013 stood at around 57.8 kilograms. However, these figures are expected to rise with increased industrialisation throughout the country.

Market Size

According to the data released by Department of Industrial Policy and Promotion (DIPP), the Indian mining and metallurgical industries attracted foreign direct investments (FDI) to the tune of US$ 1,467.88 million and US$ 8,267.99 million, respectively, in the period April 2000–August 2014.

The Indian steel industry is divided into primary and secondary sectors. The primary sector comprises a few large integrated steel providers producing billets, slabs and hot rolled coils. The secondary sector involves small units focused on the production of value-added products such as cold rolled coils, galvanised coils, angles, columns, beams and other re-rollers, and sponge iron units. Both sectors cater to different market segments.

Companies such as Steel Authority of India Ltd (SAIL), Rashtriya Ispat Nigam Ltd (RINL) and NMDC Ltd are responsible for the bulk of the production in the public sector, while companies such as Tata Steel, JSW Steel and Essar Steel are some of the big names in the private sector of the Indian steel industry.

Steel production in the country has increased at a compound annual growth rate (CAGR) of 6.9 per cent over 2008–2012. The infrastructure sector accounts for close to 60 per cent of the country's total steel demand while the automobile industry accounts for 15 per cent.

Investments

The steel industry and its associated mining and metallurgy has seen a number of major investments and developments in the recent past. Some of them are as follows:

  • Adani Enterprises Ltd has planned to buy out the royalty rights of Carmichael coal project from Linc Energy Ltd for a sum of US$ 145 million. It is estimated that this project will provide electricity for up to 100 million people in India.
  • Jindal SAW Ltd has entered into an asset purchase agreement and plans to acquire PSL-North America Llc, a US-based steel pipe maker. Jindal SAW, a part of the OP Jindal Group, produces SAW pipes widely used in the energy sector for the transportation of oil and gas.
  • Tata Steel Ltd has bought 100,000 tonnes of iron ore from NMDC Ltd over the last two months and has also sought a long-term supply tie-up with the state-run miner. It has already started sourcing small quantities of iron ore from NMDC from June 2014 by participating in the e-auctions being conducted by NMDC from time to time.
  • Tata Steel has chalked out a Rs 12,000–14,000 crore (US$ 1.96–2.28 billion) capital expenditure plan to fund expansion of its Kalinganagar plant in 2014–15. The company’s capacity would increase from the current 9.5 million tones (MT) to 13 MT after the expansion.
  • Indsur Group announced that its US arm Indsur Stelcore Inc has won a Rs 500 crore (US$ 81.71 million)order from a Mexican firm for supply of around 100,000 tonnes of steel plates. Indsur has manufacturing plants for steel castings, auto components, pipes, steel and steel related products strategically located in India, the UK, and the US.
  • JSW Steel Ltd plans to acquire Welspun Maxsteel Ltd (WMSL) in a deal worth over Rs 1,000 crore (US$ 163.42 million). This move is aimed at achieving the strategic goal to enhance its steel production to 40 million tonnes per annum (MTPA) in the next decade from the current 14.3 MTPA. This acquisition, together with that of Ispat made earlier, will help JSW strengthen its position in the western Indian market.

Government Initiatives

The Government of India plans to set up a steel plant under SAIL at Bayyaram in Khamman District of Telangana, according to Mr Narendra Singh Tomar, Union Minister of Steel and Mines. A feasibility study is already underway and soon after its completion, a site would be selected for plant and funds allocation.

Some of the other recent government initiatives in this sector are as follows:

  • After the approval of the new mining law by the Parliament of India, the SAIL-led Afghan Iron and Steel Consortium (AFISCO) will soon recommence negotiations with the Afghanistan government to set up a plant with a capacity of 1.5 MTPA.
  • The Ministry of Steel has proposed to set up special purpose vehicles (SPVs) with State governments to revive investment in the steel sector. The role of the SPVs will be to acquire land and obtain all necessary environment and forest clearances, while NMDC Ltd will be the company creating these SPVs.
  • The Ministry of Steel has also proposed Special Mining Zones, where regions with mineral resources will be identified as strategic resources and one nodal authority will arrange necessary green clearances for mining projects in such areas.

In addition, the Government of India has picked up pace in giving several projects environmental clearances, as it seeks to reboot the investment flow in the country. The clearances were given for key projects such as coal mining at Chhatrasal for Sasan Power and Mahanadi for Coal India. This move will significantly help in enhancing the Indian steel sector.

Road Ahead

The recently released Union Budget 2014–15 has paved the way for the development of the Indian steel sector with proposals for the construction of 100 smart cities and changes in the MMRD Act. Also, India’s ranking in the global list for production of crude steel is all set to improve with increasing demand for domestic consumption in the years to follow. As per Tata Steel, India's steel sector is anticipated to witness investment of about Rs 2 trillion (US$ 32.68 billion) in the coming years.

Exchange Rate: INR 1 = US$ 0.0163 as on October 28, 2014

References: Media reports, Press Releases, Press Information Bureau, Department of Industry Policy and Promotion, Ministry of Steel, Confederation of Indian Industries

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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