By Kunal Bose
The country was no short of doubters when the 2017 national steel policy set a capacity target of 300m tonnes of crude steel by 2030-31. Considering that capacity found in 2016-17 was 126m tonnes, the challenge for the industry, a combination of public and private producers, was to build fresh capacity of 174m tonnes through brownfield and greenfield routes in a span of 14 years. Now only a few years away from the target date, Indian steel capacity stands at 220m tonnes with quite a few expansion programmes making rapid progress to completion and therefore, the 300m tonne target looks realisable.
In the process, India’s per capita steel use has risen from the very low of 61 kg in the base year 2016-17 to 116 kg now with the 2030-31 target remaining 160 kg. The targeted 2030-31 steel use here stands in poor comparison with the global average of 209 kg. The comparison will look even poorer pitched against China’s nearly 602 kg and South Korea’s close to 925 kg. Mercifully, the recently released draft steel policy up to 2047, circulated among stakeholders to elicit comments and suggestions, provides for per capita steel consumption of 302 kg mounted on a capacity buildup of 604m tonnes and finished steel demand of 505m tonnes. Whatever that is, India is already the world’s second largest producer of steel, a distant second though, next to China.
Whether it is steel, aluminium or copper, Beijing saw it early that if China were to emerge as a robust production hub for the world market, then among other things, it must have a thriving metals sector. And this has to be ensured irrespective of the local availability of quality feedstocks such as iron ore, bauxite and copper ore. Mind you, though overly dependent on imports of iron ore, bauxite and copper concentrate, China produces the three concerned metals in volumes that is half or more than half of the total global production. Take steel for instance. Following aggressive capacity shedding and industry consolidation by way of mergers, China’s steel capacity ranges from 1.25bn tonnes to 1.35bn tonnes.
But due to the lingering crisis in the housebuilding sector and economic growth sputtering over the last several years, China’s steel production last year for the first time since 2018 slid below 1bn tonnes to 960.8m tonnes. Furthermore, falling domestic demand was the reason China had to export 119m tonnes last year and 110m tonnes in 2024, much to the discomfiture of steelmakers of importing countries. In many instances, the bruised steelmakers have been able to prevail upon their governments to give them protection from such predatory imports.
Chinese export aggression and the reactions it set off in the form of raising trade barriers by affected countries, particularly the US, however, did not do good to free trade. President Donald Trump was unabashed in using the occasion to offer uncommonly high levels of protection to the local steel industry found to be cost uncompetitive. Highly unfair to the rest of the world, including India Trump tariff measures led to sharp drop in steel imports by the US last year leading to some improvement in capacity use of domestic industry and one big promise of investment of $15bn at a greenfield site by Essar promoted Mesabi Metallics.
POTUS remains on a trip to make America great again, not least by inflicting pains on countries across the continents from Cuba to China. But as the common person in the US is realising to her cost not least in the form of high retail inflation in gas to grocery prices, Trump adventures, including engaging the country in a war with Iran continue to backfire. In contrast, Chinese President XI Jinping’s belt and road initiative (BRI) is to strike friendship with a large number of countries by promising infrastructure development and economic cooperation and extending credit on easy terms.
Behind the apparent Chinese benevolence lies the strategic consideration of striking friendships with countries across the continents, specially the ones owning considerable but unexplored natural resources. That is why Beijing has stayed focussed on Africa, before any other country, including the US thought of spreading its influence in that continent. The Chinese wanderlust for minerals preceded the launch of BRI by many years. While Beijing introduced BRI in 2013 with great fanfare, the country’s maiden acquisition of a mineral resource company Hierro Peru by Shougang Group happened in 1992.
The two principal considerations for China to secure equity stake in overseas iron ore groups are: First, a sure way of reining in the three major miners, namely, BHP, Rio Tinto and Vale of Brazil who till a few years ago had a vice like grip on iron ore prices is to diversify the sources of supply; second, the locally available iron ore being of inferior grades, China will remain majorly dependent on imports for the principal material of steelmaking through BF-BOF route. For instance, during 2025, in spite of a fall in steel production, Chinese imports of ore were up 1.8% year-on-year to 1.26bn tonnes.
That amounted to approximately 80% of Chinese steel industry’s ore requirement. From equity participation linked to right to equivalent share in production to straight ownership of resources abroad to strategic alliances for sustainable procurement of ore, China has used multiple ways to ensure raw materials supply security. What has helped China in accessing offshore iron ore assets is its funding and also building rail, road and port infrastructure linked to opening of new mines. This strategy helped the country to become one of the major promoters of exceptionally high fe (iron) bearing iron ore mine Simandou in Guinea. Once Simandou becomes fully operational, it will be among the largest iron ore mines in the world. Last year, Simandou exports amounted to 20m tonnes, with almost everything going to China.
As our own draft steel policy says, India’s iron ore demand will rise to 772m tonnes in 2047 from 299m tonnes in 2025 and the expected requirement of 367m tonnes in 2030. The target is not unattainable since India sits on resources (hematite and magnetite combined) of 28.52bn tonnes, of which reserves are an estimated 18.71bn tonnes. Of all the ore bearing states, Odisha tops the list with maximum production and reserves. As industry officials will say a good portion of resources could be converted into reserves by a well-planned time-specific programme with a window welcoming foreign investment.
The problem that now confronts local steel mills is the insufficient production of high grades of ore, resulting from over 65% of the indigenous mineral being of medium to low grades with high impurities. At a number of mines, high grades of ore have already been mined leaving these with inferior grades compelling steel mills to depend on imports for quality ore. Indian policymakers must have watched with interest how forays abroad with a mix of policies have given China long-term security in iron ore supply. The draft steel policy of India has recommended the Chinese model for consultation. (IPA Service)
