India Inc to add 32% steel capacity next year

Land woes are not going to come in the way of steel production, as India gears up to add substantial steel capacity next year through expansion of existing units.

Major steel companies have indicated that more than 32 per cent capacity will be added to the current 63 million tonnes (mt) at a cost of around ' 72,000 crore. Of this, most of the addition will be in flat steel, used in the automobile and white goods sectors, while long products used in the construction sector will account for about 30 per cent.

The addition may be far short of the steel ministry’s projections of 124 mt by 2011-12, but at least it’s not going to be hit by land hurdles or want of funds. The projects have already achieved financial closure.

Missing the capacity target, though, could be a blessing in disguise for a sector which is yet to recover from the slowdown.

But the industry is not worried. “Flat steel ramp-up takes time,” said Jayant Acharya, director (sales & marketing), JSW Steel.

Moreover, the country is still a net importer of steel. Around three million tonnes of hot rolled coil (HRC), a benchmark for flat steel, is imported every year. “Capacity additions should help substitute imports,” Acharya said.

Flat steel import in July was up 35 per cent on a year-on-year basis. Imports had increased by about 66 per cent, joint managing director JSW Steel, Seshagiri Rao said, while adding that the demand-supply scenario in India was at a comfortable level.

According to World Steel Association (WSA) figures, India ranked third among major steel producing countries at 62.8 mt. That’s still just five per cent of the world production.

RAMP UP
Company	Capacity addition (million tonnes)	Investment (' crore)
IISCO Steel Plant	2.5	10,000
Bokaro Steel Plant	1.2	3,000
Tata Steel	3	14,000
Essar Steel	5	16,000
JSW Steel	3	8,600
RINL	3	12,238
Bhushan Steel	2.5	8,500

“Demand has been growing every year at 10-12 per cent; so the market can absorb the additional capacity,” Bhushan Steel Managing Director Neeraj Singal said.

Per capita consumption in India is 46 kg, compared to a world average of 200kg.

However, the government has set an ambitious target of becoming the second-largest steel producer in the world. That’s based on the memoranda of understanding (MoUs) that have been signed.

Around 222 MoUs have been signed to create capacity of 276 mt steel. At present, Japan is the second-largest producer with a capacity of 87.5 mt.

Of course, to realise that capacity would require key resources: land and mines. Small wonder that the industry is nonchalant about the quantum of steel that is going to flow into the market. The milestone is still a long way off.