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India's Steel Industry Turns Red Hot as Economy Booms


India's steel industry is set for massive expansion following an upsurge in domestic demand. The industry is benefiting from strong economic growth in the country*** in recent years.

Massive highways, bridges, and hotels are under construction around booming cities such as Bangalore, Delhi, and Bombay.

And in the coming years, more such projects will guzzle steel as India spends $15 billion to overhaul its dilapidated infrastructure.

At the same time, tens of thousands of new homes are being built for a growing and large population. And a steadily expanding middle class has begun buying more consumer goods that use steel - cars, refrigerators and washing machines.

All this is good news for the steel industry, which was grappling with a recession four years ago as it coped with slumping demand and low prices.

Moosa Raza heads the Indian Steel Alliance that represents the steel industry. Mr. Raza says both government-owned and private steel companies are upbeat as domestic demand soars from current levels of about 36 million tons a year.

"We expect that annual growth rate for steel should be between seven to eight percent. On that basis our demand on a conservative basis should grow to something like 62 to 65 million tons by 2011, 2012," said Mr. Raza.

Several big companies, such as Steel Authority of India, Tata Steel and Essar Steel, have announced massive expansion plans in recent months totaling almost $1.5 billion.

In June, South Korean steel maker Posco signed an agreement to establish a 12 million ton steel plant in Orissa state in the country's east.

Experts say the scope for growth is huge because India's per capita consumption of steel is still tiny compared with global standards.

Some companies are also exporting part of their production to countries such as China, which has become a huge steel consumer. Mr. Raza says most makers are eyeing both the domestic and overseas market because India is rich in iron ore reserves.

"We have enough iron ore resources of a very high quality to develop our industry to a level of easily up to 200 million tons," he explained. "I would say this is a sunshine industry, I am very bullish on the Indian steel industry."

But analysts warn the Indian steel industry faces increasing competition in the coming years as several countries expand their steel producing capacities.

*** Correction - A map formerly on this page included an incorrect depiction of Kashmir.

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