Infra thrust to boost steel demand but one key challenge remains

The Indian steel industry is all set to get a major thrust in the form of the government’s heightened focus on infrastructure development but a key challenge could hamper the growth of the sector, which is directly and closely linked to the overall economic development of the country. 

A report by global consulting major Deloitte states that raw material availability is going to be a key challenge as captive leases are set to expire by 2030. Slow process of iron ore mine allocation along with intermittent mining bans across a few states are also impacting the sector, it says.  

“It is expected that 2030 will be important year for the iron ore mining sector with significant impact on steel production due to expiry of captive leases under Mines and Minerals (Development & Regulation) Act 2015,” stated a report by Deloitte released at the India Steel 2023 conference by industry body FICCI. 

“Proactive steps are needed by the government and industry to ensure a seamless transition for these significant milestones. Issues related to logistics from the mining areas also need to be addressed to mitigate lag in evacuation of iron ore. High import dependency of coking coal / coke is another ongoing concern for the Indian steel industry due to constraints related to coking coal availability and production in India. Timely steps will have to be taken to make optimal quantity available for the sector and also to improve the production through the use of new mining technologies,” it added. 

In terms of solutions, Deloitte is of the view that the government needs to look at expediting new iron ore blocks and auction it quickly along with putting in place more steel scrap recycling centres, and policies to support exports. 

Meanwhile, the report titled 'Steel Outlook of 2030 and 2047' highlights the fact that the steel industry will get a boost from government spending on infrastructure as almost 62 per cent of steel goes into infrastructure construction. 

Incidentally, the government announced almost Rs 10 lakh crore of infrastructure spending in the current budget, which is around 3.3 per cent of the GDP.  

Further, the performance linked incentive or PLI schemes are impacting various sectors, and there is a trickle-down impact on the steel industry also. 

The steel sector contributes approximately two per cent to the Indian GDP and provides employment to over two million people, as per the report. In 2047, the report forecasts a crude steel capacity of 500 million tons, and per capita consumption of around 220-225 kg per capita.