India as a Steel Producer: Gleam or Gloom

The government has focused its attention to steel manufacturing in India with a rapid increase in the measures taken to boost the steel industry. All attempts have been made to raise the profile of India as a manufacturing hub for steel. China is already moving by leaps and bound towards consumption-led growth, now it seems like the time is ripe for our country as well.

The good news is the government driven efforts have started to show some actions. Nearly two dozen sectors have been identified by the government as focus areas under this massive campaign. The total steel consumption per capita is increasing with a rapid growth in industrial sector. India came out as the third largest producer of steel in the world outshining US last year. Yet there is very little to cheer after knowing the other side of the coin. The overall steel production in FY 2015 saw a hike of just 2.6%. The total domestic demand of steel is projected at 113.3 MTPA by the FY 2016-17.

The consumption of steel has grown to 76.99 MT in the FY 2015. The demand has increased with the infrastructural reforms, automotives demands and other industrial growth factors. This is now expected to reach 104 MT by the year 2017. It has also affected the consumption per capita of steel which stood at 60 kg in FY 2015 against that of world average of 222kg. The net imports have increased massively following the recent consumption trends. In India imports stood at 9.32 MT for FY 2015.

India has increased its net imports losing its export competitiveness in the last 10 years. This can also be made by the fact that the net exports have increased barely to 5.5 million tonnes in 2014-15 from 4.5 million tonnes in the year 2013-14. So, overall the exports grew at a CAGR of 11.32 percent. That’s definitely not a thing to rejoice.

While last year India took over US for bagging third place as world’s largest steel producer after China and Japan, things do look promising here for the years to come. But the steel industry in India has to fight its own demons, mainly the constant shortage of iron core. Steel imports from China, Japan and Korea are on constant surge. Steel imports from China have increased from 1.7 million tonnes in the year 2013-14 to that of 3.5 million tonnes in 2014-15.

The steel sector covers a huge market of India contributing to nearly 2% of GDP of the country. The steel industry has given employment to over 600,000 people. Looking at the domestic scenario, things might seem promising here. The recent government initiatives are aimed to scale up the overall steel production in India. We are aiming to bag the position of being the second-largest producer in the world by 2017. Reforms have been underway and they sure look promising. They are aiming to fill the gap between demand-supply with suitable measures. But it is so early to say that it seems like a ray of light to our Steel manufacturing industry.

The domestic steel industry is making reforms and has raised the import duties on steel under a lot of pressure from domestic manufacturers. In fact, anti-dumping duties have also been imposed to discourage steel imports but they seem not to please the domestic manufacturers.

In other news, SAIL is planning to invest whopping US$ 23.8 billion to increase its production to 50 MTPA by the year 2025. The government has also increased the duty on export of iron ore to 30% now to increase domestic production. The steel plants with capacity between 3 to 6 MTPA are planned at major four iron rich states i.e. Karnataka, Jharkhand, Orissa and Chhattisgarh. Modi-led government has rolled out some flagship programs like ‘Smart Cities Mission’ and ‘Housing for all by 2020’ apart from the ‘Make in India’ that has already gained traction. These are aimed at increasing per capita consumption of steel in the country.

It is yet to be seen if the nationalistic appeal of ‘Make in India’ can outdo the constant hike in imports. The coming years will decide if the steel industry will lose its appeal to exporters or new growth plans steer it into a different direction altogether.

References:

http://steel.gov.in/overview.htm

http://thewire.in/2016/02/10/you-cant-make-in-india-if-you-cant-make-steel-21264/

http://www.ibef.org/industry/steel.aspx