In part one of this series, Sohrab Darabshaw explained how India’s steel strategy has changed over the years and how the previous government set the goals being evaluated today by the new BJP government and Prime Minister Narendra Modi.
India’s Ministry of steel has recommended taking a hard look at the previous government’s policy framework to enable the steel industry to capitalize on the domestic resources and turn them into a competitive advantage.
While India’s BJP government has not given up hope, on reaching the previous administration’s goal of 300 million tons of steel production per annum, it is of the opinion that if the magic figure of 300 mtpa has to be achieved, the country would have to work towards greater exploration, raising mining capacities and developing infrastructure, or else brace for significant exports. India’s crude capacity for steel production is currently 96 mtpa.
The report also says the supply crunch will hit producers without captive mines, who will have to depend on small merchant markets, according to a report in The Hindu BusinessLine.
As per the Steel Ministry’s estimates, the projected ore demand by 2025-26 will be 346 mtpa, assuming an 8 percent growth in Gross Domestic Product (GDP). The BJP government has added this cautionary note that in the absence of an export market and continued policy push for value addition, the iron ore mining industry will go for value addition and consume much of this valuable resource itself, only complicating the supply chain.
Essentially, what the Ministry is saying is that because of very few exploration efforts in the past, there are just not enough mines to be allocated on a captive basis for the new generation of steel producers.
The Ministry has concluded that for realizing the national mission of a steel capacity of 300 mtpa by 2025-26, an additional steel production capacity of 176 mtpa in India’s eastern provinces and 26 mtpa in the rest of the country is required. This could be in the form of mega steel projects in States like Jharkhand, Chhattisgarh and Odisha.
Now, the new government has sought suggestions from various stakeholders, including industry representatives, on its report.
The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.