Analysis of Metal Sector in India

The metal sector in India has a long history. It dates back to ancient times and remains vital to the economy even today. For the unaware, the metal sector is primarily related to the extraction (mining) and processing of metals like iron, copper, and gold. This sector supports major industries, such as manufacturing and construction.

Now, if we look at some statistics, India's key metal production has shown steady growth in FY 2024-25. Iron ore and limestone, which make up 80% of the total mineral production value, have increased significantly. Iron ore production rose from 90 million metric tonnes (MMT) to 98 MMT, showing 8.90% growth.

Also, manganese ore production saw a sharp 18.20% rise to 1.3 MMT. In the non-ferrous metal sector, aluminium production grew by 1.30% and reached 13.95 lakh tonnes in FY 2024-25.

Additionally, the metals sector contributes significantly to India's GDP. It also plays a key role in generating employment and boosting foreign exchange through exports. If you are planning to invest in the metal sector, read this comprehensive analysis for better decision-making.

The growth of the metal sector in India is mainly driven by rising infrastructure development and government initiatives like "Make in India". Also, the growing demand from industries such as construction, automotive, and electronics significantly increases the output of the metal industry.

For more clarity, let’s check out these three major aspects:

1. Impressive CAGR of 3.36%

Between 2018 and 2023, India’s metals and mining industry showed consistent production growth. It increased from 1,032.15 million tonnes in 2018 to 1,217.59 million tonnes in 2023. This expansion happened at an impressive Compound Annual Growth Rate (CAGR) of 3.36%. Each year, the industry produces more metals and minerals, which reflects the rising demand for them. As per recent estimates, steel is also expected to grow 8% annually in 2024 and 2025.

2. Increasing demand for metals

As India grows economically, industries like construction, automotive, and electronics are expanding. The metals and mining industry currently supports this increasing demand by providing raw materials like:

• Iron ore (for steel)
• Bauxite (for aluminium)
• Copper (for electrical uses)

Additionally, coal is needed to produce energy, which powers many industries. Be aware that all these industries are highly dependent on metals, and their expansion could significantly boost the overall output of the metal sector.

3. Favourable government initiatives

The Indian government is working to boost the steel industry by signing agreements with 27 companies. They plan to invest about Rs. 300 billion to increase the production of speciality steel by 25 million tonnes over the next five years.

Additionally, the government launched a new Rs. 120 billion Production-Linked Incentive (PLI) scheme. Notably, this scheme will support local manufacturing of heavy mining and construction equipment. This move aims to:

• Reduce imports
• Create jobs
• Develop infrastructure faster

It is worth mentioning that mining can harm the environment in several ways. It can cause soil erosion, create sinkholes, and lead to loss of biodiversity. Pollution from mining affects the soil and surface water, which makes it unsafe. Additionally, mining contributes to climate change due to the carbon emissions it produces. Even the mining infrastructure causes deforestation and disturbs animal habitats.

As a result, the Indian government is increasingly bringing new regulations to reduce the environmental impact of the metal sector. For example:

• Stricter pollution control measures have been enforced to control air and water pollution caused by steel production.
• Companies that fail to meet these norms face penalties, such as plant shutdowns.

As per recent targets, the government is trying to decrease emissions by one-third by 2030. Additionally, mining and metal companies are under pressure to adopt more sustainable practices. For example, Hindustan Zinc is gradually becoming nature-positive and trying to achieve net-zero emissions by 2050.

• In FY 2024-25, the metal sector achieved significant growth due to production growth in iron ore (8.90%) and manganese (18.20%).
• The government is investing Rs. 300 billion in speciality steel production and launched a Rs. 120 billion PLI scheme to boost local manufacturing of mining and construction equipment.
• Mining activities cause pollution and lead to climate change. As a result, stricter environmental regulations have been introduced to reduce emissions by one-third by 2030.