Milestones in production

A boost in India’s infrastructure spending has supported a rapid rise in steel consumption – with the country expected to become one of the largest economies in the world. By Dilip Kumar Jha*

AFTER witnessing double-digit growth in the past two years, India’s steel consumption is likely to increase by 7-8% in the current financial year (FY) 2023-24 (April-March) due to the government’s massive capital expenditure on the construction of new infrastructure and the upgrade of existing ones, along with the rapidly expanding road and rail network. With economists forecasting India’s economic growth at 6.5-6.8% in FY 202324, after recording the world’s fastest 7.2% growth in the previous financial year, the government is confident about increasing capex on infrastructure. This increase is expected to support the rise in India’s steel consumption this year.

Record growth after a pandemic pain

The Union Ministry of Steel has reported that India’s steel consumption reached an all-time high record at 119.17Mt in the financial year 2022-23, compared to 105.75Mt in the previous year. The growth in steel consumption for FY 2022-23 represents more than a quarter of 94.89Mt recorded in the pandemic years FY 2020-21. India’s crude steel production, according to the Ministry of Steel, stood at 125.32Mt in FY2022-23 as against 120.29Mt reported in the previous year. Similarly, finished steel production in the country was reported at 121.29Mt in FY 2022-23 versus 113.60Mt in FY 2021-22. India recorded a record production of crude and finished steel production in the recently ended FY 202223.

Jayanta Roy, senior vice-president and group head of the Indian Credit Rating Agency (otherwise known as Icra) stated that the steel sector in India is expected to witness two significant milestones in FY 2022-23. “Firstly, the central government’s current year capex is expected to reach the average annual run-rate envisaged in the National Infrastructure Pipeline for the first time. Secondly, the sector will experience phenomenal consumption growth following two consecutive years of doubledigit booster, after more than a decade.”

According to the Ministry of Steel, India’s crude steel production stood at 125.32Mt in FY 2022-23, compared to 120.29Mt in the previous year. Similarly, finished steel production in the country was reported at 121.29Mt in FY 2022-23, compared to 113.60Mt in FY 2021-22. India achieved a record production of crude and finished steel in the recently ended FY 2022-23.

Roy further added that the first time this feat was achieved was in FY 2009-10 and FY 2010-11. Although private sector investments have been relatively subdued, the government’s capex drive has helped maintain the industry’s capacity utilization rate at an estimated 79% in FY 202223. With steel consumption expected to grow in the high single-digit next year, it is anticipated that the industry’s capacity utilization rate will improve to around 80% in FY 2023-24, despite the commissioning of more new expansion projects.

T V Narendran, managing director of Tata Steel, stated that India’s steel demand will continue to remain strong this year. Urban demand has recovered to some extent, particularly in the automotive sector, which has returned to pre-Covid levels.

Commercial vehicles, the steel-intensive segment of the automotive demand, are back on track. However, motorcycle demand, which reflects rural consumption trends, appears to be more fragile. Nevertheless, there is a reasonable demand for construction steel.