Current Issues in Steel Industry

Prospects for India’s Steel Industry

With 56.6 million ton production in 2009; India is world’s 5^th largest producer country of steel. The per capita consumption is too low with just 47 kg. Per person per annum.

However, this pattern is bound to change as India will need huge steel capacity in the current decade. In March 2010, India’s Prime Minister Mr. Manmohan Singh had given a call that investment in infrastructure will have to expand to USD 1,000 billion in the 12th Five Year Plan. The demand from the high growth industries such as Infrastructure & Construction, automobiles, consumer goods will lead the consumtpion of steel in the country to grow. As per the Steel Ministry statements, india may be world’s second largest steel producer by 2012 by doubling its capacity.

The India Gambit of ArcelorMittal

ArcelorMittal is world’s largest steel company by revenues ($ 65.1 billion 2009) and is geographically spread in 60 countries and has a capacity of 109 million ton per annum.

The current per capita low consumption in the country and possibility of trebling the consumption by 2020 drove Laxmi Niwas Mittal to India. Apart from India’s growing demand, the restraint on Steel Production in West due to the environment concerns and near stagnant demand coupled with high cost of labour were other vital factors for Mittal’s India gambit.

The abundant availability of Iron Ore, Coal as well as High quality low cost human resources made Mittal sign his first MOU in 2005 with Jharkhand for a 12 mtpa plant. In December 2006,. Mittal signed another agreement with the Orissa Government for a project with same capacity. Both of these MOUs have been non starters. The reasons are political, such as difficulty in acquisition of land, lack of clarity on availability of resources etc. These projects and their current position is summarized as below:

For each plant Mittal needs 4000 acre land and this is not an easy task. Apart from that in two states Jharkhand and Karnataka, there are Non-BJP governments and there is a dearth of Strong Centre-State coordination. Another problem is that Mittal seeks captive mines dedicated to its manufacturing capacity.