There is an urgent need to increase and improve the logistics arrangement for the domestic steel sector, industry body Indian Steel Association (ISA) on Thursday said.
Managing logistics requirements is still challenging and costly for many steel makers in India, ISA Secretary-General Bhaskar Chatterjee said in the Indian Steel Markets Conference 2021 organised by mjunction.
mjunction, a joint venture between Tata Steel and the Steel Authority of India Ltd, is a business-to-business e-commerce company that also publishes research reports on coal and steel verticals.
Noting that the steel production and consumption of the metal are expected to grow on the back of government initiatives, the transportation of raw materials to steel mills and finished steel to demand centres is an area to be looked at, he said in his address.
Citing a figure from a government study, Chatterjee said, "The freight cost from Jamshedpur to Mumbai can be as high as USD 50 per tonne in comparison to USD 34 per tonne from Rotterdam to Mumbai."
In India, Chatterjee said that for every 1 tonne of steel produced, roughly 3 tonnes of raw material needs to be transported.
So, even as India doubles its steel production in the next 10 years, the logistic requirement of the domestic steel industry will become virtually unmanageable unless steps are taken to improve the physical infrastructure especially by the Indian Railways, Chatterjee said.
The government has set a target to increase India's total installed steel capacity to 300 million tonne by 2030.
Addressing further, he said managing logistic requirements is still challenging and costly for many steel makers in the country.
The primary raw materials that is iron ore and coal are bulky and so is the product steel, and the process of transporting the raw materials to steel mills or finished steel to demand centres is always arduous.
Moreover, most Indian steel plants are located inland unlike in China, Japan or South Korea where they are located closely to the sea.
"This system makes the logistic requirement more taxing. Though railways are the naturally referred mode of transportation for steel and meet more than 80 pc of the total logistical requirement of the steel industry.
"There are a number of infrastructure constraints in the railways logistical ecosystem which adds to the logistical woes of Indian steel makers," Chatterjee said.
Sharing his outlook for the sector, he said the industry has to a large extent negotiated the headwinds caused by the COVID-19 pandemic. The steel demand is poised to log a compound annual growth rate (CAGR) of around 7-7.5 percent between the fiscals 2021-22 and 2024-25.
The government's initiative related to housing like Housing for All, Bharatmala project for roads, Sagarmala project for ports, Dedicated Freight Corridors, metros, the bullet train under the railways, and UDAN under the aviation sector will provide great impetus.Besides, mandatory road crash barriers on national highways, rising construction projects, use of pre-engineered buildings and design changing in urban housing will augment the steel demand in the long-term.