Urbanisation has been steadily increasing, but only about one-third of the population currently lives in the city. This will support steel demand for infrastructure, such as, roads, railway, bridges and power generation, along with residential housing. 

Steel consumption per capita is currently 74kg in India, with rural per capita consumption as low as 19kg. This indicates potential for growth with India’s Ministry of Steel forecasting steel consumption per capita of 158kg in 2031.

AME expects India’s medium to longer term (2025 to 2040) average finished steel demand growth rate to be 5.4% per year. This compares with the US, China, Korea, and Japan with average yearly growth of 1.9%, 0.8%, 0.7% and 0.3%, respectively during the same period. 

India’s infrastructure development is supported by the government initiative of ‘Gati Shaki National Master Plan’. Its aim is to create a US$20tn economy by 2040. Recently, the government announced that approximately 200 critical infrastructure projects have been sped up.

A recent report by the World Bank has indicated India will need to invest more than US$840bn in infrastructure projects over the next 15 years due to the country’s fast-growing urban population.

This suggests additional funding will be required from private and commercial investments on top of government spending plans. It has been estimated that infrastructure project of bridges, tunnels, railway track, and various building construction require approximately 60% of rebar with the remaining being sections, plate and rail track.

To implement its growing infrastructure needs the Indian government has created the National Infrastructure Pipeline (NIP) for 2019-2025. The construction sector account for more than 50% of global steel demand is more prominent in developing economy such as India.

There are currently more than 2k projects under development covering 34 sub-sectors, with a total cost of US$1.78tn. Further incentive schemes aimed at increasing its citizens standard of living include, Smart City Mission (US$26bn), AMURT (US$7.5), National Solar Mission (US$2bn), and Housing For All (US$11.3bn).

AMURT initiative is aimed at providing basic services of water supply, sewerage, urban transport and construction of amenities in cities to enhance the quality of poor and disadvantage. The top areas for AMURT investment include West Bengal, Chhattisgarh, Kerala, and Madhya Pradesh.

Hey Big Spender

The power sector will be a strong driver of India’s steel demand for a number of years into the future. The government has targeted 500GW of renewable energy generation by 2026 with the aim of replacing coal.

Currently, renewable energy sources have a combined installed capacity of 163GW. This includes solar power, large hydro, and wind power, with total allocation of 36.4%, 28.7% and 25.5%, respectively. India is planning to invest over US$100bn in renewable energy by 2024.

Further, India’s rail infrastructure will also be expanded with investment of US$715bn by 2030. Freight railway traffic is an important growth area in India and is the preferred method of transporting automobiles within the country. Rail freight traffic will increase to 3.3Bt by 2030, more than double current levels.

New investment will be required to increase freight loading to 2,024Mt from the current 1,300Mt by 2024. These projects will significantly increase steel demand in the sector for the construction of new rail cars and railway wheels.

The India government approved the production-linked incentive (PLI) scheme for speciality steel in July 2021, to better regulate demand sectors. Investment is expected to be US$5.4bn and will expand speciality steel capacity by 25Mt to 42Mt by 2028 and create 525k in new job opportunities.

The five categories of speciality steel which have been selected in the PLI scheme are coated/plated steel, high strength/wear resistant steel, specialty rails, alloy steel products and steel wires, and electrical steel. Applications were received by the government in September with the scheme to commence from 2023-24 and run for a period of five years.

To help meet the demand, the Indian government announced in May this year plans to have 2-3 vehicle scrapping units in every district across the country. India currently imports US$2.85bn worth of scrap steel each year with the new scrapping strategy expected to result in a 40% reduction in raw material costs.

The government launched its Vehicle Scrappage Policy in 2021 with the aim of removing commercial vehicles older than 15 years and passenger vehicles older than 20 years when they fail a ‘fitness test’.

India has about 5 million light motor vehicles more than 20 years old. Incentives for scraping older vehicles will include no registration charges, discount of new vehicle of 5%, and concession of road tax of up to 25% for passenger vehicles. 

Green Steel

The production of green steel is a global phenomenon aimed at reducing carbon emissions and other greenhouse gas emissions from the steelmaking process. The two methods to achieve this outcome include deciding on the raw material inputs to produce the steel and/or the energy source required for the steelmaking process.

India aims to reach carbon neutrality by 2070 with carbon emissions peaking between 2040-2045. This means by 2030 emissions intensity will be 3.8-4GtCO2e. The government has not provided any detailed carbon emissions targets for its 2070 plan. So, the impact on steel demand is largely unknown. 

In 2021, India’s BF/BOF accounted for 53% of steelmaking technology capacity, with the remainder being EAF technology. AME expects BF/BOF technology in India to grow to 67% allocation by 2028. 

India would not be able to achieve its ambitious economy goals without the use of expanding capacity with BF/BOF technology due to their larger size and cost efficiency compared to EAF steelmaking. Both Tata Steel and JSW plan to lower their carbon emission in the medium and longer term which will contribute to the green steel economy.

Tata Steel

Tata Steel aims to achieve a carbon emission intensity of less than 2MtCO2e by 2025 and 1.8MtCO2e by 2030. Out to 2025, Tata Steel will increase its share of renewable energy generation with 150MW projects being implemented across the Indian sites.

From now till 2030 Tata Steel plans to shift from metallurgical coal to natural gas a cleaner fuel. During the same period the company will upscale pilots of carbon capture and utilisation and hydrogen-based steelmaking in India. By 2025 the company aims to achieve certification from ResponsibleSteel for all its steelmaking sites in India.

JSW Steel

In fiscal year 2022 (end March 2022) JSW Steel’s greenhouse gas (GHG) emissions intensity was 2.5tCO2/t, up slightly from 2.49tCO2/t from the prior year. The company aims to reduce GHG emissions by 42%, or less than 1.95tCO2/t by fiscal year 2030 from fiscal year 2005. JSW Steel aims to be carbon neutral by 2050.

During the September quarter of 2022, the company become a participant of the United Nations Global Compact. This supports JSW Steel’s commitment to ESG targets.

Key sustainability issues for JSW Steel include energy management, carbon capture, reducing emissions and using hydrogen as a reductant. As hydrogen is increasingly becoming a viable fuel alternative to carbon, shifting to a hydrogen-based economy will accelerate as the world transitions to low carbon alternatives.

In June 2021, JSW Steel became a key member of India’s H2 Alliance (IH2A) – a consortium working in support of mainstreaming hydrogen as the fuel of the future.