People And Their Problems
New Delhi, 20 January 2007
Steel Industry
Ambitious
Expansion Plans Ahead
By Dhurjati Mukherjee
Steel has been in the news. This exceptionally versatile
metal has developed over the years and its industrial and other usages have
increased greatly. Delving into history, one finds that the first great steel
industries of Britain, Germany and the United States of America were based
on and located near their iron ore and coal mines. But, by the later half of
the 20th century, they had largely run out of iron ore. Similarly,
the Soviet bloc countries believed steel was a foundation of socialism and
built-up over-sized steel industry.
Growing competition has led to the consolidation of
industries in the old industrial countries. Primary steel producers have been
buying local mills to use them fir
re-rolling ingots. In India,
the Tatas have been quite active in this regard. In recent times, China emerged
as the biggest producer making a third of the world’s steel.
In consonance with projected 8+ per cent GDP growth rate
targeted for the next decade, the country’s metal production industry,
particularly steel, is expected to grow at a blistering 10 per cent annually.
After Australia and China, India is destined to become a major
steel manufacturer in the international scenario. The agreement signed by
Pohang Steel Company (Posco), the world’s fifth largest steel maker, to set up
a $ 12 billion (Rs 51,000 crores) steel plant in Orissa,
is a case in point as it will turn out 12 million tonnes of steel compared to
SAIL’s present production of 13 million tonnes.
After the first phase of the project is completed in 2010,
the company will produce 4 million tonnes of steel and the entire project will
be completed in 2016 with the production reaching 12 million tonnes. The
investment deal is significant in the history of world’s steel industry as it
is the first time that a steel maker is building an integrated steel plant
adopting the Finex technology, which is the next generation eco-friendly
iron-making process that allows the
direct use of cheap iron ore fines and non-coking coal feedstock. However, the
project has also generated some controversy as the Korean company has been
allowed to export 30 per cent of the 600 metric tonnes high alumina-content
iron ore allotted to it.
All this clearly shows that India has emerged as a major player
in the world steel industry. With iron ore reserves of 13 billion tonnes – 4
per cent of global resources – India
ranks fifth in the world after China,
Japan, the USA, Russia and South Korea.
Jharkhand, Orissa and Chattisgarh,
among themselves, account for 57 per cent of the reserves in the country.
However, most of this has gone untapped so far.
Apart from the abundant ore reserves, the country’s other
attraction is its geographical proximity to China, which consumes one-fourth of
the one billion tonnes of steel the world produces every year. Moreover, India is well
equipped with technology, management and scientifically qualified manpower to
meet the challenges of steel making in the coming decades. As such, global
majors like Mittal Steel, Pohang Steel of South Korea and Bao Steel of China
are queuing up to invest in India while domestic players are also seriously
exploring the need to increase capacity.
According to experts, Indian production, currently 42
million tonnes, will touch 80-110 million tonnes by the year 2015 if the 8 to
10 per cent growth is achieved. The Ministry of Steel has however set a modest
target of 100 million tonnes by 2020. Meanwhile, the merger of IISCO with SAIL
should further boost up the steel major and help the integrated company could
go in for further expansion and development.
Around Rs. 5000 crores will be invested in Burnpur and about
Rs. 2800 crores in IISCO’s collieries and iron ore mines. Chiria mines, Asia’s largest ore reserves, will soak up a little over
Rs. 2000 crores but its rich reserves could raise the capacity of Bokaro Steel
plant to 10 million tonnes, according to SAIL Chairman, V. S. Jain. This could
rival Mittal’s plans to set up a 10 million tonnes mill at Chaibasa in
Jharkhand.
There are also plans of SAIL’s merger with Vizag Steel to
create an entity that will immediately place the new Indian steel-making giant
among the world’s top 10 in terms of manufactured steel. If this matures, the
combined turnover of the two behemoths will be in the region of Rs 38,000 to Rs.
40,000 crores or nearly $ 10 billion with a crude steel production of 15.8
million tonnes presently which may go up substantially in the coming tears because of already finalized
expansion programmes of Vizag Steel.
Meanwhile, Tata Steel is planning to set up three Greenfield facilities in
Orissa, Chattisgarh and Jharkhand.
These facilities would have an aggregate capacity of 23 million tonnes and that
the units coupled with other strategic acquisition opportunities could see the
company invest Rs. 70,000 crores in the next decade. Tata Steel has plans to
attain global scale with output exceeding 30 million tonnes.
One may mention here that over the Plan periods, steel has
been accorded the pride of place in our planning strategy. The strategy has
been to increase production and productivity through modernization, expansion
and induction if new technology. Modernization has been more or less completed in the public sector steel plants while
the private ones are also being encouraged to induct technology to compete in
the international market. And the development of ultra high-powered
electric-arc furnaces and reliable continuous-casting machines provide a
low-cost route for the production of such structurals. In fact, there is lot of
emphasis on R&D to improve quality standards and become cost competitive in
the international market.
With increase in production, the demand of ore is expected
to reach around 150-160 million tonnes with another ten years or so. Current
production figures match that as domestic producers consume around 50-60
million tonnes. But whether exports of ore in future would be allowed is very
much on the Centre’s agenda. “There is a strong case to protect the resources
for the domestic industry”, an expert on mineral industry pointed out, while
also maintaining that the decision to allow Pohang
to export ore from India
every year may not be a correct decision. “With the existing consumption, the
proven reserves might last another 50 years”.
One of the demands of the steel industry has been that iron
ore should be given to steel plants exclusively for captive mining. The main
justification is that the iron ore reserves in the country being limited, these
are needed by the growing domestic industry. The Government has been trying to
formulate rules to curb the rich States’ power to dole out preferential
treatment to companies, which set up plants within their territories. It is
understood that the Hoda Committee would not allow such incidents to be
replicated. However, it is quite clear that the three ore-rich States cannot be
prevented from promoting steel plants in their own States rather than allowing
parties to set up plants in other States. The Jharkhand Chief Minister recently
regretted that though the State has 37 per cent of the country’s mineral
resources, 54 per cent of the people are below the poverty line.
The importance of steel in the country’s growth cannot be
doubted. It is thus imperative that in any strategy about the steel sector, the
following needs to be seriously considered: the future demand for ore as more
and more producers, both Indian and foreign, are attracted to set up units;
prospects of encouraging domestic producers, specially the PSUs, to increase
production for export; seeking tie-ups with foreign firms for both production
and export; and formulating plans for employment generation, thereby gearing up
development and alleviating poverty in the ore-rich States of Jharkhand, Orissa and Chattisgarh.
As is agreed by one and all that in this age of
industrialization, steel has a crucial role to play. The demand for steel is
increasing worldwide at an annual rate of 7 to 8 per cent per annum while
production is likely to increase by 4-5 per cent, according to a report
released by the Associated Chamber
of Commerce & Industry. Steel consumption is expected to grow especially in
the newly independent states of the former Soviet Union
as well in OECD (Organization of Economic Cooperation & Development)
economies. Moreover, steel prices have at a quite time high having increased by
around 250 per cent over the last two years. Experts feel that it would
increase further in the coming years because of higher input costs and other
factors.
India has the potential to become the
second or third largest steel-producing nation in the world and optimists
believe that it should be possible
to achieve it in the next 15-20 years or so. The country should take advantage
of its rich reserves and, instead of exporting ore, evolve plans to export the
end product for higher gains. There is huge potential for India to tap
the Asian and African markets for increasing exports of steel products and this
has to be pursued in the coming years. However, to compete globally in a big
way, there is need to be give more attention to R&D in the steel sector so
that Indian products could compete favourably with those from Japan, South
Korea and China.
It is expected that the National Steel Policy, which is
eagerly awaited, would take into consideration the above facts while envisaging
the 110-million tonnes target set for the year 2020. Investments of around Rs.
230,000 crores would be required to step up the output to the projected level
though, of course, 10 lakh direct and indirect jobs will be generated. In the
coming years, the international community will be keenly watching policies from
India and China, two major steel markets with
high growth potential.---INFA
(Copyright,
India News and Feature Alliance)
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