Insight Conversation: Nagendra Nath Sinha, Ministry of Steel, India

India is targeting an ambitious ramp-up of its steel production, leveraging on an unrivalled track record of multiyear economic growth that stems from a burgeoning domestic consumer demand. But the big question is, will India achieve its steel capacity growth target? Indian Ministry of Steel Secretary Nagendra Nath Sinha shares his insights with S&P Global Commodity Insights Senior Editor Rituparna Nath to answer this and other questions that are crucial to the Indian steel industry.

India is targeting to hit 300 million mt of production capacity by 2030. What steps are being taken to achieve this and how much of the new capacity expansion is expected to be through the EAF/IF route and BF route?

India's national steel policy has clearly identified the road map for reaching 300 million mt steel production capacity by 2030 to meet the projected demand of 255 million mt of crude steel at the time. We have already crossed 161 million mt of capacity, comprising 67 million mt by blast furnace-basic oxygen furnace route, 36 million mt by electric furnace and 58 million mt by induction furnace route.

All major integrated steel players are working on, have announced or are contemplating new capacity. I am optimistic that the vision set out in the steel policy will be met. We understand secondary steel sector dispersed across the country is also considering expansion.

The government, through its initiatives and polices, has been in continuous discussions with investors and stakeholders. Today, the mineral-rich states of Odisha, Jharkhand, Chhattisgarh and Karnataka are all on the threshold of witnessing significant investments in the creation of steel capacity in those states through setting up industrial hubs, special economic zones and steel plants.

As our demand is growing at CAGR of 7%-8%, and with the Indian government pushing for the creation of world-class infrastructure, we are expecting that steel demand is likely to grow either at the same or higher rate.

Indian Steel Minister Jyotiraditya Scindia recently indicated mandating steel producers to allocate a portion of their overall production to green steel. When is this expected to be implemented and how will it impact the steel industry's production commitments?

India and its iron and steel industry are committed to reduce CO2 emissions intensity. Following Indian Prime Minister Narendra Modi's commitment in COP26 in Glasgow, we are aiming to achieve Net Zero Carbon by 2070. Majority of Indian companies have announced their decarbonization strategy through the principle of carbon minimization, carbon avoidance and carbon recycling. Carbon capture and utilization is being considered as one of the main opportunities available besides improving energy efficiency, adopting advanced technologies leading to lower carbon footprint, and waste utilization.

India's steel ministry is working on a detailed decarbonization strategy. We have formed 13 task forces to help the government understand how we can respond to the demands to produce low-carbon emission or green steel. We have many experts drafted to the task forces, and we are eagerly awaiting the report from them.

No consensus has been reached on the definition of green steel among global steel producers. Our focus is on minimizing carbon emissions intensity in production of steel.

There are concerns that the EU's Carbon Border Adjustment Mechanism might impact a portion of Indian steel exports. Do you also anticipate such an impact and can it be circumvented?

Presently, CBAM mandates importers to report emissions data if the products fall under any of the sector covered by the mechanism, which includes steel.

The Indian government anticipates that steel exports will be impacted since not all steel producers may be conforming to the norms assumed under the CBAM framework. This adds to the compliance burden on small producers.

India has raised its concerns at both bilateral and multilateral levels with the EU. It is in the interest of exporters that they flag their concerns to the government, and at the same time look at ways to adapt.

An increased capacity expansion comes with increased carbon emissions. How will the steel industry remain aligned with the national carbon targets?

It is not only India -- majority of the countries, having a status similar to India, face this situation. It is a fact that 70% of the steel production across the globe is still being met by BF-BOF route and only around 30% of the production is through EAF route.

I agree that expansion comes hand in hand with increased emissions as no alternative technology is available. Our steel demand is increasing as we transit from developing to become a developed nation. Our per capita consumption of steel is at 86.6 kilograms against the global average of 228 kilograms. However, we are encouraging the industry to deploy the best available technologies. We are also promoting harvesting of scrap, which feeds into steelmaking through EAF route.

Utilization of renewable power can help in reducing emissions in the steel industry. India shall encourage the use of renewable power to the extent possible, either through self-generation or through purchase, by steel producers. As we understand, major steel players in India are already planning to switch over to renewable power partially or fully during this decade.

Significant number of our existing facilities, particularly large plants, will be due for modernization, upgrade or replacement during 2035-2045. Several technologies are under development for green steelmaking, but commercialization is at least a decade away. Hopefully, viable green steelmaking technology will be commercially available by the time, including these using green hydrogen and CCUS. Green technology adoption in such cases will help the Indian steel industry to align with the national carbon targets.

India is the second largest steel producer, just behind China. The country aims to widen the range of steel grades covered by the government incentive program in a bid to boost output. Could you tell us a bit more on this and how soon can we expect developments?

Our objective is very clear: to become self-reliant, by fostering an increasing usage of domestic steel to meet emerging demand and maintain a strategic presence in export markets.

India became the second largest producer of steel in 2018 and we have been maintaining our position since. We continuously increase self-reliance besides exporting a small percentage of our production. This shows that our policy is backed up by adequate due diligence. To strengthen this, we notified the Production Linked Incentive scheme for special and alloy steel, and the response from the industry was positive. We are confident that once the PLI scheme is fully implemented, we shall be self-sufficient in many grades of steel being imported.

The government is keen for India to become a country that can produce all grades of steel competitively. We have been discussing with the industry and our counterpart ministries to see how the scope of PLI could be expanded. We hope to come out with something in this regard in a few months.

Given the planned capacity expansion for steel, an increased demand for met coal is inevitable. India also aims to become self-reliant in terms of raw material production. What steps are being taken to achieve this?

As our main production will remain through BF-BOF route, coking coal demand will continue to grow. The Indian coal ministry is taking several steps and declared Mission Coking Coal in 2021, with an objective to produce around 140 million mt of raw coking coal by 2030. However, high ash in our reserves is one of the main concerns. The coal ministry is encouraging setting up of new washeries and encouraging adoption of advanced technologies so that yield in our washeries can be improved. In the near future, we may see a decline in the overall dependency on imported coal but we shall remain dependent on imports for major portion of our demand.

How important is it for Indian steel producers to diversify their source for coking coal from Australia?

Diversification of coking coal supplies is an ongoing process for the steel industry to minimize the risk by reducing dependency on a few countries. We are not averse to any nation but would like to safeguard our interest to remain competitive in the global market.

The government, as a facilitator, extends the needed help in bringing overseas players and the Indian steel sector together. Major overseas metallurgical coal suppliers from Mozambique, the US, Russia, South Africa and New Zealand are increasingly tapping into the Indian steel market, being among the few bright spots globally.

Is the government looking at setting up new sectors in the country, which can result in an increase in per capita consumption of steel?

The consumption basket of steel products in India comprises 68% by building and construction sector along with infrastructure, and the rest comes from other sectors.

Our per capita steel consumption has increased to 86.6 kilograms in fiscal year 2023 from 61 kilograms in fiscal year 2017, rising by almost 42%.

Long products and flat products have a ratio of about 54% and 46%, respectively, in yearly consumption of steel in India, according to the latest data for fiscal 2023.

I see demand for both the segments and speciality steel growing as the Indian government is focused on developing steel intensive infrastructure projects in railways, highways, power including renewable power, among other critical sectors for making the Indian economy "atmanirbhar" (self-reliant).

In addition, government and industry are always interacting with stakeholders to assess their emerging needs and provide solutions to meet their present and future requirements besides looking for ways to replace competing materials. The Indian Industry is also investing in developing newer grades of steel both for domestic and global markets.

The long-term growth story for Indian steel demand continues to be robust, in view of the expected growth of the Indian economy from its current GDP value of US$3.4 trillion in fiscal 2023 to US$7 trillion-$8 trillion by 2030-31. As the economy grows, more steel would be needed.

We are confident that our per capita steel consumption by 2030 shall be almost double and touch around 160 kilogram, which is almost same as planned in the national steel policy.