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Financial Aspect: Speciality Steel Industry in India

Financial Aspect: Speciality Steel Industry in India

Steel is the most conducive material for circular economy as it can be used, reused and recycled infinitely. In India’s march towards a $5 trillion economy, the steel sector has a major role fulfilling the dream. India is a developing nation with the government undertaking several huge scale infrastructural projects including Housing for All, 100% electrification, piped water for all etc. these all schemes and projects are hugely steel intensive projects.

India is the second largest steel producer in the world. In the past 10–12 years, India’s steel sector has expanded significantly. Production has increased by 75% since 2008, while domestic steel demand has increased by almost 80%. The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-effective labour.

The two very critical raw materials which are needed for steel Industry are High grade iron-ore Non-coking coal, which are sufficiently available indigenously. Another supporting factor to India’s crude steel and finished steel production is the availability of sponge and pig iron industries which are used in the steel production to produce steel through electrical routes. It is interesting to know that India has been the world’s leading producer of sponge iron since 2003, with the capacity of sponge iron making increased over the years and stood at 46.56 MT in 2018-19. Adding to this, India is also an important producer of pig iron. Post liberalization, with setting up several units in the private sector, not only has imports drastically reduced, but India has also turned into a net exporter of pig iron.

The annual production of steel is anticipated to exceed 300 million tonnes by 2030–2031. By 2030–31, crude steel production is projected to reach 255 million tonnes at 85% capacity utilisation achieving 230 million tonnes of finished steel production, assuming a 10% yield loss or a 90% conversion ratio for the conversion of raw steel to finished steel. With net exports of 24 million tonnes, consumption is expected to reach 206 million tonnes by the years 2030. As a result, it is anticipated that per-person steel consumption will grow to 160 kg.

According to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT), from April 2000 to March 2022, Indian metallurgical industries attracted Foreign Direct Investment (FDI) inflows of US$ 17.01 billion.

To tap the steel industry to its full potential several domestic investments have been undertaken by the steel sector since long. Also the major steel producer players in India which include:

  • Steel Authority of India Ltd. (SAIL)
  • Rashtriya Ispat Nigam Ltd. (RINL)
  • National Mineral Development Corporation (NMDC)
  • Manganese Ore (India) Limited (MOIL)
  • TATA Steel.
  • JSW Steel
  • Jindal Steel and power limited.
  • ArcelorMittal and Nippon steel

And many other such huge and small organizations and corporations have engaged themselves in various initiatives like collaborations, investments in R&D, National Steel Policy 2017.

Production Linked Incentive (PLI) scheme is focusing on high value additions to the products, etc. Some of them are : 

  • In September 2022, Steel Authority of India Limited (SAIL) which is a Maharatna PSU supplied 30,000 tonnes of the specialty steel for the nation’s first indigenously built Aircraft Carrier INS Vikrant.
  • In August 2022, Tata Steel signed an MoU with Punjab Government to set up a steel scrap based electric arc furnace steel plant.
  • In October 2021, Tata Steel was planning to set up more scrap-based facilities that will have a capacity of at least a billion tonnes by 2025.
  • In October 2021, JSW Steel invested Rs. 150 billion (US$ 19.9 million) to build a steel plant in Jammu and Kashmir and boost manufacturing in the region.
  • In October 2021, ArcelorMittal and Nippon Steel Corp.’s joint venture steel firm in India, announced a plan to expand its operations in the country by investing ~Rs. 1 trillion (US$ 13.34 billion) over 10 years. Also announced to invest Rs. 1 lakh crore (US$ 13.48 billion) in Gujarat for capacity expansion.
  • In August 2021, Jindal Steel & Power Ltd. announced plans to invest US$ 2.4 billion to increase capacity over the next six years.
  • In the next three years from June 2021, JSW Steel is planning to invest Rs. 47,457 crore (US$ 6.36 billion) to increase Vijayanagar’s steel plant capacity by 5 MTPA and establish a mining infrastructure in Odisha.
  • In June 2021, JSW Steel, CSIR-National Chemical Lab (NCL), Scottish Development International (SDI) and India H2 Alliance (IH2A) joined forces to commercialize hydrogen in the steel and cement sectors.

This was about the investments and collaborations made in the steel sector. To further enhance and prosper the steel sector, some legislative and policy regarding steps were  taken by the government of India to promote and expand the steel and speciality steel sector in India, which are :

  • The Union Cabinet has approved the National Steel Policy (NSP) 2017, as it intends to create a globally competitive steel industry in India.
  • In July 2021, the Union Cabinet approved the production-linked incentive (PLI) scheme for specialty steel. The scheme is expected to attract investment worth ~Rs. 400 billion (US$ 5.37 billion) and expand specialty steel capacity by 25 million tonnes (MT), to 42 MT in FY27, from 18 MT in FY21 with a view of ensuring the scheme promotes end to end manufacturing within the country. Both the policy and scheme envisages 300 million tonnes (MT) steel production within India.
  • In October 2021, India and Russia signed an MoU to carry out R&D in the steel sector and produce coking coal.
  • In June 2021, the Ministry of Steel & Petroleum & Natural Gas emphasized on the program of  ‘Making Eastern India a manufacturing hub with respect to metallurgical industries’. The presence of natural resources presents an excellent opportunity for Eastern India ( including Odisha, Jharkhand, Chhattisgarh, West Bengal and the northern part of Andhra Pradesh) to spearhead the expected growth in the domestic steel industry. This Eastern belt has the potential to add more than 75% of the country’s incremental steel capacity envisioned by the National Steel Policy. It is expected that out of the 300 MT capacity by 2030-31, over 200 MT can come from this region alone.
  • The Ministry of Steel is facilitating the 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$ 30 million).
  • The Government of India raised import duty on most steel items twice, each time by 2.5% and imposed measures including anti-dumping and safeguard duties on iron and steel items.
  • Also the Ministry of steel is encouraging suggestions and consultations form various stakeholders in the steel sector. “Chintin Shivir”, is one example of this which was an idea generation event involving 900+ representatives from the steel sector.
  • The Ministry is planning for the establishment of steel plants along the coast under the aegis of Sagarmala project. Such plants would be based on the idea of importing scarce raw materials and exporting steel products and reducing logistics cost.

One of the most important steps taken by the Government of India in the steel sector is to undertake an economic partnership with the Government of Japan. This is really a huge step. Japanese railways and technology are way ahead of time and are reliable. With this undertaking it has worked as an impetus for our developing metro and public transport network. The memorandum was signed in December 2020 and is a great opportunity.  Recently, Nippon Steel purchased with ArcelorMittal, Essar Steel India Limited, which was the largest investment made by a Japanese company in India. Nippon Steel also entered a joint venture with TATA Steel, which produces high grade steel used for automobiles. A motley of companies, led by Mitsubishi Corporation and Larsen & Toubro, is working with Steel Authority of India Limited (SAIL) for the modernisation of Rourkela Steel Plant.

Challenges & Prospects

As research and development in the steel industry progresses, new and innovative techniques of steel production are utilized by the industry. While iron ore remains the primary source of steel making, steel available in the form of Scrap is the secondary raw material for the steel industry. The Indian steel industry is characterized by the presence of a large number of small steel producers who utilize scrap, sponge iron, non-coking coal and other inputs for steel making. But medium and small steel producers have faced the heat of escalated input costs prompting them to knock the door of the banks for increasing working capital limit due to Russia-Ukraine war. Besides coking coal and freight charges making both crude and finished steel prices volatile, metals such as nickel prices. Russia contributes to 6.8% of the world’s total nickel production.

Currently, as the 2nd largest producer of steel, the steel consumption in India at 88.68 million tonnes is 1.7 times larger than that in 2007. However, the country’s per capita consumption remains 75.3kg in 2017, only one-seventh of that of Japan (549.9kg), which is a clear indicator of the immense scope for growth. Public sector partnering with the private sector and collaborating with the developed economies and technologies, with planned investments can create miracles in the steel industry and infrastructure and the economy of India. With gearing up the manufacturing sector, special emphasis is needed to ensure that the industry follows a sustainable path of development in respect of environmental friendliness, mineral conservation, quality of steel products, use of technology and indigenous R&D efforts to ensure that the country can, over time, reach global efficiency benchmarks to become a world leader in steel production technology, as well as in production of high end steel – Speciality steel.

Aayush Patil

Aayush Patil is a Research Intern at Tatvita. Presently he is pursuing his bachelors in the Liberal Arts department at the Savitribai Phule Pune University.    

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