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Dubai: India will ramp up steel production to feed global demand and fill supply gaps created by the Russia-Ukraine situation, according to a senior minister in the Indian government.
Steel and other metal prices have zoomed since the conflict erupted. Russia is one of the biggest producers of steel, aluminium and nickel, and supply disruptions due to economic sanctions caused prices of these commodities to surge.
Russia and Ukraine produce about 6 million tonnes of steel a month, which amounts to 4 per cent of total demand in the world. “We [India] are planning to further ramp up our production,” said Ramchandra Prasad Singh, the Minister for Steel. “We stand a chance and we have the potential to fill that gap and for that, we are ready to ramp up production of minerals. We will plan accordingly.”
When asked if the government will intervene to stabilise prices, the minister said “Steel is one of the deeply rooted sectors in our country, for which prices depend on demand and supply. Once you [set] a reform agenda, you cannot go back. We need to take a holistic approach to protect the small scale industries.”
Higher raw material costs
The cessation of supplies from Russia and Ukraine is a “huge loss in terms of supply chain and that has created a vacuum in the MENA region and the European countries,” said V.R. Sharma, Co-Chair at the FICCI Steel Committee and Managing Director of Jindal Steel and Power. “This shortage has jacked up the oil and energy prices.”
The input cost of steel has gone up by $100 a ton, which has destabilised the industry. Today, steel prices have reached about $1,200 a tonne plus in Europe, and in the Middle East, it is hovering around at about $1,050-$1,100.
“We are now focusing on improving our efficiency,” said Anirban Dasgupta, Director-in-charge at the manufacturer SAIL. “Coking coal prices are the main reasons for surging steel prices.
“Coking coal which in April 2021 used to be around $150 a tonne has now gone to as high as $650 a tonne, and you need 900 kilograms of coking coal per tonne of steel. What we are trying to do is to improve our efficiencies at the steel plants to improve our indigenous coal consumption.”
The government is encouraging the steel industry to increase production by offering relief for the import of coking coal without any import duty. “Government is also regularly talking to the steel industry to enhance production to meet the domestic demand and export to the rest of the world,” said Sharma.
By 2030 we are targeting to produce 300 million tonnes of steel and we are further targeting 500 million tonnes by 2047
The Indian government is currently working with the US, New Zealand and South Africa to import coking coal. “The government and Reserve Bank of India will find a way to deal with Russia through rupee-rouble trade,” said Sharma. “If this happens, then the supplies from Russia will be streamlined despite sanctions imposed by many countries.”
“This will be giving impetus for production capacity in India and also bring investment and employment opportunities in both the countries. This will go a very long way in improving our economic ties further.”