India may become 2nd largest producer of crude steel by 2015
Frost & Sullivan reported that India steel is one of the most important industrial sectors in a country and due to its wide application across sectors its growth and consumption are directly proportional to the country’s GDP. The steel sector contributes to nearly 2% of the country’s GDP and employs over 5 lakh people.
Market Insight from Frost & Sullivan finds that the per capita steel consumption rose from 38 kilogram in 2005-06 to 57 kilogram in 2011-12.
In 2011, overall steel consumption in India was around 67 million metric tonnes per annum and the GDP growth was approximately 8%, compared to 30.7 million tonnes per annum consumption of steel and GDP growth of approximately 3.8% a decade ago, in 2001. Favorable government policies for this sector along with the country’s economic growth have contributed to the steel sector’s fast paced growth.
Production of crude steel increased from 27.3 million tonne to 71.3 million in the last 10 years at a compound annual growth rate of 10% due to advancements in traditional steel making.
Electric arc and induction furnaces have been the key drivers for increase in crude steel production. Indian crude steel production capacity is expected to reach 112.5 million tonne by FY 2016. In 2010-11, total installed capacity stood at 78 million tonne and capacity utilization was in the range of 84%.
Mr Venkatesan Subramanian director of Metals & Minerals, Frost & Sullivan said that “Currently India is the world’s fourth largest producer of crude steel and if all planned capacity expansion projects become operational, it is expected to become the world’s second largest producer by 2015.”
Mr Subramanian said that “Around 300 MoUs have been signed with various states for planned capacity of around 488.56 million tonne by 2020 and major investments are planned for the states of Orissa, Jharkhand, Karnataka, Chhattisgarh and West Bengal. The intended steel capacity build up in the country is likely to result in an investment of approximately INR 5,000 billion to INR 10,000 billion by 2020.”
Traditionally, construction and infrastructure sector together have had the highest demand for steel in the country. Indian finished steel production in 2011-12 stood at 70.32 million tonne and is forecast to touch 92.29 million tonne in 2015-16.
He said that “Among steel intensive industries in India, construction registered the highest growth rates over the past consecutive 5 years. Manufacturing is the second highest steel consumer segment followed by automotive, both of which are poised to witness impressive growth over the future.”
The factors driving the growth of this sector include:
1. Expanding construction, automotive and other down stream segments
2. Overall increase in manufacturing due to global entrants
3. Availability of large consumer base due to India’s demographics
4. Capacity expansions planned by major steel producers
5. Availability of adequate iron ore reserves to meet domestic demand
Increasing imports and competition from international steel manufacturers in recent years due to price considerations, specific quality, grades and sizes, mainly from China and the CIS countries is a growing challenge for the sector.
Moreover, delayed clearances from authorities for mega projects due to regional issues, environmental and land concerns, inadequate infrastructure and inefficient transport systems, fluctuations in raw material prices and insufficient availability of power and coking coal are posing threats that may prevent the sector from reaching its potential.
To tackle these emerging competitive challenges the Indian Government and steel manufacturers need to leverage available opportunities such as high domestic demand, unexplored rural markets, abundant iron ore and coal availability, growing exports, lesser costs for per ton production, and availability of skilled labor, etc.
Source - Frost & Sullivan