How Indian Steel Industry Can Revive Export

Abhrasnata Das

Metal consumption has been one of the main driving causes behind industrialisation. Steel being most commonly used amongst all metals is the backbone of every economy and has always been at the forefront of industrial advancement.

With a production of 10.14 mt as of April 2022, India is the second-largest producer of crude steel worldwide. The production of raw steel was 133.596 MT in FY22, while the output of finished steel was 120.01 MT.

Despite being a significant producer of steel on a worldwide scale, the Indian steel industry has long struggled with issues including outdated manufacturing methods, a lack of technological advancements, and more. These difficulties have prevented the Indian steel sector from expanding significantly and from carving out a solid niche for itself in the world market.

According to sources, the Indian steel sector suffered a serious setback in 2021 as exports fell by 42%. The Indian government and big manufacturers are currently looking at several strategies that might offer the sector the much-needed boost in order to control the current scenario.

In a recent conference organized by the Indian Steel Association (ISA), Piyush Goyal, Commerce and Industry minister said, “I would urge the steel industry to get back the mojo, get back the numbers and let's for the next four months make an effort to pull up our socks and get back to significant exports, so that we can capture our market share.”

Although there are many variables that affect the growth and decline of steel export in the global market, few long term challenges have been a major hurdle for the Indian steel industry that are required to be solved on an urgent basis for increasing the overall export. In this article we have mentioned the key challenges standing tall in front of the steel industry of India.

Significant investments needed to set up modern steel-making plants

A 1-tonne capacity facility in the green-field category would cost somewhere close to INR 7000.00 crores to build, according to a PWC study from 2019. Few Indian businesses can establish big factories to benefit from economies of scale utilizing the equity method because of their limited resources due to low per capita incomes. As a result, the majority of factories rely on borrowing and debt finance.

Due to India's high cost of financing compared to nations like China, Korea, and Japan, a portion of the inflated cost invariably transfers to product expenses (near to USD 40.00 per tonne), increasing the cost of the finished goods and making it less competitive. Add to it the issue of India's cyclical need for steel.

The principal use of steel, building, is slowed down by the monsoons. One must maintain the steel factory during these months on little to no money. Such persistent leakage can cripple operations into closure in an extremely tight circumstance, as was the case in 2018 when several steel facilities lowered shutters with protracted bankruptcy processes following.

Bottleneck in Logistics

The majority of Indian steel businesses find it difficult, expensive to manage their logistical requirements. Along with coal or coking coal, iron ore is the main raw material used to make steel. Steel is one of the bulk commodities transporting which is never easy, whether it's moving finished steel to demand centers.

In addition, unlike China, Japan, or Korea, where the majority of their steel mills are situated near the coast, India's steel plants are mostly found inland. This makes it more difficult for most Indian steel factories to manage their logistical needs.

The constraints of the infrastructure, particularly with regard to the connection of the trains, are another external barrier that can be more significant than future growth issues. Up till the Indian Railways make a significant effort to reduce costs and improve rail links, capacity expansions will be limited.

Time to invest in technology

India invests far less than the rest of the world on technology, research, and development. The same holds true for the production and consumption of steel, as it has for many years. One result has been the sector's greater unattractiveness to others among young engineers.

India relied largely on foreign research and technology since neither the government nor the business sector conducted nearly as much research, which comes at a high cost. Aside from that, the technology employed in India until recently was very power-hungry, incredibly polluting, and water-hungry.

The government's insistence that steel plants comply with international environmental norms, however, is forcing change within the nation.

Future Ahead

With changing dynamics of global trade relations taking a toll on countries’ steel supply chains, and the Indian government continuing to focus on keeping economic growth over 7%, the Indian steel sector is set to become the key weapon in the nation’s road towards becoming an economic powerhouse.