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Why does India boost steel production

Author:管理员Clicks:2549 Time:2015-06-11

Tomar, Minister of India Federal Steel and Mining, recently indicated that India will invest 2.94 trillion rupees (about $46 billion) in the next decade to boost India's annual steel capacity from 90 million tonnes to 300 million tonnes, a huge leap forward. The new capacity will be achieved by upgrading old factories, improving technological levels, adding new capacities, and launching mergers & acquisitions. Why does India begin to make such a big leap in producing steel.

First of all, to boost "Made in India". As India's "National Manufacturing Plan" comes out, government will attach importance to industries which are closely related to steel, such as manufacturing, auto, railway and mining industries. Data showed India's current average consumption of steel is less than 60 kg, much lower than the world average of200 kg, and lagging behind major economies by a huge gap. Obviously, there is a great room for India's steel consumption to increase. Also, the development of India's real economy needs the support of a well-developed steel industry.

Secondly, it is to overcome the bottleneck of infrastructure construction. Over 60% of the Indians live in the rural area with outdated infrastructure. Now as the government boosts construction of roads and bridges, low-renting houses, industrial parks, and so on, all the projects need rebar as their backbones. Meanwhile, India is now dedicated to becoming a big exporting country, which will also highly increase the demand for steel. As for India, now is a good timing for it to boost steel capacity.

In addition, boosting steel capacity is also to reduce unemployment. India has a serious problem of employment as it has a large population. India's iron and steel industries are labor-intensive for the nation’s low degree of automation in ore mining, smelting and processing. Since the whole industrial chain needs so much labor force, boosting the steel industry will surely be a good way to add more jobs.

Actually, it’s proper to develop the steel industry in India, as it has rich iron ore resources. Official data show that India's iron ore reserve registers 25 billion tonnes, most premium high-degree ores (two third Haematite with Fe content above 58%, and also magnetite with Fe content between 30%-40%). So, India has large amount of domestic iron ore as the basis of boosting steel industry.

But there are still some disadvantages, such as coal, holding back India's steel industry development. Although India is rich in coal resource, the coking coal and coke suitable for steel making are in extremely short supply. Huge dependence on importing coal becomes a bottleneck that confines India's steel industry. Meanwhile, the investors also face certain practical problems such as high financing costs, strict labor law and inadequate infrastructure. Especially the inadequate railways and ports fail to meet the needs of steel industry's rapid development.

Experts believe India's efforts in boosting steel capacity brings new opportunities to the cooperation between India and China. With advantages in steel industry, China can export steel products in a large volume thanks to the modern equipment, leading techniques and lower costs.

In India, although there are famous steelmakers, including Tata Group and Essar Steel, the steel industry is relatively low and the cost remains too high. Data show the cost of producing 1 tonne of rebar for in India is "15000 rupees" higher than that in China. Consequently, it's easy to see the opportunities when you find the cost gap of $240 per tonne between India and China.