- Major share of upcoming capacity through BF-BOF route
- Lower scale of scrap generation a deterrent for EAF-IF producers
- Cleaner technologies to alter dynamics of country’s DRI industry
India’s crude steelmaking capacity is expected to increase to 300 million tonnes (mnt) by FY’30, according to the government’s National Steel Policy (NSP), 2017. Some industry experts believe that the target is a little overambitious, although almost all estimates agree that capacity is likely to reach close to 300 mnt by that time.
SteelMint estimates that the blast furnace-basic oxygen furnace (BF-BOF) route is likely to account for 56% of the country’s steelmaking capacity by FY’30, up from an estimated 46% in FY’22.
The second-largest steel producer in the world is expected to clock crude steel production of 118 million tonnes (mnt) in FY’22, as per SteelMint data. Out of total production, the share of the BF-BOF route is likely to be 54 mnt or 46%, while the electric arc furnace-induction furnace (EAF-IF) route should account for around 64 mnt of production, or 54% of total output.
BF-BOF capacity expansion
SteelMint estimates that the share of the BF-BOF route in India’s crude steel production in FY’22 will rise 2% from the preceding fiscal, while in the medium term it will probably rise over 50% by FY’25-26, with the integrated steel producers in the country ramping up capacity to cater to growing demand.
The share of the BF-BOF route is likely to again exceed 50% of India’s total steel production in the coming years after a long gap since FY’07, data shows. While steel production through the Bessemer process has progressively increased from around 22 mnt in FY’04 to nearly 49 mnt in FY’20, its share in total production has fallen alongside the rise in the share of the electric route from 17 mnt to 62 mnt during the same period.
While the primary steel producers contributed a bulk of India’s production till about 2000, rapid expansion of sponge iron (DRI) capacity and EAF-IF mills from then onwards boosted the country’s overall capacity.
Notably, India’s steelmaking capacity has grown from 44 mnt in FY’04 to 75 mnt in FY’10 to over 150 mnt in FY’22, while production has climbed from 66 mnt in FY’10 to over 111 mnt in pre-pandemic FY’20.
Capacity utilisation fell markedly during FY’16-18 to just over 70% from 80-90% levels prior to FY’16 mainly on aggressive steel dumping by China due to domestic overcapacity. However, utilisation rates are expected to inch up to nearly 80% in FY’22 with export demand and economic recovery from the pandemic gathering momentum from mid-2020 onwards.
Lower scale of scrap generation
Most of the capacity expansion from 150 mnt at present to close to 300 mnt in FY’30 (projected) is expected to come through the integrated route.
SteelMint estimates the share of BF-BOF steelmaking in India’s total production to rise higher compared with the EAF-IF route in the coming years due to the sheer expansion in scale and industrial capacity needed to meet growing demand from the infrastructure, construction, manufacturing, transport and renewable energy sectors among others.
The NSP projects the country’s per capita steel consumption to rise above 160 kg by 2030 from around 75 kg at present. The government’s budgetary thrust on infrastructure construction by raising overall capital outlay is expected to boost steel demand manifold in the coming decades. Capital expenditure in Budget 2022 has been increased by 30%. The BF-BOF route is the preferred choice for scaling up capacity to meet the government’s target.
This is because EAF-IF route producers are unlikely to deliver on such massive growth volumes due to the comparatively smaller scale of domestic ferrous scrap generation, which is estimated to rise to 70 mnt by FY’30, according to expert sources, out of which the foundries will likely consume around 10 mnt.
Imagine a scenario of total steelmaking capacity at approximately 270 mnt by FY’30, a shade lower than 300 mnt. A capacity utilisation rate of 87% for the industry as a whole will result in total crude steel production of around 235 mnt, as per SteelMint calculation.
Considering the fact that India’s sponge iron production capacity is unlikely to grow at such a fast pace, total crude steel production by the EAF-IF route is likely to be 105-106 mnt, assuming a yield ratio of 88% for the scrap used.
Therefore, the share of the BF-BOF route is estimated to be 129.3 mnt, or 56% of total production by FY’30, with the rest accounted for by the EAF-IF steel manufacturers.
Focus on cleaner technologies
India has pledged to attain zero emissions by 2070, with a peak carbon target not before 2050. However, financing constraints, carbon taxes on exports, an emerging domestic market for carbon trading and the pressure to decarbonise along the entire value chain are expected to reshape the industry in the coming decades.
As the need to combat emissions emerges as the dominant theme in the industry, India’s coal-based DRI sector is likely to come under increasing pressure to switch over to fossil-free hydrogen or syngas derived through gasification of domestic coal. Clean technologies are expected to reshape the industry.
The country’s sponge iron industry accounts for emissions of 3 kg per tonne of steel produced compared with 2.3-2.5 kg per tonne of hot metal (thm) produced by the primary steel players some of whom are investing in technologies such as hydrogen and methane usage in BFs as well as carbon capture, storage and utilisation (CCSU) with the aim to reduce emissions to 1.8 kg/thm by 2050.
Besides greenfield expansion, the integrated steelmakers are scaling up capacity through mergers and acquisitions (M&As) and building synergy with existing operations. Foreign investments and technological collaborations, remission of duties on value-added exports, production-linked incentives and the need for advanced and specialty steels are likely to help the integrated producers build on existing capabilities.
That apart, changes in regulatory mechanisms for allocation of mineral resources are supposed to boost the captive raw material capacity of the integrated steel manufacturers.
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