The World Steel Association has predicted that India will become the second largest steel producer globally in years to come. Abundant iron ore reserves, low per capita steel consumption at present and strong demand for steel on the back of rapid growth gives India a definite competitive edge over other emerging economies.India is expected to become the world’s second largest producer by 2015–2016.
Steel Manufacturing in India
India is the world’s fourth-largest producer of iron ore after China, Australia and Brazil. It has about 25 billion tonnes of good quality iron ore reserves, – the sixth-highest in the world – with a reserves base of 9.8 million. India’s handicap however is the coking coal; while India has the fourth-largest proven coal reserves in the world, they are low quality and coking coal makes up only 17% of the total reserve.
But the real strength of India’s steel sector lies in the resilient domestic demand. The Indian steel industry has already witnessed robust growth with production (crude steel) and consumption (finished steel) registering growth of 7.7% and 7.1%, respectively. In 2010, India was the world’s fifth largest producer of crude steel, with domestic production growing at a rate of 9.5% between 2000 and 2010. Indian steel industry has been the rare exception to the havoc wrought on by the financial crisis.
Steel Demand in India
The construction and infrastructure sector is India’s largest steel consumer, accounting for 61% of total steel consumption. Over the last three years infrastructure development has increased the demand for long steel on an average by 8.6%, but flat steel by only 3.2%. Power and pipeline construction for oil and gas transportation are likely to be the important drivers of steel demand during the next five years.In addition, the shipbuilding industry is likely to undergo a fast growth cycle further pushing up demand for steel.
It is not surprising, therefore, that several global steel players have shown keen interest to enter the Indian market;ArcelorMittal and POSCO, for instance, have planned mega greenfield projects in India. Some other global players have entered into strategic partnerships or joint ventures with Indian steel majors to seize a slice of the Indian market.