Robust demand, led by a rise in economic activities, helped the domestic steel industry churn out good performance in the last couple of years. However, global capacity additions, coupled with prospects of a slowdown in Chinese market could play spoil sports.

Indian steel industry has been having good times in the recent past. propelled by the economic upswing, continuous rise in the domestic demand from sectors such as automotives, capital goods, infrastructure, and engineering is a major reason for this good performance. On the global platform, India is the ninth largest producer of steel with an annual production capacity of 34 million tons. Finished steel production has crossed 38 million tons in FY05 and is expected to be 40 million tons in FY06. Exports accounted for 4.5 million tons and imports stood at 2 million tons in FY05. Pig iron and sponge iron production were 3.17 million tons and 13 million tons respectively. The share of primary producers (i.e., SAIL, RINL, and Tata Steel) and secondary producers in the total production of finished (Carbon) steel were 62.70% and 37.30% respectively during the period April-November 2005. In FY05, India produced about 145 million tons of iron ore out of which about 72 million tons (roughly 50%) was exported-mostly to Japan, South Korea, and China. Iron ore prices have risen sharply in the recent past (71.5% in FY06) due to higher demand from China.

Given the rich mineral wealth, states like Orissa, Chhattisgarh, and Jharkhand, are leaping ahead in attracting huge investments of worth two lakh crores. The latest National Steel Policy 2005 envisages that India could achieve 110 million tons capacity by 2019-2020, making the country a cost-effective and high quality producer, besides the enhancement in scale and upgradation of technology. Against this target, Indian companies have already announced their ambitious plans for taking production to over 100 MTPA levels by 2020. Global steel makers are rushing towards Asia to set up manufacturing bases to cater the growing demand. However, China is restricting foreign investment in steel to protect its domestic industry. In such situation, investments are flowing into India. A host of foreign steel makers like Mittal, Posco, and Vendata, are setting up integrated steel plants, taking into view of India's huge iron ore reserves. Similarly, domestic companies like Tata, Essar, SAIL, RINL, JVSL, and Ispat, have announced the brownfield as well as the greenfield projects of 15 million tons over the next five years.

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