Business Today

Steeling The Scene

India is set to become the second largest user of steel in the world.
Edwin Basson   New Delhi     Print Edition: June 16, 2019
Steeling The Scene
Representative Image

In 2018, India produced 106.5 million tonnes (MT) of crude steel, the highest ever. It also overtook Japan as the world's second largest producer of steel. The country's apparent use for finished steel products, a measure of steel demand, increased by 8.3 per cent in 2018 to reach 96 MT, making India the third largest steel using country after China and the US. According to worldsteel's latest Short Range Outlook (SRO), Indian steel demand growth will be 7.1 per cent and 7.2 per cent in 2019 and 2020, respectively, far greater than the forecast for the US, 1.3 per cent and 0.3 per cent, respectively. If our forecasts are accurate, it means India will become the second largest user of steel in the world this year. Indeed, as India recovers from the demonetisation shock and GST streamlines a previously fragmented taxation system, India continues to unlock its potential for increased growth.

Industry pundits sometimes ask if India will be the steel industry's new China. It is important to remember that these impressive Indian growth figures are from a very low base; in 2018, India's steel use per capita was 71 kg, well below the global average of 225 kg. Something else to consider is that India's steel geography is very uneven; steel use per capita stands at nearly 250 kg in Uttarakahand, many times more than in Bihar. Important steel using industries, such as the automotive hubs in Haryana, Maharashtra and Tamil Nadu are far removed from steel producing states of Jharkhand and Odisha, although planned infrastructure projects connecting existing industrial cities and sites will increase India's connectivity, reducing logistical costs of transportation across states and boosting steel demand. For these reasons, although we expect to see growth rates of 7 per cent and higher, a repeat of the Chinese takeoff seems unlikely.

In China, huge investment-led growth in infrastructure and construction by the state saw steel use grow at a much faster rate than GDP. India's growth model is different; it is more service-orientated and less controlled by a central government. India's steel demand has been growing at almost exactly the same level as its GDP. However, while the rise in steel demand in India will be less dramatic than China's - to be expected in a diversified economy with a strong services sector - it may be a long time until we see any decline like we saw in China in 2014 and 2015. India will be foremost in the second league of big players, which includes Japan, the US, South Korea and others, for the foreseeable future.

In terms of sustainability of the industry, India faces the same challenges that the entire steel industry faces: improving safety and health, reducing greenhouse gas emissions from primary steel production, improving energy efficiency, managing supply chains, and others. However, both the steel industry and steel as a material can rightly claim to be major contributors to improving the sustainability of human activity in general.

The decarbonisation of the global economy will be a steel intensive process be it renewable energy, mass transport, smart cities or electrification. India can proudly claim to be leading the way in many aspects of this. At worldsteel's recent Board meeting, Tata Steel and JSW Steel were among the only six of about 160 worldsteel members recognised as Sustainability Champions for the work they did last year in this direction. Tata Steel's shipping and logistics team has initiated a project to reduce greenhouse gas emission from shipping operations by increasingly deploying energy efficient vessels for ocean transportation. JSW Steel's 'Springboard' programme aims to improve the underrepresentation of women across management roles by offering training and education to its women employees.

India can confidently look forward to being a major player in the evolving dynamics of the global steel industry.

The writer is Director General of World Steel Association.

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close