Gloom in Indian Industry as Steel Makers Look for $50 Billion to Add 60 Million Tons in Five Years

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--For the first time since June 2009, India's industrial output went negative, showing a 5.1% decline in October 2011, compared with a growth of 11.3% in October 2010. Capital goods were down 25%, manufacturing was down 6%, and mining was down 7.2%.

The dramatic fall in capital goods production indicates a decline in construction and development projects, which impacts steel consumption and demand. This leads to job losses, a weakening of the currency, higher interest rates, lower prices, and declines in profitability. To date, the federal government has not announced any remedial initiatives. In October 2010, the sector grew 21.1%.

Set against this gloomy scenario, the central working group for the steel sector for the 12th Five Year Plan (2012-17) projects that India's steel production will increase to 149 million tons annually in 2016-17, from 89 million tons in 2011-12. In 2010-11, steel-making capacity stood at an annual 78 million tons.

The group's final report says that about $50 billion of investment in the sector will be required over five years to raise domestic steel output by 60 million tons. The estimated supply of iron ore and coking coal to support the added capacity will increase to 206.2 million tons and 90.2 million tons, respectively, from the current 115 million tons and 43.2 million tons.

Domestic steel demand is expected to increase an annual average of 10.3% to 113.3 million tons in 2016-17, the final year of the 12th Five-Year Plan, from 65.61 million tons in 2011.

The annual steel-making capacities that are expected by the working group are:

• 2012-13: 104.66 million tons
• 2013-14: 119.01 million tons
• 2014-15: 129.39 million tons
• 2015-16: 140.57 million tons
• 2016-17: 149.00 million tons

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