As steel demand and production pick up in the West, India back to being No 5 producer.
The government’s target to double the country’s steel capacity is nowhere in sight. A faster than expected recovery in steel demand and production in the West has made India slip down to number five from number three last year in the global rankings of steel producers.
The new steel minister, Beni Prasad Verma, while agreeing that India is the world’s fifth largest steel producer, has said with a targeted production capacity of 120 million tonnes by 2012, the country is expected to become the second largest steel producer very soon. From where the enhanced capacity would come in the next one year is a pertinent question.
Verma stressed that growth in the Indian steel industry has been consistent over the years despite adverse external conditions. According to data made available by the World Steel Association, India’s steel production for 2010 is 66.8 million tonnes as against 62.8 million tonnes in 2009. This is a growth of 6.4 per cent, the lowest in the top 10 steel producing countries in the world.(Click here for table & graph)
In 2009, the country produced 62.8 mt of steel, up from 55.2 mt in 2008, translating to an increase of close to 14 per cent. The situation today is worse than what it was in 2007, when the slowdown was starting to hit the world. India, at number five with 53.1 mt of production, saw its steel production grow by 7.3 per cent against 2010’s 6.4 per cent.
The world crude steel production reached 1.4 billion tonnes for the year 2010, up by 15 percent over 2009, and registered a new high for global steel production. India continues to underperform. Rakesh Arora, head of research, Macquire India, said, “Steel production is not growing as the capacity addition is slow. We are not able to create more capacity and that is the sole reason why growth in India is in single digits.”
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ArcelorMittal and POSCO, two big ticket investments of 12 million tonnes each in the Indian steel sector, have still not taken off. Moreover, the capacities of local steelmakers are delayed due to land acquisition and environmental issues.
Despite growth in steel production, India’s share in the global steel production continues to decline. The country had a 5.1 percent share in the global production in 2009, which now stands at 4.7 per cent.
World Steel Association said, “All the major steel-producing countries and regions showed double-digit growth in 2010. The EU and North America had higher growth rates due to the lower base effect from 2009 while Asia and the CIS recorded relatively lower growth.”
And this, analysts believe, will take time to correct. An analyst with a domestic research firm said, “JSW and Tata Steel together will add another six million tonnes of capacity in the next fiscal and that should prop up the steel production growth numbers for the country in FY12. However, the number two slot will continue to elude us as the country will have to outpace the developed world and must have at least 120 million tonnes of steel production to reach that stage.”
It was just last year that India, with 62.8 mt steel production, was number three, with only China and Japan above at 567.8 mt and 87.5 mt respectively. Russian and US steel production was lower than India, at 60 mt and 58.2 mt, respectively. It was during this time that the central government was blowing its trumpet of doubling the steel capacity by 2012 and becoming second only to China.
In 2010, on the back of a faster recovery, steel production in the US outpaced the world at 38.5 per cent, at 80.6 million tonne, and the European Union recorded an increase of 24.5 per cent compared to 2009, producing 172.9 mt of crude steel in 2010. “However, crude steel production in the UK and Greece continued to decline in 2010,” World Steel notes.
An analyst said, “The steel demand and production in the Western world has improved considerably in the last one year and that is showing now. A lot of idle capacities are restarted, or, are in the process of firing again.”
The US, which was at 98.1 mt in 2007, dropped to 58.2 mt in 2009 and in 2010, has bounced back to 80.6 mt. Russia, with its peak steel production of 72.4 mt in 2007 is at 67 mt this year. Finally, Japan, at 109.6 mt in 2009, is just 10 mt away from its peak production of 120.2 mt of 2007. The analyst said, “With six mt coming up next year, India might be able to marginally beat Russia to the number four position but improving its ranking further is an uphill and time-consuming task.”
JSW Steel, in a statement, said, “The demand for steel in India has seen a robust growth in excess of 9-10 per cent over the year 2009-10. Rapid urbanisation and spending on infrastructure within India is certain to drive steel demand and in the year 2011 – 12, it is estimated the demand is likely to grow between 12-14 per cent.” The mismatch between the production and demand is met through imports and will continue in the same fashion till the time bottlenecks to create more capacity at home are sorted out.