Confederation of Indian Industry (CII), an association of Indian businesses, has reported that a majority of northern India Steel units are running significantly below 50 per cent of their capacity.
Some of the prominent reasons are said to be the power crisis & increasing prices of raw material. The power shortage in northern states are resulting in production losses and forcing many mills to work only single shifts.
Depreciation of rupee resulted in significant increase in cost of imported Steel melting scrap, which is a major input in secondary Steel production. Also, due to INR depreciation, export orders have been cancelled or deferred, which is another hindrance for the steel industry in north India.
Preventive measures has been also recommended by CII report mentioning that steel supplier should play major role in implementation of various projects including Delhi-Mumbai Industrial corridor, export zone and industrial parks across Rajasthan, Haryana & western UP. These projects will improve Long Steel demand and it will help in sustainability.
As per the report, demand is expected to bounce back in later half of 2015 with growth in infrastructure in 12th 5 year plan, as announced by government. Growth in automobile and consumer durable sectors will also support Steel demand growth in long run.
Considering potential growth constraints growth of steel market is suspected to be muted owing to decline in consumer core sectors.
Undoubtedly, regulatory hurdles and land acquisition challenges will remain the largest supply side barrier for Indian steel market.
Northern India Steel units’ hub contributes about 16 per cent to country’s annual Steel production. The hub comprise of multiple small and medium units. These units cater to construction and light engineering sector including bicycle and auto parts. Uttar Pradesh is the largest producer and consumer of Steel in north India with production of 5.6 MnT pa.