Chapter - II Steel Industry: An Overview

Chapter - II

Steel Industry: An Overview

2.1 Introduction

In modern industrial era the importance of iron and steel cannot be

overestimated. We use it every day in the cars we drive, the bridges we cross,
the cans we open and the building in which we live and work. Steel is
considered crucial to the development of a modern economy and the
backbone of human civilization. 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 fertilisers. The material greatness of a nation
is often measured by the level of per capita consumption of steel and is treated
as an important index of the level of socio-economic development and living
standards of people of a country.

The experience of the developed as well as the developing countries has

shown the important role played by the iron and steel industry in the
economic growth. India‘s economic growth too is contingent upon the growth
of the Indian steel industry. In India Steel accounted for about 2 percent of
gross domestic product with iron The per capita consumption of steel which
was only 2 kg per capita per annum at the dawn of independence has now
(2018) reached 69 kg per capita per annum which is no mean achievement for
a country like India. It is fitting that we should look back upon the long road –
rarely a smooth one, often a rocky one – along which the Indian steel industry
travelled.

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Chapter - II Steel Industry: An Overview

2.2 Historical Background

Key Events:
1907: Tata Iron and Steel Company set up.
1913: Production of steel begins in India.
1918: The Indian Iron and Steel Co. set up by Burn and Co. to compete
with Tata Iron and Steel Co.
1923: Mysore Iron and Steel Company set up
1939: Steel Corporation of Bengal set up
1948: A new Industrial Policy Statement states that new ventures in the
iron and steel industry are to be undertaken only by the central
government.
1954: Hindustan Steel is created to oversee the Rourkela plant.
1959: Hindustan Steel is responsible for two more plants in Bhilai and
Durgapur.
1964: Bokaro Steel Ltd. is created.
1973: The Steel Authority of India Ltd. (SAIL) is created as a holding
company to oversee most of India's iron and steel production.
1989: SAIL acquired Vivesvata Iron and Steel Ltd.
1993: India sets plans in motion to partially privatize SAIL
2015: India ranked as the third largest crude steel producer in the
world, leaving behind United States
2017: Introduction of National Steel Policy 2017 and allowing 100
percent Foreign Direct Investment (FDI) in the steel sector under the
automatic route.
2018: India ranked as the second largest crude steel producer in the
world, leaving behind Japan

Source: Public Enterprises, Government Policy and Impact on Competition:

Indian Steel Industry: Report Prepared for the Competition Commission of
India, Indicus Analytics: New Delhi.

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Chapter - II Steel Industry: An Overview

Chinese people invented steel as this alloy of iron and carbon could
serve better if used in making weapons. From China, the process of making
steel from iron reached to India. Since as early as 300 BC, high quality steel
was being produced in India. The Indian ‗Wootz Steel‘ was highly sought
after by the Persians, Romans and others. All these go to establish that India
possessed high skill and technology for making iron and steel in the country.
It is claimed that the famous ―woote‖ steel from which Damascus swords
were made was originally from South India, and the term ―wootz‖ itself being
derived from the kannada term ―Ukku‖. The IRON PILLAR of Delhi, 20' 5"
tall and weighing about 6 tonnes built 1500 years ago, the Konarak Beam
produced about 1100 years ago, the iron pillar at Dhar, the iron pillar at
Kordachari hill, the iron tridents at Tonginath Temple and on Mount Abu, the
big Cannon pipe at Tanjore made out of iron rods bound by three layers of
steel rings, etc are some of the examples of ancient massive and impressive
Indian iron product. Unfortunately, there was no endeavour of documenting
this technology properly and later on, the Britishers did not encourage
indigenous technology to grow. Like many other industries, steel making also
declined with the advent of colonial rule, and was lost so much so that a
country that was pioneer in iron and steel making and used to export to other
countries had to depend on an imported technology for the production of steel
in commercial scale-in the nineteenth and twentieth century AD.

In modern times, the first attempt at making steel was in 1830 when iron
and steel plant was set up at Porto Novo in Tamil Nadu. A similar effort was
made in 1874 when another steel manufacturing plant was set up at Kulti in
West Bengal, which later passed on to the hands of Bengal Iron Works. It was
the Bengal Iron Company, which for the first time produced steel on a
commercial basis. The most important development in the field of iron and
steel manufacturing was with the commissioning of Tata Iron and Steel

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Chapter - II Steel Industry: An Overview

Company (TISCO) at Sakchi (now Jamshedpur) in 1907. Jamshedji

Nusserwaji Tata, the founder of Tata House, had a great vision of producing
steel in India on commercial scale and it was solely due to his earnest effort
that Tata Iron and Steel Company Ltd. was born. The plant, with a small
production of few thousand tonnes of finished steel, steadily grew on to
become the largest integrated steel plant in India. The famous Howrah Bridge
of Kolkata was built in 1914, using 80,000 tonnes of steel produced by Tata‘s.
The Indian Iron and Steel Company (IISCO) was established in 1918 at
Burnpur, West Bengal. When IISCO and TISCO were being shaped in the
north, Sir M. Visvesvaraya conceived the production of iron in the state of
Mysore. Construction of Bhadravati Iron and Steel Works was started in 1921
and the first blast furnace was lighted in January 1923. The name of the plant
was later changed to Visvesraraiya Iron and Steel Works Limited.

In 1947, Indian Iron and Steel production was only one million tonnes.
However, in due course, much progress was achieved during the planning era.
Particularly during the Second Plan (1956-61) when three integrated steel
plants were setup at Bhilai, Durgapur and Rourkela. During the Third Plan
(1961-66) a new steel plant was set up at Bokaro. The Fourth Plan steel
programme was based on the maximum utilization of existing steel capacity
and preparation of plans to set up three new steel plants at Salem (Tamil
Nadu) Vijay Nagar (Karnataka) and Vishakapatnam (Andhra Pradesh) to
create additional steel capacity to meet the requirements. In 1972 the
management of the IISCO was taken over by the government and in 1973, the
government setup the Steel Authority of India Limited (SAIL) to maintain a
balance and co-ordination in production and to function as a holding company
along the lines of similar but older bodies in Italy and Sweden.

Rigorous control was exercised in steel industry up to early nineties.

However, after liberalization some major developments took place like

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Chapter - II Steel Industry: An Overview

removing restriction on setting up of large steel plant capacities, eliminating

export restrictions, reducing import tariffs, encouraging foreign investment,
etc thus, making Indian steel industry market oriented and integrated with the
global steel industry. Very recently, the government come up with a new
National Steel Policy in 2017 with the aim of establishing roadmap and
framework for its development. The policy envisages steel production to
reach at 300 million tonnes by 2030-31. However, the litmus test of the steel
industry will be to surmount all the difficulties and remain globally
competitive.

Figure 2.1: Iron and Steel Industry in India

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Chapter - II Steel Industry: An Overview

2.3 Iron to Steel

2.3.1 Types of Iron

The three major types of iron are pig iron, cast iron and wrought iron.

 Pig iron is the intermediate product of smelting iron ore with high-carbon
content, typically 3.5 percent to 4.5 percent, which makes it very brittle
and not very useful directly as a material except for limited applications.

 Cast iron an alloy of iron and carbon, and is popular because of its low
cost and its ability to make complex structures. The Cast Iron has Carbon
content of 2 percent to 3 percent. It has material properties like low
melting point, good fluidity, resistance to deformation, resistance to
oxidations and has thus, become a material with a wide range of
applications ranging from being used in the making of pipes, universal
joints to Crank-shaft, rail road, etc.

 Wrought iron is an iron alloy with low carbon content. This type of iron
can be easily welded. The wrought iron is strong and could withstand the
extreme weather conditions without showing the effect of corrosion and
rust.

2.3.2 Steel Manufacturing Process

About 60 percent of total steel is made using electric route and 40

percent using blast furnace. Out of 60 percent of steel made using electric
route, 30 percent of steel is made on Electric Arc Furnaces (EAF) and 30
percent on Induction Furnace (IF). Steel making is broadly classified as:

 Oxygen Steel Making

a) Blast Furnace or Basic Oxygen Furnace (BF/BOF): The key raw

materials required for steel making are iron ore, coking coal, limestone
and dolomite. Different raw materials received from mines and other

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Chapter - II Steel Industry: An Overview

sources are stacked and screened in the Raw Material Handling Plant of
the Steel Plant. Coking coal is crushed, screened, blended and then heated
in Coke Oven to make carbon rich Coke, fit to be used in the Blast
Furnace, where it acts as a reducing agent and provides heat energy to
liberate iron from iron ore and other impurities. Fine particles of iron and
coke are pre-heated before feeding them to Blast Furnace. This is done in
the Sinter Plant where these are mixed with flux (limestone and dolomite)
and heated to form solid porous pieces called sinter. A series of chemical
reactions then takes place through which iron is extracted from iron ore in
a hot molten state, called as Hot Metal. Hot metal, or liquid iron, contains
about 4 percent carbon and other impurities. The iron is then converted
into steel by reducing its carbon content and other impurities in the Basic
Oxygen Furnace (BOF). Liquid steel obtained from BOF is cast in
different shapes and sizes depending on the type of finished product to be
made.

 Electric Steel Making

b) Electric Arc Furnace (EAF): EAFs are used to produce carbon steels and
alloy steels primarily by recycling scrap i.e., steel goods which are no
longer in use or are broken into pieces for reprocessing, or Direct Reduced
Iron (DRI is another form of iron, but it is in solid form), or some amount
of hot metal. This arc furnace is used to produce mini steel structural bars
and steel rods with the right amount of porosity, optimal purity and crystal
size to satisfy the highly stringent requirements of many industries.

c) Induction Arc Furnace (IAF): is one of the most advance processes of

making steel. Like EAF it uses electricity as its main fuel. IAF is the most
efficient way of producing steel. A large numbers of small steel producers
use this technology.

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Chapter - II Steel Industry: An Overview

In India, steel is made by all the three methods as described above; it is

further shown for the year 2018 in the graphic below:

Percentage Share of Steel Making In India

29.16
40.06 BOF
IF
EAF

30.78

Source: Indian Steel Industry Analysis, ibef.org

Figure 2.2: Percentage share of different steel manufacturing process

2.3.3 Types of Steel

Steel, an iron based mixture containing two or more metallic and/or non-
metallic elements, can be classified into two broad categories, alloy steel and
carbon steel.

 Alloy steels are alloyed with other metals or materials, like manganese,
silicon, nickel, chromium, vanadium, molybdenum etc in addition to
carbon, to impart special properties to steel. For example, to increase
steel‘s corrosion resistance properties, nickel and chromium are used in
the making of stainless steel.

 Non-alloy or Carbon steels are steels in which the main alloying additive
is carbon. Carbon steels are classified based on the amount of its carbon
content. The four main classes of carbon steels are:

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Chapter - II Steel Industry: An Overview

a) Mild and low carbon steels (contain 0.16 percent to 0.29 percent
carbon). They come at a relatively low cost and are used for many
applications.

b) Medium carbon steels (contain 0.30 percent to 0.59 percent carbon).

They are used in large automotive industries.

c) High carbon steels (contain 0.6 percent to 0.99 percent carbon). They
are used for springs and high-strength wires.

d) Ultra-high carbon steels (contain approximately 1 percent to 2 percent

carbon). These used for specialized products such as knives, axles, or
punches. Steels with carbon content above 2 percent are considered to
be cast iron.

2.4 Industry Structure

On the basis on the routes of production, the Indian Steel Industry can
be divided into two types of producers, viz. integrated producers and
secondary producers.

 Integrated steel producers have traditional integrated steel units which

have facilities for producing pig iron from iron ore, converting them to
molten steel, casting them into slabs, billets and blooms and re-rolling
them to make finished steel products.

 Secondary producers are the mini steel plants (MSPs), which make steel
by melting scrap or sponge iron/direct reduced iron (DRI) or hot
briquetted iron (HBI). They comprises mainly of Electric Arc Furnace
(EAF) and Induction Furnace (IF) units and largely produce long steel
products such as a rod, a bar or a section. These are mostly used in
housing and construction, railway tracks, engineering products, gears,
tools etc.

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Chapter - II Steel Industry: An Overview

2.5 Profile of Selected Five Companies

2.5.1 Tata Steel Limited (TSL)

Tata Steel (earlier known as Tata Iron and Steel Company or TISCO)
established in 1907, represents the country‘s single largest, integrated steel
plant in the private sector. Tata Steel founded and developed India‘s first
industrial city, now Jamshedpur, where the company established one of Asia‘s
first integrated steel plants. Tata Steel is also examining further capacity
enhancement through greenfield projects in Jharkhand, Karnataka, Odisha etc.
The Company also possesses and operates captive iron ore, coal and chrome
ore mines.

2.5.2 Steel Authority of India Limited (SAIL)

Steel Authority of India Limited (SAIL) is the largest steel-making

company in India and one of the eight Maharatna‘s of the country‘s Central
Public Sector Enterprises. Iron and steel is being produced by SAIL at its 5
integrated plants situated in Chattisgarh (Bhilai), West Bengal (Durgapur and
Burnpur), Odisha (Rourkela) and Jharkhand (Bokaro) and 3 special steel
plants situated in Tamil Nadu (Salem), West Bengal (Durgapur), and
Karnataka (Bhadravathi). The Government of India owns about 75 percent of
SAIL's equity and retains voting control of the Company. However, SAIL, by
virtue of its ‗Maharatna‘ status, enjoys significant operational and financial
autonomy.

2.5.3 JSW Steel Limited (JSW)

JSW Steel is a fastest growing Indian steel company. It started its

production in 1982 by setting up the Jindal Iron and Steel Company near
Mumbai. In 2005, Jindal Iron and Steel Company (JISCO) merged with Jindal
Vijyanagar Steel Ltd (JVSL). Now, JSW has 6 steel producing plants situated

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Chapter - II Steel Industry: An Overview

in Karnataka (Vijayanagar), Tamil Nadu (Salem), and Maharashtra (Tarapur,

Vasind, Kalmeshwar and Dolvi).

2.5.4 Rashtriya Ispat Nigam Ltd. (RINL)

RINL, the corporate entity of Visakhapatnmam Steel Plant (VSP) is a

Navratna PSE under the ministry of steel. Vishakhapatnam Steel Plant –
popularly known as Vizag Steel, is the first Shore based Integrated Steel Plant
in the country. RINL is wholly owned by the Government of India. However,
the government is now planning to divest 10percent of its equity and in this
regard, it had filed a draft prospectus with market regulator SEBI for an Initial
Public Offer.

2.5.5 Jindal Steel and Power Ltd. (JSPL)

Led by Mr. Naveen Jindal, the youngest son of the legendary Shri O.P.
Jindal, it is one of the fast growing major steel units in the country. JSPL has
a wide variety of product portfolio that caters the demand of steel markets.
JSPL operates the largest coal-based sponge iron plant at Raigarh in
Chhattisgarh.

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Chapter - II Steel Industry: An Overview

2.6 World Steel Dynamics

Table 2.1

World Crude Steel Production 2000 to 2017 (in million tonnes)

Years World

2000 850

2001 852

2002 905

2003 971

2004 1063

2005 1148

2006 1250

2007 1348

2008 1343

2009 1239

2010 1433

2011 1538

2012 1560

2013 1650

2014 1670

2015 1621

2016 1627

2017 1689
Source: World Steel Association Report, 2018

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Chapter - II Steel Industry: An Overview

Growth Rate (percent per annum)

20

15 15.66

10 9.47 8.89
8.00 7.84 7.33
7.29
6.22 5.77
5
3.81
1.43 1.21
0 0.24 0.37
-0.37
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-2.93
-5

-7.74
-10

Figure 2.3: Growth Rate of World Steel Production

Table 2.1 and Figure 2.1 presents the figures of world steel production
and the year-over-year growth rate of the world steel production during the
period 2000 to 2017 respectively. During the period 2000 to 2007 the world
steel production has shown a consistent increase with an average growth rate
registering around 6.85 percent. Thereafter, for the two consecutive
successive years the world steel production dipped. It however, regained itself
back again in 2010 and achieved a growth rate of 15.66 percent for that year
(the highest year-over-year growth for the entire period). Since then, the
world steel production has shown an increasing growth rate for each year
except the year 2015. The average growth rate for the entire period i.e., 2000
to 2017 has been calculated as 4.26 percent.

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Chapter - II Steel Industry: An Overview

Table 2.2

Top Steel Producing Companies 2017

Rank Company HQ Crude Steel

(million tonnes)

1 Arcelor Mittal Luxembourg 97.03

2 China Baowu Group China 65.39

3 Nippon Steel and Japan 47.36

Sumitomo Metal
Corporation (NSSMC)

4 HBIS Group China 45.56

5 POSCO South Korea 42.19

6 Shagang Group China 38.35

7 Ansteel Group China 35.76

8 JFE Steel Corporation Japan 30.15

9 Shougang Group China 27.63

10 Tata Steel Group India 25.11

19 JSW Steel Limited India 16.06

25 SAIL India 14.80

56 Essar Steel Group India 6.03

75 RINL (VIZAG Steel) India 4.41

86 JSPL India 3.48

Source: World Steel Association Report, 2018

Table 2.2 shows the top steel producing companies for the year 2017. As
has been evident from the table Arcelor Mittal a steel producing company
from Luxembourg has been ranked first with 97.03 million tonnes crude steel

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Chapter - II Steel Industry: An Overview

production, followed by China Baowu Group with 65.39 million tonnes

production and Nippon Steel and Sumitomo Metal Corporation with 47.36
million tonnes. Indian Steel Producing Company, Tata Steel Group has been
ranked tenth with 25.11 million tonnes production. Other Indian Steel
Companies that have managed to secure ranking in the world steel association
report are JSW Steel Limited (ranked nineteenth) with 16.06 million tonnes,
Steel Authority of India Limited (ranked twenty fifth) with 14.80 million
tonnes, Essar Steel Group (ranked fifty sixth) with 6.03 million tonnes,
Rashtriya Ispat Nigam Limited or VIZAG Steel (ranked seventy fifth) with
4.41 million tonnes and Jindal Steel and Power Limited (ranked eighth sixth)
with 3.48 million tonnes of crude steel production for the year 2017.

Table 2.3

Major Steel Producing Countries 2017

Country Rank Tonnage (million tonnes crude steel)

China 1 831.7

Japan 2 104.7

India 3 101.4

United States 4 81.6

Russia 5 71.3

South Korea 6 71.0

Germany 7 43.4

Turkey 8 37.5

Brazil 9 34.4

Italy 10 24.1

World 1689.4
Source: World Steel Association Report, 2018

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Chapter - II Steel Industry: An Overview

Share in Production of Steel of Some Major Countries

(in percentage)
2.04
2.57 1.43
2.22 China
4.20
4.22 Japan
India
4.83
United States
6.00 49.23 Russia
6.20 South Korea
Germany
Turkey
Brazil
Italy

Figure 2.4: Production Share of Steel of Some Major Countries (2017)

Table 2.3 shows the major steel producing countries in the year 2017 on
the basis of crude steel production in million tonnes. China has been ranked
first with 831.70 million tonnes of crude steel production which is way ahead
then its contemporaries. Next comes Japan with 104.70 million tonnes closely
followed by India with 101.40 million tonnes. On the other hand, Figure 2.4
shows the share of major steel producing countries in percentage terms. China
occupies a share of 49.23 percent of the world steel production followed by
Japan with 6.20 percent and India with 6.00 percent.

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Chapter - II Steel Industry: An Overview

Table 2.4

Major Importers and Exporters of Steel 2017

Rank Net Exports Million Rank Net Imports Million

(exports Tonnes (imports Tonnes
minus minus exports
imports)

1 China 60.9 1 United States 25.2

2 Japan 31.2 2 Thailand 12.6

3 Russia 24.9 3 Vietnam 12.3

4 Ukraine 13.8 4 European 10.1

Union

5 Brazil 13.0 5 Indonesia 8.7

6 South Korea 12.0 6 Mexico 8.6

7 India 7.5 7 Philippines 7.3

8 Taiwan, China 4.7 8 Malaysia 6.0

9 Iran 4.4 9 Algeria 4.6

10 Belgium 4.0 10 Poland 4.5

Source: World Steel Association Report, 2018

Table 2.4 shows the ranking of countries on the basis of net exports and
net imports of steel in million tonnes. On the basis of net exports, China has
been ranked first with 60.9 million tonnes of net exports of steel followed by
Japan with 31.2 million tonnes and Russia 24.9 million tonnes. India has been
ranked seventh with 7.5 million tonnes of net exports of steel. On the basis of
net imports, United States has been ranked first with 25.2 million tonnes of
net imports of steel followed by Thailand with 12.6 million tonnes and
Vietnam with 12.3 million tonnes.

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Chapter - II Steel Industry: An Overview

2.7 Indian Steel Dynamics

Steel Production in India has been growing at a fast pace and has entered
into a new development stage, post de-regulation, riding high on the resurgent
economy and rising demand for steel. Rapid rise in production has resulted in
India superseding Japan and becoming the second largest producer of crude
steel during the year 2018 so far, from its third largest status in 2017.

Share in Production of Steel of India's Top Steel

Producing Companies 2017
(in percentage)

31.07 24.76 TSL

SAIL
JSW
3.43 15.84 ESSAR
4.35
RINL
5.95
14.60 JSPL
Others

Source: World Steel Association Report, 2018

Figure 2.5: Share in Production of Steel of India’s Top Steel Producing

Companies (2017)

Figure 2.5 shows the percentage share of production of steel of India‘s

top steel producing companies for the year 2017 on the basis of crude steel
production in million tonnes. TSL has a share of 24.76 percent in the total
crude steel production of the country which is way ahead then its
contemporaries. Next comes, SAIL with 15.84 percent share of crude steel
production and is closely followed by JSW with 14.60 percent. Essar has a
share of 5.95 percent, RINL 4.35 percent and JSPL 3.43 percent in the total
crude steel production of the country.

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Chapter - II Steel Industry: An Overview

The following chart highlights the contribution of the public and private
sector in crude steel production in the country during period 2007-08 to 2016-
17.

Performance of Public and Private Sector in Crude Steel Production

(2017)

(in million tonnes)

79.48
71.87
71.77
64.92
61.94
57.81
53.68
49.13
42.06
36.76

17.09 16.37 16.71 16.99 16.48 16.48 16.77 17.21 17.92 18.45

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Public Sector Private Sector

Source: Ministry of Steel Annual Report, 2017-18

Figure 2.6: Performance of Public and Private Sector in Crude Steel

Production (2017)

An analysis of the above chart indicates that during the period the 2007-
08 to 2016-17 the average contribution of public sector in total crude steel
production of the country is 23.10 percent and that of private sector is 76.90
percent. The percentage share of public sector in crude steel production has
varied from 31.74 percent in the year 2007-08 to 18.84 percent in the year
2016-17 with a declining trend. As for the private sector the percentage share

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Chapter - II Steel Industry: An Overview

has varied from 68.26 percent in the year 2007-08 to 81.16 percent in the year
2016-17 with an increasing trend.

Crude steel production has shown a sustained rise throughout the period
under the study along with capacity. Data on crude steel production, capacity
and capacity utilization during the period 2007-08 to 2016-17 is given in the
table below:

Table 2.5

Crude Steel Production 2017

(in million tonnes)

Year Capacity Production Capacity utilization

(%)

2007-08 59.85 53.86 91

2008-09 66.34 58.44 88

2009-10 75.00 65.84 88

2010-11 80.36 70.67 88

2011-12 90.87 74.29 82

2012-13 97.02 78.42 81

2013-14 102.26 81.69 80

2014-15 109.85 88.98 81

2015-16 121.97 89.79 74

2016-17 128.27 97.93 76

Source: Ministry of Steel Annual Report, 2017-18

Crude steel production grew at 6.83 percent annually (CAGR) from

53.86 million tonnes in 2007-08 to 97.93 million tonnes in 2016-17. Such
growth in production was driven by capacity expansion, from 59.85 million

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tonnes in 2007-08 to 128.27 million tonnes in 2016-17, a CAGR growth of

8.52 percent during ten year period under the study. Though both the steel
producing capacity and steel production has increased for the period under the
study but the steel production has not been able to keep pace with the steel
producing capacity which is reflected in the capacity utilization figures of the
table given above, which was as high as 91 percent for the year 2007-08 but
eventually came down and remained just 76 percent for the year 2016-17.

Table 2.6

Trend in Production, Consumption, Import and Export of Total Finished

Steel 2017

Total Finished Steel (million tonnes)

Year Production Import Export Real

for sale Consumption

2007-08 56.06 7.02 5.08 52.13

2008-09 57.14 5.84 4.44 52.35

2009-10 60.62 7.38 3.25 59.34

2010-11 68.62 6.66 3.64 66.42

2011-12 75.70 6.86 4.59 71.02

2012-13 81.68 7.93 5.37 73.48

2013-14 87.67 5.45 5.98 74.09

2014-15 92.15 9.32 5.59 76.99

2015-16 90.98 11.71 4.07 81.52

2016-17 101.81 7.22 8.24 84.04

Mean 77.24 7.54 5.03 69.14

CAGR (%) 6.92 8.81 9.27 6.13

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Chapter - II Steel Industry: An Overview

The fortunes of Indian steel manufacturers have been looking up due to

favourable global conditions, government regulations and spends thereby,
resulting in increasing demand for the metal globally. Vast productions of
steel products lead to expansion of steel products export thereby, reducing the
dependence on import, which made India a net exporter for the year 2017.

Production for sale of total finished steel stood at 101.81 million tonnes
during 2016-17, as against 56.06 million tonnes in 2007-08 which shows that
the production of finished steel grew at an average annual growth rate
(CAGR) of 6.92 percent for the period 2007-08 to 2016-17. However, the
CAGR of the first half of the period under the study was 7.65 percent as
compared to the latter half which was 6.20 percent.

Export of total finished steel during 2016-17 stood at 8.24 million tonnes
against 5.08 million tonnes in 2007-08, growing at a CAGR 9.27 percent for
the period 2007-08 to 2016-17. The CAGR for the first half of the period
under the study was negative 0.87 percent however, it improved for the latter
half of the period under the study to a positive 19.42 percent and eventually
India became a net exporter of total finished steel in the year 2016-17.

Import of total finished steel during 2016-17 stood at 7.22 million

tonnes, as against 7.02 million tonnes in 2007-08, growing at a CAGR 8.81
percent for the period 2007-08 to 2016-17. The CAGR of the first half of the
period under the study was 9.10 percent as compared to the latter half which
was 8.81 percent which shows India‘s reducing dependence on imports.

Domestic actual consumption of total finished steel stood at 84.04

million tonnes in 2016-17 as against 52.13 million tonnes in 2007-08, which
grew at a CAGR 6.13 percent. However, the CAGR of the first half of the

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period under the study was 8.81 percent as compared to the latter half which
was 3.44 percent which shows a decline in consumption of steel for the period
mainly due to relatively slow growth in major steel consuming sectors such as
automotive and consumer durables.

2.8 National Steel Policy, 2017

A new National Steel Policy is being drafted to replace the National

Steel Policy, 2005 as an effort to steer the industry to achieve its full potential,
enhance steel production with focus on high end value added steel while
being globally competitive. Excerpts from the draft of new National Steel
Policy 2017 have been given below:

a) Vision: To create a globally competitive steel industry that promotes inter-

sectoral growth.

/ OR /

To create a self-sufficient steel industry that is technologically

advanced, globally competitive and promotes inclusive growth.

b) Mission: Provide environment for attaining –

 Self-sufficiency in steel production by providing policy support and

guidance to private manufacturers, MSME steel producers, CPSEs and
encourage adequate capacity additions.

 Development of globally competitive steel manufacturing capabilities

 Cost-efficient production and domestic availability of iron ore, coking

coal and natural gas

 Facilitate investment in overseas asset acquisitions of raw materials.

 Enhance domestic steel demand.

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d) Objectives: The National Steel Policy aims at achieving the following

objectives –

 Build a globally competitive industry with a crude steel capacity of

300 million tonnes by 2030-31

 Increase per Capita Steel Consumption to 160 Kgs by 2030-31

 To domestically meet entire demand of high grade automotive steel,

electrical steel, special steels and alloys for strategic applications by
2030-31

 Increase domestic availability of washed coking coal so as to reduce

import dependence on coking coal to 50 percent by 2030-31

 To be net exporter of steel by 2025-26

 Encourage industry to be a world leader on energy and raw material

efficient steel production by 2030-31, in a safe and sustainable manner

 Develop and implement quality standards for domestic steel products

2.9 A SWOT Analysis of Indian Steel Industry

The sector‘s main strengths, weaknesses, opportunities as well as

threats/challenges are as summarised below:

Strengths Weaknesses
 Availability of quality iron ore  High cost of energy/power
and Coking coal  Poor infrastructure linkages for
 Low labour wage rates movement of both raw material
 Abundance of quality manpower and finished products

 A regionally dispersed secondary  Relatively high cost of capital

steel sector to cater to local specially for smaller producers
demand  Low labour productivity as well
as rigid labour laws

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 Dependence on imported
technology and equipment
including for maintenance
operations
 Multiple statutory clearances
required for mining and steel
making investments
 Issues linked to land acquisition
and rehabilitation
 Low R&D investments

Opportunities Threats/Challenges
 Growing domestic demand from  Fear of the new steel plants losing
steel intensive investments like competitiveness due to high costs
infrastructure building, real estate, of land, capital and higher
automobile/ auto components, provisions for protection of
communications, ship building, environment, CSR, etc.
defence, and medical equipment,  Euro-zone financial crisis and
consumer durables etc. slowdown in other developed
 Unexplored rural market world may lead to oversupply,
 Huge potential for productive dumping of steel and depression
foreign collaboration particularly of steel prices.
in specialized steel making  Potential competition from
products and equipment countries like China
 Unstable/Adverse global market
trends
 Dwindling raw material reserves
specially iron ore through exports

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2.10 Conclusion

Steel Production in India has been growing at a fast pace, riding high
on the resurgent economy and rising demand for steel. But the picture was
quite bleak for steel makers across the globe, a few years ago when the world
was experiencing the global melt down of 2008 and the Indian economy was
reeling under the severe recession. Excess capacity and output from China,
coupled with contraction in demand, made steel prices crash, eroding the
profitability of steel makers. Relatively smaller players which went on an
expansion spree, piling on large debt to fund their projects, took a hard knock
as the steel cycle reversed, with many of them turning insolvent. That‘s
probably why five out of twelve companies that were referred by the RBI to
NCLT (National Company Law Tribunal) in the first list, are steel companies.
The five companies — Bhushan Steel, Bhushan Power and Steel, Essar Steel,
Electro Steels and Monnet Ispat & Energy — which are going through the
NPA resolution process constitute around one sixth (~22 million tonnes) of
the total crude steel capacity in India.

The fortunes of Indian steel manufacturers have been looking up over

the last few years due to favourable global conditions, government regulations
and support thereby, resulting in increasing demand for the metal globally.
Vast productions of steel lead to expansion of steel products, increase in
export and reduced dependence on import, which made India a net exporter
for the year 2017.

Rapid rise in production has resulted in achieving two historic

milestones: First, when India became the third largest finished steel producer
in the world with 92.15 million tonnes of steel production, leaving behind
United States in the year 2015 and second, when very recently, India
superseding Japan became the second largest producer of finished steel in the

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world with 106.50 million tonnes of steel production in the year 2018
stepping up from its third largest status in 2017.

On the global front, the world crude steel production reached 1690
million tonnes in 2017 and showed a growth of 4% over the year 2016. China
remained world‘s largest crude steel producer in 2017 with 832 million tonnes
of crude steel production followed by Japan (105 million tonnes), India (101.4
million tonnes) and the USA (82 million tonnes).

It is interesting and pleasing to note that the Indian steel demand is

expected to grow by 7.3 percent in 2019. When we juxtapose the growth rate
of steel demand in India with the growth rate of global steel demand, we find
that India stands far-far better as the global steel demand is expected to grow
by 1.4 percent in 2019. However, as revealed from the World Steel
Association Report, 2017 the per capita finished steel consumption is
estimated to be only 69 kg for India as compared to 212 kg estimated for the
world and 523 kg estimated for China. Main reasons for the low per capita
steel consumption in India being its low consumption in infrastructure sector
and the high prices of steel.

A long-term growth perspective for the domestic iron and steel industry
that aims at building a globally competitive steel industry with crude steel
capacity of 300 million tonnes by 2030-31 has been envisaged in the National
Steel Policy, 2017. It also aims at increasing the per capita steel consumption
to 160 Kgs by 2030-31.

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References

1. Government of India, Ministry of Steel, Annual Reports (2008-09 to

2017-18)

2. Government of India. Ministry of Steel, National Steel Policy, 2017

3. Joint Plant Committee, Annual Statistics (2008-09 to 2017-18)

4. Indian Steel Industry Analysis, India Brand Equity Foundation Report

(December, 2018)

5. World Steel Association Report, 2018

6. Public Enterprises, Government Policy and Impact on Competition:

Indian Steel Industry, Report Prepared for the Competition
Commission of India, Indicus Analytics, New Delhi.

7. Sidhu S.S., (1983), The Steel Industry in India Problems and

Perspectives, Vikas Publishing House Private Limited.

8. Ghosh, S., (2005). Iron and Steel Industry in India - Past, Present and
Future.

9. Bagchi J., (2005), Development of Steel Industry in India, I K

International Publishing House Private Limited.

Websites

1. www.steel.nic.in

2. www.tatasteel.com

3. www.sail.co.in

4. www.jsw.in

5. www.vizagsteel.com

6. www.jindalsteelpower.com

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