India’s Steel Industry Expansion
India’s steel industry is poised for significant growth in the coming years, with plans to add around 23 million tonnes (MT) of crude steel capacity between FY24 and FY27, according to a report by Nomura.
Growth Rate and Capacity
The industry is reflecting a compound annual growth rate (CAGR) of 4.8%. This growth target aligns with the long-term average from FY15 to FY24.
Major Contributors to Expansion
The report highlights that major steel players, including JSW, JSPL, Tata Steel, and ArcelorMittal & Nippon Steel, will account for nearly 87% of the ongoing capacity expansion. Despite this increase, experts believe the Indian steel sector is entering a favorable phase.
Supply-Demand Balance
The report suggests that even with a conservative 6% CAGR in steel demand through FY27, capacity additions may still lag behind demand growth. This could enhance the domestic supply-demand balance and reduce the need for steel companies to rely on exports for volume growth.
Competitive Positioning
Analysts indicate that India’s steel companies are well-positioned in the global metals sector. They benefit from operating at the lower end of the global cost curve due to lower labor costs. India’s iron ore costs remain competitive, even for non-integrated steel producers.
Future Drivers of Growth
The future expansion of India’s steel industry will largely rely on brownfield projects, which involve upgrading existing facilities. Strong domestic demand is another factor that may help reduce reliance on exports.
Recent Performance
Between 2019 and 2023, India’s steel production grew at a 6% CAGR, significantly outpacing China’s 1% growth and the rest of the world’s 1% decline. With these dynamics, Indian steel companies are viewed as some of the best-positioned producers globally, offering substantial growth potential.
Conclusion
“We believe Indian steel majors are among the best-placed producers globally,” the report concluded. (ANI)