India needs to focus on improving logistics for steel sector, which is costly and managing it is quite challenging for most of the steel producers in the country, said secretary general of Indian Steel Association (ISA), Bhaskar Chatterjee, during the Indian Steel Markets Conference 2021 organized by Mjunction.
Indian steel production and consumption is expected to increase now that the government has announced many initiatives, but the transportation of raw material like iron ore, coal, and that of finished steel, needs to be looked at, he noted.
Chatterjee said, “The freight cost from Jamshedpur to Mumbai can be as high as $50/mt in comparison $34/mt from Rotterdam to Mumbai”, highlighting the transportation anomalies within the country.
For every 1mt of steel produced, around 3mt of raw material needs to be transported. So, even as India doubles its steel production in the next 10 years, the logistic requirement of the domestic steel industry will become virtually unmanageable unless steps are taken to improve the physical infrastructure, especially by the Indian Railways, Chatterjee explained.
The government has set a target to increase India’s total installed steel capacity to 300mn mt by 2030. Moreover, most Indian steel plants are located inland unlike in China, Japan or South Korea where they are located closer to the ports.
“This system makes the logistic requirement more taxing, even though railways are the preferred mode for steel and meet more than 80 pc of the total logistical requirement of the steel industry,” he said.
There are a number of infrastructure constraints in the railways logistical ecosystem which adds to the logistical woes of Indian steel makers, Chatterjee added.
According to ISA’s outlook for the steel sector, the industry has, to a large extent, negotiated the headwinds caused by the COVID-19 pandemic, and steel demand is poised to log a compound annual growth rate (CAGR) of around 7-7.5pc between the fiscals 2021-22 and 2024-25.