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Business News/ Industry / Manufacturing/  India saw 25.6% rise in steel production in first 8 months of 2021: Report
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India saw 25.6% rise in steel production in first 8 months of 2021: Report

Steel exports accounted for ₹19,267 crores whereas imports from China accounted for ₹16,369 crores, the Infomerics report said

The Indian steel sector contributes approximately 1.5% to its GDP and is one of the core sectors forming the backbone of the economy (AFP)Premium
The Indian steel sector contributes approximately 1.5% to its GDP and is one of the core sectors forming the backbone of the economy (AFP)

NEW DELHI : Despite being hit by the lack of construction activities due to covid-19 for a year, the steel industry has bounced back and had reported a 25.6% growth in crude steel production in the first eight months of 2021, Infomerics Valuation and Rating said on Thursday.

According to government data, the country’s crude steel production stood at 77.74 million tonnes (mt) in the January-August period of the calendar year 2021, which is a growth of 25.6 per cent over the same period of the previous year.

According to the Infomerics report titled, Steel Industry: Trends & Prospects, along with higher production, the country’s steel exports in FY22 are also expected to surpass that of FY21. The exports have already crossed 70% of FY21 levels. Imports, on the other hand, is expected to maintain their declining trend

The declining imports and rising exports are an indicator of the country moving ahead in its pursuit of self-sufficiency or “atmanirbhar", said the report.

Although there have been border tensions with China, the steel industry has seen sustained trade flow between India & China. However, that comes with a positive note, i.e., exports accounted for 19,267 crores whereas imports from China accounted for 16,369 crores, the Infomerics report said.

The Indian steel sector contributes approximately 1.5% to its GDP and is one of the core sectors forming the backbone of the economy, providing employment to about 25 lakh persons directly and indirectly. India is the third-largest manufacturing hub of steel pipe in the world and steel pipes constitute 8 to 10% of the steel consumption.

Given the abundance of iron ore, coal and many other raw materials required for iron and steel making, there is the immense latent growth potential for this industry in India, said the report.

The government has been taking necessary steps to facilitate smooth production & sustaining of the steel industry. The National Steel Policy (NSP) (2017) was implemented to foster faster development of the industry to scale global benchmarks. This aspect has considerable contemporary significance because eastern India has the potential to add over 75 per cent of the India’s incremental steel capacity. It is expected that of the 300 MT capacity by 2030-31, over 200 MT can accrue from this region, said the report.

Yet another notable development in the sector is the approval of the PLI Scheme by the cabinet for “Specialty Steel" in India to be implemented over FY24 to FY30 with a budgetary outlay of 6,322 crore. The PLI incentive is expected to boost domestic production of “Specialty Steel" and attract significant investment for its production in the country.

As per the report, despite sustained production and trade, the challenges remain to be there for the industry as the coal shortage in India is increasing the production and operating costs of steel companies. Further, global inflationary trends (including recent US inflation, where the CPI has surged to a 6.2 % for the last 12 month in October 2021 due to higher fuel costs and disrupted supply chain) is also posing a threat of rising prices including of essential inputs. High energy costs in Europe are also a matter of concern since the auto industry (an end-user of steel) is still suffering from semiconductor issues in European countries.

The report noted that any hit to the construction sector would also be reflected in the steel industry. This has exactly been the case where the COVID pandemic has severely hurt the construction sector. Although it is certainly difficult for the industry to upscale production, it is by no means, un-doable, Infomerics report has suggested. Achieving the goal calls for demand in greenfield and brownfield steel mills, up-scaling to acquire muscle and scale in global terms, technological modernization, and up-gradation to reap benefits of economies of scale and scope, enhancing energy efficiency and productivity and backward integration into global raw material sources constitute important elements of the growth strategy, it added.

According to Infomerics, the optimism for the industry springs from India’s relatively low per capita steel consumption and the likely rise in consumption. The report specifically mentions surging infrastructure construction, the rapidly developing automobile and railways sectors, huge stimulus package launched in several countries across the development spectrum in the aftermath of the covid-19 pandemic and the rising global steel prices are certain to provide an impetus to this sector.

However, to achieve the ambitious national objective of 300 million tonnes of production capacity by 2030-31 in terms of the National Steel Policy, 2017 and the National Mineral Policy- 2019, synchronized and concerted action with a sense of immediacy by all stakeholders to support the different stakeholders, increase financing by the private sector, and enhance consumption and trade of steel is required, it said.

Leading steel companies needed to enhance prices (hot-rolled coil or HRC) to offset coking coal price increase. In 2022, steel demand is expected to further increase by 2.2% to 1,896.4 MT. Thus, the global prospects seem good. The recent US infrastructure spends would also augur well for the industry by raising further global demand for steel.

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Published: 09 Dec 2021, 01:08 PM IST
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