1. Understanding the Low Demand For Steel In India
Dr Susmita Dasgupta,
Joint Chief Economist, JPC
Author, Economics of the Indian Steel Industry. United Kingdom
For
Metal Junction, Kolkata
7th of June 2018

2. Excess Production of Finished Steel (Mild) in thousand tonnes
Year
Production for Sale
Apparent Consumption
Excess Production
35410
28897
6513
38584
31169
7415
41318
34389
6929
44390
39185
5205
50196
44328
5868
56075
52125
3950
57164
52351
4813
60624
59339
1285
68620
66421
2199
75696
71021
4675
81681
73483
8198
87675
74096
13579
91457
76993
14464
90981
81521
9460
101805
84042
17763
Source: JPC and ERU

3. Year
Estimated Demand by assuming 9.1% GDP growth (most conservative). Planning Commission
In million tonnes
Fructified Demand
66.5
71.02
73.3
73.84
80.8
74.10
89.1
76.99
98.3
81.52
108.3
84.02
Source: Report of the Working Group on Iron and Steel for the 12th Five Year Plan ( ). Planning Commission.

5. State of Excess Production of Mild Steel
Net Stocks
Net Imports
Excess Production
Excess Production as Percentage of Production %
Total Availability With Stocks as % of Demand
-272
-2996
6513
18.39
111.23 32
-3295
7415
19.22
113.32
175
-2272
6929
16.77
114.05
225
-628
5205
11.73
112.25
-38
-457
5868
11.69
112.12 95
1952
3950
7.04
111.51
283
1402
4813
8.42
112.41
1103
4131
1285
2.12
110.99
-64
3027
2199
3.20
107.77
547
2275
4675
6.18
110.56
-1023
2557
8198
10.04
113.24
-412
-535
13579
15.49
117.05
1603
3724
14464
15.82
125.70
1290
7633
9460
10.40
122.55
1415
-1016
17763
17.45
121.61
Source: JPC and ERU

7. Elasticities and Intensities of Steel In GDP
Elasticity of Production with GDP Constant
Elasticity of Production With GDP Current
Elasticity of Consumption with GDP Constant
Elasticity of Consumption with GDP Current
1.13
0.75
0.99
0.65
1.00
0.54
1.47
0.78
0.53
1.37
0.79
1.26
0.74
1.89
1.11
0.29
0.12
0.06
0.03
0.70
0.40
1.55
0.88
1.48
-0.14
1.34
-0.12
1.54
0.00
1.04
1.77
0.67
0.64
0.18
0.07
0.05
0.23
0.21
-0.07
-0.02
0.26
Source: National Accounts Statistics, JPC and ERU

8. Assessment of Excess Capacity in Thousand Tonnes Assuming 100% Capacity Utilization
BSP
DSP
RSP
BSL
ISP
ASP
VISL
RINL
Tata Steel
Majors
EAF/Corex
Induction Furnaces
Total
-308 94
425
690 53
125
-11
-346
-598
310
1760
3506
5700
-818 43
328
606 79 93
-20
-493
-724
662
1354
4073
5183
-657 -4
297
525
163 84 -9
-542
-103
323
574
3907
4558
-1129 1
239
132 86
-34
-584
270
192
237
5207
4711
-874
233
-90
293 28
-41
-587
-174
1340
2004
4110
6326
-1130
-112
-193 42 77
-40
-219
-13
1862
1549
3932
5988
-1258
-84
-183
783 83 66 23
-53
-646
4582
467
4126
7906
-1183
-164
-228
761
100 29 15
-295
3852 62
5976
9162
-1404
-159
-260
768 89 34 10
-325
-56
3884
-192
7302
9691
-976
-270
713
170 27
-218
-328
8525
1845
7081
16491
-1083
-232
-309
603
365
103 54
-161
1470
7116
2315
8260
18501
-1211
-217
-391
584
373
112
105
-292
445
7232
3584
8915
19239
-882
-261
1608
529
2359
130 72
-386
269
4188
8511
16137
-1133
-173
1670
968
1629
143 76
2659
-360
11309
22727
11504
51019
-812
-240
1468
1206
1106
146
2338
812
5507
5410
12649
29669

15. Let us look at the capacity plans of 2015-16 (Source: IBEF, January 2016)
Company
Existing
Brownfield
Greenfield
Status
JSPL
4.5
1.6
7.5
NCLT
Bhushan Steel
5.6
3.9
Bhushan Steel and Power Limited
2.5
Electrosteel
1.7
2.51
Visa Steel
0.5 1

16. Conclusions Demand may well be overestimated.
Please note that steel has a life cycle of at least 15 years, money spent on steel may not be spent again before 15 years.
The value of steel relative to the value of the uses is declining with technology sophistication, you pay more for the sophistication and less for the material input.

17. Is the demand for steel that great?
Say, investment in infrastructure is USD 192 bn.
Say 15% of this consists of cost of steel, which is USD 28.8 bn.
At Rs 67 to a USD, this is bn
At Rs 45,000 per tonne, we have 43 million tonnes of consumption only.

18. The demand for steel due to modernization in 2015-16
In 2015 FE, there were two wheelers and three wheelers, 3 million passenger vehicles and 0.7 million commercial vehicles, consuming only million tonnes of steel.
Similarly, consumer durable market at USD 20.6 billion consumed no more than 2 million tonnes of steel.
The spending on infrastructure in 2015 FE was USD 149 billion only. This translated to hardly 21 million tonnes of steel.
Together, they constitute only 34 million tonnes of steel.
In that year, India produced 91 million tonnes of steel and consumed 84 million tonnes of the same.
50 million tonnes was the regular market.