Following the successful model of East Asian economies, India’s new government will attract foreign direct investment (FDI), set up world-class investment and industrial zones along the dedicated freight corridors and industrial corridors across the country, and strive to build a global manufacturing center. This economic growth strategy will bring huge opportunities to the domestic steel and iron ore industries.
A recent study by Deutsche Bank predicted that steel demand in India will increase by 4% – 5% this year, exceeding the 2% growth rate in 2013-14, 8% in 2016 and an average compound rate of 15% after 2017. In 2015-2020, India is likely to become the second largest steel consumer after China. According to the report, India will become a large steel importer in fy2019-20, with imports reaching 24 million tons, accounting for 17% of consumption, and crude steel production will increase by 48%.
In terms of raw materials, India’s iron ore demand will increase by 53% and coking coal demand by 39%. In fy2015, India is likely to import 15.5 million tons of iron ore, a record high in import history. However, it depends on the loosening of mining restrictions. If the restricted mines recover soon, the domestic ore supply will be able to meet the demand for new steel production capacity by 2020.
Deutsche Bank also expects India to become a net exporter of iron ore again from fy2016, however, exports have shrunk significantly from historical levels. By 2020, India’s iron ore exports will be stable at 15-35 million tons, a significant decrease from about 80-120 million tons in the 2005-2010 fiscal year.