Indian steel makers are pressing ahead with plans to add new capacity, betting on the strategic imperative of maintaining domestic primary steel production outweighing concerns over global overcapacity, amid mounting trade frictions and geopolitical uncertainty.
India, the second highest producer of the alloy which goes into making a range of products from safety pins to submarines, continued its growth in output between January to June (9.2 per cent) even as the rest of the world recorded a decline (-2 per cent).
Plans are afoot to add at least 30 million tonnes (mt) of capacity by 2027 to take the installed capacity to 209.9 mt from 179.5 mt at the end of 2024, according to a report published by The Organisation for Economic Co-operation and Development (OECD) in May.
Going by the National Steel Mission of the Indian government, India’s capacity is targeted to reach 300 mt by 2031 and steel makers in the private and public sector — JSW Steel, AMNS, JSW Steel, Jindal Steel and SAIL — have outlined big-ticket investment roadmap through the decade.
The ambitious plan may be tested if projections made in the OECD report are taken into consideration. The study claimed that global steel overcapacity is estimated to reach 721 mt by 2027.
National importance
After the Russia-Ukraine war and Trump tariffs upended the global trade system, countries are realising the importance of having a sovereign steel industry.
“Steel is a foundational industry for any economy that requires very significant investments, has a multiplier effect on employment and helps develop a resilient national supply chain,” Koushik Chatterjee, executive director & CFO of Tata Steel, argued.
Steel makers pointed out that consuming countries would not like to be overly dependent on imported steel in a conflict situation. “Steel is a nationally important strategic asset,” Jayant Acharya, joint managing director and CEO of JSW Steel, said, pointing towards its role in defence, aerospace and infrastructure.
We don’t want to depend on imported steel to build our critical infrastructure and bridges, like Chenab bridge for instance ,” Acharya explained.
Best place
Both Acharya and Chatterjee argued that India is the best place to make steel, given its abundant resource of iron ore, skilled workforce and availability of a very large and growing domestic market.
“India is just at the cusp of creating its infrastructure, unlike the West. When you build a nation and you are filling up infrastructure gaps across the country, a lot of steel will be required for the next two to three decades,” Acharya argued.
Chatterjee concurred. Arguing that India is at the ‘take off point’ on its industrialisation future, he said, “To make India competitive it needs to have its own sovereignty and self-sufficiency in steel and to do that it needs to build competitive capacity in high value-added products to serve the emerging market needs.”
While India is on a growth path, many western economies will find it difficult to maintain capacities at the present level as the unit cost of replacing aging plants is higher than creating new ones in places like India.
China, the world’s largest producer, consumer and exporter of steel, is also trying to put a leash on its annual output which is close to 1,000 mt.
Global recognition
The importance of having domestic steelmaking is not lost on the developed economies either. Trump imposed a 50 per cent tariff on steel, aluminium and their products thereof to protect the US steel industry, and giving impetus for growth.
Earlier this year, the UK government took over the ailing British Steel complex in Scunthorpe, an industrial town in northern England. Jingye, the Chinese company that owned the plant, had threatened to shut it down, citing losses of about $940,000 a day.
“Steel is fundamental to Britain’s industrial strength, to our security and to our identity as a primary global power,” Britain’s business and trade secretary, Jonathan Reynolds, told Parliament in April when the government passed an emergency legislation to take control of the company, which was previously owned by Tata Steel UK.
The UK government also extended a £500 million grant to TSUK ensuring Britain continues to have primary steelmaking on the British isle.
India too has imposed a provisional safeguard duty at 12 per cent for 200 days even as the industry is clamouring for a longer span and higher duty.
“The role of steel in all developed economies has been like a skeleton. Be it sky-scrapers, highways, high speed trains, smart cities, industrial corridors…every success story is backed by the strength of steel,” Prime Minister Narendra Modi said in an event in April.