Majority of iron and steel units in northern India are running at below 50 per cent of their capacities primarily because of power shortage and spiralling input cost, a CII-Accenture report said on Wednesday.
“Most steel mills are running at less than 50 per cent of their respective rated capacities because of poor supply and rising input cost,” the report, which was released here, said.
“The power outages in northern states are resulting in production losses and forcing many mills to work only single shifts,” it further said.
The report on ‘Indian Steel Industry-An overview and growth prospects of steel industry in north India’ further pointed out that rupee depreciation against the US dollar has not only raised industry’s input cost but also dealt a severe blow to industry as it faced cancellation of export orders.
“Depreciation of rupee resulted in significant increase in cost of imported steel melting scrap, a major input in secondary steel production. Further due to rupee depreciation, export orders have been cancelled or deferred, which is another set-back for the steel industry in north India,” it said.
India’s northern steel hub contributes about 16 per cent to country’s annual steel output with hub comprising multiple small and medium units - primarily induction furnaces and steel re-rolling mills located in and around Punjab and Haryana.
These units cater to construction and light engineering sector including bicycle and auto parts. Uttar Pradesh is the largest producer and consumer of steel in north India with production of 5.6 million tonne per annum.
Suggesting measures for de-bottlenecking steel sector in north, the report said the steel suppliers should play a major role in implementation of mega investment projects, including $100 billion Delhi-Mumbai Industrial Corridor, export zones and industrial parks across Rajasthan, Haryana and western UP as these projects will continue to drive sustained demand for long steel.
Presenting potential growth constraints, the report said the growth in steel market is expected to be muted in short term on account of poor growth in core consumer sectors.
“The demand is expected to rebound in later half of 2015 with growth in infrastructure as announced in 12th five year plan. Growth in automobile and consumer durable sectors will also support demand growth in long run,” it said.
Regulatory hurdles and land acquisition challenges remain the largest supply-side constraint for Indian steel market, it added.