Starting a steel business in India can be a lucrative business venture considering the country’s rapid infrastructural and industrial growth. There are government incentives, credit availability, and a genuine market demand for steel manufacturing, trading and retail, making steel business a suitable opportunity for aspiring entrepreneurs and existing businesses. There are several steel business ideas one can explore, regulatory compliance requirements, and challenges which will impact steel business profit and growth. Here, let us explore how to start a steel business in India – the steps involves and things to keep in mind when you begin a steel business.

How to start a steel business?

If you want to start a steel business, there are several steel business ideas that you can explore. You can consider steel manufacturing, steel trading, steel retail, steel fabrication, steel distribution and more. Whichever business idea and model you are selecting, the steps to start a steel business will remain similar.

Steps to start a steel business in India:

Listed below are the essential steps to establish a successful steel business discussing steel business investment needs, compliance requirements, market understanding and other details.

Step 1: Market research and business planning

Begin by conducting a thorough market research and analysis. This may include exploring the current demand in domestic/international markets, competitors, pricing strategy, key challenges, primary buyers, supply chain and logistics requirements, among others.

You should also be able to identify the primary industries requiring steel (e.g., steel in construction, steel in automotive, steel application in manufacturing, etc.) and forecast demand for the next 5-10 years. For instance, if you want to start a steel business making galvanised steel products, such as galvanised steel coils, the automotive sector (i.e., auto parts) can be a target customer. You should be able to identify present and future requirements, existing competition, potential threats and opportunities, procurement and manufacturing challenges, among others.

Accordingly, design a business plan detailing your target market/audience, competition, products, pricing strategy, marketing strategy, procurement strategy, estimated sales, profits/losses, and other details. This will enable you to check the feasibility of your business idea, and also avail funding in the future. For instance, since a steel business is a capital-intensive business, your business plan should outline the roadmap through the years – how investments will be made and by when the sales revenues will churn profits.

Step 2: Identify a suitable location

The next step to start a steel business will be for you to identify the location of your business. This will be impacted by the type of steel business you are running.

For instance, if you want to start a steel manufacturing unit, your plant will have to be located in an industrial area in states like Odisha, Karnataka, Maharashtra, Chhattisgarh, where raw materials are available. (Also read: Steel plants in Odisha)

Similarly, if you want to start a steel retail business, steel trading business or steel distribution business, your business has to be in close proximity to your suppliers and customers. For instance, if your target customers are in the automotive industry, then having your offices in cities like Pune, Chennai, Gurgaon/Delhi etc. will be more practical.

You should also identify supply chain and transportation/logistics feasibility and challenges when selecting and finalising a location for your steel business.

Step 3: Secure funding

When looking at how to start a steel business, this is probably the most challenging step – to secure funding to start a steel company.

When you write your business plan, provide an estimate of the capital required to start and operate the business. This might include details on – cost of machinery, office/factory space, operational expenses, transport cost, raw material cost etc.

For funding, consider a mix of options – business loans for steel industry, investor funding, personal funds, etc. Securing a business loan and finding investors can be challenging, especially if you are a new business. In such cases, ensuring you have sufficient collateral (e.g., property/assets) to pledge for securing the loan.

It’s also important to remember that your funding requirements will vary based on the type of steel business you are establishing. For instance, if you want to start a steel manufacturing company, your investment will be upwards of a few crores. If you want to start a steel supplier or steel distributor business, you can begin with a modest investment of ₹15 lakhs to ₹20 lakhs and secure funding through loans (roughly ₹50 lakhs and above). In such cases, you can also consider taking a government startup business loan and check MSME schemes for new businesses and startups.

Step 4: Obtain necessary licences and certificates

You will next have to get your business registered and obtain the required licences, certifications and permits from local and national authorities for doing business.

This will vary vastly depending on the type of steel business you are doing. For instance, the list of industrial and business licences, safety and quality certificates, environmental clearances and permits for a steel fabrication unit will be different from permits required for retailing steel products.

Some of the commonly required licences/certificates/permits include – Business incorporation certificate (e.g., LLP, partnership, company etc.) from the Ministry of Corporate Affairs, GST registration, Udyam MSME registration (if applicable), trade licences, pollution and environmental clearances, factory licence, etc.

Keep in mind that there are centre and state specific requirements. Always seek legal and professional advice on the regulatory requirements to ensure compliance.

Also read: GST registration procedure and Udyam registration process

Step 5: Setup your business unit

The next step to start a steel business is to set up your facility depending on the nature of your business and scale of operations. Basic equipment and machinery for cutting, molding, assembling steel will be required to be purchased. Additional equipment will depend on the steel business you are engaged in.

For instance:

• If your business involves making specialised parts for the aerospace sector, precision and accuracy will come first. You will in this case need to invest in highly-advanced, automatic machines (e.g., automated steel sheet bending machines) instead of manual ones to get accurate results.
• Similarly, if you are into steel manufacturing, then you will have to procure machinery for every stage of steel production (i.e., right from steel annealing to fabrication). This will include a mix of manual and automated machines depending on the step of steel production.
• On the other hand, if you are into making steel utensils for residential use, the nature of your equipment and machinery will be less sophisticated.

In brief, you should ensure that your unit has the latest technology equipment to maintain efficiency and quality of production/storage.

At this stage, you will also need to setup IT infrastructure for your business. This may include investment in software and hardware, digitisation initiatives, automation etc. This will vary depending on your vision and business plan and the business requirements.

Step 6: Establishing supply chain and logistics network

Supply chain challenges in the steel industry has been a constant challenge for business owners and suppliers. From availability to storage, transportation, and materials handling, there are several logistics and SCM challenges that you will encounter. Plan a solution for them to ensure that your steel business does not run into known obstacles in these areas.

You approach should be to formalise successful business relationship with multiple raw material suppliers, vendors and distributors and establish a reliable logistics network to ensure timely delivery and production. You should also collaborate with 2-3 different vendors/suppliers to avoid unforeseen surprises that can impact your business. Also, check payment terms, timelines, and quality of goods/services being provided.

For instance, if you are a real estate builder, you need to collaborate with a steel seller/supplier who can provide different steel types as required for your construction project.

Step 7: Scale your marketing and sales activities

And finally, a key step to start a steel business is to ensure that you spread word about your business to the right people, through the right channels.

You will need to design a marketing and sales strategy that highlights and promotes your products. Ideally, you should use a mix of digital and non-digital marketing methods to maximise your reach.

For instance, as a digital strategy for your steel business, you can focus on building a SEO-optimised website with informative blogs and videos, a WhatsApp strategy to get sales enquiries and send status update messages, an email marketing strategy to generate leads, and more.

As a non-digital strategy, you can participate in steel industry expos and conferences, distribute brochures and flyers (also digital PDF), etc. You should also build strong relationships with your suppliers and distributors, steel companies in construction or manufacturing sectors, etc. to increase each, get more leads, and have better conversions.

In all these cases, ensure you have your steel company marketing collaterals ready in digital and print format for quick distribution.

Now that you understand how to start a steel business, let’s try to answer some of the frequently asked questions related to starting a steel company or related business.

How much does it cost to start a steel company?

A vital question when it comes to starting a steel business is – How much does it cost to start a steel company?

There are several financial considerations here. Also, the initial investment will vary depending on the scale and type of business you are establishing.

For instance, let’s consider the costs of setting up a steel business as a small-scale steel supplier.

• Total capital investment: ₹70 lakhs to ₹1.5 crores (Note: This is the total; below are the different categories explained)
• Lease/rent of warehouse/factory shed: ₹10 lakhs to ₹30 lakhs annually (location specific)
• Purchase of machinery/equipment: ₹20 lakhs to ₹50 lakhs (one time)
• Procurement of steel inventory (initial): ₹25 lakhs to ₹50 lakhs annually (assuming cash from sales will be regularly fed back into the business and a diversified stock can be availed on credit)
• Operational expenses: ₹10 lakhs to ₹12 lakhs annually (e.g., transport, office supplies, salaries etc.)
• Business licences/ software subscriptions: ₹5 lakhs to ₹7 lakhs annually
• Miscellaneous: ₹2 lakhs to ₹5 lakhs annually

This breakdown is a rough financial plan you should have if you want to start a steel company/business. Similarly, depending on the nature of your business, the expenses will vary allowing you to budget for a successful launch and sustenance.

Note: This is a sample and only for reference. Please consult a financial advisor or legal expert for more details.

Is steel business profitable?

If you look at some of the biggest companies in India, you will find several businesses in the iron and steel industry – Tata Steel, JSW steel, SAIL, Jindal Steel, etc.

The profitability of a steel business varies and is driven by the type of business. For instance, if you are a steel manufacturing company, your profits will start showing after a couple of years (i.e., 7-10 years), whereas the profits will be more evident in 3-5 years if you start a business as a steel supplier or a manufacturer of steel products like utensils, auto-parts, furniture, etc.

Let’s understand steel business profits with the example of manufacturing steel bolts and nuts (Note: this is for reference and understanding only):

• Cost of setting up a plant for manufacturing bolts and nuts: ₹1.25 crores to ₹2 crores (including machinery, raw material, operational infrastructure)

Now, if production is as planned and stable market demand, such a business can expect to see profits from Year 4 or Year 5 onwards.

With the right business strategies (i.e., expansion, customer acquisition/retention, pricing), revenue growth can be promising over Year 1 to Year 5.

• Year 1: Brand awareness, establishing market presence, marketing, customer acquisition, operational expenses
• Year 2 and Year 3: Increased market presence, leading to 15% to 30% increase in revenue
• Year 4 and Year 5: Established market and clients, optimised production, expected 25% to 40% YoY growth (considering market dynamics are stable and favourable)

Keeping these numbers and hypothesis (i.e., market trends, steel demand, price stability) in mind a steel business in manufacturing bolts and nuts can expect to reap profits of 10% to 15% annual from Year 4 or Year 5 onwards.

How much can I earn from a steel factory?

As a business owner, it’s important for you to understand how much can you earn from a steel factory before starting your business. Like every other business, the earnings and revenue will vary depending on the type and scale of the steel factory you operate. It will also change over time influenced by operational efficiency, market demand, and other investments. A profit margin of 30% to 35% over the long term is possible making starting a steel factory a very lucrative business idea.

(Also read: Manufacturing business ideas)

Let’s consider a basic example to understand the financial trajectory of a steel factory earnings in India.

• Initial years (0-3 years): This period is for setting up the factory, presenting awareness of your products, and stabilising productions. For instance, a ₹5 crore investment in a medium sized steel factory, in the first three years profits will be minimal and revenues will be reinvested. Expect to meet break-even-point or even minor losses.
• Growth phase (4-7 years): In this phase, if market conditions remain unchanged, basic profits can be expected. By optimising production, operations, and marketing/sales activities, annual profits could grow to 10% to 15%.
• Establishment phase (8-12 years): Once the business has stabilised and economies of scales reach, profit margins can multiply. A stable steel factory can expect profits to grow by 15% to 20% in this phase. However, considering price volatility in the steel industry, it’s expected to see acceleration in revenues.
• Expansion phase (12 years onwards): This is the phase when the steel factory can consider diversification and even global expansion. Accordingly, 20% to 35% profits from the steel factory is possible depending on how efficiency the business is able to adapt to changing markets and adapt technology.

The key to maximising earnings from a steel factory is planning, operational efficiency, technology adoption, and adapting to market and customer requirements.

How to become a steel merchant?

A steel merchant is one who is engaged in the buying and selling of steel and steel products. Unlike manufacturers who produce steel, the focus of steel merchants is on trading steel products. They often work directly with steel retailers and end users, making them different from steel suppliers and distributors.

Let’s take a look at the steps to become a steel merchant in India:

• Understand the steel market and types of steel to enable you to approach manufacturers and stock the right products with you
• Register your business as a steel merchant and acquire the required licences and permits to ensure your business is compliant
• Identify the right manufacturer and build strategic partnerships to ensure constant availability of quality steel products
• Find the right location for setting up your business i.e., proximity with customer base, transportation access, etc.
• Store the required steel products safely
• Promote your business and ensure you are promptly addressing customer enquiries and queries

Steel business ideas for you to consider

To sum up, let’s take a look at some of the steel business ideas that you can take up as a MSME business owner to start your steel business. While some of the ideas require less investment and are easy to start with, others require more investments but are more profitable in the long run.

Here’s a list of steel business ideas for you to explore:

• Steel fabrication unit
• Steel export and import services (Also read: How to start an export import business)
• Steel recycling plant
• Steel tool manufacturing
• Steel furniture production unit
• Manufacturing of steel products for residential use (e.g., steel railing, gates, railings, kitchen utensils)
• Steel dealership/supplier
• Steel distribution / warehousing centre
• Pre-fabricated steel building kits
• Steel cutting/slitting services and steel detailing services (e.g., architectural/design detailing for modern steel railing designs for gates and balconies, furniture, utensils, decorative items, etc.)

Moreover, in manufacturing, you can manufacture different kinds of products needed for different industries. Examples are given below:

• Automotive industry: steel components
• Construction industry: TMT bars, steel angles, steel railings, steel pipes
• Infrastructure industry: steel girders
• Multiple industries: steel wires
• Household items: kitchen utensils, steel furniture, etc.

*Disclaimer: This article is for reference information only. Please consult with an industry consultant, tax professional or legal consultant for more details on setting up a steel business.

Author: Swati Deshpande

Swati is a passionate content writer with more than 10 years of experience crafting content for the business and manufacturing sectors, and helping MSMEs (Micro, Small and Medium Enterprises) navigate complexities in steel procurement, and business services. Her clear and informative writing empowers MSMEs to make informed decisions and thrive in the competitive landscape.