China has been the biggest producer and consumer of steel in the past decade. However, in recent years, it has been facing a problem of oversupply due to excess capacity. As a result of its sluggish domestic demand, the country has resorted to dumping steel abroad. Learning from this, India needs to not only provide assured demand for steel but also sustain this demand in order to incentivise steel manufacturers to increase investment in the business. Besides, initiatives such as digitalisation, Make in India, demonetisation and the goods and services tax will further encourage investment.
Challenges in the steel industry
One of the major challenges faced by the steel industry is demand generation and market development. Increasing capacity from the existing 110 million tonnes (mt) to 300 mt (as per the target in the National Steel Policy, 2017) will be a challenge if there is a lack of sufficient demand to absorb the increased production. Maintaining the competitiveness of the Indian steel industry in a sustainable manner amidst a competitive global environment is yet another challenge perceived by steel producers. Therefore, some structural changes are required to be made in the steel industry and its value chain to remain competitive globally.
Currently, the highways and bridges sector does not making use of continuous concrete. The Ministry of Steel is in talks with the Ministry of Road Transport and Highways to use it on a stretch in Delhi on a pilot basis. Also, steel-based structures need to be adopted at the earliest. A major challenge faced by steel manufacturers is the codification of thermo-mechanically treated (TMT) bars. The use high quality TMT bars, which are both earthquake and corrosion resistant with specification of the corrosion-resistant grade, has therefore been recommended.
Steel producers are of the opinion that high strength steel should be used which will save raw materials. For instance, 1 tonne of steel requires 2.5 tonnes of raw material. However, the use of high strength steel will lead to higher production with the same quantity of raw material.
The construction segment has great potential to increase the use of steel. The country’s current steel intensity in the sector is very low vis-à-vis its global counterparts. Also, galvanised C-sections (IS 801), which are prevalent abroad, can be used in the construction segment due to their long life of around 40 years. Meanwhile, there lies significant opportunity in the infrastructure sector as a whole to make use of steel by way of import substitution.
The low availability and pricing dynamics of raw materials – iron ore and coal – has continued to fret steel producers. In order to combat this, producers recommend linking of coal blocks to their steel plants to ensure continuous supply. In addition, economical transportation of coking coal and iron ore must be ensured.
With excess capacity of steel in countries such as China, Korea and Japan, India has become susceptible to dumping due to increasing demand for the material from various segments. The government has levied anti-dumping duty in the range of 4.58 per cent to 57.39 per cent of the landed value of cold-rolled flat stainless steel products. However, there have been instances of dumping as the reference price is very low. Therefore, the implementation of the anti-dumping duty must be monitored regularly.
The introduction of a module in academic institutions for architecture and civil engineering which educates students about steel-intensive structures has been recommended. Further, skilled manpower should be made available to the industry. Other recommendations include improving the ease of doing business for steel manufacturers, collaborating with the Ministry of Railways to revisit logistics costs, and promoting the development of inland waterways.
Traditionally, steel has been produced and sold as a commodity. In order to create demand, steel producers have realised that it has become important to work closely with consumers helping them in deciding the design and type of steel they need and optimising the use of steel. Therefore, the provision of a one-stop solution to consumers will be key in furthering steel consumption.
Going forward, collaboration between various steel producers is required so that there is a composite material supplier to end-user application. It is equally important to establish service centres in the country and undertake joint ventures for technology innovation.
The government’s continuous thrust to the infrastructure sector has boosted the confidence of steel producers. With steel demand expected to increase from the sector due to big-ticket programmes and a healthy line-up of infrastructure projects, steel producers are bullish about the industry. Various proposals to the Ministry of Steel, if implemented, will enable the industry to realise its potential. Steps such as a reduction in transportation costs, easier availability of raw materials, use of corrosion-resistant steel, and technological innovation must be taken.
Based on a panel discussion among Ruchika Govil, Joint Secretary, Ministry of Steel; Alok Sahay, Executive Director, SAIL; Prashant Dash, Executive Director, NMDC; Manish Mishra, Chief, Regulatory Affairs, Tata Steel; Ashok Bharadwaj, Senior Vice-President, New Business Development & Marketing, JSW Steel; and Ashwani Kumar, Vice-President, Sales & Marketing, Jindal Steel and Power, at a recent India Infrastructure conference.