An Overview of the steel sector - Ministry of Steel, Governmrnt of India

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Last Updated on : 2.12.2009

AN OVERVIEW OF STEEL SECTOR

Global Scenario

In 2007 the World Crude Steel output reached 1343.5 million metric tons and showed a growth of 7.5% over the previous year. It is the fifth consecutive year that world crude steel production grew by more than 7%. (Source: IISI)
China remained the world’s largest Crude Steel producer in 2007 also (489.00 million metric tons) followed by Japan (112.47 million metric tons) and USA (97.20 million metric tons). India occupied the 5 th position (53.10 million metric tons) for the second consecutive year. (Source: IISI)
The International Iron & Steel Institute (IISI) in its forecast for 2008 has predicted that 2008 will be another strong year for the steel industry with apparent steel use rising from 1,202 million metric tonnes in 2007 to 1,282 million metric tonnes in 2008 i.e. by 6.7%. Further, the BRIC ( Brazil, Russia, India and China) countries will continue to lead the growth with an expected increase in production by over 11% compared to 2007.

Domestic Scenario

The Indian steel industry have entered into a new development stage from 2005-06, riding high on the resurgent economy and rising demand for steel. Rapid rise in production has resulted in India becoming the 5 th largest producer of steel.
It has been estimated by certain major investment houses, such as Credit Suisse that, India’s steel consumption will continue to grow at nearly 16% rate annually, till 2012, fuelled by demand for construction projects worth US$ 1 trillion. The scope for raising the total consumption of steel is huge, given that per capita steel consumption is only 40 kg – compared to 150 kg across the world and 250 kg in China.
The National Steel Policy has envisaged steel production to reach 110 million tonnes by 2019-20. However, based on the assessment of the current ongoing projects, both in greenfield and brownfield, Ministry of Steel has projected that the steel capacity in the county is likely to be 124.06 million tonnes by 2011-12. Further, based on the status of MOUs signed by the private producers with the various State Governments, it is expected that India’s steel capacity would be nearly 293 million tonne by 2020.

Production

Steel industry was delicensed and decontrolled in 1991 & 1992 respectively.
Today, India is the 7th largest crude steel producer of steel in the world.
In 2008-09, production of Finished (Carbon) Steel was 59.02 million tonnes.
Production of Pig Iron in 2008-09 was 5.299 Million Tonnes .
Last 5 year's production of pig iron and finished (carbon) steel is given below:

(in million tonnes)
Category	2004-05	2005-06	2006-07	2007-08	2008-09
Pig Iron	3.228	4.695	4.993	5.314	5.289
Finished Carbon Steel	40.055	44.544	55.416	58.233	59.02
(Source: Joint Plant Committee)

Demand - Availability Projection

Demand – Availability of iron and steel in the country is projected by Ministry of Steel annually.
Gaps in Availability are met mostly through imports.
Interface with consumers by way of a Steel Consumer Council exists, which is conducted on regular basis.
Interface helps in redressing availability problems, complaints related to quality.

Steel Prices

Price regulation of iron & steel was abolished on 16.1.1992. Since then steel prices are determined by the interplay of market forces.
There has been an up-trend in the domestic steel prices since 2006-07 and the trend accentuated since January this year.
Rise in raw material prices, strong demand in the international and domestic market and up-trend in the global steel prices have been some of the reasons cited by the industry for increase in the steel prices in the domestic market.
The mismatch in demand and supply is considered to be the main reason on the demand side for the rise in steel prices. Honourable Steel Minister has held discussion with all major steel investors including Arcellor-Mittal, POSCO, Tata Steel, Essar, Ispat and also SAIL, RINL to explore the possibility of expediting the ongoing as well as envisaged steel projects.
The Government also took various fiscal and other measures for stabilizing the steel prices like exempting pig iron, non alloy steel and steel making inputs like zinc, ferro-alloys and metcoke from customs duty; withdrawing DEPB benefits on export of various categories of steel products and bringing back railway freight on iron ore from classification 180 to 170 for domestic steel producers.
In May 2008, the Government imposed 15% export duty on semi-finished products, and hot rolled coils/sheet, 10% export duty on cold rolled coils/sheets and pipes and tubes and 5% export duty on galvanized steel in coil/sheet form in order to further curtail rising prices and increase supply of steel in the domestic market.

Imports of Iron & Steel

Iron & Steel are freely importable as per the extant policy.

Last five years import of Finished (Carbon) Steel is given below:-

Year	Qty. (In Million Tonnes)
2004-2005	2.109
2005-2006	3.850
2006-2007 (Partly estimated)	4.436
2007-08	6.581
2008-2009 (Partly estimated)	5149

(Source: Joint Plant Committee)

Exports of Iron & Steel

Iron & Steel are freely exportable.
Advance Licensing Scheme allows duty free import of raw materials for exports.

Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports. Under this scheme exporters on the basis of notified entitlement rates, are granted due credits which would entitle them to import duty free goods. The DEPB benefit on export of various categories of steel items scheme has been temporarily withdrawn from 27th March 2008, to increase availability in the domestic market.
Exports of finished carbon steel and pig iron during the last five years and the current year is as :

Exports (Qty. in Million Tonnes)
Year	Finished (Carbon) Steel	Pig Iron
2004-2005	4.381	0.393
2005-2006	4.478	0.440
2006-2007 (Prov.estimated)	4.750	0.350
2007-2008	4.627	0.560
2008-2009 (Prov.estimated)	3.482	0.350

(Source : Joint Plant Committee)

Levies on Iron & Steel

SDF LEVY- This was a levy started for funding modernisation, expansion and development of steel sector.

The Fund, inter-alia, supports :

Capital expenditure for modernisation, rehabilitation, diversification, renewal & replacement of Integrated Steel Plants.
Research & Development
Rebates to SSI Corporations
Expenditure on ERU of JPC

SDF levy was abolished on 21.4.94
Cabinet decided that corpus could be recycled for loans to Main producers
Interest on loans to Main Producers be set aside for promotion of R&D on steel etc.
An Empowered Committee has been set up to guide the R&D effort in this sector.
EGEAF – Was a levy started for reimbursing the price differential cost of inputs used for engineering exporters. Fund was discontinued on 19.2.96.

Opportunities for growth of Iron and Steel in Private Sector

The New Industrial Policy Regime

The New Industrial policy has opened up the iron and steel sector for private investment by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario.

The Growth Profile

(i) Steel

The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new/greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies.

At present, total (crude) steel making capacity is over 34 million tonnes and India, the 8^th largest producer of steel in the world, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. As per the ratings of the prestigious " World Steel Dynamics", Indian HR Products are classified in the Tier II category quality products – a major reason behind their acceptance in the world market. EU, Japan have qualified for the top slot, while countries like South Korea, USA share the same class as India.

(ii) Pig Iron

In pig iron also, the growth has been substantial. Prior to 1991, there was only one unit in the secondary sector. Post liberalization, the AIFIs have sanctioned 21 new projects with a total capacity of approx 3.9 million tonnes. Of these, 16 units have already been commissioned. The production of pig iron has also increased from 1.6 million tonnes in 1991-92 to 5.28 million tonnes in 2002-03. During the year 2003-04, the production of Pig Iron was 5.221 million tonnes.