Global Steel Industry Development Essay Example

in 2001-2002. During the first two decades of planned economic development, i.e. 1950-60 and 1960-70, the average annual growth rate of steel production exceeded 8%.

However, this growth rate could not be maintained in the following decades. During 1970-80, the growth rate in steel production came down to 5.7% per annum and picked up marginally to 6.4% per annum during 198090, which further increased to 6.65% per annum during 1990-2000. Though India started steel production in 1911, steel exports from India began only in 1964.

Exports in the first five years were mainly due to recession in the domestic iron and steel market.Once domestic demand revived, exports declined. India once again started exporting steel only in 1975 touching a figure of 1 million tonnes of pig iron and 1.4 million tonnes of steel in 197677.

Thereafter, exports again declined to pick up only in 1991-92, when the main producers exported 3.87 lakh tonnes, which rose to 2.79 million tonnes in 1995-96 and 3.3 million tonnes in 2001-02.

The growth in the steel sector in the early decades after Independence was mainly in the public sector units set up during this period.The situation has changed dramatically in the decade 1990-2000 with most of the growth originating in the private sector. The share of public sector and private sector in the production of steel during 1990-91 was 46% and 54% respectively, while during 2001-02 the same was 32% and 68% respectively. This change was brought about by deregulation and decontrol of the Indian iron & steel sector in 1991.A number of policy measures have been taken since 1991 for the growth and development of the Indian iron

& steel sector. Some of the important steps are (a) removal of iron & steel industry from the list of industries reserved for the public sector and also exempting it from the provisions of compulsory licensing under the Industries (Development & Regulation) Act, 1951, (b) deregulation of price and distribution of iron & steel, (c) inclusion of iron and steel industry in the list of high priority industries for automatic approval for foreign equity investments up to 51%.

This limit has been since increased up to 100%, (d) lowering of import duty on capital goods and raw materials etc.Growth of the Indian Steel Sector after LiberalizationFinished Carbon SteelThe Indian steel sector was the first core sector to be completely removed from the licensing regime as well as pricing and distribution controls. This was done primarily because of the inherent strengths and capabilities demonstrated by the Indian iron and steel industry. The growth rate in 1995-96 was a phenomenal 20%.

During 1996-97, finished steel production shot up to a record 22.72 million tonnes with a growth rate of 6.2%, while in 1997-98, the finished steel production increased to 23.37 million tonnes, which was 2.

8% more than the production of the preceding year. The growth rate decreased drastically in 1997-98 and 1998-99 being 2.8% and 1.9% respectively.

The growth rate in 2001-2002 was 4.29% with the total production touching 31.63 million tonnes. The production of finished steel during April -December, 2002 has been 23.83 million tonnes, which is 6.3% higher than the production during the corresponding period of 2001-02.

Details of total production of finished carbon steel and the share of main and secondary producers in it from

1991-92 onwards are set out in the following Table:Pig IronAlongwith the production of steel, the production of pig iron in the country has also increased. The details since 199192 are as under:Sponge IronDuring the early 90s, the sponge iron industry had been specially promoted so as to provide an alternative to steel melting scrap, which was increasingly becoming scarce. The production of sponge iron (Direct Reduced Iron DRI) during the period 1991-92 to 2002-03 was as under:As per the International Iron and Steel Institute, India has emerged as the largest producer of sponge iron in the world in 2001. Production of sponge iron in the country as an alternative feed material to steel melting scrap, which was being imported hitherto in large quantities by the Electric Arc Furnace Units and the Induction Furnace Units, has resulted in considerable savings in foreign exchange.Apparent Consumption of SteelApparent consumption of steel is arrived at by subtracting export of steel from the total of domestic production and adding the import of steel in the country. Change in stock is also adjusted in arriving at the consumption figures.

It is also treated as the actual domestic demand of steel in the country. Details of year-wise apparent consumption of finished steel since 1990-91 are given in the table below:The apparent consumption of steel did not show any substantive increase in 20012002 mainly due to slowdown being faced by some of the steel using industries like automobile and engineering industries and construction. With the revival of demand for automobile and engineering goods and general improvement in the economy, it is expected that consumption of steel will increase further.India's per capita crude steel

consumption, as per the latest available figures is 27 Kg, which is far below the level of other developed and developing countries - 472.4 kg., 428.

6 kg. and 128 kg. in USA, EU and China respectively. With the ongoing economic liberalisation resulting in faster economic growth, steel consumption is expected to increase rapidly.

Long Term Demand Availability Projections of Finished SteelIn order to have a long term perspective to facilitate planning, a Sub Group on Steel and Ferro Alloys was constituted for the steel sector under the aegis of the Planning Commission. The Sub-Group deliberated upon all aspects including supply-demand projections for finished steel during the period 2001-02 to 2011-12. Considering a GDP growth rate of 6.5% as realistic during the 10th Plan, the SubGroup has projected the demand of finished carbon steel in the country to rise as follows:Import and Export of Iron and Steel(a) Import of SteelImport in steel sector has been mainly in plates, hot rolled coils, cold rolled coils and semis. Import of steel (carbon, alloy and stainless) during 2002-03 (up to December, 2002) was about 0.72 million tonnes.

Import of steel (carbon, alloy and stainless) during 200102 was about 1.50 million tonnes, which was 17.43% less than imports in 2000-2001. The total import of steel, pig iron and scrap during the last five years and value thereof was as under:(b) Export of SteelThe general policy and procedures for export and import of iron and steel, Ferro alloys and Ferro scrap are at present decided by the Ministry of Commerce in consultation with the Ministry of Steel. In a momentous move to push exports aggressively, Government of India has announced several measures

in the new Five year Exim policy (200207), which is in effect from 1st April 2002.

These include the removal of quantitative restrictions on exports save in respect of a few sensitive items; permission for setting up overseas banking units in Special Economic Zones (SEZ); retention of duty-neutralisation instruments including Duty Entitlement Pass Book (DEPB) and other export promotion schemes. The most important move in the new Exim Policy is the reduction of transaction time for exporters by introduction of a new eight digit commodityClassification in line with imports. Under Advance Licensing, the new policy abolishes Duty Exemption Entitlement Certificate (DEEC) Book, a practice followed since 1975. The policy also withdraws Advance License for annual requirements. Exporters can now avail Advance License for any value.

The Union Ministry of Commerce ; Industry has recently gone in for a hike/ revision in the DEPB rates for steel exporters, covering exports of galvanized products, hot rolled coils and cold rolled coils. For HR coils, the rate has been revised to 15%, while for galvanized plain/galvanized coated and cold rolled, the present rates are at 17% and 18% respectively.DEPB Scheme has been made further attractive by including SAD in DEPB with effect from 1st April, 2002. India's major market for steel and steel items include USA, Canada, Indonesia, Italy, West Asia, Nepal, Taiwan, Thailand, Japan, Sri Lanka and Belgium.

The major steel items of export include HR coils, plates, CR and galvanized products, pipes, stainless steel, wire rods and wires. With the fall in prices along with depressed domestic demand, India has been increasing exports to overcome the excess supply situation. This has resulted in antidumping actions being

taken by developed countries like USA, EU and Canada.The trade action by some countries against Indian steel industry has, to some extent, affected India's exports to these countries.

The Government of India and the Indian steel producers are trying to combat such actions despite such efforts being very expensive and involving time consuming procedures. Details of the quantity and value of steel, pig iron and sponge iron exported from the year 1998-99 are given in the table below:Current Global ScenarioIn the year 2000, the World Crude Steel production was 848 million tonnes, showing an impressive growth of 7.6% over the previous year. The world steel consumption also rose by almost 8%.

The international steel trade constituted around 303 million tons or 40.5% of the production. In 2001 and 2002, world crude steel production was 833.70 million tonnes and 886.70 million tonnes, respectively.The following significant developments have been witnessed recently in the global steel scenario:There has been a spate of mergers and acquisitions all over the world in the steel industry.

This is a relatively new development in the steel industry and is not confined only to companies within the same country but often involved cross border acquisitions and mergers. China has emerged as the most vibrant market for steel production and consumption. The crisis of excess capacity and prevalence of market distorting practices in the global steel market has induced protectionist measures from a number of steel trading countries.To address these issues a series of high level intergovernmental meetings have been held under the auspices of the OECD.

In March 2002, the US President announced imposition of temporary safeguard measures on import of key steel

products into USA. In retaliation in respect to the US action, EU has also imposed provisional safeguard measures against import of certain steel products. China, Canada and Thailand etc. have initiated safeguard investigations against import of steel products into their countries.