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September 13, 2006

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Steel: India ambles on..... By Pratap Thorat

Mittal Steel Company of Indian businessman Laxmi Niwas Mittal is the world's largest producer of steel. Forbes magazine's March 2006 ratings reveal that Laxmi Mittal himself is the third wealthiest person in the world. The price of $128 million that he paid to buy his Kensington Palace Gardens house in London in 2003 is considered to be the highest price ever paid for a house. The extravaganza of $65 million to host his daughter's wedding in June 2004 made the most expensive wedding in the world's history.

This may be the story of the fabled World Steel King from India. But it is certainly not the account of the Indian steel industry, which is still floundering for a prominent place in the world steel scenario. But there are indications of India's forward march on this front too.

Indian crude steel production rose from 33 metric tones in 2004 to 38.1 MT in 2005 a sharp rise of 16.7 percent. It is about 42 MT now. China's rose from 100 MT in 1995 to 330 MT in 2005 and is in a hurry to reach the 500 MT mark. India remains a tiny toddler in the race for the steel with China. But that was not so in the 60s and 70s, when they ran neck and neck. In the next 20 years China quickened itself to a mind-boggling pace by creating monsters in its infra-structure. In spite of having huge iron ore in its landmass, India looked anemic and its steel industry bonsai. India left itself far behind China in steel in these two crucial decades. The only silver-lining was that India produced steel cheaper by $ 50 per ton than China.

The UK-based GFMS Metal Consultancy firm published a report last month. Its title "Indian Steel: The Next China" does not need any further comment on the emerging production and consumption scenario here. Sharp is the rise in the domestic steel demand, which is stimulated by Indian government's recent spending of over $15bn on infrastructure projects such as roads, bridges and airports, in an effort to pull the country up to international standards. Added to it is the frenzied housing construction activity and growing demand of the automobiles. Experts believe that in steel production India would cross the 60 MT mark by 2010 and the 130 MT mark by 2015. It is hoped that steel will become another sunshine industry of India.

Vast reserves of unexploited iron ore and coal raw material base coupled with the government's slow but sure move towards liberating the steel industry's price structure has started making India a potential major world player in the eyes of the world. The resolve to not share iron ore with China or anybody else is growing here in recent months. Instead, they choose to export the finished product.

The iron ore is mined in the form of lumps and fines. The elementary blunder Indian steel-makers had made was that they did not employ the technology to process the fines to produce steel. China did that and enabled itself to gobble up India's unsintered fines. India exports 87 percent of the fines, which otherwise lie waste. The Indian industry is now waking up to treat these iron ore fines.

India's three leading industry bodies - Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce & Industry (FICCI) and the Associated Chambers of Commerce & Industry of India (ASSOCHAM) have joined hands to exert pressure on the government to ban export of iron ore. Surprisingly, worst critics of the private sector, the left-wing Marxist-Communists, have joined the chorus. Party lines blurred when the chief minister of iron-ore-rich Chhattisgarh state and Congress MP and the chief of the Jindal Steel Naveen Jindal met the prime minister to press the demand. There is almost consensus to save this natural resource to build up the nation fast as the figure for the projected annual steel consumption of India is 300 MT. India produces steel at a lower price than its neighbour beyond the Himalayas and that is bound to make it a magnet to the global investors in the foreseeable future.


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