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Can we imagine our day without steel?

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  24 Feb 2015 12:00 AM GMT

Dr BK Mukhopadhyay

‘From dawn to dusk, steel surrounds our daily lives. Whether you’re waking up, keeping time, getting in or logging on, steel is there making your everyday activity possible’ - an observation by World Steel Association – something to remember.

So India has emerged as one of the largest steel producers in the world. India is, currently, the 4th largest producer of crude steel in the world as against its 8th position in 2003. India continues to maintain its lead position as the world’s largest producer of Direct Reduced Iron (DRI) or Sponge Iron.

Driven by satisfactory demand India’s production has been showing an uptrend during the ongoing fiscal too. The steel sector contributes nearly 2 percent of the country’s GDP and employs over 6 lakh people. The per capita consumption of total finished steel in the country has risen from 51 kg in 2009-10 to about 60 kg in 2013-14.

The economy is steadily becoming set to be the world’s second largest producer of steel by 2015-16 - by when the steel production is slated to reach 137 million tonne compared to the present level. Going by the current estimate of Rs. 4000 crore investment per million tonne of additiol capacity, the steel sector is expected to witness an estimated investment of Rs. 870640 crore by 2020.

India’s capacity for crude steel production expanded from about 75 million tonnes per annum (mtpa) in 2009-10 to about 101.02 mtpa in 2013-14. Crude steel production grew at 7 percent annually (CAGR) from 65.84 million tonnes in 2009-10 to 81.69 million tonnes in 2013-14. Production for sale of total finished steel (alloy + non-alloy) stood at 87.67 million tonnes during 2013-14, compared to 60.62 million tonnes in 2009-10 - an average annual (CAGR) growth of around 9 percent.

Real consumption of total finished steel (alloy + non-alloy) grew at a CAGR of 7.2 percent during the last five years. Domestic real consumption of total finished steel (alloy + non-alloy) was placed at 74.09 million tonnes in 2013-14, which, in turn, increased by 0.83 percent on a year-on-year basis. Export of total finished steel (alloy + non-alloy) during 2013-14 stood at 5.98 million tonnes while import of total finished steel (alloy + non-alloy) during 2013-14 stood at 5.45 million tonnes. India was a net exporter of total finished steel in 2013-14.

Actually, after a disastrous run in the last decade and also initial years of this decade, our steel sector has clearly rebounded – top global companies evincing deep interest to put up large integrated units here.

No doubt, Chi continues to reign high - the world’s leading steel producer with an annual turnover of around 422 million tonnes. Japan, with a production of 116 million tonnes, comes next. U S A comes third [98.6 million tonnes], Russia being the fourth largest steel producer.

If the current trends are of any indication global steel capacity is likely to continue to grow since a number of Governments have been continuously encouraging investors in the steel industry mainly to meet the infrastructure needs. Strong demand is also emating from industrial sector’s expansion. Thanks are, therefore, due to booming infrastructure in emerging economies especially!

SAIL [Steel Authority Of India Limited], one of the able mahabarats, has been doing pioneering works on this score. It is on an aggressive drive to expand its market reach in the country as well. The company had been building its dealer networks and also setting up new stockyards in the country. In order to make its steels available at the door steps of customers and increase the steel consumption in rural areas it was setting up such stockyards in states like Jharkhand and Bihar. The steel giant has its presence felt in over 600 districts of the country through its network of stockyards.

SAIL also had the right objective to set up mills near consumption centres - in states where it had no manufacturing presence. This would definitely help the company to expand the reach. Accordingly, the Steel Ministry decided to set up a total of ten steel processing units across the country and each such unit is slated to come up near consumption centres in industrially backward districts. In this case the processing unit [mills] will be using the basic steel manufactured by the big plants of SAIL and then converting the same into items of use. Though SAIL would take up this initiative of its own without creating a different company for execution of the same, yet TATA Steel – the competent largest private sector steel company set up a separate joint venture company to spearhead the initiative of setting up - such steel service centres.

Major initiatives taken by the Government in the very recent past also deserve special mentioning. The Steel & Steel Products (Quality Control) Orders, 2012, have come into effect from 1st Oct 2014 on all 15 products having direct bearing on safety & security on human beings and infrastructure. Expansion of two steel plants [IISCO, Burnpur and Rourkela Steel Plant] are ready to be dedicated to the tion, thus adding about 4.7 million tonnes of crude steel capacity. Active engagement with Ministry of Mines, Coal and also Ministry of Environment and Forests has been undertaken for simplification of procedures.

The policy facilitated the formation of Indian Steel Association (ISA) to articulate the needs and aspirations of the steel sector of the country. As a major step towards ensuring long term security in the supply of coking coal, ICVL has taken over the operating coal mine and coal assets of Rio Tinto in Mozambique.

This is also the trend in the global context – such units forming an integral part of large steel companies. With the very acquisition of Corus Tat Steel has been able to transform itself from a local player into a global giant! It has now emerged as the sixth largest steel producing company in the world in which the share of saleable steel stands at a towering 70 to 75 percent [out of company’s total sales].

So, this is high time that a reasoble decision is taken so far as exporting of our ore reserves is concerned. The country’s own demand has been and would go up in the coming years. Quality of ores [hematite variety especially] is also one of the bests. So why not to steadily put an end to exporting of such items?

Mineral policy should be a realistic one. But till now nothing of that sort in the comprehensive sense has been clearly located. It is high time that before entering into long term contracts we must be able to project and realise the position.

Though the large scale operations would help in getting a footprint in newer markets [viz. U S, Europe and Cada] it should not be forgotten that raw material availability continues to be a matter of big concern. Acquiring of more iron ore and coal mines around the world is no child’s play. In fact the raw materials prices in the recent past have risen to new heights as steel production continues with the upswing trends.

As per current thinking on this score : despite significant investments to increase production of some raw materials, trade distorting exports restrictions as well as infrastructure problems in some of then raw materials markets, the sector has the potential to forge ahead.

The O E C D alyses must be taken very seriously in as much as it has cautioned of growing risks to the intertiol steel market. The indication clearly states that while world demand for steel would continue to expand favourably, growing economic risks associated with housing market and associated other problems cloud the outlook at least partially. Continued capacity expansions as observed in many parts of the world could well impact on the price-front if demand growth slows down significantly. As capacity expansion continues to be there, abrupt slowdown in global demand have the potentialities to create trade friction to the detriment of the long term health of the steel industry.

The future success of the steel industry obviously depends on the ability to mage the entire supply chain – right from backward integration to forward linkages. The importance of downstream products are also no less – ball bearing rings, alloy steel bearings [ used in two wheelers, fans and motor pumps ], ferro-manganese and ferro- chrome, cold rolled steel products, galvanized steel sheets, etc. Steel is and will be in much demand in the sectors like the aerospace, construction, automotive, railways as well as in consumer products.

So the overall outlook for the steel sector is very much a positive one. Let us cash in on this uptrend!!

(The Writer, a noted Magement Economist and an Intertiol Commentator on Business and Economic Affairs, can be reached at

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