The Hindu Business Line : Surplus seen in steel output; exports likely

China, as is well known, is the world's largest producer and consumer of steel, an industrial metal that is integral to economic growth, especially for infrastructure development.

The strong positive correlation between economic growth and metals consumption is common knowledge.

Key areas

Last three years, India has emerged as one of world's fastest growing significant economies with GDP growth rate of eight per cent a year.

Housing and infrastructure are key areas of future development. Huge investments are being committed.

Naturally, steel would be a critical input. What's the emerging Indian steel scenario? About India, a new study from GFMS Metals Consulting says the country may become steel surplus and forced to look for export options.

"Significant proportion of announced green-field capacity will not actually be developed in the next five years. Very simply, the capital requirements of over $75 billion cannot be raised internally. However, brown-field expansion at existing steelmakers, the backward integration of re-rollers and the forward integration of smaller DRI or pig iron producers into steelmaking coupled with the emergence of 2-3 green-field sites will push up steel output sharply."

Mismatch

A mismatch between domestic steel output and consumption demand may develop forcing India to enter the export market.

"While domestic demand will grow in excess of forecast GDP rates, it will not be able to absorb all the additional steel and an increasing proportion (particularly for flat products) will be exported," the report points out.

Crude steel output should increase to 72.7 million tonnes by 2011, an average annual increase of 9.2 per cent, while finished steel demand will rise by a slightly more constrained, but still very strong, 8.6 per cent per annum, with the balance going to semis exports, GFMS observed adding that by 2011, total slab exports from India will be in excess of 2.5 ml.t. per year.

Rise in Ore output

Suggesting that raw material base was critical to India's competitive position, the report forecast Indian iron ore production will increase to 170 ml.t. by 2011, of which 65 ml.t. would be exported.

Iron ore exports out of India have hit a controversy. As much as 50 per cent of current output is shipped out of the country.

The National Steel Policy has set a domestic steel production target of 100 ml.t. by 2019-20 to meet projected internal demand of 90 ml.t.

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