Indian domestic output struggles with rail steel demand
State-controlled rail monopoly Indian Railways will require around 21pc more steel rail track in the 2019-20 fiscal year starting 1 April than it did in 2018-19, although India's state-controlled steel producer Sail will be unable to meet all the demand.
Indian Railways expects demand of 1.7mn t of steel rail track for 2019-20 compared with 1.4mn t in 2018-19.
Sail had been the sole provider of steel rail track to Indian Railways but it has been unable to keep pace with the rapid expansion of the country's railway network and demand for rail track. Sail has committed to supplying 1mn t of rail track to Indian Railways for 2018-19 and 1.2mn t in 2019-20, much lower than the demand. The rail track will be supplied by Sail's 7mn t/yr Bhilai steel mill in central India's Chhattisgarh state.
Indian Railways last year awarded the first ever tender for supply of 100,000t of rail track to private-sector firm Jindal Steel and Power, the only other Indian steel producer with rail track production capacity.
Indian Railways has limited options for buying rail track as a federal order requires state-controlled companies to buy domestic steel for government projects unless the required quality of steel is not made in India. Indian Railways is planning to buy 695,000t of rail track through international tenders, although details of these were unavailable. India's steel ministry last month told Indian Railways it cannot consider imported rail track for these tenders unless the steel grades were not manufactured in India.
India's 2018-19 federal budget targeted adding an additional two to four rail lines to around 18,000km of single track, while 5,000km of narrow gauge railway lines will be converted to broad gauge railway track. Railways accounts for the biggest share of India's planned infrastructure spending of $94bn in 2018-19.
Railroad spending generates 640t of steel demand for every kilometre of rail track on average globally, according to US bank Morgan Stanley. Use of steel in building railway tracks is less than that for building bridges and buildings.
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