Sector structure/Market size

The steel industry in India has been moving from strength to strength and according to the year-end review by the Press Information Bureau, India has emerged as the fourth largest producer of steel in the world and the second largest producer of crude steel.

Significantly, state-owned steel maker, Steel Authority of India (SAIL), which reported a net profit of US$ 571 million in January-June 2009, has become the most profitable steel company globally, beating steel majors such as ArcelorMittal, Posco, Bao Steel and Nippon in the half yearly profits.

Production

Steel production reached 28.49 million tonne (MT) in April-September 2009.

The National Steel Policy has a target for taking steel production up to 110 MT by 2019–20. Nonetheless, with the current rate of ongoing greenfield and brownfield projects, the Ministry of Steel has projected India's steel capacity is expected to touch 124.06 MT by 2011–12. In fact, based on the status of memoranda of understanding (MoUs) signed by the private producers with the various state governments, India's steel capacity is likely to be 293 MT by 2020.

Consumption

India accounts for around 5 per cent of the global steel consumption. Almost 70 per cent of the total steel used is for kitchenware. However, its use in railway coaches, wagons, airports, hotels and retail stores is growing immensely.

India's steel consumption rose by 6.8 per cent during April-November 2009 over the same period a year ago on account of improved demand from sectors like automobile and consumer durables.

A Credit Suisse Group study states that India's steel consumption will continue to grow by 16 per cent annually till 2012, fuelled by demand for construction projects worth US$ 1 trillion.

The scope for raising the total consumption of steel is huge, given that per capita steel consumption is only 35 kg – compared to 150 kg across the world and 250 kg in China.

Steel players like JSW Steel and Essar Steel are increasing their focus on opening up more retail outlets pan India with growth in domestic demand. JSW Steel currently has 50 such steel retail outlets called JSW Shoppe and is targetting to increase it to 200 by March 2010. They expect at least 10-15 per cent of their total production to be sold by their retail outlets.

Essar Steel which currently has over 300 retail outlets across the country, plans to set up 5,000 outlets of various formats soon. It expects to sell 3MT of steel through the retail route in two years.

Exports

Out of India's annual iron ore production of more than 200 MT, about 50 per cent is exported.

India's iron ore exports more than doubled to 9.3 million tonne in October 2009 as compared to 4.4 million tonne in the same month a year ago on the back of increase in demand from Chinese steel producers, as per a joint study by a group of iron ore exporters.

Iron ore is a key input in steel making. The country’s iron ore exports during April-October 2009 period grew 20 per cent over the year ago period to 53 million tonne, as per the study.

Investments

A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive huge domestic and foreign investments.

The domestic steel sector has attracted a staggering investment of about US$ 236 billion, according to the Minister of State for Steel A Sai Prathap.