Consumer Behavior on

Indian iron and steel industry

TO: NAVEEN
BY: PADMA KHANAL
Roll No: 15/ICS/034
 Overview
 At global level in 2018, the world crude steel production reached 1789 million tonnes
(mt) and showed a growth of 4.94% over 2017.
 China remained world’s largest crude steel producer in 2018 (928 mt)
followed by India (106 mt), Japan (104 mt) and the USA (87 mt).
 Per capita finished steel consumption in 2017 is placed at 212 kg for world and 523
kg for China and for India it was 69 kg as published by World Steel Association.
 India is the largest producer of sponge iron in the world and the 3rd largest
finished steel consumer in the world after China & USA.
 The Government has taken various steps to boost the sector including the introduction
of National Steel Policy 2017 and allowing 100 per cent Foreign Direct
Investment (FDI) in the steel sector under the automatic route.
 The growth in the Indian steel sector has been driven by domestic availability of raw
materials such as iron ore and cost-effective labour. Consequently, the steel sector has
been a major contributor to India’s manufacturing output.
 Demand – Availability

Demand and availability of iron and steel in the country are largely determined by
market forces and gaps in demand-availability are met mostly through imports.

Interface with consumers exists by way of meeting of the Steel Consumers’ Council,
which is conducted on regular basis.

 Interface helps in redressing availability problems, complaints related to quality

India is the seventh largest steel producer in the world, producing about 45 million
metric tons of finished carbon steel.
 Its domestic consumption stood at over 40 million tons in 2005-06, holding sixth
position in the world. Indian steel exports are mainly to the USA, EU and South East and
East Asia.
 Indian steel production has been growing for the past 15 years at a rate of 7% per
annum and is projected to grow at a faster pace. India exported over 5 million tons of steel
and imported nearly the same amount.
 Demographic changes
 In the meantime, various demographic changes are taking place in
India.
 Rural population in India in 1991 is thrice that in 1901, while urban
population in 1991 is nine times that in 1901. About 400 million Indians
comprise the working population in 2001 as against 314 million in 1991.
 At the same time, number of enterprises and employment have grown
more rapidly in rural areas.
 India has the highest youth population (Aged 15-35 years) in the
world. People aged between 15 and 59, who have the potential to
contribute to the economic activity, comprise around 60% of Indian
population and this is likely to increase in future.
 Further, the middle and higher income-classes have been expanding
in India in the recent years and are expected to retain the momentum,
thanks to increased economic activities in the country.
 Urban Population

 The number of people living in urban areas has risen to

27.8% in 2001 from 25.7% in 1991.
 Urban population in India is 285 Million, which is close to the US’ total population of
300 Million people. Further, the urban sector contributes 50-60% to GDP of India.
 Moreover, number of towns and cities in India has increased from 3891 in 1981 to 4378
in 2001.
 Number of migrants from rural to urban India has grown from 229 million in 1991 to
307 million in 2001. Of course, things have moved further along this direction over the
past decade till now
 All these trends point towards the fact that the country is at the threshold of a huge
urbanization and consumption spree.
 This may lead to massive surge in steel demand along with urban construction and
associated change in the lifestyle of the population.
 Facing such a steel demand surge, India has a recoverable reserve of 13460 million tons
of iron-ore.
 However, reduced iron ore exports from India have grown a lot, despite fluctuations
over

years, necessitating a huge import of pig iron.

 On the other hand, iron-ore mining leases might not be given to the new steel capacities
in many Indian states.
 Further, tribal people need to relocated for the expansion of mining activities in the
Eastern states.
 All these socio-economic and demographic aspects affect both supply and demand of
Indian steel industry.
 This needs to be scrutinized further by both the industry and the government for any
policy or strategic decision.
 Problems of Iron and Steel Industry
 Poor demand, price slump, competition from cheaper imports and delays in project
execution are major problems in Indian steel industry.
 Inadequate supply of power and coal, Inefficiency of public sector units and under-
utilisation of capacity are other challenging issues.
 Indian banks are grappling with bad loans (NPA) and at the same time the industry which
has a long gestation period, needed huge investment.
 Raw material and infrastructure bottlenecks issues are also there. Obsolete
technology in PSUs led to inferior quality products.
 Under-utilization of labour due to frequent strikes, lockout, inefficient management (slow
land acquisition, environment clearances etc.) factors facilitate dumping in the market
decreasing the global prices hitting the domestic producers and their exports.
 Global glut and a surge in cheap imports from China, Russia, Korea and Japan have
dented the domestic industry’s fortunes.
 Suggestions
 The iron and steel industry needed a comprehensive planning for modernisation, up-
gradation of technologies, replacement of obsolete equipment and removal of technological
imbalances.
 Presently, the government is trying to support the industry through the RBI’s strategic debt
restructuring scheme. But it needs long-term finance, such as, pension funds, savings etc.
which can withstand cyclical volatility of profits unlike funding from banks or capital markets.
 Anti dumping duties on cheap import to protect domestic producers.
 More focus on infrastructure and automobile industry to increase domestic demand and job
creation to counter-balance global slowdown.
 Servicing of bad loans by government to provide capital and reviewing the credibility before
dispatching the loans.
 Increased foreign investment.
 More emphasis on Green Climate Fund to procure environment friendly technology.
 Decrease iron ore exports to ensure raw material supply.