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Background paper - Steel

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Background paper - Steel

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Background paper - Steel

  1. 1. Steel
  2. 2. © Confederation of Indian Industry Content  Sectoral Snapshot  The Potential  Current Growth Drivers  Major Challenges faced 2
  3. 3. © Confederation of Indian Industry 3 Sectoral Snapshot 3rd Largest Globally by production capacity (~110 million tonnes) 2% Sector’s Contribution to GDP 100% FDI allowed under automatic route ~6.7% Sector’s Contribution to Industrial GDP 7.3% CAGR of domestic demand between 1991 – 2016 ~600,000 employment generated by sector Source: IBEF; Joint Plant Committee FDI – Foreign Direct Investment
  4. 4. © Confederation of Indian Industry 4 Advantage India Reason 1 Government boost to Infrastructure & Rural spending (220% over last 5 Yrs average)  Rs. 3.4 Lakh crs in Infra up 28% YoY  Rs. 2.87 Lac crs for rural spending up (FM Budget Speech) Reason 2 Significant reserves of natural resources:  Iron Ore reserves 31 Billion Tonnes  Coking Coal reserve 34 Billion Tonnes (Source: Platts) Reason 3  Significant growth expected in key demand sectors such as infrastructure, auto and railways Reason 4 Favorable demographics :  Young Population  Skilled man power  Long coastal line Potential  Production expected to increase to 300 MT by 2025  Low per capita steel consumption at 64 kg vs global average of 220 kg (Source Primary Data)  Growing middle class & rapid urbanization; high potential rural demand  Government focus on infrastructure development & manufacturing led growth
  5. 5. © Confederation of Indian Industry 5 Current Growth Drivers Policy and Eco-system • Policies designed for fair and open trade:  Iron ore export duty 0% below 58%  Coking coal has low import duty of 2.5% • Policies creating level playing field:  Minimum Import Price on 173 lines of steel products  Safeguard duty on Hot rolled coils • FDI: Given “High Priority” status with 100% FDI through automated approval route • Fair presence of public & private sector players leading to healthy competition Industry Evolution and Capabilities • 110 MT Crude Steel capacity • Indian Steel Mills ranked amongst Top-10 world class steel makers for operational excellence, cost competitiveness and sustainability by World Steel Association (WSA) • New & modern mills are capable to produce all grades & qualities of Steel as per International standards like Hardened-Quenched (HT-QT) & Tempered Bars, Boiler Quality, etc • Capability to cater to demand for specialty steel for Auto, Defense, Electrical and Marine sectors Market • Indian steel demand grew modestly by 4.5% in FY 2015-16 to 80.5 million tonnes • Likely to grow by 5.4% to 84 million tonnes according to Short Range Outlook (WSA) CY 16 and 88 MT in CY 17
  6. 6. © Confederation of Indian Industry 6 Major Challenges faced by sector Internal Challenges  Inconsistent availability of indigenous Iron Ore (Both Quantity and Quality)  Low contribution of manufacturing sector in GDP: 17%, (vs. 36% in China; 35% in Thailand)  Inadequate and under-developed infrastructure (Ports and Rail) resulting ion high logistic cost  High cost of finance External Challenges  Surplus steel production capacity and low capacity utilizations across geographies  Slowing international demand (-3% de-growth in CY2015 and -0.8% de-growth in CY2016E)  Surging steel imports from China, especially commodity grades • Geopolitical tensions – disrupting free global trade and investments • Imminent threat of heightened trade barriers (tariff and non-tariff) and market access

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