Iron & Steel Industry in India

Introduction

India was the world’s second-largest steel producer@ with production standing at 106.5 MT in 2018. 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. India’s steel production capacity has expanded to 137.975 million tones in FY19. India surpassed Japan to become the world’s second largest steel producer in 2019, with crude steel production of 111.2 million tonnes.

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.

Indian steel industries are classified into three categories such as major producers, main producers and secondary producers.

Market Size

India’s finished steel consumption grew at a CAGR of 7.5 per cent during FY08-FY19 to reach 97.54 MT. India’s crude steel and finished steel production increased to 106.56 MT and 131.57 MT in 2018-19, respectively. In FY20 (till February 2020), crude steel and finished steel production stood at 100.78 MT and 94.01 MT respectively.

During 2018-19, 6.36 MT of steel was exported from India. Exports and imports of finished steel stood at 7.78 MT and 6.39 MT, respectively, in FY20P (up to February 2020).

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 for Promotion of Industry and Internal Trade (DPIIT), the Indian metallurgical industries attracted Foreign Direct Investments (FDI) to the tune of US$ 11.45 billion in the period April 2000–December 2019.

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

• For FY2019-20, JSW Steel set a target of supplying around 1.5 lakh tonne of TMT Rebars to metro rail projects across the country.
• In October 2019, Kamdhenu Ltd added new production capacity of 60,000 tonne per annum in Dadri, Uttar Pradesh to manufacture Kamdhenu Structural Steel.
• As of December 2018, Vedanta Group is going to set up a one million tonne capacity steel plant in Jharkhand with an investment of Rs 22,000 crore (US$ 3.13 billion).
• Ministry of Steel plans to invest US$ 70 million in the eastern region of the country through accelerated development of the sector.
• The production capacity of SAIL is expected to increase from 13 MTPA to 50 MTPA in 2025 with total investment of US$ 24.88 billion.
• In December 2019, Arcelor Mittal completed the acquisition of Essar Steel at Rs 42,000 crore (US$ 6.01 billion) and also formed joint venture with Nippon Steel Corporation.
• In February 2020, GFG Alliance acquired Adhunik Metaliks and its arm Zion Steel for Rs 425 crore (US$ 60.81 million), marking its entry into the Indian steel market.
• JSW Steel has planned a US$ 4.14 billion capital expenditure programme to increase its overall steel output capacity from 18 million tonnes to 23 million tonnes by 2020.
• In March 2019, ArcelorMittal was declared as the winning bidder to acquire Essar Steel for a consideration of Rs 42,000 crore (US$ 5.82 billion).
• Tata Steel has decided to increase the capacity of its Kalinganagar integrated steel plant from 3 million tonnes to 8 million tonnes at an investment of US$ 3.64 billion.

Government Initiatives

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

• Government introduced Steel Scrap Recycling Policy aimed to reduce import.
• An export duty of 30 per cent has been levied on iron ore^ (lumps and fines) to ensure supply to domestic steel industry.
• Government of India’s focus on infrastructure and restarting road projects is aiding the boost in demand for steel. Also, further likely acceleration in rural economy and infrastructure is expected to lead to growth in demand for steel.
• The Union Cabinet, Government of India has approved the National Steel Policy (NSP) 2017, as it seeks to create a globally competitive steel industry in India. NSP 2017 envisages 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030-31.
• 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$ 30 million).
• The Government of India raised import duty on most steel items twice, each time by 2.5 per cent and imposed measures including anti-dumping and safeguard duties on iron and steel items.

Road ahead

The National Steel Policy, 2017, has envisaged 300 million tonnes of production capacity by 2030-31. The per capita consumption of steel has increased from 57.6 kg to 74.1 kg during the last five years. 

As per Indian Steel Association (ISA), steel demand to grow by over 7.2 per cent in both 2019-20 and 2020-21.

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.

Note: Conversion rate used as on January 2020, Re 1 = US$ 0.01402

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

Note: ^@ - Behind China, ^Except low grade (below 58 per cent)

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