At the
India Steel Conference in Long Beach, CA, hosted by American Metal Market (AMM) and the American Institute for International Steel (AIIS), participants discussed
India's strong domestic demand for steel, its raw material-rich location, its good relationship with the
US, and its strength in the IT and software industries; these are the major factors that drive
India's fast-growing economy. However, the Indian government must further develop its infrastructure and resolve its land acquisition problems in order to let new
investments proceed smoothly.
In recent years, many of the world's largest steel producers, such as Tata,
SAIL, POSCO, Mittal and Essar, have signed contracts to build steel plants in
India. Currently,
SAIL, Tata, Essar, JSW Steel and Ispat produce around 95 percent of
India's flat rolled products. The new boom in industrial activity in the Indian market has many market players thinking of
India as a major business development location for the steel industry.
The strong domestic steel demand in
India comes from the country's increasing
automotive manufacturing,
construction, white-goods, and durable goods markets.
Investments in infrastructure, urban renewal and housing
construction also stimulate the demand for steel. At the same time,
India's strong domestic demand boosts its export market as well. Ron Somers, president of the US-India Business Council, mentioned that
automotive manufacturing in
India is now a $15 billion-industry and has reached 20 percent annual growth in export activity. Therefore,
India's shift in focus to
manufacturing has resulted in strong domestic steel demand as well as increased export activity in end products.
There are about 25 billion tons of
iron ore reserves in
India. The raw materials are especially rich in the eastern part of
India, with more than 50 percent of the
iron ore mined in this part of the world destined for export. Last year, the amount of
iron ore India exported to
China reached 83 million tons. Nowadays, the pricing trend for
iron ore, both in
India's domestic market and for export, is going up. With its advantage as a raw material-rich location,
India has been converting
iron ore to hot metal for a long time, and has in recent years persuaded foreign steel producers to put their money into investment projects.
India and the
US have developed a good partnership in recent years.
India has facilitated
US use of its airspace and airports since September 11, 2001, and there is close cooperation between the militaries of the two countries. The countries also work together on space-related issues as well as in the pharmaceutical sector. Companies such as DELL, Sony Ericsson, ABB and Honeywell started doing business in
India several years ago. Lately, Tata has combined with Corus to become the fifth largest steel company in the world.
India is becoming more international as the
investments grow. Moreover, many Indians are English-speaking, which is good for
US business.
India is well-established in the IT and software industries. It produces a large number of engineer graduates every year, and is the world's second-fastest growing country in telecommunications. Last year,
India recorded six million new cell phone registrations. Nuclear energy is another asset. Economists say that both
India's GDP and its industrial
production have been growing by approximately 9 percent since 1995.
India is following in
China's footsteps and is expected to go to the next level. However,
investments are facing several problems. Infrastructure is one of the main issues. Rapid growth of infrastructure, for example, the building of ports, railways, highways, airports and bridges, is needed for steel logistics and for reducing energy costs. Another difficult issue for development in
India is land acquisition. There are many different people such as villagers and local farmers who own the land, and it is difficult to ask them sign and allow the land to be converted to industrial use. The shortage of power, the existing labor laws, the lack of
coking coal, and the rainy weather are additional challenges for the new projects.
Bharat Wakhlu, president of Tata USA, stated: “India will be part of the new, steel-consuming world” due to its “potential for exponential growth in steel
consumption.” He added, “By 2012,
India will be a global steel hub.”
Raju Daswani, publisher of AMM, indicated that “India is set to emerge as a large net exporter of steel,” and its “capacity
production is expected to rise faster than demand in the next decade.” Therefore, some of the world's largest steel producers are now getting ready to do business in this emerging market.
SteelOrbis would like to note a couple issues that were not fully addressed at the conference -besides
India's infrastructure problem, the biggest obstacles it poses are an over-regulating bureaucracy as well as the prevalence of corruption. These problems are obviously improving on both fronts or else foreign companies would not invest in
India. However, the quantum leap in
India's growth will not happen until these two issues have been brought under greater control.