REPORT ON IRON & STEEL INDUSTRY

INTRODUCTION

The indian iron and steel industry is nealy a century old,with Tata Iron & Steel Co (Tata Steel) as the first integrated steel plant to be set up in 1907. It was the first core sector to be completely freed from the licensing regime (in 1990-91) and the pricing and distribution controls.The steel industry is expanding worldwide. For a number of years it has been benefiting from the exceptionally buoyant Asian economies (mainly India and China).The economic modernization processes in these countries are driving the sharp rise in demand for steel.

The New Industrial policy adopted by Government of India has opened up the iron and steel sector for private investment by removing it from list of industries reserved for public sector and exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are freely permitted upto certain limits under an automatic route.

ADVANTAGES OF IRON AND STEEL INDUSTRY IN INDIA

EVOLUTION OF INDIAN STEEL SECTOR

STRUCTURE OF THE STEEL SECTOR

OUTLOOK FOR STEEL DEMAND AND SUPPLY

(a.) Domestic Demand(i) The demand for steel has been worked out on the basis of observed relationship

between steel consumption and selected macro economic variables under four scenarios of GDP growth (i.e. of 8%, 8.5%, 9% and 9.5%) by 2016-17. The Draft Approach paper of the Twelfth Five Year Plan envisages a GDP growth of 9% per annum. In the ‘Most Likely‘ growth scenario i.e. 9% GDP growth, the demand for steel works out to be 113.3 million tonnes by 2016-17. Therefore, it is likely that in the next five years, demand will grow at a considerably higher annual average rate of 10.3% as compared to around 8.1% growth achieved during the last two decades.(1991-92 to 2010-11).

(b.) Export Demand(i) India has enormous potential and necessary resources, capabilities to become a

global supplier of quality steel. Also there exists ample market opportunities in the neighbouring regions of Asia, Africa and the Middle East. The policy framework while according top priority to meet domestic demand should also take into account the large export possibilities.

ESTIMATED DEMAND AND CAPACITY CREATION

(i) In a deregulated environment, it is difficult to forecast capacity creation, especially in the private sector. Further, capacity creation is sensitive to unfurling market conditions domestic as well as global. Based on information furnished by the existing and prospective investors, the estimated crude steel supply works out to more than 128.1 million tonnes in 2016-17. These estimates have been worked out based on historical trends as well as an objective assessment of the following factors.

Actual extent of land already acquired for the new units; Availability of investible funds with the respective enterprises to

support the planned increase in existing capacity; Availability of infrastructural network at the project site; and Availability of key raw material linkages.

(ii) The National Steel Policy had set a production target 110 million tonnes to be achieved by 2019-20. The Indian steel industry may achieve double digit growth in consumption and surpass this production target by 2016-17 well ahead of the target date.

(iii) In the last 20 years (i.e. 1991-92 to 2010-11) import of steel as a percentage of total consumption in India has varied between a high of over 13% in 2007-08 and a low of 4.8% in 1998-99 and 2001-02. Import of steel during Twelfth plan is expected to be around 5 million tonnes per annum.

(iv) A strong steel industry can emerge only if it can take on international competition and develop overseas markets. Keeping this in view, net exports of 2 million tonnes has been assumed in 12th plan. Accordingly assessment of finished steel of production has been worked out at 115.3 million tonnes in 2016-17.

(c.) Requirement of Raw Materials, Infrastructure and Investments to Ensure Additional Production.(i) Estimates of total and additional requirement of raw materials have been

worked out Based on the projected production of crude steel according to process routes and average norms of consumption. However, in view of the fact that there exists large scope of improvement in operational efficiencies and also due to the fact that there are possibilities of changes in technology adopted, the estimates of input requirements are only indicative:

Estimated Requirement of Raw Materials and Other Inputs by 2016-17

Raw Materials

India is endowed with abundant Iron ore resources, the basic input for steel making. Of late, large scale exports of iron ore have raised concerns about future availability of iron ore resources to meet the fast rising domestic steel demand. Large quantities of iron ore fines are exported due to mismatch between domestic production and consumption and also lack of adequate sintering and pelletisation facilities for steel making. Steel industry confronts the problem of depletion of high grade ore deposits and lack of domestic technological capabilities to process low grade iron ores. In the larger national interest of conservation of natural resources and environment, efforts are being made to preserve and utilize the precious Iron ore fines for domestic production of steel and at the same time the Ministry has taken measures to discourage export by imposing higher tariffs and special levies etc.

The domestic availability of Coking coal, a critical raw material required by steel industry is limited and therefore the Indian Steel industry has to depend heavily on imported coking coal to meet its needs. Currently, domestic steel makers meet 70% of their coking coal requirement through imports. The quantum of imports may go up significantly in the 12th plan as steel production in a large number of new projects is likely to be through the BF-BOF route. To ensure raw material security and minimize the impact of volatility in coal prices, it is desirable to acquire overseas coking coal assets. International Coal Ventures Limited

(ICVL), a Joint Venture company promoted by SAIL in 2008-09 and consisting of RINL, NMDC, CIL and NTPC to achieve the above objective has not made much progress so far but it is imperative to make this venture more effective.

In view of the limited availability of coking coal in the global market and the fact that its supply is controlled by a few large companies, it will be extremely important to increase the domestic production of coking coal and upgrade its quality to meet the requirements of steel making. Technologies which require less of coking coal and lower grades of it will need to be encouraged.

Non-coking coal used for production of sponge iron is also increasingly becoming scarce in the country. With the demand for non-coking coal from priority sectors like power, Fertilizers etc going up further, its availability for steel making is likely to be limited during the 12th plan. While sponge iron producers may opt for import of coal, the economic viability of this sector may be under pressure due to higher prices of imported coal. Moreover, the gas based DRI units face restricted supply of CNG, largely due to priority allocation of gas to power and fertilizer sectors. Supply of CNG to this sector is a major concern for its growth and these units may have to depend more on imported source of fuel supply. Many existing and new producers propose to create additional capacity manifold under gas based route in Twelfth plan period.

THE MAIN PRODUCERS

This category includes public sector integrated plants of the Steel Authority of India Ltd. (SAIL) (with its various subsidiaries) and the Rashtriya Ispat Nigam Ltd. (RINL) along with the private sector producer Tata Steel Ltd. The Main Producers – all dating back to the pre-deregulation era - have a combined capacity of around 22.55 million tonnes per annum with current capacity utilization rates exceeding 100%.

Majors: This category includes integrated steel plants (other than the Main Producers) with crude steel capacity of 0.5 million and above – irrespective of technology routes - like JSWL, ESSAR, JSW Ispat Steel Ltd (erstwhile Ispat Industries Ltd) and JSPL. Estimated total crude steel capacity of these producers is around 17.40 million tonnes. These are primary steel makers using diverse technology routes like DRI-EAF DRI/BF-EAF, COREX/BF- BOF etc.

Other Producers: This category includes the mini steel plants - mainly the Electric Arc Furnace (EAF) and Induction Furnace (IF) units - with capacity below 0.5 million tonnes as also all EOF units. Besides it also covers the stand-alone processors without backward integration of steel making like the Re-rolling (RR) units, Cold Rolling (CR) units, GP/GC Sheets units, Pig Iron & Sponge Iron Plants, etc.