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The Indian steel industry outlook for 2023 looks promising with the country gearing to become a US $5 trillion economy by 2030 (or sooner). And as per market predictions and reports, the steel industry in India will play a pivotal role in steering India towards its goal (Source: EY-CII report).
With ~120 MT production, India is the world’s second largest producer of crude steel (after China). The distribution of iron and steel industry is spread across the states of Odisha, Jharkhand, Chhattisgarh, Karnataka, Maharashtra, West Bengal, and Gujarat, while the use of steel in construction, automotive, railways, capital goods and consumer durables, has been growing.
As per reports by CareEdge Research, the domestic steel consumption growth rate in India is expected to be around 10-12% in FY2023. There is also a rise in investments in the infrastructure sector and support from the government to encourage the growth and outlook of the Indian steel industry.
On that note, let us take a closer look at the growth prospects of the India steel industry, reasons that trigger growth and its future.
Steel industry outlook: Growth prospects of the Indian steel sector in 2023
Let us first look at what’s driving the demand for steel metal in India. According to predictions by the World Steel Association, the steel industry growth rate is estimated to be around 6.7% in 2023. After a slack period following the pandemic, the sector was able to revive in 2021-22 with global demand for steel rising.
The growth prospects and steel industry outlook in India is favourable. Recent changes in export taxes and import duties on steel, complemented by the rising demand for affordable housing, infrastructure development and construction projects, has led to a pan-India need for steel metal. Moreover, the government’s initiative to make India self-sufficient has made room for sustainable urban development, construction of proposed logistics parks and industrial corridors – all adding to the meteoric demand for finished steel and steel as a raw material.
The iron and steel industry naturally will play a dominant role in bringing progress. In the next section, let us take a look at what are the growth prospects of the steel sector, the present outlook and future prospects of steel in India, and the multiple factors supporting and contributing to it.
Budget 2023-24: Announcements for the steel sector
Every year, all eyes are on the Budget announcement for news on monetary incentives, rebates, funds allocation and more for the development of different sectors and businesses.
In Budget 2023-34, though there were no specific funds for driving growth of the steel sector, there are several opportunities present in other industries that would directly boost the steel industry outlook.
- Railways: The government’s initiative to redevelop 50+ existing railway stations and the plan to provide a capital of ₹2.4 lakh crore to Railways is likely to scale the need for steel.
- Logistics: An investment of ₹75,000 crore is planned for 100+ critical transportation infrastructure projects that will connect ports, coal, steel, fertiliser, and food grain sectors across the first- and last-mile delivery network. This is expected to improve connectivity and transportation services across major points, in turn leading to a rise in demand for steel.
- City development: Urban planning development projects will be undertaken to transform cities into sustainable cities. With the proposed ₹10,000 crore annual fund, the goal is to ramp up infrastructure development, especially in Tier II and Tier III cities. This is likely to witness a growth in steel demand, especially for TMT steel bars in construction among others.
(Source: Outlook, March 2023)
Steel pricing in India
An overview of steel pricing will show how steel metal has always had its demand in India. However, in the last few months, especially following the global economic crisis caused by the pandemic, the price of steel in India has been dynamic. In February 2023, there was a 5% increase in steel prices in India.
Multiple factors, including rise of raw material prices (especially iron ore and coking coal) and rise in infrastructural and engineering projects, has impacted daily steel price. It is however predicted that steel prices will be above the pre-pandemic rates, i.e., ₹60,000 per tonne by March 2023.
Recent developments in the steel sector
The Ministry of Steel signed 57 MoUs with 27 companies for specialty steel under the PLI scheme (Production Linked Incentive). Under the scheme the government has approved a sum of ₹6322 crore for steel sector growth. Apart from creating new jobs and contributing to making India the 3rd largest economy globally (by 2030-31), the scheme aims to create an additional capacity of 25 MT of specialty steel in the next five years. (Source: IndiaCSR)
- For focused production of value-added steel, collaboration between the 27 companies and the government is crucial
- Initiatives like Green Steel and Hydrogen Mission would enable low carbon emissions
- R&D, new product development, and best practices should be adopted across the steel sector
As can be seen from the recent events and Indian steel sector overview, there’s a promising future for the steel sector in India.
5 reasons for growth of steel sector in India
With cities expanding, technological advent of Industry 4.0, and rise in construction and engineering projects, the meteoric rise of the steel industry is not unexpected. Today, there are different types of steel manufactured and used in India to cater to its rising demand. From the industry-wide use of steel coils to steel channels and steel alloys, there is a market ready for steel products everywhere.
An Indian steel industry overview analysis will identify the following as some of reasons for the growth of the steel sector in India:
- Resource availability: Though the cost of iron-ore has been on the rise in recent years, it is still one of the most widely available resources domestically. In addition to that, considering that the production of steel is a capital- and labour-intensive process, labour is also available economically. This naturally has helped to balance steel production costs.
- Industry-wide application: Steel and steel products have its uses across multiple industries – shipbuilding, automotive, pharmaceutical, aviation, real estate, energy, home appliances, electronics etc. Whether it’s using corrugated sheets in roofing or using TMT bars in buildings for safety against natural disasters, the use of steel as a raw material is visible across all industries.
- Longevity of steel metal: Steel as a metal has longevity. For instance, stainless steel used in making cutlery lasts longer than glass. Steel is also low on maintenance. TMT bars used in housing construction projects can stand for years unlike wood or other raw material used. Moreover, based on its composition and type, steel is strong, ductile, can bear heavy load, is corrosion and heat resistant – in short, it’s more cost-effective and value-for-money than other raw materials. Recycling of steel is also possible which makes it a preferred raw material in industries, adding to its growing demand.
- Government initiatives: As stated previously, the government has introduced several initiatives to boost steel production in India and reach 300 MT in production by 2030. It has removed the 15% export taxes, and working towards removing technology, logistics and infrastructure bottlenecks.
- Ease of purchase: Technology has made buying and selling of steel and steel products easier today. Buyers can buy steel online through reliable steel marketplaces and online websites, in a secure, transparent, and quick manner.
Summing up: Overview of the steel sector in India
A ₹10 lakh crore capital expenditure plan was announced. The goal of this plan is to focus on domestically produced steel to make the nation self-reliant. The plan would also position India as a leading manufacturing hub and gradually scale the steel sector’s contribution to India’s GDP from its current 2% to 5%. (Source: IndiaCSR)
As a raw material, the demand for steel has been steadily rising. Though there are often concerns about price hike and environmental factor, the benefits and applications of the metal are too many.