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How Indian steel industry facing a decline and still being optimistic

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kapila
kapila
Limiting her in few words would be a herculean task. She Likes to add some zing to the story. When not writing, she loves to watch movie. She especially enjoys being a fashionholic. Affiliated with QuickCompany which deals in Trademark Registration, LLP Registration and Other Legal Activities.

I think every industry in India went through trauma for some time. Except for the automobile industry, name one section which is not under stress. This holds specially true for the steel industry in India- one of the fastest growing industries which has found itself, in a miserable plight. Steel has extended the entire manufacturing sector.

The sluggish growth of the steel industry itself showcases the pathetic condition of the industry. I think the China syndrome is overplayed by most of the steel players, whereas, the major concern in India is the consumption which is not growing.

Preface

The most important product of the modern world is steel. India’s steel industry has a history. Historically, During the industrialization phase a strong steel industry supported the nations.

India holds the fourth position in producing and the third position in consuming steel. However, the problems associated with the steel industry are more complex than in other industries, the reason being its high capital intensity, high dependence on bulk raw material, perpetual over capacity and low profitability. Moreover, it requires government and social interventions for sustainable growth.

After liberalization the structure of industry has changed significantly. Now the government should switch its role as a regulator to a facilitator to remove the bottlenecks and to make the sector more competitive.

Segmentation of the Indian steel industry

From domestic appliances, electrical equipment to consumer products, steel finds a wide variety of applications.

Competitive Landscape

Even having big steel producers in the global steel industry, Indian steel industry considered as the most potential global steel hub. The Indian steel market is set by the existence of giants such as SAIL, Tata Steel, JSW Steel, Essar Steel.

Growth Over the Year

Before liberalization, the Indian steel industry was integrated with the public sector only. Now, Tata Steel and SAIL are the only big players in the Indian steel market. Liberalization in Indian economy opened up the way for many in the steel industry, as a result an increase in production capacity was witnessed.

The Indian steel industry has seen tremendous but steady growth. During the period, since 2008 and running into 2014, Indian steel market grew unwaveringly while the global steel market faced depression due to excess capacity in crude steel making. The world witnessed a volatility in steel prices. This left a keen effect on the steel industry globally.

But in the past two years, the steady growth of Indian steel demand and production has lost the pace. The last two years have been awful for the Indian steel industry.

Indian industry can not affored to be isolated with what is going on in the world. The global economic crises has pushed the steel industry into recession and, trade in steel has declined significantly.

Government Initiatives

The Indian steel industry is currently passing through a declining phase. Even the government is admitting that the Indian steel industry is going through a severe downturn. Globally, low demand and over capacity result in dumping and adopting predatory prices. This is evident from the fact that the major steel producing countries like China, Japan and Korea are dumping their products at lower than their cost of production. Consequently, domestic produces reduce their prices and crumble their profit margin. Trouble for the domestic producers and losses which occured, forced the government to take some necessary steps to bail out the domestic players.

Government initiatives in steel industry sector are:

  • Imposing anti-dumping duty.
  • Safeguard duty on imported steel products.
  • Policy on MIP (Minimum Import Price).
  • ‘MSTC Metal Mandi’ an e-platform launched under the ‘Digital India’ initiative where finished and semi-finished steel products are selling.
  • To make the domestic industry more competitive, CBEC (Central Board of Excise and Customs) announces zero export duty on iron ore.
  • Steel research and technology facility provided by the Ministry of Steel.

In spite of these initiatives by the government, the Indian steel industry is yet to come out of the woods due to weak demand and cheap imports.

Steel Industry Future Forecast

There are many studies which point towards an increased demand. We can say that the scenarios are on the optimistic side for the future of the steel industry even after examining the assumptions.

The steel industry plays a decisive role in infrastructure development.  The more the increase in the number of infrastructure projects, the more demand for steel and steel products. So, there is extensive sphere for growth in steel industry as a rise in consumption is foreseen due to increased infrastructure construction.

Domestic availability of cheap labour and iron ore, are the primary factors for the development of Indian steel industry. During the forecast period, till 2020, the bloom extrimity of iron ore will demand the steel manufacturing.

All in all, it’s not the end of the steel industry, just a hard time which will pass away soon with the joint efforts of government and domestic producers. I hope India’s expectation of moving up from third place to the second largest producer of crude steel may indeed come true in the coming decade.

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kapila
kapila
Limiting her in few words would be a herculean task. She Likes to add some zing to the story. When not writing, she loves to watch movie. She especially enjoys being a fashionholic. Affiliated with QuickCompany which deals in Trademark Registration, LLP Registration and Other Legal Activities.
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