Manish Pande, Regional Director CRU in India, addressing a meeting in London, said the main challenges to the growth of the steel industry in India are:

– Acquiring mineral concessions due to long delays in gaining environmental and forest clearance permits;
– Land acquisition is a major bottleneck;
– Need for a clear-cut resettlement and rehabilitation policy for local people;
– Inadequate handling capacity at ports;
– Availability and slow speed of rail transport;
– Poor roads (only 2% are national highways but these carry 40% of freight);
– Low labour productivity (one-third that of China).
– Lack of hard coal for coking.

However, positive factors are the young age of the population, the present low per capita consumption of steel (55kg – viz 277kg in Europe – EU and 188kg in USA) – this offering great potential for growth, the growing degree of urbanisation requiring steel intensive infrastructural projects and an abundance of ore – 14.6bnt haematite and 10.6bnt magnetite based on a rich 56% Fe cut-off threshold.

However, CRU estimate that demand for steel in India will grow at a CAGR of 6.7% to 2016 with consumption then at 100Mt. MoU have been signed to increase output capacity by 276Mt at present but the history of past projects show this to be an aspiration rather than a reality and CRU predict total capacity to be 120Mt by 2015 of which about 33Mt is new capacity installed between 2011 and 2015.

The Government targets for the 12th 5-year plan which commenced 1 April 2012 is a GDP growth of 9% from a 10% annual increase in construction and 9.8% in manufacturing.

Economic development in India slowed to 6% in Q4 2011 from a peak of 9.5% in Q1 2010 which has resulted in a slow-down in steel consumption of -4% in Q4 2011 compared with Q4 2010. However, prices have risen largely due to the falling value of the rupee and increased costs of raw materials, in particular coking coal.