Q1. What percent of the steel projects that were kicked off with such fun fare a few years back are now stalled? What are the prospects of these stalled projects seeing the light of the day, at least in the near to medium term?
Q2. What, according to you will be India’s steel making capacity in 2020, based on current ground realities?
A1&2 A number of MoUs were signed in the last few years with the State Governments of Odisha, Chattisgarh, Jharkhand and Karnataka for setting up steel plants in respective States by both public and private sector steel manufacturers. However, as some of the major steel projects were based on assured supply of raw materials particularly iron ore from the neighbouring States, the uncertainty regarding the availability of iron ore as well as problems of land acquisition and environment and forest clearance of the project were primarily responsible for delaying / stalling a number of such projects. Some of these projects have been abandoned, for instance, the project by ArcelorMittal of 24 million tonne capacity in the States of Odisha and Jharkhand. At the same time, some of the projects have initiated steps by reducing the original capacity of the project. For instance, POSCO’s project of 12 million tonne at Odisha has now been downgraded to 6 million tonne capacity.
In addition, the declining trend in steel demand initially in Europe and USA and subsequently in all the emerging countries, has also led to rethinking of undertaking steps for investing in capacity creation for steel as per the original programme. In a way, there is some amount of reluctance on the part of the individual steel manufacturer to add on the fresh capacity at the current period. Notwithstanding, the delay in green-field project, almost all the brown-field expansion (SAIL, Tata Steel, JSW) are going on as per the original schedule and in the near future India would experience an augmentation on steel capacity through brown-field expansion only.
Taken together, the current steel making capacity at around 97 million tonne would enhance to 117-118 million tonne by 2016-17. During the next four years’ time, the capacity addition would be dependent on various factors like the speed of environment & forest clearance, the assured supply of raw materials and issues relating to acquisition of land. By 2020 around 150 million tonne (pessimistic assessment) and 175 – 180 million tonne (optimistic assessment) capacity is likely to be created. However, these assessments are based on the current status of the industry and may undergo a change in the near future subject to the change in the demand scenario and raw materials availability position.
Q3. What the main reasons behind such a dismal scenario?
A3. As I have mentioned in the earlier paragraph that issues like raw material availability, land acquisition and clearance from the environment & forest department are the major hurdles for slow growth in capacity addition in steel. Another significant reason that has been added to the woes of Indian steel manufacturers is the subdued market condition particularly the demand for flats from automobile, ship building and other processing industries.
Q4. With such a tepid supply side, what will be the main drivers of increasing consumption of steel in India which continues to wriggle at abysmally low levels?
Q5. What is INSDAG doing to reverse these tends, especially to bolster consumption of steel in the rural areas?
A4&5. The main driver of steel consumption in Indian scenario continues to be infrastructure and construction, machinery & equipments, automobile and other processing industries. The manufacturing sector is passing through a crisis, exhibiting a growth rate of 2.5 – 3% per month against the 6 to 7% growth in the previous year. The manufacturing sector comprising of capital goods and consumer durables have a strong steel intensity apart from the growth in infrastructure development. The demand push in these sectors would particularly depend on enhancing the fixed asset investment as a percentage of GDP. In the last few months, there has been a declining trend of gross domestic capital formation (a proxy for investment) as a percentage of GDP. This has to be enhanced by increasing Govt investment and creating enabling environment for private investment. A number of economic reforms by the Govt would be needed to attract FDIs in various critical sectors. The economic reform by the Govt has to be accompanied by an appropriate fiscal and monetary policy in order to bolster the market sentiment.
This is the time when considerable efforts would be needed to promote the consumption of steel in various application areas. The Institute for Steel Development & Growth (INSDAG) has a specific role to play in this regard. INSDAG, over the years, has been concentrating on knowledge dissemination to the various end-users including professionals, designers by highlighting the advantages of steel use in various applications. INSDAG has made efforts in promoting life cycle analysis as a regular part of the business decision in order to drive home the advantages of steel vis-à-vis RCC. Slowly these efforts are yielding benefits and steel is being increasingly recommended as a preferred design material by the consultants and professionals. As lack of fabrication has become a major hurdle in increasing steel consumption in the country, INSDAG is putting a great deal of emphasis on conducting training programme on best practices on steel fabrication particularly in the rural areas and is getting a tremendous response to these training programmes from the rural / retail segment. INSDAG is also bringing out the manuals on steel fabrication and erection. In order to encourage the use of good quality steel, INSDAG has been associated with BIS, IIT Madras, SERC Chennai in formulating Codes & Standards for steel – concrete – composite bridges & flyovers, earthquake resistant TMT and structurals, etc.
Q6. Anything that you would like to communicate to our readers.
A6. Steel is must recyclable and environment friendly materials. It offers much faster construction. It is durable, versatile and a delight in the hands of a designer. It provides a strong backbone to elegant construction and infrastructure building. I would like all the readers to suggest ways and means for INSDAG to carry forward the message of steel.
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