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

Steel Industry in India

Latest update: July, 2016

Steel demand has outpaced supply over the last five years

  • In FY15, the consumption of finished steel grew to 76.99 MT while the CAGR increased to 5.74 per cent during FY08-15
  • Driven by rising infrastructure development and growing demand for automotives, steel consumption is expected to reach 104 MT by 2017
  • It is expected that consumption per capita would increase supported by rapid growth in the industrial sector, and rising infra expenditure projects in railways, roads & highways, etc.
  • For FY15, per capita consumption of steel in India was 60 kg against the world average of 222 kg
Growth

Demand supply gap resulting in increased imports

  • With growth in demand for steel outpacing growth in domestic production over the last few years, imports have increased
  • India was a net importer of steel till FY13, but turned a net exporter of the same in FY14. In 2015, India imported 9.32 MT of steel while exports declined to 5.59 MT in FY15 from 5.98 MT during 2013-14
  • During FY11-15, import of steel grew at a compounded annual rate of 9.01 per cent, whereas, exports increased at a CAGR of 11.32 percent
  • Total domestic demand for steel is estimated at 113.3 MTPA by 2016-17
Growth

 

Last Updated: July, 2016

SECTORAL REPORT | January, 2016

METALS AND MINING SECTOR REPORT | August, 2015

Introduction

India is the world’s third-largest producer of crude steel (up from eighth in 2003) and is expected to become the second-largest producer by 2016. The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to India’s manufacturing output.

The Indian steel industry is very modern with state-of-the-art steel mills. It has always strived for continuous modernisation and up-gradation of older plants and higher energy efficiency levels.

Market Size

India’s crude steel production grew by 4.9 per cent year-on-year to at 8 Million Tonnes (MT) in May 2016. ! Total steel production in the country is expected to increase by 7 per cent in 2016.

During FY 2015-16, hot metal production increased at a rate of 1.3 per cent year-on-year to 57.13 MT, whereas the production for sale of total finished steel stood at 90.39 MT. India’s consumption of total finished steel increased by 4.5 per cent to 80.45 MT during FY 2015-16.

Total finished steel exports during FY 2015-16 stood at 4.08 MT, whereas total finished steel imports stood at 11.71 MT for the same period. India’s crude steel capacity has increased 7.6 per cent to 118.2 MT.

The steel sector in India contributes nearly two per cent of the country’s Gross Domestic Product (GDP) and employs over 600,000 people. The per capita consumption of total finished steel in the country has risen from 51 Kg in 2009-10 to about 61.9 Kg in 2015-16.

Investments

Steel industry and its associated mining and metallurgy sectors have seen a number of major investments and developments in the recent past.

According to the data released by Department of Industrial Policy and Promotion (DIPP), the Indian metallurgical industries attracted Foreign Direct Investments (FDI) to the tune of US$ 8.89 billion, respectively, in the period April 2000–March 2016.

Some of the major investments in the Indian steel industry are as follows:

  • JSW Group plans to invest around Rs 10,000 crore (US$ 1.48 billion) at Salboni in West Bengal to set up 1,320 Megawatt (MW) coal-based power plant, 4.8 million tonne cement plant and paints factory over a period of next five to seven years.
  • National Mineral Development Corporation (NMDC) has planned to invest Rs 40,000 crore (US$ 5.93 billion) in the next eight years to achieve mining capacity of 75 Million Tonnes Per Annum (MTPA) by FY2018-19 and 100 MTPA by FY2021-22, compared to 48 MTPA current capacity.
  • Posco Korea, the multinational Korean steel company, has signed an agreement with Shree Uttam Steel and Power (part of Uttam Galva Group) to set up a steel plant at Satarda in Maharashtra.
  • Iron ore output in India is expected to increase by 25 per cent to 153 Million Tonnes in FY 2016, which in turn will help reduce iron ore imports by two-thirds to five Million Tonnes, SAIL plans to invest US$23.8 billion to increase the steel production to 50 MTPA by 2025.
  • ArcelorMittal, world’s leading steel maker, has agreed a joint venture with Steel Authority of India Ltd (SAIL) to set up an automotive steel manufacturing facility in India.
  • Iran has evinced interest in strengthening ties with India in the steel and mines sector, said ambassador of the Islamic Republic of Iran, Mr Gholamreza Ansari in his conversation with Minister of Steel and Mines, Mr Narendra Singh Tomar.
  • Public sector mining giant NMDC Ltd will set up a greenfield 3-million tonne per annum steel mill in Karnataka jointly with the state government at an estimated investment of Rs 18,000 crore (US$ 2.67 billion).
  • JSW Steel has announced to add capacity to make its plant in Karnataka the largest at 20 MT by 2022.

Government Initiatives

The Government of India is aiming to scale up steel production in the country to 300 MT by 2025 from about 90 MT in 2015-16.

The government has launched the National Mineral Exploration Policy (NMEP), which will help to adopt comprehensive exploration of non-fuel and non-coal mineral resources that would give a major boost to the economy.

Metal Scrap Trade Corporation (MSTC) Limited and the Ministry of Steel have jointly launched an e-platform called 'MSTC Metal Mandi' under the 'Digital India' initiative, which will facilitate sale of finished and semi-finished steel products.

The Parliament of India has cleared amendments to the Mines and Minerals Development and Regulation (MMDR) Act, which will enable companies to transfer captive mines leases similar to mines won through an auction, and which is expected to lead to increased Mergers and Acquisitions (M&A) of steel and cement companies.

The Ministry of Steel has announced to invest in modernisation and expansion of steel plants of Steel Authority of India Limited (SAIL) and Rashtriya Ispat Nigam Limited (RINL) in various states to enhance the crude steel production capacity in the current phase from 12.8 MTPA to 21.4 MTPA and from 3.0 MTPA to 6.3 MTPA respectively.

The total outlay for infrastructure in Budget 2016-17 stands at Rs 221,246 crore (US$ 32.8 billion), which is expected to generate much needed demand for steel industry.

The Minister of Steel & Mines, Mr Narendra Singh Tomar, has reiterated commitment of Central Government to support the steel industry to reach a production target of 300 Million Tonne Per Annum (MTPA) in 2025.

The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs 200 crore (US$ 29.65 million).

State-run company Steel Authority of India (SAIL) has received an order for supplying steel for seven warships to be constructed for the Indian Navy. This would be the first time Navy’s warships will be built using Indian steel.

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

  • The Government of India plans to enact a law that will allow the companies which received mining licenses without having gone through the auction process, to transfer these leases, in a move that is expected to make Mergers and Acquisitions (M&As) easier in the steel, cement, and metals sectors.
  • The Central Board of Excise and Customs (CBEC) has issued a notification announcing zero export duty on iron ore pellets, which will help the domestic industry to become more competitive in the international market.
  • Steel Research and Technology Mission of India (SRTMI) was established with an initial capital of Rs 200 crore (US$ 29.65) by the government to spearhead Research & Development (R&D) activities of national importance in collaboration with the steel industry.
  • Government of Chhattisgarh and Jharkhand plan to set up Greenfield steel plants with initial capacity of 3 Million Tonnes Per Annum (MTPA), which will be later enhanced to 6 MTPA.
  • Ministry of Steel has signed a Memorandum of Understanding (MoU) with Ministry of Skill Development and Entrepreneurship to facilitate skill development through Central Public Sector Enterprises (CPSE) of the Ministry.
  • Government has introduced the National Mineral Exploration Trust (NMET) to enhance mineral exploration in the country.
  • Government of India plans to auction eight coal blocks with reserves of 1,143 million tonnes to steel and cement firms in January 2016, as per coal secretary Mr Anil Swarup.
  • Government has planned Special Purpose Vehicles (SPVs) with four iron ore rich states i.e., Karnataka, Jharkhand, Orissa, and Chhattisgarh to set up plants having capacity between 3 to 6 MTPA.
  • SAIL plans to invest US$ 23.8 billion for increasing its production to 50 MTPA by 2025. SAIL is currently expanding its capacity from 13 MTPA to 23 MTPA, at an investment of US$ 9.6 billion.
  • A Project Monitoring Group (PMG) has been constituted under the Cabinet Secretariat to fast track various clearances/resolution of issues related to investments of Rs 1,000 crore (US$ 148.24 million) or more.
  • To increase domestic value addition and improve iron ore availability for domestic steel industry, duty on export of iron ore has been increased to 30 per cent.

Road ahead

India is expected to become the world's second largest producer of crude steel in the next 10 years, moving up from the third position, as its capacity is projected to increase to about 300 MT by 2025. Huge scope for growth is offered by India’s comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.

Exchange Rate Used: INR 1 = US$ 0.0148 as on July 11, 2016

References: Media reports, Press releases, Press Information Bureau (PIB), Joint Plant Committee (JPC)

Note: !- According to data released by the Brussels based World Steel Association

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

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