NSP, A Path-breaking Opportunity for Indian Steel Industry

17 July 2017

It is a matter of great satisfaction that National Steel Policy 2017 prepared by steel ministry has been approved by the government for implementation. The earlier policy drafted in 2005 needed revision in view of the sweeping changes happening in the global and national economy impacting the demand and supply perspectives of the material, pricing and availability of raw inputs, technological breakthroughs in user segments necessitating changes in the technology of steel making and emergence of new high value added steel. The capacity targets envisaged in the document has clearly set out the availability of principal raw materials required for production by 2030-31.

The emergence of new technology in the field of non-conventional energy like solar power, more availability of natural gas for energy as well as for steel making, more beneficiation and use of pellets in the BFs may result in a paradigm shift in the current norm of consumption and change the pattern of coking coal and iron ore demand in the next 5-7 years. This is good news as it would somewhat ease the logistic pressure on movement of raw materials and reduce the cost of production. The long term plans for Railways, Coal India may have to be reworked based on these technological interventions.

The capacity augmentation plan in NSP is crucially dependent on how Indian economy shapes up in the next decade to generate adequate demand for steel. From the various development planning schemes being undertaken by the government in areas of rural and urban development, affordable housing, smart cities, defence procurement, Make in India, dedicated freight corridors, metro rail network, Sagarmala and port led growth programmes, it is apparent that apart from requirements for standard grades of steel, there would be enormous scope for high performance low weight steel to influence the buying pattern by these sectors desirous of their end products/structures look innovative, sleek and in tandem with the state-of-the-art technology.

Needless to mention that these changes in the specific buyers’ perspectives may be sweeping, thanks to globalisation, policy supports for technology transfer and penchant for value added steel by our architects and structural engineers. The codal provisions in Euro, British or American codes for designs are aggressively pursued by our engineers to cater to the buyers’ needs. They need not wait for development of corresponding Indian codes.

For instance, the delayed release of code for cold formed structural (IS-801) for pre-engineered or pre-fabricated structures is a dampener but definitely not a severe constraint for use of these type of structures in the country. The use of cold formed structural as well as hollow and tubular steel reduces the weight of the structures and enhances the inherent properties of the structures in terms of load bearing capacities, corrosion resistance and durability.

It would therefore imply that capacities that are going to be created either via brown field or green field expansions in expectation of the emerging demand need to emphasise the value added component of the steel product profiles that the emerging market would demand. Keeping in view the inordinate delays that characterise our project completion schedules encountering numerous clearances in land, environment, raw material securities and availability of capital related issues, the envisaged demand in grades, sizes and profiles in the DPR are found to be falling short of the emerging market needs at the time of commercial commencement of the projects resulting in the project continuing to suffer from lower realisation and inability to repay the debts incurred for installing capacities and creation of other commensurate plant facilities. The thrust on R&D by the steel producers that has a special mention in the NSP would only enable them to meet the emerging demand for value added steel by reorienting the product mix.

The NSP projects finished steel demand to grow from the current level of 83.6 MT to 230 MT by 2030-31 at a CAGR of 7.5% per annum. This is against the CAGR of 6.4% per annum growth envisaged for crude steel capacity expansion in the country. The incorporation of the concept of value added steel is likely to have a bearing on the steel intensity of GDP in the coming years and may lead to bringing down both steel demand and supply projections in terms of volume. This, however, excludes the impact analysis of Industry 4.0 that speaks of robotics, artificial intelligence and increasing digitisation requiring new skills, revised manpower and job contents, innovative production and marketing strategies. It would be a much better implementation strategy of NSP if suitable proactive steps in each of the vital areas start getting activated.

Source: Financial Express