What Are The Challenges Faced By Steel Industry In India

As the 20th century progressed, large-scale industries like iron and steel began to drive the economies of the world. This gave an enormous advantage to countries with established steel industries. With the progression over the years, India also set its foot in such sectors and gained a potential market for itself.

However, after the 21st century, large-scale industries like steel commenced developing themselves with help of many resources like creating new steel grades, using upgraded machinery, and relying on modern technology. But developing countries like India are failing to properly adapt to these changes.

Due to the inability to fully utilizing its structural steel production capabilities, India relies on imports to a certain magnitude.

Nonetheless, several measures like “Make in India” and the new steel procurement policies have been initiated by the government to decrease imports, expand domestic production and increase domestic demand. Many companies are also contributing to the development of the steel industry by using better technology, providing online steel procurements, introducing faster supply methods, and many more. Yet, there lie many bigger challenges for the steel industry in India.

1.    Shortfall Of Capital: The most evident and definite challenge for the steel industry in India is Capital. Developing countries like India have a higher difficulty amassing huge capital investments for large-scale industries like steel. Even the major public sector integrated steel plants are aided by foreign investments. Thus, the production cost increases and so do other expenses. The world’s financial imbalance due to covid-19 has tightened the situation for investors with the fear of risks. Such circumstances agitate investors to demand high returns in a short period. But the Indian steel industry requires long-term investments to develop efficiently. It all leads to higher domestic steel prices which in turn leads to a decrease in domestic demand.

2.    Technological Advancement: Steel Industry in the 21st century heavily depends on technology. The technologically advanced machinery, tools, and equipment give a significant boost to steel production and steel procurement. However, many companies find it difficult to access and install these machinery, tools, and equipment due to various factors like capital, land, expertise, manpower, and more. Thus, utilizing cost-intensive methods that spike the domestic steel prices in India.

3.    Productivity Ratio: In the financial year 2021, India’s crude steel production and finished steel production stood at 102.49 MT and 94.66 MT, respectively. Also, India has overtaken Japan in 2019 and became the second-largest steel producer in the world. These feats look astonishing and marvelous but in reality, they are different. India has one of the lowest per capita labor productivity of around 90-100 tonnes. To make it simpler, if a country produces 1.2 million tonnes of steel with 300 employees while India produces the same output with over 5000 employees. This itself shows the potential room for development in India.

4.    Raw Materials: India has abundant deposits of iron ore. However, it has a limited amount of high-grade coking coal. Thus, India largely fulfills its coking coal requirements through imports from Australia. But due to various factors like variegated weather and the pandemic, there have been huge fluctuations in coking coal supply as well as coking coal import prices. This in turn has severely affected the steel prices in India for both crude and finished.

5.    Environment And Energy: Environmental issues are increasing at tremendous speed. The Indian steel industry is no exception to it. For most developing countries like India, steel is an energy-intensive business. It is due to the unavailability of technology that prioritizes environmental safety. This results in a larger carbon footprint for the steel industry, as well as a negative impact on the immediate environment.

Regardless of being theoretically 100% recyclable and one of the most demanded raw materials in the world, steel has many other production complications to be fully utilized by India. However, many such steel procurement issues can be avoided with the help of OfBusiness.

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