Outlook: What's Ahead for the Metals and Mining Sector?

India is a country rich in natural resources. It produces several important minerals, such as iron ore, bauxite, limestone, and coal. These resources support the overall economy and are foundational for construction, infrastructure, and energy production. If we specifically talk about the metals and mining sector, it contributes about 8.10% to the total manufacturing output. Additionally, this sector provides “critical input materials” necessary for various industries.
 

Between 2018 and 2023, the production of metals and mining sector in India grew from 1,032.15 million tonnes to 1,217.59 million tonnes. This growth represents a CAGR of approximately 3.36%. Such a healthy rise in production indicates a strong demand for metals and minerals. This growth will help companies operating in the sector to boost their revenue and earn bigger profits.
 

As an investor, you can consider investing in the stocks of companies within the metals and mining sector to achieve higher long-term returns. For your help, we are presenting four key reasons that show the positive future outlook of this industry.

India is the third largest energy consumer. It has a growing need for electricity, which is driving up the demand for coal. Also, the government is strongly focusing on developing infrastructure like roads, railways, and airports. This will boost the need for steel, which is expected to grow by 10% in the coming years. Moreover, India aims to increase its steel production to 300 million tonnes per year by 2030, with a demand of around 255 million tonnes.
 

Similarly, the demand for zinc is expected to double in the next 5-10 years. This will happen due to significant infrastructure investments, especially in steel-related projects. For more clarity on this increasing demand, check the table below showing positive growth in the production of certain key minerals:

India has adopted the goal of becoming “Aatmanirbhar” (self-reliant) in speciality steel production. Moving forward, the government has plans to manufacture high-quality steel, which is used in advanced industries. This move would elevate India to the same level as steel giants like Korea and Japan.
 

Under the Production Linked Incentive (PLI) Scheme for speciality steel, India has signed 57 agreements with 27 companies. This has already resulted in investments of about US$ 3.55 billion. This scheme is expected to create 25 million tonnes (MT) of extra steel production capacity and generate 17,000 jobs by the fiscal year 2027-28.
 

Moreover, five production units are already operational, with nine more expected to start by the end of FY24.

The recently enacted “Mines and Minerals (Development and Regulation) Amendment Act, 2021” has allowed owners of captive mines to sell up to 50% of their annual mineral output (including coal) in the open market. For the unaware, captive mines are those that are primarily used to supply their own production needs.
 

This change is significant because it gives mine owners more flexibility and the opportunity to profit from excess production. By allowing sales in the open market, the government aims to increase competition and improve resource management. Ultimately, this will benefit both producers and consumers.
 

Furthermore, in December 2023, the Ministry of Mines even suggested reducing performance security and upfront payment requirements for mining critical minerals. If implemented, this proposal will make it easier for more companies to participate in mining auctions. Consequently, this will attract more bidders.

• India's increasing need for electricity and infrastructure development will boost the demand for metals, especially steel and zinc.

• The government is trying to achieve self-reliance in “speciality steel production”. This move will significantly elevate India’s status in the international steel market.

• In the metals and mining sector, India enjoys lower production costs and has an extensive mining infrastructure. This provides a competitive edge.

It is worth mentioning that India has a significant competitive edge in producing steel and alumina due to lower production and conversion costs. This cost advantage allows Indian companies to manufacture these materials more economically compared to other countries.
 

India also has an extensive mining infrastructure. As of FY22, there were about 1,319 operational mines in India, with 545 focusing on metallic minerals and 775 on non-metallic minerals. To better understand India’s competitive advantage, check the table below, showing its rank in terms of production capacity: