India's steel consumption growing faster than production

Consumption might grow by over 5% in the calendar year 2014 to 83 million tonne

With increased government's focus on infrastructure and housing sectors, India's steel demand is likely to grow faster than production. While steel production continued to face intense pressure due to the lack of raw materials - iron ore and coal - linkage, its consumption will grow sustainably.

Global advisory firm Earnst & Young in its recent study said that India's steel consumption would grow by over 5% in the calendar year 2014 to 83 million tonnes compared with 79 million tonnes the country consumed in the previous year. In contrast, however, steel production in India would grow somewhat 3% to 84 million tonnes in the current calendar year compared with 81 million tonnes in the previous year.

The forecast assumes significance in terms of recent announcement by the Bharatiya Janta Party (BJP) led National Democratic Alliance (NDA) government which declared increased focus on infrastructure and housing sectors. Immediately after the announcement, corporate announced $5 billion investment on budget housing projects.

Steel production in India is facing major raw material shortage due to closure of iron ore mines in major producing states including Karnataka, Goa and Odisha. Speaking on the occasion of release of Steelworld, a city-based B2B publication published by Chandekar Business Media, Union Steel Minister Narendra Singh Tomar, said, "There is sufficient iron ore production in the country to meet the domestic demand and steel makers are not facing any shortage of the key input."

The release marks Steelworld's 20 years of publication, dedicated to iron ore and steel sector. Anant Geete, the Union minister for Heavy Industries also graced the occasion. "Information about steel sector is of vital importance to heavy industries. Steelworld is doing a great service by making this information available for the last 20 years," said Geete.

With steel consumption sets to increase, the surplus of steel inventory is likely to decline by 50% to a mere 1 million tonnes this year as compared to 2 million tonnes in the previous year.

Data compiled by the Joint Plant Committee (JPC) showed India's steel consumption growth remained muted at 0.5% during April - December 2013, but production growth rate improved steadily to 5.2% during the same period.

The minister said that while total iron ore consumption stood at 100.57 million tonnes, total iron ore production was seen at 167.29 million tonnes in 2011-12. The trend continued in subsequent years as well. India produced 135.85 million tonnes of iron ore in 2012-13 against its consumption of 103.59 million tonnes. Tomar emphasized that the government was not proposing to put restriction on export of iron ore.