Steel industry is expected to increase production capacity by 20 per cent to 100 million tonnes per annum (mtpa) by 2013.
Currently, the country has a crude steel capacity of 80 mt.
Mr Vikram Amin, Executive Director, Essar Steel, said the addition will be through expansion of existing capacity (brownfield projects) as against fresh capacity (Greenfield expansion). These projects are awaiting clearances from various ministries.
Speaking at the ‘Metals Outlook 2012' seminar on Saturday, Mr Amin said the country will emerge the second largest steel producer overtaking Japan and the US by 2016.
The world's largest steel producer China has a capacity of 700 mt followed by Japan with 110 mt and the US 86 mt. Steel demand has not kept pace with the capacity addition. The slowdown in Government's infrastructure spends and high interest rates have spooked steel demand.
RAW MATERIAL SHORTAGE
“Given the current outlook, we expect the supply to exceed demand in next few years. The capacity utilisation will be under pressure,” said Mr Amin. Having put in steel production capacity, the steel industry is expecting the Government to ensure that the required raw materials such as iron ore and coking coal are made available.
The Supreme Court has recently banned iron ore mining in Karnataka, leading to sharp spike in prices. The Goa Government has also issued show cause notice to iron ore miners seeking clarification on production front.
Urging the industry to keep its capacity expansion on track, Dr A.S. Firoz, Chief Economist, Ministry of Steel, said delaying projects on the pretext of excess supply is not a solution.
“After a certain period, the cost of capital will increase to such a level that the entire project will become unviable. Moreover, companies will have the requisite capacity when the demand looks up,” he said.