SSS 2020: India steel growth rate to continue rise but 2030 output forecast unlikely - Tata Steel

India will miss its forecast steel targets in 2030, but the sector should continue to grow on increased government spending, Tata Steel chief executive T.V. Narendran said during Fastmarkets Steel Success Strategies 2020 virtual conference on October 26-28

During a Q&A session Narendran was asked to comment on the future of the Indian steel market and production as well as the sustainable growth rate for India over the next decade.

Narendran said that steel consumption growth in India over the last decade has typically been below the GDP growth rate - at 7.08% annual GDP vs 5-6% per year for steel consumption - on growth being consumption lead, rather than investment lead.

Going forward, however, Narendran points to the Indian government spending far more on infrastructure than it has done in the past, even over the last five years. There has been more spending on infrastructure in India than at any time before that and over the next 10 years, the government is expecting and hoping to spend a lot more money on infrastructure, Narendran added.

Narendran said he expects steel consumption growth in India to at least match the GDP growth rate, whereas in a developing country it should be above that at about 1.2-1.3 times the GDP growth rate.

“A fair assumption would be [for the steel consumption growth rate to] at least [match] GDP growth rate at 7-8% growth per year, a minimum given our demographic. I believe India should grow at 10%, but I think even 7-8% growth is something to be happy with,” he said, excluding 2020 and 2021.

Following the Covid-19 pandemic earlier this year, which curtailed steel production as a result of a strict national lockdown, Narendran now thinks the government’s original forecast of 300 million tonnes by 2030 - made in 2015 - would now more likely be in a 200-250 million-tonne range as a result of the slowdown, but added that this was still, “pretty much double [the steel production of] last year.”

Following the pandemic, there was a need to de-risk supply chains and change the supply-chain strategy given that geopolitical forces also accelerated, Narendran said.

“Companies with global supply chains will need to maintain options in multiple geographies with differing risk profiles. The negative sentiment in China of late will result in the supply chain shifting to other economies and Vietnam, India and Bangladesh are countries that can be positioned to positively gain from this shift,” he said.

“Over the next decade, growth in steel demand will be driven by India, the Association of Southeast Asia Nations (ASEAN) and the Middle East and North Africa (MENA) region as well as demand growth slowing in China and the rest of the world,” Narendran said. “Overall, the next decade will have much slower steel demand growth than in the previous two decades. Growth in countries such as India will be more consumption lead, hence, less steel intensive and to that extent a bit slower.”

"[It is] becoming very important for us as an industry to focus on changing customer needs, changing geography and sectors where there is an increasing need to minimize waste and focus on life cycle management,” Narendran said.

India has plenty of good quality iron ore, but the country will always be short of coking coal, which is largely imported from Australia, in addition to being short of scrap metal for a long time, Narendran said.

The country aims to reduce its reliance on imports and establish an organized sector of recycling centers that process steel scrap, Fastmarkets understands. Earlier this year, for example, Tata Steel commissioned what it said was the country’s first scrap recycling plant as part of a long-term strategy to develop a self-reliant Indian steel industry.

Sign up here for Fastmarkets’ free webinar on November 4, 2020, beginning at 9am GMT: European flat steel market - on the mend after the Covid-19 fallout?

- Overview of EU flat steel price developments in 2020 so far
- Suppliers’ response to the drop in demand
- Fortress Europe? Toughening of trade defense measures
- The survival of European steelmakers facing high raw material costs
- Demand contraction and a slow path to recovery
- Near-term price outlook.

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