India’s steel sector: are we ready for the big leap?
Steel is a critical industrial metal for growth and development of several sectors including infrastructure, construction, defense, mobility and so on. No wonder, there is a strong positive correlation between economic growth and steel consumption. For this reason, steel is called a ‘growth commodity’.
In 2024, world crude steel production was 1,885 million tonnes. China is the world’s largest producer at 1,005 mln t. India is by far the world’s second largest with production of 150 mln t.
India’s finished steel capacity currently stands at about 200 mln t, having increased from 171 mln t in 2023-24 and 151 mln t a year earlier.
Production has been rising consistently in recent years as can be seen from Table I alongside.
Table I: India’s Finished Steel Capacity and Production Trends (Mln T)
| Year | Capacity | Production | Consumption |
|---|---|---|---|
| 2021-22 | 152.81 | 113.60 | 105.75 |
| 2022-23 | 151.25 | 123.20 | 119.89 |
| 2023-24 | 170.77 | 139.15 | 136.29 |
Current production capacity is an estimated 200 Mln T
Given the expansionary phase in which the country currently stands and massive amounts being spent on infrastructure development, India’s steel consumption has been growing at 10-12 percent per annum. Production growth has kept pace with consumption growth.
Although domestic production exceeds domestic consumption and domestic demand is met largely through domestic production, India imports finished steel.
Table II: India’s Rising Import of Finished Steel (‘000 T)
| Country | 2021-22 | 2022-23 | 2023-24 |
|---|---|---|---|
| China | 833 | 1407 | 2687 |
| Korea | 2009 | 2228 | 2670 |
| Japan | 664 | 841 | 1274 |
| Vietnam | 75 | 320 | 737 |
| Taiwan | 194 | 163 | 185 |
| Others | … | … | … |
| TOTAL | 4,669 | 6,022 | 8,320 |
As can be seen from the Table, our finished steel import has been rising rapidly. It has nearly doubled in the last two years. The surge in import has raised concerns among domestic producers.
Steel is a deregulated sector in our country. Prices are determined by market forces including demand supply dynamics, global market conditions, raw material price trends, cost of logistics, power, fuel and so on.
The Government of India acts as facilitator by creating conducive policy environment for development of steel sector including for small, medium producers.
The government has taken several initiatives to reduce import and improve the competitiveness of Indian steel. These include Production Linked Incentive (PLI) scheme for specialty steel; steel quality control orders (SQCOs) to eliminate sub-standard steel products marketing and import; steel import monitoring scheme as well as fiscal imposts like anti-dumping duty, countervailing duty and safeguard measure against import surge.
The government aims to expand the steelmaking capacity to 300 mln t by 2030-31 that is a 50 percent increase in capacity in next five years. While the target is not daunting, challenges remain. Several questions deserve close attention.
- Does India have the steely resolve to achieve this ambitious target?
- Does India have adequate raw materials like iron ore, coking coal, limestone and critical elements such as magnesium, nickel and chromium?
- What will be the extent of our import dependence?
- Where will finance come from?
- How much of the capacity will actually be used?
- What will be the environmental impact of building 300 mln t production capacity?
- Will demand keep pace with production or will there by excess capacity?
These issues deserve a dispassionate evaluation.
Raw material security is most critical. We need a robust raw material strategy. Given the enormous geopolitical headwinds to global free trade, dependence on import that too from limited sources of supply may prove to be rather risky.
To feed 300 mln t capacity by 2030, India will need about 450 mln t of iron ore. Quality of ore is important. It is recognized that ‘Beneficiation’ of low quality ore will result in cost control.
On current reckoning, coking coal may be a challenge. We will need 160 mln t and currently we are substantially import dependent. What can we do to augment domestic production or ensure uninterrupted supply?
Currently, the geopolitical situation is fraught. The world faces uncertainties, especially the global steel sector with large ‘excess capacity’ and slowing demand growth.
Without doubt, the Indian steel sector is poised for a big leap; but challenges remain. We need enormous ‘political will’ and stakeholder cooperation to move ahead.