*Indian steel<http://www.innovatorieuropei.com/redazione/editoriali/indian-steel>
* (by asif Parvez)
India was the 5th largest producer of crude steel in the world in 2010
(according to World Steel Association) and is poised to become the 2nd largest
producer by 2015-16, provided all requirements for fresh capacity creation
are met. The domestic crude steel production grew at CAGRG of 8.4 per cent
between 2005-06 and 2009-10. This growth was driven by both capacity
expansion (from 47.99 million tonne in 2004-05 to 72.96 million tonne in
2009-10) and improved capacity utilization. India, is also the world's
largest producer of direct reduced iron (DRI) or sponge iron, is expected
to maintain this lead in the near future. Sponge iron production grew at a
CAGR of 11 per cent to reach a level of 20.74 million tonne in 2009-10
compared to 14.83 million tonne in 2005-06.
The Indian steel industry is broadly classified into Main Producers (Steel
Authority of India Ltd. (SAIL), Tata Steel and Vizag Steel/RINL), Major
Producers (plants with crude steel making capacity above 0.5 million tonne
- Essar Steel, JSW Steel, Jindal Steel & Power and Ispat Industries) and
Other Producers. The latter comprises of numerous steel making plants
producing crude steel/finished steel (long product/flat product)/ pig iron/
sponge iron and are spread across the different regions of the country
From a negligible global presence, the Indian steel industry has come
forward to a new age and is now globally acknowledged for its product
quality. As it traversed its long history during the past 64 years, since
independence, the Indian steel industry has responded efficiently to the
challenges of the highs and lows of numerous market cycles. The Indian
Steel Industry has withstood international competition despite the
reduction of basic customs duty on steel from 25-30% in 2002-03 to 5%
currently. The industry now operates in an open economy where exports and
imports respond to increases or decreases in the domestic demand driven
primarily by market signals.
From the year 2002, the global industry turned around, helped to a great
extent by China, whose spectacular economic growth and rapidly-expanding
infrastructure led to soaring demand for steel, which its domestic supply
could not meet. At the same time, recoveries in major markets took place,
reflected by increase in production, recovery of prices, return of
profitability, emergence of new markets, lifting of trade barriers and
finally, rise in steel demand worldwide.
*“Urbanization and industrialization have supported a phenomenal growth in
China’s steel demand over the past decade. The fundamentals underlying
China’s growing demand will remain robust, driving this demand into the
next decade. India is expected to follow China’s lead, and increased
controls on its export capacity and early signs of increased steel
intensity suggest its emergence as a major market will continue’*…..RioTinto,
2010.
India’s National Steel Policy (formulated by Ministry of Steel) long-term
objective is to ensure that India has a modern and efficient steel industry
of world standards, catering to diversified steel demand. The focus of the
policy is to attain levels of global competitiveness in terms of global
benchmarks of efficiency and productivity. The National Steel Policy 2005
had projected consumption to grow at 7% based on a GDP growth rate of
7-7.5% and production of 110 million tonne by 2019-20. These estimates will
be largely exceeded and it has been assessed that, on a 'most likely
scenario' basis, the crude steel production capacity in the country by the
year 2012-13 will be nearly 110 million tonne. The crude steel performance
has been contributed largely by the strong trends in growth of the electric
route of steel making, particularly the induction furnace route, which
accounted for 31 per cent of total crude steel production in the country
during 2009-10 and has emerged as a key driver of crude steel
production. Corporate
Social Responsibility (CSR) has been identified as an important parameter
in the MoUs since 2007-08. CSR activities focusing on environmental care,
education, health care, cultural efflorescence and peripheral development,
family welfare, social initiatives, including sports activities and other
measures are under implementation. All profitable public steel companies
have earmarked at least 2% of their distributable surplus for CSR
activities since 2007-08.
* *
During 2011, the strong demand for steelmaking ingredients worldwide was
accompanied by major issues on the supply side. Major steel companies are
following vertical integration into their business. Iron ore deals
represented 11.8% of M&A, measured by value (up from 10% in 2010) and 5.6%
of deal volumes (down from 9% in 2010). Iron ore targets were spread across
the globe with Canada being the most targeted nation—28% of the targets by
volume were domiciled there. Australia (12%), China (10%) and Brazil (8%)
were the other nations with notable takeover volumes. New frontier
geographies were also targeted due to their proximity to emerging market
nations that demand iron ore but also because of escalating production
costs in developed regions.
* *
*“China’s 12th five-year plan for 2011-2015 continues to support the
drivers of commodity demand, including iron ore, coal and copper. The
social housing program, involving the construction of 36 million units, out
of which 10 million are scheduled to take place in 2011 and another 10
million in 2012 will add strength to the property market and iron ore
demand from 2H11 onwards.”……*Vale, 2010.**
The rejuvenated steel market in the country has already witnessed the
announcements of mega expansion plans of leading domestic producers in the
form of Greenfield and/or Brownfield projects in different parts of the
country. According to PwC, securing supply will be India’s chief concern,
many Indian-led deals will resemble typical China-led deals from the
2000-2007 period, often structured as private placements (debt or equity)
with offtake or royalty agreements. The decision of Posco, South Korea, to
set up their 12 million tonne integrated steel plant in Orissa, a state in
eastern India has given the Indian steel industry a feel of what
'globalization' is all about. This was soon followed by Mittal Group's
announcement of plans to set up their 12 million tonne integrated steel
unit in Orissa. The domestic Indian steel producers (both public and
private sector) also are not lagging behind and are foraying into other
parts of the world to have their footprints by acquiring mines and other
steel companies, actively in Africa, Australia, USA and Europe. Indian
conglomerate TATA Steel's $12 billion acquisition of Anglo-Dutch giant
Corus Group Plc, transformed TATA Steel Ltd. into a major global steel
producer, which may well be regarded as a benchmark even in the history of
the Indian steel industry. Such developments only prove that the Indian
steel industry has entered a mature phase.
* *
*Sources: Ministry of Steel; India, The Hindu, Annual Reports 2010
(RioTinto, BHP Billiton, Vale, Tata Steel), The Economic Times, Mining
Deals 2010-PwC, Tracking Trends 2012-Deloitte etc.*
--
Innovatori Europei
www.innovatorieuropei.com (Web)
infoinnovatorieuro...@gmail.com (Email)
http://groups.google.com/group/innovatorieuropei (Forum)
