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Indian Steel Industry Analysis

August, 2014

India is expected to become the second-largest steel producer in the world by 2016. Easy availability of low-cost manpower and presence of abundant iron ore reserves make India competitive in the global setup.

Steel production in India has increased at a compound annual growth rate (CAGR) of 7.9 per cent over FY09-14 to reach 81.54 million tonnes per annum (MTPA). The total market value of the Indian steel sector stood at US$ 57.8 billion in 2011 and is anticipated to touch US$ 95.3 billion by 2016. Total consumption of steel grew to 73.9 million tonnes (MT) in FY14 as against 73.5 MT in FY13; over FY08-14, consumption has expanded at a CAGR of six per cent. Driven by rising infrastructure development and growing demand for automotives, steel consumption is expected to grow at an average rate of 6.8 per cent, reaching 104 MT by 2017.

The Government of India has allowed 100 per cent foreign direct investment (FDI) under the automatic route in the steel sector. It has also reduced the basic custom duty on the plants and equipment required for initial setup or expansion of iron ore pellets plants and iron ore beneficiation plants from 7.5/5 per cent to 2.5 per cent.

Huge scope for growth is offered by India's comparatively low per capita steel consumption, the expected rise in consumption due to increased infrastructure construction, and the thriving automobile and railways sectors.

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