SUPPLY OF STEEL IN INDIAN MARKET India is the 4th largest crude steel producer and the largest producer

of sponge iron or DRI in the world. Over the past 4 years (2007-2011), Indias total steel production rose more than 22%. The estimated output for steel production in 2012 is 73.42 million tons which is 4.8 million tons more than the total production in 2011. Indian steel imports dropped more than 5% over the past 4 years; however it is projected that imported steel in 2012 will be 0.17 million tons more than the imported steel in 2011 due to the current economic slowdown. The export of Indian steel is projected to rise in 2012 by 0.40 million tons and this continues the trend where export of Indian steel has picked up in recent years. For India, growth in apparent steel use is expected to grow by 6.9% in 2012 and by 9.4% in 2013. SUPPLY DEMAND MISMATCH The steel market is facing a supply demand mismatch due to which major Indian steel giants are facing loan the possibility of loan defaults. Steel demand grew by 8.8 per cent during the past four years of the current Five Year Plan period, compared to 10.4 per cent in the tenth Five Year Plan. 1987 pending proposals with the government to develop mines, factories, ports, roads and bridges also hit the steel sector and hence there is a backlog. The main factors involved in creating the demand supply mismatch are as follows:1. Demand for steel from automobile and construction companies is decreasing due to global economic slowdown. The demand from the automobile sector, a major consumer, has been identified as a dampener. The automobile sector projected a meagre 1.6 per cent growth in steel consumption this fiscal, against an over 7 per cent growth registered last year. 2. A steep rise in the cost of raw materials like iron ore and coal hit steel makers production cost as it had to depend on imports. There has been a severe clampdown on mining activities in Southern India and hence there is a shortage of low cost and high quality iron ore. Also large scale exports of iron ore have hurt the supply of steel in India. 3. An important factor involved in the supply of steel is the alternative means of steel production in blast furnaces using coking coal. India is the third-largest importer of coking coal in the world. 70% of Indias coking coal demand is met through imports and hence this overdependence on foreign coking coal coupled with a falling rupee means a rise in costs. 4. Illegal mining has also severely depleted the iron ore reserves of India. The mining scams in Karnataka and Odisha have led to a fall in the quantity of available raw materials and as a result, reduced the supply of steel. 5. Major players like Posco and Arcelor Mittal are involved in setting up of green field steel plants. However a combination of lack of land availability and a long drawn out setting up process means rising production costs. References: http://www.business-standard.com/india/news/low-demand-supply-constraintsdeepen-crisis-in-steel-sector/465192/ http://steel.gov.in/overview.htm#over5 http://www.wikipedia.org