High dependency on imported coking coal, scrap shortage among challenges for steel sector: Report

New Delhi, Jun 26 (PTI) The country's steel sector, which is aiming for an ambitious production capacity target faces challenges like high dependency on imported coking coal and limited availability of steel scrap, a financial consultancy firm said on Thursday.

India's steel industry -- considered the backbone of the nation's infrastructure and manufacturing ecosystem -- is moving toward the government's target of achieving 300 million tonnes per annum (MTPA) of crude steel capacity by 2030-31.

"As of 2024-“25, India has achieved an installed capacity of 205 MTPA, followed by proposed capacity expansion plans of 167 MTPA till 2031 by major steel players. However, the sector faces several challenges, including the need for iron ore beneficiation, an 85 per cent dependency on imported coking coal, limited availability of steel scrap, and high CO2 emission intensity in the steelmaking process," MP Financial Advisory Services LLP (MPFASL) said in a statement.

Additionally, external headwinds such as low-cost imports from China, EU safeguard duties, and impending carbon tariffs pose further risks to the industry's growth trajectory.

High logistics costs accompanied by the time-consuming process for obtaining approvals for green field projects and a higher cost of financing when compared to China, the largest steel producer, further pose challenges towards the desired steel capacities, it said.

It further said while there are challenges, the steel capacity target would be achieved through a multi-pronged strategy, dependent on five critical levers -- accelerated investments in green and value-added steel, infrastructure and raw material linkage improvements, clean technology adoption, policy reform for financing and approvals and a strong public-“private execution model.

"Overcoming resource, policy, and trade challenges through innovation and sustainability will be key to positioning India as a global hub for green and specialty steel, supporting its 5 trillion dollar economy vision," Mahendra Patil, Founder and Managing Partner at MP Financial Advisory Services LLP, said.