History & Growth of Indian Iron & Steel
Future of Indian Steel Market
India has a long history of the use of iron and steel. However, it was only after the first decade of the 20th century that manufacture of iron and steel as a modern industry made a beginning in this country. It was in 1911 that India’s first iron and steel plant – the Tata Iron and Steel Company Ltd. (TISCO) was set up in Jamshedpur in Bihar in private collaboration with a US firm. Nearly three and a half decades later another plant was launched at Burnpur in neighbouring Bengal — the Indian Iron and Steel Company Ltd. (IISCO) — with British participation.
At the commencement of Five-Year Plans (1951) there were three steel plants located at Jamshedpur, Asansol and Bhadravati. Not only capacity of these plants was increased but six integrated plants in public sector have been established at Durgapur, Rourkela, Bhilai, Bokaro, Vishakhapatnam and Salem, Apart from these more than 140 mini steel plants have also been set up to meet the growing internal demand. India is having the largest iron ore deposits in the world and also having coal, therefore, having very good prospects of the further growth of iron and steel industry.
India is home to the fifth-highest reserves of iron ore in the world. As of April 2022, India was the world’s second-largest producer of crude steel. In FY22, India’s export rose by 25.1%, compared with 2021.
The steel industry in India is among the most important industries in the country. In 2019, India became the second-largest steel producer in the world surpassing Japan. India’s finished steel consumption is anticipated to increase manifold in 2030-31. Read here to know the history and growth of the steel industry in India.
Metal consumption has been one of the main driving causes behind industrialization.
Steel has long held the top position among metals. Steel is both a raw material and an intermediary product, therefore its production and consumption are commonly used as indicators of a nation’s economic success.
Therefore, it would not be overstating the case to say that the steel industry is the backbone of any economy and has always been at the forefront of industrial advancement.
The steel industry in India is divided into three groups: primary producers, secondary producers, and large producers.
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 capacity for producing steel has grown concurrently, and the rise has been largely organic.
- India is home to the fifth-highest reserves of iron ore in the world.
- As of April 2022, India was the world’s second-largest producer of crude steel.
- In FY22, India’s export rose by 25.1%, compared with 2021.
The steel industry and its associated mining and metallurgy sectors have seen major investments and developments in the recent past.
- India was the largest producer of Direct Reduced Iron (DRI) or Sponge Iron in the world in 2021.
- India is the 2nd largest consumer of finished steel preceded by China as the largest steel consumer as per the World Steel Association.
Challenges
The secondary steel sector in India currently contributes over 40% of the total capacity and it will need to play a crucial role for India to reach 300 MT capacity.
The need is to identify challenges to capacity expansion in the country with a special focus on secondary steel and to correspondingly discuss suggestions on alleviating these.
- Despite being the 3rd largest steel consumer in the world, India has per capita steel consumption that is only one-third of the world’s average.
- Low per capita consumption due to overall poverty compared to the world average decreases the incentive to set up huge plants to take advantage of economies of scale.
- Despite being a small share of imports by quantity, alloy, and stainless steel contribute disproportionately to the import bill by value.
- Few Indian entities can establish large factories to benefit from economies of scale utilizing the equity route because of their limited resources due to low per capita incomes. As a result, the majority of factories rely on borrowing and debt finance.
- India invests significantly less than the rest of the world in technology, research, and development. The same holds for the production and consumption of steel, as it has for many years.
- The technology utilized in India up until recently needed a lot of power, was very dirty, and used a lot of water.
- India is at a disadvantage when it comes to producing steel the way it wants to due to a lack of electricity. With the correct balance of thermal and renewable energy, there might be some relief.
- For every tonne of iron ore extracted, there is a lot less coal available, necessitating coal imports to maintain captive power plants. India receives coal primarily from Australia and Indonesia. Australia has been increasing its coal costs, which has a direct impact on the cost of iron and steel in India.
Government initiatives for the steel sector
Some of the recent Government initiatives in this sector are:
National Steel Policy (NSP) 2017: The new Steel Policy enshrines the long-term vision of the Government to give impetus to the steel sector.
- It seeks to enhance domestic steel consumption and ensure high-quality steel production and create a technologically advanced and globally competitive steel industry.
- The policy also envisages domestically meeting the entire demand for high-grade automotive steel, electrical steel, special steels, and alloys for strategic applications and increasing domestic availability of washed coking coal to reduce import dependence on coking coal from about 85% to around 65% by 2030-31.
The Government has also announced a policy for providing preference to domestically manufactured Iron & Steel products in Government procurement.
The government has also approved a Production-linked Incentive (PLI) Scheme for Specialty Steel. It is expected that specialty steel production will become 42 million tonnes by the end of 2026-27.
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.
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.
Way forward
Given the importance of a wide range of sectors on steel production as India strives to become a manufacturing powerhouse through governmental initiatives like Make in India, the steel industry in India has emerged as a key emphasis area.
India ranks as the world’s second-largest producer of steel and is on track to surpass China as the world’s second-largest consumer of steel, with the sector contributing around 2% of the country’s GDP.
India continues to employ concrete in the majority of its structures, despite its enormous population and several incentives to experiment with different methods.
- Steel is used far more frequently to construct columns and buildings in the west, the Gulf, and other settled areas.
- Using steel van produce higher skyscrapers, requires considerably less time to assemble, requires much less maintenance, and helps lower the weight of projects.
- There are numerous examples, including the Empire State Building in New York, the Taipei 101 Tower in Taiwan, the U.S. Steel Tower in Pittsburgh, Pennsylvania, the Shun Hing Square Tower in Shenzhen, China, and the Burj Khalifa in Dubai, which is the most well-known of them all.
India’s export production capability and industry both have the potential to aid the country in regaining a favourable steel trade balance.
India’s relatively low per capita steel consumption and the anticipated increase in demand due to rising infrastructure construction and the flourishing automobile and railroad sectors present enormous growth potential