Future of Iron and Steel Industry | Term Paper | World | Metallurgy

Here is a term paper on the future of iron and steel industry with the help of statistics.

The future growth and success of iron ore mining on a sustainable basis shall depend on a variety of factors. The foremost amongst is the regulatory challenge which involves land acquisition. At present our steel consumption is low, and very minimal as compared to the industrialized nations. The production does not meet the domestic demand. At present the private participation is low, but it may increase in the coming years.

Another difficulty is in long delays in granting of prospecting license and mining lease, the time taken for this is ranging between 3 to 7 years, although this could generally happen in a few months time. When prospecting permission is delayed, subsequent weeks or exploration, assessment all get affected (Table 10.1).

On the logistics-there is a deficiency in infrastructure such as a good railway network in the mining areas and evacuation of ore to the mills. One may be disappointed that present only around 3,800 MT of dedicated wagon of iron ore are available, as compared to 20,000 MT wagons in Australia and 40,000 MT in Brazil. There is thus need and scope for growth. Similarly the roads not work, especially in Jharkhand-Orissa state border region need attention.

Overall, we need more infrastructure development at ports, and support at social as well as administrative level.

Global steel production has been mainly driven by China. Chinese steel production during 2005-2009 grew at a CAGR (Compound Annual Growth Rate) of 12.4 per cent. Non-Chinese steel demand has reached at a CAGR of 4.5 per cent.

Import of basic input materials such as iron ore by China has increased from 275.3 Million Tonnes in 2005 to 628.3 Million Tonnes in 2010. India exports major share of iron ore to China (average 7.5 per cent growth in the last decades) and huge demand of natural resources to meet the development of its economy, is offering a vast market for the Indian iron ore as can be seen in Tables 10.2, 10.3 and 10.4.

India accounts for around 5 per cent of the global steel consumption. Almost 70 per cent of the total steel used is for kitchenware. The scope for raising the total consumption of steel is huge, given that per capita steel consumption is only 40 kg- compared to 150 kg average across the world and 250 kg in China. Freight advantage ($ 15/MT) for supplies to eastern hemisphere (Japan/China) compared to Brazil (Freight $ 26/MT) (Table 10.5).

In India Iron ore and Steel industry is second largest industry after Coal industry. There are 25 billion tonnes of iron ore resources. Most of the reserves are economically exploitable. The three states of Orissa, Chhattisgarh and Jharkhand account for almost half of India’s iron ore reserves. Steel Authority of India Limited and National Mineral Development Corporation are major producers of Iron ore. Based on the physical size, Iron ore is divided into lumps and fines.

In India most of the Iron ore is used for making of steel. Our steel sector consumes mostly lumps and we export fines to other countries due to lack of advanced technology. Domestic consumption in India is mostly in construction, infrastructure and automobile. China and Japan are the major Indian iron ore importing countries. Iron ore and steel industry faces logistic challenges in the form of regulatory, infrastructure and social/political aspects.

Government should concentrate on the issues like granting of mining leases, and license, land acquisition, environmental and financial approvals, decreasing the freight charges both in rail and roadways, revise the Mining and Mineral Taxation Laws, encourage the private and foreign investments in infrastructure areas like Railways, Roadways and Ports, control the illegal mining activities, and provide security for safe mining from extremist activities laying the separate rail lines and road ways from Iron ore mining areas to ports like Brazil and Australia, encourage the R & D activities to invent the new technologies for industrialization and using iron ore fines efficiently.

The opportunities in iron ore and steel industry in India are vast. India will emerge as the strongest market in the world between 2010 and 2015, when demand will grow annually at 7.7 per cent. This year, steel consumption in India is expected to grow by a hefty 10 per cent (last year, the country had to import about 4.7 million tonnes of steel). The steel scenario in India will continue to remain buoyant over the next few years, as the hunger for the metal keeps rising, thanks to vibrant end-user demand.

Industry being one of the core sectors in any economy, consumption of steel is usually a good indicator of the economic development of any country. The end use patterns of steel means that the steel demand has strong positive correlation with economic growth of any country. The demand of steel with respect to GDP (Gross Domestic Product) in most of developing countries is generally more than 1. For China it has been estimated at 1.15 and for India at 0.95.

The demand intensity of steel with respect to GDP per capita varies depending upon the state of development of economy rising in initial stages and then falling off in advanced stages of economic development.

We analyse China and India economies today, the demand elasticity and intensity of Steel with respect to the GDP is expected to fall in China in next 4-5 years. Whereas, in India it is likely to be on the rising trend for the next 10-15 years. There is so much of backlog to be covered in India.

In India based on the current GDP, the planners believe that the steel demand growth is likely to mirror the GDP growth till about 2025 and will be in the range of 135-165 million tonnes by the year 2025 and by 2050 in the range of 465-540 million tonnes.

According to Goldman Sachs report released in the month of October 2003, The Global Economic Paper called ‘Dreaming with BRICs- The Path to 2050’, Going by analysis and projections of this report, the size of the Indian Economy in 2050 will be $27.8 Trillion and it will be the 3^rd largest economy after China and The US.

According to an estimate, with the growing need for oil and gas transportation infrastructure, a US$ 118 billion opportunity is waiting to be tapped by steel manufacturers in the next five years. Indian steel companies are likely to get 19 per cent of the total global demand in the years to come. A host of steel companies have lined up with major investment proposals. Indian steel industry is likely to receive huge domestic and foreign investments.

The domestic steel sector has attracted a staggering investment of about US$ 236 billion; this consists of nearly 222 MoUs signed between the investors and various state governments mostly in the states of Orissa, Jharkhand. Chhattisgarh and West Bengal.

According to the Investment Commission of India, investments of over US$ 30 billion in steel are in the pipeline over the next 5 years. Tata Steel itself plans to invest over $15 billion in these three minerals-rich eastern states, adding 23 million tonnes to its existing capacity of 5 million tonnes.

The National Steel Policy has envisaged steel production to reach 110 million tonnes by 2019-20. However, based on the assessment of the current ongoing projects, both in green field and brown field, Ministry of Steel has projected that the steel capacity in the county is likely to be 124.06 million tonnes by 2011-12. Further, based on the status of MOUs signed by the private producers with the various State Governments, it is expected that India’s steel capacity would be nearly 293 million tonne by 2020.

The Indian government plans to invest over US$ 350 billion in industries related to infrastructure and construction. In such a scenario, the Indian steel industry has a long way to go. Rising demand from the automotive and capital goods segments are other drivers for consumption of the commodity.

Passenger car sales during the first four months of FY11 have increased by 29.6 per cent, while commercial vehicle sales have increased by 64.8 per cent. We forecast the construction and infrastructure spending by the government to continue unabated. This is likely to help maintain strong steel demand over the next 2-3 years.