Future of the Indian Steel Industry


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The Future of the Indian steel industry lies in the accumulation of idle capacities, low end products and adverse terms of trade.

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Future of the Indian Steel Industry

  2. 2. If the steel industry continues to grow at 8% annually on an average. 2
  3. 3. According to the Annual Report 2011-12 of Ministry of Steel, Government of India 3
  4. 4. The main reason for this is the stagnating population and zero growth rates of economies. 4
  5. 5. 1. Trade in raw materials adjunct to steel business like coal, iron ore, chromium, zinc and nickel. 2. Repeated relocations of steel facilities. Eg POSCO and plants of Arcelor Mittal. 3. Development of cities and real estates in land earmarked for steel plants as in JSE, Karnataka, BSL in Jharkhand. Essar and Tata Steel have real estates and investments in SEZs. 4. Businesses such as ocean liners and port development. Eg Tata NYK and Dhamra port. Essar Shipping, JITF Vector of the Jindals. 5
  6. 6.  Lack of mineral resources like iron and coal.  Limited supply of natural resources like water and land.  Pollution impacts on air and water.  Poor skills. 6
  7. 7. Managing Shortage of Iron Ore 7
  8. 8.  India has reserves of 13000 million tonnes, a stock of about 25 years beyond 2030.  Mining of poorer quality of iron ore with gangue.  Fines are likely to be mined and hence lower Fe content.  Increased pollution due to use of fines, more fines due to lower Fe and higher gangue.  Steel plants are likely to get uncertain mix of iron ore. 8
  9. 9. Observes that pollution in the sponge iron industry is more due to the poor quality of raw materials than due to poor management of pollution control technology. 9
  10. 10.  Pelletization to use iron ore fines.  Export of pelletization instead of iron ore, leaving the steel industry exactly in the same place.  Increased concentration in mine ownership and in mining for pellets. Hectic mine buying.  Elimination of DRI industry or integrating it to Blast Furnaces or EAFs.  Migration of DRI to Gulf where natural gas prices are low and DRI is the only way to make margins.  New designs of Blast Furnace to be able to use 100% pellets. 10
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  12. 12.  India has at present 284370 million tonnes of coal including coking and non coking as proved, indicated and inferred reserves, according to the Ministry of Coal, 2012.  Assuming that the steel industry uses 12% of the coal produced, the industry can claim only 12% of the coal reserves which is 34124 million tonnes.  At the rate of 423 million tonnes annually, we are left with only 80 years. 12
  13. 13.  Monopoly of the government over coal mining and allocation of blocks.  The strange clauses in Fuel Supply Agreement of Coal India Limited, the PSU which has a monopoly over coal.  Much of coal has very high ash content emitting high pollution and adversely affecting fuel economy.  The need to import coal and the compulsion to export thermal grades in return. 13
  14. 14. 1. Mixing of grades and emerging with a poorer quality of coal. 2. Integration of steel facilities for maximum use of waste gas in order to ease out burden on coal. 3. Rush for coal blocks due to anxieties related to land acquisition issues. 4. Squatting over blocks to hoard and raise domestic prices. 5. Diversion of profits from steel to purchase coal blocks abroad. 14
  15. 15. 1. Community attacks on DRI plants because of increased pollution. Community attacks on Coke Oven emissions. 2. Japanese companies coming with non recovery coke ovens with cleaner technology and better heat recovery systems. Such technology supplies bring along with them raw material assurances. 3. Thermal coal must be exported from coal blocks held by steel companies to pay for royalties and coking coal. 4. Crisis in the power sector due to export of thermal coal. 5. Insistence on nuclear energy to overcome the export of thermal coal. 6. Huge crisis of coal for stand alone DRI, merchant pig manufacturers, stand alone sinter and pellet plants. Threat of elimination. 15
  16. 16. Pursuit of raw materials will favour larger plants over the smaller, where smaller plants are likely to be eliminated. 16
  17. 17. 17
  18. 18.  Larger plants with automation with specific deskilling policies.  Contract labour.  Standard grades.  Purchased technology especially tied with raw material trade. Loss of indigenous technology.  Apathy of Indians to research. 18
  19. 19. 19
  20. 20.  Indian population is expected to be 1.5 billions.  At the present rate of annual growth of 1.5% and the growth of steel at 8%, it is expected that the per capita consumption of steel will grow by 5.3%.  If the present per capita steel consumption in India is 50 Kgs, then at 5.3% growth, by 2030, per capita consumption will be no more than 120 kgs, maximum 150 kgs.  Annual demand for steel will be 225 million tonnes of steel leaving 100 million tonnes each year as surplus.  With declining growth of steel demand across the world, this surplus steel will prove burdensome. 20
  21. 21. And other products will have to be imported in return causing a series of cheap imports in the rest of the economy. 21
  22. 22. Industrial Structure Technology Profile  Larger and integrated plants and elimination of smaller stand alone plants.  Production of standard grades and import of specialized grades albeit from Indian plants located abroad.  De skilled workforce.  Repeated relocation of steel business to generate profits.  Creating maximum distance between raw material and steel plants to generate freight business.  Integration of stages eg DRI, pellets, iron ore beneficiation and steel production.  Creating facilities that can use a variety of raw materials.  Technologies to manage off gas and hence integration of processes.  Large scale mergers and acquisitions in dedicated technology providers like Danieli, Corus, Tenova; or Hatch and Beddows. 22
  23. 23.  We will observe quite a bit of capital migration as value added processes and raw material production will migrate abroad. DRI facilities in the Gulf countries, ferro alloys in Nepal and Bhutan and so on.  Technology will be chosen to ensure raw material supply. Like Japanese technology supplies of non recovery Coke ovens will come with coke.  Large scale automated plants for sinter and pellet leading to large scale and automated steel plants.  Standard grades will be produced and the diversity and broad base of the industry likely to be compromised. 23
  24. 24. Thank You. 24