India’s finished steel production has been growing at a compound annual growth rate (CAGR) of 8.39 per cent during the five-year period from 2012 to 2017. As of 2016-17, the country’s finished steel production stood at 111.25 million tonnes (mt). Currently, steel consumption in infrastructure is less than 10 per cent and is targeted to reach 30 per cent by 2030.
Indian Infrastructure takes a look at the demand for steel that will arise from various infrastructure sectors in the future…
Roads and bridges
The construction of roads and bridges entails the use of several steel products such as rebars, angles, plates, hot rolled coils, billets, steel channels, beams, etc.
The demand for steel from the roads and bridges sector is expected to grow on account of the government’s increased thrust on road development. Several big-ticket programmes like Bharatmala Pariyojana, Setu Bharatam, Chardham Mahamarg Vikas Pariyojana and Sagarmala are expected to provide an impetus to the steel sector. Further, the government also plans to construct major bridges over the Ganga and Brahmaputra rivers, develop smart cities, construct new airports and strengthen the old ones under the Regional Connectivity Scheme and undertake the construction of new metro projects. Some of the major upcoming bridge projects include the Rs 12 billion Kosi river bridge, the Rs 30 billion new bridge over the Ganga river running parallel to the Mahatama Gandhi Setu, the Rs 15 billion six-lane Ganga bridge at Phaphamau in Allahabad, the Rs 35 billion Gohpur-Numaligarh bridge, the Rs 40 billion Dhubri-Phulbari bridge and the Rs 12 billion Kakdeep-Sagar Island bridge.
Larsen & Toubro Construction’s overall steel consumption has been around 948,000 tonnes amounting to Rs 38.75 billion. The company has several ongoing bridge projects across the country – Nawadin and Azimgani in West Bengal, Joghigopa in Assam and Bridge No. 164 in Manipur; two rail-cum-road bridges at Munger and Patna in Bihar; and one rail-cum-road bridge each at Sraighat and Boghibeel in Assam. Taken together, these projects pose a total steel requirement of 9,858 kg per square metre. Further, the steel usage in dam and tunnel projects also ranges from 4 to 10 per cent of the overall cost.
Some of the recent innovations in the steel sector such as higher grade steel, weathering steel and bend TMT steel have enhanced its use in the construction of roads and bridges. One of the major advantages of weathering steel is the lower maintenance cost. It also mitigates most of the structural deficiencies as it is corrosion resistant, thereby offering a design life of 120 years. However, it has several disadvantages as well. As compared to conventional steel, it is quite expensive. Further, weathering steel is not suitable for use in areas where industrial pollutant content in the atmosphere is high.
Despite the measures taken by the government, road construction companies still have concerns with regard to steel procurement. These include increased dependence on major suppliers, volatility in steel prices and non-availability of domestic steel for high-end applications. In addition, the non-existence of an automated fabrication yard for mass production of fabricated steel, lack of skilled manpower, low quality locally available steel, non-availability of thicker steel plates in the local market and lack of transparency in quality control and assurance at construction sites are issues which need immediate attention.
Port-based development of steel clusters, an increased emphasis on strategic ventures for production and development of high-end, alloy and electrical steel as well as the increased use of stainless steel in coastal and earthquake-prone areas will augur well for the sector in the long run.
Railways
Indian Railways (IR) is a major consumer of steel and its use in the sector ranges from building wagons, locomotives, coaches, wheels, axles, permanent ways to bridges and several other civil structures. The major types of steel procured by IR include mild steel, corten steel, stainless steel and special steels. Given the increase in wagon production during recent years – from 10,395 in 2015-16 to 10,716 in 2016-17 – the sector’s demand for steel is expected to increase. IR plans to add another 8,000 wagons in 2017-18 and 15,000 in 2018-19. Further, IR also has plans to produce 4,620 coaches in 2017-18, 5,900 coaches in 2018-19 and 7,200 coaches in 2019-20. In addition, IR’s locomotive manufacturing units are expected to produce 700-800 locomotives annually in the short to medium run. At present, IR’s structural steel requirement stands at 581,000 tonnes while the reinforcement steel requirement is 2.61 mt. Further, IR’s requirement of normal and head-hardened rails stands at 4 mt and 200,000 tonnes respectively, while that of asymmetrical rails is 46,000 tonnes. In addition, the requirement of thick web switches, cast manganese steel (CMS) and weldable CMS crossings is as high as 23,000 and 3,000 units respectively. This huge material requirement is bound to translate into a higher demand for steel.
During 2016-17, around 210,000 tonnes of steel worth Rs 8 billion was procured at the Railway Board level. During 2014-15 and 2015-16, the steel procurement stood at around 72,000 tonnes and 260,000 tonnes respectively. This is expected to increase further on account of several ambitious projects in the pipeline such as the dedicated freight corridor and high speed railway projects.
In addition, rail projects such as the 125 km Rishikesh-Karnaprayag rail link, the 498 km Bilaspur-Manali-Leh rail link, and regional rapid transit systems such as the 90 km Delhi-Ghaziabad-Meerut stretch, the 111 km Delhi-Sonipat-Panipat stretch and the 180.5 km Delhi-Gurugram-Alwar stretch offer huge prospects for the steel sector.
Buildings and real estate
In the buildings and real estate sector, structural steel is an important material on account of its physical, mechanical and chemical properties. Structural steel is light weight, durable and recyclable, which translates into cost savings for the parties involved. Though procurement and management of structural steel is similar to that of other materials, its use in construction offers some unique aspects such as off-site fabrication and rapid on-site erection. Further, composite construction involving the use of concrete, steel filler beams and girders has resulted in a reduction in foundation costs, decreased the live load deflections, allowed the use of shallower beams for facilitating reduction in building height and enabled an increase in span lengths. Composite columns are four to six times more economical than all-steel columns. They also offer economic advantages in terms of the 50 per cent reduction in manpower requirement.
Besides composite construction, structural steel cambering can be used to compensate for deflections caused by pre-composite dead loads. Cambering should be deployed for girders, fillers and composite floor beams. Cold cambering methods are more widely used and are generally more economical than heat cambering. Under cold cambering, the beam is mounted on a frame and force from a ram is used to bend the beam to create a camber. Top-down construction also contributes to the steel demand for flooring purposes.
However, structural steel has several shortcomings. These include higher initial costs, limitation in architectural design, and difficulties in incorporating changes during the construction process. Given the large-scale construction activities planned for the future, the demand for steel is expected to rise.
Piping and pipelines
A basic crude distillation unit requires around 3,000-4,000 tonnes of steel, 2,000-2,500 tonnes of reinforcement steel, around 350 km of pipelines and 2,500-3,000 tonnes of equipment. Cumulatively, 16 projects being undertaken by Engineers India Limited (EIL) require about 350,000 tonnes of steel for building structures and around 300,000 tonnes of reinforced steel. The company also has 14-15 projects in the pipeline which pose a requirement of around 400,000 tonnes of steel. In addition, EIL is also undertaking several airport projects and providing water pipelines under the Atal Mission for Rejuvenation and Urban Transformation in Odisha. In all, EIL’s current projects pose a demand amounting to 1.2 mt of steel. These projects offer a huge opportunity for Indian steel manufacturers but they will need to ensure that the steel is supplied on time as all the projects have strict deadlines to adhere to.
India should move towards increasing the use of stainless steel in pipelines to reduce corrosion, learning from international case studies on city water service pipelines in Tokyo and Taipei where leakages were reduced by more than 25 per cent. The National Steel Policy, 2017, has emphasised using the concept of life-cycle costs while evaluating projects rather than just considering the upfront cost. Further, the principle of life-cycle cost has been included in the 2017 manual for the procurement of goods to encourage greater use of stainless steel. In addition, the Indian Stainless Steel Development Corporation is collaborating with the Bureau of Indian Standards to develop standards for water service pipelines. With the government’s increased emphasis on building lasting infrastructure, the Indian stainless steel industry is growing very fast. At present, India is the second largest producer of stainless steel after China.
Indian Oil Corporation Limited (IOCL) owns 11 of the 23 oil refineries in the country. At present, all its refineries are under expansion as the demand for energy in all forms – petroleum, crude oil, natural gas – is increasing. Today, India has a network of 41,500 km of trunk pipelines, of which IOCL operates around 13,400 km. This number is likely to increase to 86,000 km by the end of 2030, of which IOCL’s share will be 32,000 km. Further, India is developing coastal locations to facilitate the import of liquefied natural gas (LNG). Some of these are already operational but the requirement is expected to triple by 2030. Pipelines offer an efficient way of transporting petroleum products and cost about one-tenth as compared to road tankers. Therefore, there is a strong emphasis on their development.
At present, natural gas use is at 6.5 per cent of the total energy mix. Given the government’s vision to reduce carbon emissions, gas use is expected to grow to 15 per cent by the end of 2030. Further, the central government plans to expand its network of pipelines for transporting petroleum to the northeastern region as well as to several neighbouring countries such as Bangladesh, Myanmar, Bhutan and Nepal. These indicate that the prospects for steel in the country are quite bright. At the same time, there is a need to focus on the quality aspect as well.
With the government’s growing emphasis on the use of natural gas, there has been a boom in city gas distribution (CGD) projects. The demand for steel from the CGD segment is estimated to be 10,000–12,000 tonnes per annum.
The quality of domestically available steel, its corrosion resistance and on-time delivery by Indian manufacturers are some of the areas of concern for pipeline manufacturers with regard to the steel sector.
Telecom towers
There are nearly 3.2 million telecom sites in the world with India having the second largest telecom infrastructure comprising nearly 460,000 telecom sites. Till 2004-05, most of the towers were conventionally designed. Post 2005, tubular towers were introduced. These towers provide optimised utilisation of the telecom site and enhance signal efficiency. So far, more than 70,000 tubular towers have been installed in the country. This is expected to create a huge demand for steel from the sector.
India has witnessed a 100 per cent growth in data usage on a year-on-year basis. Given the rapid emergence of rural and semi-rural telecom sites as well as the smart city initiatives towards the creation of telecom infrastructure, integration with social security needs such as video surveillance, street lighting, etc., will contribute to the demand for steel.
With regard to steel, the telecom sector faces several design-stage challenges such as the availability of pre-customised profiles such as tubes and angles. Further, there is a preference to use concrete rather than steel solutions, as steel is comparatively more expensive.
Transmission towers
Over the years, the country’s transmission system has evolved with the growth of power demand and generation. There has been an increase in the number of 400 kV lines; high capacity, long-distance 500 kV high voltage, direct current (HVDC) transmission lines; and 765 kV delta configuration lines. In order to cater to the need of bulk power transmission and right-of-way concerns, greater emphasis has been laid on the development of 400 kV multi-circuit lines, 765 kV double-circuit lines, 800 kV ultra HVDC lines and 1,200 kV ultra high voltage alternating current lines. Further, during the past 15 years, India’s installed generation capacity has grown from 105 GW to 330 GW. With regard to the transmission network, 288,396 ckt. km of transmission lines have been added over the past 25 years and, at present, span over 375,000 ckt. km.
Given the growth of the power transmission segment in the country over the years and the future plans for capacity augmentation, the demand for steel from the segment is expected to grow in the near future.
Conclusion
The line-up of infrastructure projects is a key positive for the steel sector. Sectors such as railways, roads and real estate are expected to offer significant opportunities in the coming years. Owing to the strong pipeline, order inflows are expected to gain momentum. However, the ability of Indian steel manufacturers to ensure on-time delivery remains a major challenge.