[Market Insight] Indian Steel Industry Overview

India is currently the world's 2nd largest steel producer. In FY22 (till January), India’s production of crude steel and finished steel stood at 98.39 MT and 92.82 MT, respectively. The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-effective labor. Hence, the steel sector has been a major contributor to India's manufacturing output.

Indian Steel Production and Process Routes

According to CARE Ratings, India's crude steel production is expected to reach 112-114 MT in FY22, up 8-9% year-on-year, with demand expected to be supported by economic recovery, government spending, and enhanced liquidity. The share of different process routes in total production of crude steel in the country during the terminal years of the last five-year span is shown in the pie chart below:

Evolution of the Indian Steel industry

• 1907-1918: Production of steel started in India (TISCO was set up in 1907) & IISC was set up in 1918 to compete with TISCO.

• 1954-1964: Hindustan Steel Ltd and Bokaro Steel Ltd. were set up in 1954 and 1964, respectively. Private players were in downstream production mainly producing finished steel using crude steel products.

• 1973-1992: Steel Authority of India Limited (SAIL) was created in 1973 as a holding company to oversee most of India's iron and steel production.

• 1993-2014: Foreign players began entering the Indian steel market and launched of Scheme for promotion of Research and Development in Iron and Steel sector.

• 2015-2020: In 2019, India ranked as the second-largest crude steel producer in the world. Between April 2020 and January 2021, India’s cumulative production of crude steel stood at 87.21 MT and finished steel at 76.04 MT.

Overview of Indian Steel Exports 2021

• In 2021, India exported 12.79mt of total finished steel compared to 10.15mt in 2020, making the country a net exporter of finished steel.

• Meanwhile, imports of finished steel totaled 5.001mt in 2021, compared to 4.43mt in 2020.

India's main export regions are Asia and parts of Europe. In 2021, India's billet exports to Nepal fell slightly by 3% year-on-year, but Nepalese mills have reduced billet orders from India due to strong demand for sponge iron, which has led to a significant increase in sponge iron imports from India. Meanwhile, India's billet exports to Indonesia also increased by 55% year-on-year.

Top Steel Mills in India

1. Steel Authority of India Limited (SAIL) with an annual crude steel capacity of 21.4mt， is the largest steel-making company in India and one of the seven Maharatna’s of the country's Central Public Sector Enterprises. The company's production capacity includes five integrated mills and three special steel mills, mainly located in the eastern and central regions of India, close to domestic sources of raw materials.

2. Tata Steel is currently the world’s second-most geographically-diversified steel producer with an annual crude steel capacity of 23mt. The company is one of the few steel producers that is fully integrated – from mining to the manufacturing and distribution of finished products, it operates in 26 countries and has a commercial presence in over 50 countries with employees across five continents.

3. JSW Steel is a flagship company of the JSW Group. The company is a leading integrated steel manufacturer with a steel capacity of 19.4mt. Currently one of the fastest-growing companies in India with a presence in over 100 countries. JSW is also the first company to manufacture high-strength and advanced high-end steel products for its automotive segments.

4. Jindal Stainless Limited (JSL) is India's largest manufacturer of stainless steel with a capacity of 1.1 million tonnes per annum & 8mt steel product capacity, located on the eastern coast of India in the state of Odisha. The manufacturing complex comprises 250,000 tons per annum of Ferro Alloy’s facilities with world-class technology and equipment.

Major Investments in the Indian Steel Industry

• In the next three years from June 2021, JSW Steel is planning to invest Rs. 47,457 crore (US$ 6.36 billion) to increase Vijayanagar's steel plant capacity by 5 MTPA and establish a mining infrastructure in Odisha.

• In August 2021, Tata Steel announced to invest Rs. 8,000 crore (US$ 1.08 billion) in capital expenditure to develop operations in India in FY22.

• In August 2021, ArcelorMittal announced to invest Rs. 1 lakh crore (US$ 13.48 billion) in Gujarat for capacity expansion.

• In August 2021, Tata Steel announced to invest Rs. 3,000 crore (US$ 4.04 billion) in Jharkhand to expand capacities over the next three years.

• In August 2021, Jindal Steel & Power Ltd. announced plans to invest US$ 2.4 billion to increase capacity over the next six years to meet the rising demand from customers.

• In October 2021, ArcelorMittal and Nippon Steel Corp.'s joint venture steel firm in India, announced a plan to expand its operations in the country by investing ~Rs. 1 trillion (US$ 13.34 billion) over 10 years.

The Indian Steel Market Outlook 2022

For the purpose of alleviating India's high inflation level, the Indian government issued a policy to adjust the import and export tariffs of raw materials and steel products on May 22, 2022:

• Reduce the import tariff rate of coking coal and coke from 2.5% to zero tariffs.

• Raise export tariffs on HR, CR, and coated coils over 600mm wide from 0% to 15%.

• Increase export tariffs on iron ore of different iron grades and varieties to 45%-50%.

In recent years, India has been developing its own steel consumption system to activate domestic demand. Therefore, it is expected that the export of Indian steel products will be significantly suppressed under the influence of tariff adjustments, and the prices of iron ore and steel are likely to rise in the short term.

Although India's exports are expected to shrink, however, steel, one of India's core industries, contributes slightly more than 2% to the country's GDP. Over the years, the Indian government has announced various initiatives to boost the nation's steel sector, including infrastructure projects such as rail transport, dedicated freight corridors, high-speed rail tracks, affordable housing projects, automobiles, and low-cost power transmission.

India's GDP growth is expected to remain subdued, given that India's major steelmakers have deferred the capacity addition plans for nearly 15MT over the past two years. Therefore, growth in the steel industry is likely to remain robust in 2022.

About CUMIC

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