With the Indian economy
expected to return to
high growth path within
a year or so and with
the government determined to
keep up the pace of investment in
infrastructure, the demand for
steel is expected to move up at a
faster rate in coming years.
To meet the increased demand
for steel and take advantage of
the situation, steel majors are
expanding their capacities on a
large scale and small and medium
companies have drawn up
big investment plans. The
expanding market for steel and
huge iron ore reserves have also
enticed a couple of foreign steel
majors to invest in India.
Another reason for raising the
confidence levels of the steel
investors is that, during the
global economic slowdown in
2008 and 2009, when steel production
across Western countries
declined, India recorded a
growth of 2.8 per cent in 2009.
China was the only other country
to record a positive growth
during this period.
Global picture
According to the International
Iron & Steel Institute, in 2008,
world crude steel output was
1,326.50 million tonnes indicating
a fall of 1.8 per cent compared
to 1,351.30 million tonnes in the
previous year. Given the slow
recovery seen in the developed
economy, the output is expected to
remain subdued in the next couple
of years.
| World's Top 10 Steel Makers in 2008 |
| Rank |
Producers |
million tonne |
| 1 |
Arcelor-Mittal, UK |
103.3 |
| 2 |
Nippon Steel, Japan |
37.5 |
| 3 |
Baosteel Group, China |
35.4 |
| 4 |
Posco, South Korea |
34.7 |
| 5 |
Hebei Steel Group, China |
33.3 |
| 6 |
JFE, Japan |
33 |
| 7 |
Wuhan Steel Group, China |
27.7 |
| 8 |
Tata Steel, India |
24.4 |
| 9 |
Jiangsu Shagang Group, China |
23.3 |
| 10 |
US Steel, USA |
23.2 |
| Source: www.worldsteel.org |
Among the major steel producing
countries, China retained its
position as the largest crude steel
producer by producing 500.5 million
tonnes in 2008. It was followed
by Japan (118.7 million
tonnes) and USA (91.4 million
tonnes). While China maintained
positive growth in 2009 also,
Japan and USA registered a fall
in production.
Among the steel producers,
Arcelor-Mittal was the largest
steel producer in the world with
production of 103.3 million tonnes
in 2008. Nippon Steel of Japan
and Baosteel of China followed
with 37.5 million tonnes and 35.4
million tonnes respectively. Tata
Steel with a total production of
24.4 million tonnes ranked 8th.
Indian scenario
In 2008-09, India produced
around 57.16 million tonnes of
steel and consumed around
53.35 million tonnes. Between
2004 and 2009, steel production
increased at an average rate of
5.6 per cent and consumption
increased by 7.8 per cent.
| Top 10 Steel Producing Countries in 2008 |
| Rank |
Country |
million tonne |
| 1 |
China |
500 |
| 2 |
Japan |
119 |
| 3 |
United States |
92 |
| 4 |
Russia |
69 |
| 5 |
India |
55 |
| 6 |
South Korea |
54 |
| 7 |
Germany |
46 |
| 8 |
Ukraine |
37 |
| 9 |
Brazil |
34 |
| 10 |
Italy |
31 |
| Source: www.worldsteel.org |
According to the National Steel
Policy announced in November
2005, the overall steel production
in the country was expected to rise
to over 110 million tonnes by
2019-20. Domestic steel demand
is expected to grow by over 7 per
cent on a compounded annual
basis over the next 15 years.
Export of steel products was to
register over fivefold increase to
26 million tonnes by 2020.
India accounts for around 5 per
cent of the global steel consumption.
According to the ministry of
steel, consumption grew 8 per
cent in the fiscal year ended
March 2010, due to strong
demand from automobile, infrastructure
and housing sectors.
Import-export
India imports more iron and steel
than it exports. During the 10
months of 2009-10, the country
imported iron and steel worth $6.7
billion against
exports valued at $2.8
billion. A major
grouse of steel producers
is the export of
iron ore that can be
converted into value
added iron and steel
products by domestic
steel producers.
Export of iron ore,
which declined by 8
per cent to $3.9 billion
during April-January 2008-09 following
the global slump, shot up
to $4.4 billion during the corresponding
period of 2009-10.
| Steel Projects by Ownership |
| Ownership |
Projects |
Cost |
Capacity (million tpa) |
| Government |
9 |
63,907 |
20.85 |
| Private |
77 |
600,309 |
192.60 |
| Indian |
70 |
471,309 |
159.80 |
| Foreign |
7 |
129,000 |
32.80 |
| Total |
86 |
664,216 |
213.45 |
Project investment
The total quantum of investment
lined up in the steel industry
reflects the confidence of project
promoters about the high growth
expected in coming years. As of
March 2010, there were 846 projects
in the steel sector intending
to enhance capacities in the primary
(sponge iron and pig iron),
crude steel, secondary, and alloy
steel sectors.
For our current study, we chose
to look at the progress made by
the 86 integrated steel projects
that will augment crude steel
manufacturing capacity. These
projects account for bulk of the
total investment envisaged in
the entire steel sector.
The 86 projects involve an
aggregate crude steel manufacturing
capacity of 213.45 million
tpa. They also envisage the setting
up of captive power generation
capacity of 11,000 mw.
Although most of these projects
were announced in mid-
2000, only 44 were under implementation
as of March 2010. A
total of 42 projects with an
aggregate capacity of 130.4 million
tpa are still on the drawing
boards waiting for either allocation
of iron ore mines, land for
project or various approvals
from government agencies.
The progress of these 44 projects,
currently in various stages of
implementation, indicates that if
these projects are implemented as
per schedule, then India's total
steel manufacturing capacity will
have more than doubled from 72
million tpa in March 2010 to
around 154 million tpa by 2015.
State-wise projects
Iron ore rich states, Chhattisgarh,
Jharkhand, Karnataka, Orissa
and West Bengal, have attracted
most of the steel projects. Jharkhand,
which enjoys the largest
iron deposits in India, has bagged
15 integrated mega steel projects
with a total capacity of 47.15 million
tpa. Orissa, which boasts of
signing the highest number of
MoUs for setting up steel projects,
has 16 integrated steel projects
with a total capacity of 38.45 million
tpa.
Karnataka, which recently
started attracting mega steel
projects, had 16 such projects as
of March 2010 with a total capacity
of 46.5 million tpa. The mega
proposals that the state managed
to attract include proposals from
Arcelor-Mittal and Posco whose
similar-sized projects in Jharkhand
and Orissa respectively
have not made much progress for
various reasons.
| Capacity Additions: 2011-2015 |
| Year |
Capacity Addition (million tpa) |
Total Capacity (million tpa) |
| 2010 |
|
72.00 |
| 2011 |
7.20 |
79.20 |
| 2012 |
16.70 |
95.90 |
| 2013 |
28.64 |
124.54 |
| 2014 |
20.20 |
144.74 |
| 2015 |
9.34 |
154.08 |
Chhattisgarh and West Bengal
are the other two states to attract
sizeable investment in the form of
mega projects.
Project ownership
Interestingly, among the Indian
steel companies, not only existing
large players such as Tata Steel,
Essar, JSW, Jindal Steel & Power and Bhushan Steel are expanding
their respective capacities manifold,
even small- and mediumsized
steel companies like Aaress
Iron & Steel, Adhunik Corporation,
Bramhani Industries, Jai Balaji
Industries, RM Steel and Welspun
Power are setting up large
capacity greenfield projects.
Of the seven foreign-owned
projects, two each were by Ispat
Industries, Arcelor-Mittal and
Posco. The seventh project is
being set up by Essar Holding
in Orissa.
Steel Authority of India Ltd,
Rashtriya Ispat Nigam Ltd and
NMDC Ltd account for bulk of the
investment in the steel sector.
These three companies together
intend to add 17.7 million tpa of
fresh steel manufacturing capacity
in the next couple of years.
Capacity additions
Considering the progress made
by the 86 steel projects as monitored,
a ProjectsToday special
study indicates that fiscal 2010-
11 will see a subdued capacity
addition of 7.2 million tpa. This
will be followed by 16.7 million
tpa of capacity addition in 2011-
12. The subsequent two years
will see healthy capacity additions
of 28.64 million tpa and
20.2 million tpa.
Outlook
Land acquisition is a common
hurdle faced by nearly all private
mega steel projects. Identifying
and taking possession of
the unencumbered land is one
issue the state governments
have to tackle on a war footing, if
they want the mega steel projects
to fructify on their soil.