India: Demand for flats to surge on high-end applications. Are mills up to the task?

• Flat products capacity stagnant in India over last 3 decades
  
  
• Only 5-6% of imported grades are not produced domestically
  
  
• Flat steel demand from renewables sector to remain at 1.5 mnt/year till 2030
  
  

Capacity addition in the steel industry may be happening at a steady pace on a positive CAPEX cycle; however, it is crucial to cater to domestic demand for various grades of steel which are needed for high-end, new-age applications. Such pressing issues were discussed in detail during the session on Which way will the Indian steel supply-demand balance tilt by 2030? - Focus on Flats at the 2nd India Steel & Metal Conference hosted jointly by SteelMint and SUFI.

Sachin Shetty, Manging Partner, Quesrow Consulting was the moderator of the session, while the speakers were Rajesh Goyal, Sr. Vice President - Strategic Sourcing, ReNew Power; Praveen Shrivastava, Chief of Marketing & Sales (Branded Products & Retail), Tata Steel Ltd; Raveesh Sabharwal, Asst. Vice President - Procurement Kirby Building Systems; and Saji Samuel, Executive VP, JSW Steel.

Key takeaways

Per capita steel consumption is expected to grow to 96 kg in CY'24 from around 86 kg currently but most of this growth is happening in the urban sector.

Steel demand will get a boost with the steady expansion of steel-intensive construction by replacing wood, which is a depleting resource.

Domestic demand is robust which can easily sustain prices. Steel prices today are under pressure because of import arrivals over the last couple of quarters.

In the 1990s, the share of flats and longs production in India was 45:55. Even today it is the same whereas in China the share of flat products in total steel production has gone up to 50% from 35-40% even in the 2000s. Other economies such as Russia and South Korea have raised the share of flat steel production to even 65-70%.

Flat steel consumption is set to grow with use in infrastructure, energy and mobility sectors but the production of high-end grades from the mills is still low. Mills still mainly focus on the commercial grades.

End-users can minimise dependence on imports if mills focus on high-end grades. However, demand for certain special structural grades, grades used in high-end infra and transmission, has increased at an exponential pace. Mills have to catch up to that.

Mills are planning capacity with an eye on emerging applications and demand. Today, Indian mills have capacity of supplying high-strength steels for the automotive and other applications, even for vehicles with 5-star ratings, such as CRC with strength levels of more than 1,100 MPa.

The government has to take a relook at standards. Out of total Indian imports only about 5-6% are grades that are not produced in the country.

Renewable energy is a new entrant in the demand category, mainly for flat products. As per government targets, India has to add 40-50 GW every year. As for wind turbines, about 1 mnt of steel plates are required for 10 GW. For solar, the current requirement stands at another 500,000/year, which makes it 1.5 mnt/year of flat steel products for immediate renewable infra.

There is also huge export opportunity to SE Asia, given the investments in renewable energy in the region. In fact, to the Middle East, too. The government is creating a lot of offshore wind capacity in Gujarat and Tamil Nadu.

In the next 10-15 years, steel mills will have to shift to lesser CO2-emitting processes if only to meet steel users' demand and an equivalent of CBAM may well come to India. An equivalent of EU carbon tax may well be replicated in India.

Indian steel mills can provide carbon credits to buyers, such as those in the automotive industry. However, mills need a steady demand channel for green steel as well as government support to able to take concrete production decisions.

Fast-paced growth in India's manufacturing base, from around 16-17% of the country's GDP to about 22-25%, will drive the demand for 'green steel', which does not have a clear definition as yet but is sure to find buyers for all high-end and new-age applications.

Most modern airports are getting made with steel tubular structures. The Indian Railways should replicate such designs for railway stations and other facilities to boost steel usage and also for durability and aesthetic finesse. Similarly, FCI can switch grain storage silos from cement to steel.