In the last fiscal year 2017-18 that ended in Mar’18, Indian firms churned out record quantity of steel at 102.19 MnT (a y-o-y growth of 4.3%) as the government took steps to protect steelmakers, India’s construction activity rebounded and China closed down its illegal capacities.
In the ongoing fiscal year of 2018-19, India’s domestic steel demand has gathered speed amid an infrastructure building boom that is set to more than double capacity of the nation’s mills.
According to SteelMint analysis, India is set to add about 17-18 MnT of steel capacities in the next two fiscal years that is by FY21 mostly through brownfield expansion (capacity addition in existing plants). Taking a conservative view, while major players are estimated to add about 15 MnT of capacities, additions from the induction furnaces is projected to be around 2 to 2.5 MnT.
As per the capacity expansion plans disclosed by key Indian steel players, JSW Steel is set to increase its Vijaynagar, Karnataka plant capacity by 1 MnT (from the current level of 12 MnT) whereas in case of Dolvi plant in Maharashtra, the capacity expansion of 5.7 MnT is expected by March 2020. Thus, the total capacity addition from JSW Steel over next two years is estimated to be around 6.7 MnT which is estimated to be fully operational by 2021.
In the long run the company plans to increase its Vijaynagar plant capacity by another 5 MnT making it total to 18 MnT, However, the company may delay its expansion plan for Vijaynagar plant if it acquires any of the distressed assets of Essar or Bhushan Steel; as quoted by the company’s top management.
In the case of Tata Steel, the company has already initiated the expansion work of its steel plant at Kalinganagar plant from 3 MnT to 8 MnT per annum which will be completed by 2020. India’s government-run enterprise.
India’s public sector mining company, NMDC (National Mineral Development Corporation) is also diversifying its business and is setting up a new steel plant at Nagarnar in Chhattisgarh with a capacity of 3MnT which is anticipated to commission by FY19.
Along with these expansions, Indian companies would also try to ramp up production from assets acquired through the resolution process under Insolvency and Bankruptcy Code (IBC) at the earliest so as to capitalise on the improved demand for steel both in domestic plus international markets and firm prices.
These IBC proceedings have opened the scope for consolidation in the steel sector which may lead to better economies of scale, synergies in raw material procurement and better pricing power for manufacturers.
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