India 6/4/06 11:50 Page 1

india 6/4/06 11:50 Page 1 INDIA hough the Indian steel industry has been touted for years as one with great potential for India: Potential and growth Tdevelopment, the promise never quite seems to materialise. In the These 9 pages are devoted to the development of the steel industry in mid to late nineties, after India finally concluded the liberalisation of the sector, India. With a population close to that of China of 1bn, India’s steel many investments in steel capacity were industry produced just 38.4Mt of crude steel in 2005 compared to announced with great pomp. With the private sector allowed a freer hand in China’s 349.4Mt. This feature looks at India’s potential to boost production, entrepreneurs with vision output to 110Mt by 2010 as announced by its government. could take advantage of India’s wealth in natural resources, particularly iron ore, and BY G DE BASSOMPIERRE & L ARENDSE bring the country into the forefront of international steelmaking. However, when it became clear a few years later that the investments would not Major steelmaking plants in India be pursued – for a number of reasons – the (Based on a map by Joint Plant Committee of India) great expectation turned into great disappointment and a whole decade went by with the impression that India was destined PAKISTAN to remain nothing but a hopeful candidate. In the meantime, Chinese output skyrocketed, pushed by the need to cover its own growing appetite for steel, and became a much more believable destination for NEPAL investment: in short, a developing market Ɂ Delhi that kept its alluring promises. As this profile on India goes to press, a company with an Indian at its head is making headlines. The whole worldwide BANGLADESH steel community is being rocked by the 1 ripples Mittal Steel is making through its aggressive acquisition bids. Yet, though Mr Ɂ Kolkata Lakshmi Mittal hails from India, he 3 2 conducts all his business from the UK and 11 4 The Netherlands and, paradoxically, does not possess any steelmaking capacity on the Ɂ 5 6 subcontinent as yet, although he has Mumbai recently announced his intention to build a greenfield 12Mt/y plant in Jharkhand state 10 7 eastern India in a departure from his 9 Main & Major Steel Plants established business plan of growing by acquisition. At one time, rumour has it that 1 Bokaro (SAIL) for lack of faith in his national industry, he 2 Durgapur (SAIL) vowed never to make business in India 3 Jamshedpur (TISCO) before departing overseas to build the 4 Bhelia (SAIL) successful steel empire that has made 5 Raipur Mittal Steel the largest steel group in the 6 Rourkela (SAIL) world. Is this new found show of confidence 7 Vishakhapatnam (RASHTRIYA ISPAT) from India’s most famous expatriate 8 Salem (SAIL) industrialist a concrete sign of changing 9 Visvesvaraya (SAIL) times in the steel sector? Or are we 8 10 Vasind (JINDAL) witnessing a whole new wave of similar 11 Ahmedabad announcements (mundane occurrences really at the peak of an industry cycle) as were made in the nineties? enforces policy. On the other hand, many and consumption. In fact, the rate of There are several indications to support hammered the argument that slow growth growth of the domestic consumption of the fact that the current growth of the would also result in healthier growth with steel – which is extremely low in India at Indian industry has solid foundations fewer inadequacies between production about 30kg/capita as opposed to a world behind it and that the road ahead will unquestionably lead to progress. We talked to several of the leading steel businessmen Item/Producers 2001-02 2002-03 2003-04 2004-05 in India for this profile and few seemed to Crude Steel doubt that the alluring predictions for the Main Producers 17 552 18 767 19 756 19 738 future of the industry would somehow fail ASP + VISL 210 215 256 277 to materialise. Most of them questioned Major and other Secondary Producers the pace however. As an apology, we heard EAF Units/Corex-MBF-EOF 5 904 6 711 8 238 10 229 many times that in a democracy such a Induction Furnaces 4 298 4 750 5 998 8 242 build-up would naturally be slower as the TOTAL 27 964 30 443 34 248 38 486 government can do little more than ‘set the % Share of Major / Secondary Producers 36.5 37.6 41.6 48.0 scene’ and even then, its decision-making process suffers from the giant-democracy Finished Steel (Non-Alloy & Alloy) speed characteristic of Indian politics. Main Producers 13 198 14 534 15 383 15 824 Majors 4 607 5 141 5 832 6 786 India, they argued, would never achieve a Other Secondary Producers 13 820 15 632 18 028 19 716 growth of steel capacity comparable to that of China where the government frequently TOTAL FINISHED STEEL: 31 625 35 307 39 243 42 326 Source: Joint Plant Committee (JPC) – Kolkata, India *Global Business Reports Table 1 Output of crude steel and finished products (kt in fiscal year) 32 Steel Times International April 2006 india 6/4/06 11:50 Page 2 INDIA Plant Capacity 2001-02 2002-03 2003-04 2004-05 2004-05 Actual % of Actual % of Actual % of Actual % of prod capacity prod capacity prod capacity prod capacity BSP 3 925 3 967 101.1 4 233 107.8 4 743 120.8 4582 116.7 DSP 1 802 1 668 92.6 1 708 94.8 1 759 97.6 1806 100.2 RSP 1 900 1 334 70.2 1 475 77.6 1 572 82.7 1603 84.4 BSL 4 360 3 498 80.2 3 670 84.2 3 754 86.1 3835 88.0 IISCO 520 346 97.3 327 86.1 301 57.9 357 68.7 ASP 234 95 40.6 109 46.6 141 60.3 150 64.1 VISL 118 115 121.1 106 111.6 115 97.5 127 107.6 TOTAL (SAIL) 12 859 11 023 81.5 11 628 91.6 12 385 96.3 12460 96.9 Tata Steel 4 000 3 749 107.1 4 098 117.1 4 224 105.6 4103 102.6 VSP 2 910 2 990 102.7 3 256 111.9 3 403 116.9 3452 118.6 TOTAL 19 767 17 762 93.0 18 982 99.4 20 012 101.2 20015 101.2 (majors) Majors 6 560 3 763 78.9 4 192 87.9 5 108 77.9 6237 95.1 Other Secondary 16 919 6 439 62.5 7 269 64.8 9 128 54.0 12234 72.3 GRAND TOTAL 43 248 27 964 81.8 30 443 86.8 34 248 79.2 38 486 89.0 Source: JPC – Kolkata, India Note: Percentage refer to the capacity in the respective year Table 2 Production and capacity utilisation of main and secondary producers (crude steel) (kt) KEY FOR TABLES SAIL (Steel Authority of India) BSP Bokaro Steel Plant DSP Durgapur RSP Rourkela BSL Bhilai IISCO India Iron & Steel ASP Alloy Steel Plant VISL Visvesvaraya OTHER Tata Tisco VSP Visakhapatnam (Rashtriya Ispat) Plant Capacity 2001-02 2002-03 2003-04 2004-05 2004-05 Actual % of Actual % of Actual % of Actual % of prod capacity prod capacity prod capacity prod capacity BSP 4 080 4 133 101.3 4409 108.1 4 932 120.9 4 511 110.6 DSP 2 088 1 843 88.3 1940 92.9 1 982 94.9 2 017 96.6 RSP 2 000 1 467 73.4 1645 82.3 1 727 86.4 1 691 84.6 BSL 4 585 3884 84.7 4 086 89.1 4 108 89.6 4 132 90.1 VISL 216 174 80.6 157 72.7 173 80.1 168 77.8 IISCO 850 688 94.9 671 89.5 641 75.4 684 80.5 Total (SAIL) 13 819 12 189 88.9 12 908 94.1 13 563 98.1 13 203 95.5 Tata Steel 4 400 4040 106.3 4 437 110.9 4 466 101.5 4 347 98.8 VSP 3 400 3485 102.5 3 942 115.9 4 055 119.3 3 920 115.3 TOTAL (majors) 21 619 19 714 94.4 21 287 100.8 22 084 102.2 21 470 99.3 Source: JPC – Kolkata, India Note: Percentage refer to the capacity in the respective year Table 3 Production and capacity utilisation of main producers of hot metal (kt) average of 150 kg/capita – may be the most government’s National Steel Policy as the determining factor when assessing the national objective would entail almost pace of steel output growth for the tripling output between now (39.1Mt/y) industry. and the next fourteen years (to 110Mt/y by In short, the steel business community 2020). By 2010 already, it is believed that of India has absolute faith in the country’s India could have achieved double its trumps when it comes to building up a actual capacity and cross the 70Mt mark. much bigger industry in the future. “I’m Nonetheless, to fulfill the entirety of its very confident that India will be one of the shiny promises for growth, the steel lowest cost producers of steel”, says Mr industry will still have to tackle some Rajinder Miglani, Chairman and significant roadblocks. Issues such as the Managing Director of Uttam Galva. He condition of the transport infrastructure, added that in Russia raw materials need to the flexibility of labour laws, the mining be moved several hundred kilometers to and raw materials policy, red tape at the steelworks or ports, likewise in Brazil, national or state level, the cost of power, and that India was the only place where etc.

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