Steel industry in India to reach 300MT of production capacity by 2030

India was the world’s third largest steel producer and third-largest steel consumer in 2017. The total crude steel production in India increased at a CAGR of 5.43 per cent during FY12-18 with output reaching 103.13 million tonnes per annum in FY18. By 2030-31, the National Steel Policy 2017 aims to achieve up to 300 million tonnes of production capacity.

Definition / Scope
Market Overview
Top Market Opportunities
Market Drivers
Industry Challenges
Technology Trends
Pricing Trends
Regulatory Trends
Other Key Market Trends
Market Size and Forecast
Market Outlook
Competitive Factors
Strategic Conclusion
References
Appendix

Definition / Scope

Steel is a strong metal that is mixture of carbon and iron, used as a structural and fabricating mate. Steel industry refers to the industry that is involved in the processing of iron ore into steel. Steel is a major component used in automobiles, buildings, infrastructure, ships and others.

Market Overview

The production of steel started in India with the establishment of Tata Iron and Steel Company (TISCO) in 1907. Indian Iron and Steel Company was set up in 1918 to compete with TISCO.
In 1923, Mysore Iron and Steel Company was established. New ventures were only undertaken by the central government, according to the new Industrial Policy Statement 1948.
In the early 1990S, the steel production was dominated by the public sector. While private players focused mainly on producing finished steel using crude steel products.
Steel Authority of India Ltd was set up in 1973 to oversee most of the India’s iron and steel production.
Post 1990, foreign players started entering the Indian steel market. There was no requirement of license for capacity creation and export duty on iron ore was levied to focus more on catering growing domestic demand.
There was launch of Scheme for promotion of Research and Development in Iron and Steel sector.
India became ahead of Japan to become the world’s second largest steel producer in 2018 with crude steel production of 106.50 million tonnes.

Top Market Opportunities

Automotive – The automotive industry accounts for 10 per cent of demand of steel in India. The automotive industry is forecasted to grow to US$ 260-300 billion by 2026.
Capital Goods – The capital goods sector accounts for 11 per cent of steel consumption and expected to increase 14/15 per cent by 2025-26.
Infrastructure – The infrastructure accounts for 9 per cent of steel consumption and expected to increase 11 per cent by 2025-26. 70 per cent of the country’s infrastructure estimated at US$ 89.50 billion is yet to come up.
Airports – In FY18, passenger traffic at Indian airports stood at 308.75 million and number of operational airports stood at 100 in September 2018. The estimated steel consumption in airport building is likely to increase more than 20 per cent over new few years.
Railways – Gauge conversion, setting up of new lines and electrification is expected to drive steel demand for railway sector. PPP Investments in railways are expected to grow from US$ 3.72 billion in 2017-18 to US$ 4.19 billion in 2018-19.
Oil and Gas – By 2040, the primary energy consumption of oil and gas is estimated to surge to 10 mbpd and 14 bcfd respectively. This would lead to an increase in demand for steel tubes and pipes, hence providing attractive opportunity to the steel industry.
Power – By 2022, the government is aiming to achieve 175 GW of renewable power generation capacity. Additionally, the government also aims capacity addition of 58,384 MW from conventional sources between 2017-22. This would lead to increment in both transmission and distribution capabilities there by increasing steel demand.
Rural India – Rural India is expected to reach per capita consumption of from 12.11 kg to 14 kg for finished steel by 2020. The government of India’s initiative like Pradhan Mantri Awas Yojana and Pradhan Mantri Gram Sadak Yojana are also surging demand for construction steel in rural India.

Market Drivers

Robust Demand

Infrastructure, oil, gas and automotive will drive the growth of the industry. India’s finished steel consumption is expected to increase to 230 MT by 2030-31 from 90.68 MT in 2017-18.The appliances and consumer electronics sector is expected to expand at a CAGR of 8.96 per cent over during 2017-2022, leading to the growth of the steel industry.

The automobile production expanded at a CAGR of 7.08 per cent during FY13-18.While Gross Value Added of the construction industry grew 8.8 per cent during 2017-18.

Policy Support

100 per cent FDI through automatic route is allowed in steel industry. National Steel Policy 2017 was implemented to encourage the steel industry to reach global benchmarks. An export duty of 30 per cent is levied on iron ore to ensure supply to domestic steel industry. Further, 20 per cent safeguard duty is levied on steel imports.

Increasing Investments

The steel industry is India is witnessing consolidation of players which has led to investments by entities from other sectors. India would require to invest US$ 156.08 billion by 2030-31 to achieve steel capacity build-up of 300 million tonnes per annum by 2030.

Industry Challenges

The per capita labor productivity in India is quite low as opposed to other countries. The per capita labor productivity in India is at 90-100 tonnes while it is 600-700 tonnes per man per year in major steel producing companies like Japan and Korea.
Cost of electricity in India is the highest in the world. Power cost was recorded 5.9 in India while it was 2.2 in South Africa, 3.8 in Canada, 4.3 in USA, 4.7 in Mexico, and 4.0 in South Korea.
The energy consumption in many integrated steel plants in India is usually high at 6-6.5 Giga calorie per tonne of crude steel. While it is only 4.5-5.0 in other developed countries. The higher rate of energy consumption in India is due to obsolete technologies and old operating practices.

Technology Trends

Companies are endeavouring coal gasification and gas based Direct-Reduced Iron production. Other alternatives technologies such as Hismelt, Finex and ITmk3 are being adopted to produce hot metal.
Ministry of Steel has issued necessary directives to the steel companies to frame a strategy for taking up more R&D projects by spending at least one per cent of their sales turnover on R&D to facilitate technological innovation in the steel industry.
Ministry of Steel has implemented energy efficiency improvement projects for mills operating with outdated technologies.

Pricing Trends

The price regulation of steel and iron was put end in India on 16 January 1992.
The steel price is determined by interplay of market forces, raw material prices and international price trend.
12.5 per cent basic excise duty is levied for steel with no export duty on steel items.
Export duty of 30 per cent is levied by Government of India on all forms of iron ores excluding low grades.

Regulatory Trends

The GOI has levied export duty of 30 per cent on iron ore to ensure supply to domestic steel industry.
The Union Cabinet, Government of India has approved the National Steel Policy 2017 that would create a globally competitive steel industry in India. By 2030-31, the National Steel Policy aims 300 million tonnes steel-making capacity and 160 kgs per capita steel consumption.
The Ministry of Steel is planning to set up of an industry driven Steel Research and Technology Mission of India in association with the public and private sector steel companies. This is expected to enhance research and development activities in the iron and steel industry at an initial corpus of US$ 30 million.

Other Key Market Trends

RINL, Vishakapatnam Steel Plant and the Power Grid Corporation of India Ltd signed an MoU to set up a JV company to manufacture transmission line towers and tower parts including R&D of new high-end products.
SAIL and Arcelor Mittal are going to form a joint venture to set up 1.5 million tonne per annum steel plant.
Vedanta Group is going to set up a one million tonne capacity steel plant in Jharkhand with an investment of US$ 3.13 billion, as of December 2018.

Market Size and Forecast

The total crude steel production in India increased at a CAGR of 5.43 per cent during FY12-18 with country’s production reaching 103.13 million tonnes per annum in FY18.
The finished steel production for sale in India stood at 104.98 MT during 2017-18.
The finished steel consumption increased at a CAGR of 5.70 per cent during FY08-18 to reach 90.70 MT.
The steel production capacity increased at a CAGR of 8.71 per cent from 59.84 million tonnes in FY08 to 137.98 million tonnes in FY18.
In FY18, BOF, EAF and IF contributed 55.27, 40.24 and 42.47 million tonnes respectively.
Exports and imports of finished steel stood at 9.62 MT and 7.48 MT respectively in FY18.
The steel industry contributes over 2 per cent to the India’s GDP and employs 500,000 people directly and 2.5 million indirectly.
India’s per capita consumption of steel grew at a CAGR of 4.12 per cent from 46 kgs in FY08 to 68.90 kgs in FY18.

Market Outlook

By 2030-31, the National Steel Policy 2017 aims to achieve up to 300 million tonnes of production capacity. Out of the total, BF-BOF route is expected to contribute 65 per cent of capacity, and remaining 35 per cent is expected to come from EAF & IF routes.
The steel manufacturing output is expected to increase to 128.6 MT by 2021, accelerating the share of global steel production from 5.9 per cent in 2018 to 7.7 per cent by 2021.
India is expected to surpass USA to become the world’s second largest steel consumer in 2019 with total steel consumption of 102.3 MT.
The National Steel Policy aims to increase per capita steel consumption to 160 kgs by 2030-31.
National Mineral Development Corporation is expected to increase the iron ore production 75 million tonnes per annum until 2021 indicating new opportunities in the sector.

Competitive Factors

India ranked the world’s second largest producer of crude steel in 2018 from eight spot in 2003.
There is easy availability of low-cost manpower in India.
There is abundant iron ore reserve in India making it competitive in the global set up. India is home to the fifth-highest reserves of iron ore in the world.

Key Market Players

JSW Steel

JSW Steel is a top integrated steel manufacturer with presence in over 100 countries. It is the first company to manufacture high-strength and advanced high-end steel products for its automotive segments.

It has the capacity to produce 18 million tons per annum with plants in Karnataka, Tamil Nadu and Maharashtra.

Tata Steel

It is the world’s second most geo-graphically diversified steel producer. It is the lowest cost producer of steel in Asia and has presence in over 50 countries. It is also the second largest steel producer in Europe with a crude steel production capacity over 12.1 MTPA. By 2025, the company is planning to enhance installed production capacity to 30 MTPA.

Steel Authority of India

SAIL is the largest steel making company in India. It is also one of the seven Maharatna’s of the country’s Central Public Sector Enterprises. It has five integrated steel plants and three special steel plants located in eastern and central regions of India. The company manufactures and sells a wide range of steel products.

Strategic Conclusion

India was the world’s second largest steel producer in 2018. The steel industry is driven by increased infrastructure construction, booming automobile and railway sectors.

Further, the availability of raw materials such as iron ore and cost effective labour is also supporting the growth of the industry. India is expected to beat USA to become the world’s second largest steel consumer in 2019.

Appendix

BCFD – Billion Cubic Feet Per Day
CAGR – Compound Annual Growth Rate
FDI – Foreign Direct Investment
FY– Indian Financial Year (April to March)
JV – Joint Venture
MoU – Memorandum of Understanding
MPBD – Million Barrels Per Day
MT – Million Tonnes
MTPA – Million Tonnes Per Annum
SEZ – Special Economic Zone
TMT – Thermo Mechanically Treated
US$ – US Dollar