New Economic Trends of India for Steel Industry:Growth for India's steel industry has been hampered by regulatory

and environmental hurdles, land acquisition delays and social opposition. But players are finding ways to expand capacities as demand for steel races in one of the fastest growing economies of the world. India targets 120 million tonnes of domestic steel output at the end of 2012 from nearly 70 million tonnes in 2009/10. Following are five trends seen in the industry:

1. Consolidation
Analysts say buyouts could be an easy way of getting hold of land and regulatory approvals by companies seeking growth. "Over the next couple of years, there could be mergers and acquisitions, particularly in the sponge iron sector," said Arun Kejriwal of Kejriwal Research & Investment Services, referring to the hundreds of small units, many of which are unviable. In December, JSW Steel agreed to buy a controlling stake in loss-making rival Ispat Industries that would push its capacity to the top most position. It also agreed to buy Bellary Steel.

2. Doggedness of foreign firms

South Korean POSCO got an approval for its 12 million tonne plant in eastern Orissa state last month after waiting since 2005, and its plans for a another plant in Karnataka and a joint venture with Steel Authority of India (SAIL) in Jharkhand remain. The world's top steelmaker ArcelorMittal has also waited years to build plants in Jharkand, Orissa and Karnataka and has a stake in Uttam Galva Steel. "Foreign players have taken the difficulties in their stride," said Manish Pande, regional director of CRU Strategies. "As the industry expands, there will be opportunities for them to come in as joint venture partners, technology partners or on their own."

The delays have not discouraged the industry and other foreign players who have set foot in India are: - Japan's Nippon Steel in joint venture with Tata Steel for making cold rolled sheets. - Japan's JFE Holdings in talks with JSW for a stake buy. - Japan's Kobe Steel and SAIL in talks for a joint venture. - Russia's Severstal and NMDC in joint venture to a build steel plant.

3. Relocation, smaller plants

ArcelorMittal, POSCO, Bhushan Steel and JSW have chosen Karnataka state in the south for making new steel plants, away from east India that is mineral rich, but fraught with social and land-acquisition problems. "If you can't get your steel plant simply because you can't get the land, it doesn't matter whether you have got an iron ore deposit nearby," Neil Bristow of H&W Worldwide Consulting told Reuters on the sidelines of the Global Steel seminar last month. Bristow said investors may even look to the west coast that has less iron ore, but is closer to Africa from where coking coal is imported. ArcelorMittal has also spoken about a shift towards smaller modular sites as against mega projects.

4. Use of low grade raw materials

Traditional steel blast furnaces can take only iron ore lumps and coking coal. But now, industry members are looking at technology that will enable them to use iron ore fines and non coking coal as they are abundantly available in India. A big part of India's over 200-million tonne iron ore output is the powdery iron ore fines while coal production of over 500 million tonnes is mostly non coking coal. "Raw material costs account for 50% to 55% of the total cost of steel production. We need to utilize low grade raw materials available locally," CS Verma, chairman of SAIL , said in a speech at the Global Steel seminar. SAIL's joint venture plan with POSCO is for using the Finex technology that can use iron ore fines directly in the blast furnace.

5. Environmental awareness
With stricter implementation of environmental rules, and a new mining bill that seeks to have companies pay 26 of their profits to displaced locals, companies are expected to spend more on environment and society, analysts say. "I expect the industry to be more cognizant towards social responsibility," said Anjani Agrawal, national leader-mining and metals at Ernst & Young. "So I expect people to not just spend more, but spend appropriately."