India's steel consumption is expected to grow at its fastest pace in five years next year on Prime Minister Narendra Modi's infrastructure push, but a scarcity of raw materials means it will be at the expense of another key goal - curbing imports.
In his triumphant election campaign, Modi criticized the last government for exporting iron ore but importing steel. But his first five months as the prime minister has coincided with a surge in imports of both, denting his high-decibel drive to make India an export powerhouse.
India's steel imports from China, the world's biggest producer of the alloy, doubled in April-September from a year ago though the country has enough capacity to meet its demand.
While India's consumption is expected to rise, China will continue to see a downtrend, likely leading to a flood of cheap steel from China just as Modi pushes ahead with a signature 'Make in India' initiative to boost industry.
Charged by the strongest electoral mandate in three decades, Modi has staked his reputation on making India an export hub, launching his pet campaign with much fanfare in September with a lion as its logo.
Soaring steel imports, however, underscore the challenges Modi faces in realizing his dream. Steelmakers, such as JSW , are clamoring for higher import tariffs.
"The 'Make in India' slogan has to be true for steel also," said Ravinder Bhan, deputy general manager of marketing at state-owned Steel Authority of India. "Let steel firms get iron ore and other raw materials. But that's not happening."
India, Asia's third-largest economy, has become a major importer of iron ore and coal despite having big reserves of both at home. Once a top exporter, India is now bringing in shiploads of iron ore due to court action against illegal mining that has stifled supply, while coal behemoth Coal India is struggling to boost production.
The shortages mean that India's steel industry is running at 80 percent of capacity. But the World Steel Association expects Modi's pro-business plans - building 100 new 'smart' cities, creating new logistic hubs and residential townships - to spur steel demand that has been weak in recent years.