Last Updated: July 25, 2014
L N Mittal
President and CEO, Arcelor-Mittal
Updated: May, 2014
SECTORAL REPORT | April, 2014
METALS AND MINING SECTOR REPORT | April, 2014
India has become the second best in terms of growth amongst the top ten steel producing countries in the world and a net exporter of steel during 2013–14. Steel production in India recorded a growth rate of 4.8 per cent in February 2014 over February 2013. The cumulative growth during April–February, 2013–14 stood at 4.2 per cent over the corresponding period of the previous year.
Steel contributes to nearly two per cent of the gross domestic product (GDP) and employs over 500,000 people. The total market value of the Indian steel sector stood at US$ 57.8 billion in 2011 and is expected to touch US$ 95.3 billion by 2016. The infrastructure sector is India’s largest steel consumer, thereby attracting investments from several global players. Owing to this connection with core infrastructure segments of the economy, the steel industry is of high priority right now. Also, steel demand is derived from other sectors like automobiles, consumer durables and infrastructure; therefore, its fortune is dependent on the growth of these user industries.
The liberalisation of the industrial policy and other government initiatives have given a definite impetus for entry, participation and growth of the private sector in the steel industry. Allowing foreign direct investment (FDI) has been a positive step since India is heavily dependent on foreign technologies. These foreign technologies generally add life to the plant and production units, which ultimately lead to the country’s economic growth.
India’s real consumption of total finished steel grew by 0.6 per cent year-on-year in April–March 2013-14 to 73.93 million tonnes (MT), according to Joint Plant Committee (JPC), Ministry of Steel. Construction sector accounts for around 60 per cent of the country's total steel demand while the automobile industry consumes 15 per cent.
India became net steel exporter in 2013–14 and is likely to maintain the momentum in 2014-15 as producers are looking to dock more overseas shipment to tide over subdued domestic consumption. Total steel exports by India during 2013–14 stood at 5.59 MT, as against imports of 5.44 MT. During the period, Steel Authority of India (SAIL) clocked a 30 per cent growth in exports and aims to more than double the shipments to 1 MT in 2014–15. Rashtriya Ispat Nigam Ltd (RINL), which exported 1 lakh tonne steel last fiscal, aims to treble that in the current fiscal.
Iron ore export from India has showed a 253 per cent increase during the period October–December 2013, at 3.75 MT as against 1.06 MT in the corresponding period of the previous year, on the back of the opening of new mines in Chhattisgarh, Madhya Pradesh and Rajasthan, as per the Federation of Indian Mineral Industries (FIMI).
India needs investment of US$ 210 billion over the next decade to achieve the steel production capacity of 300 million tonnes per annum (MTPA) by 2025 from the current 90 MT, according to Mr C S Varma, Chairman and Managing Director, SAIL. Some of the major investments in the sector are as follows:
The Government of India has allowed 100 per cent FDI through the automatic route in the Indian steel sector. It has significantly reduced the duty payable on finished steel products and has streamlined the associated approval process.
The government is taking steps to increase industrial activity in Uttar Pradesh (UP). Addressing a Conference on ‘Demand for Steel in India: The End User Perspective,’ the Union Minister of Steel, Mr Beni Prasad Verma said, in order to increase supply of steel to rural consumers, companies like SAIL and RINL have set up 521 and more than 100 rural dealers respectively in remote parts of UP.
In order to provide thrust on research and development (R&D), the Ministry of Steel is encouraging R&D activities both in public and private steel sectors, by providing financial assistance from Steel Development Fund (SDF) and Plan Scheme of the Central Government. Under the SDF scheme, 82 R&D projects have been approved with total project cost of Rs 677 crore (US$ 111.92 million) wherein SDF assistance is Rs 370 crore (US$ 61.17 million). Under the Plan Scheme, eight projects were approved with a total cost of Rs 123.27 crore (US$ 20.38 million) wherein Government assistance is Rs 87.28 crore (US$ 14.43 million).
To encourage beneficiation and pelletisation of iron ore fines in the country, basic customs duty on the plants and equipment required for initial setting up or substantial expansion of iron ore pellets plants and iron ore beneficiation plants has been reduced from 7.5 per cent to 2.5 per cent. Import of critical raw materials for steel industry, such as coking coal, non-coking coal and scrap are subject to zero or very low levels of custom duty.
The future of the Indian steel industry is bright. The government plans to increase infrastructure spending from the current 5 per cent GDP to 10 per cent by 2017, and the country is committed to investing US$ 1 trillion in infrastructure during the 12th Five-Year plan. “Taking 15 per cent as steel component in the total investment, then it can generate additional demand worth US$ 75 billion of steel in the next few years or US$ 15 billion worth of additional demand a year or in terms of quantity, an additional demand of 18.75 MT per annum,” as per Mr C S Verma, Chairman, SAIL.
With urban population increasing globally, there is a greater need for steel to build public-transport infrastructure. Emerging economies will also continue to be a major driver of demand as these necessitate a huge amount of steel for urbanisation and industrialisation. The sector is expected to see an investment to the tune of about Rs 2 trillion (US$ 33.06 billion) in the coming years, as per domestic giant, Tata Steel.
Exchange Rate: INR 1 = US$ 0.01653 as on April 22, 2014
References: Media reports, Press Releases, Press Information Bureau
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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