UNIT -1

COUNTRY 2007 2008 2009 2010 2011 2012

1 P R of China 494.9 500.5 567.8
625.1 683.3 716.5
2 Japan 120.2 118.7 87.5
109.4 107.6 107.2
3 United States 98.1 91.4 58.1
66.4 86.2 88.6
4 India 53.1 55.2 56.6
66.2 72.2 76.7
5 Russia 72.4 68.5 59.9
80.3 68.7 70.6
6 South Korea 51.5 53.6 48.6
57.5 68.5 70.6
7 Germany 48.6 45.8 32.7
44.4 44.3 42.7
8 Turkey 25.8 26.8 25.3
28.5 34.1 35.9
9 Brazil 33.8 33.7 26.5
32.6 35.2 34.7
10 Ukraine 42.8 37.1 29.8
33.0 35.3 32.9
World 1,351.3 1326.5 1,219.7 1,413.6 1,490.1 1547.8
TOP TEN Steel producing countries
8/4/2014
2 Dr R Haldar
India has become a major hub for steel products. The Goldman
Sachs forecasts say, India's GDP is likely to surpass the GDP of Japan
by 2032. The steel demand outlook is quite bright. International Iron
and Steel Bureau (IISB) forecasts say, 'India is going to play a major
role in global steel market dynamics'. These developments have
induced Indian and foreign steel-makers to implement
modernization of existing plants and new steel projects.
The Ministry of Steel, Government of India has revised its domestic
steel demand forecast upward, for 2019-20, from the earlier figure
of 110 Mt (as per National Steel Policy, 2005) to 180 Mt 200 Mt.


MAJOR ISSUES
The demand side of the product market, ie, the demand
scenario and forecasting.
The supply side of the product market, ie, the future supply of
steel (brown field and green field projects)
Infrastructure requirement of Indian steel industry to achieve
target production and challenges ahead
Policy measures
Strategic planning framework to meet the challenges

Domestic finished steel demand is likely to touch 156 Mt by
2019-20.

INFRASTRUCTURE REQUIREMENT OF INDIAN
STEEL INDUSTRY AND THE CHALLENGES
The major infrastructures required for steel industry are mining,
power, water and external infrastructure like rail, road, power,
human capital, consultancy etc. The big issue with the Indian steel
industry is as to how to meet the infrastructure requirement for
steel production.
Internal Infrastructure
Steel industry's internal infrastructure constitutes of iron ore, coal,
limestone, dolomite, natural gas etc. Availability of these
infrastructure itself is a challenge for meeting the growing demand
for steel in India.
8/4/2014 5 Dr R Haldar

Iron ore is the basic input for production of steel. In the
present context, demand-supply scenario of iron ore largely
determines the future of steel in India. It is observed that
321 Mt of iron ore (at mines) is required to achieve the
target finished steel production of 156 Mt in 2019-20. Of this,
requirement of BF grade iron ore is 240 Mt and DR grade is
81 Mt. Cumulative requirement of iron ore for the period
2007-08 to 2019-20 is 257 billion tonnes

A major portion of good quality iron ore has already
been used during the last century.
The quality of iron ore left contains less Fe content
and mixed with more gangue materials.
India's iron ore have relatively high alumina and low Fe
content which causes adverse slag chemistry.
The ores are less closely sized and contain large
amount of undesirable fines than in other countries.
At present, major portion of India's iron ore is of the
medium grade (with 62.5% Fe content).
Problems with Iron Ore
Over the years mines have gone deeper and deeper
and the mines with high grade ore such as Bailadila
mines in the Barbil sector are now less in number.
Fe content is again scattered in the lump.
Major portion of the iron ore needs beneficiation
for use in steel making. In the process, about 15% of
the ore gets reduced.

Coking Coal
Coking coal is another major mining infrastructure for steel
industry. India has huge coal reserves but as far as coking coal is
concerned India has serious shortage. An estimation of the
requirement of coking coal for achieving the target iron and steel
production by 2019-20 is given in Figure. Coking coal demand is
likely to be as high as 97Mt in 2019-20. Details of the computations
are given in Table. This is a challenging area, involving dependence
on imports, which is to be looked into. To meet this constraint,
meticulous planning is required as import of coking coal means
foreign exchange outflow besides dependence on overseas sources
both with respect to availability and pricing.
External Infrastructure
The role of external infrastructure is no less important.
External infrastructure mainly constitutes of railways,
roads, ports, power, water etc.
Power
Steel plant operations are continuous in nature.
Therefore, uninterrupted supply of good quality power is
essential for smooth operation of a steel plant. In case of
electric arc furnace based route, a strong power supply
grid support is essential to sustain high short circuit level.
The power requirement for typical steel plants of various
capacities and different process routes are :
Water
Railways
Land Human Capital
Finance
Land
Around 600 acres of land is required for installation of an integrated
steel plant of 1 Mt capacity with provision for future expansion up to
two million tonnes. The total land area to be acquired would depend
on the composition, size of main technological units, and topography
of the land and the shape of the plot of land. Depending on the type
of plant, these factors assume varying degrees of importance. But, the
major challenge in this area is land acquisition as has been taken in
recent events.
Human Capital
Skilled human resource is very vital for the growth of any industrial
sector. It is estimated that the anticipated steel production of 156
Mt by 2019-20 would require additional workforce of 275000 by
2019-20. Further the creation of one man-year of employment in
the steel industry generates an additional 3.5 man-years of
employment elsewhere in the economy due to its strong linkages
with other sectors such as transport, mining, construction,
machinery, and steel fabrication.
Thus, the total additional employment generated in the economy
due to expected production of 156 Mt of steel by 2020 would be
around two million. Lack of engineering graduates in the
metallurgical and related industry is going to create a lot or
problems in the growth of such industries.
Factors Affecting Technological Growth of Steel Sector in India
For four decades since independence, the steel industry in India grew in protected and
controlled environment with administrative control over prices, distribution and allocation of
imports resources, and high tariffs .
The productivity levels of state-owned large integrated steel plants remained low, and on
the other hand private sector firms were deprived of many of the opportunities to grow.
Due to inadequate growth of infrastructure sectors, the overall demand of steel remained
low. As for example, in 1996 the per capita consumption of steel in India was only 24.1 kg as
compared to 603.4 kg, 384.3 kg, and 400 kg in Japan, Italy, and United States respectively.
Technology policy of India has major impact on steel industry. India took a long time to
develop its first technology policy in 1958. It lacked direction during the early formative years
after independence. The next notable technology policy came only in 1983. The technology
policy of India could not generate the desired thrust for a sustainable technological growth.
The low level of R&D expenditure by steel manufacturers in India has impact on the
technological growth of steel sector. Indian companies put less emphasis on R&D expenditure.
As for example, in 1997-98, Tata Steel spent only 0.14% of its sales value on R&D. The in-house
research facilities in most of the large integrated steel plants are not properly organized. Many
of them started their R&D activities late.

Technology transfer did not take place properly. Some of the major problems were:
inadequacy of knowledge and skill to exploit the results and lack of confidence in the
successful exploitation of the projects on commercial basis. Bureaucratic efficiency, controls of
royalty, inadequate price of technology, import restrictions are some of the major
impediments considered serious by the technology suppliers.
Impact of poor infrastructure like high cost of electrical power, poor reliability of the
availability of electrical power, inadequate transport facilities, less-developed logistic network
decelerated the growth of steel industry.
Developing economy like India faced problems of building local technological capabilities.
Due to this, the local manufacturing industry was not able to provide adequate technological
support to steel sector. The steel manufacturers had to import many of their equipment
besides technology.
Cumbersome procedures to comply with the series of statuary requirements, and the
corresponding poor efficiency of administrative machinery retarded the growth of steel
Industry .
Technological forecasting has not been done properly.
In many cases, particularly for medium and smaller size steel producers, initial high cost of
adoption of newer technologies is also a major barrier to their technology adoption.

STRATEGIES TO MEET THE INFRASTRUCTURE CHALLENGES
i. The advantage of indigenous availability of iron ore for Indian
steel industry needs to be further built upon. The experience
of China with regard to paucity of iron ore in the last half
decade is a pointer to this direction.
ii. Large reserves of iron ore are in deep forests and in ecologically
sensitive areas, where full-scale mining may be discouraged for
fear of environmental degradation.
iii. Some of the richest mines are also located in tribal belts where
mining may lead to widespread displacement and
impoverishment of indigenous population especially, those
dependent on forest resources and this restricts mining
operations.
8/4/2014 14 Dr R Haldar
iv. Gradual reduction in export of iron ore imposing export duty to
meet the requirements of steel industry with priority.
v. Exploration of minerals needs to be accorded highest priority
with necessary incentives and by removing various legal /
procedural constraints, Environment and forest clearance for
mining leases should be granted within a pre-specified time
frame,
vi. A transparent set of policy rules that addresses the issue of
compensation and makes the affected/displaced persons
beneficiaries of the mining projects should be framed,

8/4/2014 15 Dr R Haldar
vii. Scientific mining and economies of scale are to be encouraged
for which a minimum economic size for iron ore mines may be
prescribed,
viii. Beneficiation of iron ore and coal needs to be taken up as a
priority to increase the size of reserves suitable for requirements
of steel industry. Adoption of relevant technology in these areas
needs to be encouraged through suitable fiscal incentives,
ix. Sintering and pelletization need to be encouraged for domestic
usage of iron ore fines for which fiscal incentives may be
considered. Steel plants having captive iron ore leases should
ideally use all their iron ore fines and exports/domestic sale of
lump/ fines to be discouraged.
8/4/2014 16 Dr R Haldar
x. Indigenously available coals need to be blended with
imported coal to make these suitable for metallurgical
operations. Therefore, there is a need to intensify efforts
to acquire mines overseas to protect against poor
availability and rising prices of purchased inputs. The
Indian steel industry should enter into long
term/evergreen contracts with major coal companies in
the world. Further, alternative technologies like injection
of PCI, coal tar etc. into blast furnaces need to be fully
explored to reduce dependence on imported coking coal.
8/4/2014 17 Dr R Haldar
xi. Ferro-alloy is an essential input for steel making. The
basic raw materials needed for this industry, especially
chrome and high quality manganese ore, are in short
supply. It is, therefore, necessary to give thrust to
exploration of these minerals. In the intervening period,
these ores should be conserved for domestic use
pending large-scale discoveries. Further, in view of the
surplus domestic capacity, the industry needs to be
exempted from the ongoing fiscal rationalization
processes aimed at rectifying the inverted import duty
structure vis--vis the steel industry for the time being.
8/4/2014 18 Dr R Haldar
Education and training institutions would need to be reinforced to
ensure availability of trained and skilled manpower for the steel
industry. Moreover, the issue of creating conducive environment
to attract young talents in core industries including steel sector in
the country would also need to be addressed adequately.
The Government has an important facilitating role in the
development of the steel industry. As steel making is a highly
capital intensive and complex process requiring large scale
investment, historically the industry has evolved with
Government support. Some of the important areas, where
Government support is required, are - providing essential
infrastructure facilities; assuring easy availability of critical inputs
such as iron ore, coal, gas and power; provision of training facility
for manpower development and creation of a consolidated and
reliable data base for informed decision making by all
stakeholders.
8/4/2014 19 Dr R Haldar

UNIT-
2