FDI in Steel Industry Million Tonnes (MT) in FY20 and the Figure Is Anticipated to Rise to 300 MT by 2030-31

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FDI in Steel Industry Million Tonnes (MT) in FY20 and the Figure Is Anticipated to Rise to 300 MT by 2030-31 STEEL April 2021 For updated information, please visit www.ibef.org Table of Contents Executive Summary 3 Advantage India 4 Market Overview 6 Recent Trends and Strategies 16 Growth Drivers 21 Opportunities 27 Key Industry Contacts 30 Appendix 32 2 Executive summary Strong growth opportunities Second-largest • Demand for steel from different sectors will producer of crude steel drive this industry. • Consumption of steel by India’s infrastructure • For the period April 2020 and February segment is expected to increase to 11% by 2021, India’s cumulative production of crude FY26. steel stood at 93.1 MT. • Steel demand from the automotive sector is • Between April 2020 and March 2021, India’s expected to increase due to rise in the cumulative production of finished steel demand for automobiles. finished steel at 76.04 MT. • The new Vehicle Scrappage policy will help in • SAIL reported 9% growth in crude steel reducing steel prices as the policy enables production for the Q3 FY21. The production recycling of materials used in old vehicles. stood at 4.37 million tonnes against 4 mt • On the healthcare front, key steel producers during the same period in FY20. are now exceeding their capacities to • Total crude steel production in India produce oxygen cylinders for COVID increased at a CAGR of 4.85% betwwen patients. FY16 and FY20, with the country’s output • The Smart Cities’ Affordable Housing and reaching 108.50 million tonnes per annum industrial corridors are a few government (MTPA) in FY20. intitivates to boost the steel industry • India surpassed Japan to become the • About 158 lakh metric tonnes (MT) of steel world’s second-largest steel producer in are likely to be consumed in the construction 2019, with crude steel production of 111.2 of houses sanctioned under the Pradhan million tonnes. India overtook the US as the Mantri Awas Yojana (Urban). second-largest consumer of steel in 2019. • Moreover, capacity increased to 142.29 FDI in steel industry million tonnes (MT) in FY20 and the figure is anticipated to rise to 300 MT by 2030-31. • Policy allowing 100% FDI (via the automatic route) in the steel industry has boosted investments. • Between April 2000 and March 2020, Indian metallurgical industries attracted FDI of US$ 13.4 billion. Note: MTPA - Million Tonnes Per Annum, MT- million tonnes Source: World Steel Association, Ministry of Steel, News Articles 3 Advantage India 4 Advantage India 1. Robust Demand 4. Increasing Investment ► India’s finished steel consumption is ► To achieve steel capacity build-up of anticipated to increase to 230 MT by 300 MTPA by 2030, India would 2030-31 from 90.68 MT in 2017-18. need to invest US$ 156.08 billion by 2030-31. ► In February 2021, consumption of finished steel rose to 9.13 MT ► The industry is witnessing compared to 8.55 MT for the same consolidation of players, which has month in 2020. led to investment by entities from other sectors. The ongoing ► To drive post COVID-19 economic consolidation also presents an recovery, for the government has opportunity to global players to enter planned investments in roads, 1 4 the Indian market. railways, metro connectivity, industrial parks, industrial corridors, DFC, transportation of water, oil and gas, 3. Policy Support transmission towers, affordable ADVANTAGE ► The National Steel Policy (NSP) 2017 housing. All these sectors will drive INDIA was implemented to encourage the demand for steel. 2 3 industry to reach global benchmarks. 2. Competitive Advantage ► Government introduced Steel Scrap Recycling Policy to reduce import. ► As of 2019, India is the world’s second-largest producer of crude ► Export duty of 30% has been levied on steel (up from eighth spot in 2003) iron ore* (lumps and fines) to ensure with 111.2 MT. supply to domestic steel industry. ► Easy availability of low-cost ► The Government of India raised import manpower and presence of abundant duty on most steel items twice, each iron ore reserves make India time by 2.5%, and imposed measures competitive in the global set up. including anti-dumping and safeguard duties on iron and steel items. ► India is home to fifth-highest reserves of iron ore in the world. ► eUnder th Union Budget 2020-21, the government allocated Rs. 39.25 crore # Notes: MT - Million Tonnes, FDI - Foreign Direct Investment, ^National Steel Policy 2017, USGS Mineral Commodity Summaries (US$ 5.4 million) to the Ministry of 2020, *except low grade (below 58% ), MT- million tonnes , MoM – month over month Source: Metallurgical and Materials Engineering Division Board Steel. 5 Market Overview MARKET OVERVIEW 6 Evolution of the Indian steel sector 1907-18 1923-48 1954-64 1973-92 1993-2014 2015-20 . Production of steel . Mysore Iron and . Hindustan Steel Ltd . SAIL was created in • Foreign players • In 2019, India started in India Steel Company was and Bokaro Steel 1973 as a holding began entering the ranked as the (TISCO was setup set up in 1923. Ltd. were setup in company to oversee Indian steel market second-largest in 1907) . According to the 1954 and 1964, most of India's iron • No license crude steel producer . IISC was set up in new Industrial Policy respectively. and steel requirement for in the world. 1918 to compete Statement (1948), . In the early 1990s, production. capacity creation • Between April 2020 • Imposition of export and January 2021, with TISCO. new ventures were the public sector . In 1989, SAIL duty on iron ore, to India’s cumulative only undertaken by dominated steel acquired Vivesvata focus more on production of crude the central production. Iron and Steel Ltd. catering growing steel stood at 87.21 Government. Private players were . In 1993, the domestic demand MT and finished in downstream Government set • Decontrol of steel at 76.04 MT. production mainly plans in motion to domestic steel producing finished partially privatise prices steel using crude SAIL. • Launch of Scheme steel products. for promotion of Research and Development in Iron and Steel sector. Notes: (1)TISCO - Tata Iron and Steel Company; IISC - Indian Iron and Steel Company; SAIL -Steel Authority of India Ltd; MT- million tonnes 7 Structure of the steel sector Steel Form Composition End use Finished Non-alloy Liquid steel Crude steel Alloy Structural steel steel steel Low Ingots Flat Stainless carbon Construction steel steel Medium Silicon Semis Non-flat carbon Rail steel electrical steel High High carbon speed steel Source: Report on Indian steel industry by Competition Commission of India 8 Steel production capacity has expanded rapidly Crude Steel Production Capacity in FY19 – By Route Crude Steel Production Capacity (in million tonnes) (in million tonnes) 290 265 300 240 BOF 215 32.99 190 165 49.45 140 115 EAF 142 142 138 90 128 122 65 40 15 28.48 IF FY16 FY17 FY18 FY19 FY20 FY31P . India’s steel production capacity has expanded rapidly over the past few years, growing at a CAGR of 3.93% from 122 MT in FY16 to 142 MT in FY20. The National Steel Policy 2017 has envisaged achieving up to 300 MT of production capacity by 2030-31. FBF-BO route is expected to contribute 65% of the capacity, while the remaining 35% is expected to come from EAF & IF routes. Expansion of production capacity to 300 MT will translate into additional investment of Rs. 10 lakh crore (US$ 156.08 billion) by 2030-31. In the third quarter of FY21, the total steel output of Jindal Steel and Power Ltd., JSW Steel Ltd., SAIL and Tata Steel India stood at 14.95 MT, a 6% YoY increase. These four companies contribute ~45% to India’s annual steel production. Note: P - Projection, ^CAGR is up to FY20, BF-BOF - Blast Furnace-Blast Oxygen Furnace, EAF - Electric Arc Furnace, IF - Induction Furnace, MT- million tonnes Source: Joint Plant Committee, Ministry of Steel 9 Steel production in India has been growing at a fast pace Total crude steel production (million tonnes) Total finished steel production (million tonnes) 140.0 120 120.0 100 100.0 126.86 120.14 110.92 80 108.50 103.13 97.95 80.0 106.60 101.03 101.29 89.79 60 92.78 60.0 40 40.0 85.60 20 20.0 0.0 0 FY16 FY17 FY18 FY19 FY20 FY21* FY16 FY17 FY18 FY19 FY20 FY21* . The steel sector contributes over 2% to India’s GDP. Also, it employs 500,000 people directly and 2.50 million indirectly. From April 2020 to February 2021, India’s cumulative production of crude steel stood at 92.78 MT. Between April 2020 and February 2021, India’s cumulative production of finished steel stood at 85.60 MT. To support MSMEs, the government has reduced customs duty on stainless steel to 7.5%. InY F 20, crude steel production and finished steel production in stood at 108.50 MT and 101.03 MT, respectively. Steel manufacturing output of India is expected to increase to 128.6 MT by 2021, accelerating the country’s share of global steel production from 5.9% in 2018 to 7.7% by 2021. Notes: FY - Indian Financial Year (April - March), MT - Million Tonnes, CAGR - Compound Annual Growth Rate; *- Until Feb 2021 Source: Joint Plant Committee, News Articles, Ministry of Steel, World Steel Association 10 Demand has outpaced supply over the last five years Consumption of finished steel (in million tonnes) Per-capita consumption of steel (in kgs) # 120.0 CAGR 5.2% 76.00 CAGR 4.12% 74.00 100.0 72.00 74.10 80.0 97.54 70.00 100.01 90.71 84.04 68.00 60.0 81.52 66.00 68.90 84.08 40.0 64.00 20.0 62.00 65.25 63.99 60.00 0.0 58.00 FY16 FY17 FY18 FY19 FY20 FY21* FY16 FY17 FY18 FY19 .
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