Backed by the massive expansion plans of its biggest two steel producers and a major contribution from the private players, the steel ministry is targeting to be the world’s second-biggest steel producer “soon”, a jump of two places.
Data for 2011 from the World Steel Association show China topped with 683 million tonne (mt), followed by Japan at 107.5 mt and the Unites States at 86 mt.
India was No. 4 with a capacity of 72.2 mt.
Beni Prasad Verma, Union minister for steel, on Friday said: “India will soon become the second-largest manufacturer of steel in the world ... Steel capacity in the country has increased from 66 mt in 2009 to 90 mt in 2012.”
He was chairing a meeting of a parliamentary consultative committee to review the functioning of RINL.
He said the per capita steel consumption in the country has risen from 38 kg to 59 kg.
While China is moving very slowly in expanding steel capacity now, both the US and Japan are hardly adding anything as compared with India.
“India is on an expansion spree. SAIL is taking its capacity from 14 mt to 24 mt in the next three to five years, followed by major expansions by companies such as JSW Steel, Tata Steel and Essar Steel, etc. All these companies together will add close to 30-35 mt in the next five years,” said an analyst at an international rating agency.
He said if ArcelorMittal’s and Posco’s plant too come up by March 2017, then India might as well add a capacity of over 50 mt, making it the second-biggest steel producer in the world.
Industry experts said while the target is not impossible and could be achieved within the current
Five Year Plan, what is important to note is whether that will fetch enough return on investments for these players.
They said merely adding capacity does not ensure that returns will be equally big.
“The steel market in the US and the Europe has almost saturated and all that is there is replacement demand. This is also putting a downward pressure on global raw material prices and consequently the steel prices. Therefore, even if India increases capacity, steel companies will not get the prices they once got in 2009 or even now,” he said.
He feels that the entire steel market will see a further bottoming out of prices the world over before they start climbing, and even then the peak will not be attractive.
Also, what is important to note is the current per capita consumption of steel in India as compared to the world.
According to the World Steel Association, the global average per capita steel consumption currently stands at around 215 kg.