4th edition of ‘ISA Steel Conclave 2023’ was held, nudging Steel Firms to ramp up their capacities so that India’s output of the critical infrastructure input doubles to 300 million tonnes a year by 2030.The event was marked by discussions on the theme, ‘Steel Shaping The Sustainable Future,’ underscoring the multifaceted role of the steel industry in India’s growth and development.
State of Steel Sector in India
Present Scenario
- India is the world’s second-largest producer of crude steel, with an output of 125.32 million tonnes (MT) of crude steel and 121.29 MT of finished steel production in FY23.
- The steel industry in India has experienced substantial growth in the past decade, with a 75% increase in production since 2008.
- The per-capita consumption of steel in India stood at 86.7 kilograms in FY23.
- The Indian steel industry has been driven by the availability of raw materials, such as iron ore, and cost-effective labor.
- As per the National Steel policy, launched in 2017, India projects crude steel capacity of 300 million tonnes (MT), production of 255 MT and a robust finished steel per capita consumption of 158 Kgs by 2030-31.
Significance
- Steel is one of the widely used materials all over the world. The iron and steel industry is the bottom line producer industry.
- The steel industry plays a pivotal role in crucial sectors such as construction, infrastructure, automobile, engineering, and defense.
- Steel is a key sector for the Indian economy (responsible for 2% of the country’s GDP in FY 21-22).
Challenges Faced by the Steel Sector
Barriers to Setting up Modern Steel Plants
- One major hindrance is the significant investment required for establishing modern steel-making plants.
- The high cost, around Rs 7000.00 crores for a 1-tonne capacity plant, poses challenges for many Indian entities.
- Reliance on debt financing, coupled with expensive finances in India compared to other countries, inflates product costs, making the final steel product less competitive globally.
Cyclical Demand and Monsoon Challenges
- The cyclical demand for steel in India, influenced by factors like monsoons that slow down construction, creates financial challenges for steel plants.
- During low-demand periods, steel plants must operate with minimal income, leading to financial strain and, in severe cases, closures.
Low Per Capita Consumption
- India’s low per capita consumption of steel, at 86.7 kgs compared to the world average of 233 kgs, reflects economic disparities.
- With low per-capita income and consumption, the incentive to establish large-scale steel plants for economies of scale diminishes.
- China, with significantly higher per capita income, demonstrates a more robust demand for steel.
Low Investment in Technology and Research
- India historically lags in investing in technology, research, and development for the steel sector.
- This results in dependence on international research and technology, incurring additional costs. Outdated and polluting technologies further contribute to the sector’s unattractiveness.
Slow Adoption of Steel in Construction
- India’s adherence to traditional concrete-based construction methods, rather than embracing steel, hinders the steel industry’s growth.
- Unlike the west, where steel is extensively used in construction for its efficiency, strength, and speed, India is yet to fully leverage steel in its construction practices.
Environmental Concerns
- The steel industry is among the three biggest producers of carbon dioxide. Consequently, steel players across the globe are increasingly facing a Decarbonisation Challenge to reduce its carbon footprint from both environmental and economic perspectives.
Impact of EU’s CBAM
- From 1th January 2026, the EU will start collecting the Carbon Tax (Carbon Border Adjustment Mechanism) on each consignment of steel, aluminum, cement, fertilizer, hydrogen and electricity. It will have an adverse impact on India’s exports of metals such as Iron, Steel and aluminum products to the EU, because these will face extra scrutiny under the mechanism.
- CBAM is part of the “Fit for 55 in 2030 package”, which is the EU’s plan to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels in line with the European Climate Law.