Dependence on steel imports to double in two years

Steel output rises a marginal 3% year-on-year to 57 million tonnes in 2009.

India’s reliance on imported steel is likely to almost double in the next two years, due to the widening deficit between slow growth in domestic production and rapidly growing consumption.

By 2012, imported steel is estimated to contribute 14 per cent or 11 million tonnes of the country’s total forecast consumption of 88 mt. In 2010, the country is estimated to use six mt or eight per cent of imported steel in an overall consumption of 71 mt, shows data compiled by HSBC Global Research.
 

SLIPPING SUPPLIES STEEL BALANCE SHEET
	2008	2009	2010	2011*	2012*
Crude steel capacity	62	65	71	77	82
Crude steel production	58	57	65	71	77
Capacity utilisation	93	87	92	92	95
Apparent consumption	54	61	71	79	88
Imports	(-) 4	5	6	8	11
Source: HSBC Global Research, * Estimated                                    (million tonnes)

Steel output rose a marginal three per cent year-on-year to 57 mt in 2009; India was one of the very few nations to register positive growth. In February, the steel ministry announced a capacity target of 124 mt of crude steel by 2012. Barely a month later, the ministry revised the target down to 115 mt, still considered too optimistic.

Considering new capacity being set up by private and public sector steelmakers, total crude steel production capacity is estimated to increase by nine per cent to 77 mt in 2011 and by five per cent to 82 mt in 2012.

Triggered by huge infrastructure demands — national highways, stadia and other mega projects being developed — growth in consumption is estimated to move much faster. In each of the next two years, the steel sector may record a demand growth over 11 per cent.

S K Gupta, Director, JSW Steel Ltd, attributes mainly two factors for growing dependence on imported steel. First, public sector steel behemoths Steel Authority of India Ltd (SAIL) and Rashtriya Ispat Nigam Ltd (RINL) have not invested adequately on capacity expansion. Second regulatory bottlenecks, such as the land acquisition hurdles for multinational steel majors ArcelorMittal and Posco.

SAIL has proposed to add 7.7 mt of additional capacity to its existing 12.5 mt by 2011-12. RINL also plans to increase production capacity by 3.4 mt to its 2.9 mt of existing facility. But, the industry was expecting much more, especially from SAIL, which is self-sufficient in raw material availability, an analyst said.

Other steel majors, including Tata Steel, Jindal Steel and Essar Steel, are planning to bring in 26.7 mt of fresh capacity to raise India’s total potential to 101.4 mt.

Meanwhile, the government has levied 10 per cent and 15 per cent export duty on iron ore fines and lumps to discourage ore exports.

The move was to protect India’s natural resources for extended use. The government also aimed through the levy to raise domestic steel output. But, production will lag demand for some years, the analyst added.