MUMBAI, India India is expected to become the second-largest crude steel producer in the world by 2015 as the countrys construction, infrastructure, manufacturing and automotive sectors expand.
Global research and consultant firm Frost & Sullivan Ltd. said it expects Indias crude steel production capacity to hit 112.5 million tonnes in the 2015-16 fiscal year.
Capacity expansions planned by major steel producers, the availability of a large consumer base due to Indias demographics and adequate iron ore reserves to meet domestic demand are among the key factors driving growth, according to a Frost & Sullivan report.
"Around 300 memorandum of understandings have been signed with various states for planned capacity of around 488.56 million tonnes per year by 2020 and major investments are planned for the states of Orissa, Jharkhand, Karnataka, Chhattisgarh and West Bengal," Frost & Sullivans director of metals and minerals, Venkatesan Subramanian, said.
Total installed capacity in India currently stands at about 78 million tonnesmaking it the worlds fourth-largest crude steel producerwhile capacity utilization was around 84 percent in 2010-11.
Indias finished steel production of 70.32 million tonnes in 2011-12 is forecast to rise to 92.29 million tonnes in 2015-16.
However, the report highlighted several threats that could prevent the sector from reaching its potential, including a possible delay in obtaining approval from local authorities for large-scale projects due to environmental and land concerns, inadequate infrastructure and inefficient transportation systems, fluctuating raw material prices, and insufficient power and coking coal. In addition, competition from international steelmakers, mainly in China and eastern Europe, also poses a challenge.
Frost & Sullivan does not expect the Indian Supreme Court ban on mining activities in some parts of the country to affect the steel industry in the long run. The ban came about following concerns of environmental damage and illegal mining in Karnataka state and was later extended to other regions. "As the ban on mining activities is temporary, it will have a short-term impact on the Indian steel industry," Subramanian told AMM sister publication Steel First.
The consultancy firm also does not expect a recent coal scandalwhich came to light after the countrys comptroller and auditor-general pointed out that the arbitrary allocation of coal blocks to private companies for captive use had caused massive losses to the nation while private companies made windfall gainsto have a lasting effect on the steel industry. The coal allocation is said to have cost the Indian treasury an estimated loss of more than $181 billion.
The scandal "is likely to have a short-term repercussion on steel production in India. The shortfall in coal demand will be met by steel companies through imports," Subramanian said.
A version of this article was first published by AMM sister publication Steel First.