Posted on 25 Nov 2015
The Narendra Modi Government wants India to be the world’s third largest crude steel producing country. Govt says India is on its way to be the world’s third largest crude steel producing country surpassing USA, as per trend in the current calendar year (CY 2015).
But is the path ahead smooth?what are the major challenges to the India’s journey in the global steel sector?
Narendra Singh Tomar,Minister of Mines & Steel, said the per capita steel consumption in India is still very low, about 60 kg compared to the global average of about 217 kg per capita.
Imports increased by 75.5% in FY 2014-15. In the current year 2015 also, during April to September 2015, imports have increased by about 42% compared to corresponding period last year. The domestic steel prices have maintained a sharp downward trend during the period.
The rising debt of the steel industry is also a major concern. The share of stressed advances to the steel sector has been the highest among various sectors excluding infrastructure.
Steel companies face difficult financial situation and the net sales realization of steel companies is decreasing due to declining prices of steel products, leading to financial strain due to reduced operating EBIDTA and profits.
With a lot of capacity added in the last decade or so, especially in China, and steel demand either falling or remaining stagnant in most countries, the industry is burdened with massive excess capacity, estimated to be around 550 million tonnes (25% of global capacity).
The biggest overcapacity exists in China, 250 to 300 million tonnes. The Chinese steel industry continues to produce and sell steel at extremely low prices, sometimes even below cost of production.
Since in the medium term India is the only major nation which will be seeing significant growth in steel consumption, the attention of countries like China, Japan and South Korea is sharply focused on the Indian market.
