The minerals and metals industry is expected to fill production gaps in 2024 and reduce dependence on imports, helped along by policy reforms, incentives and large-scale expansion plans of industry behemoths such as Tata Steel, Vedanta Ltd and JSW Steel. In 2023, India’s robust infrastructure-backed demand was met with the help of imports.
India is expected to ride towards sustainability with aggressive policy amendments enabling 'ease of doing business' for domestic players, which will also help fulfil the country's quest to become self-reliant, cutting down import dependency for raw materials and metals, crucial for green energy transition. The country is expecting to see sales of one crore Electric Vehicle (EV) a year by 2030.
The nascent private exploration and mining sector will be seen contributing heavily as the second round of auction of 100 blocks of critical minerals is expected to be launched in the first half of next year.
In 2023, the domestic steel industry was plagued with rising imports of the metal amid a surge in infrastructure projects, eroding profits of Indian steel players amid pricing issues and higher costs. The import situation is expected to be the same next year, according to Crisil which projects 6 million tonnes (MT) of steel imports in FY24. On the other hand, the mining industry underwent a string of policy changes, widening the sector for private participation. It remains to be seen how these changes will take shape in 2024.
Here are the top things to watch out for in the metals and mining sector in 2024:
Carbon tax impact: The European Association’s (EU) 12 percent carbon border tax on Indian steel and iron will take effect from 2026. The implementation of the Carbon Border Adjustment Mechanism (CBAM) is expected to affect between 15 and 40 percent of India’s annual steel exports to Europe, denting profits of companies including Tata Steel, JSW Steel and the Steel Authority of India.
Decarbonisation plans of Indian metal companies: Amid targets to achieve carbon neutrality by 2050 and carbon tax implementation in 2026, players such as Tata Steel, JSW Steel and the Steel Authority of India will aggressively push through sustainable production techniques such as using renewable energy sources (such as hydrogen) to produce steel. The transition will witness significant investment by steel companies in the coming year.
Financing of metal and mining projects: The Coal Ministry's initiative to liberalise the coal sector will see financial institutions take up funding of mining projects. A series of reforms are expected in the sector as the government strives to make it investor-friendly, helping companies like Vedanta Ltd, Adani Enterprises and NMDC secure enough financing.
Critical minerals auction: The Ministry of Mines will conduct the auction for the second tranche of strategic and critical minerals in February 2024. More than 100 blocks containing minerals such as lithium, platinum-group elements, graphite, molybdenum, potash, phosphorite and rare earth elements will be put up for auction. The move is expected to strengthen India's domestic supply of raw materials required to support its shift towards clear technologies. Bidders for the first tranche of the auction will also be finalised.
Steel imports: In a bid to arrest the rising imports of cheaper steel, the government is working on a Production-Linked Incentive (PLI) 2.0 scheme to ensure adequate raw material supply for the steel sector in 2024. India's finished steel consumption in India is projected to increase by 12 percent in FY24, according to rating agency Fitch
Expansion of refined copper production: Gautam Adani-led Adani Enterprises' copper-producing factory at Gujarat's Mundra is expected to kickstart operations in March 2024. The facility will have an annual production capacity of one million tonnes (MT). The industry expects the factory to reduce India's dependence on copper imports, supporting energy transition.
NMDC's gold mining in Australia: State-owned National Mineral Development Corporation (NMDC) will commence gold mining activities in Australia during the first quarter of next year in a bid to enhance India's presence in the global gold production landscape.
Industry Outlook
Jayanta Roy, Senior Vice President, Corporate Ratings, ICRA Limited
In the current fiscal, accelerated infrastructure spending, ahead of the General Elections, along with a rise in coal consumption for power generation due to an uptick in power demand, the mining sector’s growth rate further increased up to 7.6 percent in H1 FY2024. The growth outlook remains favourable as the increased pace of investments in infrastructure/manufacturing, the pandemic, remains a secular trends for India.
Brokerage Motilal Oswal
For 2024, most base metal markets are expected to keep swinging between a smaller surplus and deficit quite easily, depending on how demand plays out. Longer term fundamentals for most metals and historically tight inventories suggest that there could be some positive upside, despite largely balanced markets.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
