With Chinese steel industry entering into autocatalytic consumption stage, the prices of raw materials for steel, like coking coal and steel scrap, have shot up sharply in the recent months. Given the increasing steel consumption in the country, Indian steel makers need to adopt strategies like consolidation to manage the situation.

Indian steel industry, the eighth largest steel producer in the world, is faced with a peculiar situation. The demand for steel is booming and hence, the steel prices, but Indian steel makers are unable to cash on it. The rising steel consumption in China, which provided an excellent export opportunity to the Indian steel companies until a few months ago, is playing the spoilsport now. Due to increased steel demand, China stopped exporting coking coal (or coke), the major raw material in steel manufacturing, to India. Hence, the production costs have shot up for Indian steel makers, thereby nullifying the effect of increased steel prices on the bottom line of the steel companies.

The Indian steel industry is dominated by three integrated steel producers (ISPs) and few major secondary producers like Ispat Industries and Jindal Steel. The state-owned Steel Authority of India Limited (SAIL) and Rastria Ispat Nigam Limited (RINL) and private player Tata Iron and Steel Company (TISCO) are the integrated steel makers and account for nearly half of the steel production in the country.

Iron ore and coke are the major raw materials for the integrated steel mills. They follow the traditional "Coke oven-Sinter-Blast furnace- Basic oxygen furnace route" for steel production. As around 900 kgs of coking coal is required to make one tonne of steel, coke is among the high-value inputs for steel making.