Supply of steel to Indian auto industry to get major boost after ArcelorMittal Nippon Steel's Hazira expansion

ArcelorMittal Nippon Steel India, a leading integrated flat steel producer in the country, currently has a crude steel capacity of about 9 million tonnes per annum and a pellet capacity of about 20 million.

By Shahkar Abidi calendar 28 May 2024 Views icon14962 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Supply of steel to Indian auto industry to get major boost after ArcelorMittal Nippon Steel's Hazira expansion

ArcelorMittal Nippon Steel India, a joint venture between steel giants ArcelorMittal and Nippon Steel will include a new 2 million tonne cold rolling mill and an upstream hot strip mill, targeting the fast-growing automotive sector with specialty steel grades, at its flagship plant in Hazira, Gujarat.  

Ranjan Dhar, Director and VP, Sales and Marketing, said that ArcelorMittal Nippon Steel India was launching a new automotive line, with the plant currently under construction. The company is currently in expansion mode and aims to target 15 MTPA from the current 9 MTPA –  with an estimated investment of Rs 60,000 crore. The new cold rolling mill, specifically designed for automobiles, will produce all the specialty steel varieties offered globally by both companies. 

"Considering the global landscape for automotive steel, there are only 3-4 major companies. Two of those companies – ArcelorMittal and Nippon Steel – are in this joint venture," Dhar added. "So I think its sufficient to say that we are bringing to India the best technologies and products that are available globally for the automotive industry."

ArcelorMittal Nippon Steel India, a leading integrated flat steel producer in the country, currently has a crude steel capacity of about 9 million tonnes per annum and a pellet capacity of about 20 million. In the passenger vehicle segment, the company's share currently stands around 7-8%, which it intends to increase "significantly"  over the next five years. "Our emphasis is that as these new capacities will come early next year, technically, there should not be any need for any imports," Dhar emphasised.

Surge in demand for high performance steel 

This move comes as India's auto industry experiences a surge in demand for high-performance steel, which now forms around 60% of the total body structure in today's vehicles. ArcelorMittal Nippon Steel India's expansion aims to capitalise on this trend, offering vehicle manufacturers a domestic source of advanced steel materials, with industry captains estimating the specialty steel segment to grow at a CAGR of 7-8%. 

Citing industry trends, Ranjan Dhar, Director and VP, Sales and Marketing at ArcelorMittal Nippon Steel India, told Autocar Professional that the demand for automotive steel is rising alongside a decline in dependence on imports, which has fallen to 10-12%, down from around 35-38% 'few years ago'. "As new capacities are added, including ours at ArcelorMittal Nippon Steel India, we're introducing all the products currently being imported to provide complete solutions domestically," Dhar informed, adding that around 15% of the company's total steel production revenue comes from the automotive segment.

Lakshmi Mittal, Executive Chairman, ArcelorMittal, while speaking at the inaugural session of the 10th edition of the Vibrant Gujarat Summit in January had mentioned stated that the first phase of the Hazira expansion plant is likely to see completion by 2026 it will be further expanded in multiple phases, to make it a 24 MTPA steel plant – thus becoming the world's largest steel plant. The second phase will be completed by 2029, Autocar Professional had reported earlier.

ArcelorMittal Nippon Steel India's upcoming expansion next year will include a new cold rolling mill and an auto plant specifically designed for electric vehicle (EV) steel production, keeping up with the shift towards electric mobility.  

ArcelorMittal Nippon Steel India is already engaging with auto companies developing new EVs for the Indian and global markets, Dhar noted. This gains importance in the context of the unavailability of specific varieties of electrical steel in India. Limited availability of these specialised steels forces auto companies to design vehicles with import dependence in mind. Conversely, having all the necessary steel varieties readily available in India will encourage design innovation in the sector. 

Specialised steel to make Indian auto exports competitive 

Betting on the India growth story, Dhar remarked that, both commercial vehicle and passenger vehicle demand in India has been growing. Although CV demand tends to be more cyclical and is currently seeing a slight downside, Dhar expects it to be a temporary phenomenon with numbers expected to pick up significantly in the second half of this year. He added that the company is not just adding metric tonnes of capacity to what is already available, but also strategically introducing some of the specialty products used globally by the automotive industry, for both internal combustion engine (ICE) and electric vehicles (EV). This will empower the Indian auto industry to not only strengthen its domestic market position but also evolve into an export hub. 

India's stature as the third largest automotive market in the world automatically puts it in comparison with China which currently exports about 4 million cars a year. This is equal to India's total car production which at present stands roughly around 4.2 million cars annually. "So, definitely India can partake into that space of exporting vehicles out of India. And then if there are some automobile manufacturing hubs around the globe, India will also have steel available to supply steel to these hubs. But our first preference as a country should be that we produce more automobiles in India" Dhar continued, before adding that the firm does not export automotive steel at present. Its overall steel exports account for around 5-6%.

PLI scheme needs larger scale push

Responding to the slow progress of investments in PLI scheme for specialty steel in India, the Ministry of Steel in February stated that as of December 2023, the selected companies under the PLI scheme have already invested about Rs 12,900 crore against an investment commitment of Rs 21,000 crore up to FY24. It is expected that another Rs 3,000 crore will be invested by these companies during  FY24, i.e., about Rs 16,000 crore of a total of Rs 29,500 crore will be invested by FY 2023-24. Additionally, the Ministry envisages an investment of Rs 10,000 crore in FY25.

"Typically, investments in the steel sector have a long gestation period and depend on, inter alia, procurement of various equipment, many of which are sourced from abroad."

"Delays due to unavoidable circumstances in the projects include supply chain issues on the back of geopolitical factors, unforeseen events, natural disasters and changed market circumstances for certain PLI products also have an impact on the pace, phasing, and  the quantum of investmen,t" the Steel Ministry said in a statement.

Acknowledging the advantages of the PLI Scheme for specialty steel, Dhar noted that it needs a bigger push towards manufacturing across all sectors. This strategy is crucial for job creation and sustained economic growth. He believes there to be a need for creating 15-20 mega-manufacturing zones across the country, encompassing automobiles, components, capital equipment, and other industries, spread across the country.


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