Can India's Steel Industry Deliver on Years of Promise?
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GBR copy_Layout 1 7/5/12 12:07 PM Page 1 Indian steel supplement India rising: Can India’s steel industry deliver on years of promise? A REPORT BY GLOBAL BUSINESS REPORTS FOR STEEL TIMES INTERNATIONAL India has seen crude steel production Picture courtesy of Flickr: increase by 47Mt or 174% since the start Himanshu Sarpotdar of the 21st century an average annual increase in output of 14.5%. It now ranks as the fourth largest producer in the world. Much of this growth has come from the private sector which now accounts for three-quarters of total pro- duction. This Special Report compiled in India by Global Business Reports reveales Steel – The gateway through interviews with key industrial players how this remarkable growth has been achieved. Additional articles review to India’s industrialisation India’s passion for small and large scale DRI plants, its vast ore reserves but trou- bled development of these and how a 105 year old steel site has moved into modern times. By Joseph Hincks and Pavlina Pavlova * Built in the days of the British Raj, the ‘Gateway to India’ is an impressive monument on the shore of the then city of Bombay – present day Mumbai – and remains a symbol to welcome foreign investment into India From the arrival of the Qilin in Nanjing, who ly recorded) compared to India’s 72.2Mt in that were thought to herald the absolute harmony of calendar year (Table 1). Once skyrocketing, the Yongle Emperor, to Halley’s Comet fore- China steel demand is expected to decelerate telling the victory of William the Conqueror, Dr Amit Chatterjee and the steel rolling industry is expected to portents of prosperity have transcended history former Technical experience stable but comparatively lower and culture. Director Tata Steel growth from 2012 to 2016. Today, the conventional assessment of a and recently retired Despite the obvious growth potential of country's performance begins with reference to advisor to the MD Indian steel production and consumption, the its Gross Domestic Product (GDP). GDP, how- trajectory of the country's steel industry over the ever, is a rather turgid measurement. next few years is more difficult to predict. On Examining a country's steel industry provides a the one hand, India has signalled its intent more dynamic and expansive means of fore- sumption per capita in India remains remark- through investing heavily in giant steel mills, casting its economic future. Steel consumption ably low. Average Indian steel consumption in continuous modernisation and the upgrading of per capita is directly related to the condition in 2011 stood at around 55kg per person per year, old plants. Expectations are tempered, however, which a population lives: it can be broken down compared to the global average of 206kg and by concerns over access to raw materials, a com- regionally to depict discrepancies in economic more than 500kg in mature economies coun- plex land allocation process, and questions over development, it reflects patterns of urbanisa- tries such as the USA and Japan. What is espe- the ability of India’s infrastructure to keep up. tion, infrastructure spend, the state of industry cially relevant is that rural Indians, who consti- and manufacturing capacity. “Steel production tute more than 70% of the country's popula- A roadmap to success and consumption is accepted as a barometer of tion, consumed on average just 9.78kg in 2011 Economic reforms in 1991 ushered in a new era any country’s progress,” says Dr Amit according to Sushim Banerjee, director general of growth and new capacity was piled onto Chatterjee, consultant and former advisor to of Institute for Steel Development and Growth India’s steel scenario. Yet despite a succession the managing director of Tata Steel, (INSDAG). For India to truly become a global of high profile investment announcements, the Jamshedpur. leader in steel production, it must access its pace of development, especially relative to that In the case of India, an examination of the domestic market; meaning this figure has to of China, did not befit that of a waking giant. steel industry is particularly instructive. The increase drastically. Although India’s impressive economic growth country is now the world’s third largest steel In a sense, China’s Qilin has already arrived. rate made the country appear an ideal destina- consumer yet, while production has increased China reported produced of 695.5Mt of crude tion for FDI, discouraged investors repeated steadily since economic liberalization, con- steel in 2011 (this figure being only that official- similar complaints: infrastructure was absent; *Global Business Reports www.steeltimesint.com Steel Times International – July/August 2012 – XX GBR copy_Layout 1 7/5/12 12:07 PM Page 2 Indian steel supplement ports and roads were needed; and things in the Financial year Quantity particular have been shunted back and forth country just happened too slowly. (April-March) (Mt) between the federal and state governments. In 2005, the Indian Government, in its new “There is no point in selling India as an invest- role as a facilitator, came up with a directive 2000-01 26.89 ment destination at Davros when the invest- that promised a solution: The National Steel 2001-02 27.94 ments which have already come are facing mul- Policy 2005. The policy envisaged steel produc- 2002-03 30.44 tiple problems and not able to move forward,” tion reaching 110Mt by Financial Year (FY) 2003-04 34.25 vice president corporate affairs Posco India, 2019-20 with an annual growth rate of 7.3%. 2004-05 38.49 Vikash Sharan, told journalists in January 2012. The 2005 Steel Plan was largely successful 2005-06 46.46 Although in many ways India’s democratic and by 2007 new investment had propelled 2006-07 50.82 approach to land allocation is to be lauded, the India towards becoming the fifth largest pro- 2007-08 53.86 government must be seen to be taking steps ducer of steel in the world and the largest pro- 2008-09 58.44 towards streamlining the process if it expects to ducer of direct reduced iron (DRI, also referred 2009-10 65.84 garner future greenfield project investment. to as sponge iron) in the world. 2010-11 69.58 “Land acquisition is a problem and is the At the time of writing, the National Steel 2011-12 73.79(p) main reason for investors shifting their focus to Policy 2005 was being reviewed in light of the Source: Joint Plant Committee (JPC) brownfield projects. The governments of the rapid developments on both the supply and (p) Provisional five or six states that are major steel producers demand side of the domestic steel industry. The need to make brave decisions, otherwise India new steel policy, released in June 2012, will set Table 1 Crude steel production in India will not have an industry. We are hopeful of a production targets far exceeding those of the (Million metric tonnes in Financial Year) practical approach being taken,” India’s govern- 2005 plan. ment supported Joint Plant Committee told us. Based on an estimated infrastructure spend Financial year Quantity In February 2012, signs were emerging that of nearly US$1tr, the projected growth of Posco could soon see a resolution to some of India’s manufacturing industries, an increase in these land issues, and there are hopes that the the country’s urban population to 600 million 1999-00 28.03 new steel policy will expedite a more efficient by 2030, and the emergence of the rural market 2000-01 28.00 approach to land acquisition. Purshopam for steel consumption, the Ministry of Steel’s 2001-02 29.19 Agarwal, vice president, projects advisory and Working Group on Steel for the 12th Five Year 2002-03 30.63 structured finance, of SB Capital Markets at Plan April 2012-17 has projected that crude 2003-04 33.62 the State Bank of India is optimistic about steel capacity in India is likely to reach 140Mt 2004-05 37.73 future foreign investment in the country. “I by FY2016-17. Furthermore, memorandums of 2005-06 43.91 think we will see more foreign steel players in understanding (MoUs) signed by private pro- 2006-07 49.67 India in the near future,” said Agarwal. ducers with the various state governments indi- 2007-08 55.23 “Everybody is eyeing India in terms of further cate that capacity might exceed 200Mt by 2020. 2008-09 55.09 growth in business. With some more clarity in “The next five year plan includes infrastruc- 2009-10 60.00 terms of policy issues, I am hoping more and ture investment, financed by taxes on the steel 2010-11* 64.56 more players will be interested in coming here.” industry, and commitment to research and *Provisional development,” the Joint Plant Committee told Source Steel Scenario Yearbook Coking coal us. “In general, we expect demand to grow at Land access issues may have accounted for the around 8.5%, although this year the manufac- Table 2 Apparent steel consumption of delays in India’s greenfield projects, but they turing sector slowed down slightly and growth carbon steels by Financial Year (Mt) were not the sole constraint on the Indian steel will only be around 6%.” industry’s growth in 2011; a look at the produc- Table 2 shows apparent steel consumption Product Production % change tion figures of India's largest steelmakers in (ie Production + Imports – Exports) of carbon for sale over prev FY 2011 reveals that constraints were felt even by steels since 2000. Consumption has grown over long established plants (Table 3). the period by 36.5Mt or 130% an average annu- Cold Pig Iron* 5881 1.66 India has abundant thermal coal resources, yet al growth in demand of 10.8%.