How will the Indian steel industry look in 5 years from now?

In the last 5 years, steel consumption has remained robust, growing at a CAGR of 6.84%. However, due to limited capacity and the shortfall in domestic production, a large part of the requirement was fulfilled through imports. This trend is more noticeable in the import-export numbers of the last 5 years. Imports have grown at 11% CAGR, whereas exports have declined by 7.5%.

Also, in this period, India's crude steel capacity has increased from 51 MT (in 2005) to 73 MT (in 2010). As per the goals set under  the National Steel Policy (NSP), the country will require production of over 100 MT by 2019-20 from the levels of 38MT in 2004-05. This implies a CAGR of 7.3%.

Steel consumption is positively liked to the GDP growth rate, as it includes construction and infrastructure development, which comprises 45% of the total steel consumption (2010). Therefore, the consumption in the coming years is expected to remain at 7%, with the expectation that the country will grow at a minimum of 7%. Of course, with the demand growing at 7% CAGR, the total consumption in 2015 will stand at 84 MT, which will need to be met by higher production output.

We, at DSIJ, tried looking at the expansion plans of the major steel producing companies in coming years, and compared this at 7% growth rate in consumption over the next 5 years.

As per the NSP, at 7% CAGR growth, the estimated capacity that will need to be added by 2016 is 30 MT. This will take the country's steel making capacity from 73 MT in 2011 to 100 MT by 2016. On the other hand, at a 7% growth rate, the demand for steel will stand at 85 MT.

In summation, we believe that the capacity addition by companies remains uncertain and challenging. This is on account of various issues like the problems in land acquisition, infrastructure bottlenecks, etc., which may delay the implementation of the Greenfield as well as the Brownfield expansion plans. For example, global steel giant, POSCO, signed an MoU with the Govt. of Orissa for the construction of a 3 MT capacity steel plant in Bhubaneswar. 6 years hence, the company is yet to initiate any project-related work on the ground. Therefore, a question about whether we can meet the increasing demand without much further delays in setting up new steel plants.