The country's steel consumption is expected to grow at its fastest pace in five years in 2015 on Prime Minister Narendra Modi's infrastructure push, but a scarcity of raw materials means it will be at the expense of another key goal - curbing imports.
In his triumphant election campaign, PM Modi criticised the previous government for exporting iron ore but importing steel. However, the Prime Minister's first five months have coincided with a surge in imports of both, denting his high-decibel drive to make the country an export powerhouse.
The nation's steel imports from China, which is the world's biggest producer of the alloy, doubled in the first half of the current financial year, that is between April-September, from a year ago though the country has enough capacity to meet its demand.
While the country's consumption is expected to rise, China will continue to see a downtrend, likely leading to a flood of cheap steel from China just as Modi pushes ahead with the flagship 'Make in India' initiative to boost domestic industry.
Charged by the strongest electoral mandate in three decades, the prime minister has staked his reputation on making the country an export hub, launching his pet campaign with much fanfare in September with a lion as its logo.
Soaring steel imports, however, underscore the challenges Modi faces in realising his dream. Steelmakers, such as JSW, are clamouring for higher import tariffs.
"The 'Make in India' slogan has to be true for steel also," said Ravinder Bhan, deputy general manager of marketing at state-run Steel Authority of India (SAIL). "Let steel firms get iron ore and other raw materials. But that's not happening," he added.
The country has become a major importer of iron ore and coal despite having big reserves of both at home. Once a top exporter, the domestic steel industry is now bringing in shiploads of iron ore due to court action against illegal mining that has stifled supply, while coal behemoth Coal India (CIL) is struggling to boost production.
The shortages mean that the domestic steel industry is running at 80 per cent of capacity. But the World Steel Association expects the prime minister's pro-business plans - building 100 new 'smart' cities, creating new logistic hubs and residential townships - to spur steel demand that has been weak in recent years.
CHINA IMPORTS JUMP
World Steel expects domestic demand to rise 3.4 per cent to 76.2 million tonnes in 2014, after growth of 1.8 per cent in 2013. Structural reforms and improving confidence will support a further 6 per cent growth in 2015, it said.
Home-grown steelmakers such as JSW, Tata Steel and Jindal Steel and Power (JSPL), however, run the risk of being priced out by their Chinese competitors.
"The global market is such that the only thing that you can do is take some protective action to save the (domestic) industry," said AS Firoz, chief economist at a Steel Ministry unit. "Otherwise you can't decide what the global prices will be or at what price China will export steel."
A Steel Ministry spokesman said he had no immediate comment on whether authorities would consider raising tariffs, although a government official, who spoke on condition of anonymity, said the issue was being looked into.
China, the world's largest steel producer, rolls more steel in a month than the country, which is the fourth largest producer, manages in nine months. However, a slowdown in China means it is set to end with a surplus of about 100 million tonnes a year.
"MADE OUTSIDE INDIA"
A tonne of reinforcement steel produced in the country for use in buildings can cost up to Rs 15,000 ($244) more than that from China, according to Firoz.
Shipments into the country jumped 33 per cent to 4.19 million tonnes in April-September period of the current financial year from a year ago, with imports from China leaping 108 per cent to 1.34 million tonnes. Total steel imports in the financial year ending March 31, 2015 could nearly double to 9 million tonnes, JSW predicts.
"Through 'Make in India', Modi is saying that India should be the hub for the rest of the world and of course to meet our full demand," said NC Mathur, president of the Indian Stainless Steel Development Association.
"Instead something made outside India is coming into the country. That's a big threat. It's a week after week, month after month survival issue," Mathur added.