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An Overview of Indian Steel Industry and Its Impact on Construction Sector

Chapter · January 2021

DOI: 10.1007/978-981-15-8293-6_17

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An Overview of Indian Steel Industry
and Its Impact on Construction Sector

James Mattom, P. Herrick, and Vinay Mohan Agrawal

Abstract In the construction industry, steel is a prime and a rapidly growing sector
in our country. India has leapfrogged its position from fourth to the second largest
producer in steel sector outdistancing Japan and are using all the state-of-the-art
technology for the production. Still the demand of steel tends to increase every
year and helps in the overall economic growth in the long term. Industries like
automobiles, consumer durables, infrastructure, production and so on are some of the
major consumers of the steel sector, among which the construction and infrastructure
industry has the maximum utilization of 63% from its total production. There has
been observance of exponential increase in demand of steel sector since 1874, when
the first steel production began for which new industrial policy is considered to be
one of the important catalysts. In the present scenario, the government spends huge
amount of funds for the steel and it predicts that the total production of steel is
supposed to increase up to 300MT by the financial year 2030–2031 [1]. All the new
projects initiated by the government like smart city and other infrastructures could
benefit the escalating demand of steel sector in India. The usage of goods that are
locally produced would indirectly help in increasing the national revenue and GDP.
But there are a lot of problems like uncertainty in the supply of raw materials due to
environmental issues and lack of metallurgy engineers. The government is promoting
local production of steel by levying a heavy tax of 30% for export of the iron ore.
Ministry of Steel (MOS) is also under the purview of establishing SRTMI (Steel
Driven and Technology Mission of India), which is a pubic–private partnership and
had been allotted Rs. 200 crores for the research and development purpose. It is
affirmed that steel sector of China is currently the largest steel producer in recession,

Reviewers Comment: This non-technical article is important for all civil engineers. This article
well balances the economic growth with steel industry and thus adds another dimension to civil
engineers to think beyond regular design and construction.

J. Mattom (B) · P. Herrick · V. M. Agrawal

National Institute of Construction Management and Research, Goa Campus, Ponda, India
e-mail: jamestom895@gmail.com
V. M. Agrawal
e-mail: vagrawal@nicmar.ac.in

© Springer Nature Singapore Pte Ltd. 2021 197

B. B. Das et al. (eds.), Recent Trends in Civil Engineering, Lecture Notes
in Civil Engineering 105, https://doi.org/10.1007/978-981-15-8293-6_17
198 J. Mattom et al.

while the country’s steel sector is at a steady growth which would help India as a
nation to take a bigger leap, and thus incorporating a sustainable growth in the future.

Keywords Steel industry · Construction sector · Indian economy · GDP

1 Introduction

Among all the major manufacturing industries, steel sector is proved to be the back-
bone for nation’s stable economic growth and it plays an important role in boosting
most of the developing and under-developing countries (G20). As per the reports of
Steel Users Federation of India (SUFI), one of the major achievements is that our
country India has surpassed Japan to achieve the feat of being the globe’s second
largest producer of steel after China having grabbed a biggest milestone for than
50% of the total production worldwide.
In the current stage, the Indian steel industry has better technology and has been
always on-looking for continuous upgradation and renovation of archaic plants in
such a way that greater energy efficiency levels can be reached. The Indian steel
industry is currently operating at 77% capacity utilization with major producers
exhibiting capacity utilization of 100%, while small and medium enterprises (SME)
producers’ capacity utilization is at slightly lower level [2].
Most of the resources which are being un-utilized cater to the demand of many
products (TMT, wire rods and structural steel), providing a major demand in the
infrastructure building section. On the other hand, with respect to the growth of
manufacturing and other processing industries machinery and equipment would be in
demand of flat steel products. The stable growth in sectors like architecture, building
and construction (ABC) and auto, railway and transport (ART) segments would
enhance the need for special and value-added steel that must be made available at
indigenously competitive prices which would prove to be one of the key factors to
sustain in the mindset of domestic players as shown in Fig. 1.

Fig. 1 Rhetoric comparison

of steel’s production versus 120
consumption from 2015 to
2018 100

80

60

40

20

0
2015-2016 2016-2017 2017-2018
Producon Consumpon
An Overview of Indian Steel Industry and Its Impact … 199

3%
3% Construcon and
9% Infrastructure

Engineering and
Fabricaon
22% Automove
63%
Other transport

Packaging and
others

Fig. 2 Percentage proportion of steel in different sectors

In the fiscal year 2018–2019, India’s steel production is sustained to remain higher
as compared to the growth which is seen due to domestic demand from industries
such as automobile, infrastructure and other user-oriented industries.
Figure 2 shows the usage of steel by major sectors in India and it can be seen
that the construction and infra sector depicts the highest demand driver of steel,
accounting a share of 63% during the fiscal year 2017–2018, then the engineering
and fabrication sector of 22.1% of the total finished steel consumed in an year.
Thereafter, the automotive sector is the third large steel consumer of 10.1%, and
other transport and packaging sector of 2.9%.

2 Literature Review

As per many researchers and industry experts, the steel industry is considered to be
the archaic and most prime industry. It is considered as the backbone of our country’s
economy. Through past records there is a valid proof that the steel manufactured in
India in the late 1810s were of much superior in quality to British steel. After India’s
independence in 1947, a total capacity of 25 lakhs tons was achieved by three major
steel companies [3].
In order to achieve an industrial growth in general and also in adherence with
the steel industry, the economic reforms commenced by the government since 1991
200 J. Mattom et al.

have added an entirely new definition. This led to oversee, specifically for the steel
industry which has been removed from the knowledge of other industries reserved
for public sector. Since January 1992, in order to get a long-term vision to make the
steel industry more competitive and efficient, certain prices and distribution controls
have been eradicated and also relaxation has been observed in an automatic approval
of foreign equity investment up to 100% allowed by the Government of India. In the
region of both imports and exports, restrictions of external trade have been removed,
which gradually led to lower import duty rates. Certain other benefits which have
profited the Indian steel industry for a fixed period of time are: allowance to relocate
resources from foreign financial markets, convertibility of rupees on trade account
and rationalization of current structure of tax [4].
Amidst India replacing Japan as the second largest steel producer, China has
profoundly grabbed a share of 51% crude steel production. The global steel body in
its latest report noted that China’s crude steel output increased in an order as follows:
1. 928.3 MT (million tons) in 2018 from 870.9 MT in 2017 (a rise of 6%).
2. China’s share increased in an order to 51.3% in 2018 from 50.3% in 2017.
3. India’s crude steel production in 2018 stood at 106.5 MT (rose by 4.9%) from
101.5 MT in 2017.
4. Japan produced 104.3 MT in 2018 (down by 0.3%) from 104.33 MT in 2017 [5].
The demand of steel in China is expected to escalate from 600 MT (in the year
2010) to a peak of 753 MT (until the year 2025), and then gradually decrease to
510 MT in 2050. While the construction industry in the steel sector will gain the
highest total share, it will eventually portray a decrease in demand in the future. In
the automobile manufacturing, the demand will increase rapidly before 2035 and its
share will increase from 6.0% in 2010 to 19.0% in 2050. Over the last few decades,
the steel industry in China has geometrically increased at an astonishing rate, which
eventually lead to rise in economic development. Amidst this growth, there are many
un-toward problems such as excessive environmental pollution and increasing energy
consumption [3].
Way back in the year 2008, the steel industry has acquired a massive over-capacity
due to a universal slowdown and because of that its demand gradually decreased in
major developed countries, like USA, Europe and Japan, and in developing countries,
like China, India, Africa and so on. At the current stage, India is climbing up the
ladder efficiently to overcome the same in view of steel production. Import of surplus
steel from the neighbouring countries in the Indian market would create problems
such as reduced profits leading to no jobs, lower prices of the finished products and
even to an extent of bankruptcies of domestic firms [3].

3 Growth and Evolution

The first blast furnace in India was constructed at Kulti in the year 1870 and the
production of steel in this furnace began in the year 1874. Later, TATA started its
steel production TISCO in the year 1907. Later, several different steel production
An Overview of Indian Steel Industry and Its Impact … 201

Table 1 Important steel

TISCO 1907
manufacturing industries and
their year of inundation IISCO 1918
MISC 1923
SCB 1939
Hindustan Steel Ltd. 1954
Bokaro Steel Plant 1964

started in the preceding years. Table 1 shows important steel producing industries
and their year of establishments; these industries laid the foundation for the present
achievements in the steel sector.
Government of India has formed a New Industrial Policy in 1948 according to
which the new ventures relating to steel industries was established by Government
of India and already existing units were allowed to be managed and developed by
private sector. Until 1990, the liberalization reforms of the steel industry were under
the government and was completely controlled by the government. For the price regu-
lation and setting up of additional plants, it was mandatory to get approval from the
government authorities [6]. In the year 1993, government planned to partially priva-
tize SAIL and also government agreed to the following major aspects in accordance
with steel industry:
• Allow foreign players to enter
• Giving license to all the players who are interested to enter
• Permission for the export of iron ore.
After the privatization of steel industry, there has been a lot of developments in
the production of steel.

4 Steel Production and Its Type

Steel in India is manufactured by two routes: oxygen route and electric route, as
shown in Fig. 3. In oxygen route method of steel production, the metal is melted
to the desired temperature and then the oxygen is blown into it. Generally, a blast
furnace is used for this purpose. Almost 44% of the steel production in the country
uses the blast furnace. Generally, the impurities come and float at the top layer and
are to be manually removed. Electric route is a method in which the metal is generally
melted with the help of electric power. This method generally contributes to about
56% [2] of the production of steel in the country. In the electric route the production
is done by two different furnaces: electric arc furnace and induction furnace.
Electric arc furnace is one of the types of electric route. It is generally considered
to be the most efficient way for the production of steel. This method contributes to the
production of steel of about 22% [2]. This method is considered to be eco-friendly
since it emits a very little quantity of CO2 . When compared to the oxygen route,
202 J. Mattom et al.

Steel
Producon

Electric Route Oxygen Route

(56%) (44%)

Electric Arc Inducon

Blast Furnace
Furnace Furnace
(44%)
(22%) (34%)

Fig. 3 Types of steel production

the total energy required to produce the steel is about 400–500 kWh/ton. Another
advantage of electric arc furnace is that scrap metal can be used for the production
of steel in this method which utilizes waste efficiently.
Induction furnace is another type of electric route. This method of production
generally contributes to about 34% [2] of the total steel that is produced. It can
produce steel from both scrap and direct-reduced iron (DRI). In India the availability
of scrap metal is very less but there is a huge abundance of available coal as a natural
resource. The availability of coal in abundance could help in the production of DRI
at a very low cost. This type of DRI is called as coal-based DRI and is used in the
electric route in the process of melting and helps in the production of steel at a very
low cost. In India the availability of the scrap metal is very less but there is a huge
abundance in the availability of the coal as a natural resource.
In the total production, almost 63% is used in the infrastructure sector which
includes both structural steel and reinforcement bars. Reinforcement bars or
reinforcing steel are of two types: mild steel bars and deformed steel bars.
The government expects the demand for steel to be in a constant state of increment
and to be raised to the level of 230 MT by the FY30-31. In the present condition the
infrastructure is holding almost 9% of the total steel that are produced, and the sector
seems to be increasing at a constant rate. At this rate it is expected to reach 11% by
the FY25-26.
During the twelfth 5-year plan, the government expected the investment to be Rs.
55.74 lakh crores and then later revised to Rs. 37.24 lakh crores for the infrastructure
development in the country [7]. It is expected that the government would increase
the funds for country’s infrastructure development in years to come.
Government of India is planning to create a number of smart cities, and initially
government has released about Rs. 9940 crores to the states for the smart city up to 31
An Overview of Indian Steel Industry and Its Impact … 203

March 2018 [8] and it is expected that about 2.04 lakh crores is to be allotted for the
development of about 99 smart cities as Finance Minister informed the Parliament.
This smart city project will need a huge construction which will increase the demand
of steel.
The total steel demand per person in the finance year 2016–2017 is about
9.89 kg/person and it is expected to increase by the end of FY21-22 to 12–
14 kg/person. This is mainly due to the different policies and schemes that are made by
both the central and the state government like Indra Awaas Yojana, Pradhan Mandhiri
Gram Sabha Yojana and Housing for all. These schemes will demand construction
activity and will increase in per capita consumption of steel.
In the financial year 2017–2018, the traffic at the airport was around 308.75 million
in all the 94 airports throughout the country that are operational for the public use.
So the government has planned to create and develop airports in the tier-2 cities
to reduce the traffic density. During the financial year 2014–2015 the government
proposed for the construction of 16 different sea ports throughout the country. All
these infrastructure projects will boost the steel demand in India.
From the Fig. 4 (Steel production growth rate in India) and Fig. 5 (Annual growth
rate of steel vs. GDP growth rate), it is evident that during the FY2013 to FY2018
there is a huge variation noted down in the year 2016 because of demonetization
which had a mirror effect in the FY2017 and showed the GDP growth declining
from 7.11 to 6.68% and also internally there is an astonishing decline in the steel
sector showing a negative value of −1.30% in the year 2016 and eventually escalating
to 5.6% in FY2017 [9].
It can be inferred that any variation in the objectives of macro-economic variables
would have an internal effect in the instruments such as monetary policy. But between
the FY2017 and FY2018 we can observe that the annual growth rate of steel is
increasing gradually from 5.6 to 6.7% and also the GDP growth rate has increased
from 6.68 to 7.3% [10]. By the year 2020 the expected REAL gross domestic product
would be figured to 7.75% and four years down the line from 2018 to 2022 the GDP

10000

8000

6000

4000

2000

Fig. 4 Production of steel during Sep. 2017 to August 2018

204 J. Mattom et al.

0.10%

0.08%

0.06%

0.04%

0.02%

0.00%
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
-0.02%
Annual Growth Rate of Steel GDP Growth Rate

Fig. 5 Annual growth rate of steel versus GDP growth rate

growth rate of India would be 7.73% as per the reports. The future proposed increase
in GDP would alternatively boost the Indian steel sector market scenario and would
also show less variations in the business cycles [11].

5 Current Scenario and Initiatives by Government

The Indian steel industry tussle with variations leading to uncertainties pertaining to
its availability and consistent supply of raw materials, that is, both coal and iron ore
still remains a challenge in Western Ghat places like Goa’s early mines stoppage: An
add-on hassle in the industry. Since the markets shifted its domain from an allocation
process to an auction process in order to achieve the mining blocks, it has brought
about considerable transparency such as issues related to transport logistics from the
mine areas which needs to be differentiated to mitigate lag in evacuation of coal, iron
ore and other minerals.
The Indian steel industry has acquired all the required expertise to produce steel at
a minimal cost but indeed, the infrastructure is a daunting sector and until it reaches
to a saturation point, it will not act as catalyst in order for India to remain as the major
steel producer. Another major hurdle is that land acquisition (confidentially Indian
steel industry being about 100 years old) has a wide gap in research, development
and innovation [12].
According to Joint Plant Committee, the country’s production w.r.t steel sector was
8.22 MT in the FY2017, which escalated to 4.4% rise, leading to the production of
8.59 MT during April 2018. Well-known players like SAIL, RINL, JINDAL STEEL
and so on, all combinedly produced 5.01 MT during April 2018 as compared to 4.7
An Overview of Indian Steel Industry and Its Impact … 205

MT produced in FY2017. The rest 3.57 MT came from other small players thriving
in this industry, portraying a growth of 1.4% over FY April 2017.
During April 2018, the hot metal’s output was at 5.8 MT as compared to 5.38 MT
in 2017. While 4.38 MT was produced by the major stakes in the sector, the rest 0.96
MT resulted from other big players. Pig iron’s output rose from 0.78 MT in FY2017
to 0.8 MT FY2018 (a 1.9% rise). Our country’s steel resultant rose to 8.43 MT in
Feb 2018 against 8.29 MT as in Feb 2017 [13].
The recent government initiatives in this sector are:
• To ensure the required supply of domestic steel industry, an export duty of 30%
has been levied on iron ore.
• Upcoming road and infra projects are considered to be a back-end measure in
order to escalate the increasing demand for steel products.
• To have a higher growth rate in the demand of steel, the upgradation of rural
economy and its domain in infrastructure proves to be the best approach.
• In order to promote R&D activities in ferrous and steel industry, Ministry of Steel,
Govt. of India has put an initial amount of Rs.200 crores in accordance with Steel
Driven and Technology Mission of India, combining both private and public sector
companies [2].

6 Analysis of Indian Steel Industry

• In the long term, steel sector incorporates the overall economic growth of other
major industries whose fortune is directly proportional to the growth of these
industries.
• The steel sector indirectly alleviates the overall economy over 2% to the gross
domestic product of the nation and helps in providing 20 lakh employment
opportunities [14].
• Our country has suffered from prodigious in-flow of imports of steel from other
Asian countries like South Korea, Japan and China. South Korea and Japan had a
benefit due to India’s free-trade agreement [15].
• In order to maintain an equilibrium between imports and domestic demand, there
is an observance of aligning of steel prices to global export prices. It poses a major
risk in improving the demand for Europe and other Asian countries if there is an
increase in resultant growth in exports [16].

7 Conclusions

From the above discussions it can be concluded that the Indian steel industry has all
the capabilities in meeting the escalating demand of other important industries.
It runs through the blast furnace process with high consolidation. Due to the
difference in the ratio of hot metal to that of crude steel productions, it can be
 206 J. Mattom et al.

analysed that the secondary steel producers (non-ISP) are using scrap route to meet
the difference created by integrated steel producers (ISP) which could only produce
about 60% of the total demand.
With the initiative of the government requiring major infrastructure developments,
the demand of steel is increasing rapidly. These initiatives will create a good number
of job opportunities to the young population of our country which will definitely
help in improving the GDP of the nation.

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