India’s Steel Sector set to Ride on the Economic Surge ahead


‘Steel is the fabric of the modern world, holding it all together’

India’s steel sector recently surpassed Japan to become the second largest globally, demonstrating its rapidly growing clout as a manufacturing powerhouse. The steel sector, which is pivotal for numerous sectors such as construction, infrastructure, automobile, engineering, and defence, is a backbone for India’s swift infrastructure development. The country, which has a current production capacity of over 170 MT, is targeting an installed capacity of 300 Million Tonnes (MT) by 2030.

Production & Consumption Trends

India’s production performance of the steel sector from April-Nov 2023, was a high of 89.71 million tonnes vis-à-vis 78.49 MT during the corresponding period last year (CPLY), a 14.3 per cent jump. The country witnessed domestic steel consumption stood at 87.06 million tonnes, 14.9 percent higher than CPLY of 75.76 MT. The country’s domestic crude steel production was 94.114 million tonnes, a growth of 14.7 per cent as compared to 82.07 million tonnes in the same period last year.

India, which is highly dependent on imports for its coking coal requirement, imported about 70-80 MT in 2023. The ISA expects steel production to be in the range of 123-127 MT in FY24.

India vis-à-vis the World

India’s production surge in the last two years can be termed significant as almost all major steel-producing countries saw a dip in 2022. While China, the largest steel producer, saw output fall to 1.01 billion tonnes, lower than 1.03 billion tonnes; Japan, the third largest steel producer, saw output at 89.2 MT in 2022, lower than 96.3 MT in the previous year. The United States and Russia also witnessed a drop (80.5 MT in 2022 from 85.8 MT) and (71.5 MT in 2022 from 77 MT) respectively.

Government Initiatives spurring steel demand

In 2017, the government formulated the National Steel Policy, which lays a broad roadmap for encouraging growth for the industry, both through demand and supply. Significant steps in this direction including infrastructure development under the Gati-Shakti Master Plan, the ‘Make-in-India’ initiative for the manufacturing sector, and other flagship schemes are providing impetus to the overall growth of the steel sector in the country. For the PM Gati Shakti National Master Plan, the Ministry of Steel has already uploaded geolocations of over 2,000 steel units for gaining insights into the steel production facilities. This is expected to facilitate various infrastructure planning including highways, ports, gas pipelines, and inland waterways. Further, it has mapped data of various iron ore mines, to enable better visibility and management of critical raw materials.

The recently launched National Logistics Policy, 2022, outlined the Ministry of Steel to create Sectoral Plans for Efficient Logistics. Another laudable effort undertaken by the Indian government has to be set up the Steel Scrap Recycling Policy, which is expected to promote metal scrapping centres for recycling of ferrous scrap. A joint venture between Mahindra Accelo and MSTC has been set up, which has already set up eight Vehicle Scrapping Centres in the country. Further, it has taken up issues pertaining to the National Infrastructure Pipeline projects of steel firms with concerned government departments.

India’s manufacturing prowess has been witnessed in recent years, thanks to the growing budgets towards Research and Development. The Ministry sought proposals from distinguished Research Labs, Academic Institutions, and Steel firms for R&D projects to develop alternate processes and technologies. These can address major challenges including waste utilization, climate change, and resource efficiency amongst others. In FY 2023, 4 R&D projects were approved with a total outlay of over INR 3.6 crore, and 14 ongoing R&D projects are continuing under the aegis of the Ministry of Steel.

Minister of State for Steel, Mr. Faggan Singh Kulaste had also recently confirmed on efforts to push the use of Artificial Intelligence and newer technologies for boosting steel output and reducing carbon emissions.

On the qualitative aspect, the Ministry has introduced a Steel Quality Control Order, banning defective steel products and conformation to BIS standards. A total of 145 Indian Standards have been notified under the Quality Control Order covering alloy steel, carbon steel, and stainless steel.

In fact, 25 common minimum Safety Guidelines for the Iron and steel Sector have been formulated, after extensive consultations, adhering to the ILO Code of Practice. on safety in the Iron and steel industry. Inputs have also been taken from the World Steel Association’s guidance document on “Safety & Health Principles and Definitions”.

PLI 2.0

The government is already contemplating on Production Linked Incentive Scheme 2.0 and ensuring adequate raw material supply. Under PLI 1.0, the government had envisaged the production of specialty steel for creating an additional capacity of 25 MT.

The government had approved the inclusion of ‘Specialty Steel’ under the PLI Scheme, with a 5-year financial outlay of INR 6,322 crore to promote the manufacturing of ‘Specialty Steel’ within the country by attracting capital investment and promote technology up-gradation in the steel sector.

Industry Concerns

The Indian Steel Association, an industry body representing all the major Public and Private sector steel enterprises of India, recently said that the high raw material prices and increasing imports will be an industry concern. Factors such as “dumping of steel products”, especially from Vietnam and China have remained challenging for India.

For instance, China has been exporting over 8 million tonnes of steel each month in 2023, which is the highest in the previous decade, impacting profitability and international steel prices.

Sustainability

Currently, the Indian steel sector accounts for 240 million tonnes of carbon emissions annually, which is expected to double by 2030 as India aims to fulfil its ambitious infrastructure development targets. A Deloitte-FICCI report titled ‘India Steel 2023 Amrit Kaal journey: Facilitating the Indian growth story’ had said that the sector accounts for 12 percent of the total carbon emissions in India, with each tonne produced emitting 2.55 tonnes of CO2 against global average of 1.85 tonne. 

Initiatives such as the National Green Hydrogen Mission, announced by the Ministry of New and Renewable Energy in 2022, has made steel industry a stakeholder.

It is anticipated that green steel can catalyse a 150 million tonne shift from coal-based to hydrogen-based steelmaking and will make energy efficiency and decarbonization the two key focuses of the steel industry across the globe. The shift can also expedite India’s vision to be carbon neutral by 2070 and an immediate target of reducing the total carbon emissions by one-third by 2030, vis-à-vis 2005 levels.

The Indian government had set up 13 task forces for green steel in April last year, which includes components such as

  • Developing benchmarks, certification and monitoring of carbon emissions from steel plants;
  • Policy framework for creating demand for green steel across key end-use sectors
  • Supply-side push including improving energy efficiency, transitioning to renewable energy, higher usage of pellets and scrap, adoption of carbon capture utilisation and storage and exploring interim transition pathways to green steel
  • Research and development, exploring innovative financing mechanisms, learning from global examples and exploring possible collaborations and skill development

India’s leading steel majors are already taking steps in transitioning towards green production. While Tata Steel is carrying out hydrogen use in blast furnace, Kalyani Steel is harnessing solar power in electric arc furnace. JSW has confirmed on having a green hydrogen plant and renewable energy of over 1000 MW under construction.

International steel major ArcelorMittal’s upcoming plant in Hazira by 2029 will be the largest globally, with a capacity of 24 million tonnes. It is anticipated that the first phase will be completed by 2026.

Global Collaborations

Indian Steel Association signed an agreement with the ASEAN Iron and Steel Council in May 2023 to unlock new avenues of growth and sustainability in the steel sector. Later in July, an Indo-Japan bilateral was held for cooperation in the steel sector and decarbonization issues, with the main objective of producing more value-added steel in India. Japanese major Nippon had announced setting up one of the largest global steel plants in Odisha in 2023.

In what may be termed as the growing influence of India’s steel industry, the World Steel Association appointed T V Narendran, MD & CEO of Tata Steel as one of its Vice-Chairmen. The association, which acts as a focal point for the steel industry, provides leadership on all major strategic issues impacting the industry and represents over 85% of the world’s total steel production.

In a recent update, the Indian Steel Association has pushed the government to explore a Free Trade Agreement with Mexico, to push for exports. India, which is exploring FTAs with the UK and EU, also expects steel to be an important and growing market in the coming times, especially with a large number of Indian companies already having a significant presence in these regions.

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