Indian Steel Industry in Post Covid 19 Era

INDIAN STEEL
INDUSTRY
in post COVID19 era
A SEAISI Webinar
On 30th June 2020
Presented by
Nirmalya Mukherjee
Editor & Managing Director

India’s Status in World Steel Production
India became the SECOND LARGEST steel producer of crude steel after China
in 2018 and 2019, by replacing Japan.
Crude steel production 2019
Rank Country Qty (mt)
1 China 996.3
2 India 111.2
3 Japan 99.3
4 USA 87.8
5 Russia 71.9
6 South Korea 71.4
7 Germany 39.7
8 Turkey 33.7
9 Brazil 32.2
10 Iran 25.6
Source: pib.gov.in
www.steelmetallurgy.com

A vibrant Steel
industry has
historically been
the foundation of
a nation’s rapid
Industrial
Development.
India’s competitive advantage in steel production
is driven from:
• Indigenous availability of high grade iron ore and non-coking coal
• Existence of a vast and rapidly growing market for steel especially in areas
of road expansion, house construction, building bridges manufacturing
home appliances, etc.
• Strong MSME sector
• A relatively young educated work force with competitive labour costs
• Existence of high demand for steel products in the neigbouring countries
which are mostly developing in nature.
• Deregulated sector in India
• The Indian Government does not set any annual targets for steel
production.
• Decision on quantity of steel production is taken by individual
companies based on commercial considerations and market
requirements.
Features of Indian Steel Industry
Source: ibef.org
Equipped with state-of-the-
art steel mills, the Indian
steel industry has always
strived for continuous
modernisation and up-
gradation of older plants
and higher energy
efficiency levels.

Source: business-standard.com
Market Size
Finished steel
consumption grew at a
CAGR of 7.5 % during
FY08-FY19 to
reach 97.54 MT
Source: ibef.org
74.3
229.3
0
50
100
150
200
250
India World
Per capita consumption
of steel in India in 2019 (in Kilograms)
Crude Steel Production:
109.3 MT in 2018.
111.2 MT in 2019.
Source: World Steel

Source: Iron and Steel Review 2020

Iron ore scenario
In India
India, the world’s fourth largest
iron ore producer
ODISHA
34%
JHARKHAND
23%
CHHATTISGARH
22%
KARNATAKA
11%
GOA
5%
ANDHRA PRADESH
2%
MADHYA PRADESH
1%
MAHARASHTRA
1%
OTHER STATES
1%
Other
5%
Karnataka
72%
Andhra Pradesh
13%
Rajasthan
6%
Tamil Nadu
5%
Goa
2%
Kerala
1%
Telangana
1%
Other States
0.005%
Other
2%
Total Resources
of Hematite
(State-wise)
Total Resources
of Magnetite
(State-wise)
Total Resources of Iron Ore:
33.28 (in Billion Tonnes)
Magnetite - 10.79
Hematite - 22.49

Direct reduced iron production 2012 to 2019
(million tonnes)
Source: World Steel Association

Export Import of Steel (World) Scenario in 2019
Major Exporters and Importers of Steel in the world and India’s position in 2019
(in million tonnes)
Source: World Steel Association
Total Export = 13.4 Mt
Total Import = 8.9 Mt
Net Export = 4.4 Mt
CASE OF INDIA

Source: steel.gov.in
Domestic Scenario
The Indian steel industry has entered into a new development stage, post de-regulation in 1991-
1992, riding high on the resurgent economy and rising demand for steel.
Rapid rise in production has resulted in India becoming the 2nd largest producer of crude steel during
2018 and 2019.
The country was also the largest producer of Sponge Iron or DRI in the world and the 3rd largest
finished steel consumer in the world after China & USA in 2019.
In a de-regulated, liberalized economic/market scenario like India the Government’s role is that of a
facilitator which lays down the policy guidelines and establishes the institutional mechanism/structure
for creating conducive environment for improving efficiency and performance of the steel sector.
Basic Economic Outlook and Growth Prospects of
Indian Steel Industry

Government Initiatives
• Government introduced Steel Scrap Recycling Policy aimed to reduce import.
• An export duty of 30% has been levied on iron ore (lumps and fines) to ensure supply to domestic
steel industry.
• Government of India’s focus on infrastructure and restarting road projects is aiding the boost in
demand for steel. Also, further likely acceleration in rural economy and infrastructure is expected to
lead to growth in demand for steel.
• The Union Cabinet, Government of India has approved the National Steel Policy (NSP) 2017, as it
seeks to create a globally competitive steel industry in India. NSP 2017 envisages 300 million tonnes
(MT) steel-making capacity and 160 kgs per capita steel consumption by 2030-31.
• The Ministry of Steel is facilitating 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 at an initial corpus of Rs
200 crore (US$ 30 million).
• 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.
Source: ibef.org

Major investments in the Indian steel industry
• For FY2019-20, JSW Steel set a target of supplying around 1.5 lakh tonne of TMT Rebars to metro rail
projects across the country.
• In October 2019, Kamdhenu Ltd added new production capacity of 60,000 tonne per annum in Dadri,
Uttar Pradesh to manufacture Kamdhenu Structural Steel.
• As of December 2018, Vedanta Group is going to set up a one million tonne capacity steel plant in
Jharkhand with an investment of Rs 22,000 crore (US$ 3.13 billion).
• Ministry of Steel plans to invest US$ 70 million in the eastern region of the country through accelerated
development of the sector.
• The production capacity of SAIL is expected to increase from 13 MTPA to 50 MTPA in 2025 with total
investment of US$ 24.88 billion.
• In December 2019, Arcelor Mittal completed the acquisition of Essar Steel at Rs 42,000 crore (US$ 6.01
billion) and also formed joint venture with Nippon Steel Corporation.
Source: ibef.org

Major investments in the Indian steel industry
• In February 2020, GFG Alliance acquired Adhunik Metaliks and its arm Zion Steel for Rs 425 crore (US$
60.81 million), marking its entry into the Indian steel market.
• JSW Steel has planned a US$ 4.14 billion capital expenditure programme to increase its overall steel
output capacity from 18 million tonnes to 23 million tonnes by 2020.
• JSW Steel has bagged two iron ore mines with a total reserves of 980 million tonnes in the auction in
Odisha, the Narayanposhi iron block with 190 MT reserve and the Nuagaon mine, which has a total
estimated reserve of around 790 million tonne. Both wins will give JSW Steel around 22 mtpa of captive
iron ore for its plants.
• Tata Steel has decided to increase the capacity of its Kalinganagar integrated steel plant from 3 million
tonnes to 8 million tonnes at an investment of US$ 3.64 billion.
Source: ibef.org

Indian steel mills are
more competitive
and Indian steel has
become particularly
appealing to foreign
buyers in during the
months of worldwide
lockdown.

Domestic Demand Scenario
• Sale in the domestic market became increasingly difficult after the
lockdown. The domestic market was down and domestic consumers were
unable to receive cargoes because they did not have people to
unload, forklift operators and crane operators.
• India's demand for steel contracted by 91% y-o-y in April 2020 with end
user industries like auto, real estate, and infrastructure that constitute
80% of demand, coming to a virtual standstill.
Foreign Demand Scenario
• The liquid steel manufacturers in Asia are down and unable to supply to
their customers.
• Non-integrated steel mills in China and southeast Asia that depend on
Chinese crude steel are now turning to imports from countries including
India as China slowly returns to full scale production of crude steel.
• In China and South Asia, there’s a lot of demand for semis while in
markets in Europe, where the entire steel industry has stopped
functioning, there’s a demand for finished products.
Source: odishabytes.com
Steel production
took a substantial
hit in the month
of March and April
when the country
was under
lockdown as most
user industries
witnessed halt in
production.

Indian Steel Mills Thrive On Exports
During COVID-19 lockdown period Indian steel exports rose by 29.5% to
8.24 million tonnes in 2019-20, according to the Union steel ministry.
• Jindal Steel & Power Ltd (JSPL) resumed export bookings during
lockdown period and sold more than 500,000 tonnes of steel. Export
orders led to JSPL recording a 5% year-on-year rise in steel and pig iron
output in April.
• JSPL exports to China, Europe (Germany, Denmark, Italy, Spain) and the
Middle East. While demand in Europe and Middle East is for plates,
structurals, round billets and rail blooms, southeast Asia’s demand is for
pig iron and billets.
• SAIL's products booked from China are primarily semi-finished steel -
both billets (processed further into long products) and slabs (for flats) and
hot rolled coils.
• The Steel Melting Shop-2 (SMS-2) of SAIL-Bhillai Steel Plant (BSP)
exported cast slabs to China. The export order for 30,000 tonne of cast
slabs of Grade JS-SS400 was received in may 21, 2020.
Source: odishabytes.com
During COVID-19
lockdown period
Indian steel
producers were
forced to rely on
exports.
Absence of domestic
demand led to export
of mainly billets which
is an intermediary
product and as such
poor value addition
Prices have plummeted
by 15-16% over time &
are still quite volatile.

Source: Steel Ministry
Summary of Export of Iron & Steel April 2020 (Prov.)
– Steel Insights Bureau

Source: Steel Ministry
Summary of Import of Iron & Steel April 2020 (Prov.)
– Steel Insights Bureau

It is often believed that the
realisation part in case of foreign
exports is 15% less than the
domestic sale. So ideally the profit
margin is higher if the produce is
sold in the domestic market.
Source: businesstoday.com
“Indian steelmakers would have to push exports, even though
less profitable, to keep operating at somewhat better capacity
utilisation rates than what was reported in April 2020.”
- Jayanta Roy of ICRA

Post Covid 19 –
Way Forward for

Source: outlookindia.com
The Government of
India announces of
20 Lac crore to
kick start economy
and boost
consumption
The actual expenditure
envisaged by the govt.
is Rs 92,000 crore, of
which Rs 54,000 crore
will boost private
consumption, and the
rest will contribute to
public investment and
spending.
The tranches:-
• The minister advised states and regulatory authorities for extending
the registration and completion date of real estate projects under RERA
to de-stress developers and ensure completion of projects for
homebuyers to get their booked houses on time. Real Estate being one of
the major consumer of steel in India, chances for revival of demand is
there.
• The government allowed states to fund the food and shelter facilities to
migrant workers from the disaster response fund that would cost Rs
11,000 crore to the centre. Shelter for people means a rise for steel in the
construction of houses for them.
• Reforms for sectors including coal, minerals, defence production, air
space management, airports, MRO, distribution companies in UTs, space
sector, and atomic energy can also be beneficial for the steel industry of
India.

Indian Steel
Demand May Not
Recover Until Q3
This Fiscal Year
Recent survey of steel manufacturers carried out by Crisil- the credit
ratings agency predicted:
• The demand is likely to recover starting from Q3, mainly driven by revival
in infrastructure and construction activities and improved availability of
funds due to the recent fiscal measures announced by the government.
• The sector utilization is expected to range between 50% and 70% in fiscal
2021, said 30% of survey participants. Crisil survey sees average utilization
to be 66%-68%.
• There will be limited correction in steel prices.
Source: CRISIL
Nearly 45% of Indian
steelmakers met with
severe disruptions in
supply of raw
materials during the
national lockdown
period. The supply of
iron ore was the most
impacted.
Nearly 45% of Indian steelmakers met with severe disruptions
in supply of raw materials during the national lockdown period.
The supply of iron ore was the most impacted.

Way Forward in New Normal Era
• In case of National Highways of India (NHIs) the I
Indian Government is trying to speed up the road
constructions which will definitely help in the
increase of demand in steel inside the country.
• Along with roads construction of crash barriers
will also increase. This will again boost up the
demand for steel.
• Proposal for construction of steel ropeways in the
hilly areas might also help the steel industry of
the country gain some sale orders.
• Construction of modular steel bridges have been
proposed.
Source: ibef.org
Indian Union minister Nitin Gadkari emphasized on revamping its public transport system. His tips to
boost the demand for steel in the country are as follows:-

Way Forward in New Normal Era
Opportunities from Physical distancing are:-
• Indian Steel industry would need to embrace non-contact order acquisition channels like EDMS for strategic customers
and eCommerce for direct MSME Retail.
• Non-contact intelligent appliances like washing machines, vacuum cleaners, autonomous cars should do well. As
would 2 wheelers like motorbikes and cycles over public transport.
• Govt. may plan “House for everybody Mission” to ensure future safe distancing. Steel has always been fastest
rehabilitation construction material. If per sq ft subsidy is increased, steel houses could boom.
• Move away from labour intensive construction could shift construction technology to Steel intensive factory built
buildings. This will also better express the Achievement aspirations of New India which is already taking shape in the
Assertive Resurgence sweeping India and needs an expression in Urban architecture
Source: ibef.org
Supply Side risks are low but Demand side risks are high. Retaliatory Demand – Steel & Construction
should catch up by December 2020.

Conclusion
In the year 2017 the Union Cabinet, Government of India approved the National Steel Policy (NSP)
2017, as it seeks to create a globally competitive steel industry in India. NSP 2017 envisages 300 million
tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030-31.
In the present scenario it is unlikely
that the Indian Steel Industry will be
able to reach this mark by the year
2030-2031.
Go Vocal For Local
At present our vision and mission will be to increase the demand
for steel domestically instead of looking for exports and also
imported finished steel products. This would boost up the India
Steel Industry.
What can we do?
Massive Expenditure in Infrastructure Development
Per capita consumption of steel in India in 2019 was 74.3 Kilograms
still very low compared to the world figure 229.3 Kilograms. There
is huge scope in increasing demand for domestic steel through
various government and non-government initiatives which will
eventually boost the industry in the long run.
What is the present scenario?
By thumb rule to produce every additional 1
million tonne of steel an investment of 1
billion dollars in required.
To achieve a projected 5 million tonnes to an
additional 4 billion dollars investment is
needed. What are the avenues to get that?
Not to forget!

THANK YOU

Indian Steel Industry in Post Covid 19 Era

Indian Steel Industry in Post Covid 19 Era

Recommandé

Contenu connexe

Tendances

Tendances(20)

Similaire à Indian Steel Industry in Post Covid 19 Era

Similaire à Indian Steel Industry in Post Covid 19 Era(20)

Plus de Sayantani Banerjee

Plus de Sayantani Banerjee(8)

Dernier

Dernier(20)

Indian Steel Industry in Post Covid 19 Era