Metals & Mining

Metals & Mining

India’s strategic location enables export opportunities to developed as well as fast-developing Asian markets.  It has a vast mineral potential with mining lease granted for longer durations of 20 to 30 years. The demand for iron and steel is growing steadily and has strong growth expectations for the residential and commercial building industry. India is the second largest crude steel producer in the world. It is also the third largest producer of coal and fourth largest producer of iron ore worldwide.

 

  • Crude steel production in India stood at 111.2 MT as of 2019. It is forecasted to reach 255 MT in FY 2030-31.
  • Coal production in the country stood at 729.10 million tonnes (MT) in FY20 and reached 304.88 MT in FY21 (as of October 2020).
  • The production of iron ore in FY20 stood at 206.45 MT. India owns about 8% of the world’s iron ore deposits.

 

Metal and metal products are immediate inputs for all the industries. In India, aluminium is used in automobiles, aerospace, construction, electrical and packaging sectors. Iron is extensively used in making steel and steel is used in construction, housing and transportation sectors. Lead is mainly used in the manufacturing of lead acid storage batteries. About 50% of the zinc is used in galvanisation. It protects steel products from corrosion. The largest consumer of zinc is the galvanizing industry. India has roughly 5% of the world’s total zinc reserves. Copper is used in the electrical, transport and consumer durable manufacturing sector.

The worldwide pandemic Covid-19 has led to severe disruptions across the value chain of the metals and mining industry. Some of the challenges faced by the Indian metals and mining sector are automation and softwares that are used in the fabrication processes, lack of skilled workers, shortage of raw materials along with Transportation problems.

However, this industry has tremendous growth potential. The Make in India initiative has been focusing on innovation lately. Machines are being made more efficient so they can mine more to meet with the export demands. The industry requires a very high degree of skill. Therefore, these skills have to be nurtured, developed and maintained. The government is restructuring the framework and trying to untangle the bureaucratic hurdles to enable ease of business. 

Indian exporters often find it challenging to meet standards and conformity assessment criteria demanded by developed nations. Therefore, the government, Bureau of Indian Standards (BIS), and relevant industry bodies could consider joint programmes pertaining to standards and technical regulations. For example, the Ministry of Steel along with BIS have periodically imposed quality control orders on domestic steel to improve quality of manufactured products as per designated product standards. It may be beneficial to harmonise local standards with global standards to facilitate increase in steel exports.

 

 Value of base metals exported from India in FY20:

Tin  & Its Products-                       10.45 Million

Nickel & Its Products-                   92.62 Million

Lead & Its Products-                    372.06 Million

Zinc & Its Products –                   569.07 Million

Copper &Its Products-                 854.16 Million

Aluminium & Its Products-        5091.51 Million

Products Of Iron & Steel-          7034.67 Million

Iron & Steel-                              9277.47 Million

 

In June 2020, iron and steel recorded more than 100% growth in exports shipments of US$ 1.32 billion against US$ 653.52 million in June 2019. The index of mineral production accounted for 132.7 in March 2020. The mining group under Index of Industrial Production (IIP) stood at 109.7 for FY20, witnessing a growth of 1.7% y-o-y.  The per capita finished steel consumption is also expected to rise from 74.1kg in 2018 to 158kg by 2030-31. Coal demand is projected to grow from 955.26 MT in 2019-20 to 1.27 BT in 2023-24. The FDI equity inflows into the metallurgical and mining sector was $14.20 billion and $ 27.73 million into coal production (April 2000-2020).

Growth Drivers of the Industry:

  1. Cost advantage – Fair advantage in conversion cost of steel and alumina 
  2. Rising demand from infrastructure and transportation sectors– Schemes such as Housing for all by 2022 and expansion of railway network
  3. Unexplored mines – Only 20% of the total reserves have been mined till now
  4. Supportive government policies – Permission granted to captive mines to sell coal in open market
  5. Atmanirbhar Bharat Abhiyan– Production Linked Incentive scheme in specialty steel sector has been introduced under Atmanirbhar Bharat 3.0 package
  6. Single Window Clearance Portal– A unified platform that facilitates the grant of clearances and approvals required for starting a coal mine in India.

 

An article published in the FICCI newsletter, authored by Shridhar Kamath, Partner, Deloitte India and Rajib Maitra, Director, Deloitte India; mentions that the sector has the potential to have significant impact on GDP growth, foreign exchange earnings and create competitive advantage for end use sectors such as construction, infrastructure, automotive, power, etc. with respect to securing key raw materials at competitive prices.

There is a significant scope for new mining capacities in iron ore, bauxite and coal and considerable opportunities for future discoveries of subsurface deposits. The Infrastructure projects continue to provide lucrative business opportunities for steel, zinc, and aluminium producers. The expectations of the demand for these metals is high for the residential and commercial building industry. Since growth in the metals and mining sector is primarily driven by sectors like infrastructure, automotive, power, construction, etc., it is important that these sectors revive back at the earliest.