Steel is an important basic material of construction for creation of infrastructure and many other applications. In the last century, a country's steel production used to be treated as an indicator of industrial progress and developement of the country. The major steel producing nations were the US, (the-then) USSR, Japan, Germany etc. That has been changing for various reasons, including the pollution creating impact of steel industry, among other reasons.Of late, steel production has been moving eastwards. Currently, China has become the driver of steel industry, having crossed 560 million tons per annum (mtpa), whereas their nearest rivals ( Japan, USA & others ) are less than 100 mtpa. India is at around 56 mtpa.
 Importance of steel
For developing countries, steel continues to be the most common material of construction for creating infrastructure, be it roads, bridges, railways, industries, power plants, transmission lines, ports, buildings ( schools, hospitals etc ), as also for consumer durables viz. automobiles, appliances & other household gadgets.
There has been a tussle between steel and other materials like aluminium, plastics etc but steel continues to be the material of choice by many for its strength & durability, recyclability & being environmentally safer than other materials like plastics.
Steel plants can create pollutants but with the development of technology, there have been safe ways of producing steel, taking care of environment as well. There have been various kinds of pollution control devices like dust catchers, electrostatic precipitators, heat & flame protection devices etc which reduce the hazards associated with steelmaking, within acceptable limits.
 Steel production
Steel is produced out of iron-ore, as well as by melting scrap. There can be a lot of pollution during production of steel, if proper technologies are not adopted and adequate precautions not taken. In the conventional integrated steel plant, the main production units consist of Coke ovens, Sinter Plant, Blast Furnaces, Steel Shop ( Basic Oxygen Converters ), Continuous Casting & Rolling Mills ( Long and/or Flat ). In an alternative mini steel configuration, electric furnaces melt either scrap or Direct Reduced Iron ( DRI ), also known as sponge iron.
 Environmental aspect in steelmaking
- There is a lot of dust and heat generation in the steelmaking processes. There have been various dust catching techniques which remove & recover dust which can be recycled. The pollution control norms in various countries lay down the dust that can be discharged through the chimneys as also the ambient dust content in the production shops. Similarly, there are norms of various gases (Sox, Nox etc) permissible to be discharged through the chimneys. Most of the reputed equipment builders & suppliers are able to meet these IPCC ( Intergovernmental Panel on Climate Change ) norms.
- Apart from these specific pollutants, there is the issue of greenhouse gas emissions. New very large blast furnaces produce less CO2. In converters, waste gases can be recovered and reused. Electric Arc Furnace ( EAF ) uses electricity to melt scrap and other steel materials. Electric Arc Furnaces are less carbon-dependent than the conventional integrated steel plant. Continuous Casting is a more efficient method of casting.
Nowadays, external waste, such as plastics, can be added to a blast furnace, reducing the CO2 emission from coal.
( Source: IISI Publication-Steel and You The life of steel )
There are plans to increase steel capacity in India substantially to support the economic growth rate. It would be essential to adopt technologies which are efficient as also environment-friendly, so that the growth is sustainable & for the well being of the population at large.
 History of Indian steel
India is known to have an ancient history in the art of metallurgy and steelmaking. Over the centuries, this initial advantage seems to have been lost. During the modern industrial revolution era in Europe and the West, India lagged behind in this art and science so much so that when the legendary Jamshetji N Tata was exploring the feasibility of setting up a steel plant in the iron-ore and coal bearing belt of Eastern India in the early 20th century , Sir Frederick Upcott, head of the Great Indian Peninsular Railway is reported to have remarked that ..’I shall eat every pound of steel rail the Tatas succeed in making…’. This remark notwithstanding, Jamshetji went about fulfilling his dream and vision diligently and did the preparatory work for the establishment of the modern Indian steel industry at Jamshedpur (in the present day state of Jharkhand ), where his successors laid the foundation of Tata Steel in 1907. Tata Steel recently celebrated the centenary of this historical event.
With its modest output of around 6 million tons per annum (mtpa) at Jamshedpur, in a global output of over a billion tons per annum, Tata Steel occupied a pride of place among the global steel industry as one of the lowest cost, good quality steel producer, even before it embarked on its acquisition of the anglo dutch company 'Corus'. Tata Steel, after Corus acquisition is among the top steel producing companies of the world
Tata Steel(TISCO) and Indian Iron & Steel Co (IISCO) were the only two integrated steel producers in India at the time of independence of the country in 1947 with a modest output of less than 2 mtpa. With the achievement of independence, the first Prime Minister of the newly independent Nation, Jawaharlal Nehru had a vision of an economically strong India within a democratic political set up. He laid emphasis on the setting up of basic infrastructure and heavy industries within the country to make it self reliant during course of time to provide the necessities of life to its teeming millions. Even before the Industrial Policy Resolution 1956 was formulated, steps were taken to set up three 1-mtpa plants at Rourkela, Bhilai and Durgapur in 1955-56 in the Public Sector. Today, there is a lot of debate and divergence of views whether the Public Sector is the right model for business especially in the manufacturing sector with its demands on efficiency, productivity and competitiveness vis-à-vis the Private Sector. But, fifty years ago, possibly that was the need of the hour.
The initial three plants got set up fairly successfully within a span of 3-4 years from the dates of signing of their agreements. Out of these three, only Bhilai Steel Plant has maintained a steady progress as a successful unit ( in spite of being in the Public Sector) possibly because of the cosmopolitan character of its workforce and on account of least political interference there. It may be mentioned here that these plants had been set up with technical and economic cooperation with three different countries- Rourkela with the-then West German, Bhilai with the-then Soviet Union and Durgapur with British collaboration.
 Indian public sector steel industry
When the proposal for the fourth Public sector steel plant in the coking coal belt at Bokaro (close to Jamshedpur) was under consideration, a request was made to the United States for collaboration. Legend has it that the proposal for this collaboration had to be dropped as the Capitalist Super Power found it unacceptable to associate for setting up a plant in the Public Sector. By 1963-64, when this was under finalization, the Industrial Policy Resolution 1956 had already laid down that steel industry was reserved for the Public Sector. Beyond the-then existing plants TISCO & IISCO in the Private Sector, all new capacity had to be created essentially in the Public Sector. Those were the days, when Nehru era was coming to an end. India proclaimed herself to be a Non-aligned nation, but the public perception was that the Nation was pretty much aligned to the Socialist Super Power. Thus, losing no time, the Soviet Union came forward and offered to collaborate again for the fourth Public Sector plant. With the successful experience of Bhilai Steel with Soviet collaboration, the proposal got readily accepted. Bokaro was then called a swadeshi steel plant insofar as indigenous engineering and machine building capacity were to be utilized extensively as opposed to the initial turn-key manner in which the first three plants had been set up. This attempt at indigenization proved very trying for Bokaro as it took enormous time to commission even the first Blast Furnace Complex. But for the dynamic leadership of Mantosh Sondhi ably supported by K C Khanna, which resulted in molten iron and steel flowing out of Bokaro, people had started writing it off as a white elephant. However, as a result of good leadership at Bokaro & SAIL through the years, the plant has managed to keep its head above water at times good and bad.
By the time Bokaro was set up, Public Sector had four integrated plants in operation and a fifth coastal plant was under consideration at Visakhapatnam. Meanwhile, in 1971, IISCO had been nationalized and became a part of the Public Sector steel industry. Tata Steel was the only flag bearer of Private integrated steel producer modernizing its facilities at Jamshedpur and managing it pretty well by international standards in terms of cost and quality.
 Post liberalization developments in Indian steel industry
Expansion programmes of the SAIL (Steel Authority of India Ltd) plants at Rourkela, Bhilai, Durgapur and Bokaro along with the Vizag plant of RINL (Rashtriya Ispat Nigam Ltd) were the only growth story of the steel industry in India in the 70’s and 80’s until the decontrol of the steel industry as a part of economic reforms package started in 90’s. Steel capacity stagnated at around 15-20 mtpa for a pretty long time till the new private entrepreneurs took the initiative of setting up greenfield plants with backward and forward integration. The new players included Essar Steel, Ispat Group, Jindals and others. Steel capacity presently has touched 55 mtpa as a result of entry of new private players but as mentioned earlier, this is a fraction of the Chinese steelmaking capacity which has crossed 500 mtpa during the same period.
Out of the foreign leaders in steelmaking, POSCO of South Korea signed an MoU with the Govt of Orissa quite sometime ago but the project has been bogged down due to various reasons. There are issues of land acquisition & rehabilitation of displaced persons, apart from long-term lease of iron-ore, among others. Arcelor Mittal signed an MoU with the government of Jharkhand followed by another one with the government of Orissa but the progress here too has been tardy.
Among the Indian players, almost all- Tatas, Jindal South West, Jindal Steel & Power, Essar Steel, Bhushan Steel & even some newer entrants have signed MoU's with concerned State Govts in the states of Jharkhand, Orissa, Chattisgarh & West Bengal. The leasing of iron-ore & coal mines as well as site related issues ( land acquisition and rehabilitation of displaced persons ) have appeared as serious bottlenecks in almost all the greenfield projects.
 Indian steel industry in global context
A lot has been written and discussed by way of comparison of growth stories of economies of China and India. Whereas India occupies a pre eminent position in the software field, China has become the global manufacturing centre. In spite of the steady but possibly because of slow implementation of economic reforms in India for almost two decades, the Indian growth rate, pre-global meltdown was hovering around 8-9% only as against Chinese of over 12%. Post recovery after the global economic slowdown, India has bounced back to around 7.5%, whereas China continues to grow faster.
As far as the steel industry is concerned, China has been driving the bus, so to say, in the 21st century.
Out of a total annual global steel production of over 1.2 billion metric tonnes, the contribution of China has almost been half in 2009, whereas India, sadly, is only one tenth of China. Major steel producing nations' output dipped in 2009 and has been as follows:
(Source: Crude steel statistics 2009- World Steel Association)
Of late, Indian entrepreneurs like Lakshmi N Mittal and Ratan N Tata, who have almost achieved a celebrity status in India, seem to be moving towards having a significant control of the global steel industry. Arcelor Mittal headed by Lakshmi N Mittal is still limited to operations outside India (Europe, North & South America, former CIS countries, Africa & Asia). For a number of years in the recent past, Arcelor Mittal has tried entry into India by the initiative of signing MoU’s for setting up greenfield projects in the states of Jharkhand & Orissa. In a reverse mode, Tata Steel has moved out of India in the 21st century by global acquisitions, the most significant being acquisition of Corus by Tatas.
India has the competitive advantage in steel due to abundant availability of good quality iron ore within the country. Coking coal, of course, is not locally available in sufficient quantity and quality. Huge coal imports would thus become a necessity for quantum jump in steel capacity, unless there is a breakthrough in technology of reducing iron ore or making steel directly through alternative routes. Production of Direct Reduced Iron (DRI) offers a distinct possibility of growth depending on economics. India already occupies a pride of place in DRI production in the world. Out of a total of annual production of around 70 million metric tonnes, India produces almost one fourth ( 18 mtpa ).
If India has to maintain its rate of economic growth, huge investments in infrastructure including Power Generation are inescapable. All this is possible and would need commensurate growth in steel capacity. While China has already peaked in its steel production, becoming a net exporter recently, India has a long way to go. Even if 500 mtpa would appear to be beyond comprehension at this stage, a modest target of 100 mtpa in the next 10-15 years would need an addition of almost 5 mtpa each year with immediate effect. While investors have been taking the initiative of signing MoU’s with various state governments of West Bengal, Jharkhand, Orissa & Chattisgarh, among others, the progress on ground is not visible. This is a matter of concern.
 Indian steel industry in the 21st century
While China is the leader of the world steel industry in the 21st century, India occupies the fifth place in terms of production volume in 2008. Projections are that India should move towards 100 mtpa and beyond in the next decade. The projected steel capacity creation in India before the onset of global meltdown was as follows :
The global meltdown has somewhat affected this growth plan as much as it has affected the global steel industry very severely.
In terms of capacity creation in India, there are innumerable problems associated with land acquisition and rehabilitation of displaced persons for greenfield projects, as was indicated earlier. As such, wherever greenfield projects are planned, whether by global players like Arcelor Mittal, POSCO etc or Indian entrepreneurs like Tatas, Essar,JSW etc, there has hardly been any progress on the ground. The only capacity expansion that is currently taking place, are at the existing locations whether of PSU's like SAIL/RINL or private co's like Tatas, JSW, Essar etc.
Greenfield projects of POSCO and Arcelor Mittal are, therefore, not likely to be established in the near future ( 2011-12 ). In fact, Arcelor Mittal has already announced its scaling down of capacity projections and unavoidable delays both on account of mining lease allocation, land acquisition problems as well as the global slowdown. Recently, after the visit of the South Korean President as the chief guest at the Indian Republic Day celebrations at Delhi, POSCO is reported to be back on fast track. The site work is expected to start in a few months.
Apart from ambitious capacity expansion at their existing locations, the private sector co's are really creating world class facilities in the steel industry in India. While Tatas have always maintained their reputation of good management as the first steelmakers in India and still the foremost, other new entrants like Sajan Jindal's JSW at Belary in Karnataka and Ruias' Essar Steel at Hazira in Gujrat have been very innovative in their approach and are competing with the Tatas in terms of product quality, delivery and customer services. Even though Navin Jindal's 'Jindal Steel & Power' at Raigarh in Chattisgarh has lower scale of operations so far, their business model and cost effective strategies already reflect in its share values on the Indian stock market.
Even the PSU's are trying to keep pace. SAIL, which has been designated as a Maharatna PSU recently has had the advantage of visionary leadership at the top management level including such luminaries like Dr V Krishnamurthy. It has managed to remain competitive in spite of the disadvantages and constraints of being in the Public Sector. SAIL is living upto its stated contribution of making meaningful difference to people's lives. Likewise, RINL, which was initially slow in catching up with its capacity achievement, has appeared as a frontrunner in Long Products manufacture with its product quality and innovative approach in spite of the fact that it does not have its own captive iron ore mine so far. These PSU's had also planned massive investments for capacity enhancement to contribute to India's deserved position in the global steel industry in the 21st century. Of course, the recent economic slowdown had dampened these initiatives a bit but the recovery seems to be already on its way.
On the whole, in spite of the global economic slowdown, it can be safely assumed that capacity expansion at the locations of the existing steel plants will catch up soon. What is not certain though, is the fate of greenfield projects, where apart from the entrepreneurial initiatives, a lot of government initiative and strong will is needed both at the central level at Delhi as well as the state capitals to resolve the issues of mining leases and land acquisition/rehabilitation problems expeditiously.
If India has to occupy its rightful place as a developed nation towards 2020, its business model and international trade pattern must change from raw material exporter to finished goods exporter- from a commodity producing nation to a value creating nation.
In the context of the steel and mining industry, it would mean that the iron ore export from India to China, Japan and other countries must stop and in stead, all of the iron ore produced must get converted into steel and steel products. To begin with, even commodity type steel production and export would be preferable to exporting iron ore but eventually, the steel ought to be custom and tailor made and better still, automobiles and appliance/gadgets export rather than steel per-se.
As far as the Indian steel industry is concerned, the government has to plan its mining lease and other policies in a manner that motivates entrepreneurs towards converting the iron ore into steel rather than exporting it as unfinished material. In stead of knee-jerk reactions of tinkering with the export duty on iron ore one way or the other, the government might consider fundamental changes in its approach like dividing the ore bodies into well demarcated blocks and putting them for auction by a transparent process of bidding by the steel co's. With the formation of the new government at Delhi and economic reforms processes getting due attention and priority, one hopes that the issues of greenfield steel projects get resolved sooner than later.
Another aspect where we need to pay attention in the Indian steel industry in the 21st century is Research & Development. Whereas Austria, being a small country is credited with the development of the LD process, which is today by far the most widely used technology for steelmaking, India has not been able to develop a technology to avoid usage of coking coal for ironmaking in an integrated steel plant. As a result, we are heavily dependent on import of coking coal to a large extent. For massive growth of the steel industry in the 21st century and beyond, it makes a great sense to invest in development of an indigeneous technology for ironmaking or direct steel smelting on an industrial scale using indigeneously available coal. There is an urgent need for encouraging innovation in the steel industry. Industry-academic interface also needs to be strengthened for R & D as well as building human capital for the steel industry.
Author: K A P Singh