Market Trends India: Performance of the Steel Sector in India

Author / Editor: BDB India Pvt Ltd / Lisa Saller, Lisa Saller

The global steel production recorded a marginal growth of 1% to reach 1,665 MT over the previous year. The sector contributes to nearly 2% of India’s GDP and is likely to grow by 6.2% in 2015 and 7.3% in 2016.

India has become one of the most attractive destinations for investments in the manufacturing sector.
India has become one of the most attractive destinations for investments in the manufacturing sector.
(Photo: pixabay)

The ‘Make in India’ initiative by the Indian Government encourages multinational and domestic companies to manufacture their products in India. Investment proposals of over Rs 1, 10,000 crore (US$ 16.56 billion) being received in the last 12 months across industries is a clear indicator that the initiative is working.

India has become one of the most attractive destinations for investments in the manufacturing sector. With a hard focus on the manufacturing sector, the government is trying to upgrade the skills of its workforce. Taking a cue from countries such as Japan and Germany, known for their top-quality manufacturing, the government is starting an investor outreach program with several countries to bring global best practices into India so as to achieve world standards and be a part of the global supply chain.

Furthermore, the government recently launched ‘Make in India Mittelstand!’, a business support program for 30 ‘high-potential’ German companies to invest in India. Global manufacturing is in turmoil with the low cost model of last two decades coming under pressure. China’s competitiveness is eroding. Brazil seen as one of the most competitive destination ten years ago is becoming a high-cost country.

This turmoil provides a unique opportunity for India to become among the top three manufacturing players in the world. `Make in India` has changed the mind sets-both inside and outside the country. Various states were mobilized and the results are showing. The following is an overview of the Indian steel sector.

Indian steel sector

The global steel production recorded a marginal growth of 1% to reach 1,665 MT, over the previous year. The sector contributes to nearly 2% of the country's GDP. Indian Steel sector is likely to grow by 6.2% in 2015 and 7.3% in 2016. Construction, infrastructure, capital goods and automobiles are the major sectors responsible for steel consumption in the country. While traditional sectors have stronghold in steel consumption; special steel are increasingly being used in engineering industries like defense, aerospace, power generation and oil and gas.

Indian steel industry can be broadly classified based on type of producers operational in country.

  • Integrated Steel Producers — predominantly “Primary Steel Producers” converting iron ore to finished steel through various operations such as refining facilities, rolling facilities, etc. A steel producer having a minimum production capacity of 1 MT per annum of crude steel is referred to as ‘Integrated Producer’.
  • Secondary Steel Producers — primarily mini steel plants that melt scrap or sponge iron to produce steel. Major iron ore rich states such as Odisha, Chhattisgarh, Jharkhand, and Karnataka house the maximum number of integrated steel plants.

States such as Maharashtra, Gujarat and NCR region, along with iron rich states dominate the secondary steel producers and rolling mills scene.

Steel production in India

In 2014–15, production of total finished steel (alloy + non alloy) was 91.46 MT registering a growth of 3% over 2013–14.

India remained the largest producer of sponge iron (or DRI) in the world with a total production of 20.38 million MT. The production of pig iron for sale stood at 9.7 MT showing a growth of 22% over the previous fiscal year.

Imports and exports of steel

India, a net importer of total finished steel since 2007–08 turned into a net exporter in 2013–14. However, during the last fiscal year, India again became a net importer. India can freely import and export iron and steel.

The government plans to set up four steel plants, the first state owned Greenfield projects in steel sector since almost last four decades. The Steel Ministry is facilitating setting up of ‘Steel Research & Technology Mission of India’ (SRTMI) in association with public and private sector companies to boost research and development activity in the iron and steel sector. Along with China, imports from Japan and South Korea continue to bog down the Indian market. Central government has announced to impose a 20% safeguard duty on import of certain category of steel. India imported 15 MT of iron ore in 2015 owing to ban on mining activities and declining global prices.

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