Business Today

Metal & mining - Steeling for growth

Strong domestic demand for steel has led to both greenfield and brownfield capacity expansions, making India the fifth-largest crude steel producer in the world.

     Print Edition: Budget 2008 Special

India among largest crude steel producer
India among largest crude steel producer
Strong domestic demand for steel has led to both greenfield and brownfield capacity expansions, making India the fifth-largest crude steel producer in the world.

As on October 2007, finished steel production reported a year-on-year growth of 7.1 per cent to 29.92 million tonnes, while iron ore exports have increased by 100 per cent in the last five years (2002-07) and are likely to grow faster as the global steel production increases.

 

Construction and automobile sectors are the key drivers for growth in the metal industry. Several foreign players have evinced interest to set up steel plants in India, including Japan’s Kobe Steel and ArcelorMittal.

At the same time, Indian firms have been active in acquiring firms abroad, such as Essar Steel’s acquisition of Algoma Steel in Canada.

The government is launching a National Research and Development Mission with a corpus of Rs 60-65 crore to be funded from large steel companies to promote R&D in the domestic steel sector.

 Corporate impact

  •  
    J. Mehra, Chief Executive Officer, Essar Steel Holdings

    “The government’s continued commitment towards ensuring a double-digit manufacturing growth by carrying on with the ongoing reform process looks reassuring”

    J. Mehra

    SAIL: Being an integrated player, SAIL has a low-cost structure. To that extent, withdrawal of the 5 per cent customs duty on steel melting scrap is not likely to have a huge impact.

  • Tata Steel: Like SAIL, it is also an integrated player, which means the impact of duty withdrawal on steel melting scrap will be minimal. That apart, Tata Steel sources its own iron ore, which means consumption of scrap is still quite limited. The increase in export duty on chrome ore will benefit the domestic steel industry as a whole

  • Essar Steel: May stand to gain marginally and it is possible it may benefit a little more than a company like Tata Steel and SAIL. At the end of it, the impact still will be very marginal.

  • Hindalco Industries:While there has been a withdrawal of duty on both steel melting and aluminium scrap, it is business as usual at Hindalco. Final selling price could reduce slightly.

  • NALCO: The company’s performance will be the key determinant. Impact has been minimal and it is possible that the final selling price could move southwards

Sectoral impact

  • Appointment of coal regulator to streamline the procedures

  • Reduction of customs rate on iron or steel melting scrap and aluminium scrap from 5 per cent to nil will benefit the metal industry

  • Increase in export duty for chrome ore from Rs 2,000 per mt to Rs 3,000 per mt will have a positive impact on the domestic steel industry

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