If steel is the backbone of infrastructure creation, strong infrastructure abets the growth of a nation’s steel industry by aiding its transportation. In 1QFY2025, production at Tata Steel – the over $165 billion salt-to-software Tata group’s steel manufacturing arm – stood at 5.25 million tonnes, up 5 per cent YoY, while domestic deliveries were up 3 per cent YoY. Peeyush Gupta, Vice President of Total Quality Management, Group Strategic Procurement & Supply Chain Tata Steel, tells Manish Pant the company is looking at leveraging the emerging options in rail and water transportation to meet the ever-growing demand for the commodity from all corners of India. Edited excerpts. In a note issued before the 2024 election results, global market intelligence firm S&P said that a third term for Prime Minister Modi would help sustain India’s steel demand. So, how strong would the demand be over the next five years? We are at the cusp of the Amrit Kaal and I will tell you why we believe 2047 is firmly in our line of sight. A little over 20 years ago, we consumed 27 million tonnes of steel. At that time, the steel demand in China registered rapid growth due to the 2008 Beijing Olympics. And they have reached 1,000 million tonnes today! As far as India is concerned, we also doubled consumption in ten years. We were at about 55 million tonnes in 2009-10. And if the COVID-19 pandemic hadn’t happened, we would have crossed 120 million tonnes before 2023. Our steel consumption will improve further because of the push to infrastructure creation. You will, therefore, find the steel demand doubling to 250 million tonnes over the next ten years, and then again double further to 500 million tonnes by 2040-45. This is based on the proviso that India’s GDP would grow 7-8 per cent in our endeavour to reach a developed country status by 2047. The growth of China’s steel industry was, among others, supported by iron ore mined in India. Also, has the sustained volatility in domestic iron ore prices resulted in any interesting trends in procurement? To be somewhat factually correct, India has been a smaller exporter of iron ore to China. The bulk of China’s growth depends on the import of nearly 1 billion tonnes of iron ore from Australia. Another development is that mining companies like Vale and Rio Tinto are setting up blending facilities to supply China with ready-to-use high-grade iron ore. Iron ore is a liquid commodity with many sources. You can move iron ore across continents at a nominal cost. It is coal that’s a bigger challenge for us. The high-end variety of coking coal is available only in Australia and Canada, and that’s not such a liquid product. Leaving aside the period from 2001-2011, when iron ore moved from $40 to $180 per tonne, coal has shown far more volatility. Iron ore volatility has been in a narrower range. What is more important for a steelmaker is the type of iron ore available, and the input supply chain in terms of whether they will take pellets, iron ore, or DRI (direct-reduced iron) grade material. Will this enhanced consumption in India continue to be driven solely by the infrastructure sector’s growth or do you see other sectors also playing a role? As a country, we are still at 30 per cent urbanisation. This has to grow to up to 60 per cent. Any urban setup requires not only different kinds of homes but also gadgets and appliances that go into those homes. Automotive or appliances require high-end steel-based products. India still has one-third of makeshift roofs of tiles and thatch. They will first convert into steel, and from there to colour-coated steel. If you look at our households, 30 years ago we were consuming a small amount of steel. Today, we are surrounded by the increasing intensity of steel. Whether it is the bullet train project, airlines, or automobiles, they all require steel through infrastructure. Being a value-for-money product, steel will combine with concrete to expand its market. Interestingly, if a strong steel industry helps in infrastructure creation, infrastructure creation also helps in building a robust steel sector. How has the development of expressways and dedicated Western and Eastern freight corridors by the Indian Railways helped you? We can’t courier steel to our customers.For every tonne of steel manufactured, you need to move three times the weight of the raw materials. And since all that comprises bulk materials, those materials are moved through sea routes or the railway. Rail transport has been the mainstay of the Indian iron and steel industry for the last 100 years. The Indian Railways has to not only feed the industry with raw materials, it also has to cater to passengers. Our population was only 400 million at the time of Independence. In the last 75 years, we have grown three times that number. What used to be largely 60 per cent of material movement by rail at the time of Independence, is less than 20 per cent today! Indian Railways has been replaced by road transport and has been trying hard to reclaim a fair share of freight traffic. So, we have less than 30 per cent of material movement by rail, 50-60 per cent by road and the rest by waterways or other modes of transport. But that needs to change as it’s unsustainable. If a truck can carry 40 tonnes of iron ore, a railway can carry 3,000 tonnes, and a ship 20,000 tonnes. Rail transport and waterways, therefore, work out much cheaper on a per-unit basis. In other countries with a flourishing mining industry, they have separate corridors for freight movement. But in India, passengers and freight services use the same track. Since the same track supports passenger and freight services, we should encourage a dedicated freight corridor, or a partially-dedicated freight corridor to move materials. The Dedicated Freight Corridors are among the most outstanding initiatives announced by the Railways. Over the past few years, you have also heavily utilised waterways to move goods. How is this new mode of transport helping to supplement your economies of scale? Owing to our presence in eastern India, Tata Steel is among the first companies to make a head start using waterways. The ports in Kolkata, Haldia, and Paradip are well connected by waterways. The issue has been the maintenance of the rivers, which are largely available for daytime navigation. Because of silting, we only have a limited draft available. This means we can barely move 1,000-1,500 tonnes of cargo. With most industries not located near rivers, a three-point multimodal transportation is required. You have to get to the river point by road, then do the river route, and then again do the road network to feed to the final markets. That way you end up doing three times the carriage. However, that still works out in certain pockets like Bangladesh or, for that matter, using Bangladesh to reach Tripura or Lower Assam. We have also used the waterways to move oversized cargo to plants from Paradip port. Odisha is particularly attractive for the promotion of river transport. We moved an oversized cargo for a project close to our Kalinganagar steel plant. It would have been infeasible to carry such a large cargo by road. How are you looking at expanding this to meet your sustainability goals? In our case, at less than 10 per cent, supply chain or Scope 3 emissions are a small proportion. During transportation, we largely use rail transport, which runs on electricity, or the river and sea routes for transporting coal. Our outbound movement is only around 25 per cent by road. But as the denominator reduces, that same Scope 3 will become a larger proportion. In preparation for that day, we have started using LNG to transport coal from Australia. We are also using biofuels. We have started using electric and LNG trucks for moving finished goods. We are looking to introduce coastal shipping from the East Coast to the West Coast. The concept of coastal shipping is an attractive proposition as it helps you save on both transportation costs and emissions. How much steel are you looking at transporting using waterways? We want to do about 1,000 tonnes a month in eastern India, which adds to around 12,000 tonnes yearly. However, the Northeast and Bangladesh are relatively limited markets. Therefore, we only do riverine transportation there. However, if your question is slightly expanded to how much transportation we intend to do through coastal shipping plus waterways, the answer will be close to 2 million tonnes! That’s what we want to do in the next two years. How do you see future developments like government policy on beneficiation or the increased promotion of green steel impacting the steel supply chain? The way we make steel will change. The supply chain will come into play in two ways. Firstly, you would have to start using non-coal material such as LNG or hydrogen as a reducing agent for iron ore. Secondly, a richer form of Fe might be transported to an energy surplus location for conversion to green DRI. So, the world will start to see one of the three routes being taken in steelmaking. The first one is scrap. The US is already working on that. At Tata Steel, we are already running full scrap operations in Thailand. We are also thinking of doing that in the UK. The second route will be the increased use of greener DRI produced using green energy. Finally, those who do not have access to DRI-grade pellets would start using non-coking coal energy sources like LNG or hydrogen.