Iron & Steel Industry in India

INTRODUCTION
One of the primary forces behind industrialization has been the use of metals. Steel has traditionally occupied a top spot among
metals. Steel production and consumption are frequently seen as measures of a country's economic development because it is
both a raw material and an intermediary product. Therefore, it would not be an exaggeration to argue that the steel sector has
always been at the forefront of industrial progress and that it is the foundation of any economy. The Indian steel industry is
classified into three categories - major producers, main producers and secondary producers.

India is the world’s second-largest producer of crude steel, with an output of 125.32 MT of crude steel and finished steel
production of 121.29 MT in FY23.

India’s steel production is estimated to grow 4-7% to 123-127 MT in FY24.

The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-
e ective labour. Consequently, the steel sector has been a major contributor to India's manufacturing output.

The Indian steel industry is modern, with state-of-the-art steel mills. It has always strived for continuous modernisation of older
plants and up-gradation to higher energy e iciency levels.

Strong growth opportunities

Demand for steel from di erent sectors will drive this industry.

Consumption of steel by India’s infrastructure segment is expected to increase to 11% by FY26.

Steel demand from the automotive sector is expected to increase due to rise in the demand
for automobiles.

The new Vehicle Scrappage policy will help in reducing steel prices as the policy

enables recycling of materials used in old vehicles.

On the healthcare front, key steel producers are now exceeding their capacities to

produce oxygen cylinders for COVID patients. The Smart Cities’ A ordable Housing and

industrial corridors are a few government intitivates to boost the steel industry

• About 158 lakh metric tonnes (MT) of steel are likely to be consumed in the construction
of houses sanctioned under the Pradhan Mantri Awas Yojana (Urban).

FDI in steel industry

Policy allowing 100% FDI (via the automatic route) in the steel industry has

boosted investments.

Between April 2000-March 2023, Indian metallurgical industries attracted FDI

inflows of US$ 17.23 billion.

Second-largest producer of crude steel

In FY24 (until July 2023), the production of crude steel and finished steel stood at 45.39

MT and 43.01 MT respectively.

In CY22, India produced about 124.5 MT of crude steel, while finished steel production
stood at 117.6 MT.

In FY23, crude and finished steel production stood at 125.32 MT and 121.29 MT respectively.

In July 2023, crude steel production in India stood at 11.52 MT.

In July 2023, finished steel production stood at 10.53 MT.

Steel Authority of India Limited (SAIL), achieved the best-ever annual production during the
financial year 2022-23. The company recorded 18.289 million tonnes.

(MT) of crude steel production with a growth of 5.3% over the previous best.

In FY22, SAIL’s crude steel production stood at 17.36 MT and saleable steel production was
16.9 MT.

Moreover, capacity increased to 142.29 million tonnes (MT) in FY20, and the figure is
anticipated to rise to 300 MT by 2030-31.
ADVANTAGE INDIA
ROBUST DEMAND

India’s finished steel consumption is anticipated to increase to 230 MT by 2030-31 from

119.17 MT in FY23.

India is the world’s second-largest producer of crude steel, with an output of 125.32 MT of
crude steel and finished steel production of 121.29 MT in FY23.

INCREASING INVESTMENTS

The industry is witnessing consolidation of players, which has led to investment by entities
from other sectors. The ongoing consolidation also presents an opportunity to global
players to enter the Indian market.

POLICY SUPPORT

In October 2021, the government announced guidelines for the approved specialty steel
production-linked incentive (PLI) scheme.

Under the Union Budget 2023-24, the government allocated Rs. 70.15 crore (US$ 8.6
million) to the Ministry of Steel.

COMPETITIVE ADVANTAGE

India’s steel production is estimated to grow 4-7% to 123-127 MT in FY24. Easy availability
of low-cost manpower and presence of abundant iron ore reserves make India competitive
in the global set up.

India is home to fifth-highest reserves of iron ore in the world.

Evolution of the Indian steel sector

1907-18 1923-48 1954-64 1973-92 1993-2014 2015-22

Production of steel new ventures were production mainly In 1993, the • catering growing • second-largest
started in India (TISCO
only undertaken by producing finished Government set domestic demand crude steel producer
was setup in 1907) the central steel using crude plans in motion to • Decontrol of in the world.
IISC was set up in Government. steel products. partially privatise domestic steel • In FY23, the finished
1918 to compete with Hindustan Steel Ltd  SAIL was created SAIL. prices steel production
TISCO. and Bokaro Steel Ltd. in 1973 as a • Foreign players • Launch of Scheme stood at 121.29 MT.
Mysore Iron and  were setup in 1954 and holding company began entering the for promotion of • In FY23, the
1964, respectively. to oversee most Indian steel market Research and production of crude
Steel Company was set
up in 1923. In the early 1990s, of India's iron and • No license Development in Iron steel in India stood at
the public sector steel production. requirement for and Steel sector. 125.32 MT
According to the new
dominated steel  In 1989, SAIL capacity creation • In 2019, India
Industrial Policy
production. acquired • Imposition of export ranked as
Statement (1948),
Private players were in Vivesvata Iron duty on iron ore, to the
downstream and Steel Ltd. focus more on
Steel production capacity has expanded rapidly
For the first me ever, India surpassed China as the top developer of coal-based steel capacity in July 2023, according to the latest
report from Global Energy Monitor (GEM).

India’s steel produc on capacity has expanded rapidly over the past few years, growing at a CAGR of 3.96% from 122 MT in FY16 to
154 MT in FY23. The Na onal Steel Policy 2017 has envisaged achieving up to 300 MT of produc on capacity by 2030-31.

India will commission new steelmaking facili es with a capacity of about 40 MT per year by the 2025/2026 financial year.

BF-BOF route is expected to contribute 65% of the capacity, while the remaining 35% is expected to come from EAF & IF routes.

Expansion of produc on capacity to 300 MT will translate into addi onal investment of Rs. 10 lakh crore (US$ 156.08 billion) by 2030-
31.

Crude Steel Production Capacity in FY20 – By Route

Crude Steel Production Capacity (in million tonnes)
(in %)

290
265
240
27% BOF
215
190
165 45%
140
115 EAF
90
65
40
28%
15 IF
Steel produc on in India has been growing at a fast pace

In FY24 (un l July 2023), the produc on of crude steel and finished steel stood at 45.39 MT and 43.01 MT, respec vely.

In FY23, the produc on of crude steel and finished steel stood at 125.32 MT and 121.29 MT respec vely.

In FY22, produc on of finished steel stood at 133.596 MT.

In FY22, produc on of crude steel and finished steel stood a 133.596 MT and 120.01 MT, respec vely.

To support MSMEs, the government has reduced customs duty on stainless steel to 7.5%.

Total crude steel production (million tonnes) Total finished steel production (million tonnes)

160.0
140 140.0
120.0
120
100.0
100 80.0
60.0
80
40.0
60 20.0
0.0
40

20

0
Trends in import and export of steel
In FY24 (un l July 2023), the exports and imports of finished steel stood at 2.56 MT and 1.98 MT, respec vely.

In FY23, exports and imports of finished steel stood at 6.7 MT and 6.02 MT, respec vely.

In FY22, India exported 11.14 MT of finished steel.

In April 2023 exports of steel stood at 8.55 lakh metric tonnes (LMT), while imports stood at 4.60 LMT.
INDIAN STEEL MARKET ROUND-UP
The following is a status report on the performance of Indian steel industry during April 2023, based on provisional data released by
Joint Plant Commi ee (JPC) in its MIS Report for April 2023. It is to be noted that total finished steel includes both non-alloy and alloy
(including stainless steel) and all comparisons are made with regard to same period of last year.

Performance of Indian steel industry

Item April 2023*(mt) April 2022 (mt) % change*
Crude Steel Production 10.721 10.387 3.2
Hot Metal Production 6.925 10.387 3.2
Pig Iron Production 0.512 10.387 3.2
Sponge Iron Production 3.893 10.387 3.2
Total Finished Steel (alloy/stainless + non-alloy) 10.387 3.2
Production 10.253 10.387 3.2
Import 0.46 10.387 3.2
Export 0.855 10.387 3.2
Consumption 9.951 10.387 3.2
Source: JPC; *provisional; mt=million tonnes

Overall Produc on

• Crude Steel: Produc on at 10.721 million tonnes (mt), up by 3.2%.

• Hot Metal: Production at 6.925 mt, up by 5.4%.

• Pig Iron: Production at 0.512 mt, down by 7.1%.

• Sponge Iron: Production at 3.893 mt, up by 8.0%, led by coal-based route (80% share).

• Total Finished Steel: Production at 10.253 mt, up by 6.5%

INDIAN ECONOMY – HIGHLIGHTS OF PERFORMANCE
GDP: As per provisional es mates of the Central Sta s cs Office (CSO), Ministry of Sta s cs and Programme Implementa on, Real
Gross Domes c Product (GDP) at Constant (2011-12) Prices in 2022-23 is es mated to have a ained a level of ₹ 160.06 lakh crore, as
against ₹ 149.26 lakh crore in 2021-22, showing a growth of 7.2 per cent. Except manufacturing almost all the sectors reported strong
growth during this period, with Trade, Hotels, Transport, Communica ons and Services related to Broadcas ng sector repor ng the
highest growth (14.0%) and Manufacturing sector, the lowest (1.3%).

Industrial Produc on: Provisional CSO data show that the overall Index of Industrial Produc on (IIP) for the month of April, financial
year 2023-24 rose by 4.2% over same period of last year, encouraged by similarly high levels of growth trends noted for the various
sectors/sub-sectors.

Infrastructure Growth: Provisional data released by the DPIIT indicate that the Index for the Eight Core Infrastructure Industries saw a
growth of 3.5% during the month of April, financial year 2023-24, with a few sectors registering growth while the others repor ng
contrac on on yoy basis.

Infla on: The rate of infla on based on Consumer Price Index stood at 4.25% and that on Wholesale Price Index stood at -3.48% in
May 2023. Both the CPI infla on and WPI infla on came down compared with the previous month.
Porter’s five forces model:

Threat of New Entrants

Due to the significant capital investment necessary to establish a steel mill, the steel industry in India faces high entry barriers. In
addi on, maintaining opera ons, achieving economies of scale, and having access to distribu on channels come at a large fixed cost.
So, the threat of new compe tors is minimal.

Bargaining Power of Suppliers

The steel industry in India depends on various raw materials such as iron ore, coal, and other inputs. The bargaining power of suppliers
is moderate as there are a limited number of suppliers, but there are subs tutes available for most raw materials.

Bargaining Power of Buyers

The bargaining power of buyers is moderate due to a large number of buyers in the market. However, the buyers have limited power to
nego ate prices as steel is an essen al input for many industries.

Threat of Subs tutes

The threat of subs tutes for steel is low, as it is a widely used and essen al material in various industries such as construc on,
automobiles, and infrastructure development.

Compe ve Rivalry

The steel industry in India is highly compe ve with the presence of various players. However, the compe on is primarily based on
price, quality, and delivery schedules, and not on product differen a on. This intense compe on results in a low-profit margin for the
industry players.
PEST Analysis
PEST analysis is used to assess the external macro-environmental factors that can influence an organiza on or industry. It look into
the Poli cal, Economic, Social and Technological factors that shape the business environment.

Poli cal Factors

Government policies and regula ons: There are numerous government rules that apply to the iron and steel industry in regards to
commerce, employee safety, and environmental protec on. Changes in laws and regula ons may impact costs, produc on
processes, and market access for industry par cipants.

Tariffs and trade agreements: These two aspects could affect how fiercely compe ve a sector is. Tariffs and trade barriers can limit
market access and raise prices, whereas trade agreements can open up new export and import opportuni es.

Poli cal stability: The iron and steel industry’s growth and stability depend on poli cal stability. Opera ons and investments in the
sector may be affected by poli cal instability, conflicts, or changes in the administra on.

Economic Factors

Economic development and growth: They are in mately correlated with the iron and steel sector. Steel is more in demand for
manufacturing, infrastructure, and building during mes of economic expansion. Reduced demand and financial difficul es for
industry par cipants might result from economic downturns.

Prices for raw materials: The business depends on supplies such iron ore, coking coal, and scrap metal. Iron and steel producers’
produc on costs and profit margins may be impacted by price fluctua ons.

Exchange rates: Because the iron and steel sector competes on a worldwide scale, changes in exchange rates can have an impact on
export and import costs as well as compe veness and profitability.
Social Factors

Urbaniza on and popula on: Urbaniza on and popula on increase are factors that are driving the need for iron and steel, which is
needed for consumer goods, infrastructure, and building. The product mix of an industry and market demand may change as a result
of shi s in demographics and consumer preferences.

Availability of competent labour: The iron and steel sector needs a skilled workforce for opera onal and manufacturing tasks. The
availability of skilled workers can affect both compe veness and produc on efficiency.

Technological Factors

Technological developments: New developments in technology can improve the produc vity, quality, and efficiency of the
manufacture of iron and steel. Digitaliza on, robots, data analy cs, and automa on can spur innova on and raise industry
compe on.

Research and development: Inves ng in R&D ini a ves can result in the crea on of new methods, materials, and goods for the iron
and steel sector. R&D ini a ves can aid businesses in staying one step ahead of rivals and adjus ng to shi ing market demands.
SWOT Analysis
Strengths

Strong demand: Iron and steel are crucial raw materials for a variety of industries, including manufacturing, infrastructure,
automo ve, and construc on. The industry reaps the rewards of steady demand for its goods.

Established Infrastructure: The iron and steel industry’s supply chains, manufacturing facili es, and transporta on systems are all
well-developed, allowing for effec ve produc on and distribu on.

Diverse product range: Wide range of items produced by the industry, including various alloys, varie es of steel, and specialist goods.
Companies can meet a variety of client wants and adjust to shi ing market demands because to this diversity.

Weaknesses

Impact on the environment: The iron and steel industry significantly boosts pollu on and greenhouse gas emissions. Pressure on the
sector to switch to more environmentally friendly produc on methods and lessen its carbon impact is rising.

Price sensi vity: The industry is highly sensi ve to varia ons in the price of raw materials like coking coal and iron ore. Profit margins
and the stability of the economy may be impacted by changes in these pricing.

Concerns about overcapacity: The iron and steel sector has experienced overcapacity in some areas, which has increased supply and
put pressure on prices. This may lead to fierce compe on and decreased profitability for market par cipants.
Opportuni es

Infrastructure development: The iron and steel business has poten al as a result of rising investments in infrastructure projects,
par cularly in emerging economies. Steel is needed in significant amounts for these projects, increasing demand for the items made
by the sector.

Technological advancements: In the iron and steel industry, advancements in technology like automa on, AI, and 3D prin ng can
boost produc on, reduce costs, and enhance product quality.

Urbaniza on and industrializa on: As ci es and their industries grow quickly in emerging na ons, so does demand for iron and steel.
The demand for industry, infrastructure, and building will rise as economies and popula ons rise.

Threats

Trade disputes: Trade disputes, taxes, and protec onist legisla on can obstruct global supply chains, which can have an impact on
the iron and steel industry’s business. These elements may restrict market access and raise prices.

Subs tu on: The usage of conven onal iron and steel products in par cular applica ons may be threatened by the development of
alterna ve materials and technologies, such as composites or 3D-printed structures. Businesses must constantly develop fresh
concepts and make adjustments to emerging market trends.

Economic downturns: During economic slowdowns or recessions, the demand for iron and steel products can drop significantly. Due
of its vulnerability to changes in the economy, the industry must modify the way its ac vi es are conducted.