Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

High input costs and unavailability of coking coal are the major challenges faced by India’s steel industry, according to SAIL chairman A K Chaudhary. India’s input cost of $450/mt is $100/mt higher than China’s and the government is taking steps to ease the production cost challenges in the steel sector. 


India needs to be globally competitive and increase its exports of steel and manufactured items, said SAIL chairman A K Chaudhary at a session arranged by FICCI on Saturday. 


The production cost of steel is higher, with multiple taxes contributing to its rise. Other factors driving the cost of production upward include around 20pc royalty on input materials like coal or iron ore, and higher freight cost than other countries. 


The country is dependent on import of coking coal, particularly imports from Australia, Indonesia, the US, and over 300 mining leases for coal and iron-ore are slated to expire on Mar 31, 2020. The steel industry is likely to face disruption after the expiry, according to SAIL’s chairman. 


Mines will be allotted through fresh auctions post expiry as per the amended Mines and Minerals (Development and Regulation) Act. It could affect supply of iron ore to the steel industry according to the Federation of Indian Mineral Industries (FIMI).


The country has 48 operative mines, 24 in Odisha, six each in Jharkhand and Karnataka, five in Gujarat, three in Andhra Pradesh, two in Rajasthan, and one mine each in Himachal Pradesh and Madhya Pradesh, according the Federation of Indian Mineral Industries (FIMI) data. The remaining are non-operative mines. 


Capacity addition

The Indian government has also launched initiatives which will ramp up the steel production capacity. SAIL’s Bhilai Steel Plant (BSP) underwent modernisation and expansion in 2019, raising its annual capacity by 3mn mt to 7mn mt, at an investment of Rs17,000cr. The enhanced capacity is likely to commence by 2024-25. 


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