WHERE INDIAN STEEL INDUSTRY STANDS TODAY!
WHERE INDIAN STEEL INDUSTRY STANDS TODAY!
Latest update: January, 2017
Shares in Production: SAIL and Tata lead the way
As of FY16(1), SAIL was the leader in India’s steel sector with the company accounting for 13 per cent of country’s finished steel production and 15.8 per cent of country’s crude steel production.
Tata Steel, another household name in the country, leads private sector activity in the steel sector. During FY16(1), the firm accounted for 10.33 per cent of finished steel production and 11.03 per cent of the country’s crude steel production
India’s crude steel production grew by 9.4 per cent year-on-year to at8.1Million Tonnes (MT) in August 2016.! During April-August 2016, crude steel production in the country grew by 7 per cent year-on-year to 39.98 MT.
Over April-August 2016, steel imports fell 34.5 per cent year-on-year to 3.01 MT, while steel exports rose 23.6 per cent year-on-year to 2.38 MT.
Steel consumption in the country is expected to grow 5.3 per cent year-on-year to 85.8 MT during FY2016-17, led by growth in the construction and capital goods sector.
Steel industry and its associated mining and metallurgy sectors have seen a number of major investments and developments in the recent past.
According to the data released by Department of Industrial Policy and Promotion (DIPP), the Indian metallurgical industries attracted Foreign Direct Investments (FDI) to the tune of US$ 8.89 billion, respectively, in the period April 2000–March2016.
Some of the major investments in the Indian steel industry are as follows:
Tidfore Heavy Equipment Group, the China-based infrastructure giant, is looking to enter the Indian market by signing an investment agreement worth US$ 150 million with Uttam Galva Metallics, to expand its Wardha unit along with South Korean steel major Posco.
ArcelorMittal SA is looking to set up a joint venture (JV) factory in India with state-owned Steel Authority of India Ltd (SAIL), to manufacture high-end steel products which could be used in defence and satellite industries.
JSW Group plans to invest around Rs 10,000 crore (US$ 1.49 billion) at Salboni in West Bengal to set up 1,320 Megawatt (MW) coal-based power plant, 4.8 million tonne cement plant and paints factory over a period of next five to seven years.
National Mineral Development Corporation (NMDC) has planned toinvest Rs 40,000 crore (US$ 5.96 billion) in the next eight years to achieve mining capacity of 75 Million Tonnes Per Annum (MTPA) by FY2018-19 and 100 MTPA by FY2021-22, compared to 48 MTPA current capacity.
Posco Korea, the multinational Korean steel company, has signed an agreement with Shree Uttam Steel and Power (part of Uttam Galva Group) to set up a steel plant at Satarda in Maharashtra.
ArcelorMittal, world’s leading steel maker, has agreed a joint venture with Steel Authority of India Ltd (SAIL) to set up an automotive steel manufacturing facility in India.
Iran has evinced interest in strengthening ties with India in the steel and mines sector, said ambassador of the Islamic Republic of Iran, Mr Gholamreza Ansari in his conversation with Minister of Steel and Mines, Mr Narendra Singh Tomar.
Public sector mining giant NMDC Ltd will set up a greenfield 3-million tonne per annum steel mill in Karnataka jointly with the state government at an estimated investment of Rs 18,000 crore (US$ 2.67 billion).
JSW Steel has announced to add capacity to make its plant in Karnataka the largest at 20 MT by 2022.
Some of the other recent government initiatives in this sector are as follows:
The Government of India has approved a joint venture (JV) between MSTC Ltd and Mahindra Intertrade Ltd, for setting up India's first greenfield auto shredding and recycling facility, which will aide in saving of foreign currency, as a result of import substitution of scrap.
Mr Narendra Singh Tomar, Union Minister of Steel, Mines, Labour and Employment, has launched the National Mineral Exploration Policy (NMEP), which will help to adopt comprehensive exploration of non-fuel and non-coal mineral resources that would give a major boost to the economy.
Metal Scrap Trade Corporation (MSTC) Limited and the Ministry of Steel have jointly launched an e-platform called 'MSTC Metal Mandi' under the 'Digital India' initiative, which will facilitate sale of finished and semi-finished steel products.
The Parliament of India has cleared amendments to the Mines and Minerals Development and Regulation (MMDR) Act, which will enable companies to transfer captive mines leases similar to mines won through an auction, and which is expected to lead to increased Mergers and Acquisitions (M&A) of steel and cement companies.
The Ministry of Steel has announced to invest in modernisation and expansion of steel plants of Steel Authority of India Limited (SAIL) and Rashtriya Ispat Nigam Limited (RINL) in various states to enhance the crude steel production capacity in the current phase from 12.8 MTPA to 21.4 MTPA and from 3.0 MTPA to 6.3 MTPA respectively.
The Minister of Steel & Mines, Mr Narendra Singh Tomar, has reiterated commitment of Central Government to support the steel industry to reach a production target of 300 Million Tonne Per Annum (MTPA) in 2025.
The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs 200 crore (US$ 29.65 million).
The Central Board of Excise and Customs (CBEC) has issued a notification announcing zero export duty on iron ore pellets, which will help the domestic industry to become more competitive in the international market.
Government has planned Special Purpose Vehicles (SPVs) with four iron ore rich states i.e., Karnataka, Jharkhand, Orissa, and Chhattisgarh to set up plants having capacity between 3 to 6 MTPA.
SAIL plans to invest US$ 23.8 billion for increasing its production to 50 MTPA by 2025. SAIL is currently expanding its capacity from 13 MTPA to 23 MTPA, at an investment of US$ 9.6 billion.
India is expected to become the world's second largest producer of crude steel in the next 10 years, moving up from the third position, as its capacity is projected to increase to about 300 MT by 2025. Huge scope for growth is offered by India’s comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.
Exchange Rate Used: INR 1 = US$ 0.0149 as on September 21, 2016
References: Media reports, Press releases, Press Information Bureau (PIB), Joint Plant Committee (JPC)
Note: !- According to data released by World Steel Association
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the sam
Steel industry in China
The Steel industry in China has developed over several decades into the world biggest. China accounted for over 50% of world steel production in 2013. It has been driven by rapid modernisation of its economy, construction, infrastructure and manufacturing industries.
The steel industry was small and sparsely populated at the start of the twentieth century and during both world wars. Most of the steel infrastructure was destroyed during the wars, and were using Soviet technologies. China lagged behind the western countries in its steel industry development even though they were using central planning techniques during the early days of communist rule.
The steel industry gradually increased it output. China's annual crude steel output was 100 million tons in 1996.
China produced 123 million tons of steel in 1999. After its ascension to the WTO it aggressively expanded its production for its growing appetite of manufacturing industries such as automotive vehicles, consumer electronics and building materials.
The Chinese steel industry is dominated by a number of large state-owned groups which are owned via shareholdings by local authorities, provincial governments and even the central authorities. According to China Iron and Steel Association, The top 5 steel groups by production volume in 2015 are Baosteel Group–Wuhan Iron and Steel Corporation, Hesteel Group, Shagang Group, Ansteel Group and Shougang Group.
By 2008 raw materials such as Iron ore prices grew and China had to reluctantly agree to price increases by the three largest iron ore producers in the world; BHP Billiton, Rio Tinto and Vale. During the Global financial crisis the Chinese steel mills won price reprieves as demand from their customers slowed. When the demand started to pick up again in 2009 and in 2010, the price crept back up due to higher demand for automobiles, low interest rates, government fiscal stimuli around the world.Prices for iron ore were negotiated on an annual contract pricing scheme.  Australian iron ore producers were not happy that iron prices did not reflect Spot market pricing. In 2010 pressure from BHP Billiton and Rio Tinto to move to a quarterly based index pricing succeeded. Many Japanese steel mills and Chinese steel companies had to follow as demand for raw materials heated up. Spot-basis pricing has caused problems for steel manufacturers such as exposing them to price fluctuation in the market and reducing the stability of resource supply. Steel mills prefer long term pricing to hedge against cost and maintain raw material supply stability. Rio Tinto has said it will cancel contracts and sell the steel on the spot markets if Chinese steel mills back down on the new quarterly pricing regime.
In 2011 China was the largest producer of steel in the world producing 45% of the world's steel, 683 million tons, an increase of 9% from 2010. 6 of 10 of largest steel producers in the world are in China. Profits are low despite continued high demand due to high debt and overproduction of high end products produced with the equipment financed by the high debt. The central government is aware of this problem but there is no easy way to resolve it as local governments strongly support local steel production. Meanwhile, each firm aggressively increases production. Iron ore production kept pace with steel production in the early 1990s but was soon outpaced by imported iron ore and other metals in the early 2000s. Steel production, an estimated 140 million tons in 2000 increased to 419 million tons in 2006. Much of the country's steel output comes from a large number of small-scale producing centers, one of the largest being Anshan in Liaoning.
China was the top exporter of steel in the world in 2008. Export volumes in 2008 were 59.23 million tons, a 5.5% fall over the previous year. The decline ended China's decade-old steel export growth. As of 2012 steel exports faced widespread anti-dumping taxes and had not returned to pre-2008 levels. Domestic demand remained strong, particularly in the developing west where steel production in Xinjiang was expanding.
On 26 April 2012 a warning was issued by China's bank regulator to use caution with respect to lending money to steel companies who, as profits from the manufacture and sale of steel have fallen, have sometimes used borrowed money for speculative purposes. According to the China Iron and Steel Association the Chinese steel industry lost 1 billion Rmb in the first quarter of 2012, its first loss since 2000.
As of 2015 the global steel market was weak with both Ukraine and Russia attempting to export large amounts of steel.Weak domestic demand in 2014 resulted in record exports of 100 million metric tons of steel by the Chinese steel industry.
Efforts by the Chinese Ministry of Environmental Protection under the Action Plan for the Prevention and Control of Air Pollution has resulted in pressure on steel mills in Linyi and Chengde to employ environmental protection measures on pain of being closed down.
In the context of lowered demand (see also 2015–16 Chinese stock market crash), in 2016 the Chinese state announced large scale closures and redundancies in heavy and primary industries, many of which were functioning as zombie companys, with 1.8 million redundancies (15% of workforce) in the coal and steel industries planned to take place by 2020.
STEEL : GLOBAL SCENARIO (COURTESY AIST Feb 2017)