Indian Government's Ultra Mega Steel Projects Could Double Country's Steel Output By 2014

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MetalMiner is pleased to welcome guest columnist TC Malhotra. Based in New Delhi, Malhotra will be reporting on the Indian metal and manufacturing industry. This is his first article for MetalMiner.

With the positive response from the launch of ultra mega projects in the power sector, the Indian federal government proposes to launch a similar scheme in the steel sector. To meet the rising domestic steel demand and to curb large steel imports, a panel appointed by Indian Steel Ministry has proposed ultra mega steel projects (UMSP).

Citing delays in multi-billion dollar ventures of steel producers such as ArcelorMittal and POSCO because of regulatory and land-acquisition hurdles, the panel has favored ultra mega projects to double India’s steel capacity to 145 million tons by 2015-16, according to a report by the Press Trust of India (PTI). Presently, India has capacity to produce about 78 million tons, but estimates suggest that by 2014-16 the country would need 145 million tons of steel to meet their domestic needs.

The steel ministry panel favors setting up plants that will each have a capacity of 10 million tons per year. According to panel suggestions, each ultra mega steel project will be built on a fast-track basis, using super critical technology on the pattern of ultra mega power projects that may cost Rs 500 billion ($11.1 million). The raw material-rich states of Jharkhand, Orissa, West Bengal, Chhattisgarh and Karnataka are prime targets for these plants. The panel has also suggested setting such plants in Brownfield sites like Bokaro Steel Plant of Steel Authority of India Ltd, or Rashtriya Ispat Nigam Ltd, Visakhapatnam.

A final decision on the panel recommendations is yet to be made.

Economic growth of 8-9 percent has pushed up demand because of the need to develop infrastructure and cater to higher sales of consumer goods and autos. Industry experts say that consumption of steel is taken to be an indicator of economic development. While steel continues to have a stronghold in traditional sectors such as construction, housing and ground transportation, special steels are increasingly used in engineering industries such as power generation, petrochemicals and fertilizers.

Growing demand forces the industry to import steel, which is detrimental to the country’s economy, so the panel suggested enhancing production. Analysts say that steel imports in India are projected to rise to 9 million tons by 2015 from 7.3 million tons in 2011 as production may fail to match demand.

According to the recent research report, “Indian Steel Industry Outlook to 2012, issued by RNCOS, the Indian steel market has continued to post robust growth despite unfavorable economic conditions across the world. Research estimations show India’s steel imports are expected to grow at a compound annual growth rate of 20 percent during the 2011-2013 fiscal years.

Currently India is the world’s fifth-largest steel maker, and the country has also emerged as the largest sponge iron/direct-reduced iron (DRI) producing country in the world in 2010, a rank it has held onto since 2002.

India occupies a central position on the global steel map, with the establishment of new state-of-the-art steel mills, continuous modernization and upgrading of older plants, improving energy efficiency and backward integration into global raw material sources.

Analysts believe that with the rising steel demand, growing economy, rich resource base of iron ore, skilled manpower and vast experience of steel making and the huge capacity expansion plans, India is expected to become the second-largest producer of steel in the world by 2015-16.

Ultimately, the Indian federal government provides the overall policy environment to promote growth of the industry.

–TC Malhotra

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