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Arnab Basu
Joint Technology Consulting Leader
PwC India
1 https://www.ibtimes.co.in/india-second-largest-steelmaker-ahead-japan-
behind-china-765071
https://www.worldsteel.org/en/dam/jcr:96d7a585-e6b2-4d63-b943-
4cd9ab621a91/World%2520Steel%2520in%2520Figures%25202019.pdf
With the emergence of economies driven by industrialisation complex industries dealing with various reactive/non-reactive
at the beginning of the twentieth century, countries with sound elements. Immense strength, low weight, durability and ductility
steel industries benefited from a first-mover advantage. India at a low cost make steel the most valuable raw material of the
became independent in the middle of this century and looked to manufacturing sector.
become self-reliant under its newly adopted model of a mixed
Steel has contributed immensely towards India’s economic
economy. To achieve this goal, the primary (raw materials),
growth. This is evident from the similar growth patterns of India’s
secondary (manufacturing) and tertiary (services) sectors had to
GDP and steel production in the country, which also highlights
be developed simultaneously. As a raw material and intermediate
the economy’s dependence on steel. National consumption of
product, steel was the common link between all three sectors.
finished steel rose from 6.5 MT in 1968 to 98.71 MT in 2018,
Apart from being a product of the primary sector, steel is
while GDP (at constant price, 2010) grew from USD 0.25 trillion
probably the most extensively used input in manufacturing. Due
in 1968 to USD 2.7 trillion today.
to its high corrosion resistance, steel finds wide usage in many
Comparison of GDP growth rates and crude steel production rates (1968–2018)
30
25
20
15
10
-5
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
-10
Source: GDP data: World Bank, steel production data: World Steel Association
Today, the steel industry contributes slightly more than 2% to net exporter in FY 2016–17, with exports of total finished steel
the GDP of the country. This percentage accounts for direct reaching 8.24 MT vis-à-vis imports of 7.22 MT in the same year. It
contribution. The indirect contribution of steel is much larger, maintained this position with a positive trade balance of 2.138 MT
owing to the dependence of other sectors. The steel industry in the next year too. But with rising protectionism and an ongoing
employs nearly half a million people directly and two million trade war (among other factors), India has seen a steep decrease
people indirectly. The output effect of steel on Indian economy of 33.9% in its exports, clocking only 6.36 MT in 2018–19. In
is approximately 1.4x with an employment multiplier of 6.8x. contrast, imports saw an increase of 4.7% and stood at 7.83 MT.
As per the World Steel Association, globally, for every two jobs As a result, the country once again became a net importer in
created in the steel industry, 13 more jobs are created across the last financial year.3 Though small in scale, a positive trade
the supply chain.2 balance from finished steel production was remarkable for a
country like India, which missed the opportunity to build a mature
India is currently the world’s second largest producer of crude
secondary sector in its hurry to strengthen the tertiary/services
steel, with 110.92 MT produced in 2018–19 (up from 103.13
sector. However, the current global economic downturn and
MT in 2017–18). The country has strengthened its domestic
structural changes in many related industries have arrested this
steel industry considerably over the last decade. It became a
upward trend, at least for now.
2 https://pib.gov.in/newsite/PrintRelease.aspx?relid=153661
https://steel.gov.in/make-india#skipCont
3 http://jpcindiansteel.nic.in
2005
India becomes
1973 one of the top 10
New model for steel producers in
managing the steel the world
1875 industry presented
Bengal Iron and Steel 1962 to the Parliament;
Company in Barakar Completion of set-up of SAIL
Durgapur, Bhilai
1907 and Rourkela
Establishment of steel plants 1991
Tata Iron & Steel
Company (TISCO)
Government of India 2018
liberalises the steel India becomes the world's
sector by removing second largest producer
iron and steel industries of crude steel
1937 1954 from the reserve list
Establishment of Set-up of
Steel Corporation Hindustan Steel
of Bengal Pvt. Ltd.
2,000 1,808
1,800 1,690
1,627
1,560
1,600
1,400 1,251 1,239
1,200
970
1,000 799 848
734 725
800
600
400
200
-
1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 2016-17 2017-18 2018-19
120 111
103
98
100
78
80 66
60 51
39
40 27
25
17 20
20
-
1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 2016-17 2017-18 2018-19
Source: GDP data: World Bank , steel production data: World Steel Association, JPC data
At 51.3%, China is the world’s largest producer of steel. With India allows for 100% foreign direct investment (FDI) under the
a total contribution of 5.9%, India has overtaken Japan to automatic route. This has paved the way for huge investments in
become the second largest producer of steel.5 Production of the India’s steel sector by foreign countries. FDI in steel stood at
steel has kept pace with its global usage. In 2018, the global 0.34% of the GDP last year, and the key reasons for investment
usage of steel stood at 1712.1 MT, up from 1632.5 MT in 2017. were technology and state-of-the-art machinery.
Per capita consumption of steel increased to 224.5 kg in 2018
The private sector has also played a significant role in
from 216.3 kg in 2017.6
strengthening the Indian steel industry, and Indian steel
companies have acquired foreign ones in order to expand.
4 GDP data: World Bank, steel production data: World Steel Association,
http://jpcindiansteel.nic.in
5 https://www.business-standard.com/article/economy-policy/india-pips-japan-to-be-second-largest-global-steel-producer-119012100723_1.html
6 https://www.worldsteel.org/en/dam/jcr:96d7a585-e6b2-4d63-b943-4cd9ab621a91/World%2520Steel%2520in%2520Figures%25202019.pdf
7 http://jpcindiansteel.nic.in/
8 https://steel.gov.in/sites/default/files/draft-national-steel-policy-2017.pdf
9 http://jpcindiansteel.nic.in/writereaddata/files/ANNUAL%20PERFORMANCE%202018-19.pdf
10 CAGR computation
11 ISA analysis
12 https://www.globaldata.com/store/report/gdcn0460mr--construction-in-india-key-trends-and-opportunities-to-2023/
13 https://www.globaldata.com/store/report/gdcn0460mr--construction-in-india-key-trends-and-opportunities-to-2023/
14 Centre for Monitoring Indian Economy (CMIE) Database
15 ISA analysis
The Government of India announced the Automotive Mission Since the beginning of 2018, both economic growth and
Plan 2016-26 (AMP 2026) in 2015. The plan outlines the vision industrial growth in India have consistently slowed down. As
for all sub-segments in terms of size, global footprint and a result, the capital goods sector growth was strong in 2018
technological maturity, etc. It aims at sustained automotive at 6.4%, but is expected to fall below 1.5% in 2019. Since late
growth and bringing India at par with the global auto giants. 2018, manufacturing growth fell significantly due to liquidity
concerns, especially in the SME segment, coupled with slowing
Therefore, steel demand from the automotive sector is expected
new investments. Falling tariffs in solar and wind energy have
to be sustained, despite the temporary blip in growth this year.
impacted the implementation of announced projects. However,
However, the Indian government is putting a significant thrust on
the sector is expected to recover in 2020.
electric vehicles, which will require less steel as these vehicles
have fewer auto components.
16 https://www.ibef.org/industry/india-automobiles.aspx
17 https://www.ibef.org/industry/india-automobiles.aspx
18 CMIE
Import duty on coal 5–7 In conclusion, therefore, a large share of the challenges that
Clean Energy Cess 2–4 the steel industry has faced since 2014 can be traced to the
extremely high finance costs or cost of borrowed capital.
Taxes and duties on iron ore 8–12
Although India’s Reserve Bank has lowered the policy repo rate
Finance 30–35 five times and by 135 basis points in 2019 alone, the cost of
Total cost disadvantage 80–100 capital in India still remains significantly high and Indian steel
makers continue to face a relative disadvantage vis-à-vis their
Source: NITI Aayog competitors from the developed world.
19 https://niti.gov.in/sites/default/files/2019-07/Need%20for%20a%20new%20Steel%20Policy_NITI%20Website%20Final.pdf
Moreover, most Indian steel plants are located inland, unlike in • lowering the freight class for iron ore to 145, uniform with the
China, Japan or Korea, where they are located close to the sea. freight class for coal and limestone
This increases the challenge of managing logistics requirements
• inclusion of iron ore, coal and coke in Long Term Tariff
for most steel plants in India.
Contract (LTTC) Policy
Railways are naturally the preferred mode of transportation for
• no long-term policy on freight structure for short lead traffic to
steel makers. More than 80% of the total logistics requirements
a distance of 100 km
of the steel industry are met through the railway network, as the
sea route can be partially leveraged for only three steel plants. • removal of route rationalisation policy (Charging of iron ore
Moreover, transportation through roadways for bulk materials is and Limestone by a longer route)
economically unviable.
• abolition of long-term policy on freight structure for short lead
The railways face huge infrastructure constraints, which makes traffic up to a distance of 100 km.
managing logistics challenging for Indian steel makers. Moreover,
In conclusion, infrastructure bottlenecks, especially in railway
for a long time now, the overwhelming dependence of the Indian
connectivity, are another external challenge that can outweigh
Railways on revenue from freight traffic, especially from bulk
future growth considerations. Unless there is a significant effort
commodities, is well documented. In other words, the freight cost
by the Indian Railways to rationalise costs as well as to improve
of moving materials through the railways, both raw materials
railway connectivity, capacity additions will remain limited.
and finished steel, is artificially much higher as passenger traffic
is subsidised from freight earnings by the Indian Railways. Tax, duties and cess: While the government has recently
NITI Aayog estimates a relative cost disadvantage for Indian lowered corporate tax rates to 25%, there are certain non-
steelmakers at USD 20–25 per tonne of finished steel. The study creditable taxes, duties and cesses, specifically paid by the steel
estimates that the freight cost from Jamshedpur to Mumbai can sector, which reduce the competitiveness of Indian steel products
be as high as USD 50/tonne in comparison with USD 34/tonne in the global market.
from Rotterdam to Mumbai.20
20 https://niti.gov.in/sites/default/files/2019-07/Need%20for%20a%20new%20Steel%20Policy_NITI%20Website%20Final.pdf
Abolition of these taxes, cesses and duties or making them coking coal in India, with an estimated reserve of approximately
creditable would only increase India’s competitiveness and, 12 billion tonnes. The coal mines in Jharia have had to deal with
in turn, add value to both upstream and downstream steel- fires and issues related to subsistence right from the time mining
producing and steel-using units. operations commenced in early 1900. Moreover, the entire town
of Jharia is located on coal fields and close to 100,000 people
The National Steel Policy has laid down certain goals. For these
reside there. The development of the Jharia coal fields will not
to be realised, Indian steel needs to be globally competitive.
only secure the coal requirement of the steel industry, acting as
Otherwise, India will never be able to increase steel exports
a major incentive for investment, but will also lead to the overall
beyond a certain limit and will continue to be threatened by
development of the region.
cheaper imports. To prevent his, the government needs to ensure
that the additional burden of USD 80–100 that Indian steel The National Steel Policy, 2017, envisages that only 65% of
makers are saddled with is removed. Removal of non-creditable India’s coking coal requirements will be met through imports by
taxes, duties and cesses is the easiest to achieve. Otherwise, we 2030–31. If India is to consume 180 million tonnes of coking
foresee this to be a big challenge going forward. coal annually, this means that around 60–65 million tons will be
provided by domestic sources. This poses a serious challenge
Raw materials: Although India has abundant reserves of iron ore
to the growth aspirations of the Indian steel industry, unless the
and coal, it has negligible reserves of coking coal. The National
Jharia fields are developed.23
Steel Policy envisages that India will reach 300 million tonnes
of steel-making capacity, and 68% of that will be through the Environment and energy consumption: Increasingly,
blast furnace route, which requires coking coal. This translates environmental concerns are taking centre stage and the Indian
to about 200 million tonnes of steel being produced using coking steel industry is not immune to this trend. The steel industry is
coal, which means an annual consumption of about 180 million energy-intensive and is the second biggest consumer of energy
tonnes of coking coal.21 globally. This leads to a higher carbon footprint and also affects
the immediate environment. Using energy-efficient methods
India largely fulfils its coking coal requirements through imports
to produce steel will not only reduce production costs but also
from Australia. But due to vagaries of weather, there has been
improve competitiveness. This can be achieved through highly
huge fluctuations in coking coal supply as well as coking coal
developed energy management systems and usage of the latest
prices.
technologies in steel production.
Jharia fields in eastern India are amongst the world’s largest
coal fields in terms of reserves, with an estimated coal reserve
of 19.4 billion tonnes.22 Jharia coal fields are the only source of
21 https://www.thehindubusinessline.com/news/national/india-can-produce-300-mt-of-steel-by-2030-experts/article9783300.ece#
http://ficci.in/spdocument/20782/ficci-steel-report.pdf
22 Indian mineral yearbook 2011, India bureau of mines, Ministry of mines Government of India Oct 2012
23 https://www.mjunction.in/blog/taking-stock-indias-met-coal-coke-outlook/
120
100
94
Energy consumption percentage
100
82
78
80 68
62
58
60 48
44 42 41 41
40 27
20
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Year
Source: Worldsteel.org
Slurry and other solid wastes and emissions like GHGs are Besides these challenges, we would like to highlight two threats
byproducts of the steel manufacturing process and result in that can turn into potential challenges and hamper the growth
environmental pollution. As per the World Steel Association, on aspirations of the Indian steel industry. The first arises from global
an average, in 2017, 1.83 tonnes of CO2 were emitted for every steel trade and the second is digital disruption.
tonne of steel produced, which is equivalent to around 7–9% of
An understanding of the global steel industry and developments
direct emissions from the global use of fossil fuel. In India, the
in the last few years is important. China is the world’s largest
figures are marginally higher.25
steel producer, accounting for 51.3% of global production and
Water management is a crucial step and challenge in steel an output that is nearly eight to nine times higher than that of the
manufacturing, especially in areas where availability of pure second largest producer, which is India. Clearly, exports from
water is decreasing. Thus, reusage becomes important, China have the potential to disrupt global trade and international
necessitating desalination and cooling of water to avoid steel prices. Moreover, in the last couple of years, protectionist
damaging vital equipment like rolling mills. Desalination requires barriers are being put up by various nations against steel imports.
large amounts of energy (for crystallisation), which produces With a growing market, India is a potential destination for all the
a low-quality salt that has no commercial use and is costly to displaced exports from countries like China, Japan and Korea,
dispose of. who all have a substantial export basket in steel products.
Going forward, if the Indian steel industry is to fulfil its growth We perceive this as a threat rather than a challenge. However, if
aspirations, it will have to continuously upgrade to energy- the areas outlined above are not addressed vis-à-vis improving
efficient technologies and invest in processes that help reduce India’s competitiveness in terms of costs, this threat can become
the carbon footprint. The Indian government has already released a challenge to the growth aspirations outlined in the National
draft environment guidelines which are quite stringent and may Steel Policy, 2017.
become stricter in future.
The other potential challenge that the Indian steel industry
This means that many inefficient and small steel producers will will soon start facing in a significant way is digital disruption;
find it unviable to produce steel while complying with increasingly however, this also represents an opportunity in terms of staying
strict environment norms. This may jeopardise the goals laid out globally competitive. The next section focuses on this aspect.
in the National Steel Policy, 2017.
24 https://www.worldsteel.org/en/dam/jcr:f07b864c-908e-4229-9f92-669f1c3abf4c/fact_energy_2019.pdf
25 https://www.worldsteel.org/publications/position-papers/steel-s-contribution-to-a-low-carbon-future.html
To what extent have you made progress toward the implementation of digital ecosystems?
And five years from now?
Current digital ecosystem maturity and
future development by geographic region
26 https://www.weforum.org/agenda/2019/06/the-digital-revolution-will-transform-steel-and-metals-companies/
27 https://www.strategyand.pwc.com/gx/en/insights/industry4-0.html
28 https://news.thomasnet.com/companystory/downtime-costs-auto-industry-22k-minute-survey-481017
Digital Novice
Digital Follower
Digital Innovator
Digital Champion
0 10 20 30 40 50 60 70 80 90 100%
Among industries, automotive and electronics have the largest requires connecting and managing disparate systems and
share of digital champions, at 20% and 14% respectively. partners across an extended value chain. Consumer goods,
Operations in auto companies have been optimised, automated, industrial manufacturing and process industries lag significantly
and connected for decades, and electronics manufacturers behind
have been at the forefront of outsourced manufacturing, which
Industrial equipment
and engineering 23% 42% 22% 13%
Industrial
manufacturing 22% 46% 26% 6%
Digital Novice
EMEA 30% 45% 20% 5%
Digital Follower
Digital Innovator
Americas 15% 35% 39% 11% Digital Champion
Organisations can conduct a small-scale pilot test that focuses on a single business unit, geographic market or asset. The pilot can
begin with a few advanced use cases, demonstrating the benefits of the digital methodology and serving as a roadmap for setting up
in-house arrangements.
Internet of things
2020
Drones Outlook Virtual reality
3D printing Blockchain
Artificial intelligence
XaaS
(12%)
Software
Services 16%
$217B $261B
27%
IT and
installation
1.7 T
$252B
services
(15%)
$585B
$362B
Connectivity Hardware
22% 35%
As per a study by PwC, the following are the drivers of IoT growth:
Convergence of/
IT and operational
technology
IoT Decreasing cost
of megabit/sec
enabled by AI
Source: PwC
30 https://www.ndt.net/article/wcndt00/papers/idn135/idn135.htm
31 https://www.cioandleader.com/article/2017/06/05/how-jindal-steel-and-power-using-iot-future-proof-its-business
32 https://ark-invest.com/research/industrial-robot-cost-declines
33 https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/tata-steel-unveils-uks-biggest-robotic-welding-line/articleshow/57171709.cms
34 https://www.toptal.com/finance/market-research-analysts/drone-market
35 https://www.livemint.com/technology/gadgets/flying-high-how-commercial-drones-are-taking-flight-in-india-through-enterprise-1551640246185.html
36 https://www.hoganas.com/en/services/digital-metal/
37 https://www.forbes.com/sites/tomdavenport/2018/02/08/shining-up-a-rusty-industry-with-artificial-intelligence/#e30913c61c43
8
6
4
2
0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Labour productivity Personalisation Time saved Quality
https://www.ibef.org/industry/steel.aspx
https://www.weforum.org/agenda/2019/06/the-digital-revolution-will-transform-steel-and-metals-companies/
https://pdfs.semanticscholar.org/c1d5/69ab2e291b1eb13ad0444807786ac6da1fc1.pdf
https://www.kuka.com/en-in/industries/metal-industry
https://www.newgenapps.com/blog/8-uses-applications-and-benefits-of-industrial-iot-in-manufacturing
https://worldsteel.org
https://steel.gov.in/
https://www.researchgate.net/publication/312551979_Metal_Crash_Barrier
https://www.marketsandmarkets.com/Market-Reports/crash-barrier-systems-market-155586627.html
https://www.alliedmarketresearch.com/barrier-systems-market
https://www.livemint.com/
https://en.stahl-online.de/index.php/topics/energy-and-environment/energy/
https://www.businesstoday.in/opinion/columns/indian-steel-industry-overcoming-challenges-and-strengthening-itself/story/277398.html
https://www.worldsteel.org/en/dam/jcr:f07b864c-908e-4229-9f92-669f1c3abf4c/fact_energy_2019.pdf
https://www.keralaenergy.gov.in/files/Resources/Iron__Steel_Sector_Report_2018.pdf
https://blogs.oracle.com/iot/steel-manufacturing-leader-adopting-industry-40-production-monitoring-with-oracle-iot-asset-monitoring
https://social-innovation.hitachi/en-us/think-ahead/manufacturing/digital-manufacturing/
http://www3.weforum.org/docs/WEF_White_Paper_Technology_Innovation_Future_of_Production_2017.pdf
https://www.pwc.com/us/en/industries/industrial-products/library/industrial-digital-ecosystem.html
https://www.pwc.com/gx/en/issues/data-and-analytics/publications/artificial-intelligence-study.html
https://www.pwc.com/us/en/services/consulting/library/artificial-intelligence-predictions-2019.html
https://morth.nic.in/sites/default/files/Report_on_installation_of_crash_barriers_at_accident_prone_locations_on_National_Highways_
on_hilly_terrain.pdf
https://www.pwc.com/gx/en/industries/industries-4.0/landing-page/industry-4.0-building-your-digital-enterprise-april-2016.pdfhttps://
www.pwc.com/gx/en/industries/communications/assets/pwc-ai-and-iot.pdf
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Contact us
Arnab Basu
Joint Technology Consulting Leader
PwC India
Himanshu Ghawri
Director, Technology Consulting
PwC India
Authors
Kartikay Kumar, Jyothsna Bandi, LeelaRam Tenneti (PwC India)
Contributors
Himanshu Ghawri, Aman Jaiswal, Anshul Gupta (PwC India)
Editorial support
Dion D’Souza, Saptarshi S Dutta (PwC India)
Design
Pallavi Dhingra (PwC India)
© 2019 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers
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