Modi Focus on Railways, Housing Set to Double India Steel Demand

(Bloomberg) -- Steel demand in India, the world's third-biggest producer, is set to more than double in the next decade as Prime Minister Narendra Modi boosts investments in infrastructure.

Consumption is seen expanding to 210 million metric tons by 2025-26 from 90 million tons in the fiscal year ended March 31, S. Abbasi, joint secretary in the Steel Ministry, told an industry conference in Raipur in Chhattisgarh state on Tuesday. The demand surge is seen boosting iron ore usage to an estimated 360 million tons over the same period, coking-coal consumption to 140 million tons and non-coking coal to 100 million tons, he said.

The South Asian nation is banking on a building boom as the economy rebounds and Modi's government invests in new railways, power plants and housing. India's gross domestic product is forecast to grow fivefold by 2032, while the manufacturing sector's contribution in the economy is likely to grow to 25 percent from 17 percent, Abbasi said.

“India has a significant market, which is growing, for steel and that is good news for the mining industry as well as the steel industry,” Abbasi said. Steel use in India's rural areas is low with the country's per-capita consumption at 59 kilograms, way below the world average of 225 kilograms, he said.

Slowing Imports

The steel ministry is working with state-run companies and other ministries to ensure raw-material supply at suitable prices, he said.

Steel demand in India is estimated to grow at 5 percent to 6 percent in 2016-17 and the domestic industry is expected to perform better this year as imports have slowed and China is not in a “tailspin” as it was last year, T.V. Narendran, managing director of Tata Steel Ltd., said on Monday.

Imports into India are sliding after the government imposed a floor price through August and levied safeguard duties until 2018. The country imported a record of 11.2 million tons in 2015-16 as countries such as China shipped out their surpluses, according to Steel Ministry data.

Modi wants to almost triple the size of the domestic industry over the next decade and reduce reliance on imports. The Steel Ministry estimates capacity will rise to 300 million tons by 2025 from 110 million now.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Thomas Kutty Abraham, Ana Monteiro