India Soon to Be World's 2nd Biggest Steel Producer: No Foolin?

India, one of the fastest-growing crude steel producers as a nation, may well become the world’s second-largest producer of steel by 2015 — if everything goes well.

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This is the general forecast by business research firm Frost & Sullivan. In its market insight report, the firm said India would achieve this target because of its “expanding construction and infrastructure sectors,” which will boost the demand for steel between now and 2015.

A report in the Hindu Businessline newspaper quoting Venkatesan Subramanian, director of metals and minerals for Frost & Sullivan, noted that currently, India was the world’s fourth-largest producer of crude steel. If all planned capacity expansion projects become operational, it is expected to become the world’s second-largest producer by 2015.

The three other nations ahead of India at the moment are China, Japan and the US, according to the World Steel Association.

While consumption of steel is generally taken as an indicator of its economic progress, there are challenges that India faces in this sector that will have to be met if the Frost & Sullivan prediction is to become reality.

One of the factors contributing to the optimistic forecast by F&S is the 300 or so Memoranda of Understanding (MoUs) that have been signed by various Indian states like Odisha, Karnataka, Chhattisgarh and West Bengal for planned capacity of around 488.56 million tons by 2020. The steel sector presently contributes 2 percent to the country’s overall GDP.

The F&S report is based on past parameters like favorable government policies for the sector, along with economic growth.

Admittedly, India’s infrastructure is growing at a never-before-seen pace, only partially halted because of the current global recession. Yet, besides financial worries, the two major challenges that this sector today faces are the glacial pace of implementation of government policies (coupled with policy framing confusion), and resource supply.

The first of three major hurdles to India’s #2 spot as steel producer — resources — are outlined in Part Two.

Sohrab Darabshaw contributes an Indian perspective to MetalMiner.

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