India, home to ample iron ore resources and the third biggest crude steel producer, has paradoxically turned into a net importer of iron and steel.
During April-September, the country imported iron and steel valued at $5.33 billion, exceeding its exports worth $4.22 billion. This has reversed the trend of the country being a net exporter of iron ore and steel products for the past two consecutive years. In the last financial year, exports of iron and steel were valued at $11.24 billion, overshooting the $10.43 billion in imports.
Between 2009-10 and 2017-18, the country’s exports of iron and steel logged a CAGR (compounded annual growth rate) of 12.07 per cent, states a report by the Indian Brand Equity Foundation (IBEF), quoting figures sourced from the Ministry of Commerce.
According to the report, the country has turned into a net importer of iron and steel due to robust demand in the manufacturing sector and rise in infrastructure projects under implementation. The country’s transition into a net importer of steel is despite the buoyancy in domestic crude steel output. Crude steel production in FY18 reached an all-time high of 102.34 million tonnes (mt), increasing 4.5 per cent year-on-year (y-o-y). A forecast by the World Steel Association projects Indian steel demand to grow 5.5 per cent in calendar 2018 to 92 mt and six per cent in 2019 to touch 97.5 mt. By 2019, India is also poised to dislodge the US as the second largest steel consumer, the association predicted.
But firm growth in steel demand is driving higher imports.
The impact of higher steel growth is also felt in iron ore with steel companies showing increasing dependence on imports. The country imported iron ore worth $350.99 million in FY18. The same uptrend has spilled into this financial year.
“Domestic iron ore prices have firmed up significantly in the past three months. The gap between domestically sourced and imported ore is narrowing. And, shore-based steel plants are finding it viable to import ore,” said a senior official with a steel company.
Iron ore imports by the country zoomed 190 per cent to 6.34 mt during April-August, data by the Pellet Manufacturers Association of India (PMAI) showed. Imports are projected to be above 12 mt in this financial year as the momentum will continue despite the glut in the domestic market.
In FY18, iron ore sourced by steelmakers and other end-use industries stood at 8.6 mt, 48 per cent higher than in 2016-17. Imports of iron ore are on an upswing since steel plants located on the coast have shown an increasing tendency to import the key ingredient. Imports of iron ore have turned out to be a cheaper option for shore-based steel units compared to buying from the domestic market.
Source: Business Standard
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