AN OVERVIEW OF STEEL SECTOR

Global Scenario | Domestic Scenario | Production | Demand - Availability

Projection | Steel Prices | Imports | Exports| Levies on Iron & Steel | Opportunities for
growth of Iron and Steel in Private Sector

Global Scenario

 In 2018, the world crude steel production reached 1789 million tonnes (mt) and showed a
growth of 4.94% over 2017.
 China remained world’s largest crude steel producer in 2018 (928 mt) followed by India
(106 mt), Japan (104 mt) and the USA (87 mt).
 World Steel Association has projected Indian steel demand to grow by by 7.3% in 2019
while globally, steel demand has been projected to grow by by 1.4% in 2019. Chinese
steel use is projected to show nil growth in 2019.
 Per capita finished steel consumption in 2017 is placed at 212 kg for world and 523 kg for
China by World Steel Association. The same for India was 69 kg in 2017. Per capita steel
consumption is yet to be publish be WSA.

Note: Source for Data for the year 2017 is World Steel Association report, Steel
Statistical Yearbook, 2018 and press releases)

Domestic Scenario

 The Indian steel industry has entered into a new development stage, post de-regulation,
riding high on the resurgent economy and rising demand for steel.
 Rapid rise in production has resulted in India becoming the 2nd largest producer of crude
steel during the current year (2018) so far, from its 3rd largest status in 2017. The country
is also the largest producer of sponge iron or DRI in the world and the 3rd largest finished
steel consumer in the world after China & USA.
 In a de-regulated, liberalized economic/market scenario like India the Government’s role
is that of a facilitator which lays down the policy guidelines and establishes the
institutional mechanism/structure for creating conducive environment for improving
efficiency and performance of the steel sector.
 In this role, the Government has released the National Steel Policy 2017, which has laid
down the broad roadmap for encouraging long term growth for the Indian steel industry,
both on demand and supply sides, by 2030-31.
 The said Policy is an updated version of National Steel Policy 2005 which was released
earlier and provided a long-term growth perspective for the domestic iron and steel
industry by 2019-20.
 The Government has also announced a policy for providing preference to domestically
manufactured Iron & Steel products in Government procurement. This policy seeks to
accomplish PM’s vision of ‘Make in India’ with objective of nation building and
encourage domestic manufacturing and is applicable on all government tenders where
price bid is yet to be opened. Further, the Policy provides a minimum value addition of
15% in notified steel products which are covered under preferential procurement. In order
to provide flexibility, Ministry of Steel may review specified steel products and the
minimum value addition criterion.

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Production

 Steel industry was de-licensed and de-controlled in 1991 & 1992 respectively.
 India is currently the 2nd largest producer of crude steel in the world.
 In 2017-18, production of total finished steel (alloy + non alloy) was 126.85 mt, a growth
of 5.6% over last year.
 Production of Pig Iron in 2017-18 was 5.73 mt, a decline of 45% over last year.
 India was the largest producer of sponge iron in the world. The coal based route
accounted for 79% of total sponge iron production (30.51 mt) in the country in 2017-18.
 Data on production of pig iron, sponge iron and total finished steel (alloy/stainless + non-
alloy) are given below for last five years and April-January 2018-19 (prov.):

Indian steel industry : Production (in million tonnes)

Category 2013-14 2014-15 2015-16 2016-17 2017-18 April-Jan.
2018-19*
Pig Iron 8.35 10.23 10.24 10.34 5.53 5.024
Sponge Iron 22.87 24.24 22.43 28.76 30.51 27.574
Total Finished Steel 99.38 104.58 106.60 120.14 126.85 109.169
Source: Joint Plant Committee; *prov.

Demand - Availability

 Industry dynamics including demand – availability of iron and steel in the country are
largely determined by market forces and gaps in demand-availability are met mostly
through imports.
 Interface with consumers exists by way of meeting of the Steel Consumers’ Council,
which is conducted on regular basis.
 Interface helps in redressing availability problems, complaints related to quality.

Steel Prices

 Price regulation of iron & steel was abolished on 16.1.1992. Since then steel prices are
determined by the interplay of market forces.
 Domestic steel prices are influenced by trends in raw material prices, demand – supply
conditions in the market, international price trends among others.
 An Inter-Ministerial Group (IMG) is functioning in the Ministry of Steel, under the
Chairmanship of Secretary (Steel) to monitor and coordinate major steel investments in
the country.
 As a facilitator, the Government monitors the steel market conditions and adopts fiscal
and other policy measures based on its assessment. Currently, GST of 18% is applicable
on steel and there is no export duty on steel items. The government has also imposed
export duty of 30% on all forms of iron ore except low grade (below Fe 58%) iron ore
lump & fines and iron ore pellets both of which have nil export duty.
 In view of rising imports, the Government had earlier raised import duty on most steel
items twice, each time by 2.5% and imposed a gamut of measures including anti-dumping
and safeguard duties on a host of applicable iron and steel items. In a further move to curb
steel imports, the Indian government banned the production and sale of steel products that

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 does not meet Bureau of Indian Standard (BIS) approval and to check the sale of
defective and sub-standard stainless steel products used for making utensils and various
kitchen appliances, it issued the Stainless Steel (Quality Control) Order, 2016 for
products used in making utensils and kitchen appliances, that will help filter imports of
the metal. Again, in February 2016, the Indian Government had imposed the Minimum
Import Price (MIP) condition on 173 steel products. The MIP was extended thrice and
ceased to be effective in February 2017. Currently, a mix of anti-dumping /safeguard and
other measures are in place on a range of steel items to control the inflow of cheap steel.
Further, a Steel Price Monitoring Committee has been constituted by the Government
with the aim to monitor price rationalization, analyze price fluctuations and advise all
concerned regarding any irrational price behaviour of steel commodity.

Imports

 Iron & steel are freely importable as per the extant policy.
 Data on import of total finished steel (alloy/stainless + non alloy) is given below for last
five years and April-November 2018-19 (prov.):

Indian steel industry : Import of Total Finished Steel (in million tonnes)
Category 2013-14 2014-15 2015-16 2016-17 2017-18 April-Jan. 2018-19 *
Qty 5.45 9.32 11.71 7.23 7.48 6.547

Source: Joint Plant Committee; *prov.

Exports

 Iron & steel are freely exportable.

 India emerged as a net exporter of total finished steel in 2016-17 and 2017-18.
 Data on export of total finished steel (alloy/stainless + non alloy) is given below for
last five years and April-November 2018-19 (prov.):

Indian steel industry : Exports of Total Finished Steel (in million tonnes)
Category 2013-14 2014-15 2015-16 2016-17 2017-18 April-Jan. 2018-19*
Qty 5.99 5.59 4.08 8.24 9.62 5.150

Source: Joint Plant Committee; *prov.

Levies on Iron & Steel

SDF levy

 This was a levy started for funding modernisation, expansion and development of
steel sector. The Fund, inter-alia, supports :
1. Capital expenditure for modernisation, rehabilitation, diversification, renewal
& replacement of Integrated Steel Plants.
2. Research & Development
3. Rebates to SSI Corporations

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 4. Expenditure on ERU of JPC
 The SDF levy was abolished on 21.4.94
 Cabinet decided that corpus could be recycled for loans to Main Producers
 Interest on loans to Main Producers is set aside for promotion of R&D on steel etc.
 An Empowered Committee has been set up to guide the R&D effort in this sector.
 EGEAF – Was a levy started for reimbursing the price differential cost of inputs used
for engineering exporters. Fund was discontinued on 19.2.96.

Opportunities for growth of Iron and Steel in Private Sector

The New Industrial Policy Regime

The New Industrial policy opened up the Indian iron and steel industry for
private investment by (a) removing it from the list of industries reserved for public sector and
(b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign
direct investment are now freely permitted up to certain limits under an automatic route.
Ministry of Steel plays the role of a facilitator, providing broad directions and assistance to
new and existing steel plants, in the liberalized scenario.

The Growth Profile

(i) Steel : The liberalization of industrial policy and other initiatives taken by the Government
have given a definite impetus for entry, participation and growth of the private sector in the
steel industry. While the existing units are being modernized/expanded, a large number of
new steel plants have also come up in different parts of the country based on modern, cost
effective, state of-the-art technologies. In the last few years, the rapid and stable growth of
the demand side has also prompted domestic entrepreneurs to set up fresh greenfield projects
in different states of the country.

Crude steel capacity was 137.97 mt in 2017-18, up by 7.6% over 2016-17 and India, which
emerged as the 2nd largest producer of crude steel in the world in 2018 so far, as per
provisional production data released by the World Steel Association, has to its credit, the
capability to produce a variety of grades and that too, of international quality standards.

(ii) Pig Iron: India is also an important producer of pig iron. Post-liberalization, with setting
up several units in the private sector, not only imports have drastically reduced but also India
has turned out to be a net exporter of pig iron. The private sector accounted for 94% of total
production of pig iron in the country in 2017-18 (5.73 mt).

(iii) Sponge Iron: India, world’s largest producer of sponge iron (2017, prov.), has a host of
coal based units located in the mineral-rich states of the country. Over the years, the coal
based route has emerged as a key contributor and accounted for 79% of total sponge iron
production in the country. Capacity in sponge iron making too has increased over the years
and stood at 49.6 mt (2017-18).

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