There was a time when the steel industry was born alongside raw materials. For instance, for example, Bokaro, Durgapur near coalfields, and Bhadravati, Bhilai & Rourkela in the vicinity of iron ore sources. Now times have changed. Raw materials are not the most important or the only determining factor if supplies of iron ore and coal are irregular.
The closure of several mines has caused chaos following an investigation by the Shah’s committee and a decision by the Supreme Court. For example, the ban on iron ore mining in Karnataka and Goa (2011-12), the ban on iron ore mining in Odisha due to the processing of necessary permits (2014), the cancellation of more than 200 coal blocks and prices (PMI) due to for a minimum income.
With a low dependence on raw materials and a significant difference in transport costs by road, water and rail. Today, the entire value chain is important, taking into account the added value of infrastructure and logistics, product quality, technological efficiency, the MSME sector, demand and production capacity for steel, raw materials, profits, land, water, energy and alloys, environmental management, safety, trade and financial risks.
Iron and steel industry forms the base of all other industries; therefore it is called basic industry. It is one of the most complex and capital intensive industry.
Emphasis on basic and heavy industries was placed with the adoption of Mahalanobis model in the secod FYP.
Factors influencing the locations of Iron and steel industries:
- Raw material: Mostly large integrated steel plants are located close to source of raw materials, as they use large quantity of heavy and weight losing raw materials. Eg: Concentration of Iron and steel industry in Chota Nagpur region-Presence of Iron ore in this region. TISCO at Jamshedpur.
- Markets: As its heavy & bulky transportation cost is high. Therefore nearness to market is important especially for mini steel plants access to nearby markets is most important in order to minimize transportation cost. Also as mini steel plants rely on scrap metal they are mostly present in Maharashtra. Visakhapatnam steel plant located near the coast has excellent import-export facility
- Labour: Availability of cheap labour is also important. Eg: Rourkhela plant, Orisa; Bhilai steel plant in Chattisgarh, mostly in Chota Nagpur region
- Availability of electricity mostly hydro and water for cooling. Eg: Bokaro steel plant on banks of river Damodar, Visheshwarya steel plant, Kar near river Bhadra.
The iron and steel industry forms the backbone of the industrial development and its location is determined by various factors such as:
- Near iron ore mines: To reduce the transportation cost, Industries are located near mines with Iron ore, manganese, limestone, dolomite deposits. For example: Rourkela in India and Kuznetsk Basin in Western Siberia.
- Near coal Fields: Inefficiency of railway engines during the Industrial Revolution times made it cheaper to transport iron ore to coalfields not vice versa. For example: Appalachian-Pennsylvania in USA, Wuhan in China.
Transportation: Location near coastal regions reduces the cost of transporting raw material (usually imported) from port to factories. For example, Chicago in USA, Vishakapatnam in India.
Modern Technology: such as electric smelters, Open hearth system etc. have helped in shifting of steel industries away from coal and iron-ore reserves by making efficient use of scrap metal & also reducing energy requirement. For example, Bhushan steel plant in Ghaziabad.
Industrial Inertia: Industries continue to be located in the same area despite decline of locational advantages e.g. depletion of raw material. For example, Ruhr in Germany; Pittsburg in the USA.
Developmental policies of government for backward regions: For example, Bhilai and Salem plants in India.
Strategic reasons: After WWII, the USA and the USSR adopted a policy to not allow the concentration of the industry in one region. Thus, in the USA some plants were setup in the western region such as California and the USSR in the eastern side towards Pacific coast.
Over time, Iron and Steel Industry started shifting towards coastal regions such as steel industry in OsakaKobe, Japan, Steel plant at Vishakhapatnam, Ratnagiri, and the coastal cities of the USA such as Cleveland, Detroit and Chicago. The reasons are:
- Depleting coal resource in mainland changed economics of cost of transportation of raw material versus that of finished product.
- Near ports, steel can be exported and raw material can be imported with ease.
Market-based location is generally found in countries where coal and iron ore deposits are rare.
For example, Japan is deficient in both iron ore and coal and almost all raw materials are to be imported from overseas countries.
This makes Japanese steel plants mostly market-based.
The great ‘Tokyo-Yokohama’ and ‘Osaka – Kobe – Heemeji’ iron steel regions are market-based.
Transportation is another controlling factor of the location of iron and steel industry.
The intermediate location, in some cases, gets distinct advantages in terms of the accessibility with raw materials, market and transportation. Its port location is of advantage.
For example, the Vizag Steel Plant, Visakhapatnam in Andhra Pradesh, is the first port-based plant that started operating in 1992.
The raw material-based industries are now facing disadvantages because of depleting reserves of raw material.
Apart from this, the drastic reduction of coal use and development of fuel economy also attracted industries to the areas where transport is cheaper.
For example, a cheap water route or break of bulk location, where due to loading and unloading facilities, raw materials are available at a much cheaper rate.
Iron & steel being basic industry provide raw materials for other industries, in order to avoid the spiraling effect and ensure fair trade, provide level playing field to domestic industry govt has taken steps to make big the Make in India initiative.
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